Philippine Insurance Laws Revision 1914

Core definitions and insurable interest rules

Section 2 defines insurance as a contract whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event.
Section 3 allows insurance for any contingent or unknown event (past or future) that may damnify a person with an insurable interest, or create liability against him.
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 Act’s provisions so far as they can apply.
Section 6 identifies contract parties as insurer (indemnifies) and insured (indemnified).
Section 7 permits as insurers only those who hold a certificate of authority from the Insurance Commissioner.
Section 8 permits insurance for anyone except a public enemy.
Section 11 establishes insurable interests in life and health, including: (a) self; (b) persons wholly or partly depended on for education or support; (c) persons under legal obligation for payment of money or respecting property/services where death or illness might delay or prevent performance; and (d) persons upon whose life an estate or interest depends.
Section 12 establishes insurable interest in property as any interest, relation, or liability of a nature that a contemplated peril might directly damnify the insured.
Section 13 allows insurable interest to be an existing interest, an inchoate interest founded on an existing interest, or an expectancy coupled with an existing interest.
Section 14 grants a carrier or depository an insurable interest in property held up to its liability, not exceeding the thing’s value.
Section 15 denies insurability of a mere contingent or expectant interest not founded on an actual right or a valid contract.
Section 16 states the measure of insurable interest in property is the extent the insured might be damnified by loss or injury of the property.
Section 17 states the sole object of insurance is indemnity, and if the insured has no insurable interest, the contract is void.
Section 18 requires insurable interest must exist when the insurance takes effect and when the loss occurs, though it need not exist in the meantime.

What policies cover; changes, transfers, and void terms

Section 19 provides that a change of interest in any part of the thing insured, without a corresponding change of interest in the insurance (subject to “cases specified in the next four change of interest” and life/accident/health exceptions), suspends the insurance to an equivalent extent until the interests vest in the same person.
Section 20 provides that a change of interest after the occurrence of injury resulting in a loss does not affect the right to indemnity for the loss.
Section 21 provides that change of interest in one or more distinct things separately insured by one policy does not avoid insurance for the others.
Section 22 provides that change of interest by will or succession on the death of the insured does not avoid insurance; the insured’s interest passes to the person taking his interest in the insured thing.
Section 23 provides that transfer of interest by one partner/joint owner/owner in common who is jointly insured to the others does not avoid insurance even if the policy agrees it ceases upon alienation.
Section 24 renders void any policy stipulating payment of loss whether the insured has an interest, except in cases provided in Section 166, or that the policy is received as proof of such interest, and renders void any policy executed by way of gaming or wagering.

Concealment, representation, rescission, and waiver

Section 25 defines concealment as neglect to communicate what a party finds knows and ought to communicate.
Section 26 provides that concealment (intentional or unintentional) entitles the injured party to rescind the insurance contract.
Section 27 requires each party to communicate, in good faith, all material facts within his knowledge that the other has no means of ascertaining and about which no warranty exists.
Section 28 allows rescission where an insured intentionally and fraudulently omits to communicate information tending to prove the falsity of a warranty.
Section 29 limits communication obligations, requiring disclosure on inquiry only for matters known to the other; matters the other ought to know by ordinary care; matters waived by the other; matters proving or tending to prove existence of an excluded risk by warranty; and matters relating to risks excepted from the policy and not otherwise material.
Section 30 defines materiality by probable and reasonable influence of facts on the party to whom communication is due in forming his estimate of disadvantages or making inquiries.
Section 31 requires each party to communicate general causes open to inquiry that may affect political or material perils contemplated, and all general usages of trade.
Section 32 permits waiver of the right to information of material facts by policy terms or by neglect to inquire where distinctly implied in other facts communicated.
Section 33 provides that information of nature or amount of the interest of one insured need not be communicated unless in answer to an inquiry, except as prescribed in Section 49.
Section 34 states neither party is bound to communicate even on inquiry his own judgment on matters in question.
Section 35 allows representations to be oral or written.
Section 36 allows representations to be made at issuing or before issuing the policy.
Section 37 requires representation language to be interpreted under the same rules as contract language.
Section 38 treats representations as to the future as promises unless it appears they are merely belief or expectation.
Section 39 forbids a representation from qualifying an express provision in the insurance contract; it may qualify an implied warranty.
Section 40 allows a representation to be altered or withdrawn before insurance is effected but not afterwards.
Section 41 presumes a representation refers to the date the contract goes into effect.
Section 42 permits insured persons without personal knowledge to repeat information believed true from others with explanation, or submit it fully to insurer, without responsibility for truth unless it proceeds from an agent of the insured whose duty is to give the intelligence.
Section 43 deems a representation false when facts fail to correspond with its assertions or stipulations.
Section 44 grants the injured party a right to rescind from the time the representation becomes false if it is false in a material point, whether affirmative or promissory.
Section 45 makes materiality of a representation determined by the same rule as concealment materiality.
Section 46 extends Sections 25 to 47 to modifications of an insurance contract as well as original formation.
Section 47 requires that whenever the Act grants a right to rescind to the insurer, the insurer must exercise it before commencement of an action on the contract.

