Corporate/officer definitions and core concepts
- Section 2(a) defines a contract of insurance as an agreement where one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event.
- Section 2(a) provides that a contract of suretyship is deemed an insurance contract only if made by a surety doing an insurance business as provided in the Code.
- Section 2(b) defines doing/transacting an insurance business to include: (1) making or proposing to make insurance contracts as insurer; (2) making or proposing to make suretyship contracts as a vocation; (3) reinsurance and other business specifically recognized as constituting doing of an insurance business; and (4) doing or proposing substantially equivalent business designed to evade the Code.
- Section 2(b) provides that lack of profit or lack of separate or direct consideration is not conclusive that the activity is not doing/transacting an insurance business.
- Section 2(c) defines “Commissioner” as the Insurance Commissioner.
What may be insured; parties; insurable interest
Section 3 allows insurance of “any contingent or unknown event” that may damnify a person with an insurable interest or create liability, subject to the Code’s chapter rules.
Section 3 states that spousal consent is not necessary for a married person’s policy on his or her life or that of his or her children.
Section 3 provides automatic vesting: rights, title, and interest in the policy of the original owner on the life or health of the person insured automatically vest in the latter upon the death of the original owner, unless the policy provides otherwise.
Section 4 prohibits insurance for or against the drawing of any lottery, or for or against any chance or ticket in a lottery drawing a prize.
Section 5 subjects all kinds of insurance to the chapter rules on the contract, to the extent provisions can apply.
Section 6 permits every corporation, partnership, or association duly authorized to transact insurance business to be an insurer.
Section 7 allows anyone except a public enemy to be insured.
Section 8 governs mortgagor/mortgagee policies: where a mortgagor insures in his own name with loss payable to the mortgagee, or assigns to a mortgagee, insurance is deemed on the mortgagor’s interest; the mortgagor does not cease to be a party and acts that would avoid insurance have the same effect, but acts required to be performed by the mortgagor may be performed by the mortgagee with the same effect.
Section 9 provides that if the insurer assents to transfer from mortgagor to mortgagee and imposes further obligations making a new contract, acts of the mortgagor cannot affect the assignee’s rights.
Section 10 establishes insurable interest in life and health including interests of: (a) oneself, spouse, and children; (b) persons wholly or partly depended on for education or support or with pecuniary interest; (c) persons under legal obligation for payment of money or regarding property/services where death/illness might delay/prevent performance; and (d) persons whose life supports estates/interests vested in the insured.
Section 11 gives the insured the right to change the beneficiary unless expressly waived in the policy; if not changed during lifetime, the designation is deemed irrevocable.
Section 12 forfeits the beneficiary’s interest when the beneficiary is the principal, accomplice, or accessory in willfully bringing about the insured’s death; forfeited share passes to other beneficiaries unless disqualified; if no other beneficiaries, proceeds go to the insured’s estate.
Section 13 treats insurable interest in property as any interest/relationship/liability of such nature that a contemplated peril might directly damnify the insured.
Section 14 allows insurable interest in property to consist of existing interest, inchoate interest founded on existing interest, or expectancy coupled with existing interest.
Section 15 states that a carrier or depository has insurable interest in what it holds up to its liability but not exceeding the value.
Section 16 declares that a mere contingent or expectant interest without actual right nor valid contract is not insurable.
Section 17 fixes the measure of insurable interest in property as the extent the insured might be damnified by loss or injury.
Section 18 requires property insurance contracts to be enforceable only for the benefit of some person having an insurable interest.
Section 19 provides timing: insurable interest must exist when insurance takes effect and when loss occurs, but need not exist in between; for life/health, it must exist when insurance takes effect, but need not exist thereafter or when loss occurs.
Sections 20–24 regulate how changes of interest affect or do not affect insurance, including suspension in property unless corresponding change of insurance interest occurs, non-effect of changes after injury causing loss, non-avoidance for other distinct things insured under one policy, non-avoidance for will/succession, and non-avoidance for transfers among jointly insured partners/joint owners/common owners.
Section 25 voids any policy stipulation for payment of loss whether or not the insured has any interest, or policies received as proof of such interest, and voids policies executed by way of gaming or wagering.
Concealment and misrepresentation rules
- Section 26 defines concealment as neglect to communicate what a party knows and ought to communicate.
