INSURABLE INTEREST

Question 1

GENERAL RULE ON INSURABLE INTEREST

Answer 1

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

Question 2

NECSSITY OF INSURABLE INTEREST

Answer 2

1. LEGAL RIGHT TO INSURE
2. VALIDITY OF THE CONTRACT

Question 3

THE INSURRED HAS AN INSURABLE INTEREST ON THE FOLLOWEING PERSONS (LIFE AND HEALTH)

Answer 3

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.

Question 4

TWO CLASSES OF LIFE POLICIES

Answer 4

INSURANCE UPON ONE’S LIFE

INSUREANCE UPON LIFE OF ANOTHER

Question 5

3 GENERAL CATEGORIES OF INSURABLE INTEREST IN THE LIFE OF ANOTHER

Answer 5

1. RELATIONS BY BLOOD OR MARRIAGE
2. BUSINESS RELATIONSHIP
3. CREDITORS

Question 6

INSURABLE INTEREST IN PROPERTY INSURANCE MAY CONSIST OF

Answer 6

1. AN EXISTING INTEREST
2. INCHOATE INTEREST FOUNDED ON EXISTING INTEREST
3. AN EXPECTANCY, COUPLED WITH AN EXISTING INTEREST IN THAT OUT OF WHICH THE EXPECTANCY ARISES

Question 7

COMPARE AND CONTRAST INSURABLE INTEREST IN PROPERTY VS LIFE IN TERMS OF:

EXISTENCE OF INSURABLE INTEREST

Answer 7

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

Question 8

CONTRAST INSURABLE INTEREST IN PROPERTY AND LIFE IN TERMS OF:

EXTENT

Answer 8

LIFE: Unlimited except in
life insurance
effected by creditor
on life of debtor.

PROPERTY: Limited to actual
value of interest in
property insured.

Question 9

CONTRAST INSURABLE INTEREST IN PROPERTY VS LIFE IN TERMS OF:

BASIS OF EXPECTATION

Answer 9

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

Question 10

CONTRAST OF INSURABLE INTEREST IN LIFE AND PROPERTY IN TERMS OF:

NATUE OF INSURABLE INTEREST

Answer 10

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.

Question 11

INSURABLE INTEREST OF CARRIER OR DEPOSITORY

Answer 11

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

Question 12

INSURABLE INTEREST OF MORTGAGOR

Answer 12

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.

Question 13

INSURABLE INTEREST OF MORTGAGEE

Answer 13

His interest is only up
to the extent of the debt. Such
interest continues until the mortgage
debt is extinguished.

Question 14

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

Answer 14

TRUE

Question 15

CONTRAST STANDARD/UNION MORTGAGE CLAUSE

VS

OPEN/LOSS PAYABLE MORTGAGE CLAUSE

Answer 15

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.

Question 16

Effects of Loss Payable Clause

Answer 16

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.

Question 17

GENERAL RULE ON CHANGE OF INTEREST

Answer 17

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.

Question 18

THE FOLLOWING MAY BE TRANSFERRED OR ASSIGNED

Answer 18

1. THE THING INSURED
2. THE POLICY ITSELF
3. THE CLAIM ITSELF

Question 19

GENERAL RULE ON CHANGE OF INTEREST

Answer 19

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.

Question 20

EXCEPTIONS IN CHANGE OF INTEREST

Answer 20

1. In life, health and accident
   insurance.(Sec. 20);
2. Change in interest in the thing
   insured after occurrence of an
   injury which results in a loss.
   (Sec. 21);
3. Change in interest in one or
   more of several distinct things
   separately insured by one policy.
   (Sec. 22);
4. Change of interest, by will or
   succession, on the death of the
   insured. (Sec. 23);
5. Transfer of interest by one of
   several partners, joint owners,
   or owners in common, who are
   jointly insured, to others. (Sec.
   24);
6. 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);
7. 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).

Question 21

TRANSFER OF POLICY IN LIFE INSURANCE

Answer 21

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.

Question 22

TRANSFER OF POLICY IN PROPERTY INSURANCE

Answer 22

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.

Question 23

TRANSFER OF POLICY IN CASUALTY INSURANCE

Answer 23

It cannot be transferred without the
consent of the insurer.

 Reason: The moral hazards are as
great as those of property insurance.

Question 24

EFFECT OF POLICY TRANSFER WITHOUT THE CONSENT OF THE INSURER

Answer 24

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

Question 25

TRUE OR FALSE

CLAIM OF THE INSURED AFTER LOSS IS NOT TRANSFERABLE AND ANY STIPULATION TO THE CONTRARY IS VOID

Answer 25

FALSE

REASONS:

1. THE STIPULATION HINDERS FREE TRANSMISSION OF PROPERTY
2. TRANSFER DOES NOT INVOLVE A PERSONAL CONTRACT, BUT A MONEY CLAIM OR RIGHT OF ACTION
3. TRANSFER INVOLVES NO MORAL HAZAR