TITLE 4. CONCEALMENT Sec. 26. What is concealment: A neglect to communicate that w/c a party knows and ought to communicate.

Requisites of concealment: 1.) A party knows a fact w/c he neglects communicate or disclose to the other; to

uberrima fides meaning of utmost good faith) hot tip: remember meaning of this crazy latin word!

Exception to duty to communicate: Those falling under Sec. 30 Test to determine whether one must communicate: If the applicant is aware of the existence of some circumstance w/c he knows would influence the insurer in acting upon his application, good faith requires him to disclose that circumstance, though unasked. Sec. 31: What is material (infra) Sec. 107: Concealment in marine insurance in addition to matters in Sec. 28, all info material to the risk (except those in Sec. 30) must be communicated. Sec. 35 (infra): Mere opinion, judgment, or expectation not necessary to be communicated. Fieldmans Insurance v. Songco: Owner of an ownertype jeep persuaded by insurance agent to enter into a common carrier insurance contract. After accident, insurance co. refused to pay up on the ground that the vehicle was not a common carrier. Ins. Co. estopped. It knew all along that it was a private vehicle. Sec. 29. Failure to communicate information proving or intending to prove the falsity of a warranty entitles insurer to rescind Here the concealment must be intentional or fraudulent to warrant rescission. Sec. 30. Matters w/c each party to insurance contract is not bound to communicate: 1.) Those w/c the other knows; 2.) Those w/c, in the exercise of ordinary care, the other ought to know, and of which the former has no reason to suppose him ignorant; 3.) Those of w/c the other waives communication; 4.) Those which prove or tend to prove the existence of a risk excluded by the warranty, and w/c are not otherwise material; and 5.) Those w/c relate to a risk excepted from the policy and w/c are not otherwise material. Exception: when the other inquires Insular Life v. Feliciano: Falsified answers due to collusion between the insured and the insurance agent and medical examiner. Insurance company absolved from liability. Sec. 31. Materiality to be determined by influence of facts on party in forming estimate of the risk, not by the event. Test of materiality: If the knowledge of fact would cause the insurer to reject the risk, or to accept it only at a higher premium rate, that fact is material, though it may not even remotely contribute to the contingency upon w/c the insurer would become liable, or in any wise affect the risk. Principal question to ask: Was the insurer misled or deceived into entering a contract obligation or in fixing the premium of insurance by the withholding of

2.) Such party concealing is duty bound to disclose such fact to the other; 3.) Such party concealing makes no warranty of the facts concealed; and 4.) The other party has no means of ascertaining the fact concealed. Four primary concerns of parties to an insurance contract: 1.) The correct estimation of the risk w/c enables the insurer to decide whether he is willing to assume it, and if so, at what rate of premium; 2.) The precise delimitation of the risk w/c determines the extent of the contingent duty to pay undertaken by the insurer; 3.) Such control of the risk after it is assumed as will enable the insurer to guard against the increase of the risk because of change in conditions; and 4.) Determining whether a loss occurred, and if so, the amount of such loss. Sec. 27. Intentional or unintentional concealment entitles injured party to rescind contract Law makes no distinction between intentional and unintentional concealment. There is no need to prove fraud to be able to rescind. Criterion in applying Sec. 27: Was the insurer misled or deceived into entering a contract obligation or in fixing the premium of insurance by the withholding of material information or facts w/in the insureds knowledge or presumed knowledge? Saturnino v. Philamlife: Concealed operation for cancer involving removal or right breast. Info given obviously false as well as material. Insurer allowed to rescind. Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due in forming his estimate of the proposed contract, or in making his inquiries. Waiver of medical examination renders even more material info required concerning previous condition of health and diseases suffered. Henson v. Philamlife: There is no need to prove intent to conceal to warrant rescission. Sec. 28. Duty of each party in an insurance contract to communicate to the other, in good faith all facts material to the contract and as to w/c he makes no warranty, and w/c the other has no means of ascertaining (Insurance contract is a contract

