3. BR_COMCRIM_INSURANCE

What is the measure of indemnity in open and valued policies in fire insurance?

In Open Policies The expense it would be to the insured at the time of the commencement of the fire to preplace the thing lost or injured in the condition in which it was at the time of the injury. while in Value Policies the parties are bound by the valuation in the absence of fraud

Q: What is the effect of a valid abandonment?

It is equivalent to a transfer by the insured of his interest, to the insurer, with all the chances of recovery and indemnity (Sec. 146, ibid.)

Q: What is abandonment?

It is the act of the insured by which, after a constructive total loss he declared the relinquishment to the insurer of his interest in the thing insured (Sec. 138, ibid.).

When is seaworthiness admitted by the insurer?

It is when: The warranty of seaworthiness is to be taken as fulfilled; or The risk of unseaworthiness is assumed by the insurer. (ibid.)

Q: What is the source of liability of TPL insurance?

The insurer's liability is based on contract; that of the insured is based on tort. (Malayan Insurance Co. vs. CA, 165 SCRA 136 [1988].)

Q: To whom may notice of abandonment be made?

To the insurer or his authorized agent or the broker who is the agent for both parties (ibid.)

When is the loss of profits conclusively presumed?

When profits are valued and insured by a contract of marine insurance, a loss of them is conclusively presumed from a loss of the property out of which they were expected to arise, and the valuation fixes their amount. (Sec. 160, Insurance Code.)

Q: Why are insurance contracts called contracts of adhesion?

While generally, stipulations in a contract come about after deliberate drafting by the parties thereto, there are certain contracts almost all the provisions of which have been drafter only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only participation of the party is the signing in his signature or his adhesion thereto. Insurance contracts fall into this category (Sweet lines inc. v. Tawag, GR l-37750, May 19, 1978) An illustration of a contract of adhesion is when the insurer used "fine print " letters in condition stated in a contract of insurance.

Q: Lawrence, a boxer, is a holder of an accident insurance policy. In a boxing match, he died after being knocked out by the opponent. Can his father who is a beneficiary under said insurance policy successfully claim indemnity from the insurance company? (1990 Bar Question)

Yes. Clearly, the proximate cause of death was the boxing contest. Death sustained in a boxing contest is an accident. (De la Cruz v. Capital Insurance & Surety Co.,G.R. No. L-21574, June 30, 1966)

Can the insured pledge, hypothecate, or transfer a fire insurance policy or rights thereunder?

Yes. He may do so after a loss has occurred and even without the consent of, or notice to, the insurer. (Secs. 21 and 83, Insurance Code.) In such a case, it is not the personal contract which is being assigned, but a claim under or a right of action on the policy against the insurer. (De Leon, supra, pg. 390.)

Q: Is this right of the insured subject to any limitation?

Yes. Section 173 of the Insurance Code prohibits the exercise of this right in the case where the pledging, hypothecating, or transferring is made to any person, firm or company who acts as agent for or otherwise represents the insurer.

Q: What is co-insurance?

Co-insurance is a form of insurance in which the person who insures his property for less than the entire value is understood to be his own insurer for the difference which exists between the true value of the property and the amount of insurance. In such a case, a marine insurer is liable upon a partial loss only for such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the property insured. (Sec. 157, Insurance Code.).

What is the risk insured against in marine insurance?

GR: In the usual form of marine policy, the risks insured against are only "perils of the sea" XPN: when the insured is an "all risk policy" and thus covers even perils of the ship" XPN to XPN: when the risks are expressly excepted by the "all risk policy"

Fire Insurance What is fire insurance?

It is a contract of indemnity by which the insurer, for a consideration, agrees to indemnify the insured against loss of or damage by fire, lightning, windstorm, tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies. (Sec. 167, ibid.)

Q: In case of reshipment, what happens the liability of the insurer as regards the cargo?

When a ship is prevented, at an intermediate port, from completing the voyage, by the perils insured against, the liability of a marine insurer on the cargo continues after they are thus reshipped. The insurer may, however, require additional premium if the hazard be increased by his extension of liability (Sec. 133, Insurance Code).

Q: What are the distinctions between actual and constructive loss?

actual loss It exists when the subject matter of the insurance is wholly destroyed or lost or when it is so damaged as no longer to exist in its original character. while constructive loss It is one which the loss, although not actually total, is of such a character that the insured is entitled, if he thinks fit, to treat it as total by abandonment. (Sec. 131, Insurance Code.) actual loss The insured has the right to claim the whole insurance without notice of abandonment. (Sec. 135, Insurance Code.) while constructive loss Abandonment by the insured is necessary in order to recover for a total loss (Sec. 138, Insurance Code.) in the absence of any provision to the contrary in the policy.

