insurance notes midterms 2013

7/30/2019 Insurance Notes Midterms 2013

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BlueSapphiresNotesinInsurance|Midterms2013|Concealment|Representation|Policy|Warranties 1

Aquino:chapter6ASCERTAININGANDCONTROLLINGRISKS

4primaryconcernsofinsuranceparties1. correctestimationoftherisk

a. enablestheinsurertodecidewhetherhewillassumeit2. precisedelimitationoftherisk

a. determinestheextentofthecontingentduty3. controloftheriskafteritisassumed

a.

fortheinsurertoguardagainsttheincreaseoftheriskonchangeofconditions4. determiningwhetherthelosshasoccurredandamountoftheloss

devicestoascertainandcontrolrisks

1. concealment2. representation3. warranty4. condition5. exception

thecorrectestimationoftherisko ifallmaterialinformationaredisclosedandtheinformationdisclosedcanbereliedupon

delimitationo byusingexceptionsthatareinsertedinthepolicyorstatedintherider

controloftherisko resortingtothepromissorywarrantiesandconditionsthatwillpreventtheoccurrenceoftherisksafterthe

policyhasbeenissued

CONCEALMENT(section26)

neglecttocommunicatethatapartyknowsandoughttocommunicateo mustcommunicateingoodfaithallfactswithinhisknowledgewhicharematerialtothecontracto theobligationofeachparty

thedutytodiscloseisrequiredbecauseinsurancecontractsareuberrimaefidaeo utmostgoodfaith

- insuranceisacontractuponspeculation

MATERIALITY onlymaterialfactsarerequiredtobedisclosed materialifitwillaffecttheinsurersactiononhisapplication

o approvingwithhigherpremiumorrejectingorfixingtermsandconditions materialiftheywillaffectthedecisionoftheinsuredtoenterintotheinsurancecontracts

section31

determinednotbytheevento solelyontheprobableo reasonableinfluenceofthefactsuponthepartywhomthecommunicationisdue

generallymaterialo relatestophysicalormoralhazard

thetestofmaterialityo istheeffectwhichtheknowledgeofthefactinquestionwouldhaveonthemakingofthecontract.

- ifnotinthepolicythatmakesitanobligationtodiscloseduringthelifeofthecontractthenthereisnodutytomakeadisclosureforthefactsoccurringaftertheinsurancetakeseffect

theprincipalquestiontherefore,mustbe:

- wastheinsurermisledordeceivedintoenteringacontractobligationorfixingthepremiumofinsurancebywithholdingofmaterialinformationoffacts


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CAUSATIONNOTNECESSARY

thematterconcealedneednotbethecauseoftheloss theinsuredneednotdieofthediseaseifhehadfailedtodisclosetotheinsurertheexistenceofthedisease.

o Itissufficientthathisnondisclosuremisledtheinsurerinforminghisestimates

Requisitesonthegroundofconcealment:

1. partyknowsthefactconcealed.Oratleastoughttoknow2. materialfacts3. nowarrantyisextendedbythepartyregardingthefactconcealed4. theotherpartydoesnothavethemeansofascertaining

KNOWLEDGEOFTHEAGENTOFTHEINSURED

knowledgeontheagentoftheinsuredcanbeimputedtotheinsuredhimselfo dutyoftheagenttoacquirethecommunicateinfoofthefactso possiblefortheagent(reasonablediligence)tomakethecommunicationbeforethemakingoftheinsurance

contract

theprincipal-insuredisboundwiththeknowledgeofhisagentwhosedutyistogiveinformation

WHENTHEREISNOCONCEALMENT

Section30

1. knownbytheotherparty2. exerciseofordinarycare,theotherpartyoughttoknowandthattheotherpartyhasnoreasontosupposehimignorant3. waivescommunication4. proveortendtoprove theexistenceofariskexcludedbyawarranty5. riskexceptedfromthepolicy

Section32

6. eachpartytothecontractisboundtoknowallthegeneralcauseswhichareopentohisinquirytoeachothera. whichmayaffectthepoliticalormaterialperilscontemplated

Section33

7. therighttoinformationofmaterialfactswaivedbythetermsoftheinsuranceorbyneglecttomakeinquiryastosuchfacts,impliedinotherfactsofwhichinformationiscommunicated

a. matterisincludedinthegeneralusageoftrade

Section34

8.

informationofthenatureoramountoftheinsuredproperty,isnotdisclosedunlessinanswertoaninquiry

Section35

9. informationofthepartysownjudgmentuponthemattersinquestion

FACTSTHATNEEDNOTBEDISCLOSED

heneednotbetoldgeneraltopicsofspeculation theinsurerisboundtoknoweverycause

o naturalperilso difficultyofthevoyageo kindofseasono probabilityoflightingo hurricaneso earthquakes

insurerisboundtoknoweverycausewhichmayoccasioninpoliticalperils

JUDGMENTOFOPINION

opinionodtheinsuredneednotbedisclosed theremustbegoodfaithandnointenttodeceive

althoughfalse,arepresentationoftheexpectationintentionbelief,opinionorjudgmentwillnotavoidthepolicyifthereisnoactualfraudininducingtheacceptanceofrisk

answersofanapplicantwhoisnotadoctorregardingthemedicalhistoryofhiswifelargelydependsonopinionratherthanfact.


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o SCsaidnoconcealmentsolongastheanswersaremadeingoodfaithandwithoutintenttodeceiveeveniftheanswerswhichareinthenatureofopinionsareuntrue.

KNOWLEDGEOFTHEINSURER

at the time of the issuance of the policy of insurance, has knowledge of existing facts which if insisted onwouldinvalidatethecontractfromitsveryinception

o suchknowledgeconstituteswaiverofconditionsinthecontractinconsistentwiththefactsandtheinsurerisestoppedfromassertingthebreachofconditions

reason:

toallowacompanytoacceptonesmoneyforpolicyofinsurancewhichitthenknowstobevoidandofnoeffect thattheinsuredbelieveittobevalidandbinding,issocontrarytothedictatesofhonestyandfairdealingandsoclosely

relatedtopositivefraud

itwouldallowthecompanytotreatthepolicyasvalidlongenoughtogetthepremiumonitandleaveitatlibertytorepudiateitthenextmoment.

executeabindingcontractratherthantohavedeceivedtheinsuredintothinkingheisinsuredwhenunfactheisnotandtohavetakenhismoneywithoutconsideration

INTENTIONALANDUNINTENTIONALCONCEALMENT

Section27

concealmententitlesthepartytorescindacontractofinsurance

- everyconcealmentwhetherarisingfromaccident,negligence,inadvertenceormistakeifmaterialwillbeequallyfataltothecontractasifitwereintentionalorfraudulent

goodfaithisnotadefenseinconcealment

generallyintentionalorunintentionalconcealmentissuperfluous

- except- section29

o intentionalorfraudulentomissiononthepartofoneinsured,tocommunicateinformationofmattersprovingortendingtoprovethefalsityofawarranty,entitlestheinsurertorescind

- theremaybematerialconcealmenteveniftheinsuredhasnoknowledgeoftheexistenceofadutytodisclose.- Amanmayhaveactedwithgoodfaithintheordinarytermofthephraseyetstillbeheldtohaveactedintheutmost

goodfaithinthelegalsense.

KNOWLEDGEOFTHEFACTCONCEALED actualknowledgeoftheinsuredisnotnecessarytogivetheinsurancecompanytherighttoavoidthepolicyonthe

groundofconcealment

majorityviewabsenceofknowledgeofthefactsconcealedwillnotdeprivetheinsureroftherighttoinvokeconcealment

o unintentionalconcealmentisstillconcealment hetookthepolicybutisnotawareofsuchfact

o concealmentisnotintentional thereisconcealmentevenifthepartydoesnotknowbutoughttoknowthematter presumedknowledge notawareofthenatureoftheillnessbyreasonofnegligenceorindifference

minority view-thecontractcannotbe rescindedon theground ofconcealment ifnon-disclosingpartydoesnotknowthefact

involved.

onecanconcealonlyifheknowswhattoconceal mistake,goodfaithandnegligencewillnotexcusetheinsuredformmaterialconcealment

exceptions

1. mattersallegedlyconcealedisamatterofopiniona. ex.Medicalconditionoftheinsuredisamatterofopinionwhichcannotbeinvokedso longastherewasno

intenttodeceive

2. whentheinsurerwaivedhisrighttotheinformationasinthecasewheretheinsuredgaveanimperfectanswerWAIVEROFINSURER

Aquestionwasnotansweredat allorimperfectly answered thebutinsured and theinsurerissuesa policywithoutfurtherinquiry,theywaivetheimperfectionoftheanswerandrendertheinformationimmaterial.


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Insurertooeagertoaccepttheapplicationandreceivetheinsuredspremium.Itwouldbeinequitablenowtoallowtheinsurertoavoidliabilityunderthecircumstances

REMEDY

- thepresenceofconcealmententitlestheinsurerorescindtheinsurancecontract- therighttorescindshouldbeexercisedprevioustothecommencementofanactiononthecontract

note: concealmentwhetherintentionalorunintentionalentitlestheinjuredpartytorescindthecontractofinsurance defenseisavailableeveniftheinsuredisunawareofherfatalillness factismaterialwhenitcouldcertainlyaffectthedecisionoftheinsurertoenterintotheinsurancecontract collusiononthepartoftheinsuredandtheinsuranceagentandthephysicianwhichvitiatesthepolicy.Itisadeliberateattempttodefraudtheinsurer false statement by the insurers agent hence it should be the insurer who should bear the effects of its agentsmisconduct.(nocollusion) materialityistobedeterminednotbytheeventbut

o solelybytheprobableandreasonableinfluenceoffactsuponthepartywhomthecommunicationisdue,informinghisestimateoftheproposedcontract,orinmakinghisinquiries theinsuredneednotdieofthediseasehehadfailed todisclosetothe insurer.It issufficientthathisnon-disclosure

misledtheinsurerinforminghisestimatedoftherisksoftheproposedinsurancepolicyorinmakinginquiries.

REPRESENTATION

statementsmadetogiveinformationtotheinsurertoinducehimtoenterintotheinsurancecontract collateralcommunicationmadetotheotherpartyinwritingorbywordofmouth

TIMEOFREPRESENTATION

Section37

atthetimeorbeforetheissuanceofthepolicyo statementsmadeafterthepolicytakeseffectwillnolongerhaveanybearingonthedecisionoftheinsuredto

enterintothecontract.

Exceptiontotherule

Section47

modificationofacontractofinsuranceastoitsoriginalformation.o Representationsmayalsobemadeatthetimeoforbeforetherenewalofthepolicy

DISTINCTIONSANDSIMILARITIES

CONCEALMENT REPRESENTATION

Anomission(nondisclosure) Positiveassertion

Cannotrefertofutureacts(meaningpastactsnisiya) Canpertaintothefuturebecauseitispromissory

Testofmaterialityapplies Testofmaterialityapplies

Partycanrescind Partycanrescind

KINDS

representationmaybeastoformo oralo written

representationmaybeastothenatureo affirmative

dealingwithfactsexistingatthetimethecontractismadeo promissory

statementsmadebytheinsuredconcerningwhatistohappenatthetimetheinsuranceisalreadyeffective

section39

astothefutureisdeemedapromiseo unlessitappearsthatiswasmerelyastatementofbelief

INTERPRETATION

ruleo construedliberallyinfavoroftheinsuredandrequiredtobeonlysubstantiallytrue


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section42

representationispresumedtorefertothedateonwhichthecontractgoesintoeffect

TESTOFMATERIALITY

Section46

materialmisrepresentationiftheknowledgeofonepartythereofwillaffecttheinsurersactiononhisapplication,eitherbuyapprovingitwiththecorrespondingadjustmentforahigherpremiumorrejectingthesameorinfixingtheterms

andconditionsofthepolicy

representationastoageinlifeinsurance

anyamountpayableorbenefitaccruingunderthepolicyshallbesuchastopremiumpaidwouldhavepurchasedatthecorrectage.

