INSURABLE INTEREST Flashcards
GENERAL RULE ON INSURABLE INTEREST
IT IS PECUNIARY IN NATURE
A person has an insurable interest in
the subject matter if he is so connected,
so situated, so circumstanced, so
related, that by the preservation of the
same he shall derive pecuniary benefit,
and by its destruction he shall suffer
pecuniary loss, damage or prejudice
NECSSITY OF INSURABLE INTEREST
- LEGAL RIGHT TO INSURE
- VALIDITY OF THE CONTRACT
THE INSURRED HAS AN INSURABLE INTEREST ON THE FOLLOWEING PERSONS (LIFE AND HEALTH)
a. of himself, of his spouse and of
his children;
b. of any person on whom he
depends wholly or in part for
education or support;
c. of any person under a legal
obligation to him to pay money
or respecting property or
services, of which death or
illness might delay or prevent
performance; and
d. of any person upon whose life
any estate or interest vested in
him depends.
TWO CLASSES OF LIFE POLICIES
INSURANCE UPON ONE’S LIFE
INSUREANCE UPON LIFE OF ANOTHER
3 GENERAL CATEGORIES OF INSURABLE INTEREST IN THE LIFE OF ANOTHER
- RELATIONS BY BLOOD OR MARRIAGE
- BUSINESS RELATIONSHIP
- CREDITORS
INSURABLE INTEREST IN PROPERTY INSURANCE MAY CONSIST OF
- AN EXISTING INTEREST
- INCHOATE INTEREST FOUNDED ON EXISTING INTEREST
- AN EXPECTANCY, COUPLED WITH AN EXISTING INTEREST IN THAT OUT OF WHICH THE EXPECTANCY ARISES
COMPARE AND CONTRAST INSURABLE INTEREST IN PROPERTY VS LIFE IN TERMS OF:
EXISTENCE OF INSURABLE INTEREST
LIFE: Must exist only at the time the policy takes effect and need not exist at the time of loss
PROPERTY: MUST EXIST WHEN THE INSURANCE TAKES EFFECT AND WHEN THE LOSS OCCUR
CONTRAST INSURABLE INTEREST IN PROPERTY AND LIFE IN TERMS OF:
EXTENT
LIFE: Unlimited except in
life insurance
effected by creditor
on life of debtor.
PROPERTY: Limited to actual
value of interest in
property insured.
CONTRAST INSURABLE INTEREST IN PROPERTY VS LIFE IN TERMS OF:
BASIS OF EXPECTATION
LIFE: The expectation of
benefit to be derived
from the continued
existence of life need
not have any legal
basis whatever. A
reasonable
probability is
sufficient without
more
PROPERTY
An expectation of
a benefit to be
derived from the
continued
existence of the
property insured
must have A LEGAL BASIS
CONTRAST OF INSURABLE INTEREST IN LIFE AND PROPERTY IN TERMS OF:
NATUE OF INSURABLE INTEREST
LIFE: The beneficiary need
not have an insurable
interestover the life
of the insured if the
insured himself
secured the policy.
However, if the life
insurance was
obtained by the
beneficiary, the
latter must have
insurable interest
over the life of the
insured.
PROPERTY: The beneficiary
must have
insurable interest
over the thing
insured.
INSURABLE INTEREST OF CARRIER OR DEPOSITORY
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
INSURABLE INTEREST OF MORTGAGOR
As owner, has an
insurable interest therein to the
extent of its value, even though the
mortgage debt equals such value.
The reason is that the loss or
destruction of the property insured
will not extinguish the mortgage
debt.
INSURABLE INTEREST OF MORTGAGEE
His interest is only up
to the extent of the debt. Such
interest continues until the mortgage
debt is extinguished.
TRUE OR FALSE
THE NATURE OF BOTTOMRY LOAN IS THAT THE PAYMENT OF THE LOAN IS CONDITIONAL, SUBJECT OT THE SAFE ARRIVAL OF THE VESSEL AT THE PORT OF DESTINANTION
TRUE
CONTRAST STANDARD/UNION MORTGAGE CLAUSE
VS
OPEN/LOSS PAYABLE MORTGAGE CLAUSE
STANDARD/UNION MORTGAGE CLAUSE : Subsequent acts
of the mortgagor
cannot affect the
rights of the
assignee
OPEN/LOSS PAYABLE MORTGAGE CLAUSE
Acts of the
mortgagor affect
the mortgagee.
Reason:
Mortgagor does
not cease to be a
party to the
contract.
Effects of Loss Payable Clause
a. The contract is deemed to be upon
the interest of the mortgagor; hence, he
does not cease to be a party to the
contract.
b. Any act of the mortgagor prior to the
loss, which would otherwise avoid the
insurance affects the mortgagee even if
the property is in the hands of the
mortgagee.
c. Any act, which under the contract of
insurance is to be performed by the
mortgagor, may be performed by the
mortgagee with the same effect.
d. In case of loss, the mortgagee is
entitled to the proceeds to the extent of
his credit.
e. Upon recovery by the mortgagee to
the extent of his credit, the debt is
extinguished.
GENERAL RULE ON CHANGE OF INTEREST
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 interests in the thing
and the interest in the insurance are
vested in the same person.
THE FOLLOWING MAY BE TRANSFERRED OR ASSIGNED
- THE THING INSURED
- THE POLICY ITSELF
- THE CLAIM ITSELF
GENERAL RULE ON CHANGE OF INTEREST
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 interests in the thing
and the interest in the insurance are
vested in the same person.
EXCEPTIONS IN CHANGE OF INTEREST
- In life, health and accident
insurance.(Sec. 20); - Change in interest in the thing
insured after occurrence of an
injury which results in a loss.
(Sec. 21); - Change in interest in one or
more of several distinct things
separately insured by one policy.
(Sec. 22); - Change of interest, by will or
succession, on the death of the
insured. (Sec. 23); -
Transfer of interest by one of
several partners, joint owners,
or owners in common, who are
jointly insured, to others. (Sec.
24); - When a policy is 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); - When there is an express
prohibition against alienation in
the policy, in case of alienation,
the contract of insurance is not
merely suspended but avoided.
(Art. 1306, NCC).
TRANSFER OF POLICY IN LIFE INSURANCE
It can be transferred even without the
consentof the insurer except when
there is a stipulation requiring the
consent of the insurer before transfer.
(Sec. 181)
Reason: The policy does not represent
a personal agreement between the
insured and the insurer.
TRANSFER OF POLICY IN PROPERTY INSURANCE
It cannot be transferred without the
consent of the insurer.
Reason: The insurer approved the
policy based on the personal
qualification and the insurable interest
of the insured.
TRANSFER OF POLICY IN CASUALTY INSURANCE
It cannot be transferred without the
consent of the insurer.
Reason: The moral hazards are as
great as those of property insurance.
EFFECT OF POLICY TRANSFER WITHOUT THE CONSENT OF THE INSURER
THE INSURANCE POLICY WILL BE SUSPENDED AND WILL NOT BE AVOIDED UNTIL THE INTEREST IN THE THING AND INTEREST IN THE INSURANCE ARE VESTED IN THE SAME PERSON
TRUE OR FALSE
CLAIM OF THE INSURED AFTER LOSS IS NOT TRANSFERABLE AND ANY STIPULATION TO THE CONTRARY IS VOID
FALSE
REASONS:
- THE STIPULATION HINDERS FREE TRANSMISSION OF PROPERTY
- TRANSFER DOES NOT INVOLVE A PERSONAL CONTRACT, BUT A MONEY CLAIM OR RIGHT OF ACTION
- TRANSFER INVOLVES NO MORAL HAZAR