Q: What is constructive total loss?

constructive total loss is when 1. More than 3⁄4 thereof in value is actually lost, or would have to be expended to recover it from the peril 2. The thing insured is injured to such extent as to reduce its value more than 3⁄4 3. The thing insured is a ship, and the contemplated voyage cannot be lawfully performed without incurring either an expense to the insured of more than 3⁄4 the value of the thing abandoned or a risk which a prudent man would not take under the circumstances; or 4. The thing insured, being cargo or freightage, and the voyage cannot be performed, nor another ship procured by the master, within a reasonable time and with reasonable diligence, to forward the cargo, without incurring the like expense or risk mentioned in no. (3). But freightage cannot in any case be abandoned (and thus declared constructively lost) unless the ship is also abandoned. (Sec. 131 and 139, Insurance Code.)

Q: What constitutes actual total loss?

1. A total destruction of the thing insured; 2. The irretrievable loss of the thing by sinking, or by being broken up; 3. Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or 4. Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured. (Sec. 130, Insurance Code.)

Q: What are the two divisions of casualty insurance?

1. Accident or health insurance -Insurance against specified perils which may affect the person and/or property of the insured. (E.g. personal accident, robbery/theft insurance) 2. Third party liability insurance (TPL)- Insurance against specified perils which may give rise to liability on the part of the insured of claims for injuries or damage to property of others. (De Leon, supra, pg. 392.)

What are the special marine insurance contracts and clauses?

1. All- risks policy 2. Barratry clause 3. Inchmaree clause 4. Sue and Labor Clause

CHARACTERISTICS AND NATURE OF AN INSURANCE CONTRACT Q: What are the characteristics of an insurance contract?

1. Consensual - It is perfected by the meeting of the minds of the parties as to the object, cause and consideration of the insurance contract. There should be acceptance of the application for insurance. 2. Voluntary - the parties may incorporate such terms and conditions as they may deem convenient: provided they do not contravene any provision of law and are not opposed to public policy, law morals, good customs, or public order. GR: the taking out of an insurance contract is not compulsory. XPN: liability insurance may be required by law in certain instances (CMVLI, employees under Labor Code, or as a condition a business or calling affecting the public safety or welfare) 3. Aleatory - Liability of the insurer depends upon some contingent event. 4. Unilateral - It imposes legal duties only on insurer who promise to indemnify in case of loss. 5. Conditional - it is subject to conditions the principal one of which is the happening of the event insured against. 6. Contract of indemnity - recovery is commensurate with the amount of the loss suffered. 7. Personal - each party having in view the character, credit and conduct of the other. 8. Property - since insurance is a contract, it is property in legal contemplation. 9. Risk- distributing device - Insurance serves to distribute the risk of economic loss among as many as possible of those who are subject to the same kind of loss. 10. Onerous - there is a valuable consideration called the premium.

What does a casualty insurance cover?

1. Employer's liability insurance 2. Workmen's compensation insurance 3. Public liability insurance 4. Motor vehicle liability insurance 5. Plate glass insurance 6. Burglary and theft insurance 7. Personal accident and health insurance as written 8. by non-life insurance companies, and 9. other substantially similar kinds of insurance (ibid.)

Q: What are the forms of acceptance of abandonment?

1. Express 2. Implied from the conduct of the insurer 3. Mere silence of the insurer for unreasonable length of time after notice. (sec. 150, Insurance Code)

Q: What are kinds of average?

1. Gross or general averages - damages or expenses which are deliberately caused by the master of the vessel or upon his authority, in order to save the vessel, her cargo or both at the same time from a real and known risk. (Art. 811, ibid.); and Note: This kind of average must be borne equally by all of the interests concerned in the venture. (De Leon, supra, pg. 351.) 2. Simple or particular averages - they include all damages and expenses caused to the vessel or to her cargo which have not inured to the common benefit and profit of all the persons interested in the vessel and her cargo. (Art. 809, ibid.).

Why is the distinction between marine and fire insurance important?

1. In marine insurance, the rules on constructive total loss (Secs. 13.1, 139, Insurance Code) and abandonment (Sec. 138, ibid.) apply but not in fire insurance; 2. In case of partial loss of a thing insured for less than its actual value, the insured in a marine policy is a co-insurer of the uninsured portion (Sec. 157, ibid.), while the insured may only become a co-insurer in fire insurance if expressly agreed upon by the parties. (Sec. 172, ibid.). (De Leon, supra, pg. 380.)

What are the two major divisions of Marine Insurance?