- misstatementastotheagedoesnotavoidthepolicyo resultwillbethatsuchpremiumpaidwouldhavebeenpurchasedatthecorrectageo thebenefitsthatwillbepaidbytheinsuredwouldhavepurchasediftheagehadbeencorrectlystates.

Nopersoncantestifyinhisownageexceptfromhearsay- Soifmisstatedtheamountoftheinsurancewillbeadjusted

theageoftheinsuredisthechiefcorner-stoneofthelifeinsurancestructure.o Birthcert

If wala gi require then the insurer merely relied on the representation of the insured, and onlyrecourseistomakeanadjustmentonthepremiumifthereismisstatement

Misstatementshouldbedoneingoodfaithforitnottobeagroundtorescindiftheintentistodeceive

ERRONEOUSDESCRIPTIONOFBUILDINGINFIREINSURANCE

withoutthefaulttotheinsuredcannotbeconsideredmaterialrepresentation. Themistakeoftheagentsoremployeesoftheinsurancecompanycannotprejudicetheinsured.

REMEDYSection44

If therepresentation is false ina material point,whetheraffirmative orpromissory, theinjuredparty isentitled torescindthecontractfromthetimewhentherepresentationbecomesfalse

Therighttorescindtotheinsureriswaivedbytheacceptanceofpremiumpaymentsdespiteknowledgeofthegroundforrescission

RESCISSIONISUNAVAILABLE1. whenthereisestoppel

a. insureracceptedthepremiumpaymentsdespiteknowledgeofthegroundforrescission2. whenthereiswaiver3. actionhasalreadycommencedonthecontract4. incontestableclauseapplies

WARRANTIES

anaffirmationoffactorpromisethatformspartofthetermsandconditionsofthepolicy a warranty is a statement or promise set forth in the policy or by reference incorporated therein, the untruth or

nonfulfillmentrendersthepolicyvoidablebytheinsurer

section68

awarrantymayrelatetothepartthepresentandfutureo safety-valvebywhichinsurercanensurethataninsuranceisactuallyorthecharacterattributedtoit.

KINDSOFWARRANTIES

1. expressa. statedinthepolicyorattachments

2. implieda. naturalelementofthecontractimposedbylawandarepartofthepolicywithoutneedthatitbestated

i. ex.Impliedwarrantyofseaworthinessinmarineinsurance3. affirmativewarranty

a. existatthetimetheyaremadeb. undertakingthatsomepositiveallegationoffactistrue

4. promissorywarranty


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a. stipulatesthatcertainthingsaretobedoneoraspecifiedconditionshallexistduringthecurrencyoflifeoftheinsurancecontract

b. onepartyisboundbytheexecutorstipulation

RULESONPROMISSORYWARRANTIES

Section72

astatementinapolicywhichimpartsthatitisintendedtodoornottodoathingwhichmateriallyaffectstherisk,isawarrantywhatsuchactoromissionshalltakeplace.

Section73

whenbeforethetimearrivesfortheperformanceofawarrantyrelatingtothefuturealossinsuredagainsthappens,orperformancebecomesunlawfulattheplaceofthecontractorimpossible,theomissiontofulfillthewarrantydoesnot

avoidthepolicy.

promissorywarrantymayeitherbeo positiveacto omission

FORMALITIESOFEXPRESSWARRANTY

Section69

noparticularformofwordsisnecessarytocreateawarranty

section70

everyexpresswarrantymadeatorbeforetheexecutionofapolicy,mustbecontainedinthepolicyitself,orinanotherinstrumentsignedbytheinsuredandreferredtointhepolicyasmakingpartofit

2waysofmakinganexpresswarranty

1. containedinthepolicyitself2. expressedinanotherinstrumentprovidedthattheseparateinstrumentissignedbytheinsuredandreferredtointhe

policy

EXAMPLESOFEXPRESSWARRANTY

Section71

statementinapolicyofamatterrelatingtothepersonofthinginsuredortotheriskasafactisanexpresswarranty. Example: Astatementinthelifeinsurancepolicythattheinsuredhasnotbeeninvolvedinanyvehicularaccidentforthepast10

yearsorhasneverbeenchargedwithanycrimeinvolvingmoralturpitudeisanexpresswarranty. Astatementthatthereisnogasolineintheinsuredbuildingisawarrantybecauseitrelatestotheriskinsuredagainst

BREACHOFWARRANTYBYTHEINSURED

- rendersthecontractdefeasibleo inordertoavoidthepolicytheinsurermustprovesuchbreachconsistentwiththerulethatanyviolationmust

beestablishedbythepersonwhoismakingsuchallegation

- theinsurermaywaivehisrighttoavoidthepolicyincaseofbreachbytheinsured.o Expressorimplied

REMEDY

Apartymayrescindthepolicyifthereisabreachofwarrantyinthepartoftheotherparty.

Section74

violationofamaterialwarrantyentitlestheothertorescindSection75

apolicymaydeclarethataviolationofspecifiedprovisionsthereofshallavoidit,otherwisethebreachofanimmaterialprovisiondoesnotavoidthepolicy

allowedtorescindoravoidonlyinmaterialbreach breachofanimmaterialprovisiondoesnotavoidthepolicy


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DISTINCTIONS

WARRANTY REPRESENTATION

Partofthecontract Notpartofthecontract

(butacollateralinducement)

Writtenonthepolicyoritsarider Oralorinwriting

Presumedtobematerial Mustbeestablishedthatitismaterial

TheremustbeStrictcompliance Itmustbesubstantiallytrue.

riskcanalsobelimitedorcontrolledusing

o exceptionso exclusionsando conditions

CONDITIONS

- collateralterms- natureofcollateralpromisesorstipulations1. promisesorobligationsregardingclaimsprocedurethatarenotfundamentaltothevalidityofthecontract2. conditionsconferringmorerightstotheinsurerenlargingorrepeatingtheminimumrightsprovidedbylaw.

Termsandconditionsconstitutethemeasureoftheinsurersliabilityandcompliancetherewithisaconditionprecedenttotheinsuredsrighttorecoveryfromtheinsurer

Theburdeninontheinsurertoprovethattheinsuredbreachedtheconditionthatisimposedsincebreachofconditionisa

defensethatwillrelievehiminhisliabilityunderthepolicytheonusofproofisontheinsurerwhowillinvokesuchdefense

EXCEPTIONS,EXCLUSIONOREXEMPTION

Thepolicyshouldexpresssuchlimitationinclearandunmistakablelanguage.

- iftheinsurerwantstoincludetheriskofarrestoccasionedbyordinaryjudicialprocess,itmustbeexpresslysoprovideinthepolicywithoutambiguity.

o If thetermsaredoubtfulorobscurethe samemust beofnecessity be interpreted or resolved againsttheinsuredwhocausestheambiguity.

Exceptionstothegeneralcoverageareconstruedmoststronglyagainstthecompany.- 2interpretations-theonemostfavorabletotheinsuredisadopted.- Theobligationtoprovethatthelossiscoveredbytheexceptionrestsupontheinsurer.- Personal accident insurance policy specifically enumerated10where there is no liability attaches to the insurance

companyforanyinjury,disabilityorlosso Theprinciple of expressiounius est exclusionalterius themention of one thing implies the exclusion of

anotherthing

Contractsoinsuranceshouldbeconstruedliberallyinfavoroftheinsuredandstrictlyagainsttheinsurer.Ambiguityinthewords

oftheinsurancecontractshouldbeinterpretedinfavorofitsbeneficiary

INCONTESTABLECLAUSE

Section48

wheneverarighttorescindacontractofinsuranceisgiventotheinsurer suchrightmustbeexercisedprevioustothecommencementofanactiononthecontract.

o Afterapolicyoflifeinsurancemadepayableon thedeathoftheinsuredshallhavebeenin forceduringthelifetimeoftheinsuredforaperiodof2yearsfromthedateofitsissueorofitslastreinstatement.

oThe insurer cannot prove that the policy is void ab initio or rescindable by reason of the fraudulentconcealmentormisrepresentationoftheinsuredorhisagent

MANDATORYINCONTESTABLECLAUSE

Lifeorendowmentpolicy:

incontestableafteritshallhavebeeninforceduringthelifetimeiftheinsuredforaperiodof2yearsfromitsdateofissueasshowninthepolicy

o exceptfornon-paymentofpremiumando exceptforviolationoftheconditionsofthepolicyrelatingtomilitaryornavalserviceintimeofwar


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grouplifeinsurance

validityofthepolicyshallnotbecontestedo exceptfornonpaymentofpremiumsafterithasbeeninforcefor2yearsfromitsdateofissue,

industriallifeinsurancepolicy

incontestableafterithasbeeninforceduringthelifetimeoftheinsuredforaspecifiedperiodnormorethan2yearsfromitsdateofissue

o exceptnon-paymentofpremiumo exceptforviolationofconditionsofpolicyrelationtonavalormilitaryserviceo exceptprovisionsrelatingtobenefitsintheeventofdisability

RATIONALE

Incontestable clause is upheld in lawnot for thepurposeof upholding fraud but for thepurposeof shutting offharvesting

defenses.

Theclauseisdesignedtoinducetheinsurertoinvestigateandactwithreasonablepromptnessifitwishestoavoidthepolicy.

- itisunfairfortheinsurertowaitforthedeathoftheinsuredwhoobviouslycannolongerdefendhisclaim.

after2yearsthedefensesofconcealmentormisrepresentation,nomatterhowpatentorwellfoundednolongerlieo congress felt thiswasa sufficientanswerto thevarious tacticsemployedby insurance companiesto avoid

liability

theinsureddiesbeforetheexpirationofthe2yearperiod,thebeneficiariescontendedthattheinsurancecompanynolongerhad

therighttorescindthecontractofinsuranceasrescissionmustallegedlydoneduringthelifetimeoftheinsuredwithin2yearsandpriortocommencementofaction.

- theSCrejectedthecontentionbecausepetitionersinterpretationwouldgiverisetotheincongruoussituationwherethebeneficiariesofaninsuredwhodiesaftertakingoutandpayingforalifeinsurancepolicywouldbeallowedtocollecton

thepolicyeveniftheinsuredfraudulentlyconcealedmaterialfacts

theincontestableclausecannotbeinvokedintheffcases:

1. non-paymentofpremiums2. violationoftheconditionofthepolicyrelatingtomilitaryornavalserviceintimesofwar3. propertyinsurance

WARLIMITATIONRIDERORWARCLAUSE

- notintheinsurancecodeo but themomentthe partiesinclude awarclause in thepolicy, thebeneficiaries canno longerinvokethe

incontestableclauseifthewarclauseisviolated.

- Thewarriderclauselimitstheliabilityoftheinsurerintheeventthattheinsuredlooseshislineasaresultofwar.