- Section 27 allows rescission by the injured party for concealment whether intentional or unintentional.
- Section 28 requires each party to communicate in good faith all material facts within knowledge that are not warranties and are material to the contract and not ascertainable by the other.
- Section 29 allows insurer rescission if an insured intentionally and fraudulently omits information tending to prove falsity of a warranty.
- Section 30 states neither party must communicate: (a) what the other knows; (b) what the other ought to know in ordinary care; (c) what the other waives; (d) matters proving risk excluded by warranty and not otherwise material; and (e) matters about a risk excepted from the policy and not otherwise material.
- Section 31 defines materiality based on probable and reasonable influence of the facts on the party’s estimate of disadvantages or inquiries, not on the event itself.
- Section 32 requires knowledge of general causes open to inquiry and general trade usages affecting political/material perils contemplated.
- Section 33 allows waiver of the right to information of material facts by policy terms or by neglect to inquire where implied in communicated facts.
- Sections 34–35 require no communication of information of the nature/amount of interest unless asked (subject to Section 51), and neither party must communicate personal judgment on matters in question.
Representation, rescission limits, and suicide-bar framework (core rules)
- Section 36 allows representations to be oral or written.
- Section 37 allows representations at the time of or before policy issuance.
- Section 38 requires interpreting language of representations by contract language rules.
- Section 39 treats representations as promises when they concern the future unless they are merely statements of belief/expectation.
- Section 40 bars a representation from qualifying an express provision but allows qualification of an implied warranty.
- Section 41 permits alteration/withdrawal before the insurance is effected but not afterwards.
- Section 42 presumes representations refer to the policy effective date.
- Section 43 allows repetition based on others’ information by an insured with explanation, without responsibility for truth unless the information comes from an insured’s agent with duty to provide it.
- Sections 44–46 provide when representations are false, when rescission is allowed, and that materiality is judged under concealment rules.
- Section 48 requires insurer’s rescission right (when given) to be exercised before commencement of an action.
- Two-year incontestability rule (life insurance): after a life insurance policy payable on death has been in force for two (2) years from issue or last reinstatement, the insurer cannot prove policy void ab initio or rescind due to fraudulent concealment or misrepresentation by the insured or agent.
Policy form, essential terms, cover notes, and cancellation/renewal
Section 49 defines the written instrument setting forth the contract of insurance as a policy of insurance.
Section 50 requires printed form with blank spaces; any word/phrase/clause/mark/sign/symbol/signature/number necessary must be written on blank spaces.
Section 50 provides that riders/clauses/warranties/endorsements pasted or attached are not binding unless the descriptive title/name is also mentioned and written on the blank spaces.
Section 50 requires countersignature by the insured/owner for riders issued after the original policy unless applied for by the insured; countersignature is taken as agreement.
Section 50 allows the policy to be in electronic form subject to Republic Act No. 8792 and rules/regulations of the Commissioner.
Section 51 mandates that a policy specify: (a) parties; (b) amount to be insured (except open/running policies); (c) premium or basis/rates for final premium; (d) property or life insured; (e) insured’s interest in property if not absolute owner; (f) risks insured against; and (g) period the insurance continues.
Section 52 allows issuance of cover notes to temporarily bind insurance pending policy issuance; within sixty (60) days after cover note issue, a policy must issue covering identical insurance and the premium.
Section 52 provides cover-note extension/renewal beyond sixty (60) days requires written approval of the Commissioner if extension is not contrary to or for violating the Code; rules may govern extensions and may dispense with written approval in compliance with such rules.
Section 53 requires that insurance proceeds apply exclusively to the proper interest of the person named or benefited, unless otherwise specified in the policy.
Section 54 allows indicating the insured as agent/trustee where principal/beneficiary is real party in interest.
Section 55 requires that to apply insurance effected by one partner/part-owner to co-partners/other part-owners, policy terms must apply to joint/common interest.
Section 56 provides that where insured description is general and may include any person/class, only one who shows intention to include him may claim benefit.
Section 57 permits policies to inure to benefit of whomsoever becomes owner of the insured interest during risk continuity.
Section 58 states transfer of the thing insured does not transfer the policy and suspends it until the same person becomes owner of both the policy and the thing insured.
Sections 59–62 classify policies as open, valued, or running and define each:
- Open policy: no agreed value; insurance amount is insurer’s maximum liability; value ascertained at loss.