1. Ocean marine insurance - covers primarily sea perils of ships and cargoes. Scope: GELS a. Goods or cargoes b. Earnings such as freight, passage money c. Liability incurred by reason of maritime perils d. Ships or hulls 2. Inland marine insurance - covers primarily the land or over the land transportation perils of property shipped by railroads, motor trucks, airplanes, and other means of transportation. a. property in transit b. bailee liability c. fixed transportation property d. floater

What are indirect loss?

1. Physical damage caused to other property. 2. Loss of earnings due to the interruption of business by damage to the insured's property. 3. Additional expenses incurred by the insurer following the damage to the property or contents by an insured peril (ibid., pg. 379-380.)

What is the effect of falsity of a representation by the insured?

1. Promissory Representation - If a representation by the insured is intentionally false in any material respect or in respect of any fact on which the character and nature of the risk depends, the insurer may rescind the entire contract. 2. Representation of Expectation -the eventual falsity of a representation as to expectation does not, in the absence of fraud, avoid a contract of marine insurance. (Sec. 112, Insurance Code)

What are the implied warranties in marine insurance?

1. Seaworthiness 2. Non-engagement from Illegal venture 3. Warranty of Neutrality 4. Non-deviation from the agreed voyage. 5. Presence of Insurable Interest

Q: What is the extent of the insurable interest of the following?

1. Ship owner - a. over the value of the vessel , even when it has been chartered by one who covenants to pay him its value in case of loss. b. If hypothecated by a bottomry loan, the insurable interest is only the excess of the value of the vessel over the amount secured by bottomry. c. He also has an insurable interest on expected freightage. (sec. 103, Insurance Code) 2. Cargo owner - over the cargo and expected profits. (sec. 105, Insurance Code) 3. Charterer - over the vessel, to the extent that he is liable to be damnified by its loss. (sec. 106, Insurable code.) 4. Creditor/lender - over the amount of the loan

What are the requisites in order that the insurer may rescind a fire insurance policy on the ground of alteration made in the use or condition of the thing insured?

1. The use or condition of the thing is specially limited or stipulated in the policy; 2. Such use or condition is altered; 3. The alteration is made without the consent of the insurer; 4. The alteration is made by means within the control of the insured; and 5. The alteration increases the risk. (Sec. 168, Insurance Code.) 6. There must be a violation of a material policy provision. (Sundiang, supra, pg. 147.)

Q: What are the kinds of losses?

1. Total, which may be: Actual total loss Constructive total loss 2. Partial

Q: When is a deviation proper?

1. When caused by circumstances over which neither the master nor the owner of the ship has any control; 2. When necessary to comply with a warranty, or to avoid a peril, whether or not peril is insured against; 3. When made in good faith, and upon reasonable grounds of belief in its necessity to avoid a peril; or 4. When made in good faith, for the purpose of saving human life or relieving another vessel in distress. (Sec. 124, Insurance Code.)

Q: What is Free From Particular Average Clause (FFPA Clause)?

A clause agreed upon in a policy of marine insurance in which it is stated that the insurer shall not be liable for a particular average.

Q: What is the effect when the ship becomes unseaworthy during the voyage?

An unreasonable delay in repairing the defect exonerates the insurer on ship or shipowner's interest from liability from any loss arising therefrom. (sec. 118, Insurance Code)

ELEMENTS OF CONTRACT OF INSURANCE Q: What are the elements of a contract of insurance?

(SPEAR) 1. Scheme to distribute losses - Such assumption of risk is part of a general scheme to distribute actual losses among a large group or substantial number of persons bearing a similar risk. 2. Payment of premium - as consideration for the insurer's promise , the insured makes a ratable contribution called "premium" to a general insurance fund. 3. Existence of insurable interest - The insured possesses an interest of some kind susceptible of pecuniary estimation, knowns as "insurable interest" 4. Assumption of Risk - the insurer assumes that risk of loss for consideration. 5. Risk of Loss - the insured is subject to a risk of loss through the destruction or impairment of that interest by the happening of designated peril.

Q: Who are parties in an insurance contract?

1) Insurer - party who assumes or accepts the risk of loss and undertakes for a consideration to indemnify the insured on the happening of a specified contingency or event. 2) Insured - person in whose favor the contract is operative and is indemnified against. Note: The insured is not always the person to whom the proceeds are paid. 3)Assured/Beneficiary- a person designated by the terms of the policy to receive the proceeds of the insurance. He may be the insured or a third party in the contract for whose benefit the policy is issued and to whom the loss is payable.

Q: What are some rules on TPL?