DEFENSESOFINSUREDAGAISNTREVOCATION

1. guaranteedinsurabilityclausea. statementthattendtoshowthattheinsuredisuninsurablecannotbeusedagainsthimintheffcase:

i. insurancehasbeeninforcepriortothecontestforaperiodof2yearsduringthepersonslifetimeii. ifthestatementisnotinwritingandornotsignedbytheinsured

2. failuretoinvokebeforecommencementoftheaction3. waiver4. estoppel

TIMELINESSOFTHERESCISSION

Previoustothecommencementofanactiononthecontract

WAIVERIntentionalrelinquishmentofaknownright

- express- implied

.therighttoinformationofmaterialfactsmaybewaivedwitherbythetermsoftheinsuranceorneglecttomakeinquiry.


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ESTOPPEL

Admissionorrepresentationisrenderedconclusiveuponthepersonmakingitandcannotbedeniedordisprovedastheperson

relyingthereon.

- estoppelinpais- estoppelbydeed

noelementofconsent

one can no longer rescind the policy if he accepted the payment of premium although he is already awareof theexistenceofthegroundtorescindthesaidpolicy.

DeLeon:TITLE4CONCEALMENT

Section26

neglecttocommunicatethatwhichapartyknowsandoughttocommunicate calledconcealment

4primaryconcernsofparties

1. correctestimationoftheriska. insurertodecidewhetherheiswillingtoassume

2. precisedelimitationoftheriska. determinestheextentofcontingentduty

3. controloftheriskafteritisassumeda. insurertoguardagainsttheincreaseoftheriskinchangeofconditions

4. determiningwhetheralossoccurredandamountoftheloss

devisesforascertainingandcontrollingrisk

1. concealment2. representation3. warranty4. condition5. exceptions

concealmentandrepresentationtosecurethesameinformationwiththeapplicant

warrantiesandconditions-dealingwithconditionsexistingattheinceptionofthecontract

exceptions-forthepurposeifmakingmoredefiniteandcertainthegeneralwordsusedtodescribetherisktheinsurerundertook

tobear.

- makingmoredefinitethecoverageindicatedbythegeneraldescriptionoftheriskbyexcludingcertainspecifiedrisks.

Generaldescriptionoftheriskconcernedhas2parts:

1. specificproperty2. specificationofsuchperilstowhichthatpropertyinterestwouldbeexposed

REQUISITESOFCONCEALMENT

1. partyknowsthefactwhichheneglectstocommunicate2. suchpartyconcealingisdutyboundtodisclosesuchfact3. partyconcealingmakesnowarranty4. theotherpartydoesnothavethemeansofascertainingthefactconcealed

warrantyismadeofthefactconcealed,thenon-disclosureofsuchfactisnotconcealmentbutconstitutesaviolationofthewarranty


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section27

intentionalorunintentionalconcealmententitlestheinjuredpartytorescindthecontractofinsurance

EFFECTOFCONCEALMENT

makesthecontractvoidableattheinsurersoptiono contractsareuberrimaefidaecontractofutmostgoodfaith

notonlythematerialfactswhichtheapplicantknowsbutextendstothosewhichheoughttoknowbeingnecessaryfortheinsurertoevaluatetherisk,eithertochargeahigherpremiumorrefuseto

issueapolicyaltogether.

Itisnodefensetopleadmistakeorforgetfulness

PROOFOFFRAUDINCONCEALMENT

- theinsurerneednotprovefraudinordertorescindacontractonthegroundofconcealment.

Existence of fraud isnotrequired0 theduty of communication is independent of theintentionand isviolated by thefact of

concealment

thelegaleffectofconcealmentwhetherintentionalorunintentionalisthesameo itentitlestheinsurertorescindthecontractofinsuranceo concealmentdefinedasnegligencetocommunicatethatwhichapartyknowsandoughttocommunicate.

REASON

- impossiblefortheinsurertoprotectitselfanditshonestpolicyholdersagainstfraudulentandimproperclaimsSECTION27 SECTION29

Aconcealmentwitherintentionalorunintentionalentitledthe

injuredpartytorescindacontractofinsurance

an intentional and fraudulent omission on the part of one

insured, to communicate information of matters proving or

tendingtoprovethefalsityofawarranty,entitlestheinsurer

torescind.

Basisoftheprovision

misleadsordeceivestheinsurerintoacceptingtheriskoracceptingitattherateofpremiumagreedupon.o Theprincipalquestion

Wasthe insurermisled tordeceived into entering a contract obligationor fixing thepremiumofinsurance by a withholding of material information or facts within the assureds knowledge or

presumedknowledge?

awareoftheailmentbuthonestlybelievedthatitwasnotmaterial o theconcealmentisnotfraudulentorintentional

awareoftheailmento thereisfraudulentconcealmentwheretheailmentwasmaterialtothecontractanddkneworbelievedthatis

wasmaterial

RULESINMARINEINSURANCE

fraudisnotessentialinorderthattheinsuredmaybeguiltyofconcealment. Thepresenceorabsenceofintentisimmaterial

SECTION28

eachpartytoacontractofinsurancemustcommunicatetotheotheringoodfaith,allfactswithinhisknowledge whicharematerialtothecontractandwhichtheotherhasnotthemeansofascertainingandastowhichhemakesno

warranty.

Mattersthatmustbecommunicatedevenintheabsenceofinquiry:

1. materialtothecontract2. theotherhasnomeansofascertainingthefacts3. thepartyhasthedutytocommunicate4. makesnowarranty

thetestis:

iftheapplicantisawareoftheexistenceofsomecircumstanceswhichheknowswouldinfluencetheinsurerinactinguponhisapplication,

goodfaithrequireshimtodisclosethatcircumstances,thoughunasked.


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Effectoffailureofinsurertoverify

- theinsurancecompanyhastherighttorelyonthestatementsoftheinsuredastomaterialfactssuchastohisprevioussickness

- theeffectofmaterialconcealmentcannotbeavoidedbytheallegationthattheinsurercouldhaveknownanddiscoveredtheillnessordiseasewhichtheinsuredhadconcealed.

Section29concealmentmustbeintentionalandfarudulent

intentionaloffraudulentomissiononthepartoftheinsured,tocommunicateinformationofmattersprovingortendingtoprovethefalsityofawarranty,entitlestheinsurertorescind.

dapatdawintentionalandfraudulentangconcealmentparamaapplyangsection29o kaiifwalasiyakabalogyudnoknowledgethengoodfaithmaybeadefensewhenthereisnointenttodeceive

theinsurer

section31testofmateriality

testofmateriality

- testistheeffectwhichtheknowledgeofthefactinquestionwouldhaveonthemakingofthecontract.- Knowledgewouldinfluencethepartiesinmakingthecontract.

Fromthestandpointoftheinsurer

- probableandreasonableinfluenceupontheinsurerinassessingtheriskinvolvedandinmakingoromittingfurtherinquiries.

- Itissufficientthatthenon-disclosuremisledtheinsurerinforminghisestimatesoftherisksoftheproposedinsurancepolicyorinmakinginquiries.

Thepolicyisavoidedalthoughthecauseofdeathbetotallyunconnectedwiththematerialfactconcealedormisrepresented.

- itissufficientthathisnon-disclosuremisledtheinsurerinforminghisestimatesoftherisksoftheproposedinsurancepolicyorinmakinginquiries.

Whenconcealmentisregardedasintentional

- thenatureofthefactsnotconveyedtotheinsurermaybesuchthatthefailureoftheinsuredtocommunicatemusthavebeenintentionalratherthaninadvertent

whenfactsconcealednotmaterial

- normalrasiyasaiyangecgnyagiasksiyaognakapaecgnabasiyaingunsiyawalasiyamagpatest.(failureoftheinsuredtorevealthefactdidnotamounttoconcealmentaswouldvitiatethecontract)

o kainegativemanangangtestitwouldnotaffectthedecisionoftheinsured

timewheninformationacquired

- theconcealmentmusttakeplaceatthetimethecontractisentersintoinorderthatthepolicymaybeavoidedandnotafterwards.

- Thedutyofdisclosureendswiththecompletionandeffectivityofthecontract

Itshouldbemadebeforethecontractbecomeseffective.

Section32.no concealment ingeneral usagesof trade and boundto know allgeneral causeswhich areopento his

inquiry

section33therighttoinformationofmaterialfactsmaybewaived.(termsoftheinsuranceorneglectorimpliedly)

- waiverisatypeofestoppel-

Notes:

theinsurerhadeverymeanstoascertainthetruthofthematterallegedintheapplication.Thefailureoftheinsurerto

makeinquiryconstitutedawaiverofitsrightstoinformationofthefacts

Intheabsenceofevidencethattheinsuredhadsufficientmedicalknowledgeastoenablehimtodistinguishbetween

pepticulcerand a tumorhis statement that said tumorwasassociated with peptic ulcerof the stomach should be

construedasanexpressionmadeingoodfaithofhisbeliefastothenatureofhisailmentandoperation.

Suchstatementmustbepresumedtohavebeenmadebyhimwithoutknowledgeofitsincorrectnessandwithoutany

deliberateintentonhisparttomisleadtheinsurer.


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Theinformationcommunicatedwasimperfectthe insurershouldhavemade furtherinquiriesaboutthe ailmentand

operationoftheinsured.

Imperfectly answered and the insurer issuesa policywithoutany further inquiry, itwaives the imperfection ofthe

answerandrenderstheomissiontoanswermorefullyimmaterial

Section34-informationonthenatureandamountneednotbecommunicatedunlessananswertoaninquiry.

disclosureofnatureandextentofinterestofinsured.

o Specifytheinterestifheisnottheowner

amortgageemustdisclosetheinterestevenifnoinquiryismadebytheinsurero sothattheinsurermaydeterminetheextentoftheinsuredsinsurableinterest

BUTTHEREISNONEEDTODISCLOSETHEINTERESTINTHEPROPERTYINSUREDIFITISABSOLUTE.

Section35neitherpartyisboundtocommunicate,evenuponinquiryinformationofhisownjudgment

thereisnodutytodisclosemereopinion,speculation,intentionorexpectations eveniftheinsuredisasked.

WHENTHEREISNOCONCEALMENT(nodutytomakecommunication)

Section30

1. knownbytheotherparty2. exerciseofordinarycare,theotherpartyoughttoknowandthattheotherpartyhasnoreasontosupposehim

ignorant

3. waivescommunication4. proveortendtoprovetheexistenceofariskexcludedbyawarranty5. riskexceptedfromthepolicy

Section32

6. eachpartytothecontractisboundtoknowallthegeneralcauseswhichareopentohisinquirytoeachothera. whichmayaffectthepoliticalormaterialperilscontemplated

Section33

7. therighttoinformationofmaterialfactswaivedbythetermsoftheinsuranceorbyneglecttomakeinquiryastosuchfacts,impliedinotherfactsofwhichinformationiscommunicated

a. matterisincludedinthegeneralusageoftradeSection34

8. informationofthenatureoramountoftheinsuredproperty,isnotdisclosedunlessinanswertoaninquiry

Section35

9. informationofthepartysownjudgmentuponthemattersinquestion

DELEON;TITLE5REPRESENTATION

Section36representationmaybeoralorwritten

statementmadebytheinsuredatthetimeoforpriortotheissuanceofthepolicy.o Past,futureorpresent

Toinducetheinsurertoenterintotheinsurancecontract.

