August, 2018 SY 2018-2019 PHILIPPINE INSURANCE LAW: CODE, CASES & COMMENTS (Course Outline) UP COLLEGE OF LAW By Dean Bartolome S. Carale REFERENCE MATERIALS: PRIMARY/MAII The Philippine Insurance Law: Code, Comments & Cases (Preliminary Edition, 2014) by Dean B.S. Carale (includes full text of RA 10607, Insurance Code of 2013) hereinfafter referred to as “BSC” OTHERS, Insurance by Prof. Emeritus Ma. Clara L. Campos, (1983 ed.) The Insurance Code of the Philippines (2014) edition by De Leon & De Leon ‘The Insurance Code of the Philippines (latest edition) by Rufus B. Rodriguez Vance, Handbook on the Law on Insurance (3" edition, 1951), hereafter referred to as VANCE Couch on Insurance (3* edition, 2000) by Russ & Segalla, hereafter referred to simply as COUCH Keeton & Widiss, A Guide to Fundamental Principles on Insurance (1988) 43 Am. Jur. 2d, Insurance, Sec. 1 - 726 (2003) 43 Am. Jur. 2d, Insurance, Sec. 1542-2077 (2003) CHAPTER I - INTRODUCTION (BSC, pp. 1-9) A. Course Coverage 1. More attention to substantive provisions of the Insurance Code of 2013 (hereinafter referred to as the Code) as against the administrative and organizational provisions 2, Topical instead of sequential treatment of provisions of the Code8. Origin and Growth of insurance; relevance/significance c. 1. Early maritime or marine insurance (See VANCE, 7-21) Read the following cases ‘on the real and hypothecary nature of maritime law, doctrine of limited liability; and, general average Yangco v. Laserna, 73 Phil. 330 (1941) Manila Steamship v. Abdulhaman, 100 Phil. 38 (1956) Chua v. IAC, 166 SCRA 183 (1988) Aboitiz Shipping v. New India Assurance, 488 SCRA 563 (2006) A. Magsaysay v. Agan, 96 Phil. 504 (1955) Development of insurance—from marime to present day varieties Current status of the insurance business in the Philippines Office of the Insurance Commission; Administrative & Adjudicatory Powers ‘Secs. 437 (2 par.) and 439, Code Laws Governing Insurance (unless specified, all sections referred to in this Outline are of the Insurance Code of 2013, RA 10607): 1. The 2013 Code, RA 10607, approved August 15, 2013, and took effect September 20, 2013. Antecedents: Provisions of the Code of Commerce; Insurance Law, Act 2427 (December 11, 1914) copied almost verbatim from the California Insurance ‘Act; Insurance Code of 1978 (PD 612 and PD 1460). See: Gercio v. Sunlife Assurance, Phil. $3 ‘Ang Giok chip v. Springfield, 52 Phil. 375 2. Civil Code, esp. Articles 739, 2011, 2012, 2021 to 2027 (dealing with life annuities), 2188 & 2207 (subrogation) 3. Special laws (e.g. GSIS Act, 5S5 Act, PDIC, crop insurance and government property insurance, among others.) CHAPTER II ~ THE CONTRACT OF INSURANCE ~ (BSC, pp. 10-50) A Definitions “contract of Insurance"; and "Contract of Suretyship"; “Meaning of” doing an insurance business” [(Sec. 2(3)] Elements (Introductory) Insurance interest Risk of loss or damage Designated peril as a cause Consideration; premium Risk distributing scheme Characteristics/Nature of insurance contracts (Review relevant provisions of the Civil Code on “Obligations and Contracts”)Aleatory (Art. 2010, Civil Code) Executory and conditional Synallagmatic {(See dissent of Vitug, J. in UCPB General Insurance v. Masagana Telamart, 356 SCRA 307 (2001)] Consensual and voluntary (Arts. 1305, 1306, and 1308, Civil Code) Contract of Adhesion (further discussed infra) Personal and of highest degree of good faith Indemnity (non-life or property) Contracts for Contingent Benefits or Services; Pre-need Plans and Similar Arrangements; Warranties covering goods sold or services rendered 1, Health care agreements; study