1. Insurable interest is based on the interest of the insured in the safety of the persons, and their property, who may maintain an action against him in case of their injury or destruction respectively. (ibid, pg. 394.) 2.In a TPL insurance contract, the insurer assumes the obligation by paying the injured third party to whom the insured is liable. Prior payment by the insured to the injured third person is not necessary in order that the obligation of the insurer may arise. The moment the insured becomes liable to third persons, the insured acquires an interest in the insurance contract which may be garnished like any other credit. (Perla Compania de Seguros, Inc. vs. Ramolete, 203 SCRA 487 [1991].) 3.In burglary, robbery and theft insurance, the opportunity to defraud the insurer (moral hazard) is so great that insurer have found it necessary to fill up the policies with many restrictions designed to reduce the hazard. The purpose of the exception is to guard against liability should theft be committed by one having unrestricted access to the property. (Fortune Insurance & Surety Co. vs. CA, 244 SCRA 308 [1995].) 4. occurrence of the injury or event upon which the liability depends. The purpose is to protect the injured person against the insolvency of the insured who causes such injury and to give him a certain beneficial interest in the proceeds of the policy. It is as if the injured person were especially named in the policy. (Shafer vs. RTC Judge, 167 SCRA 386 [1986].) . b. Indemnity against actual loss or payment -The third persons cannot proceed against the insurer, the contract being solely to reimburse the insured for liability actually discharged by him through payment to third persons, said third person's recourse being thus limited to the insured alone. (Guingon vs. Del Monte, 20 SCRA 1043 [1967].) Prior payment by the insured is necessary to give rise to the obligation of the insurer.

What are the laws governing the contract of insurance in the Philippines are the following:

1. Insurance Code of the Philippines 1978 2. New Civil Code 3. Special Laws

MARINE INSURANCE What does marine insurance include?

1. Insurance against loss or damage to: a. vessels, craft, aircraft, vehicles goods, freights cargoes, merchandise, effects, disbursements, profits, moneys , securities , choses in action, evidence of debts, valuable papers, bottomry and respondentia interests and all other kinds of property and interest therein b. person or property in connection with or appertaining to marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection with the construction, repair , operation , maintenance or use of the subject matter of such instance. c. Precious stones, jewels, jewelry,precious metals, whether in course of transportation or otherwise; d. bridges , tunnels and other instrumentalities of transportation and communication (excluding buildings , their furniture and furnishings, fixed contents, and supplies held in storage) ; 2. Marine protection and indemnity insurance

Q: Distinguish between the liability of the insurer and that of the insured in case for indemnity in TPL?

1. Insurer The liability is direct but the insurer cannot be held solidarily liable with the insured and other parties at fault. while Insured Liability is direct and can be held liable with all the parties at fault. 2. Insurer Liability is based on contract while Insured based on tort 3. Insurer The third-party liability is only up to the extent of the insurance policy and that required by law while Insured the liability extends to the amount of actual and other damages.

CLASSES OF INSURANCE What are the Classes of Insurance?

1. Life Insurance 2. Non-life Insurance 3. Contracts of suretyship or bonding 4. Compulsory Motor Vehicle Liability Insurance

What matters, when concealed, do not vitiate the entire insurance contract, but merely exonerates the insurer from a loss resulting from the risk concealed?

1. National character of the insured; 2. The liability of the thing insured to capture and detention; 3. The liability to seizure from breach of foreign laws of trade; 4. The want of necessary documents; and 5. The use of false and simulated paper. (sec. 110).

Q: What are the effects of acceptance of abandonment?

1. The insurer becomes at once liable for the whole amount of the insurance and also becomes entitled to all rights which insured possessed in the thing insured. (Sec. 146, ibid.) 2. It fixes the rights of the parties; whether express or implied, is conclusive upon them, (Sec. 151, ibid.) and irrevocable. (Sec. 152, ibid.) 3. It stops the insurer to rely on any insufficiency in the form, time, or right, of abandonment.(Sec. 143, 141, 139, ibid.) Whether the insured has a right to abandon is immaterial where the abandonment is accepted and there is no fraud. (New Orleans Ins. Co. vs. Piaggio, 16 Wall. [US] 378.) 4. On accepted abandonment of a ship, the freightage earned subsequent to the loss belongs to the insurer of the ship; but freightage earned previously belongs to the insurer of said freightage who is subrogated to the rights of the insured up to the time of the loss. (Sec. 153, ibid.) XPN: Where the ground upon which it was made proves to be unfounded. (Sec. 152, ibid.) Under Sec. 145, abandonment can be sustained only upon the ground specified in the notice thereof.

Q: What are the requisites for the validity of abandonment?

