1.

A common law wife is disqualified from becoming the beneficiary of the insured in life insurance
because of the express prohibition of:
Answer: C. The Civil Code

2.The term “doing an insurance business” within the meaning of the insurance code. Shall include:
Answer: A. Doing any kind of business, including reinsurance business, specifically recognized as
constituting the doing of an insurance business within the meaning of this Code.

3.An insurance proceeds upon the life insurance of the decease assured may pass through.
Answer: A. Any legal mode of transfer

4.Anyone except a public enemy may be insured. Who among them is considered a public enemy
under the insurance code.
Answer: B. Alien enemy

5.In order to protect and promote the interest of the people of this country, before a foreign
insurance company may be allowed to transact insurance business in the Philippines it must first
secure:
Answer: B. Capitalization compliance clearance from the Central Bank

6.Life insurance policy, as a rule, may freely be assigned if:

Answer: B. It was done before the loss provided with approval from the insurer.

7.Every person has an insurable interest in the life and health of:
Answer: B. Of her illegitimate son who is not dependent upon her for education and support

8.A partner cannot insure the life of his co-partner during the duration of their partnership if:
Answer: A. Both have no capital investment

9.When a debtor in good faith insures the life of his for the benefit of the creditor and upon full
payment of the debts.
Answer: D. Does not invalidate the policy in the event of death, the proceeds should go to the
estate of the debtor.

10.If the beneficiary predeceases the insured.

Answer: C. Proceeds will go to the estate of the insured.

11. When …
Answer: C. The wives

12.The interest of the beneficiary in a life insurance policy shall be forfeited when the beneficiary is
the principal, accomplice, or accessory in willfully bringing about the death of the insured; in which
event the proceeds shall go to?
Answer: A. The nearest relative of the insured

13. D covered by accident policy insured by insurance X. While driving his motorcycle with expired
license he was trumped by a car and be tried instantly. The policy carries a “Rider” stipulation that
the insurer is not liable if the insured dies while committing a felony.

Answer: B. Insurer is liable because the word felony was used in its general term.

14. The Insurance Commissioner issued a circular mandating all domestic insurance companies to
increase its paid-up capital from 500 million to 2 billion pesos not later than 12 months from the
date of its publication in the national news paper of general circulation. The domestic insurance
companies are not agreeable because it is discriminatory; the paid-up capital of foreign companies
is only 500 million pesos. Appeal of the circular will be brought before the:
Answer: A. Secretary of FINANCE

15.The insurance commissioner adjudicated in favor of policy holder (Mr. H) as against insurance
company (Chat) the sum of one hundred thousand pesos (P 100,000.00) because the claim of Mr.
H in his health insurance policy is valid and legitimate. “Chat” is not in conformity with the finding of
the insurance commissioner so decided to appeal the decision to:
Answer: C. Court of Appeals because the Insurance Commissioner Office is a quasi-judicial body.

16.As a rule in order for an insurance contract to be valid and binding, it is necessary that:
Answer: A. There is meeting of the minds

17.Suppose the insured and the beneficiary died at the same time, who is entitled to the proceeds
of the policy?
Answer: F. None of the above

18.When unsecured creditor insured the property of his debtor, the policy is:
Answer: C. Not valid and binding because his insurable interest is limited upon the life of the
debtor.

19.CC insured his buildings 1,2,3, and 4 for 4 million pesos under one policy with XX insurance
company effective January 3,2009 until January 10,2010 against Fire and Lightning only. On
February 14,2009, CC sold building 3. On February 16,2009 all the buildings were destroyed by
accidental fire.
Answer: C. CC cannot recover the value of the building 1,2,3,4

20.Mr. HHH owns a one storey concrete residential house with 4 bedrooms and he insured it with
KKK insurance company against fire only. Prior to the loss of the property due to accidental fire,
HHH without informing KKK converted the two bedrooms into a KTV bar catering exclusively for his
children and friends.
Answer: B. KKK Company is liable to pay because the alteration is immaterial

TEST 2 True or False

1. The term children in insurance contract includes illegitimate. TRUE
2. When the damage of the vessel is more than ¼ of its value the loss is considered technical total
loss. TRUE
3. When the damage of the vessel is ¼ of its value the loss is considered constructive total loss.
TRUE
4. When the damages and expenses incurred to the vessel or cargo for the benefit of all persons
interest in the vessel or cargo is called Simple average. FALSE (general average)
5. Doctrine of Inscrutable Fault is applicable when two vessels collided because both are at fault.
FALSE

