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Dybie B.

Lumingkit
Insurance Law

Republic Act No. 10607 (Amending Presidential Decree 612)

2. C. iv. When insurable interest must exist


 An interest in property insured must exist when the insurance takes effect, and when
the loss occurs, but not exist in the meantime; and interest in the life or health of a
person insured must exist when the insurance takes effect, but need not exist thereafter
or when the loss occurs. (Sec. 19 Insurance Code)

v. Effect of change of interest


 The mere (absolute) transfer of the thing insured does not transfer the policy, but
suspends it until the same person becomes the owner of both the policy and the thing
insured. (Sec. 58)
General Rule:
 A change of interest in any part of a thing insured unaccompanied by a corresponding
change in interest in the insurance, suspends the insurance to an equivalent extent,
until the interest in the thing and the interest in the insurance are vested in the same
person. (Sec. 20)
Exceptions:
 In life, health and accident insurance.(Sec. 20)
 A change in interest in a thing insured, after the occurrence of an injury which results in
a loss, does not affect the right of the insured to indemnity for the loss. (Sec. 21)
 A change of interest in one or more several distinct things, separately insured by one
policy, does not avoid the insurance as to the others. (Sec. 22)
 A change on interest, by will or succession, on the death of the insured, does not avoid
an insurance; and his interest in the insurance passes to the person taking his interest in
the thing insured. (Sec. 23)
 A transfer of interest by one of several partners, joint owners, or owners in common,
who are jointly insured, to the others, does not avoid an insurance even though it has
been agreed that the insurance shall cease upon an alienation of the thing
insured.(Sec.24)
 A policy may be so framed that it will inure to the benefit of whomsoever, during the
continuance of the risk, may become the owner of the interest insured. (Sec. 57)

vi. Assignment of insurance policies


 A transfer of interest by one of several partners, joint owners, or owners in
common, who are jointly insured, to the others, does not avoid an insurance even
though it has been agreed that the insurance shall cease upon an alienation of the
thing insured. (Sec. 24)
San Miguel Brewer vs. Law Union and Rock Insurance Co., 40:6
The Brewery, as mortgagee of the insured property, undoubtedly had an
insurable interest therein; but it could not, in any event, recover upon these
policies an amount in excess of its mortgage credit. This conclusion is not
only deducible from the principles governing the operation and effect of
insurance contracts in general but the point is clearly covered by the express
provisions of sections 16 and 50 of the Insurance Act (Act No. 2427). In
section 19 of the Insurance Act we find it stated that "a change of interest in
any part of a thing insured unaccompanied by a corresponding change of
interest in the insurance, suspends the insurance to an equivalent extent,
until the interest in the thing and the interest in the insurance is vested in the
same person." Again in section 55 it is declared that "the mere transfer of a
thing insured does not transfer the policy, but suspends it until the same
person becomes the owner of both the policy and the thing insured."

Central Surety & Insurance Co. vs. Silva, (CA) O.G. No. 2, Jan. 31, 1958, p.376:
The mere delivery of an insurance policy or the assignment of the
receipts thereunder cannot be construed as payment in just the same way
that delivery of other mercantile and negotiable instruments do not
constitute payment until the proceeds are realized in accordance with Article
1249 of the Civil Code. The reason is that an insurance policy is but an
evidence of a right to claim indemnification for loss occasioned by the risk
insured against.

vii. Correct estimation of risk


 enables the insurer to decide whether he is willing to assume it, and if so, at what
rate or premium
 The measure of an insurable interest in property is the extent to which the insured
might be damnified by loss or injury thereof. (Sec. 17)

viii. Delimitation of the risk


 determines the extent of the contingent duty to pay undertaken by the insurer
 A carrier or depository of any kind has an insurable interest in a thing held by him as
such, to the extent of his liability but not to exceed the value thereof. (Sec. 15)

ix. Control of the risk


 enable the insurer to guard against the increase of the risk because of change in
conditions after it is assumed.

x. Concealment
 A neglect to communicate that which a party knows and ought to communicate.
(Sec. 26)
Musgni vs. West Coast Life Insurance Company, 61:804
That this concealment and the false statements constituted fraud, is
likewise clear, because the defendant by reason thereof accepted the risk
which it would otherwise have flatly refused. When not otherwise specially
provided for by the Insurance Law, the contract of life insurance is governed
by the general rules of the civil law regarding contracts. Article 1261 of the
Civil Code provides that there is no contract unless there should be, in
addition to consent and a definite object, a consideration for the obligation
established. And article 1276 provides that the statement of a false
consideration shall render the contract void. The two answers being one of
the considerations of the policies, and it appearing that they are false and
fraudulent, it is evident that the insurance contracts were null and void and
did not give rise to any right to recover their value or amount. One ground
for the rescission of a contract of insurance under the Insurance Act is a
"concealment", which in section 26 is defined as "A neglect to communicate
that which a party knows and ought to communicate".

Argente vs. West Coast Life Insurance Company, 51:275


The assurer in assuming a risk is entitled to know every material fact of
which the assured has exclusive or peculiar knowledge, as well as all material
facts which directly tend to increase the hazard or risk which are known by
the assured, or which ought to be or are presumed to be known by him. And
a concealment of such facts vitiates the policy. It does not seem necessary
that the suppression of the truth should have been willful. If it were but an
inadvertent omission, yet if it were material to the risk and such as the
plaintiff should have known to be so, it would render the policy void.

De Leon vs. Crown Life Ins. Co., C.A. GR 44842


There was concealment where applicant did not disclose he had
pneumonia, diabetesor syphilis which avoided the insurance policy although
the cause of death was totally unconnected to the material fact
misrepresented.

Insular Life Ass. Vs. Pineda, CA GR 43967


In the absence of evidence of the uninsurability of a person afflicted with
chronic cough,concealment thereof is no ground for annulment of the policy.

Yu Pang Cheng vs. CA, GR No. L-12465, May 29, 1959


Concealment is a neglect to communicate that which a party knows and
ought to communicate. Whether intentional or not, concealment entitles the
insurer to rescind the contract. The law requires the insured to communicate
to the insurer all facts within his knowledge which are material to the
contract and which the other party has not the means of ascertaining. The
materiality is determined not by the event but by the probable and
reasonable influence of the facts upon the party to whom the
communication is due. The insured’s negative answers to the questions on
his previous ailments, or his concealment of his hospitalization deprived the
insurance company of the opportunity to make the necessary inquiry as to
the nature of his past illness so that it may form its estimate relative to the
approval of his application. Had the insurance company been given such
opportunity, it would not probably consent to the policy issuance.

Saturnino vs. Philamlife, 7 SCRA 316


Article 1249 of the New Civil Code provides that the delivery of
promissory notes payable to order, or bills of exchange or other mercantile
documents shall produce the effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired. .
Considering that the insurance policy is silent as to the mode of payment,
Capital Insurance is deemed to have accepted the promissory note in
payment of the premium. This rendered the policy immediately operative on
the date it was delivered. By accepting its promise to pay the insurance
premium within thirty (30) days from the effectivity date of the policy,
Capital Insurance had in effect extended credit to Plastic Era. Where credit is
given by an insurance company for the payment of the premium it has no
right to cancel the policy for nonpayment except by putting the insured in
default and giving him personal notice. Having held the check for such an
unreasonable period of time, Capital Insurance was estopped from claiming a
forfeiture of its policy for non-payment even if the check had been
dishonored later.

xi. Duty to Disclose


 Each party to a contract of insurance must communicated to the other, in good
faith, all facts within his knowledge which are material to the contract and as to
which he makes no warranty, and which the other has not the means of
ascertaining. (Sec. 28)

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