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Commercial Laws > Insurance Law > Flashcards

Insurance Law Flashcards

1
Q

Define an Insurance Contract

A

An agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event

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2
Q

Doing or Transacting an Insurance Business

A

A person who does any of the ff:

  1. Making or proposing to make, as an insurer, an insurance contract
  2. Making or proposing to make, as surety, any contract of surety as vocation, not as mere incident to any other legitimate business
  3. doing any business like reinsurance business
  4. doing or proposing to do any business equivalent to the above
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3
Q

Characteristics of an Insurance Contract

A
  1. Risk Distributing Device
  2. Contract of Adhesion
  3. Aleatory
  4. Contract of Indemnity
  5. Uberrimae Fidae
  6. Personal Contract
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4
Q

Insurance as a Risk Distributing Device

A

It distributes risk of economic loss among as many as possible to those who are subject to the same kind of risk.

The insured pay a premium to a general fund out of which payment will be made.

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5
Q

Contract of Adhesion - Insurance Contract

A

Since most of the terms do not result from mutual negotiations between the parties, as they are mostly made by the insurer,

In case of doubt, the contract shall be interpreted strictly against the insurer and liberally in favor of the insured.

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6
Q

Differentiate an HMO from an Insurance Plan

A

HMO’s undertake to provide or arrange for the provision of medical services through participating physicians

Insurance Companies undertake to indemnify the insured for medical expenses incurred

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7
Q

Right of Subrogation

A

if the plaintiff’s property has been insured,

and he has received indemnity from the insurance company for the injury or loss arising out of the breach of contract

the insurer shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract

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8
Q

Elements of an Insurance Contract

A
  1. The insured has an insurable interest;
  2. The insured is subject to a risk of loss by the happening of the designated peril;
  3. The insurer assumes the risk;
  4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and
  5. In consideration of the insurer’s promise, the insured pays a premium
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9
Q

Characteristics of Insurance Contracts

A
  1. Aleatory - Both parties bind themselves to do something for the other
  2. Unilateral - Payment of premium is not considered an obligation. It is the insurer’s duty to damnify the insured when the latter has suffered a loss
  3. Personal - entered into with due consideration of the circumstances of the parties.
  4. Consensual - Perfected by mere consent
  5. Uberrimae Fidae - One of perfect good faith. Both parties must avoid material concealment or representations
  6. Executory and Conditional - Insurer is subject to conditions;
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10
Q

Cognition Theory of Insurance Contracts

A

An insurance contract is perfected the moment the offeror learns the acceptance of his offer by the other party.

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. (1262a)

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11
Q

Effect of acceptance of an agent of an insurance contract

A
  1. If the act of acceptance of the risk by the agent and the giving by him of a receipt is within the scope of the agent’s authority , the receipt will bind the company
  2. Where an agreement is made between the applicant and agent, no liability shall attach until until the principal approves the risk and a receipt is given by the agent
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12
Q

Principle of Indemnity

A

The insured should not collect more than the actual cash value of the loss. This is to prevent the insured from profiting from insurance and reduce moral hazard

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13
Q

Is a beneficiary a party to an insurance contract?

A

Unless he is the insured, the beneficiary is not one of the contracting parties in an insurance contract.

Bene. MAY file an action against the insurer in case of loss.

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14
Q

Do proceeds of an insurance policy go to the estate?

A

No. Since the proceeds of an IC goes to the beneficiary, insurance proceeds are not part of the estate.

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15
Q

When does the estate get the proceeds of a policy?

A

When there is no designated beneficiary
When the designation is void

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16
Q

When is the designation of a beneficiary irrevocable?

A

GR: Designation is revocable
XP: 1. Insured expressly waived this right in said policy.
2. Insured does not change the beneficiary during his lifetime.
3. Legal Separation, void and voidable marriages - innocent spousemay revoke designation of offending spouse.

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17
Q

Invalid designation of beneficiaries

A
  1. Those made between persons who are guilty of adultery or concubinage at the time of donation
  2. Those made between persons found guilty of the same criminal offense, in consideration thereof;
  3. Those made to public officers or his wife, Asc/Desc by reason of his office
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18
Q

Effect if the insured has no Insurable Interest over the life/property

A

Policy is considered unenforceable.