- Valued policy: expresses value at a specific sum.
- Running policy: successive insurances; object defined over time by additional statements/indorsements.
Section 63 voids any policy condition limiting time to commence action to less than one (1) year from accrual.
Section 64 prohibits cancellation of non-life policies by the insurer except with prior notice to the insured; notice is not effective unless based on events after the policy’s effective date, including: nonpayment of premium; conviction for crime increasing hazard; discovery of fraud or material misrepresentation; discovery of willful or reckless acts/omissions increasing hazard; physical changes making property uninsurable; other insurance causing total insurance to exceed property value; or Commissioner determination that continuation would violate or place insurer in violation of the Code.
Section 65 requires written cancellation notices stating the relied grounds under Section 64 and that upon written request, insurer will furnish facts for cancellation basis; notices must be mailed or delivered to named insured address in policy or to the broker authorized in writing by the policy owner to receive cancellation notice.
Section 66 governs non-life nonrenewal: if insurer does not mail/deliver at least forty-five (45) days before end of policy period a notice of intention not to renew or to reduce limits/eliminate coverages, named insured is entitled to renew upon payment of premium due on renewal effective date; term rules treat policies under one (1) year as one (1) year, and policies over one (1) year or with no fixed expiration as successive periods/terms of one (1) year.
Warranties and premium payment validity
Section 67 provides that a warranty is either expressed or implied.
Section 68 provides that warranties may relate to the past, present, or future.
Section 69 states no particular form of words is necessary to create a warranty.
Section 70 requires that every express warranty made at or before execution must be in the policy itself or in another instrument signed by insured and referred to in the policy as part of it.
Section 71 treats statements in the policy as fact regarding person/thing insured or risk as an express warranty.
Section 72 defines that statements intended to do or not do something materially affecting risk are warranties that the act/omission will take place.
Section 73 provides that breach of a warranty relating to future does not avoid the policy if loss happens before performance time arrives, or performance becomes unlawful at the place of contract, or becomes impossible.
Section 74 provides that violation of a material warranty or material policy provision by either party entitles the other to rescind.
Section 75 permits policies to declare that violation of specified provisions avoids the policy; breach of immaterial provisions does not avoid the policy.
Section 76 provides that breach of warranty without fraud merely exonerates insurer from the time it occurs or prevents policy from attaching to the risk if broken at inception.
Section 77 provides that insurer is entitled to premium payment as soon as the thing insured is exposed to the peril insured against, but a policy/contract issued by an insurance company is not valid and binding unless and until the premium has been paid, except for life or industrial life policies where the grace period applies and where, under broker/agency agreements with duly licensed intermediaries, a ninety (90)-day credit extension is given.
Section 77 provides that no credit extension to a duly licensed intermediary should exceed ninety (90) days from date of issuance of the policy.
Section 78 allows Philippine government employees and GOCCs to pay insurance premiums and loan obligations through salary deduction; the treasurer/cashier/paymaster or official authorized may deduct from salary/wage/income under the insurer-employee agreement and remit deductions, and may collect a reasonable fee for services.
Section 79 makes acknowledgment in the policy/contract or receipt of premium conclusive evidence of payment so far as to bind the policy notwithstanding any stipulation that it is not binding until premium actually paid.
Return of premium; loss; notices; double insurance; reinsurance
Section 80 provides return of premium:
- Whole premium if no part of insured’s interest was exposed to any perils insured against.
- Where insurance is for a definite period and insured surrenders, pro rata unexpired portion unless short period rate agreed and appears on face, after deducting any previously accrued claim for loss/damage under the policy; life policy holders cannot avail without sufficient cause as otherwise provided by law.
Section 81 states that if a peril insured against has existed and insurer has been liable even for any period however short, insured is not entitled to return of premiums for that particular risk.
Section 82 provides entitlement to return of premium when contract is voidable and later annulled under the Civil Code; or due to fraud/misrepresentation of insurer or agent; or due to facts unknown to insured without insured’s fault; or when by insured default other than actual fraud, insurer never incurred liability under the policy.
Section 82 bars return of premium if policy is annulled/rescinded or claim denied due to fraud.
Section 83 provides ratable return in over-insurance by several insurers other than life: insured gets ratable return proportioned to excess of aggregate sum insured over insurable value.