material information or facts w/in the insureds knowledge or presumed knowledge? If so, then the contract is avoided, even if the cause of the loss w/c subsequently occurred be unconnected w/ the fact concealed. Sun Life v. CA: Sorry! Sec. 32. Each party bound to know: 1.) General causes w/c a.) are open to his inquiry, equally w/ that of the other, b.) may affect either the political or material perils contemplated. 2.) General usages of trade. Sec. 33. Right to information of material facts may be waived by: 1.) Terms of insurance (expressly); or 2.) Neglect to make inquiries where they are directly implied in other facts already communicated (impliedly). Ng Gan Zee v. Asian Crusader Life: Insured stated in his application that he had a tumor removed from his stomach. Yun pala, it was actually a portion of his stomach w/c was removed. Ins. co. now refuses to pay on ground on false information. Pay up, damnum you! Cant rescind the contract. Insured did not have sufficient knowledge to distinguish between a tumor and an ulcer. His statement was made in good faith. Ins. co. could have made an inquiry as to the illness and operation. Its failure to do so constituted a waiver of the imperfection of the answer. Sec. 34. Nature or amount of interest need not be communicated. Exceptions: 1.) In answer to an inquiry; or 2.) When he is not the absolute owner (Sec. 51: items that must be included in an insurance policy: (e) Interest of insured in property insured, if he is not the absolute owner thereof.) Sec. 35. Opinion or judgment of a party to a contract not required to be communicated Sec. 108 (marine insurance): Info of the belief or expectation of a 3rd person w/ respect to material facts is material. Title 5. Representation (Importance of representation: False representation entitles insured party to rescind Sec. 45) Sec. 36. Representation may be oral or written Representation: A factual statement made by the insured at the time of or prior to, the issuance of the policy to give information to the insurer and otherwise induce him to enter into the insurance contract. Misrepresentation: A statement 1.) as a fact of something w/c is untrue;

2.) w/c the insured stated w/ knowledge that it is untrue and w/ an intent to deceive, or w/c he states as true w/o knowing it to be true and w/c has a tendency to mislead; and 3.) where such fact in either case is material to the risk. Effect of misrepresentation: Renders insurance contract voidable at the option of the insurer, although the policy is not thereby rendered void ab initio.

Sec. 37. Representation to be made at time of, or before issuance of a policy Sec. 41: representation may be withdrawn or altered before effectivity date. Sec. 38. Language of communication the same as contracts in general Representations are construed liberally in favor of the insured. Representations need not be literally true. It is sufficient if they are substantially true. Sec. 39. Representation as to the future deemed a promise unless merely a statement of belief or expectation Different kinds of representation: 1.) Oral or written; 2.) Made at time of issuance of the policy or before; and 3.) Affirmative or promissory. Affirmative representation: Any allegation as to the existence or non-existence of a fact when the contract begins. Promissory representation: Any promise to e fulfilled after the contract has come into existence or any statement concerning what is to happen during the existence of the insurance. Sec. 40. Representation cannot qualify express provision of contract, but may qualify an implied warranty Sec. 41. Representation may be altered or withdrawn before insurance is effected, but not afterwards Sec. 42. Representation effectivity of contract refers to date of

There is no false representation if the representation was true at the time the contract takes effect altho it was false at the time it was made. But there is false representation is although/ true at the time it was made, it subsequently becomes false at the time the contract took effect. Sec. 43. Effect of representation when person has no personal knowledge of facts: 1.) He may repeat info w/c a.) He believes to be true, b.) With the explanation that he does so on the info of others; or 2.) He may submit the info, in its whole extent to the insurer.

3.) In either case he is not responsible for its truth. Exception: it proceeds from an agent of insured whose duty is to give information. Harding v. Commercial Union: Proposal form made out by person authorized to solicit insurance is an act of the insurer. Facts, even if false, not warranted by insured in the absence of willful misstatement. Sec. 44. Misrepresentation: When facts fail to correspond to assertions or stipulations, representation is deemed false Sec. 45. False representation in a material point entitles insurer to rescind from time it becomes false. Right to rescind waived by acceptance of premium despite knowledge Note that fraudulent intent here is immaterial. Musngi v. West Coast Life: Concealed that he saw several physicians for a number of ailments. He knew that he was suffering from all these ailments yet he concealed this. This concealment constituted fraud because the insurance company by reason of such statement accepted the risk w/c it would otherwise have rejected. Edillon v. Manila Bankers Life: There is was a provision in the certificate of insurance excluding ins. co. of liability to persons under 16 or over 60 years of age. However, insured stated correctly her date of birth showing that she was already 64 years old. She did not conceal her age, yet co. accepted her premium and issued the policy. Co. is estopped from disclaiming liability. Collado v. Insular Life: Accepting overdue premiums does NOT necessarily deprive it of d right to cancel d policy in case of default. A reinstated policy should be viewed as a new K, & d period for contestability for fraud/ breach of warranty in d application runs from the time of reinstatement. Sec. 46. Materiality of a representation is governed by same rules as materiality of concealment Sec. 31: How materiality determined: not by event but y the influence of facts on other party in forming an estimate of the risk. Sec. 47. Provisions of Chapter 1 applicable to amendment as well as to original contract Sec. 48. Incontestable clause; Insurers right to rescind; When must it be commenced: 1.) Non-life policy: before commencement of an action; 2.) Life insurance policy: incontestable if in force 2 years from date of issue or last reinstatement.