Misrepresentationininsuranceisastatement

1. somethingwhichisuntrue2. which the insured stated with knowledge that it is untrue and with an intent to deceive or which he states

positivelyastruewithoutknowingittobetrueandwhichhasa tendencytomislead

3. wheresuchfactiseithercaseismaterialtotherisk


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misrepresentationbytheinsuredrenderstheinsurancecontractvoidableattheoptionoftheinsurer(eventhoughinnocently

madeandwithoutwrongfulintent)

misrepresentationistheactiveformofconcealment.

Materialrepresentationsreliedonbytheinsurerwillavoidthecontract,(whetherinnocentorfraudulent)

Representationsintendedascollateralinducements-madetoinfluencetheinsurertoaccepttherisk

Section37representationmaybemadeatthetimeoforbefore,issuanceofthepolicy.

- precedetheexecutionofthecontract- atthetimeorbefore

section38interpretedinfavoroftheinsured(onlysubstantiallytrue)

warrantiesmustbetrueotherwisethecontractwillfail.

Section39Representationastofutureisdeemedapromiseunlessitismerelyastatementofbelieforexpectation

Kindofrepresentation1. oral2. written3. affirmativea. existenceornon-existenceofafactwhenthecontractbegins.4. Promissory

a. Promisetobefulfilledafterthecontracthascomeintoexistence

Promissoryrepresentationusedin2senses:

1. oralpromisenotincorporatedinthepolicya. fraudulentintentwilldefeattheinsuranceb. perononperformancecannotbeshownbytheinsurerindefensetoanactiononthepolicy

2. insertedinthepolicybutnotmadeawarrantya. promissoryrepresentation

i. merelyanexecutortermofcontract

promissoryrepresentationisthereforesubstantiallyaconditionorwarranty.

Effectofpolicyofexpressionsofopinionorexpectation

1. goodfaithorbadfaithoftheinsured.a. Willnotavoidapolicyofinsuranceifthereisnoactualfraudininducingtheacceptanceoftherisk.b. Althoughthestatementismaterialtotherisk,theinsurerisnotjustifiedinrelyinguponsuchstatementbutis

obligedtomakefurtherinquiry

2. Liabilityoftheinsurera. Falseonlywhentheintention,opinionorbeliefasstatedisnothonestlyentertained.b. Toavoidliabilitytheinsurermustprovematerialityoftheinsuredsopinionandthelattersintenttodeceive

i. Ifangrepresentationisoneoffacttheinsurerneedtoproveisitsfalsityandmateriality.Theintenttodeceiveispresumed.

Whenrepresentationisdeemedamereexpressionofopinion.

- anoralrepresentationastoafutureeventorcondition,overwhichtheinsuredhasnocontrolo propertyorlifeinsured

- deemedamereexpressionofopinionwhichwillavoidacontractonlywhenmadeinbadfaith.Section40representationcannotqualifyanexpressprovisionofacontractofinsurancebutmayqualifyasan implied

warranty

representationisnotpartofthecontractbutonlyacollateralinducementtoito mayqualifyanimpliedwarranty

Section41representationmaybealteredorwithdrawnbeforetheinsuranceiseffected

butnotafter


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Section42presumedtothedateonwhichthecontractgoesineffect

statements promissory of conditions to exist subsequent to the completion of the contract may be conditions orwarranties

o cannotberepresentation representationthatareuntruemaybewithdrawnpriortothecompletionofthecontractbutnotafterwards nofalserepresentationifitistrueatthetimethecontracttakeseffectalthoughfalseatthetimeitwasmade

o thereisfalserepresentationifitistrueatthetimeitwasmadebutfalseatthetimethecontracttakeseffect

section 43person insuredhas nopersonalknowledge ofthe fact,andbelieves tobe true,and inthe informationof

others,theinsuredisnotresponsible..

- unlessinformationcamefromtheagentoftheinsured

effectwheninformationobtainedfromthirdperson

- insuredisnotresponsibleeffectwhereinformationwasobtainedfromagentofinsured/insurer

- agentoftheinsuredo exerciseofduediligencetohavemadesuchcommunicationbeforethemakingofthecontracto iftheagentfailedtocommunicatethetruthtotheinsured.o theinsuredwillbeliableforthetruth

- agentoftheinsurero sameprincipleappliestotheinsurer

section44representationisdeemedfalsewhenthefactsfailtocorrespondwithitsassertionsorstipulations

representationsarenotrequiredtobeliterallytrue;theyneedonlybesubstantiallytrue.o representationpartlyfailsbutistrueoriscompliedwithsofarasisessentialtotheriskinsuredagainst,the

policyremainsinforce

inmarineinsuranceo substantialtruthofarepresentationisnotsufficiento theinsuredisrequiredtostatetheexactandwholetruthinrelationtoallmattersthatherepresentsorupon

inquirydisclosesorassumestodisclose

itshallbeconstruedwhenpossible,asanaffirmativerepresentationofapresentfactinordertosavethepolicyfromavoidance.

Section45ifrepresentationisfalseinamaterialpointtheinjuredpartyisentitledtorescindthecontractfromthetime

whentherepresentationbecomesfalse. the rightto rescind iswaivedby the acceptanceofpremiumpaymentsdespiteknowledge ofthegroundfor

rescission

fraudorintenttomisrepresentfactsisnotessentialtoentitletheinjuredpartytorescindacontractofinsuranceinthegroundoffalserepresentation

deemedfalsewhenitfailstocorrespondtothefactsinamaterialpoint.

Effectofcollusionorfraudofagentoftheinsurer

collusionwiththeinsuredo vitiatethepolicyeventhoughtheagentisactingwithintheapparentscopeofhisauthorityo whenthereiscollusion,theagentceasestorepresenthisprincipalandrepresentshimself;sotheinsurerisnot

estoppedfromavoidingthepolicy

principalofagento insuredmerelysignedtheapplicationformandmadetheagenttheinsurerfillthesameforhim,theinsured

madetheagentoftheinsurerhisownagent

o when the insurer required itsmedicalexaminer toput the questions and fill out the answers inhis ownhandwriting,thewriteroftheapplicationisnottheagentoftheinsured.

Theinsurerisliablewhenitsagentwritesafalseanswerintotheapplicationwithouttheknowledgeoftheinsured.

Section46materialityofarepresentationsamerulesasthematerialityofaconcealment

determinednotbytheevento butbythereasonableandprobableinfluenceoffactsuponthepartytowhomtherepresentationismade.


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Whodeterminesthematerialityoftherepresentation?o Ajudicialquestiono Thedeterminationcannotbeleftsolelytothecompany.o Themattermisrepresentedmust beof that characterwhich thecourtcan saywouldreasonably affect the

insurersjudgment.

CONCEALMENT REPRESENTATION

Insuredwithholdsinformationofmaterialfact Makes erroneous statements of facts with the intent of

inducingtheinsurertoenterintotheinsurancecontract

Testofmaterialfact(reasonableandprobableinfluenceof

facts)

Test of material fact (reasonable and probable influence of

facts)

Givestheinsurerarighttorescindthecontract Givestheinsurerarighttorescindthecontract

Whetherintentionalornottheinjuredpartyisentitledto

rescind

Whether intentional or not the injured party is entitled to

rescind

Rulesalsoapplytotheinsurer Rulesalsoapplytotheinsurer

Section47modificationofacontractofinsuranceastoitsoriginalformation

wheretheinsureris inducedtomodifytheinsurancepolicyastotherateofpremiumby amisrepresentationonthepartoftheinsuredinamaterialpoint,theinsurerisentitledtorescindsuchmodification.

Section48therighttorescindisgiventotheinsurer

suchrightmustbeexercisedprevioustothecommencementofanactiononthecontracto policyoflifeinsurancemadepayableonthedeathoftheinsuredshallhavebeeninforceduringthe

lifetimeoftheinsuredforaperiodof2yearsfromthedateofitsissueorofitslastreinstatement,

the insurer cannot prove the policy to be void ab initio or rescindable by reason ofconcealmentormisrepresentation

- generalruleo acontractofinsurancemayberescindedonthegroundofconcealmentorfalserepresentationorbreachof

warranty

o thereisnotimelimitininterposingadefense- innon-lifepolicy

o therightmustbeexercisedpriortothecommencementofanactiononthecontracto theinsurerisnotlongerentitletorescindacontractofinsuranceaftertheinsuredhasfiledanactiontocollect

theamountoftheinsurance.

However,whereanyofthematerialrepresentationisfalse,theinsurerstenderofthepremiumsandnoticethatthepolicyiscancelledbeforethecommencementofthesuitthereon,operatestorescinda

contractofinsurance

- Inlifepolicyo Thedefensesareavailableonlyduringthefirsttwoyearsofalifeinsurancepolicy.

clauseinlifeinsurancepoliciesknownasincontestableclausestipulatingthatthepolicyshallbeincontestableafterastatedperiodareingeneraluse.

Incontestabilitymeansthataftertherequisitesareshowntoexist,theinsurershallbeestoppedfromcontestingthepolicyorsettingupanydefense,

o Exceptonthegroundofpublicpolicy

Theoryandobjectoftheincontestableclause

- astotheinsurero insurer shouldhave a reasonableopportunity to investigate the statementswhich the applicantmakes in

procuringhispolicyandthatafteradefiniteperiodtheinsurershouldnotbepermittedtoquestionthevalidity

ofthepolicy

- astotheinsured


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o theassurancethathisbeneficiarieswouldreceivepaymentwithoutquestionastothevalidityofthepolicyortheexistenceofthecoverageoncetheperiodofcontestabilitypasses.

o Toprotect thepolicyholderand thebeneficiary from a lawsuitcontesting thevalidityof thepolicy after aconsiderabletimehaspassedandevidenceofthefactssurroundingthepurchasemaybeunavailable

Requisitesofincontestability

1. lifeinsurancepolicy2. payableonthedeathoftheinsured3. ithasbeeninforceduringthelifetimeoftheinsuredforatleast2yearsfromthedateofissueorlastreinstatement.

a. The2yearsmaybeshortenedbutitcannotbeextendedbystipulationb. Duringthelifetimesimplymeansthatthepolicyisnolongerconsideredinforceaftertheinsuredhasdied

Effectwhenthepolicybecomesincontestable(theinsurermaynotrefusetopaybyclaiming)

1. thepolicyisvoidadinitio2. rescindablebyreasonofthefraudulentconcealment,nomatterhowpatentorwell-founded3. byreasonoffraudulentmisrepresentationoftheinsuredorhisagent

apolicyofinsurance,afterithaslapsedorbecomeforfeited,asfornonpaymentorpremiumsorbreachofawarrantyorcondition,mayberevivedorreinstatedpursuanttoaprovisioncontainedinthepolicyortheagreementoftheparties.

