SEATWORK ANSWERS: INSURANCE LAW

1.​ A contract where a person binds himself solidarily to the creditor to fulfill the obligation of
the debtor in case the latter should fail to do so. Suretyship​

2.​ Deemed to be an insurance contract only if made by a surety who or which, as such, is
doing an insurance business. Contract of Suretyship​

3.​ An agreement whereby one undertakes for a consideration to indemnify another against
loss, damage, or liability arising from an unknown or contingent event. Contract of
Insurance​

4.​ A characteristic of insurance stating that the obligation of the insurer to pay the proceeds
of the insurance arises only upon the happening of an event which is uncertain.
Aleatory​

5.​ A characteristic of insurance stating that both the insured and the insurer have reciprocal
obligations of equal value to each other. Synallagmatic​

6.​ A contract of insurance is a contract where the insured is entitled to recover only the
amount of total loss sustained, and the burden is upon him to prove the amount of such
loss. Contract of Indemnity​

7.​ A contract of insurance is a ready-made form of contract, which the other party may
accept or reject, but which the latter cannot modify. Contract of Adhesion or Fine Print
Rule​

8.​ The contract of insurance is one of perfect good faith, not for the insured alone, but
equally so for the insurer. Uberrimae Fides​

9.​ The law presumes that the insurer considered the personal qualification of the insured in
approving the insurance application. Personal​

10.​An insurance contract is not compulsory, and the parties may incorporate such terms
and conditions as they may deem convenient, provided the same do not contravene any
provision of law and are not against public morals and public policy. Voluntary​

11.​The insured has insurable interest. Insurable​

12.​The insured is subject to a risk of loss by the happening of the designated peril. Risk of
Loss​
13.​The assumption of risk by the insurer is part of a general scheme to distribute actual
losses among a large group of persons bearing a similar risk. Distribute​

14.​In consideration of the insurer’s promise to assume the risk, the insured pays a
premium. Premium​

15.​A form of life insurance under which the premiums are payable either monthly or oftener,
and the words industrial policy are printed upon the policy as part of the descriptive
matter. Industrial Life​

16.​Essentially, it is a single insurance contract that provides coverage for many individuals.
Group Life​

17.​An insurance on human lives and insurance appertaining thereto or connected therewith.
Individual Life​

18.​An insurance covering loss or liability arising from accident or mishap. It includes
employer’s liability insurance, motor vehicle liability insurance, etc. Casualty Insurance​

19.​An insurance including insurance against loss by fire, lightning, windstorm, tornado, or
earthquake and other allied risks. Fire Insurance​

20.​An insurance against loss or damage to vessels, craft, aircraft, vehicles, goods, freights,
cargoes, etc. Marine Insurance​

21.​A financial product or service that meets the risk protection needs of the poor under
specified circumstances. Micro Insurance​

22.​An insurance that also provides benefits or values incidental thereto payable in fixed or
variable amounts, or both. It shall not be deemed to be a security or securities as defined
in the Securities Act or in the Investment Company Act. Variable Insurance​

23.​In a life insurance, the interest which the insurer is required to have in the person of the
insured. Insurable Interest​

24.​Anyone who is forbidden from receiving any donation under Article 739 of the Civil Code
cannot be named beneficiary of a life insurance policy by a person who cannot make
any donation to him. True​

25.​A creditor may only insure the life of the debtor up to the amount of the debt. True​

26.​Consent of the person whose life is insured is essential to the validity of an insurance
taken by another as long as the insured has a legal insurable interest at the inception of
 the policy. Essential​

27.​Pecuniary interest over the property is always necessary. Always Necessary​

28.​In Property Insurance, insurable interest in property may consist in: (1) An existing
interest; (2) An inchoate interest founded on existing interest; or (3) Any expectancy
coupled with an existing interest. True​

29.​When there is an express prohibition against alienation in the policy, in case of

alienation, the contract of insurance is not merely suspended but avoided. Not Merely
Suspended But Avoided​