1. There must be an actual relinquishment by the person insured of his interest in the thing insured. (Sec. 138, ibid.) 2. There must be a constructive total loss. (Sec. 139, ibid.) 3. The abandonment must neither be partial nor conditional. (Sec. 140, ibid.) 4. It must be made within a reasonable time after receipt of reliable information of the loss (Sec. 141, ibid.) 5. It must be factual. (Sec. 142, ibid.) 6. It must be made by giving notice thereof to the insurer which may be done orally or in writing; Provided, that if the notice be done orally, a written notice of such abandonment shall be submitted within 7 days from such oral notice. (Sec. 143, ibid.) 7. The notice of abandonment must be explicit and must specify the particular cause of abandonment. (Sec. 144, ibid.)

Q: What is the measure of indemnity?

1. Valued policy - the parties are bound by the valuation, if the insured had some interest at risk and there is no fraud (Sec. 156, ibid.) 2. Open policy - the following rules shall apply in estimating a loss: Value of the ship- value at the beginning of the risk Value of the cargo- actual cost to the insured, when laden on board, or where that cost cannot be ascertained, its market value at the time and place of shipment. The expected profits from the cargo are not considered since they can be covered by a separate insurance. Value of freightage- gross freightage exclusive of primage, which is a small compensation paid by a shipper to the master of the vessel for his care and trouble bestowed on the shipper's goods and which the master is entitled to retain in the absence of an agreement to the contrary with the owners of the vessels. Cost of insurance - the cost of insurance is always added in calculating the value of the ship, cargo, or freightage or other subject matter in an open policy. (De Leon, supra, pg. 372-373.)

When does insurable interest in expected profit exist?

1. When the interest in the thing involved is based on a legal right. 2. When the interest in thing involved is based on valuable consideration.

What are the instances when there is no insurable interest in freight?

1. When there is no contract and no part of the goods expected to be carried are on board, although there are goods ready for shipment or the master is provided with funds for the purpose of purchasing a cargo. 2. Where the vessel is a mere "seeking ship", the owner has no insurable interest in freight to be earned on goods not loaded.

Q: What is the express warranty as to nationality and neutrality?

1. as to nationality - imports that the vessel belongs to the subject of a particular country. 2. as to neutrality - imports that the property insured is neutral in fact, that is it belongs to neutrals and that no act of insured or his agent shall be done which can legally compromise its neutrality.

Q: What is a loan on bottomry or respondentia?

A loan in which under any condition whatever, the repayment of the sum loaned, and of the premium stipulated, depends upon the safe arrival in port of the goods on which it is made or of the price they may be receive in case of accident. (Art.719, Code of Commerce)

When is a ship "seaworthy"?

A ship is seaworthy when reasonably fit to perform the service and to encounter the ordinary perils of the voyage contemplated by the parties to the policy. (sec. 144, insurance code)

What is the scope of the seaworthiness of a vessel?

A warranty of seaworthiness extends not only to the condition of structure of the ship itself, but requires that it be properly laden, and provided with a competent master, a sufficient number of competent officer and seamen, and the requisite appurtenances and equipment, such as ballasts, cables and anchors, cordage and sails, food, water, fuel and lights and other necessary or proper stores, and implements for the voyage (sec. 116, Insurance Code.)

What is the Formula to determine the amount recoverable in co-insurance?

A: (Partial) Loss Value of thing Insured Illustration: X Amount of Insurance = Amount of recovery (Insurer's Liability) If a vessel valued at P1M is insured for only P800, 000 and is damaged to the extent of P400, 000, the insurer will be required to pay only 80% of the loss suffered, or P320,000; the other 20% or P80,000 being borne by the insured himself. P400,000 or 2/5 X P800,000 = P320, 000 P1M The insured is considered a co-insurer as to the uninsured portion of P200,000. (1M - 800,000).

What is the effect of the admission of seaworthiness by the insurer?

A: If the policy provides that the seaworthiness of the vessel as between insured and insurer is admitted, the issue of seaworthiness cannot be raised by the insurer without showing concealment or misrepresentation by the insured (Phil. American General Insurance Co. v. CA, G.R. No. 116940, June 11, 1997)

What is the difference between co-insurance in Marine Insurance and in Fire Insurance?

A: In Marine Insurance, there is co-insurance by virtue of Section 157 of the Insurance Code, as long as the above-enumerated requisites are present. Meanwhile, in fire insurance, there has to be an express stipulation to that effect. (ibid.)

Q: Can games of chances be insured?

A: No. An insurance for or against the drawing of any lottery, or for or against any chance or ticket in a lottery drawing a prize is not authorized (Sec. 4, Insurance Code).

Q: What are the requisites for co-insurance?

A: There is co-insurance when the following requisites concur: The loss is partial; and The amount of insurance is less than the value of the property insured. (Sundiang, supra, pg. 140.)

Who may be insured?

Anyone except a public enemy may be insured (Sec. 7, Insurance Code.). Note: A public enemy is a nation at war with the Philippines and every citizen or subject of such nation. It does not include mobs, thieves or robbers (Bouvier's Law Dictionary).