Theincontestabilityofapolicyunderthelawisnotabsolute

- theinsurermaystillcontestthepolicyonlyontheffgroundso lackofinsurableinteresto causeofdeathoftheinsuredisanexceptedrisko premiumshavenotbeenpaido conditionsofthepolicyrelatingtomilitaryornavalservicehavebeenviolatedo thefraudisofaparticularlyavicioustype

aschemetomurdertheinsured insuredsubstitutesanotherpersonforthemedicalexamination thebeneficiaryfeloniouslykillstheinsured.

o Thebeneficiaryfailedtofurnishproofofdeathortocomplywithanyconditionimposedinthepolicyo Theactionwasbroughtwithinthetimespecified

DELEON;TITLE6THEPOLICY

Section49thewritteninstrumentofthecontractofinsurancecalledapolicyofinsurance

Section50thepolicyshallbeprintedfromwhichmaycontainblankspaces

- theblankspacesshallbefillednecessarytocompletethecontract- anyrider,clause,warrantyor endorsementpurporting tobe partofthe contractof insuranceandwhichis

pastedorattachedtosaidpolicyisnotbindingontheinsured.

o Unlessthedescriptive titleor name oftherider isalsomentioned andwritten ontheblankspacesprovidedinthepolicy

- Unlessapplied for by the insured orowner, anyrider, clauseor warrantyorendorsement issuedaftertheoriginalpolicyshallbecountersignedbytheinsuredorowner,whichcountersignedbytheinsuredorowner,

whichcountersignatureshallbetakenashisagreementtothecontentsoftherider

- Groupinsuranceandgroupannuitypolicieso Maybetypewrittenandneednotbeinaprintedform

Policy-a writtendocument embodying the terms and stipulations of thecontract of insurance between theinsured and the

insurer.

Thepolicyissignedonlybytheinsurerorhisdulyauthorized

neednotbesignedbytheinsuredo excepto whereexpresswarrantiesarecontainedinaseparateinstrumentformingpartofthepolicy

thenthepolicyshouldbesignedbytheinsured thestandardpracticeisthattheprospectiveinsuredwillfilloutandsignanapplicationpreparedbytheinsurer

thepolicycontrolsthetermsofinsurancecontract

- thetermsconstitutethemeasureoftheinsurersliability


17/31


- tocreateanenforceableagreement,alltherequisitesnecessaryinorderthattherewillbeavalidcontractofinsurancemustbepresented

- insurancecompanieshavethesamerightsasindividualstolimittheirliabilityandtoimposewhateverconditionstheydeembestupontheirobligationsnotinconsistentwithpublicpolicy

policyacontractofadhesion

adhesioncontractisessentiallyadescriptionofthemannerbywhichthecontractisformedo onepartyhassuperiorbargainingpowerimposesitschoiceoftermsontheotherparty.o Althoughtheinsuredcanchoosefromavarietyofavailablecoverages,hecannotnegotiatethesubstanceof

thecontractwiththeinsurer.

Ambiguityresolvedagainstinsurer,liberallyinfavoroftheinsured.o Appliestosuretyshipagreements

Thecourtswillonlyruleoutblindadherencewherethefactsandcircumstanceswillshowthattheyarebasicallyone-sided.

o The fine print rule or the contract of adhesion ruled does not apply where the petitioner is an acutebusinessmanofexperiencewhoispresumedtohaveassentedtotheassailedprovisionsofthepolicywithfull

knowledgecannotclaimthathedidnotknowitsterms

ifthetermsof thecontractareclearandunambiguous,there isnoroomforconstructionandsuchtermcannotbeenlargedordiminishedbyjudicialconstruction

Policyofinsurance Contractofinsurance

Formal written instrument evidencing the contract of

insuranceenteredintobetweentheinsuredandinsurer.

itisthelawbetweenthem

Everyinsurancecontractmustbeevidencedbyapolicyandthatpolicymustbeintheformpreviouslyapprovedbytheinsurance

commissioner.

Incaseofconflictbetweenthewrittenandprintedportionsofapolicy,thewrittenpotionprevails.

Perfectionofinsurancecontracts

- assentismanifestedbythemeetingoftheofferandtheacceptanceuponthethingandthecausewhicharetoconstitutethecontract.

o Themeresigningofan applicationforlifeinsurance and thepaymentof thefirst premiumdonotbind theinsurertoissueapolicywherethereisnoevidenceofanycontractbetweenthepartiesthatsuchactsshould

constituteacontractofinsurance

Thecontracttobebindingmustbecomplete,nothingtobecompleted,nothingtobepasseduponordetermined,beforeitshalltakeeffect.o Contract is not perfected where the applicant for life insurance diesbefore the approval, or came to the

knowledgeoftheinsured.o Theacceptanceofthepolicymustbeunconditional,butitneednotbebyformalact.

Thereisnovalidandbindinginsurancecontractunlesspremiumispaid. If premium is previously paid the insurance contract will be binding upon the approval of the

applicationalthoughthepolicyhasnotyetbeenissued.

Inlifeinsurance,abindingsliporbindingreceiptdoesnotinsurebyitself.

Offerandacceptanceofinsurancecontracts

- theapplicantmakestheoffertotheinsurerthroughanapplicationforinsurancewhichisusuallyattachedtopolicyandmadeapartoftheinsurancecontract.

o Propertyorliabilityinsurance.Itistheinsuredwhoofferstotheinsurerwhoacceptstheoffero Lifeandhealthinsurance.

Dependsuponwhethertheinsuredpaysthepremiumatthetimeheappliesforinsurance Doesnotpaythepremium-applicationisconsideredaninvitationtotheinsurertomakean

offer

o Hemustacceptbeforethecontractgoesintoeffect Ifhepayspremiumwithhisapplication,hisapplicationwillbeconsideredanoffer

o iftheapplicationforinsuranceconstitutesanofferbytheinsured,apolicyissuedinaccordancewiththeofferisanacceptanceoftheofferthatperfectthecontract.

Ifthepolicyissueddoesnotconformtotheinsuredsapplication,itisanofferwhichhemayacceptorreject.


18/31


Importanceofdeliveryorpolicy.(2ways)

1. evidenceofthemakingofacontractandofitsterms2. communicationoftheinsurersacceptanceoftheinsuredsoffer

absenceofdeliveryisnothoweveraprerequisitetoavalidcontractofinsurance.

- butdeliverystillhassignificanceasthedecisiveactthatordinarilymarkstheendoftheinsurersopportunitytodeclinecoverage.

Modesofdeliveryofpolicy

1. actual/constructivedeliverya. nocontractisnomeetingofthemindsb. actualvalidtransferisnotaprerequisitetoitsvalidityunlessthepartieshaveagreedinclearlanguage.c. Deliverymaybemadetotheinsuredorhisdulyconstitutedagentorsomepersonforthebenefitoftheinsuredd. Wherenofurtherconditionsaretobefulfilled,apolicyofinsurancemaybeconstructivelydeliveredwhenitis

depositedinthemaildirectedtotheinsuredorhisagent

2. Deliveryprimarilyamaterofintentiona. Whetherornotthepolicywasdeliveredafteritsissuance,dependsontheintentionofthepartieswhichmay

beshownbytheiractsorwords.

b. Iftheapplicationcontainsaprovisionthattheinsuranceshallnotbeeffectiveuntilthedeliveryofthepolicy,deliveryisessentialtotheconsummationofthecontract.

Deliveryoftheinsurersagentasdeliverytoinsured.

2conflictingview1. beneficiarycannotrecover

a. theinsuranceagentisnothisagent2. beneficiarycanrecover

a. thecontractistobedeemedcompletewhenthepolicyhasbeendeliveredtotheinsuranceagenti. insuredcompliedwitheverycondition,actualdeliveryisnotessentialtogivethepolicythebinding

effect

ii. theinsurercansimplyconsiderthecontractperfecteduponactualdeliveryofthepolicytotheagent.

Effectofdeliveryofpolicy

1. wheredeliveryisconditionala. non-performanceoftheconditionprecedentpreventsthecontractfromtakingeffect

i. astipulationthatthepolicyshallnotbecomeoperativeunlesstheapplicantisingoodhealthatthetimeofthedeliveryofthepolicyisvalid,bindingandenforceable.

1. Goodhealthdoesnotmeanperfecthealth2. Wheredeliveryisunconditional

a. Theterms oftheapplication ordinarilyconsummatesthe contract, andthepolicy asdeliveredbecomesthefinalcontractbetweentheparties.

3. Wherepremiumstillunpaidafterunconditionaldelivery.a. Insurercannotbepresumed toextend creditfromthemerefactof unconditionaldeliveryof theinsurance

withouttheprepaymentofthepremium.

b. Theremustbeaclearandexpressacceptancebytheinsuredoftheinsurersoffertoextendcredit.

Riderinacontractofinsurance

Riderisasmallprintedortypedstipulationcontainedonaslipofpapertothepolicyandforminganintegralpartofthepolicy.

usuallyattachedtothepolicybecausetheyconstituteadditionalstipulationsbetweentheparties.o Sameeffectasifactuallyembodiedinthepolicy

Ridersbecomenecessarytoaddanewprovisiontoapolicy,ortomodifyorwaiveanexistingprovision.Savesthetroubleandexpenseofmakinganentirelynewcontract

Conflict sariderandprintedstipulations inthepolicy, theriderprevails,as beinga moredeliberateexpressionof theagreement.

o Theriderbecomesapartofthepolicyandsupersedesanypartofthepolicyinconflict

Attachedpapersininsurancepolicy

Generalrule- arideror otherpaperbecomespart ofa contractofpolicyofinsuranceif properlyand sufficiently attached or

referredtothereininamannerastoleavenodoubtastotheintentionoftheparties


19/31


Except

section226thatnoridershallbeattached,printedorstampeduponapolicyofinsuranceunlesstheformofsuchriderhasbeenapprovedbytheinsurancecommissioner

riderisnotbindingon theinsuredunlessthedescriptivetitleornameoftheriderisalsomentionedandwrittenintheblank

spacesprovidedinthepolicy

aclauseisanagreementbetweentheinsurerandtheinsuredincertainmatterrelatingtotheliabilityoftheinsurerincaseof

loss.

Anendorsementisanyprovisionaddedtoaninsurancecontractalteringitsscopeorapplication.

exampleo extendingtheperilcoveredo natureofapermitsuchasoneauthorizingtheremovaloftheinsuredpropertyandprovidingforcoveragein

anotherlocation

merelytypewrittenadditionstothecontractchangingtheamount,rateorterm. Errorsmaybecorrectedinthesamemanner

Iftheendorsementisattachedtothepolicyatthetimeofitsissue,itisnotanendorsement,strictlyspeaking.

Generalrule

whereariderisphysicallyattachedtoapolicyofinsurancecontemporaneouslywithitsexecutionanddeliveredtotheinsured

o evenwithoutsignatureoftheinsurerortheinsuredwillnotpreventitsinclusionandconstructionasapartoftheinsurancecontract

Effectoffailureofinsuredtoreadpolicy

Majorityrule

insured person to accept policies without reading is judicially recognized. It is not negligence per se because theinsuredsacceptanceandretentionofthepolicyunreadisnotmuchlachesaswilldefeathisrightofreformation.

TheyarecontractsofadhesionandnotofbargainingMinorityrule

onewhoacceptsa contractual instrumentis conclusivelypresumed,in theabsenceof fraudormistake toknowandassenttoitscontents

insuredhasthedutytoreadhispolicyandisboundbyhiscontractaswrittenwhetherhereadsitornot.o Exceptiontotheminorityrule Wheretheinsuredcouldnothavediscoveredtheerroneousstatementbysuchreading

Containingthefalsestatementwasnotattachedtothepolicyorwherethecopyattachedwasillegible Theinsuredcannotbechargedwithanydutytoreadtheapplication.

Inducedbyfraudoftheagentoftheinsurernottoreadthepolicy IftheinsuredisilliterateorunabletoreadEnglish Contractsarelongandcomplicated,difficulttounderstandevenifread

Insurersdutytoexplainthepolicy

Ifthetermsareclear,theinsurerhasnoaffirmativedutytoexplainthepolicyoritsexclusionstotheinsured.