TEST 3 Essay

1. The assured answers “No” to the question in the application for a life policy: “Are you suffering
from any form of heart illness?” In fact, the assured has been a heart patient for many years. On 7
Sep 1991, the assured is killed in a plane crash. The insurance company denies the claim for
insurance proceeds and returns the premiums paid. Is the decision of the insurance company
justified? (BAR 1997)

SUGGESTED ANSWER:
Assuming that the incontestability clause does not apply because the policy has not been in force
for 2 years, from the date of issue, during the lifetime of the insured, the decision of the insurance
company not to pay is justified. There was fraudulent concealment. It is not material that the
insured died of a different cause than the fact concealed. The fact concealed, that is heart ailment,
is material to the determination by the insurance company whether or not to accept the application
for insurance and to require the medical examination of the insured. However, if the incontestability
clause which applies to the insurance policy covering the life of the insured had been in force for 2
years from issuance thereof, the insurance company would not be justified in denying the claim for
proceeds of the insurance and in returning the premium paid. In that case, the insurer cannot prove
the policy void ab initio or rescindible by reason of fraudulent concealment or misrepresentation of
the insured. (Reviewer)

SUGGESTED ANSWER:

It depends. The decision of the insurance company is justified on the ground that there is material
concealment on the part of the assured or material representation, provided however that the 2
year incontestability period has not yet set in when the plane crash happened on September 07
1991. Otherwise when the policy of insurance has been in force for at least 2 years from its
issuance or from its last reinstatement, then the insurance company cannot deny the claim, unless
there are other grounds falling within the exceptions of the general rule on incontestability. The law
only provides for 2 years for the insurer to investigate the fraud committed by the insured. After that
the incontestability sets in and the insurer cannot deny the claim on grounds of material
concealment or misrepresentation. (10 pts student)

2. (Finals) MV Golden Friendship left Cagayan de Oro on July 1,2011 and was expected to arrive
in Manila on July 3,2011. However, on July 2,2011 while the ship was somewhere in Masbate sea;
the ship captain noticed that the bananas and mangoes worth five hundred thousand pesos started
to spoil. In order to save the cargoes, the ship captain decided to dock in Masbate, sold the subject
cargoes for five hundred thousand pesos but it took him two says time to find the buyers. Then,
they proceed to their destination(Manila) and while on their way the ship encountered unexpected
typhoon and it sank.

A.) If you were the insurance company, would you allow the ship owner to recover the value of the
vessel assuming that it was insured against perils of the sea? Reason

B.) Would your answer be the same if it was insured against perils of the ship? Reason

SUGGESTED ANSWER: The owner of the cargo bears the loss because in the case at bar, they
stayed too long at the island, making it an improper deviation. Every deviation not specified in Sec.
124 is improper. (Sec. 125, Insurance Code)

3. Mr. A obtains a fire insurance on his house and as a generous gesture names his neighbor as
the beneficiary. (BAR 1997)
A.)If A‘s house is destroyed by fire, can B successfully claim against the policy?
B.) A obtains insurance over his life and names his neighbor B the beneficiary because of A‘s
secret love for B. If A dies, can B successfully claim against the policy?

SUGGESTED ANSWER:
a) No. In property insurance, the beneficiary must have insurable interest in the property insured.
(Sec 18 Ins Code). B does not have insurable interest in the house insured.
b) Yes. In life insurance, it is not required that the beneficiary must have insurable interest in the life
of the insured. It was the insured himself who took the policy on his own life.

4. Mr. OBA, poor scientist from Manolo Fortich, Bukidnon, is the only person who discovers a
medicine that can completely cure persons infected with AIDS in a just a matter of 6 months
medication. He was invited by Mr. BOS to commercially manufacture the medicine that the latter
would provide for the building of elaborate laboratory, advertisements, marketing and hiring of
employees. The investment of Mr. BOS amounted to 100 million pesos. They estimated that the
1000 million pesos investment could be recovered in the 5th year of their business operation. In
order to protect the investment of Mr. BOS, he insures the life of Mr. OBA for 100 million pesos for
a term of 5 years, premium payable annually and designated himself (Mr.BOS) as the lone
beneficiary. On the third year of the business operation they were able to recover the 100 million
investments plus another similar profit. On the fourth year Mr.OBA was kidnapped and killed by
Mrs.BOS without the knowledge and consent of her husband (Mr. BOS). Would you allow Mr. BOS
to receive the insurance proceeds? Reason.