Q: What is the subject matter of a contract of insurance?

Anything having an appreciable pecuniary value, which is subject to loss or deterioration or of which one may be deprived so that his pecuniary interest is or may be prejudiced.

Q: What are the rules in the construction/ interpretation of insurance contracts?

By reason of the exclusive control of the insurance company, over the terms and phraseology of the contract, the ambiguity must be held strictly against the insurer and liberally in favor of the insured. (Qua Chee Gan v. Law Union And Rock Insurance,) However, if the terms, which the parties themselves have used, are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense (sun life office v. AM 195 SCRA 193).

Q: When is deviation improper?

Every deviation not specified in Sec. 124 is improper. (Sec. 125, Insurance Code.)

Q: Who may be an insurer?

Every person, partnership, association, or corporation duly authorized (by the Insurance Commission) to transact insurance business may be an insurer (Sec. 6, Insurance Code.).

When is the warranty of seaworthiness complied with?

GR: It is complied with if the ship is seaworthy at the time of the commencement of the risk. (sec. 115, Insurance Code) XPN: 1 ) In the case of time policy - the ship must be seaworthy at the commencement of every voyage she may undertake. (sec. 115) 2) In case of cargo policy- each vessel upon which cargo is shipped or transshipped must be seaworthy at the commencement of each particular voyage. (sec. 115) 3) In the case of voyage policy contemplating a voyage in different stages - the ship must be seaworthy at the commencement of each portion of the voyage. (sec. 117, Insurance Code)

What is the effect when the insured has not control of knowledge of the alteration?

GR: The insurer is not relieved from liability if the acts or circumstances by which the risk is increased are occasioned by accident, or a cause over which the insured has no control. XPN: Actually known to the insured or Insured is presumed to know of the alteration when the acts or circumstances permanently and substantially affects the conditions of the property so as to constitute an increase in risk. (De Leon, supra, pg. 383-384.)

Q: What is the liability of the insurer as to averages?

GR: The marine insurer is liable both for general average and particular average loss. XPN: When there is "Free From Particular Average" Clause in the policy making the insurer liable only for general average. XPN to XPN: When particular average loss has the effect of depriving the insured of the possession at the port of destination of the whole of the thing insured. (Sec. 136, Insurance Code.)

Q: What is an "all risks" marine insurance policy?

GR; It is that which insured against all causes of conceivable loss or damage. XPN: 1. as otherwise excluded in the policy; or Due to fraud or intentional misconduct on the part of the insured.

What are the distinctions of ocean marine and fire policies?

IN Ocean Insurance A policy of insurance on a vessel engaged in navigation is a contract of marine insurance although it insures against fire risks only.while Fire Insurance Where the hazard is fire alone and the subject is an unfinished vessel, never afloat for a voyage, the contract to insure is a fire risk, especially in the absence of an express agreement that it shall have the incidents of marine policy, or where it insures materials in a shipyard for use in constructing vessels. Also where a policy insures against fire, a vessel while moored and in use as a hospital. (De Leon, supra, pg. 380)

Q: What is the effect of the insurer's refusal to accept a valid abandonment?

If the insurer refuses to accept a valid abandonment, he is liable as upon an actual total loss, deducting from the amount any proceeds of the thing insured which may have come to the hands of the insured. (Sec. 154, ibid.)

What are the distinctions on concealment in marine insurance and other property insurance?

In Marine Insurance , the information or the belief or expectation of 3rd persons in reference to a material fact is material and must be communicated. In property Insurance, the information or belief of a 3rd part is not material and need not be communicated, unless it proceeds from an agent of the insured whose duty is to give information. In Marine Insurance, the concealment or any fact in relation to any of the matters stated in sec. 110 does not vitiate the entire contract but merely exonerates the insurer from a risk resulting from the fact concealed. In Property Insurance, Concealment of any material fact will vitiate the entire contract, whether or not the loss results from the risk concealed.

What does the phrase "perils of the sea or perils of navigation" mean?

In includes only those casualties due to the : WIN 1. Unusual violence or extraordinary action of WIND and wave, or 2. Other extraordinary cases connected with navigation. (De Leon)

What is meant by "Marine protection and indemnity insurance"?

Insurance against legal liability of the insured for loss, damage, or expense incident to ownership , operation, chartering, maintenance , use repair, or construction of any vessel, craft , or instrumentality in use of ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person. (sec. 99, Insurance Code)

When does Insurable interest in expected freightage in a charter party exist?

It exists from the time the vessel has broken ground on the chartered voyage. (sec. 104, Insurance Code)

What is an option to rebuild clause?