Thedoctrineofreasonable expectationscanoperateto imposede factoadutyonthe insurertoexplain thepolicyscoveragetotheinsured.

Optionsavailabletotheinsured Informationavailabletoinsured Informationexpectedbyinsuredfrominsurersagent Contractualrightsofinsuredafterdenialofcoverage

Groupinsurance

isthecoverageof anumberofindividualsbymeansof asingleorblanketpolicy,therebyeffectingeconomieswhichfrequentlyenabletheinsurertosellitsservicesatlowerpremiumratesthanareordinarilyobtainableforthesametype

ofinsuranceprotectiononlifepoliciessoldtoindividuals.

Formandnature


20/31


o Essentiallyasingleinsurancecontractthatprovidescoverageformanyindividuals Groupinsuranceaffects4parties

o Insurero Employero Insurero Beneficiary

Group insurance is contributory, eachmember pays all or some part of the premium and non-contributory if therepresentativepaysallofthepremiums.

o Theemployer,asrepresentativeofgrouporadministratoroftheinsuranceprogram,actsasafunctionaryinthe collection and payment of premiums and in performing related duties such as the disbursement of

insurancepaymentoftheemployees

When groupinsuranceis effected,a groupor masterpolicy iscustomarily issuedby theinsurer tothe employeroranalogouspolicyholderandcertificatesofparticipationareissuedtotheindividualemployeesorparticipants.

o Theindividualcertificatebeingnopartofsuchcontractbutonlyonaninstrumentrecitingtheemployeesrighttoprotectionunderthetermsofthegrouppolicy.

Boththemasterpolicyandthecertificatearetobeconsideredtogetheraspartofthesamecontract. Employeractasagentoftheinsurer Employeesarerealpartiesininterest

o Theprimaryaimisprotectionforhisemployeesandtheirfamiliesatthelowestpossiblecost,andinsodoing,theemployercreatesgoodwillwithhisemployees,enabletheemployeestocarryalargeamountofinsurance

thentheycouldotherwise,andhelpstoattractandholdapermanentclassofemployees.

Section51apolicyofinsurancemustspecify(mustcontain)

a. partiesbetweenwhomthecontractismadeb. amounttobeinsuredexceptopenorrunningpoliciesc. thepremium,astatementofthebasisandratesuponwhichthefinalpremiumistobedetermined.d. Thepropertyoflifeinsurede. Theinterestoftheinsuredinpropertyinsured(ifheisnottheabsoluteowner)f. Theriskinsuredagainstg. Theperiodduringwhichtheinsuranceistocontinue


21/31


Contentsofapolicy

1. nameofparties

nameincorrectlyspelledoutisimmaterial

2. amountofinsurance

a. in order to easily exactly determine theamountofindemnitytobepaidtheinsuredincase of lossor damage especially if itis

onlypartialandnottotalb. the amount of insurance is the maximumlimit on the insurers liability for loss or

damagesufferedbytheinsured.

c. I lifehealthor accident insurancethe fixedsumispayable

d. Workmenscompensationinsurancei. Theamountisnotspecifiedinthe

policybythelawimposingliability

upontheemployer

e. Theamount insured is theamount fixedinthepolicy

f. The deductible is the state amount to bedeductedfromanylosswhichisshouldered

by the insured making the insurer liable

onlyfortheexcessofsaidamount

3. Premium

Premiumrepresentstheconsiderationofthecontract

4. propertyorlifeinsured

thesubjectmatterofthecontract

5. interestofinsuredinproperty

todeterminetheactualdamagesufferedbytheinsuredincase

of loss ofthepropertycovered bythepolicyif heis not the

absoluteowner

6. riskinsuredagainst

anycontingentorunknownevent,whetherpastorfuturemay

beinsuredagainst

7. termordurationofinsurance

theperiodduringwhichtheinsuranceistocontinue

thelifeofthepolicy

12monthsareannualpolicy

shorterperiodisshortperiodpolicy

Kindsofinsurablerisk

1.personalrisk Chieflyconcernedwiththetimeofdeathordisability

Riskofincapacitythroughaccidentalinjuryorillnessoroldage

- oftendividedintolifeandhealthrisks

2.propertyrisks Lossordamagetoproperty.Arisesfromthedestructionofproperty

- directlossorindirectloss

3.liabilityrisks Involvingliabilityfor theinjury to theperson orproperty of

others

- the liability risks includes both bodily injury andpropertydamagerisks


22/31


Peril Risk Hazard

- contingentorunknowneventwhichmaycausealoss

- itisthecontingencythatoneinsuresagainst

- theexistencecreatestheriskand itsoccurrenceresults in

loss.

- Thechanceofloss- Possibilityoftheoccurrenceof

a loss based on known or

unknownfactors

- conditionor factor,tangibleorintangible,whichmaycreateor

increasethechanceoflossfrom

agivenperil.

- The sum total of the hazardsconstitute the perils which

causestherisk

-

2majorclassificationofhazard- physical hazard- everythingrelating t location, structure

occupancyexposure

- moral hazard- dishonesty,insanity, carelessness,

indifference

Requirementsforrisktobeinsurable

1. importance2. calculability3. definitenessoftheloss4. nocatastrophicloss5. accidentalinnature

therequirementsarenotabsolute

- insurabilityisbestdescribedasarelativematter.

Insurers dealwith theproblem,tryingto improve theinsurabilityof a perilbysuchmethodas limitationson theamount of

coverageandlocations,specificcontract

- insurablevariesamonginsurersandmaychangeovertime

section52covernotesmaybeissuedtobindinsurancetemporarilypendingtheissuanceofthepolicywithin60days

afterissueofacovernotes

cover notes may be extended or renewed beyond such sixty days within the written approval of thecommissioner

the commissioner may promulgate rules and regulations governing such extensions for the purpose ofpreventingviolations

o requirementsfortheissuanceandextensionorrenewalofcovernotes

2kindsofpreliminarycontractofinsurance

preliminarycontractofpresentinsurance preliminarycontractofexecutorinsurance

preliminarycontractofpresentinsurance

insurerinsuresthesubjectmatterusuallybywhatisknownasthebindingslip,binderorcovernote,thecontracttobeeffectiveuntiltheformalpolicyisissuedorriskisrejected

binder-actuallyatemporarycontractofinsuranceandisusuallyissuedaftertheapplicantpaysthefirstpremium inlifeinsurance,abindingsliporbindingreceiptdoesnotinsurebyitself bindersor cover notes serve theneedsof commercialconvenience andyet aremoredefinite and reliable than oralagreement.

o conclusiveevidenceofthemakingofacontract

preliminaryexecutorcontractofinsurance

therightacquiredbytheinsuredismerelytodemandthedeliveryofapolicyinaccordancewiththetermsagreeduponandtheobligationassumedbytheinsureristodeliversuchpolicy

covernotes(alsocalledabinder)maybeissuedtoaffordimmediateprovisionalprotectiontotheinsureduntiltheinsurercan

inspectorevaluatetheriskinquestionandissuetheproperpolicy,oruntiltheriskisdeclinedandnoticethereofgiven


23/31


temporarynature,sufficientthatthecovernotesshowsbynecessaryimplicationanagreementtopaywhateverratemaybefixed.

Noseparate premiumpaidon thecovernotebefore theloss insuredagainst occurred, does not militate against itsbindingeffectasaninsurancecontract.

o Doesnotcontainparticularsthatwouldserveasbasisforthecomputationofthepremiums

Rulesoncovernotes

1. insurance companies doing business here in the Philippines may issue cover notes to bind insurancetemporarilypendingtheissuanceofthepolicy

2. shallbedeemedtobeacontractofinsurance3. nocovernoteshallbeissuedorrenewedunlessintheformpreviouslyapprovedbytheinsurancecommission4. covernoteshallbevalidandbindingforaperiodof60daysfromthedateofissuance

a. whetherornotpremiumhasbeenpaid

b. butthecovernotemaybecancelledbyeitherpartyuponatleast7daysnoticetotheotherparty5. ifthecovernoteisnotcancelled,apolicyshallbeissuedwithin60days6. acovernotemaybeextendedorrenewedbeyondthe60dayperiodwiththewrittenapprovaloftheinsurance

commission,

a. providedthatsuchwrittenapprovalmaybedispensedwithuponthecertificationofthepres,v-pres,genmanager ofthe insurance company concerned that the risk involvedor valuehas not yetbeen

determined orestablishedand that suchextensionor renewal isnot contraryto and isnot for the

purposeofviolatinganyprovisionsoftheinsurancecode

7. insurancecompaniesmayimposeonacovernoteadepositpremiumof25%oftheestimatedpremiumoftheintendedinsurancecoveragebutisnocaselessthan500

section53theinsuranceproceedsshallbeappliedexclusivelytotheproperinterestofthepersoninwhosenameorfor

whosebenefititismade

unlessotherwiseprovided

personsentitledtorecoverunderthepolicy

thirdpersonshavenorighteitherinacourtofequityorinacourtoflawtotheproceedsofthepolicyunlesstherebesomecontractoftrust,expressorimplied,betweentheinsuredandthirdpersons

athirdpersonintheabsenceofanyprovisioninthepolicyhasalsonorighttotheproceedsthereofo apolicyofinsuranceisadistinctandindependentcontractbetweentheinsured,andtheinsurer

only theinsured,ifstillalive, orthebeneficiary, ifthe insured isalreadydeceased,is entitled toclaimtheinsuranceproceedsuponthematurationofthepolicy.

o Ex.Therepairmanisnotentitledtocollectthecostofrepairoutoftheinsuranceproceedswhowasauthorizedbytheinsuredtomaketherepairsclauseintheinsurancepolicyauthorizingtheownerofthedamagedvehicle

to contractfor its repair doesnotmeanthatthe repair isentitled tocollect the costof repair out of the

proceedsoftheinsurance.

o Ex.Wifebeingthepersoninwhosenameandforwhosebenefittheinsurancepolicyinquestionwasinsured,hasintheabsenceofprooftothecontrary.

Section54whenaninsurancecontractisexecutedwithanagentortrusteeastheinsured,thefactthathisprincipalor

beneficiary is the real party ininterestmaybe indicated bedescribing the insured asagent ortrustee orby other

generalwordinthepolicy

Aninsurancemaybetakenbyapersonpersonallyorthroughhisagentortrustee

Agentortrusteewhenmakinganinsurancecontractfororonbehalfofhisprincipalshouldindicatethatheismerelyactingina

representativecapacitybysigningasagentortrustee


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Section55torenderaninsuranceeffectedbyonepartnerofpartowner,applicabletotheinterestofhisco-partners,itis

necessarythatthetermsofthepolicyshouldbesuchasareapplicabletothejointorcommoninterest

butapartnerwhoinsurespartnershippropertyinhisownnamelimitsthecontracttohisindividualshareunlessthetermsofthepolicyclearlyshowthattheinsurancewasmeanttocoveralsothesharesofotherpartners.

Section63-aconditionlimitingthetimeforcommencinganactionthereundertoaperiodoflessthanoneyearfromthe

timewhenthecauseofactionaccruesisvoid

Generalrule-aclauseinaninsurancepolicytotheeffectthatanactionuponthepolicybytheinsuredmustbebroughtwithina

certainperiodisvalidandwillprevailoverthegenerallawonlimitationsofactionsasprescribedbythecivilcode(whichis10

years)

aperiodfixedwhichislessthan1yearfromthetimethecauseofactionaccrues,wouldbevoid. Theperiodcannotbelessthan6yearsinanindustriallifeinsuranceafterthecauseofactionaccrues.