Policy requirements; premium receipt; policy types

Section 48 defines a policy of insurance as the written instrument setting forth the contract.
Section 49 requires every policy to specify: (a) parties; (b) amount to be insured (except open or running policies); (c) premium rate; (d) property or life insured; (e) insured’s interest in property if not absolute owner; (f) risks insured against; and (g) period insurance continues.
Section 50 provides insurance applies exclusively to proper interest of the person in whose name it is made unless otherwise specified in the policy.
Section 51 allows agency/trust beneficiaries to be indicated by describing them as agent or trustee or by other general words.
Section 52 requires that insurance by one partner/common part owner apply to co-partners/other part owners only if the policy terms are applicable to their joint/common interest.
Section 53 limits benefit under a general description of insured to those showing inclusion was intended.
Section 54 allows policies to inure to whoever becomes the owner of the insured interest during the risk’s continuance.
Section 55 states mere transfer of the thing insured does not transfer the policy; it suspends until the same person becomes owner of both policy and thing insured.
Section 56 classifies policies as open, valued, or running.
Section 57 defines an open policy as one leaving value to be ascertained in case of loss.
Section 58 defines a valued policy as expressing an agreement valuing the insured thing at a specified sum.
Section 59 defines a running policy as contemplating successive insurances with subjects defined by additional statements or endorsements.
Section 60 makes acknowledgment of premium receipt conclusive evidence of payment to bind the policy, notwithstanding a stipulation that it is not binding until premium is actually paid.
Section 61 voids any pre-loss agreement not to transfer the claim after loss has happened.

Warranty standards and effects of breach

Section 62 provides warranties may be expressed or implied.
Section 63 allows warranties to relate to past, present, future, or any/all.
Section 64 states no particular form of words is necessary to create a warranty.
Section 65 requires every express warranty made at or before policy execution to be contained in the policy or in another instrument signed by the insured and referred to as part of the policy.
Section 66 provides a statement in the policy as a fact regarding the person/thing insured or risk is an express warranty.
Section 67 provides statements intending an act/omission that materially affects risk operate as warranty that the act/omission occurs.
Section 68 provides that where performance of a future warranty is not fulfilled because a loss insured against happens before performance is due, or because performance becomes unlawful/impossible at the contract place, omission does not avoid the policy.
Section 69 states violation of a material warranty or other material policy provision by either party entitles the other to rescind.
Section 70 permits policies to declare specified provisions that, if violated, avoid the policy; otherwise breach of an immaterial provision does not avoid the policy.
Section 71 provides that breach of warranty without fraud exonerates the insurer from the time it occurs, or if broken at inception prevents the policy from attaching to the risk.

Premium payment and return of premium

Section 72 entitles the insurer to premium payment as soon as the insured thing is exposed to the peril insured against.
Section 73 requires return of premium: (a) return whole premium if no part of insured interest is exposed to perils insured against; (b) in definite-period insurance surrendered before end, return the portion corresponding to unexpired time at pro-rata rate (unless short-period rate appears on the policy face), after deducting any previously accrued claim for loss/damage.
Section 73 further provides that no holder of a life insurance policy may use these surrender-return privileges without sufficient cause as otherwise provided by law.
Section 74 denies return of premium for a particular risk if the insured peril existed and insurer liability accrued for any period however short.
Section 75 requires premium return when contract is voidable due to insurer fraud or misrepresentation (or agent fraud), or due to facts the insured was ignorant of without his fault, or when by any insured default other than actual fraud the insurer never incurred any liability under the policy.
Section 76 addresses over-insurance by several insurers, requiring ratable return proportioned to the excess of aggregate sums insured over insurable value.