SUGGESTED ANSWER:
No, Mr. BOS cannot recover the insurance proceeds. This is because the pecuniary interest of
Mr.BOS over the life of Mr.OBA was already extinguished long before the death of Mr. OBA. The
extinguishment of the liability of the insurer is based on the happening of a contingent event which
is the recovery of the invested amount. Such happening of contingent event terminates the
insurance and extinguishes the liability of the insurer even before the end of the period agreed
upon.

5. Global Transport Services, Inc. (GTSI) operates a fleet of cargo vessels plying interisland routes.
One of its vessels, MV Dona Juana, left the port of Manila for Cebu laden with,among other goods,
10,000 television sets consigned to Romualdo, a TV retailer in Cebu. When the vessel was about
ten nautical miles away from Manila, the ship captain heard on the radio that a typhoon which, as
announced by PAG-ASA, was on its way out of the country, had suddenly veered back into
Philippine territory, the captain realized that MV Dona Juana would traverse the storm’s path, but
decided to proceed with the voyage. True enough, the vessel sailed into the storm. The captain
ordered the jettison of the 10, 000 television sets, along with some other cargo, in order to lighten
the vessel and make it easier to steer the vessel out of the path of the typhoon. Eventually, the
vessel, with its crewintact, arrived safely in Cebu. (A) Will you characterize the jettison of
Romualdo’s TV sets as an average? If so, what kind of an average, and why? If not, why not?
(B) Against whom does Romualdo have a cause of action for indemnity of his lost TV sets?
Explain. (3%)

SUGGESTED ANSWER:
A.The jettison of Romualdo’s TV sets resulted in a general average loss, which entitles him to
compensation or indemnification from the shipownerand the owners of the cargoes saved by the
jettison.

ALTERNATIVE ANSWER:
The jettison resulted to a particular average loss because the damage was due to the fault of the
captain.

SUGGESTED ANSWER;
B.Romualdo has a cause of action for his lost TV sets against the shipowner and the owners of the
cargoes saved by the jettison. The jettison of the TV sets resulted in a general average loss,
entitling Romualdoto indemnity for the lost TV sets.
6. A marine insurance policy on a cargo states that ―theinsurer shall be liable for losses incident to
perils of thesea.‖ 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?

SUGGESTED ANSWER:
No. The proximate cause of the damage to the cargoinsured 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.
8. “N” owns a condominium unit presently insured with Holy Insurance Company for 1 million, “N”
later sells the condominium unit to “O”. Somehow, “O” fails to obtain the transfer of the insurance
policy to his name from “N”. Subsequently, a fire of unknown origin destroys completely the
condominium unit. Who may collect the insurance?

SUGGESTED ANSWER:
No one can collect from the insurer. In property insurance, the insured must have the insurable
interest over the property at the time of the perfection of the contract and at the time of the loss. “N”
had insurable interest over the unit at the time of the inception of the policy, he did not have
insurable interest on the insured property at the time of the loss. “O” cannot also recover because
he is not a party to the insurance contract. The transfer of the property does not include the
transfer of the insurance policy.

9. Ciriaco leased a commercial apartment from Supreme Building Corporation (SBC). One of the
provisions of the one-year lease contract states: ―18.xxx The LESSEE shall not insure against fire
the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the
leased premises without first obtaining the written consent of the LESSOR. If the LESSEE obtains
fire insurance coverage without the consent of the LESSOR, the insurance policy is deemed
assigned and transferred to the LESSOR for the latter’s benefit. Notwithstanding the stipulation in
the contract, without the consent of SBC, Ciriaco insured the merchandise inside the leased
premises against loss by fire in the amount of P500, 000 with First United Insurance Corporation
(FUIC). A day before the lease contract expired, fire broke out inside the leased premises,
damaging Ciriaco’s merchandise. Having learned of the insurance earlier procured by Ciriaco, SBC
demanded from FUIC that the proceeds of the insurance policy be paid directly to it, as provided in
the lease contract. Who is legally entitled to receive the insurance proceeds? Explain.

SUGGESTED ANSWER:
Ciriaco is entitled to receive the proceeds of the insurance policy. The stipulation that the policy is
deemed assigned and transferred to SBC is void, because SBC has no insurable interest in the
merchandise of Ciriaco.

******NOTE*******************

1. Look for what happens when insured and beneficiary dies at the same time.
2. Latest bar questions. (When insured wife turned out to be transgender.)