Sections 227(b), 228(b) and 230(b) make the incontestable clause compulsory in all life insurance contracts.

Soliman v. U.S. Life: Insurer is once again given 2 years from date of reinstatement to investigate the veracity of the facts represented in the application for reinstatement. Tan v. CA: Key phrase: 2 years. Does not need to be during lifetime of the insured. The phrase during the lifetime simply means that the policy is no longer in force after the death. Tan Chay Cheng v. West Coast Life: Misrepresentations made. Tan Chay claims that co. cannot rescind because an axn for performance had already been filed. Trial court found for Tan Chay holding that an insurer cannot avoid a policy unless it brings axn. to rescind before it is sued thereon. Trial court wrong. Through fraud in its execution, the policy is void ab initio and therefore no valid contract was ever made. Not an axn for rescission coz that would presuppose the existence of a contract. Therefore, not barred by Sec. 48. Philamcare v. CA: (supra) Philamcare did not want the health care agreement to be considered an insurance contract because the incontestability clause in Sec. 48 requires that any right to rescind must be exercised before any axn is commenced on the contract, and w/in 2-year period. But as we all know it is an insurance contract so the incontestability clause applies. TITLE 6. THE POLICY Sec. 49. Policy: The written contract of insurance Contract is the meeting of the minds. The policy is the formal written instrument evidencing the contract. The best evidence that a contract has been entered into between the insurer and the insured is the delivery of the policy by the insurer to the insured. Effects of delivery of policy: If delivery is conditional, non-fulfillment of the condition bars the contract from taking effect. If unconditional, the insurance becomes effective at the time of delivery. Enriquez v. Sunlife: The contract of insurance was not perfected. It had not been proved that the acceptance of application ever came to the knowledge of the applicant. An acceptance of an offer of insurance not actually or constructively communicated to the proposer does not make a contract of insurance, as the locus poenitentiae is ended when an acceptance has passed beyond the control of the party. Sec. 50. Formal requirements of a policy: 1.) In printed form w/c may contain blank spaces; and 2.) Any word, phrase, clause, mark, sign, symbol, signature, number or word necessary to complete the contract of insurance shall be written in the blank spaces provided therein.

Formal requirements of a rider, clause, warranty, endorsement as part of the contract: 1.) The descriptive title or name of the rider w/c is pasted or attached to the policy must be mentioned and written on the blank spaces provided in the policy; and 2.) Unless applied for by the insured or owner, said insured or owner must countersign the rider. Requirements of group insurance and group annuity policies: May be typewritten and need not be in printed form. Sec. 226: Form of policies, application, riders, clauses, warranties or endorsements must be approved by the Insurance Commissioner. Rider: A printed or typed stipulation contained on a slip of paper attached to the policy and forming an integral part of the policy. Riders are usually attached to the policy because they constitute additional stipulations between the parties. If there is an inconsistency between the policy and the rider, the rider prevails, it being a more deliberate expression of the agreement of the parties. Warranties: Inserted or attached to a policy to eliminate specific potential increases of hazard during the policy term owing to axns of the insured, or conditions of property. Clauses: Agreements between the insurer and the insured on certain matters relating to the liability of the insurer in case of loss. Endorsement: An endorsement is any provision added to an insurance contract altering its scope or application. Sec. 51. Substantive requirements in a contract of insurance: Policy must specify: 1.) The parties between whom the contract is made; 2.) The amount to be insured except in the case of open or running policies; 3.) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon w/c the final premium is to be determined; 4.) The property/life insured; 5.) The interest of the insured in property insured if he is not the absolute owner thereof; 6.) The risks insured against; and 7.) The period continue. during w/c the insurance is to

1.) The loss to be insured against must be important enough to warrant the existence of an insurable contract; 2.) The risk must permit a reasonable statistical estimate of the chance of loss in order to determine the amount of premium to be paid; 3.) The loss should be definite as to cause, time, place and amount; 4.) The loss is not catastrophic; 5.) The risk is accidental in nature. See Sections 227, 228 & 230 for additional matters to be included in individual, group and industrial life insurance policies.