It gives the insurer the option to rebuild the destroyed property instead of paying the amount of the loss or damage, notwithstanding a fixed valuation in the policy. (Sec. 172, Insurance Code.) This clause serves to protect the insurer against unfairness in the appraisal and award rendered by a packed board of arbitrators, or in the proof of loss. Note: The insurer must exercise his option to rebuild within the time stipulated in the policy, or in the absence of stipulation, within a reasonable time. The choice by the insurer shall produce no effect except from the time it has been communicated to the insured. (Article 1201, Civil Code.) Unless the policy has limited the cost of rebuilding to the amount of the insurance, the insurer, after electing to rebuild, can be compelled to perform his undertaking, even though the cost may exceed the original amount of insurance. (De Leon, supra, pg. 390.)

Q: What is deviation?

It is a departure from the course of the voyage insured, mentioned in Sec. 121 and Sec. 122, or an unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage. (Sec. 123, Insurance Code.)

Q: What is a "no action" clause?

It is a requirement in a policy of liability insurance which provides that suit and final judgment be first obtained against the insured, that only thereafter can the person injured recover on the policy. It expressly disallows suing the insurer as co-defendant. (Guingon v. Del Monte, G.R. No. L-21806, Aug. 17, 1967)

Concept of Insurance What is a contract of insurance?

It is an agreement whereby one undertakes for a consideration to indemnify another against the loss, damage or liability arising from an unknown or contingent event (Sec. 2[1], Insurance Code). Note: A contract of insurance, to be binding from the date of application, must have been a completed contract (Perez vs. CA, GR No. 112329, January 28, 2000.). Thus, it must have all the essential elements of a valid contract as enumerated in Art. 1318 of the New Civil Code— 1. Subject matter in which the insured has an insurable interest; 2. Consideration, which is the premium paid by the insured, for the insurer's promise to indemnify the former upon the happening of the event or peril insured against; 3. Meeting of minds of the parties.

Casualty Insurance What is casualty insurance?

It is an insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of other types of insurance such as fire or marine. (Sec. 174, Insurance Code.)

Q: What is the event or peril insured against?

It is any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him subject to the provisions of Chapter I of the Insurance Code. (Sec. 3, Insurance Code.)

Q: What is average?

It is any extraordinary or accidental expense incurred during the voyage for the preservation of the vessel, cargo, or both and all damages to the vessel and cargo from the time it is loaded and the voyage commenced until it ends and the cargo unloaded. (Art. 806, Code of Commerce.)

What is the effect if unseaworthiness is unknown to the owner of the cargo?

It is immaterial in ordinary marine insurance and may not be used by him as a defense in order to recover on the marine insurance policy. It becomes the obligation of a cargo owner to look for a reliable common carrier, which keeps its vessels in seaworthy conditions. The shipper may have no control over the vessel but he has control in the choice of the common carrier that will transport his goods (Roque v. IAC, G.R. No. L- 66935, Nov. 11, 1985)

What does "perils of the ship" mean?

It is loss which, in the ordinary course of events, results from the: NON 1. Natural and inevitable action of the sea; 2. Ordinary wear and tear of the ship; 3. Negligent failure of the ship's owner to provide the vessel with proper equipment to convey the cargo under ordinary conditions.

What is concealment in marine insurance?

It is the failure to disclose any material fact or circumstance which in fact or law is within, or which ought to be within the knowledge of party and of which the other has no actual or presumptive knowledge (De Leon)

Q: What is meant by "doing an insurance business" or "transacting an insurance business"?

It is: (ISRA) making or proposing to make, as Insurer, any insurance contract; making or proposing to make, as Surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; doing any kind of business, including a reinsurance business, specifically Recognized as constituting the doing of an insurance business. doing or proposing to do any business in substance equivalent to Any of the foregoing in a manner designed to evade the provisions of the Insurance Code. (Sec. 2[2], ibid.) Note: In the application of the provisions of the Insurance Code, the fact that no profit is derived from the making of the insurance contracts, agreements or transactions or that no separate or direct consideration is received therefor, shall NOT be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business. (Ibid.)

Q: When is actual loss presumed?

It may be presumed from the continued absence of a ship without being heard of. The length of time which is sufficient to raise his presumption depends on the circumstances of the case (Sec. 132, Insurance Code).

What is freightage?