30.​As a general rule, a change of interest in any part of a thing insured unaccompanied by
a corresponding change of interest in the insurance avoids the insurance to an
equivalent extent, until the interest in the thing and the interest in the insurance are
vested in the same person. Avoids​

31.​In one case, the Supreme Court held that there can be no contract of insurance unless
the minds of the parties have met in agreement.​
Minds​

32.​The consideration paid by the insured to the insurer for undertaking the assumption of
the risk covered by the insurance contract.​
Premium​

33.​As a general rule, there can be no binding contract of insurance if there is no payment of
the premium, considering that it is one of the elements of an insurance contract. One of
the exceptions to the general rule is:​
Whenever a grace period provision applies as provided under the Insurance Code​

34.​A neglect to communicate that which a party knows and ought to communicate.​
Concealment​

35.​A breach of warranty that is immaterial generally avoids the contract of insurance except
when the parties stipulated that its breach will avoid the policy regardless of materiality.​
Avoids​

36.​Payment to the insured makes the insurer an assignee in equity.​

Subrogation​

37.​What is being followed in insurance contracts is what is known as the Cognition

Theory. Under this theory, the contract is perfected the moment the offeror learns about
the acceptance of his offer by the offeree.​
 Cognition Theory​

38.​Under this theory, the contract is perfected the moment the acceptance of the offer is
“manifested” or made (Example: Sending of Acceptance Letter).​
Manifestation Theory​

39.​In a contract of insurance, delivery of the policy is necessary for its perfection.​
Necessary​

40.​Cooperatives are now expressly included in the term “insurer” or “insurance company.”​
True​

41.​On July 14, 1985, X took an insurance policy on the life of her boyfriend, Y. In the
insurance application, X misrepresented that Y was in perfect health although she knew
all the time that Y was afflicted with AIDS. On October 18, 1987, Y died in a motor
accident. Shortly thereafter, X filed her insurance claim. Should the insurer pay?​
No. The insurer has no obligation to pay. Friendship alone is not the insurable
interest contemplated in life insurance.​

42.​Can a parent insure the life of his son who is no longer a minor and who is now married?​
Yes. The law does not distinguish between a married child or a minor child.​

43.​Mr. A insured the life of his wife, Mrs. B. Later, they were legally separated pursuant to a
judgment of a court. B dies after the legal separation. Can Mr. A recover the insurance
proceeds?​
Yes. A can recover because he has insurable interest over the life of B at the time
he obtained the insurance.​

44.​In the above problem, will your answer be the same if Mr. A insured the life of B when
they were already legally separated?​
Yes, since a decree of legal separation does not remove the insurable interest of a
spouse over the other.​

45.​Is mere hope or expectancy insurable?​

No, since hope or expectancy must be coupled with existing interest out of which
the expectancy arises.​

46.​Can a depositary insure the things deposited to him?​

Yes, since the depositary has an insurable interest over the thing deposited as he
will be damnified by its loss.​

47.​Can there be a recovery of the insurance proceeds where the husband took out a life
insurance on the life of his wife who (wife) died a few days after the decree of their
annulment became final?​
 Yes, since in life insurance, it is only necessary that the person who took out the
insurance on the life of another has insurable interest on such life at the time the
policy takes effect.​

48.​Any contract by which an insurer procures a third person to insure him against loss,
liability by reason of an original insurance.​
Reinsurance​

49.​The written document embodying the terms and stipulations of the contract of insurance
between the insured and insurer.​
Policy of Insurance​

50.​Suppose that Fortune owns a house valued at P600,000.00 and insured the same
against fire with three insurance companies as follows:​

●​ X – P400,000.00
●​ Y – P200,000.00
●​ Z – P600,000.00​
In the absence of any stipulation in the policies, from which insurance company or
companies may Fortune recover in case a fire should destroy his house completely?​
Fortune may recover from any insurer, any two or all of the insurers provided that
the total amount that he will recover does not exceed his loss.