Sec. 52. Rules on cover notes (binding receipts or slips, interim, temporary or provisional policies): 1.) Insurance companies doing business in the Phils may issue cover notes to bind insurance temporarily pending the issuance of the policy. 2.) A cover note shall be deemed to be a contract of insurance w/in the meaning of Sec. 1(1) of this Code. 3.) No cover note shall be issued or renewed unless in the form previously approved by the Insurance Commission. 4.) A cover note shall be valid and binding for a period not exceeding 60 days from the date of its issuance, whether or not the premium therefore has been paid, but such cover note may be canceled by either party upon at least 7 days notice to the other party. 5.) If a cover note is not so canceled, a policy of insurance shall w/in 60 days after issuance of the cover note be issued in lieu thereof. Such policy shall include w/in its terms the identical insurance bound under the cover note and premium therefor. 6.) A cover note may be extended or renewed beyond the aforementioned period of 60 days w/ the written approval of the Insurance Commission, provided that such written approval may be dispensed w/ upon the certification of the president, VP, or gen mgr of the insurance co. concerned, that the risks involved, the values of such risks, and the premiums therefore have not been determined or established and that such extension or renewal is not contrary to and is not for the purpose of violation of any provision of the Insurance Code. 7.) Insurance companies may impose on cover notes a deposit premium equivalent to at least 25% of the estimated premium of the intended insurance coverage but in no case less than P500.

Kinds of insurable risks: 1.) Personal: life or health; 2.) Property: involves loss or damage to property; 3.) Liability: involves liability of the insured for an injury caused to a person or property of another. Requirements in order that a risk be insurable:

Cover note: Written memorandum of the most important terms of the preliminary contract of insurance, intended to give temporary protection pending the investigation of the risk by the insurer, or until the issue of a formal policy, provided it is later determined that the applicant was insurable at the time it was given. 2 types of preliminary contracts of insurance: 1.) Preliminary contract of present insurance; and 2.) Preliminary executory contract. Preliminary contract of present insurance: Insurer insures the subject matter usually by what is known as a binding slip or binder or cover note w/c is the contract to be effective until the formal policy is issued or the risk rejected. Preliminary executory contract of insurance: Insurer makes a contract to insure the subject matter at some subsequent time w/c may be definite or indefinite. Under such an executory contract, the right acquired by the insured is merely a right to demand the delivery of a policy in accordance w/ the terms agreed upon and the obligation assumed by the insurer is to deliver such policy. Grepalife v. CA: Binding deposit receipt is merely an acknowledgment of receipt of premium. It is merely conditional as the insurance co. may still approve or reject the application. It is not a temporary contract of life insurance. Grepalife had disapproved of the application and so the binding deposit receipt never came into force. Pacific Timber v. CA: Ins. co. refuses to pay since it claims that the cover note was null and void due to the issuance of the policy. Cover note is not a separate policy. It is integrated into the regular policies subsequently issued. If it were a separate policy, its purpose would be rendered meaningless. Cover note was w/ consideration. No separate premiums required. Sec. 53. Insurance proceeds; to whom payable: The person in whose name or for whose benefit the policy was made. Exception: Sec. 12: Forfeiture of proceeds by life insurance beneficiary when he is principal, accomplice, or accessory in willfully bringing about the death of the insured, in w/c case, proceeds will go to nearest relative of insured. Art. 2127, CC: The security of a mortgage extends to the indemnity granted or owing the owner from the insurer.

Bonifacio Bros. V. Mora: Insurance proceeds go directly to person in whose name policy made. the proceeds cannot go directly to the dudes who repaired the car in the absence of stipulation pour autrui in contract. Since the repairmen and autoparts shop have no privity of contract w/ the ins. co., they have no cause of axn. Coquia v. Fieldmans Insurance: Where there is an express stipulation pour autrui (in event of driver, ins. co. will indemnify his personal representatives), enforcement of contract may be demanded by a 3rd party as they have a direct cause of action. Del Val v. Del Val: Del Val died intestate. His beneficiary was his son, Andres. Andres got the proceeds and redeemd parcels of land sold pacto de retro. Siblings say the proceeds should got to the estate. HELD: NO!!!! The proceeds of an insurance policy belong exclusively to the BENEFICIARY & not to the estate of the person whose life was insured, and that such proceeds are the separate & individual property of the beneficiary, and not of the heirs of the person whose life was insured. RCBC v. CA: Goyu took out a loan from RCBC. He mortgaged his factories to RCBC. His factories were insured & he told the insurance agent to endorse policies to RCBS. Factories were struck by fire. Goyu claimed proceed. MICO refused on the ground that policies were attached & proceeds were claimed by other creditors of Goyu. HELD: RCBC won! Sec. 53 ordains that the insurance proceeds of the endorsed policies shall be applied exclusively to the proper interest of the person for whose benefit it was made. In this case, to the extent of Goyu's obligation w/ RCBC, the interest of Goyu in the policies had been TRANSFERRED to RCBC effective as of the time of the endorsement. There are other issues, but this is the one relevant to this Section. (I hope-rosa) Sec. 54. Insurance contract w/ agent or trustee as insured: Fact that principal or beneficiary is the real party in interest may be indicated in policy. Insurance may be taken by a person: 1.) personally, or 2.) through his agent or trustee. If taken thru agent or trustee, should indicate that he is merely acting in a representative capacity since insurance is to be applied exclusively to the interest of the person in whose name and for whose benefit it is made. Sec. 55. Policy terms should be made applicable to joint interest to render insurance effected by one partner or part owner applicable to copartners or part owners Sec. 56. Who can claim policy benefits in case of a general description of insured: he who can show

