VIII DOUBLE INSURANCE When does double insurance exists?

? A double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest What are its requisites? There is no double insurance unless the following requisites exist: 1. The person insured is the same 2. Two or more insurers insuring separately 3. The subject matter is the same 4. The interest insured is also the same and 5. The risk or peril insured against is likewise the same Distinguish Double Insurance from Overinsurance Double Insurance Over-Insurance In double insurance, There is over-insurance there may be no overwhen the amount of the insurance as when the insurance is beyond the sum total of the amounts value of the insureds of the policies issued insurable interest does not exceed the insurable interest of the insured There are always several There may be only one insurers insurer involved THEREFORE, double insurance and over-insurance may exist at the same time or neither may exist at all What is the binding effect of stipulation against double insurance? A policy which contains no stipulation against additional insurance is not invalidated by the procuring of such insurance. However, a stipulation that insurance shall be avoided if additional insurance is procured without the insurers consent is valid and reasonable, and any breach thereof will prevent a recovery on the policy What are the effects of Double insurance? The insured can insure with two or more companies unless prohibited by prior policy Where he is allowed, but overinsurance results, he can claim in case of loss, only up to the agreed valuation (in valued policy) or up to the full insurable value (in open policy) from any, some or all insurers, without prejudice to the insurers ratably apportioning the payments The insured can also claim a ratable return of the premiums on the overinsured amount Unrevealed other insurances, when required, is a material concealment/misrepresentation and gives to the insurer the right to rescind IX. REINSURANCE What is a contract of reinsurance?

1 Reinsurance is a contract by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance What is the nature of contract of reinsurance? A reinsurance is presumed to be a contract of indemnity against liability and not merely against damage. The subject of the contract of reinsurance is the insurers risk and not the property insured under the original policy. The reinsurer agrees to indemnify the insurer , not against the actual payment made but against liabilities incurred Distinguish Reinsurance and Double Insurance Reinsurance Double Insurance The insurer becomes the The insurer remains as insured in relation to the the insurer reinsurer The subject of the The subject of the insurance is the original insurance is the property insurers risk It is an insurance of It involves the same different interest interest The original insured has The insured is the party no interest in the in interest in all the contract of reinsurance contracts which is independent of the original contract of insurance Distinguish Reinsurance and Co-insurance Co-insurance is the percentage in the value of the insured property which the insured himself assumes or undertakes to act as insurer to the extent of the deficiency in the insurance of the insured property. In case of loss or damage, the insurer will be liable only for such proportion of the loss or damage as the amount of insurance bears to the designated percentage of the value of the property insured. Reinsurance is where the insurer procures a third party, called the reinsurer, to insure him against liability by reason of such original insurance. Basically, a reinsurance is an insurance against liability which the original insurer may incur in favor of the original insured Distinguish Reinsurance and Reinsurance Treaty Reinsurance Reinsurance Treaty A reinsurance policy is a A reinsurance treaty is contract of indemnity merely an agreement one insurer makes with between two insurance another to protect the companies where one first insurer from a risk it agrees to cede and the has already assumed other to accept reinsurance business pursuant to provisions specified in the treaty. It is a Contract of It is a contract for insurance insurance

What are the matters which the reinsured must communicate to the reinsurer? The insurer who obtains reinsurance, except under automatic reinsurance treaties, must communicate the following to the reinsurer: a. All the representations of the original insured b. All the knowledge and information he possesses, whether previously or subsequently acquired, which are material to the risk What does automatic reinsurance treaties refer to? This refers to a case when two or more insurance companies agree in advance that each will reinsure a part of any line of insurance taken by the other, such contract is self executing and the obligation attaches automatically on acceptance of a risk by the reinsured. In this case, the obligation to communicate is not necessary due to the self-executing and automatic feature of such insurance. What is meant by facultative reinsurance agreement? A facultative reinsurance agreement is a contract wherein the reinsurer may or may not accept participation in the risk insured. The term facultative is used in reinsurance contracts and it is so used in this particular case merely to define the right of the reinsurer to accept or not to accept participation in the risk insured. But once the share is accepted, the obligation is absolute and the liability assumed thereunder can be discharged by the one and only way payment of the share of losses. There is neither alternative nor substitute prestation (Equitable Insurance vs Rural Insurance 4 SCRA 343) Does the original insured has interest in a contract of reinsurance? None. The original insured has no interest in a contract of reinsurance. Reinsurance is a contract solely between the reinsured and the reinsurer and creates no privity of contract between the reinsurer and the original insured. However, if the contract of reinsurance is made directly for the benefit of the reinsureds policyholders or if the reinsurer assumes and agrees to perform the reinsureds contracts, the reinsurer becomes directly liable to the policyholders. It is necessary for the original insured to accept and communicate acceptance of such benefit to the reinsurer before revocation NOTE: A reinsurer is entitled to avail of every defense which the reinsured may avail of against the original insured (Gibson vs Revilla 38 SCRA 219) X. LOSS Define loss in contract of insurance Loss is the injury or damage sustained by the insured from the perils insured against