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19
Q

Every person has an insurable interest in the life and health

A
  1. Of himself, of his spouse, and of his children;
  2. Of any person on whom he depends wholly or in part for education or support, or n whom he has a pecuniary interests
  3. Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay the performance of services

4, Of any person whose life any estate or interst vested in him depends

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20
Q

Insurable Interest in Life vs Property

A

As to extent
P - Limited to the value of the property
L - unlimited unless secured by the creditor

As to when it must exist
P - Time of perfection of the contract AND time of the loss
L - perfection of the insurance contract

As to legal basis
P - expectation must have legal basis
L - no need for legal basis

As to beneficiary’s interest
P - Beneficiary must have II
L - II not necessary if the insured took out the policy on his own life and designated another as beneficiary; Beneficiary must have an II if he takes out a policy on another

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21
Q

Insurable Interests of the Mortgagor and Mortgagee

A

Mortgagor - owner of the property, hence he has an existing interest

Mortgagee - II is to the extent of the debt,not exceeding the value of the mortgaged property

Both have an independent II therein and both may be covered by one policy, or each may take out a separate policy covering his interest.

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22
Q

When must insurable interest exist for PROPERTY?

A

An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but need not exist in the meantime

23
Q

When must insurable interest exist for LIFE?

A

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.

24
Q

Forfeiture of rights of the beneficiary in a life insurance policy

A

The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal, accomplice, or accessory in willfully bringing abou the death of the insured.

25
Q

Parties in a life insurance

A

Insured - Person whose life is insured.
Assured - Person who took out an insurance on the insured’s life

26
Q

Claims Settlement

A

No insurance company doing business in the Philippines shall refuse, without just cause, to pay or settle claims arising under coverages provided by its policies, nor shall such company engage in unfair claim settlement practices

27
Q

Unfair Claim Settlement Practices (5)

A
  1. Knowingly misrepresenting to claimants pertinent facts or provisions relating to coverage at issue;
  2. Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its polcicies;
  3. Failing to adopt and implement reasonable standards for prompt investigation of claims arising under the policy
  4. Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear
  5. Compelling policyholders to institute suits to recover amounts due under its policies by offering withouit justifiable reason substantially less than the amounts ultimately recovered in the suits brought by them
28
Q

When does payment of premium accrue?

A

Insurer is entitled to payment of the premium as asoon as the thing insured is exposed to the risk insured against.

29
Q

Forms of payment of premium

A
  1. Delivery of cash to the insurer
  2. A check subject to the rule that a delivery of a check does not produce payment unless encashed or credited to the account of the insurer
  3. Digital Money
30
Q

Effect of nonpayment of the premium

A

Obligation of the insurer will not become valid and binding if the first premium has not been paid.

Mere delivery of a promisory note or a post-dated check is not sufficient unless the case is covered by exceptions.

31
Q

Does nonpayment of premium affect perfection?

A

No. Although payment of premium creates the vinculum juris Obligation of the isnurer is subject to the condition that premium is paid.

Hence, there can be a perfected contract prior to the payment of the premium BUT the liability of the insurer does not arise if premium is not paid

32
Q

When is payment through check binding for an insurance contract?

A

There is an opinion to the effect that if the check is not postdated and covered by sufficient funds, delivery thereof will make the policy valid and binding EVEN if encashed after the loss.

33
Q

When is payment through check binding for an insurance contract?

A

There is an opinion to the effect that if the check is not postdated and covered by sufficient funds, delivery thereof will make the policy valid and binding EVEN if encashed after the loss.

34
Q

When is the policy binding even if premium is unpaid

A

1, When the grace period applies in case of life and industrial policy
2. When there is an acknowledgement in the policy or receipt that premium has been paid
3. When there is an agreement that the premium shall be payable on installment
4. When there is a credit extension
5. Estoppel

35
Q

Grounds for return of Premium

A
  1. When the thing was not exposed to the peril insured against.
  2. “Time Policy” when the policy is surrendered before the expiration of the stipulated time (pro rata)
  3. When the contract is voidable, and subsequently annulled under the civil code
  4. When the contract is annulled on account of fraud or misrepresentation of the insurer or of his agent or on account of facts, or the existence of which the insured was ignorant without his fault
36
Q

Intentional vs Accidental as used in Insurance

A

Intentional as used in an accident policy excepting intentional injuries inflicted by the insured or any other person implies the EXERCISE OF REASONING FACULTIES, CONCIOUSNESS AND VOLITION

Accident is construed by the courts in its ordinary and common acceptation. Thus, that which happens by chance or foruitously, without intention or design, which is unexpected, unusual and unforeseen.