that it was intended to include him (that he is the person described; or that he belongs to the class of persons comprehended in the policy). Sec. 57. A policy can be framed to inure to the benefit of whomsoever becomes the owner of the interest insured San Miguel v. Law Union Rock: (supra) Since policy made out only in name of SMC and not framed to cover owner or his assignees, assignee/owner could not claim under the policy. Sec. 58. Transfer of thing insured does not automatically transfer policy; coverage suspended until owner of policy and owner of interest are one and the same San Miguel v. Law Union Rock: (supra) Transfer of ownership over property insured does not mean assignee can recover under policy on that property unless so stipulated (w/c it wasnt). Sec. 59. A policy is either open, valued or running Sec. 60. What an open policy is: One in w/c the value of the thing insured is not agreed upon, but is left to be ascertained in case of loss. It is one in w/c a certain agreed sum is written on the face of the policy not as the value of the property insured, but as the maximum limit of the insurers liability. See Sec. 161: open policy rules in marine insurance; and Sec. 171: open policy rules in fire insurance.

Advantages of a running policy:

1.) The insured is neither underinsured nor overinsured at any time, the premium being based on the monthly wages reported; 2.) He avoids cancellations that would otherwise be necessary to keep insurance adjusted to the value of each location, and for w/c cancellations he would be charged the expensive short rate; 3.) He is saved the trouble of watching his insurance and the danger of being underinsured in spite of his care, thru oversight or mistake; and 4.) The rate is adjusted to 100% insurance. Sec. 63. Stipulations limiting commencement of an action to less than 1 year from the time cause of action accrues are void Sec. 231(d): Industrial life policy; Void if less than 6 years. Sec. 229: Industrial life insurance: 1.) Premiums payable monthly or oftener; 2.) Face amount not more than 500 times minimum wage in the City of Manila; 3.) industrial policy printed on contract. Art. 1144 & 1445, CC: If no period agreed upon, the action must be brought w/in 10 years (written contract) or 6 years (oral contract). You can stipulate a period when an action based on the insurance contract can be brought. In the absence of stipulation, the period is 10 years. However, if you do stipulate and you limit the period to less than one year, the stipulation is void. New Life Enterprises v. CA: Remember the case with the clarificatory letter. Also, the contract had a stipulation that an axn should be commenced within a year d cause of axn accrued. HELD: The stipulation in the k was EQUAL to 1 year (to commence an axn), the prohibition is for LESS than 1 yr. Therefore, the stipulation was valid. The SC said that the 1 year should be reckoned from the 1st rejexn, NOT the rejexn after the denial of M4recon. Sec. 64. Cancellation of a policy (other than life) by the insurer to be effective requires prior notice and occurrence of enumerated conditions: 1.) Non-payment of premium; 2.) Conviction of a crime arising out increasing the hazard insured against; 3.) Discovery of fraud misrepresentation; or of acts

Dev. Ins. Corp. v. IAC: In an open policy, in event of loss, whether total or partial, it is understood that the amount of the loss shall be subject to appraisal and the liability of the company shall limited to the actual loss and in no case shall exceed the amount of the policy. Sec. 61. What a valued policy is: One w/c expresses on its face an agreement that the thing insured shall be valued at a specified sum. It is one in w/c the parties expressly agree on the value of the subject matter of the insurance. See Sec. 156: Valued policy rules in marine insurance; and Sec. 157: Valued policy rules in fire insurance. Sec. 62. Meaning of a running policy (sometimes called floating, adjustable, blanket or declaration policy): One w/c contemplates successive insurances, and w/c provides that the object of the policy may be from time to time defined, especially as to the subjects of insurance, by additional statements or indorsements. This kind of policy is intended to provide indemnity for property w/c cannot well be covered by a valued policy because of its frequent change of location and quantity, or for property of such nature as not to admit of a gross valuation. It also denotes insurance w/c contemplates that the risk is shifting, fluctuating or varying, and w/c covers a class of property rather than any particular thing.

material

4.) Discovery of willful/reckless acts/omissions increasing the hazard insured against; 5.) Physical changes in the property insured w/c result in the property becoming uninsurable; or 6.) A determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code. Cancellation: The right to rescind, abandon or cancel a contract of insurance.