Loss rules and causation; rescue; willful act

Section 77 provides insurer liability attaches only when a peril insured against is the proximate cause of the loss; insurer is not liable where the insured peril is only a remote cause.
Section 78 provides insurer liability when the insured thing is rescued from a peril insured against, and during rescue a non-insured peril permanently deprives the insured of possession, or when loss is caused by efforts to rescue from the insured peril.
Section 79 provides that where a peril is specially excepted, a loss that would not have occurred but for that peril is excepted even if the immediate cause is a non-excepted peril.
Section 80 provides insurer is not liable for loss caused by willful act or through connivance of the insured; insurer is not exonerated by insured negligence or that of his agents or others.

Fire loss notice and proof

Section 81 provides insurer is exonerated for fire insurance loss if notice is not given to the insurer by some person insured or entitled to the benefit without unnecessary delay.
Section 82 states that if preliminary proof of loss is required by the policy, the insured need not give proof sufficient in a court of justice; best evidence available at the time is sufficient.
Section 83 waives defects in notice or preliminary proof the insured could remedy if the insurer omits to specify them as grounds of objection without unnecessary delay.
Section 84 waives delay in presenting notice or proof if caused by any act of the insurer, or if the insurer omits prompt and specific objection on that ground.
Section 85 provides that where policy requires certificate/testimony of a person other than the insured, insured satisfies the requirement by exercising reasonable diligence to procure it; if refused, insured must furnish reasonable evidence refusal was not induced by just grounds of disbelief in certified facts.

Double insurance and contribution

Section 86 defines double insurance as several insurers separately insuring the same person in respect of the same subject and interest.
Section 87 provides rules when insured is overinsured by double insurance:
- (a) the insured may claim from insurers in any order selected up to each insurer’s several liability;
- (b) in valued policy claims, insured must credit sums received under other policies against valuation;
- (c) in unvalued policy claims, insured must credit sums received under other policies against full insurable value;
- (d) if insured receives excess over valuation (valued) or excess over insurable value (unvalued), insured holds the excess in trust for insurers according to their contribution rights;
- (e) each insurer must contribute ratably between insurers to the loss in proportion to liability under its contract.

Reinsurance and effect on original insured

Section 88 defines reinsurance as where an insurer procures a third person to insure the insurer against loss or liability by reason of the insurer’s original insurance.
Section 89 requires that where an insurer obtains reinsurance, he must communicate all representations of the original insured and all material information he has, whether acquired before or after.
Section 90 presumes reinsurance is indemnity against liability, not merely damage.
Section 91 provides the original insured has no interest in the reinsurance contract.

Marine insurance: seaworthiness, voyage, deviation, loss

Section 92 defines marine insurance as insurance against navigation-connected risks to which a ship, cargo, freightage, profits, or other insurable interest in movable property may be exposed during a voyage or fixed period.
Section 93 grants the ship owner an insurable interest even when chartered, but limits insurer liability to the portion the insured cannot recover from the charterer.
Section 94 limits insurable interest of a ship hypothecated by bottomry to the excess value over the amount secured by bottomry.
Section 95 defines freightage as all benefits derived from chartering or employment for carrying owner’s or others’ goods.
Section 96 grants insurable interest in expected freightage that would have been earned but for a peril insured against or another peril incident to the voyage.
Section 97 limits existence of expected freightage interest in charter party scenarios to when the ship has broken ground and goods are ready for loading or contracts exist for putting goods on board and both ship and goods are ready for the voyage.
Section 98 grants insurable interest in profits to one who has an interest in the thing from which profits are expected.
Section 99 grants the charterer insurable interest in the extent he is liable to be damnified by ship loss.