2 What is Proximate cause? Proximate cause is the active efficient cause which sets in motion a train of events which in turn brings about a result without the intervention of any force operating and working actively from a new and independent force What is a remote cause? Remote cause is a cause that does not necessarily or immediately produce an event or injury When is the insurer liable for losses? The insurer is liable for: 1. Loss the proximate cause of which is the peril insured against although the peril not contemplated by the contract may not have been a remote cause of the loss 2. Loss the immediate cause of which is the peril insured against except where the proximate cause is an excepted peril 3. Loss through the negligence of the insured or of the insureds agents or others, and 4. Loss in the course of efforts to rescue the thing from the peril insured against although the cause of loss is not a peril insured against.. When is the insurer liable for losses? 1. Loss by the insureds willful act 2. Loss due to connivance of the insured; and 3. Loss where the excepted peril is the proximate cause What are the prerequisites for the recovery for loss in insurance against fire? 1. Notice of loss which must be immediately given unless delay is waived expressly or impliedly by the insurer 2. Proof of loss according to the best evidence obtainable. Delay may be also waived expressly or impliedly by the insurer All defects in a notice of loss, or in preliminary proof thereof, which the insured might remedy, and which the insurer omits to specify to him, within reasonable time, as grounds of objection, are waived.

When is the insurer of property against fire exonerated from liability? When no notice is given by the insured or by any other person entitled to the benefit of the insurance, within a reasonable time. What kind of proof is needed for preliminary proof of loss? When preliminary proof of loss is required in the policy, it is sufficient that the insured gives the best evidence which he has in his power and not evidence necessary in a court of justice. MARINE INSURANCE -Insurance against risks connected with navigation, to which a ship, cargo, freightage, profits or others insurable interest in movable property, may be

exposed during a certain voyage or a fixed period of time. Coverage of Marine Insurance: 1. loss or damage to aircraft 2. Loss or damage goods & merchandise for shipment 3. Persons in connection w/ marine insurance 4. Precious stones, jewels, jewelry, precious metals 5. Bridges, tunnels, & other instrumentalities of navigation Perils of Navigation -perils in making landings in river navigation and damage from rain in consequence of improper stowage. War risks -perils due directly to some hostile action, military maneuver, operational war danger Builders risks -damage to ways from launching as well as damage to the ship. Perils of the sea -all kinds of marine casualties & damages done to the ship or goods at sea by the violent action of the winds or waves; not foreseen & not attributable to the fault of anybody. Perils of the ship -losses or damages resulting from: a) natural and inevitable action of the sea b) ordinary wear and tear of ship c) negligent failure of the ship's owner to provide the vessel w/ proper equipment to convey the cargo under ordinary conditions. Inchmaree clause -provision in the policy that the insurance shall cover loss of, damage to, the hull or machinery through negligence of the master, charterers, engineers, or pilots, or through explosions, bursting of boilers, breakage of shafts, or through any latent defect in the machinery or hull not resulting from want of due diligence.

3 Loan on Bottomry/Respondentia -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 receive in case of accident. INSURABLE INTEREST ON VESSEL HYPOTHECATED BY BOTTOMRY IN CASE OF 1.Owner/debtor -difference between the actual value of the vessel and the loan on bottomry. 2.Creditor -amount of the loan RIGHT OF INSURER & LENDER IN CASE OF LOSS: value of what may be saved/salvaged shall be divided between the lender & insurer, in proportion to the legitimate interest of each one.