Section 84 allows insurer to accept additional payments besides regular premium to pay future premiums or increase benefits.
Section 85 voids agreements not to transfer the insured’s claim after loss happened if made before loss, except as otherwise provided for life insurance.
Section 86 governs proximate cause: insurer is liable for loss where a peril insured against was the proximate cause though an un-contemplated peril was remote; insurer is not liable when insured peril is only remote.
Section 87 provides rescue coverage: insurer is liable when thing insured is rescued from peril insured against, but during rescue is exposed to peril not insured against causing permanent deprivation of possession or when loss is caused by rescue efforts.
Section 88 provides that when a peril is especially excepted, loss not otherwise occurring but for that peril is excepted even if immediate cause is an unexcepted peril.
Section 89 provides insurer not liable for willful act or connivance of insured, but not exonerated by negligence of insured or agents/others.
Section 90 provides that for fire insurance loss, insurer is exonerated if written notice is not given without unnecessary delay by the insured or person entitled. For other non-life insurance, Commissioner may specify period for notice submission.
Section 91 allows preliminary proof of loss: insured need only give the best evidence in power at the time, not necessarily proof required in court.
Section 92 waives insurer’s objections to defects in notice or proof of loss that insured could remedy if insurer omits to specify grounds without unnecessary delay.
Section 93 waives delay in presenting notice or proof of loss if caused by insurer acts or if insurer omits to object promptly and specifically on that ground.
Section 94 provides certificate/testimony requirement: if policy requires certificate/testimony of a person other than insured, insured must use reasonable diligence; if person refuses, insured must furnish reasonable evidence refusal was not induced by just grounds of disbelief.
Section 95 defines double insurance as same person insured by several insurers separately for the same subject and interest.
Section 96 governs double insurance over-insurance (non-life):
- Insured may claim from insurers in any order up to amounts each insurer is severally liable.
- For valued policies, sums received under other policies deducted from value without regard to actual value.
- For unvalued policies, sums received deducted against full insurable value.
- Excess over valuation (valued) or insurable value (unvalued) is held in trust for insurers according to contribution rights.
- Each insurer contributes ratably to the loss proportionate to liability under its contract.
Section 97 defines a contract of reinsurance as one where an insurer procures a third person to insure the insurer against loss or liability by reason of original insurance.
Section 98 requires, when insurer obtains reinsurance (except automatic reinsurance treaties), that insurer must communicate all representations of original insured and all knowledge/information possessed, whether previously or subsequently acquired, that is material to the risk.
Section 99 presumes reinsurance is indemnity against liability, not merely damage.
Section 100 provides the original insured has no interest in reinsurance contract.
Marine insurance provisions (definitions, deviation, loss, abandonment)
Section 101(a) defines marine insurance to include insurance against loss or damage to vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, securities, choses in action, instruments of debts, valuable papers, bottomry and respondentia interests, and other property/interests in respect of risks/perils of navigation, transit, or transportation, including war risks, marine builder’s risks, and personal property floater risks, covering periods while assembled/packed/crated/baled/compressed/similarly prepared, awaiting shipment, or during delays/storage/transhipment/reshipment incident thereto.
Section 101(a) includes marine protection and indemnity-related coverage: insurance connected to marine/inland marine/transit/transportation including liability for loss/damage arising from construction/repair/operation/maintenance/use of the subject matter, but excluding life insurance or surety bonds and excluding bodily injury from automobile ownership/maintenance/use.
Section 101(a) includes precious stones/jewels/jewelry/precious metals and transportation instrumentalities (excluding buildings and their fixed content/storage supplies), and includes bridges, tunnels, instrumentalities of transportation/communication, piers, wharves, docks, slips, aids to navigation and transportation, including dry docks and marine railways, dams and appurtenant facilities for control of waterways.
Section 101(b) defines marine protection and indemnity insurance as insurance against or against legal liability of the insured for loss/damage/expense incident to ownership/operation/chartering/maintenance/use/repair/construction of any vessel/craft/instrumentality in ocean or inland waterways, including liability for personal injury/illness/death and loss/damage to property of another person.
Section 102 provides that the owner of a ship has an insurable interest in all cases even if chartered by one who covenants to pay him its value in case of loss, but insurer liability is only for that part of the loss the insured cannot recover from the charterer.