Non-payment of premium: refers to premiums subsequent to the first premium because the law speaks of non-payment after the effective date of the policy. Remember, if you do not pay the 1 st policy, no policy is valid and binding. Therefore, the 1st premium is the condition precedent to the effectivity of the insurance. So any premium after the effective date of the policy must refer to the premiums after the 1st one has been paid. Sec. 79(b): (infra) Cancellation by insured implied. Compare with Sec. 66: (infra) non-renewal of non-life policy Rules in Compulsory Motor Vehicle Liability: 1.) Sec. 380: for written notice of cancellation of CTPL by insurer written notice to LTO also needed 15 days prior to effectivity of cancellation. 2.) Sec. 381: for cancellation of CTPL policy by vehicle owner or operator notice to LTO also needed plus replacement of CTPL policy or bond efore cancellation effective. Sec. 65. Conditions for cancellation (by insurer) of policy (other than life): 1.) There must be prior notice of cancellation to the insured; 2.) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the grounds mentioned in Sec. 64; 3.) The notice must be in writing, mailed or delivered to the insured at the address shown in the policy; 4.) It must state which of the grounds set forth in Sec. 64 is relied upon; and 5.) If so requested by the insured, it is the duty of the insurer to furnish the facts on which the cancellation is based. Saura v. Phil International Co.: Notice of cancellation by insurer to mee alone is not effective as to mor/ owner. There must be actual and personal notice. Malayan Insurance v. Arnaldo: Notice was not effectively made. No proof was presented that the notice was actually mailed to and received. A valid cancellation requires: 1.) Prior notice to insured; 2.) Notice must be based on grounds mentioned; 3.) Must be in writing, mailed or delivered to the insured; 4.) Must state ground for cancellation. Sec. 66. In non-life insurance, insured is entitled to renew contract by payment of premium unless notified by insurer 45 days prior to expiry date TITLE 7. WARRANTIES Sec. 67. A warranty is express or implied Warranty: A statement or promise set forth in the policy itself or incorporated in it by proper reference, the untruth or non-fulfillment of w/c in any respect and w/o reference to whether the insurer was in fact

prejudiced by such untruth or non-fulfillment, renders the policy voidable by the insurer. Different kinds of warranty: 1.) Affirmative (Sec. 68); 2.) Promissory (Sec. 72); 3.) Express (Sec. 67); or 4.) Implied (Sec. 67).

Express warranty: An agreement contained in the policy or clearly incorporated therein as part thereof whereby the insured stipulates that certain facts relating to the risk are or shall be true or certain acts relating to the same subjects have been or shall be done. Implied warranty: Warranty w/c from the very nature of the contract or from the general tenor of the words, altho no express warranty is mentioned, is necessarily embodied in the policy as part thereof and w/c binds the insured as tho expressed in the contract. Affirmative warranty: One w/c asserts the existence of a fact or condition at the time it is made. Promissory warranty: One where the insured stipulates that certain facts or conditions pertaining to the risk shall exist or that certain things w/ reference thereto shall be done or omitted. It is the nature of a condition subsequent. Sec. 68. A warranty may relate to the past, present or to the future, or any or all of them Sec. 69. No particular form of words necessary to create a warranty When insured stipulates something in the policy or even in the application form, it is not always a warranty. It depends on his intention. Sometimes a statement made by the insured is not meant to be a warranty but a representation. In case of doubt, such statement is only considered a representation.

Difference between a warranty and a representation: Warranties Considered parts of the contract. Always written on the face of the policy, actually or by reference. Must be strictly complied w/. Falsity/non-fulfillment operates as a breach of contract. Presumed material. Representations Collateral inducements to the contract. May be written in a totally disconnected paper, or may even be oral. Substantial truth only required. Falsity renders policy void on the ground of fraud. Insurer must show the materiality in order to defeat axn on policy.

Sec. 70. An express warranty must be in the policy itself or in another document signed by the insured and made part of the policy Ang Giok Chip v. Springfield Fire & Marine Ins.: It is well settled that a rider attached to a policy is a part of the contract, to the same extent and with like effect as if actually embodied therein. In the second place, an express warranty must appear upon the face of the policy, or be clearly incorporated therein and made a part thereof by explicit reference, or by words clearly evidencing such intention. Sec. 71. Express warranty: A statement in the policy relating to the person or thing insured, or to the risk as a fact Sec. 72. Promissory warranty: to do or not to do a thing that materially affects the risk An act or omission is material to the risk if it increases the risk. Under the law, only substantial increase of risk forfeits the policy. Sec. 73. Breach of contract of insurance. Exceptions: 1.) When loss performance; occurs before time for warranty; effect: Avoids

b.) to all the premiums if it is broken during the inception of the contract.