Claimsmustbepresentedwithinacertainperiodafterrejectionisnotmerelyaproceduralrequirement.Itisimportantmatter

essentialtopromptsettlementofclaimsagainstinsurancecompanies.

Causeofactionaccrues

fromthehappeningofthelosso however, thecauseofaction isan insurancecontract does not accruesuntil ethe insureds claim is finally

rejectedbytheinsurer

o thecauseofactiondoesnotaccrueuntilthepartyobligatedrefuses,expresslyorimpliedlyo computednotfromthetimewhenthelossactuallyoccursbutfromthetimewhentheinsuredhasarightto

bringanactionagainsttheinsurer

1. stipulatedprescriptiveperiodbeginsfromhappeningoftheloss2. stipulatedprescriptiveperiodbeginsfromrejectionofclaim3. stipulatedprescriptiveperiodbeginsfromfilingofclaim

priornoticeofcancellationtoinsured

1. noticegiventoinsuredhimself2. noticedeliveredpersonallyorsentbymail

AQUINO;CHAPTER5;POLICY

Aclearlyreadableandunderstandableinsurancepolicyisimportantfortheprotectionofthegeneralpublic.

Consensual

perfectedbymereconsentofthepartiesandnoformalityisrequiredforitsperfection. Absenceofapolicydoesnotbarthecontractfromcomingintoexistence

Statueoffraudsinapplicable

argumento insurancecontract(withatermof1year)cannotbeperformedwithinoneyearbecausethelossmayoccur

afteroneyear.

Howeverinsurancecontractsmybeperformedwithinoneyearalthoughit iscontingentuponthehappeningofanevent.

Lifeinsurancecontractsmayremaininforcefordecades,theobligationoftheinsurancecompanytopaytheproceedsmaylikewisebeperformedwithinoneyearbecausethefurtherevent(deathofthe

insured)mayoccurwithinoneyear.Hence,theinsurancecontractsarenotcoveredwiththestatute

offrauds.

Policy

althoughformalitiesarenotrequired itismandatedbylawthatwrittenpoliciesshouldbeissuedbytheinsurer. Section49thatapolicyofinsuranceisthewritteninstrumentinwhichacontractofinsuranceissetforth

o Printedform


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Section50 shallbe inprintedformwhichmaycontainblankspacesandanyword,phrase, clause,mark,sign,symbolorwordnecessarytocompletethecontractofinsuranceshallbewrittenonthe

blankspacesprovidedtherein.

Excepto Groupinsuranceo Group annuity policies (whichmay be typewritten and need not be in printed

form)

o Approvalofinsurancecommission Allpoliciesissuedbytheinsurancecompaniedareapprovedbytheinsurancecommission

Section51apolicyofinsurancemustspecify(mustcontain)

a. partiesbetweenwhomthecontractismadeb. amounttobeinsuredexceptopenorrunningpoliciesc. thepremium,astatementofthebasisandratesuponwhichthefinalpremiumistobedetermined.d. Thepropertyoflifeinsurede. Theinterestoftheinsuredinpropertyinsured(ifheisnottheabsoluteowner)f. Theriskinsuredagainstg. Theperiodduringwhichtheinsuranceistocontinue

Marinerisknotes

is an acknowledgement or declaration confirming the specific shipment covered by its marine open policy, theevaluationofthecargoandthechargeablepremium.

Suchnoteisnotthepolicyitself.

Riders

Section50thepolicyshallbeprintedfromwhichmaycontainblankspaces

theblankspacesshallbefillednecessarytocompletethecontract anyrider,clause,warrantyorendorsementpurportingtobepartofthecontractofinsuranceandwhichispastedor

attachedtosaidpolicyisnotbindingontheinsured.

o Unlessthedescriptivetitleornameoftheriderisalsomentionedandwrittenontheblankspacesprovidedinthepolicy

Unlessappliedforbytheinsuredorowner,anyrider,clauseorwarrantyorendorsementissuedaftertheoriginalpolicyshallbecountersignedbytheinsuredorowner,whichcountersignedbytheinsuredorowner,whichcountersignature

shallbetakenashisagreementtothecontentsoftherider Groupinsuranceandgroupannuitypolicies

o Maybetypewrittenandneednotbeinaprintedform

REQUISITES

Arider,clausewarrantyorendorsementthatarenotpartoftheoriginalprintedformarebindingprovidedthat:

1. theriderisattachedtothepolicy2. thedescriptivetitle ornameofthe riderismentionedorwrittenontheblankspacesprovidedin theoriginalpolicy

form.

3. Ifnotappliedforbytheinsuredorowner,theridershallbecountersignedbytheinsured.

Anendorsementisawrittenagreementattachedtoapolicytoaddorsubtractinsurancecoverages.A rider is an endorsement to an insurance policy that modifies clauses and provisionsof thepolicy including or excluding

coverage.

iftherequirementsifsection50arecompliedwiththeytakeprecedenceovertheoriginalpolicyprovisions.o Theyaredeemedintegralpartoftheoriginalpolicyo Incaserepugnanceexistbetweenthewrittenandprintedportionsofapolicy,thewrittenportionprevails.

Theriderprevailsovertheprintedclauseitcovers. Insurancepartlyofwrittenwordsandpartlyofaprintedformandthe2areinconsistent,thewrittenwordscontrolsthe

latter.


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Contractofadhesion

insurancepolicesarecontractsofadhesionbecauseonlyoneparty(insurer)preparesthewrittencontractwhiletheotherparty(insured)merelyadherestothecontract.

Usuallytheinsuredcannotchangethewrittenpolicyimposedbytheinsurero Itisstillequallybindingasanyothercontract.o Apartyisnotrelievedofthedutytoexercisetheordinarycareandprudencebyadherence.Theconformityof

theinsuredtothetermsofthepolicyisimpliedfromhisfailuretoexpressanydisagreementwithwhatis

providedtherein

o Withoutreadingthepolicyisnotnegligenceperse. Itisincumbentupontheinsuredtoreadtheinsurancecontractisthiscanbereasonablyexpectedof

himconsideringthathehasbeenabusinessmanforalongperiodoftimeandthecontractconcerns

indemnityincaseoflossinhismoney-makingtradeofwhichimportantconsiderationhecouldnot

havebeenunawareasitwaspreciselythereasonforhisprocuringthesame.

Interpretationandproof

whenindoubtshouldberesolvedagainsttheinsurer(sincecontractofadhesionman)o againstheinsurerwhoselawyerormanagersdraftedtheinsurancepolicycontract.

Art1377.Theinterpretationofobscurewordsofstipulationsinacontractshallnotfavorthepartywhocausedtheobscurity.

Theinsuredhasnovoiceintheselectionorarrangementofthewordsemployedandthatthelanguageofthecontractisselected with great care and deliberation by experts and legal advisers employed by and acting exclusively in the

interestoftheinsurancecompany.

Suchcontractsobviouslycallforgreaterstrictnessandvigilanceonthepartofcourtsofjusticewithaviewtoprotectingtheweakerpartyfromabusesandimpositionandpreventtheirbecomingtrapsfortheunwary.

Cardinal principle ininsurancelaw that apolicyor contract ofinsuranceis tobe construed liberally infavorof theinsuredandstrictlyagainst theinsurercompany,yetcontracts ofinsurancelikeother contractsare tobe construed

accordingtothesenseandmeaningofthetermswhichthepartiesthemselveshaveused.Ifsuchtermsareclearand

unambiguous,theymustbetakenandunderstoodintheirplain,ordinaryandpopularsense.

Proof

Thepartywhoseekstoprovesuchtermsandconditionsmustpresentthepolicyduringtrialandformallyofferitasevidence.

anypersonwhoreliesonthepolicyasthebasisofhiscauseofactionmustalsoattachthesametothecomplaintasanactionabledocument

theobligationtoattachthepolicytothecomplaintasanactionabledocumentandtopresentandofferthesameapplieseveniftheplaintiffisaninsurancecompanythatistryingtorecoveronitsrightofsubrogation

no legal impedimentto theproduction of theinsuranceapplication and theinsurancepolicypursuant to subpoenaissuedbythecourt

Thepolicycannotbeconstruedpiecemeal

Aninsurancepremiumis theconsiderationpaidby theinsuredtothe insurerforundertakingto indemnifythe former

againstaspecifiedperil

Covernotes

areinterimorpreparatorycontractsofinsuranceo interim coveragemaybenecessarybecausethe insurermayneedmore time toprocessthe insurancemay

needmoretimetoprocesstheinsuranceapplication

Sec.52.Covernotesmaybeissuedtobindinsurancetemporarilypendingtheissuanceofthepolicy.Withinsixtydaysafter

theissueofthecovernote,apolicyshallbeissuedinlieuthereof,includingwithinitstermstheidenticalinsurancebound

underthecovernoteandthepremiumtherefore. CovernotesmaybeextendedorrenewedbeyondsuchsixtydayswiththewrittenapprovaloftheCommissionerifhedetermines

thatsuchextensionisnotcontrarytoandisnotforthepurposeofviolatinganyprovisionsofthisCode.TheCommissionermay

promulgaterulesandregulationsgoverningsuchextensionsforthepurposeofpreventingsuchviolationsandmaybysuchrules

andregulationsdispensewiththerequirementofwrittenapprovalbyhiminthecaseofextensionincompliancewithsuchrules

andregulations.

rulesoncovernotes(supra)

noseparatepremiumisrequiredforthecovernote


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kindsofpropertyinsurancepolicy

open valued running

open

novaluationofthepropertyisstipulatedinanopenpolicy.

Theinsurerisonlyentitledtorecovertheamountoftheactuallosssustainedbyhimashemaybeabletoestablish. Judgmentmaybeenteredagainsttheinsurerforlackofsatisfactoryproofoftheamountofhisloss. Anopenpolicyissometimescalledanunvaluedpolicybecauseitisonewhichthevalueisnotfixed,butislefttobe

definitelydeterminedoncaseofloss.

o Theactuallossasdeterminedwillrepresentthetotalindemnityduetheinsuredfromtheinsurerexceptonlythatthetotalindemnityshallnotexceedthefacevalueofthepolicy

Valuedpolicy

expressestheagreedvaluationofthethinginsuredonthefaceofthepolicy thispolicyisbindingontheparties;nopartycanestablishdifferentvaluationincaseofloss

o themeasureofindemnityistheagreedvaluationandnottheactualloss.o Thevaluedpolicyistheexceptiontotheprincipleofindemnity

Alifeinsuranceisalwaysavaluedpolicybecausetheamountfixedinthepolicyisalwaysnotrelatedtotheactualloss.o Agreeonthevaluationwhichisnotequivalenttothevalueofthelifelost

Runningpolicy

afireinsurancepolicymaybeenteredintothatcoversstockofriceandpalay,thepropertyassuredorheldbyhimintrust,oncommissionoronjointaccountwithothersand/orforwhichheisresponsibleincaseofloss,whilecontained

duringthecurrencyifthepoliciesinthebuilding.

Wheretheextentofthepropertywillbedefinedfromtimetotimebecauseofthenatureofthebusinessbeinginsured.