carefully the following cases, including dissenting opinions: PHILAMCARE Health Systems v. CA, G.R. 1256781, March 3, 2002; 379 SCRA 356 [2002] Blue Cross Health Care v. Olivares, G.R. 169737, February 12, 2008;"544 SCRA 580 (2008) Philippine Health Care Providers v. Commission of Internal Revenue, G.R. 167330, June 2, 2008; 554 SCRA 411 (2008) and 600 SCRA 413 9September 18, 2009) Resolution of Motion for reconsideration (NOTE cited case of Jordan v. Group Health, 107 F. 2d 239) 2. Pre-Need Code of the Philippines (R.A. 9829, Dec. 3, 2009) Note: Secs. 2, 4(b), (c), & (¢), & 5; Sec. 10 of the IRR of RA 9829 E. Kinds/Classes of Insurance 1. Under the Code (limited to the definitions or description in the sections indicated): Life (Secs. 181 & 182; 234 & 235 (optional) for group life and industrial life Marine (Sec. 101) Fire (Sec. 169) Casualty (Sec. 176) or liability insurance Suretyship (Sec. 177) sarge 2. Other modes of classification of insurance contracts ‘2. private (“voluntary”) and public or social insurance (compulsory) 'b. “first party insurance” and "third party insurance* (See Sec. 176) c._as to risk insured againstF- Construction/interpretation of insurance contracts (review Articles 1370 to 1379, Chil ode) 1, Basis/rationale for interpretation, whether literal or liberal (review consensual and obligatory nature of an insurance contract Articles 1305, 1306, & 1308, Civil Code), as well as Articles 1370 to 1379 on interpretation. ‘Some cases dealing with construction and interpretation. Discussion to be limited to the issue relating to contractual provisions requiring interpretation (how the \ssue/s arose and how resolved and basis/bases for such resolution) a. Strict Implementation of Terms: Cebu Shipyard v. William Lines,306 SCRA 762 (1999) First Quezon City Insurance v. CA, 218 SCRA 526 ‘Sun Insurance v. CA, 195 SCRA 193 (1991) Fortune Ins. V. CA, 244 SCRA 308 (1995) b. Liberal Interpretation of Terms: Western Guaranty v. CA, 187 SCRA 652 Qua v. Law Union, 96 Phil. 85 (1955) Geagonia v. CA, 241 SCRA 152 (1995) Rizal Surety v. CA 336 SCRA 12 CHAPTER ITI - INSURABLE INTEREST ~ (BSC, pp. 51-70) A. Definition & Purpose 1. Recall definition of an insurance contract, Sec. 2(a) 2. May not be waived, Sec. 25 8. Insurable interest in life/health Sec. 10 1. Insurable interest of the insured in his own life compared to that on the life of others. (cf. Sec. 10 a with Sec. 10b, ¢ & d) 2. Insurable Interest in health (see 2002 PHILAMCARE case, supra) £1 Oriente de Tabacos v. Posadas, 56 Phil. 147 (1931) CC. Insurable interest in property 1. Definition (Sec. 13); enforceability where no insurable interest (sec. 18) Cha v. Court of Appeals, 277 SCRA 690 2. In what it may consist of (Sec. 14); cf. expectancy (Section 16);Gibine Merchants Ins. Co. v. Court of Appeals, 179 SCRA 638 (1989) Gelsano Cagayan v. Insurance Co. of North America, 480 DSCRA 286 (2006) 3. Measure of insurable interest in property Secs. 15 to 17 4. When should insurable interest exist; ef. life - (Sec. 19) 5. Change of interest in property; instances of automatic transfer of interest; study well Secs. 20 to 24; study also Secs, 53 to 57 D. Double insurance and over insurance Secs. 95 & 96 E. Multiple or several interests on same property; special provisions on mortgagor & mortgagee - Sections 6 & 9 Geagonia v. Court of Appeals, 241 SCRA 152 (1995) Tai Tong Chuache & Co. v. Insurance Commission, 158 SCRA 366 (1968) CHAPTER IV ~ PERFECTION OF THE CONTRACT OF INSURANCE ~ (BSC, pp. 71-95) A. Offer and acceptance; consensuality of contracts 1. Delay in acceptance; “tort theory” See Article 2176, Civil Code 2. Delivery