2.) With fraud: policy avoided ab initio and the insurer is not entitled to the return of the premium paid. TITLE 8. PREMIUM Sec. 77. Insurer entitled to premium from moment risk attached; policy binding only when premium paid; Exceptions (a life insurance policy where the grace period applies) Premium: The agreed price for assuming and carrying the risk. It is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. Assessment: A sum specifically levied by mutual insurance companies or associations, upon a fixed and definite plan, to pay losses and expenses. Difference between a premium and an assessment: Premium Levied and paid to meet anticipated losses. Payment of premium, after the 1st, is not enforceable against the insured. Not a debt. Assessment Collected to meet actual losses. Legally enforceable once levied.

2.) When performance becomes unlawful; 3.) When performance becomes impossible. Sec. 74. Violation of a material warranty or other material provision by either parties entitles other party to rescind Young v. Midland Textile Ins.: Even if (storage of firecrackers) not cause of the event insured against (fire), violation of warranty terminates the contract. Compliance with terms of contract is condition precedent to right of recovery. Sec. 75. If specifically stipulated, a violation of a specified provision shall avoid a policy, otherwise a breach of immaterial provision does not avoid the policy Gen Insurance v. Ng Hua: Stipulation that failure to give notice that any other insurance was obtained would result in forfeiture of the benefits. The rebel didnt give notice that he had insurance on the same goods w/ another co. Breach of warranty. Insurer entitled to rescind. Materiality of non-disclosure of other insurance policies is undoubted. Sec. 76. Breach of warranty, w/o fraud, exonerates insurer or prevents policy from attaching to risk depending on when breach occurred Breach of warranty 1.) Without fraud: policy avoided only from time of the breach and hence, the insured is entitled to: a.) a return of premiums paid at the pro rata rate from the time of the breach if it occurs after the inception of the contract; or

Is a debt (if properly levied).

Effect of non-payment of premiums: 1.) Non-payment of the 1st premium unless waived prevents the contract from becoming binding notwithstanding the acceptance of the application nor the issuance of the policy. But non-payment of the balance of the premium due does not produce the cancellation of the contract. 2.) Non-payment of subsequent premiums does not affect the validity of the contracts unless by express stipulation, it is provided that the policy in that event be suspended or shall lapse. Secs. 227(a), 228(a), 230(a): In the case of life or endowment insurance, group life insurance and industrial life insurance, the policy holder is entitled to a grace period of 30 days. Sec. 78 (infra): acknowledgement premium in policy is binding. Sec. 177: Surety bond premiums. Sec. 52 (supra): rules on cover notes. Sec. 306(2): delivery of policy to agent presumes authority to collect premium. Phil. Phoenix v. Woodworks #1: Partial payment, balance unpaid. No cancellation of contract. Contract had been perfected and partially performed. Can demand payment of balance. Phil. Phoenix v. Woodworks #2: No payment at all. Policy must be deemed to have lapsed. of receipt of

Valenzuela v. CA: Valenzuela, agent, is not liable for unpaid premiums. The policies having lapsed, there is no more contract or obligation. South Sea Surety v. CA: Agent, in receiving check for the insurance premium prior to the occurrence of the risk insured against, acted as agent holding the insurance co. liable. Delivery of policy to agent means hes authorized to receive payment of any premium. Premiums paid to agent so co. liable for proceeds. Areola v. CA: Agents receipt is ins. co.s receipt. Agents failure to remit not a defense, co. is liable for fraudulent acts of its employees. Tibay v. CA: Partial payment does not make contract valid, binding and enforceable. There was an express stipulation for payment of premium in full. Cannot collect on policy. UCPB v. Masagana Telamart: UCPB is in estoppel for having received 60-90 day credit term. Sec. 78. Legal fiction of payment of premium for purposes of making policy binding: Acknowledgment in policy of receipt of premium is conclusive evidence of payment for purpose of making policy binding. American Home Assurance v. CA: Check received as payment for renewal of policy and a renewal certificate delivered. Fire occurred. Official receipt for payment issued. There is valid payment of premium even if the check was encashed after the fire. Sec. 79. When insured entitled to return of premiums: 1.) When no part of thing insured has been exposed to any of the perils insured against (whole premium returned); 2.) When the insurance is for a definite period and the insured surrenders his policy before termination thereof (such portion as corresponds w/ unexpired time, at a pro rata rate, returned). Exceptions: a.) Short period rate agreed upon and appears on face of policy (exception to pro rata rate). b.) Life insurance (exception to applicability of this section). 3.) When the contract is voidable because of fraud or misrepresentations of the insurer or his agent (Sec. 81 infra); 4.) When the contract is voidable because of the existence of facts of w/c the insurer was ignorant w/o his fault (Sec. 81 infra); 5.) When the insurer never incurred any liability under the policy because of default of the insured other than actual fraud (Sec. 81 infra); 6.) When there is overinsurance (Sec. 82 infra); 7.) When rescission is granted due to the insurers breach of contract.