Cancellation

Sec.64.Nopolicyofinsuranceotherthanlifeshallbecancelledbytheinsurerexceptuponpriornoticethereoftothe

insured,andnonoticeofcancellationshallbeeffectiveunlessitisbasedontheoccurrence,aftertheeffectivedateofthe

policy,ofoneormoreofthefollowing:

(a)non-paymentofpremium;

(b)convictionofacrimearisingoutofactsincreasingthehazardinsuredagainst;

(c)discoveryoffraudormaterialmisrepresentation;

(d)discoveryofwillfulorrecklessactsoromissionsincreasingthehazardinsuredagainst;

(e)physicalchangesinthepropertyinsuredwhichresultinthepropertybecominguninsurable;or

(f)adeterminationbytheCommissionerthatthecontinuationofthepolicywouldviolateorwouldplacethe

insurerinviolationofthisCode.

Sec.65.Allnoticesofcancellationmentionedintheprecedingsectionshallbeinwriting,mailedordeliveredtothenamed

insuredattheaddressshowninthepolicy,andshallstate(a)whichofthegroundssetforthinsectionsixty-fourisrelied

uponand(b)that,uponwrittenrequestofthenamedinsured,theinsurerwillfurnishthefactsonwhichthecancellationis

based.

Requisitesofcancellation

1. priornoticeofcancellationtotheinsured2. thenotice of cancellationmust bebased on theoccurrenceafter effective date of thepolicyofoneor more of the

groundsinsection64

3. noticemustbeinwriting,mailedordelivered,totheinsuredattheaddressshowninthepolicy4. thenoticemuststatethegroundsreliedupon,andfactswhichthecancellationisbased


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section64appliesonlytopropertyinsurance

itdoesnotapplytolifeinsuranceo butalifeinsurancemayalsobecancelledfor:

non-paymentofpremium fraud materialmisrepresentation

reasonfornoticerequirement

thepurposeofprovisionsorstipulationsfornoticetotheinsuredistopreventthecancellationofthepolicywithoutallowingtheinsuredampleopportunitytonegotiateforotherinsuranceinitsstead

contentsofnotice

statethegroundsreliedupon neednotbeinaparticularforminordertoformthebasisforthecancellationofapolicy

o sufficient so long as it positively an unequivocally indicates to the insured, that it is the intention of thecompanythatthepolicyshallceasetobebinding.

actualreceiptisnecessary

essentialtothecancellationundertheprovisionforcancellationbynotice. Actual receipt by the insured of a notice of cancellation is universally recognized as a condition precedent to a

cancellationofthepolicybytheinsurer.

o MailedbytheinsurerbutnotreceivedbytheinsuredisineffectiveascancellationReceiptofnoticebybroker

notbindingontheinsured. Theauthorityofthebrokertorepresenttheinsuredendswiththecompletionofthecontract,andanynoticethereafter

giventothebrokerwillnotaffecttherightsoftheinsured.

Cancellationbytheinsured

thisrightisimplicitinsection79oftheinsurancecodewhichprovidesthattheinsuredisentitledtothereturnofthepremium

o noholderofaninsurancepolicymayavailhimselfoftheprivilegesofthisparagraphwithoutsufficientcause.

Renewalofthepolicy

theinsuredhastherighttorenewanon-lifeinsurancepolicyo bypayingthepremiumdueontheeffectivedateoftherenewal

theinsurednorighttorenewifthenoticeofintentionnottorenewisgivenbytheinsureratleast45dayspriortotheexpirationofthepolicy

Sec.66.Incaseofinsuranceotherthanlife,unlesstheinsureratleastforty-fivedaysinadvanceoftheendofthepolicy

periodmailsordeliverstothenamedinsuredattheaddressshowninthepolicynoticeofitsintentionnottorenewthe

policyortoconditionitsrenewaluponreductionoflimitsoreliminationofcoverages,thenamedinsuredshallbeentitledto

renewthepolicyuponpaymentofthepremiumdueontheeffectivedateoftherenewal.Anypolicywrittenforatermof

lessthanoneyearshallbeconsideredasifwrittenforatermofoneyear.Anypolicywrittenforatermlongerthanoneyear

oranypolicywithnofixedexpirationdateshallbeconsideredasifwrittenforsuccessivepolicyperiodsortermsofone

year.

Reformationofthepolicy

agreeduponwasdifferentfromwhatwaswritteninthepolicyo

thecourthasthe power to reformthecontracts and give effect to them in thesense inwhich thepartiesintendedtobebound.

Tojustifythereformation,theproofmustbeof themostsatisfactorycharacterand itmustclearlyappearthatthecontractfailedtoexpresstherealagreementbetweentheparties

Mistake

itisalsopossiblefortheinsuredtorecoverevenoftherewasamistake.o Notnecessarythattherebeareformationofthepolicy

Designationofthebeneficiary

shouldbemadeinunequivocalterms.


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Sec.53.Theinsuranceproceedsshallbeappliedexclusivelytotheproperinterestofthepersoninwhosenameorforwhose

benefititismadeunlessotherwisespecifiedinthepolicy.

Sec.54.Whenaninsurancecontractisexecutedwithanagentortrusteeastheinsured,thefactthathisprincipalor

beneficiaryistherealpartyininterestmaybeindicatedbydescribingtheinsuredasagentortrustee,orbyothergeneral

wordsinthepolicy.

Sec.55.Torenderaninsuranceeffectedbyonepartnerorpart-owner,applicabletotheinterestofhisco-partnersorother

part-owners,itisnecessarythatthetermsofthepolicyshouldbesuchasareapplicabletothejointorcommoninterest.

Sec.56.Whenthedescriptionoftheinsuredinapolicyissogeneralthatitmaycomprehendanypersonoranyclassof

persons,onlyhewhocanshowthatitwasintendedtoincludehimcanclaimthebenefitofthepolicy.

Policyform

theinsurerisgenerallyfreetoprovideforthetermsandconditionsofthepoliciesthatitwillissuesolongasthesameprovisionsarenotcontrarytolaw,moralcustomsandpublicpolicy.

Thelawprescribesmandatoryprovisionsfortheffpolicies:

1. individuallife2. endowmentpolicies3. grouplife4. industriallife

DELEON;TITLE7WARRANTIES

Warranty isa statementor promiseby theinsuredset forth inthepolicyitselforincorporatedin itbyproperreference, the

untruthornonfulfillmentofwhichinanyrespectandwithoutreferencetowhethertheinsurerwasinfactprejudiced

rendersthepolicyvoidablebytheinsurer

warrantyingeneralinthecaseofapromissorywarranty,thesamemayreferonlytofutureevents

warranty used inaninsurancecontract doesnotnecessarily constitutea warranty nor is theuse of suchword necessary to

constituteawarranty.

A statement will be construed as a representation rather than a warranty especially if such statement is contained in any

instrumentotherthanthepolicylikeanapplication,whichinitselfcollateralmerelytothecontractofinsurance.

Answerswrittenintheapplication,answersnotresponsivetoanyquestionsaskedarenotwarranties.

WARRANTIES REPRESENTATION

Partofthecontract Collateralinducement

Warrantiesarealwayswrittenonthefaceofthepolicy Maybewritteninatotallydisconnectedpaperormaybeoral

Strictlycompliedwith Substantialtruthonlyisrequired

Thefalsityofawarrantyoperatesasabreachofcontract Rendersthepolicyvoidonthegroundoffraud

Presumedmaterial Theinsurermust show thematerialityofa representationin

ordertodefeatanactiononthepolicy

Beforea representationbe consideredas awarranty, itmustbeexpresslyincluded orincorporatedby clear reference inthe

policyandthecontractmustclearlyshowthatthepartiesintendedthattherightsoftheinsuredwoulddependonthetruthor

fulfillmentofthewarranty.

Inorderthatastipulationmaybeconsideredawarranty,itmustnotonlybeclearlyshownthatthepartiesintendeditassuchbut

itmustalsoformpartofthecontractitself,orifcontainedinanotherinstrumentitmustbesignedbytheinsuredandreferredto

inthepolicyasmakingapartofit

merereferencealoneisnotsufficienttogivethiseffect

itmustbeafacttoconstituteanexpresswarranty


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ifthestatementis anatureofan opinion,is notstrictlyspeaking,a warrantyofitstruthfulness.Sucha statement,ifdeemedawarrantyatallismerelyalimitedwarrantyastothehonestyandgoodfaithoftheinsured

section72referstoapromissorywarranty

breachofpromisesoragreementsastofutureactswillnotavoidapolicyunlessthepromisesarematerialtotherisk.o Theactoromissionismaterialtotheriskifitincreasestheriskandunderthelawonlysubstantialincreaseof

riskworksaforfeitureofthepolicywhichisavoidedincreasesthehazard

Generalrule-aviolationofawarrantyavoidsacontractofinsurance(section73referstofuturewarranties)

Except:

1. whenlossoccursbeforethetimeoftheperformance2. whenperformancebecomesunlawful3. whenperformancebecomesimpossible.

Violationofamaterialwarranty,orothermaterialprovisionofapolicy,onthepartofeitherpartythereto,entitlestheotherto

rescind.

Apolicymaydeclarethataviolationofspecifiedprovisionsthereofshallavoidit,otherwisethebreachofanimmaterialprovision

doesnotavoidthepolicy.

Effectsofbreachofwarrantybyinsured

1. withoutfrauda. thepolicyisavoidedonlyfromthetimeofbreachandb. theinsuredisentitledtothereturnofthepremiumpaidataprorataratefromthetimeofbreachifitoccurs

aftertheinceptionofthecontract

i. entitledtoallthepremiumsifitisbrokenduringtheinceptionofthecontract(voidabinitio)2. withfraud

a. thepolicyisavoidedabinitiob. theinsuredisnotentitledtothereturnofthepremiumpaid.

Conditionsinaninsurancepolicy

1. conditionprecedenta. callsforthehappeningofsomeeventortheperformanceofsomeactafterthetermsofthecontracthavebeen

agreedupon,beforethecontractshallbebinding

2. conditionsubsequenta. contract of insurance after the risk has attached and during the existence thereof, such as the condition

requiringnoticeandproofoflossincaseoflossuponaninsuranceagainstfire.

WARRANTIES CONDITION

Effect

Doesnotsuspendordefeattheoperationofthecontract Without the performance of which the contract although in

form executed by theparties and delivered, does not spring

intolife.

Alimitationtotheattachmentoftherisk,whereasawarranty

doesnotnecessarilyhavethateffect

Nature

Nottruethenthepolicyshallbenullandvoid

Not condition precedent but rather of the nature of a

defeasance

Promissory warranties are usually regarded as conditions

subsequenttobeperformedafterthepolicyhasbecomevalid

contract,non-performanceofwhichwillworkadefeasance

Exceptionsininsurancepolicy

insertedinacontractofinsuranceforthepurposeofwithdrawingfromthecoverageofthepolicy,asdelimitedbythegeneral language describing the risk assumed, some specific risks which the insurer declares himself unwilling to

undertake


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EXCEPTIONS WARRANTIES CONDITIONS

Examples

This company shall not be liable for

anylosswhiletheinsuredbuildingis

vacantorunoccupied

if the policy contains warranted

statement that the insured building is

occupied,wehaveundoubtedwarranty.

The entire policy shall be void if the

insuredbuildingbeorbecomesvacantor

unoccupied and so remained for more

than10days

insurance notes midterms 2013

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