It signifies all the benefits derived by the owner, either from the chartering of the ship, or its employment for the carriage of his own goods or those of others. (sec. 102, insurance Code)

Q: While driving his car along EDSA, Cesar sideswiped Roberto, causing injuries to the latter, Roberto sued Cesar and the third party liability insurer for damages and/or insurance proceeds. The insurance company moved to dismiss the complaint, contending that the liability of Cesar has not yet been determined with finality. Is the contention of the insurer correct? (1996 Bar Question)

No, the contention of the insurer is not correct. There is no need to wait for the decision of the court determining Cesar's liability with finality before the third party liability insurer could be sued. The occurrence of the injury to Roberto immediately gave rise to the liability of the insurer under its policy. Where an insurance policy insures directly against liability, the insurer's liability accrues immediately upon the occurrence of the injury or event upon which the liability depends. (Shafer vs. RTC Judge, supra.)

Q: Can a minor enter into an insurance contract?

No. Minors can no longer enter into insurance contracts. The exception under the (Sec. 3) Insurance Code is no longer controlling because the age of majority is now 18 years (RA No. 6809). (Sundiang and Aquino, Reviewer on Commercial Law, 2009 Ed., pg. 90.)

Can a co-insurance exist in fire insurance even if without stipulation to that effect?

No. The insured is not a co-insurer under fire policies in the absence of stipulation.

Q: A marine insurance policy on a cargo states that "the insurer shall be liable for losses incident to perils of the sea." During the voyage, seawater entered the compartment where the cargo was stored due to the defective drainpipe of the ship. The insured filed an action on the policy for recovery of the damages caused to the cargo. May the insured recover damages? (1998 Bar Question)

No. The proximate cause of the damage to the cargo insured was the defective drainpipe of the ship. This is peril of the ship, and not peril of the sea. The defect in the drainpipe was the result of the ordinary use of the ship. To recover under a marine insurance policy, the proximate cause of the loss or damage must be peril of the sea.

Q: who may make notice of abandonment?

The abandonment need not necessarily be made by the insured but may be made by an authorized agent, and an agent having an authority to insure has prima facie an authority to abandon (De Leon, supra, pg. 361.)

What is the reason for co-insurance clause in fire policies?

The co-insurance clause is a clause requiring the insured to maintain insurance to an amount equal to the value or specified percentage of the value of the insured property under penalty of becoming co- insurer to the extent of such deficiency. This is to prevent the property owners from taking out such small amount of insurance, and thereby reducing the premium payments and thereby increasing the rates of premium for all. (De Leon, supra, pg. 388-389.)

Q: What is a contract of insurance as an Uberrimae Fidei Contract?

The contract of insurance is one of perfect good faith (uberrimae fidei) not for the insured alone, but equally so for the insurer; in fact, it is more so for the latter, since its dominant bargaining position carries with it stricter responsibility. It requires the parties to the contract to communicate that which a party knows and ought to communicate, that is, the duty to disclose in good faith all facts material to the contract.

Q: What is the effect of insured's failure to make abandonment?

The insured has an election to abandon or not, and cannot be compelled to abandon although abandonment is proper. If the insured fails to abandon, he may nevertheless recover his actual loss (Sec. 155, Insurance Code.).

When is the insured presumed to have knowledge of a prior loss in marine insurance?

The insured is presumed to have knowledge of a prior loss at the time of insuring, if the information might possibly have reached him in the usual mode of transmission and at the usual rate of communication.

Q: What are the additional liabilities of the insurer of goods referred to in the reshipment of cargo?

The marine insurer is bound for: Damages; Expenses of discharging; Storage; Reshipment; Extra freightage; and All other expenses incurred in saving cargo reshipped. (Sec. 134, Insurance Code.)

What does the phrase "port of refuge expenses"

These are the additional expenses incurred in repairing the damages suffered by a vessel because of the perils insured against as well as those incurred for saving the vessel from such perils, such as the expense of launching or raising the vessel or of towing or navigating it into port for her safety. These are items to be borne by the insurer in addition to a total loss if that afterwards takes place. (Sec. 163, Insurance Code.)

What is difference between a loan on bottomry and respondentia?

They are basically the same. The only distinction is, a loan or bottomry involves a vessel as a security while a respondentia has cargo as its security. (Perez, supra)

Q: What is the rule regarding voyage in marine insurance?

When the voyage contemplated by a marine insurance policy is described by the places of beginning and ending, the voyage insured in one which conforms to the course of sailing fixed by mercantile usage between those places. (Sec. 121, Insurance Code.)

When is insurable interest in expected freightage if there is no charter party?

When there is no charter party and the price is to be paid for the carriage of goods, from the time said goods are actually on board the vessel, or if there is some contract for putting them on board, from the time both ship and goods are ready for the specified voyage

In case of loss, how much is the insured entitled to recover if profits to be realized are separately insured?

Where profits are separately insured in a contract of marine insurance, the insured is entitled to recover, in case of loss, a proportion of such profits equivalent to the proportion which the value of the property lost bears to the value of the whole. (Sec. 158, Insurance Code.)