Short period rate clause: A clause w/c appears in most fire insurance policies providing that in the event the policy is surrendered by the insured for cancellation, the company shall retain a premium for the time the policy has been in force.

There is no right to recovery of premiums in life insurance because it is not a divisible contract. It is not an insurance for any single year, w/ a privilege of renewal from year to year by paying the annual premium. It is an entire contract of insurance for life subject to discontinuance and forfeiture for nonpayment of any of the stipulated premiums. Grepalife v. CA: Late payment. Letter sent to insured saying policy not in force. Insurer must return premium. policy inoperative/ineffectual from the beginning. Co. never at risk and so not entitled to keep premium. Sec. 80. Insured not entitled to return of premiums when risk already attached and insurer liable for any period Makati Tuscany v. CA: Where the risk is entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid where the insurer was exposed to the risk for any period, however brief or momentary. Sec. 81. Insured entitled to return of premium when: 1.) Contract voidable due to insurers fault; or 2.) Insurer never incurred liability due to: a.) Insureds ignorance of facts or b.) Default other than fraud Grepalife v. CA: (supra) Never at risk; not entitled to keep premiums. Sec. 82. Insured entitled to ratable return of premium in case of over-insurance. TITLE 9. LOSS Sec. 83. Agreement not to transfer claim after loss happened is void. Exception: Life insurance Limitation on the Transfer: Sec 173: Transfer of FIRE policy to agents of insurer is void if in fraud of creditors Rationale: Against public policy for it hinders the free transmission of property from one person to another. Why should the agreement be void when it is a personal contract? After loss has been suffered, it is no longer a personal contract which is being assigned but a money claim OR a right of action under the policy. There is no moral hazard because the insurers risk cannot be increased anymore since the loss has already occurred. Sec. 84. Insurer liable if peril insured against is proximate cause. Loss: Injury or damage sustained by the insured in consequence of the happening of one or more of the accidents or misfortunes against which the insurer, in

consideration of the premium, has undertaken to indemnify the insured. Liability of Insurer for Loss: Depends on: 1.) Whether the insured suffers a loss; and 2.) The extent of the loss. Insurer liable only for a loss PROXIMATELY caused by the perils insured against although a peril not insured against may have been the remote cause of the loss. Proximate cause: That which, in natural & continuous sequence, unbroken by any new independent cause, produces an event and without which the event would not have occurred. It is the efficient cause one that sets others in motion to which the loss is attributed, although other & incidental causes may be nearer in time to the result & operate more immediately in producing the loss. Proximate cause is NOT synonymous to immediate cause. Sec. 85. Insurers liability for loss: 1.) Loss from peril not insured against to which thing was exposed in rescuing it from peril insured against; and 2.) Loss caused by efforts to rescue thing insured from a peril insured against. Insurer is liable when: 1.) Loss took place while being rescued from the peril insured against; 2.) Loss took place when, while in the course of rescue, thing is exposed to a peril not insured against, which permanently deprived the insured of possession of the thing; 3.) Loss is caused by efforts to rescue the thing insured from a peril insured against. Sec. 86. Insurer liable for loss, the immediate cause of which was the peril insured against unless the proximate cause was excepted in contract Even if the proximate cause is not the peril insured against, the insurer may still be held liable if the immediate cause is the peril insured against. 3 kinds of causes: 1.) Remote; 2.) Proximate; and 3.) Immediate Sec. 87. Insurer not liable for loss caused by willful act or with connivance of insured; Insurer liable for negligence of insured Insurer is not liable for loss when: 1.) Loss was caused by willful act of insured; or 2.) Through the connivance of the insured. Exception to the Rule: Sec 180-A (Suicide Clause): Insurer liable if:

1.) Suicide committed AFTER 2 yrs from date of issue; or 2.) Committed anytime in state of insanity Insurer is liable for negligence of insured. Contributory negligence on part of insured does NOT mitigate insurers liability. It has no application to insurance contracts.

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