Marine concealment and representation effects

Section 100 requires in marine insurance, beyond Section 27, communication of all material information possessed by each party and state exact and whole truth regarding matters represented or assumed to be disclosed.
Section 101 treats belief/expectation by a third person about a material fact as material information.
Section 102 presumes the insured knew of a prior loss if information could possibly have reached him through usual transmission and communication rates.
Section 103 provides concealment of certain matters does not vitiate the entire marine insurance; it merely exonerates the insurer from losses resulting from the concealed risk, including national character, capture/detention liability, seizure from foreign trade-law breach, want of necessary documents, and use of false/simulated papers.
Section 104 allows insurer rescission of entire marine contract if a representation by the insured is intentionally false in any material respect or regarding facts on which risk character/nature depends.
Section 105 provides eventual falsity of representation as to expectation does not avoid the contract absent fraud.

Implied warranties and seaworthiness

Section 106 implies a warranty that the ship is seaworthy in marine insurance upon a ship or freight or upon anything subject to marine insurance.
Section 107 defines seaworthiness as reasonably fit to perform services and encounter ordinary perils of the voyage contemplated.
Section 108 provides seaworthiness warranty is satisfied if seaworthy at the commencement of risk, except:
- (a) if insurance is for a specified time, seaworthiness must exist at commencement of every voyage the ship may undertake during that time; and
- (b) if cargo insurance involves transshipment at an intermediate port, each vessel upon which cargo is shipped/transshipped must be seaworthy at commencement of its particular voyage.
Section 109 makes implied warranty extend beyond structure to proper loading; competent master; sufficient competent officers/seamen; and requisite appurtenances/equipment and stores for the voyage.
Section 110 provides compliance is measured by each day in repairs: warranty is complied with if ship is seaworthy at commencement of each day in repairs with reference to that portion of voyage.
Section 111 provides unreasonable delay in repairing unseaworthiness exonerates insurer from liability for losses arising therefrom.
Section 112 states a ship may be seaworthy for ship insurance but unseaworthy for cargo insurance if unfitted to receive cargo.
Section 113 provides where nationality/neutrality is expressly warranted, implied warranty includes carrying requisite documents showing nationality/neutrality and not carrying documents casting reasonable suspicion.

Voyage, deviation, and insurer liability

Section 114 provides that where voyage is described by beginning and ending places, the insured voyage conforms to mercantile usage course of sailing between them.
Section 115 provides that if course is not fixed by mercantile usage, the insured voyage is the most natural, direct, and advantageous way as would seem to a master of ordinary skill and discretion.
Section 116 defines deviation as departure from the insured course, unreasonable delay in pursuing the voyage, or commencement of an entirely different voyage.
Section 117 states a deviation is proper when caused by uncontrollable circumstances; necessary to comply with a warranty; necessary to avoid peril whether insured or not; made in good faith on reasonable grounds to avoid peril; or made in good faith to save human life or relieve another vessel in distress.
Section 118 provides every deviation not specified in Section 117 is improper.
Section 119 provides insurer is not liable for loss happening to an insured thing subsequently to an improper deviation.

Marine loss types and abandonment framework

Section 120 provides a loss may be total or partial.
Section 121 provides any loss not total is partial.
Section 122 classifies total loss as actual or constructive.
Section 123 defines actual total loss as including total destruction; sinking/breaking up; damage rendering it valueless; or any event entirely depriving owner of possession at port of destination.
Section 124 defines constructive total loss as giving insured a right to abandon under Section 132.
Section 125 provides actual loss may be presumed from continued absence of ship without being heard of, depending on circumstances.
Section 126 requires that when perils insured against prevent completing voyage at an intermediate port, the master must exertion to procure another ship in the same/contiguous port to convey cargo to destination, and insurer liability continues after reshipment.
Section 127 adds liability for damages, expenses of discharging, storage, reshipment, extra freightage, and all other expenses incurred saving cargo reshipped under Section 126, up to the amount insured.
Section 128 provides on an actual total loss, insured is entitled to payment without notice of abandonment.
Section 129 provides no particular average liability exists (where policy frees from particular average) for losses not depriving insured of possession at port of destination, even if entirely worthless, but insurer remains liable for proportion of general average loss.
Section 130 states insurance confined to actual total loss does not cover constructive total loss, but covers loss necessarily depriving insured of possession at port of destination of the entire thing insured.