of policy Perez v. CA, 323 SCRA 613 (2000) Vda de Sindayen v. Insular, 62 Phil. 51 (1935) Enviquez v. Sun Life, 41 Phil. 269 (1920) B. Oral Contracts of Insurance ‘See RA 8792, E-Commerce Act C. Premium payment Sections 77 & 79; 64 to 66; 177; 315, Velasco v. Apostol, 173 SCRA 228 (1985) Valenzuela v. CA, 191 SCRA 1 (1990) Tibay v. CA, 257 SCRA 126 (see dissent) (1996) Makati Tuscany v. CA, 215 SCA 462 (1992) ‘South Sea Surety v. CA, 244 SCRA 744 (1995) UCPB Gen. Ins. V. Masagana Telemart, June 15, 1999; 308 SCRA 259 (1999); 356 SCRA 307 (en banc; see dissents) (2001) D. Non-default options in life insurance (Sec. 233, f & h); BSC, pp. 115-117 1. Cash surrender valueCHAPTER V - THE POLICY, 120) A 2. Extended insurance Paid up insurance ‘Automatic premium loan Read: Manufacturer's Life Insurance v. Meer, 89 Phil. 351 (1951) Reinstatement of a lapsed policy of life insuran ; Section 233 (5); BSC, pp. 117-118 Insular v, Khu, 789 SCRA 544 92016) Refund of Premiums, Sections 80 to 83 PARTIES THERETO, & RIGHTS THEREON - (BSC, pp. 96- Policy; Riders; and Cover Notes 1. Definition of a policy of insurance (Sec. 49) 2. Form & contents (Secs. 50 & 51 a to g); Sec. 232; ef. group insurance (Sec. 234); Sec. 233 on mandated provisions for life insurance policies 3. Riders and endorsements; rules on formalities & effectivity (Sec. 50, par. 2) 4. Cover notes (Sec. 52) Lim v. Sun Life Assurance, 41 Phil, 263 (1920) Great Pacific Life v. CA, 89 SCRA 543 (1979) Pacific Timber Export v. CA, 112 SCRA 199 (1962) Types of non-life insurance policies Sections 59, 60, 61 & 62, (Cf. Sections 158, 163, 173) 1. Open 2. Valued 3. Running (floating) Development Insurance v. IAC, 143 SCRA 62 (1986) Harding v. Commercial Union Assurance, 38 Phil. 464 (1918) Parties 1. Insurer Sections 6, 190 & 191 2. The insured (cf. cestui que vie in life insurance) Sections 7"; RA 6809; Articles 110-111, Family Code; Article 1930, Civil Code 3. Beneficiaries (life insurance) (2) Designation & right to change; effects of irrevocable designation Section 11 (b) Statutory limitations Articles 739; 2011 & 2012, Civil Code Insular v. Ebrado, 80 SCRA 181 (1977)Consuegra v. GSIS, 37 SCRA 315 (1971) ‘SSS v. Davac, 17 SCRA 863 (1966) Del Val v. Del Val, 29 Phil, 534 (1915) Philippine American Life Insurance v. Pineda, 175 SCRA 416 (1989) (c) Forfeiture of benefits by the beneficiary Section 12 D. Rights of Insured Over a Life Insurance Policy i(n addition to the default options and reinstatement, supra) 1. Rig 3° assign (ct. change of beneficiary) (see GREPALIFE v. CA, 316 SCRA 677 1999) Sections 184 & 185, 2. Right to borrow Section 233(g) 3. Right to dividends Section 233(e) CHAPTER VI - RESCISSION OF INSURANCE CONTRACTS: CONCEALMENT, MISREPRESENTATION, & BREACH OF WARRANTIES ~ (BSC, pp. 121-156) A. Basis/Rationale 1. Insurance is of utmost good faith (uberrimae fidel) 2. As risk management devices 3. As grounds for rescission B. Concealment 1. Definition: Secs. 26, 27, 28 & 29 2. Matters which need not be disclosed Secs. 30, 32, 33, 34 8 35, 3. Test of materiality: Sec. 31 CC. Misrepresentation 1. The active form of concealment 2. Secs. 36 to 47 (2) Form and when made (Secs. 36, 37, 41 8 42) (©) Representation as to future (Sec. 39) (c) Representation as to information (Sec. 43) (4) Effect of misrepresentation (Secs. 44 & 45) (e) Misrepresentation as to age (Sec. 244(4) (f) Test of materiality (Sec. 46)D. Cases on concealment and misrepresentations Ng v. Asian Crusader, 122 SCRA 461 (1983) Canilang v. CA, 233 SCRA 443 (1993) Yu v. CA, 105 Phil. 930 (1959) Florendo v. PHILAM, 666 SCRA 618 (2012) Sunlife v. CA, 245 SCRA 268 (1995) Equaras