37
Q

No fault clause

A

The injured third party or passenger is given the option to file a claim for death or injury without the necessity of proving the fault or negligence of any kind under the following conditions:

  1. Total indemnity shall not exceed P15,000
  2. Claim be made against one motor vehicle only
  3. The ff proof of loss, when submitted under oath, shall be sufficient evidence to substantiate the claim:

a. Police report of accident
b. Death cert and evidence sufficient to establish the proper payee
c. Medical report and evidence of medical or hospital disbursement in respect of which refund is claimed.

38
Q

Motor Vehicle Liability Insurance

A

The insurer becomes liable for the damage or injury caused in the operation of motor vehicles

39
Q

Direct Liability in MVLI

A

The third party victim may proceed directly against the insurer for indemnity. It depends WON the policy is intended to benefit THIRD PARTIES or the INSURED

  1. Intended to benefit third parties
    - Third persons to whom the insured is liable can sue the insurer.
  2. Intended to benefit the insured
    - Third persons cannot proceed against the insurer, the contract being solely to reimburse the insured for liability
    - Recourse is only to the insured.
40
Q

Incontestability Clause

A

After a policy of life insurance made payable on the death of the insured for a period of two years from the date of its issue or of its last restatement,

THE INSURER CANNOT PROVE THAT THE POLICY IS VOID AB INITIO or RESCINDIBLE BY REASON FRAUDULENT CONCEALMENT OR MISREPRESENTATION

41
Q

Incontestability Clause reqs.

A
  1. Insurance is a life insurance policy payable on the death of the insured.
  2. It has been in force during the lifetime of the insured for at least 2 years from its date of issue or last restatement
  3. After the 2 year period, the insurer is barred from rescinding the contract on the ground of fraud or misrepresentation
42
Q

Double Insurance

A

It exists where the same person is insured by several insurers separately in respect to same subject and interest.

43
Q

Is there privity between the original insured and reinsurer?

A

No. Original insured has no interest in the contract of reinsurance.
XP: Contract contains a stipulation pour autri in favor of the original insured.

44
Q

Concealment - Test of materiality

A

Neglect to communicate that which a party knows and ought to communicate

Determined not by the event, but solely by the probable and reasonable influence of facts upon the party to whom the communication is due, in forming his estimate of disadvantages of the proposed contract

45
Q

Effect of concealment

A

Vitiates the contract and entitles the insurer to rescind, even if the death or loss is due to a cause not related to the concealed matter.

46
Q

is good faith a defense in concealment

A

No. Concealment, whether intentional or not, entitled the injured party to rescind the contract.

47
Q

Representation

A

An oral or written statement of a fact or condition affecting the risk, made by the insured to the insurer tending to induce te insurer to assume the risk.

48
Q

Warranty

A

It is a statement set forth in the policy or by reference incorporated therein, the untruth or nonfulfillment of which in any respect shall render the contract voidable.

49
Q

Implied warranties in ship insurance

A
  1. The ship is seaworthy at the inception of the insurance.
  2. The ship will not deviate from the agreed voyage unless deviation is proper
  3. The ship will not engage in an illegal adventure
  4. Warranty of possession of documents of neutrality or nationality
  5. Presence of insurable interest.
50
Q

Perils of the Sea vs. Perils of the Ship

A

Perils of the sea (perils of the navigation) include only those casualties due to the unusual violence or extraordinary causes connected with navigation. It has been said to include only such losses as are of extraordinary nature or arise from some overwhelming power which cannot be guarded against by the ordinary wear and tear of the boatage and from injuries suffered by the vessel in consequence of her not being unseaworthy.

Perils of the ship refer to loss which in the ordinary course of events result:
1. From the ordinary, natural and inevitable action of the sea
2. From ordinary wear and tear of the ship
3. From the negligent failure of the ship’s owner to provide the vessel with the proper equipment to convey the cargo under the ordinary conditions

In the absence of stipulation, the risks insured against are only the perils of the sea. Thus, the insured is bound to prove that the cause of the loss is a peril of the sea.

51
Q

Seaworthiness

A

A ship is seaworthy when it is reasonably fit to perform the service and to encounter the ordinary perils of the voyage, contemplated by the parties to the policy.

Requires that it be properly laden, provided with a competent master and crew and equipment

52
Q
A
53
Q

Double Insurance Elements

A
  1. The person insured is the same
  2. Two or more insurers insuring separately
  3. There is identity of subject matter
  4. There is identity of interest insured
  5. There is identity of risk or peril insured against
54
Q

Defenses not barred by the incontestability clause

A
  1. Person taking the insurance lacked insurable interest
  2. Cause of death is an excepted risk
  3. Premiums have not been paid
  4. Conditions of the policy rekating to military or naval service have been violated
  5. Fraud is particularly vicious

Commercial Laws (3 decks)

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