Freightage benefits derived by the owner, either from: a) chartering of the ship b) its employment for the carriage of his own goods or those of others. Time when Insurable Interest on Freightage exists: a) In case of a charter party, from the time the vessel has broken ground on the chartered voyage b) If no charter party & price is to be paid for the carriage of goods, from the time said goods are actually on board the vessel or from the time both ship & goods are ready for specified voyage. In Marine Insurance, insured is required to reveal all information which he possesses material to the risk. CONCEALMENT THAT DOES NOT VITIATE THE CONTRACT EXCEPT WHEN THEY CAUSED THE LOSS: national character of the insured liability of the thing insured to capture and detention liability to seizure from beach of foreign laws of trade. want of necessary documents use of false & simulated papers

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Insurable Interest in Marine Insurance: 1) Shipowner over the vessel, except that if chartered, the insurance is only up to the amount not recoverable from the charterer .- he also has an insurable on expected freightage; no insurable interest if he will be compensated by charterer in case of loss. 2) Cargo owner over the cargo & expected profits 3) Charterer over the amount he is liable to the shipowner, if the ship is lost or damaged during the voyage.

EFFECT OF CONCEALMENT OF MATTERS: exonerates the insurer from a loss EFFECT IF MISREPRESENTATION IS INTENTIONALLY FALSE: rescission of contract by insurer EFFECT OF FALSITY OF REPRESENTATION AS TO EXPECTATION: non-avoidance of a contract of insurance IMPLIED WARRANTIES INSURANSE: IN MARINE

a) the ship is seaworthy b) no improper deviation from the agreed voyage will be made c) vessel will not engage in illegal venture d) where nationality or neutrality of a ship or cargo is expressly warranted Seaworthiness relative term depending of the NATURE of the ship, the VOYAGE, & the SERVICE in which she is at the time engaged. - Reasonable fitness to perform the service & to encounter the ordinary perils of the voyage contemplated by the parties. EFFECT OF VIOLATION OF IMPLIED WARRANTY OF SEAWORTHINESS: insurer will not be liable for a loss

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4 Actual total loss ( 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 charter) is caused by: a. total destruction of the thing insured b. irretrievable loss of the thing by sinking, or by leaving broken up c. any damage to the thing which renders it valueless d. other event which effectively deprives the owner of the possession Constructive total loss ("technical total loss") one that gives to a person insured a right to abandon

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B. PARTIAL LOSS loss other than a total loss presumption of actual loss: continued absence of a ship without being heard. CONTINUATION OF LIABILITY OF INSURER: whenever the ship upon which the cargo insured was loaded cannot continue the voyage due to the peril insured against, & cargo is loaded on another vessel ABANDONMENT - necessary only in Constructive Total Loss

WHEN REQUIREMENT OF SEAWORTHINESS SATISFIED: General Rule: Seaworthiness of the vessel is required only at the commencement of the risk. Exceptions: 1. insurance is made for a specified length of time 2. insurance is upon the cargo required to be transshipped at an immediate port

COURSE OF THE VOYAGE INSURED: a) one agreed upon by the parties b) in the absence of agreement, the course of sailing fixed by mercantile usage c) if the course of sailing is not fixed by mercantile usage, one which to a master of ordinary skill and direction, would seem the most natural, direct & advantageous

Average extraordinary/accidental expense incurred during the voyage for the preservation of the vessel, cargo, or both and all damages to the vessel & cargo from the time it is loaded and the voyage commenced until it ends & the cargo unloaded.

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DEVIATION as defined is: a) departure from the course of the voyage insured b) unreasonable delay in pursuing the voyage c) commencement of an entirely different voyage DEVIATION IS PROPER: a) when caused by circumstances over which neither the master nor the owner of the ship has any control b) when necessary to comply with warranty, or to avoid a peril, whether or not the peril is insured against c) when made in good faith, & upon reasonable grounds of belief in its necessity to avoid a peril d) when made in good faith, for the purpose of saving human life, or relieving another vessel in distress. EFFECT OF IMPROPER DEVIATION: insurers become immediately absolved from further liability Loss A. TOTAL

KINDS OF AVERAGE: GROSS/GENERAL AVERAGES include all the damages & expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from real & known risk.