v. Great Eastern, 33 Phil. 263 (1916) Qua v. Law Union Rock, 98 Phil. 85 (1955) Great Pacific Life v. CA, 316 SCRA 677 (1999); 375 SCRA 142 ‘Manulife v. Ybanez, 810 SCRA 52 (2016) E. The “incontestable clause’ in life insurance policies; defenses not barred Sections 48 and 233(b) Manila Bankders v. Aban, 702 SCRA 417 (2016) Sunlife v. Sibya, 793 SCRA 45 (2016) Tan v. CA, 174 SCRA 403 (1989) F. Warrantless: Secs. 67 to 76 a. Kinds: (2) Express (Secs. 67 & 71) (b) Implied (marine only; infra) (c) Affirmative (Sec. 68) (4) Promissory (Sec. 72 & 73) 2. Materiality and fraud Secs. 74, 75 & 76 3. Warranties in fire insurance policies; standard clauses Secs. 170, 171, 172 = Storage of hazardous materials = Alteration in use or condition = Sole ownership clause = “other insurance" clause 4, Cases: Pioneer v. Yap, 61 SCRA 426 (1974) New Life Enterprises v. CA, 2017 SCRA 609 (1992) (cf. Pacific Banking v. CA, 168 SCRA 1 (1998) (Qua Chee Gan v. Law Union, 98 Phil. 85 (1955) G. Grounds & exercise of rights of rescission Sections 48, 63, 64, 65, 170, 171, 233(b), 393 Tan v. CA, supraAreolav. CA, 238 SCRA G42 ran Chay v. West Coast Life, 51 Phil. 80 (1927), sup ), supra Filipina Compania de Seguros v. Nava, 17 SCRA 210 (1965) CHAPTER VII. RISKS AND COVERAGES - (BSC, pp. 157-204) ‘A. In general: risk & causation Insurable risk: Section 3 “Specified risks: & “all-risks” policies Exceptions/exclusions Causes mentioned in the Code: (Sections 86 & 88) Hrother terms used, e.9., “legal,” “efficient,” “predominant,” etc 5. Meaning of "proximate cause” BURY proximate,” “remote,” & “immediate” Vda de Batacian v. Medina, 102 Phil, 181 (1957) 6. Rescue from covered peril: Section 87 7. Loss due to negligence; (ef. willful act: Section 89) FGU v. CA, 454 SCRA 337 (2005) B. Life Insurance 1. Death of survival Sections 181 & 186 2. Suicide ~ Section 183; (Cf. Se. 89, supra) FF Accidental death; cf. death by accidental means Finman v. CA, 213 SCRA 493 (1992) Calanoc v. CA, 98 Phil. 79 (1955) Seaton V; Insular, 44 SCRA 58 (with dissenting opinion (1972) ‘Sun Insurance v. CA, 211 SCRA 554 (1992) Bela cruz v. Capital Insurance, 17 SCRA $59 (1966) 4. Group life insurance (Sec. 234) Pineda v. CA, supra Fternal Gardens vs. PHILAMLIFE, 551 SCRA 1 GREPALIFE v. CA, 316 SCRA 677 5, Industrial life (Sec. 236 & 237) 6, Mutual Life Insurance companies (See. 268 & 269; 1* par.) Republic v. Sunlife, 473 SCRA 129Fire insurance 1. What “fire insurance” includes Section 169 “Hostile” fire and “friendly” fire Phi, Home Assurance v. CA, 257 SCRA 468 (1996) “Increase of risks” and “moral hazard” clauses Alteration of insured property Secs. 170, 171, & 172 Malayan Insurance v. Pap Co., 703 SCRA 314 (2013) 3. Measure of indemnity Secs. 173 and 174 Casualty & Liability Insurance Section 176 . Suretyship Sec. 177 to 180 1. Definition and extent of liability Secs. 177 and 178 Cases: National Power Corp. v. CA, 145 SCRA $29 (1986) Eastern Assurance v. IAC, 179 SCRA 561 (1989) ‘Stronghold Insurance v. CA, 208 SCRA 336 (1992) Prudential v. Equinox, 533 SCRA 257 (2007) Intra-Strata v. Republic, 557 SCRA 363 (2008) 2. Premium payment Sec. 179 Reparations Commission v. Universal Deep Sea Fishing Corp., 83 SCRA 764 (1979) Philippine Pryce Assurance v. CA, 230 SCRA 164 91994) 3. Applicability of the Civil Code Sec. 180, Motor Vehicle Insurance (limited discussion) 1. Compulsory Motor Vehicle Insurance Secs. 386 and 387 Perla Compania de Seguros v. CA & Lim, 208 SCRA 487 (1992) Shafer v. Judge, 167 SCRA 386 (1988) 106. Ve, De Magiana v. Consolacion, 212 SCRA Far Eastern Surety v. Miso, 25 SCRA G63 (Ise) Peza v. Alikpala, 160 SCRA 31 (1988) Western Guaranty v. CA, 187 SCRA 652 (supra) (1990) Paramound Insurance v. Remondeulaz, 686 SCRA 487 (1992) 2. The “no-default” clause Section 391 Perla v. Ancheta, 164 SCRA 144 (1988) Reinsurance - BSC, pp. 205-207 Sections 97 to 100 PHILAM y, Auditor, 22 SCRA 135 (1968) Fieldman v. Asian Surety, 34 SCRA 36 (1970) Equitable Insurance v. Rural Insurance, 4 SCRA 343 (1962) Artex Development Co. v. Wellington Ins. Co., 51 SCRA 352 (1973) Communication and Info System v. Mark Sensing, 815 SCRA 499 (January 25, 2017) CHAPTER VIII. MARINE INSURANCE - (BSC, pp. 209-249) A. . Definition and risks covered Section 101 General and particular average Sec. 138 (optional: Article 811, Code of Commerce) ‘Magsaysay, Inc. v. Agan, supra Jarque v. Smith Bell & Co., 56 Phil. 758 (1930) Phil. Home Assurance v. CA, 257 SCRA 468, supra “Perils of the sea” and "perils of the ship” Cathay Insurance v. CA, 151 SCRA 710 (1987) Roque v. IAC, 139 SCRA 596 (1985) La Razon v. Union Insurance, 40 Phil. 40 (1919) ‘Malayan Insurance v. CA, 270 scra 242 (1997) Mayer Steel v. CA & Southsea Surety, 274 SCRA 432 Insurable interest in marine insurance 1. Parties with insurable interest (Sections 102 to 108) 2. kinds of charter partes™ Coastwise v. CA, 245 SCRA 796 (1995) Cea te industries. Moloyan Tisurance, 471 SCRA 698 (G.R. 161745, Sep. 30, seeiar Shipping v. Poncer, 479 SCRA 655 (2006), G.R, 157481, January 24, 2000 salvage v. Phil. Home Assurance, 512 SCRA 667 (2007) nConcealment and misrepresentation Sections 109 to 114; cf. Section 28 Implied warranties Sections 115 to 1122; Sections 123 to 128 1. Seaworthiness of the vessel Sec. 115 to 121, Roque v. Intermediate Appellate Court, 139 SCRA 596, supra 2. Implied warranty against improper deviation Sec. 123 to 128 3. Implied warranty of proper documentation Sec. 122 G. Kinds of losses covered by marine insuran Sections 129 to 139 total, partial, actual, constructive 1. Actual total loss. Sec. 132 2. Constructive total loss Sec. 133, 3. Concept of abandonment; requisites; conditions. Secs. 143 to 157 4. Cases: Choa v. CA, 183 SCRA 223 (1990) Filipino Merchants v. CA, 179 SCRA 638 (1989) Oriental Assurance v. CA, 200 SCRA 459 (1991) Pan Malayan v. CA, 201 SCRA 382 (1991) H. Measure of indemnity; “open and "valued" policies Sections 158 to 168 CHAPTER IX. CLAIMS SETTLEMENT & SUBROGATION ~ (BSC, pp. 250-585) Notice and proot of loss; timeliness provisions by law and by contract Sections 90 to 94; 63; 247 to 251; 397 & 439, Ar. 1144 Ci Code) B. Unfair claims settlement; sanctions 2Londres v. National Life, 94 Phil. 627 (1984) Tio v. CA, 202 SCRA 119 (1991) Noda v. Cruz-Arnaldo, 151 SCRA 227 (1967) Prescription of action Sections 63, 416 (for motor vehicle); Article 1144, Civil Code Ang v. Fulton, 2 SCRA 945 (1961) Travellers Insurance v. CA, 272 SCRA 536 (1997) Lopez v. Filipinas, 16 SCRA 855 (1966) Cathay v. CA, 174 SCRA 11 (1989) Finman v. Inocencio, 179 SCRA 480 (1989) ACCFA v. Alpha Ins., 24 SCRA 151 (1968) Eagle Star v. Chin Yu, 96 Phil. 696 (1955) Sun Insurance v. CA, 195 SCRA 193, supra (1991) Mayer Steel case, supra Vda. De Gabriel v. CA, 264 SCRA 137 ‘Subrogation Articles 1236 and 2207, Civil Code Mlustrative Cases: Malayan Insurance v. CA, 165 SCRA 536 (1988) PHILAMGEN v. CA, 273 SCRA 262 (1997) Pan Malayan v. CA, 184 SCRA 54 (1990) Fireman's Fund v. Jamilla, 70 SCRA 323 (1976) Delsan Transport v. CA, 268 SCRA 597 (1997) Cases where no subrogation succeeded: Cebu Shipyard v. William Lines, 306 SCRA 762 (1999) Eastern Shipping v. Prudential, 599 SCRA 565 (2009) Wallen Philippines v. CA, 397 SCRA 158 (2003) Home Insurance v. CA, supra ‘BSc/aima 414 August 2018 3