Abandonment: right, timing, notice, effects

Section 131 defines abandonment as act after constructive total loss declaring insurer that insured relinquishes his interest.
Section 132 permits abandonment (and recovery for total loss) when cause is a peril insured against and thresholds are met:
- (a) if more than three-fourths in value is actually lost or would require spending to recover it from the peril; or
- (b) if injured to reduce value by more than three-fourths; or
- (c) if ship cannot be lawfully performed without incurring expense to insured of more than three-fourths of thing’s value or without incurring risk a prudent man would not take; or
- (d) if cargo/freightage cannot be performed nor another ship procured within reasonable time and diligence to forward cargo without incurring like expense or risk (and freightage cannot be abandoned unless the ship is also abandoned).
Section 133 requires abandonment be neither partial nor conditional.
Section 134 requires abandonment be within a reasonable time after receipt of reliable information; if information is doubtful, insured gets reasonable time to inquire.
Section 135 provides abandonment becomes ineffectual if based information proves incorrect or if thing restored so that in fact no total loss exists at time abandonment was made.
Section 136 allows abandonment notice by oral or writing.
Section 137 requires notice of abandonment be explicit, specify particular cause, need only state enough to show probable cause, and need not be accompanied with proof of interest or loss.
Section 138 provides abandonment can be sustained only on the cause specified in the notice.
Section 139 provides abandonment is equivalent to transfer of insured’s interest to insurer, including all chances of recovery and indemnity.
Section 140 grants if marine insurer pays loss as if actual total loss, insurer is entitled to what remains of insured thing or proceeds/salvage as if formal abandonment occurred.
Section 141 provides that after loss, good-faith acts by agents of insured regarding the insured thing are at risk of insurer and for insurer’s benefit.
Section 142 provides properly given notice does not prejudice insured rights even if insurer refuses to accept abandonment.
Section 143 allows acceptance express or implied from insurer conduct; insurer silence after notice is not acceptance.
Section 144 makes acceptance conclusive and admits loss and sufficiency of abandonment.
Section 145 makes accepted abandonment irrevocable unless the ground proves unfounded.
Section 146 provides on accepted abandonment of a ship: freightage earned before loss belongs to insurer of freightage; freightage subsequently earned belongs to insurer of ship.
Section 147 provides if insurer refuses to accept a valid abandonment, insurer is liable as upon an actual total loss, deducting proceeds that come into insured’s hands.
Section 148 provides that if insured omits to abandon, insured may nevertheless recover actual loss.

Marine indemnity calculation and valuation rules

Section 149 makes valuation in marine policy conclusive for adjusting partial or total loss when insured has some interest at risk and no fraud by insured, except that if thing hypothecated by bottomry/respondentia before insurance without knowledge of person procuring insurance, insured may show real value; valuation fraudulent in fact allows insurer to rescind.
Section 150 requires marine insurer pay partial loss only for proportion of amount insured as loss bears to value of whole interest.
Section 151 provides where profits are separately insured, insured recovers proportion of profits equivalent to proportion the value of property lost bears to value of the whole.
Section 152 provides in valued policies of marine insurance on freightage or cargo, valuation applies only in proportion to the part exposed to risk.
Section 153 provides that when profits are valued and insured, loss of profits is conclusively presumed from loss of the property out of which profits are expected to arise, and valuation fixes their amount.
Section 154 sets open-policy valuation rules:
- (a) ship value includes permanent value additions and items necessary to prepare for the voyage at risk commencement;
- (b) cargo value is actual cost when laden, or market value at time and place of lading plus purchasing/placing-on-board charges, excluding losses from raising money, drawbacks, market fluctuations at port of destination, and en-route/arrival expenses;
- (c) freightage value is gross freightage exclusive of primage, without reference to cost of earning it;
- (d) cost of insurance is added to estimated values.
Section 155 provides if cargo arrives at destination damaged, insured loss is same proportion of value measured by damaged-market price at that port versus market price if sound.
Section 156 requires marine insurer liability for expenses attendant upon a loss forcing ship into port to be repaired; and if policy stipulates insured must labor for recovery, insurer pays such labor expense in addition to total loss if later occurs.
Section 157 requires insurer liability for contribution made by insured toward general average loss caused by a peril insured against.
Section 158 allows insured with contribution demand to claim whole loss from insurer, subrogating insurer to insured’s right to contribution, but bars such claim after separation of interests liable to contribution, or when insured had right/opportunity to enforce contribution from others and neglected