Requisites to the Right to claim general average contribution: a. common danger to the vessel/cargo b. part of the vessel/ cargo was sacrificed deliberately c. sacrifice must be for common safety/benefit of all d. must be made by the master or upon his authority e. not be caused by any fault of the party asking the contribution f. must be successful g. must be necessary 2. SIMPLE/PARTICULAR AVERAGE includes all the expenses & damages caused to the vessel or to her cargo which have not inured to the common benefit & profit of all the persons interested in the vessel & her cargo.

Partial loss caused by a peril insured against, which is not a general average loss

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''FPA CLAUSE" a situation wherein the insured & insurer stipulated in the policy that the vessel/cargo insured shall be free from particular average effects: a. if damage to the thing insured is a PARTICULAR average, the insured shall not be liable UNLESS the loss suffered is total b. if damage to the thing insured is a GENERAL average, insurer shall be liable whether the loss is partial or total or for the condition of the insured for his proportion of all general average losses assessed upon the thing insured which was saved. There is an ACTUAL TOTAL LOSS if the insured is effectively deprived of the use & possession of the property, whether by seizure/capture followed by condemnation/theft. Abandonment act of the insured by which, after a constructive total loss, he declares the relinquishment to the insurer of his interest in the thing insured - effect: insured is surrendering to the insurer whatever is left of the property insured, & resorting to the policy for indemnity, insurer then becomes the owner of whatever may remain of the insured thing & the insured may recover a total loss. REQUISITES FOR VALID ABANDONMENT: actual relinquishment by the person insured of his interest in the thing insured constructive total loss abandonment must be neither partial nor conditional made within a reasonable time after receipt of reliable information of the loss factual made by giving notice to the insurer which may be done orally or in writing notice of abandonment must be explicit & must specify the particular cause of the abandonment WHEN ABANDONMENT MAY BE MADE: if more than 3/4 of the value of the thing insured is actually lost if more than 3/4 of the value of the thing insured would have to be expended to recover it from the peril if it is injured to such an extent as to reduce its value by more than 3/4 if the thing is insured is a ship & the contemplated voyage cannot be lawfully performed without incurring an expense to be insured of more than 3/4 the value of the thing abandoned. If the thing insured is & the contemplated voyage can't be lawfully performed without incurring risk which a prudent man would not take under the circumstances

5 If the thing insured, being cargo or freightage, the voyage cannot be performed nor another ship procured by the master within reasonable time & with reasonable diligence RIGHT OF RECOVERY WHEN: abandonment is made recovery of TOTAL LOSS, insurer acquires all interest of the insured no abandonment recovery only of ACTUAL LOSS When abandonment becomes ineffectual: information which formed the basis of abandonment proved to be incorrect & there was in fact no total loss Form of Notice of Abandonment no particular form; may be made orally unless required to be in writing, even notice by telegraph is sufficient if complies with requirements if done orally, insured must submit to the insurer within 7 days from such oral notice, a written notice of the abandonment EFFECTS OF ACCEPTANCE OF ABANDONMENT becomes irrevocable UNLESS the ground upon which it owes made proven to be unfounded conclusive upon parties admission of the loss & sufficiency of abandonment

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HOW ACCEPTANCE OF ABANDONMENT MADE: a) express b) implied from the acts of the insurer mere silence of the insurer for an unreasonable length of time after notice shall be construed as acceptance EFFECT OF VALUATION: conclusive between the parties provided a) the insured has some interest at the risk b) there is no fraud on his party Co-insurance 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 value of property & amount of insurance REQUISITES FOR APPLICATION: insured taken is less than the actual value of the thing insured loss is partial FIRE INSURANCE No co-insurance UNLESS expressly stipulated in the policy

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MARINE INSURANCE There is always coinsurance