Sections 103–108 establish marine insurable interest rules for hypothecated ships (bottomry excess), freightage as benefits derived by the owner, expected freightage, conditions when interest exists in charter party and goods, profits as insurable interest, and charterer’s insurable interest to extent liable to be damnified by loss.
Section 109 requires, in marine insurance, communication of all information possessed material to risk in addition to general concealment duties, and requiring exact and whole truth in relation to matters represented or disclosed on inquiry.
Section 110 treats information of third person’s belief/expectation on a material fact as material.
Section 111 creates presumption of knowledge of a prior loss if information might possibly have reached insured in usual mode and rate of transmission.
Section 112 provides that concealment in listed matters (national character; capture/detention liability; seizure from breach of foreign laws of trade; want of necessary documents; use of false/simulated papers) does not vitiate entire contract but exonerates insurer from loss resulting from the concealed risk.
Section 113 allows rescission of entire marine insurance if representation by insured is intentionally false in material respect or in respect of facts on which the character/nature of risk depends.
Section 114 provides eventual falsity of representation as to expectation does not avoid marine insurance absent fraud.
Sections 115–122 establish implied warranty of seaworthiness in marine insurance on ship/freight/cargo and define seaworthiness, when complied with, what seaworthiness extends to (proper laden, competent master/officers/seamen, appurtenances/equipment/stores), treatment across different voyage portions, effect of unreasonable delay in repairing unseaworthiness, cargo-specific seaworthiness, and documents/nationality neutrality warranties.
Sections 123–128 define voyage, course, deviation, proper deviation (including circumstances beyond control; compliance with warranty; avoiding peril; saving human life/relieving distress), improper deviation, and effect: insurer not liable for loss after improper deviation.
Sections 129–138 define total/partial loss, actual vs constructive total loss, constructive total loss right to abandon, presume actual loss from continued absence depending on circumstances, continuation of cargo liability after reshipment, insurer’s continued liability with expense types subject to insured value caps, actual total loss payment without notice of abandonment, and rules on particular average and effects of free-from-particular-average clauses, including limitations.
Section 139 states insurance confined to actual loss does not cover constructive total loss but covers any loss necessarily depriving insured of possession at port of destination of the entire thing insured.
Sections 140–157 regulate abandonment:
- Section 140 defines abandonment after constructive total loss as act declaring relinquishment to insurer.
- Section 141 allows abandonment and recovery for total loss when peril insured against causes specified conditions, including thresholds based on three-fourths (3/4) (written as A34 in the code text) for actual loss/injury/repair expense, and voyage cannot be lawfully performed without incurring more than three-fourths (3/4) expense or risk a prudent man would not take, and for cargo/freightage voyage cannot be performed or another ship procured within reasonable time with reasonable diligence without incurring similar expense/risk—freightage cannot be abandoned unless ship is also abandoned.
- Section 142 requires abandonment neither partial nor conditional.
- Section 143 requires abandonment within reasonable time after receipt of reliable information, with inquiry time if information doubtful.
- Section 144 makes abandonment ineffectual if information proves incorrect or the thing insured was sufficiently restored such that no total loss existed when abandoned.
- Section 145 requires notice to insurer (oral allowed) and submission of written notice within seven (7) days if oral notice given.
- Section 146 requires explicit notice specifying particular cause with enough to show probable cause; proof of interest or loss is not required.
- Sections 147–154 limit sustainability to causes specified, treat abandonment as transfer of interest to insurer with chances of recovery, and provide effects of payments, good faith agents’ acts at insurer risk/benefit, non-prejudice even if insurer refuses, acceptance express or implied by unreasonable silence, conclusiveness after acceptance, irrevocability unless ground unfounded.
- Sections 155–156 allocate freightage earned before/after loss based on ship abandonment insurer; if insurer refuses to accept valid abandonment, insurer is liable as actual total loss with deduction of proceeds in insured’s hands.
- Section 157 permits recovery of actual loss even if insured omits to abandon.
Sections 158–168 provide measures of indemnity:
- Section 158 makes valuation conclusive absent fraud and allows showing real value for bottomry/respondentia hypothecation when insurer had no knowledge; fraudulent valuation allows rescission.
- Sections 159–165 compute partial loss proportions, profits recovery proportions for loss, valuation application by proportion of exposed part, presumption of profit loss, open policy estimation rules for ship/cargo/freightage