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Fire insurance

- a contract by which the insurer for a consideration agrees to indemnify the insured against loss, or damage to, property by fire, but may include loss by lightning, windstorm, tornado & earthquake & other allied risks, when such risks are covered by extension to fire insurance policies/ under separate policies Alteration alteration in the use or condition of thing insured will entitle the insurer to rescind the contract provided following requisites are present: a) use or condition of the thing is specifically limited/stipulated in the policy. b) such case/condition as limited by the policy is altered c) the alteration is made without the consent of the insurer d) alteration is made by means within the control of the insured e) the alteration increases the risk f) violation of a policy provision Co-insurance clause clause requiring the insured to maintain insurance to an amount equal to a specified percentage of the value of the insured property under penalty of becoming co-insurer to the extent of such deficiency Fall-off Building Clause clause in fire insurance policy that if the building or any part thereof falls, except as a result of fire, all insurance by the policy shall immediately cease. Option to Rebuild Clause option of insurer to repair, rebuild or replace buildings/structures wholly or partially damaged or destroyed, instead of the payment of the loss. Alternative obligation, either pay the amount of the loss/ rebuild the building damaged Casualty Insurance - includes all forms of instrument against loss or liability arising from accident/mishap other than those within the scope of other types of insurance GENERAL DIVISION OF CASUALTY INSURANCE: insurance against specified hazards which may affect the person/property of the insured e.g. personal accident, robbery/theft, damage to or loss of motor vehicle insurance against specified hazards which may give rise to liability on the part of the insured for claims for injuries to others/damages to their property

6 e.g. workmen's compensation, motor vehicle liability ACCIDENT/HEALTH INSURANCE Protect against not a loss of life but a loss of time, earning capacity and expenses

LIFE INSURANCE Usual object is to provide fund for the benefit of the estate/heirs beneficiaries of insured after the death of the insured

Suretyship contract whereby a person binds himself solidarily with principal debtor for the fulfillment of an obligation NATURE OF LIABILITY OF SURETY: solidary limited to the amount of the bond determined by the terms of the contract of suretyship in relation to the principal contract between obligor and obligee GUARANTOR insurer of solvency of debtor Binds himself to pay if principal is unable to pay Secondary Can not be compelled to pay the creditor unless the latter has exhausted all the properties of the debtor PROPERTY INSURANCE Principal contract 2 parties: insurer and insured Contract of Indemnity No such right, only right of subrogation May be cancelled unilaterally either by insured or insurer on grounds provided by law Risk-distributing device, premium paid as a ratable contribution to a common fund No need for acceptance by any third party

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SURETY insurer of debt Undertakes to pay principal dies not pay primary No such rights if

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SURETY Accessory contract 3 parties: surety, obligor and obligee Credit accommodation Surety can recover form principal Bond can be cancelled only with consent of the oblige, commissioner or the court Risk-shifting device premium paid being in the nature of a service fee Requires acceptance of the oblige to be valid

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WHEN SURETY ENTITLED TO SERVICE FEE ONLY: a) when contract of suretyship/ bond is not accepted by obligee b) when contract of suretyship/ bond is not filed with obligee TYPES OF SURETY BONDS

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Contract bonds a. Performance bonds b. Payment bonds Official Judicial Life Insurance - insurance payable on the death of a person or on his surviving a specified period or otherwise contingently on the continuance or cessation of life. Nature: 1. liability absolutely certain 2. amount of insurance generally no limit 3. direct pecuniary loss not required KINDS OF LIFE INSURANCE GENERAL, ordinary or old line life insurance fixed for a premium payable, without condition, at stated intervals, a sum certain is to be paid on death, without condition limited payment life insurance - specified premiums are to be paid for a specified period or until the death of insured if it occurs before the expiration of such period, and under which insurer is obligated to pay a specified sum on the death of the insured ENDOWMENT INSURANCE contract to pay a certain sum to the insured if he lives a certain length of time, or if he dies before that time, to some other person indicated as beneficiary TERM LIFE INSURANCE insurance for a term of years only, or until insured shall have arrived at a certain age ADVANCE INSURANCE contract which provides for the payment to the insured of a lump sum immediately, in consideration of his agreement to make certain periodical payments to the insurer for a specified period, or for that end of the period, the performance of insured's obligation being secured by mortgage or deed of trust TONTINE INSURANCE - form of life insurance by which the policyholder under the same plan, that no dividends, return premium, or surrender value shall be received for a term of years called the "tontine period," the entire surplus from all sources being allowed to accumulate to the end of that period, and then divided among all who have maintained their insurance in force and who have survived.

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7 police report of accident death certificate and evidence sufficient to establish proper payee medical report and evidence of medical or hospital disbursement

CLAIMS UNDER CMVLI a claim shall lie against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from in any other case, against the insurer of the directly offending vehicle

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"No-fault" Clause any claim for death or injury shall be paid up to p5,000 without necessity of proving negligence or fault, provided the following proofs of loss under oath are submitted: