Insurance Law

Question 1

1. Under P.D. No. 1460, as amended, otherwise known as the Insurance Code, which of the
   following statements in relation to insurance contracts is false?
   a. The right of subrogation applies only to property insurance and not to the life insurance.
   b. The insurer does not lose his right against the wrongdoer even if latter is released from liability by the insured after receiving payment.
   c. The right of subrogation in insurance is not dependent upon any privity of contract and
   simply accrues upon payment of the insurance claim by the insurer.
   d. The pecuniary value of human life to the beneficiary can be accurately determined in an
   insurance taken by a creditor on the life of the debtor to secure a debt.

Answer 1

b. The insurer does not lose his right against the wrongdoer even if latter is released from liability by the insured after receiving payment.

Question 2

2. Which of the following cases shall make the insurer liable on the insurance?
   a. A house was insured against fire. Unknown to the parties, it was already gutted by fire
   two(2) days before the insurance was taken.
   b. An unsecured creditor insured the vehicle of the debtor. The debt remained unpaid when the
   debtor died.
   c. The company insured the life of its Manager. The Manager was already terminated
   from his employment at the time of his demise.
   d. None of the foregoing.

Answer 2

c. The company insured the life of its Manager. The Manager was already terminated
from his employment at the time of his demise.

Question 3

3. X, 18 years of age, took a life insurance on his own life. Who among the following is disqualified
   to be the beneficiary in the life insurance contract?
   a. X’s estate
   b. X’s illegitimate child
   c. X’s father
   d. X’s grandmother

Answer 3

d. X’s grandmother

Question 4

4. A person may insure himself in the event of failure of his ticket to win in:
   a. Lotto
   b. Horse race
   c. Sweepstakes
   d. None of the foregoing

Answer 4

d. None of the foregoing

Question 5

5. X, husband , took a life insurancepolicy on the life of Y, the former’s only child. The beneficiary
   appointed in the policy is Z, the wife of X.The “assured” in the instant case is:
   a. X
   b. Y
   c. Z
   d. Y and Z

Answer 5

c. Z

Question 6

6. Who among the parties is considered “public enemy” and, therefore, may not be insured?
   a. Abbu Sayaf Member
   b. North Korean communists
   c. MILF members
   d. None of the foregoing

Answer 6

d. None of the foregoing

Question 7

7. D owns a house valued at P1,000,000 which he mortgaged to C in order to secure a loan of
   P700,000. C took a fire insurance on the house for P800,000 with D paying the premiums
   thereon. The house was partially burned due to the storage of some flammable materials by D,
   resulting into a loss of P500,000. At the same time of the loss, D had already partially paid his
   debt leaving an unpaid balance of P400,000. How will the insurance proceeds, If any, be allotted
   to the parties?
   a. C is entitled to collect P40000 from the insurer and D gets nothing. The insurer shall be
   reimbursed by D.
   b. C in entitled to collect P400,000 from the insurer and D gets nothing. The insurer shall not be reimbursed by D.
   c. C is entitled to collect P500,000 from the insurer but he shall turn over the P100,0000 to D. The insurer shall not be reimbursed by D.
   d. Both C and D cannot recover any amount from the insurer.

Answer 7

b. C in entitled to collect P400,000 from the insurer and D gets nothing. The insurer shall not be reimbursed by D.

Question 8

8. Assume the same facts in Q. 082, except that it was D who took the fire insurance payable to C
   in the event of loss. How will the insurance proceeds, if any, be allotted to the parties?
   a. C is entitled to collect P400,000 from the insurer and D gets nothing. The insurer shall be
   reimbursed by D.
   b. C is entitled to collect P400,000 from the insurer and D gets nothing. The insurer shall not be
   reimbursed by D.
   c. C is entitled to collect P500,000 from the insurer but he shall turn over the P100,0000 to D.
   The insurer shall not be reimbursed by D.
   d. Both C and D cannot recover any amount from the insurer.

Answer 8

d. Both C and D cannot recover any amount from the insurer.

Question 9

9. Assume the same facts in Q. 082 except that it was C who took the fire insurance for his own benefit. H will the insurance proceeds, ia any, be allotted to the parties?
   a. C is entitled to collect P400,000 from the insurer and D gets nothing. The insurer shall be reimbursed by D
   b. C is entitled to collect P400,000 from the insurer and D gets nothing. The insurer shall not be
   reimbursed by D.
   c. C is entitled to collect P500,000 from the insurer but he shall turn over the P100,0000 to D.
   The insurer shall not be reimbursed by D.
   d. Both C and D cannot recover any amount from the insurer.

Answer 9

a. C is entitled to collect P400,000 from the insurer and D gets nothing. The insurer shall be reimbursed by D

Question 10

10. Which of the following statements in relation to insurable interest is false?
    a. Insurable interest is immaterial when the life insurance policy is taken by the insured on his own life.
    b. Insurable interest must be pecuniary when a person insures the life of another.
    c. An unsecured creditor has an insurable interest in the life of the debtor.
    d. An unsecured creditor has an insurable interest in the property of the debtor.

Answer 10

d. An unsecured creditor has an insurable interest in the property of the debtor.

Question 11

11. Which of the following statements in relation to insurable interest is false?
    a. The employer has an insurable interest in the life of his key employee.
    b. A partner has an insurable interest in the life of his co-partner.
    c. The principal has an insurable interest in the life of his surety.
    d. None of the foregoing.

Answer 11

d. None of the foregoing.

Question 12

12. Which of the following statements in relation to the beneficiaries of the life insurance is true?
    a. A common-law wife may be designated as the beneficiary of the life insurance taken by her
    common-law husband.
    b. A beneficiary need not have any insurable interest in the life of the insured.
    c. As a general rule, the beneficiary designated in the policy cannot be changed by the insured.
    d. None of the foregoing.

Answer 12

b. A beneficiary need not have any insurable interest in the life of the insured.

Question 13

13. In which of the following cases is the insurer absolved from his liability on the insurance?
    a. X’s claim against the insurer was assigned to Y after the occurrence of the loss and despite
    and express prohibition to transfer the claim in the insurance contract.
    b. X, leaving behind his only child as legal heir,died before his insured house got totally burned
    down.
    c. X, a partner in XYZ Partnership, resigned from the firm and thereafter the insured building of
    the partnership for burned.
    d. None of the foregoing.

Answer 13

d. None of the foregoing.

Question 14

14. X insured his car for P1,000,000 and motorbike for P500,000 separately in a single insurance
    policy for which he paid a total premium of P15,000. X sold the motorbike to his friend.
    Thereafter, the remaining car was totally wrecked in a vehicular mishap. The Insurer shall be
    liable to X in the amout of:
    a. 0
    b. P500,000
    c. P1,000,000
    d. P1,500,000

Answer 14

c. P1,000,000

Question 15

15. Which of the following statements relative to concealment is false?
    a. Concelament, whether intentional or unintentional, entitles the injured party to rescind the
    insurance contract.
    b. Fraud is essential for the insurer to rescind the insurance contract on the ground of concealment.
    c. A party needs only to communicate information that is material.
    d. None of the foregoing.

Answer 15

b. Fraud is essential for the insurer to rescind the insurance contract on the ground of concealment.

Question 16

16. Which of the following cases would make the insurer liable on the insurance?
    a. Insured concealed that he had contracted syphilis; he died from a vehicular accident a year later.
    b. Insured (an old, illiterate Chinese who does not speak English) concealed the fact that she
    was seriously ill in an insurance contract worded in English.
    c. Insured concealed that he was suffer from tuberculosis in his non-medical insurance that
    dispenses with usual medical examination before the policy issued.
    d. Insured concealed the fact that he was diabetic which resulted his death three (3)years later.

Answer 16

d. Insured concealed the fact that he was diabetic which resulted his death three (3)years later.

Question 17

17. Which of the following in not characteristic of misrepresentation?
    a. It is a statement of a party that something is true when in fact it is not.
    b. It is an active form of concealment.
    c. It must be intentional in order that the injured party may rescind the insurance contract.
    d. It does not include mere expressions of opinion

Answer 17

c. It must be intentional in order that the injured party may rescind the insurance contract.

Question 18

18. One of the following is not element of the incontestable clause in life insurance:
    a. It is applicable to all kinds of life insurance policies.
    b. The period of two(2) years may be shortened but it cannot be extended.
    c. The period is reckoned from the date of the policy or date of its last reinstatement.
    d. It is founded on the general principles of estoppel.

Answer 18

a. It is applicable to all kinds of life insurance policies.

Question 19

19. Which of the following defenses is barred by the incontestable clause in the life insurance
    contracts?
    a. The person taking the insurance has no insurable interest.
    b. The premiums have not been paid.
    c. The cause of death is suicide within two (2) years from the date of the last reinstatement of the policy by the insured who insane at the time of its commission.
    d. The action on the policy is not brought within the prescribed period of ten (10) years from
    the time the case f action accrues.
20. X took a life insurance policy on January 2

Answer 19

c. The cause of death is suicide within two (2) years from the date of the last reinstatement of the policy by the insured who insane at the time of its commission.

Question 20

20. X took a life insurance policy on January 2, 200A with his wife as the beneficiary upon his death.
    In the application , X answered in the negative question of whether or not he was hospitalized in the past five(5) years prior to the application for insurance. X died of leukemia on October 1, 200C. Which of the following statement is correct?
    a. The insurer is liable because the death occurred more than two (2) years from the date of issue of the life insurance policy.
    b. The insurer is liable because the concealment is not material.
    c. The insurer is not liable because the death occurred more than two (2) years from the date of issue of the life insurance policy.
    d. The insurer is not liable because the concealment , being material, is not subject to the
    incontestability clause in life insurance.

Answer 20

a. The insurer is liable because the death occurred more than two (2) years from the date of issue of the life insurance policy.

Question 21

21. Which of the following statements relative to a policy of insurance is false?
    a. The policy must be in printed form except group insurance and group annuity which may be
    typewritten.
    b. The policy does not have to be signed by the insured except where warranty contained in a separate document.
    c. In case of conflict, the stipulations in the policy shall prevail over those contained in the rider.
    d. A cover note binds the parties to an insurance contract prior to the issuance of the policy.

Answer 21

c. In case of conflict, the stipulations in the policy shall prevail over those contained in the rider.

Question 22

22. Which of the following items need not be contained in a policy of insurance?
    a. The amount to be insured in an open policy.
    b. The interest of the insured who is not the absolute owner of the property insured.
    c. The risks insured against.
    d. The period of coverage of the insurance

Answer 22

a. The amount to be insured in an open policy.

Question 23

23. X insured his building against fire for P5,000,000. The building was totally destroyed by fire. Its
    value was determined at the time of loss to be P3,000,000 and so this was the amount recovered
    by X. What kind or type of insurance policy was taken by X?
    a. Open policy
    b. Valued policy
    c. Running policy
    d. None of the foregoing

Answer 23

a. Open policy

Question 24

24. One of the following is not a characteristic of a warranty in insurance policies?
    a. A warranty may relate to the past, present or future.
    b. A warranty may be implied in life and fire insurance.
    c. Breach of warranty which is not coupled with fraud entitles the insured to a return of
    premiums paid.
    d. A warranty has to be strictly complied with.

Answer 24

b. A warranty may be implied in life and fire insurance.

Question 25

25. Which of the following cases of nonpayment of premium shall avoid the insurance?
    a. Claim of a third party who was a victim in a vehicular mishap on the Compulsory Motor Vehicle Liability Insurance (CMVLI).
    b. Premium was only partially paid and the insured was sued for the balance at the time the loss occurred.
    c. Premium was not paid but the grace period in life insurance had not yet expired at the time
    of death of the insured.
    d. None of the foregoing.

Answer 25

d. None of the foregoing.

Question 26

26. The insured is not entitled to a return of premiums paid where:
    a. The insured has paid the premium in advance and the loss occurs before the effectivity date
    of the policy.
    b. The insured surrenders the life insurance policy.
    c. The agent of the insurer is guilty of fraud or misrepresentation.
    d. There is over-insurance by double insurance.

Answer 26

b. The insured surrenders the life insurance policy.

Question 27

27. The insurer is not liable under a fire insurance policy where:
    a. The fire that originated from an adjacent building caused the “Ipg” tank in insured house to explode.
    b. The “lpg” tank in an adjacent building that exploded caused fire to the insured house.
    c. The “lpg” tank in an adjacent building that exploded caused fire to the insured house, explosion being an excepted risk in the policy.
    d. The appliances in the insured house were damaged due to mishandling in an attempt to
    rescue them from the fire.

Answer 27

c. The “lpg” tank in an adjacent building that exploded caused fire to the insured house, explosion being an excepted risk in the policy.

Question 28

28. Which of the following incidents is a friendly fire absolving the insurer under the fire insurance
    policy?
    a. Fire burning on a stove was too high due to ignorance of the maid, causing damage
    b. Small fire set on garbage was blown by sudden gush of strong wind setting fire on a nearby
    house.
    c. Gas leaked out from the “Ipg” hose causing the fire burning on the stove to spread uncontrollably.
    d. None of the foregoing.

Answer 28

a. Fire burning on a stove was too high due to ignorance of the maid, causing damage

Question 29

29. Which of the following statements relative to double insurance and over insurance is true?
    a. There is always co-insurance in double insurance.
    b. There is always over insurance in double insurance.
    c. There is always double insurance in over insurance.
    d. None of the foregoing.

Answer 29

d. None of the foregoing.

Question 30

30. X owns a building with a fair market value of P 4,000,000. He took several fire insurance policies on the property as follows:
    Insurer -Insurance Taken -Premiums Paid
    ABC InS.- P 1,000,000 -P 1,000
    XYZ Ins.- 7.000,000 -8,000
    TOTAL =P 8,000,000 -P 9,000
    The building was completely burned to the ground by hostile fire.
    X may recover the amount of:
    a. P1,000,000 from ABC Insurance P7,000,000 from XYZ Insurance.
    b. P2,000,000 from ABC Insurance and P2,000,000 from XYZ Insurance.
    c. P4,000,000 from either ABC Insurance or XYZ Insurance.
    d. P4,000,000 from XYZ Insurance.

Answer 30

d. P4,000,000 from XYZ Insurance.

Question 31

31. Assume the same facts in Q. 30. The portion of the premiums to be returned to X by the insurers
    as a result of the over- insurance shall be:
    a. P500 from ABC Insurance and P4,000 from XYZ Insurance.
    b. P125 from ABC Insurance and P1,000 from XYZ Insurance.
    c. P3,000 from XYZ Insurance.
    d. P 0

Answer 31

a. P500 from ABC Insurance and P4,000 from XYZ Insurance.

Question 32

32. Which of the following statements relative to reinsurance is correct?
    a. The reinsurer will only pay the insurer after the latter has paid the insured in case of loss.
    b. The original insured has an interest in the contract of reinsurance.
    c. Non-life insurance companies are required by law to take reinsurance when they assume a risk on any one subject in an amount exceeding twenty per centum (20%) of their net worth.
    d. None of the foregoing.

Answer 32

c. Non-life insurance companies are required by law to take reinsurance when they assume a risk on any one subject in an amount exceeding twenty per centum (20%) of their net worth.

Question 33

33. Marine insurance excludes insurance against loss or damage to:
    a. Aircraft
    b. Bridges
    c. Jewelry
    d. None of the foregoing

Answer 33

d. None of the foregoing

Question 34

34. Which of the following statements relative to marine insurance is false?
    a. Goods that are shipped on deck are generally not covered by a marine insurance policy.
    b. Loss or damage arising from perils of the sea will exonerate the insurer from
    liability under a marine insurance policy.
    c. Floater policies cover jewelry and other precious items wherever they may be situated
    subject to boundary limits fixed in the policy.
    d. None of the foregoing.

Answer 34

b. Loss or damage arising from perils of the sea will exonerate the insurer from
liability under a marine insurance policy.

Question 35

35. Which of the following casualties relative to a vessel is a peril of the ship?
    a. Barratry
    b. Shipwreck
    c. Stranding
    d. None of the foregoing

Answer 35

d. None of the foregoing

Question 36

36. Which of the following casualties is a peril y the sea?
    a. Jettison
    b. Wear and tear of the ship
    c. Negligent supplies failure to provide necessary supplies
    d. None of the foregoing

Answer 36

a. Jettison

Question 37

37. Which of the following statements relative to marine insurance policies is true?
    a. An “all risks” marine insurance policy covers all losses during the voyage, provided they arise
    only from a maritime peril.
    b. An “inchamaree clause” in a marine insurance policy does not cover loss or damage to the
    hull or machinery arising from the negligence of the captain or crew.
    c. A “lost or not lost” provision in a marine insurance policy means that the insurer
    expressly binds itself in the event of loss of the vessel, even if the vessel should
    already be lost at the time the contract was entered into.
    d. A “floater policy” covers jewelry, works of art and other valuable personal property which
    must be moved from one place to another as a condition for the insurer’s liability in case of
    loss or damage.

Answer 37

c. A “lost or not lost” provision in a marine insurance policy means that the insurer
expressly binds itself in the event of loss of the vessel, even if the vessel should
already be lost at the time the contract was entered into.

Question 38

38. Which of the following is a characteristic of a “loan on bottomry?”
    a. The shipowner is not indemnified for the loss of his vessel during the contemplated voyage.
    b. The lender exacts a lower rate of interest on the loan.
    c. The insurable interest of the shipowner for marine insurance purposes is the full value of his vessel in case it is bottomed.
    d. None of the foregoing.

Answer 38

a. The shipowner is not indemnified for the loss of his vessel during the contemplated voyage.

Question 39

39. Which of the following statements relative to a “charter party” contract is true?
    a. In a bareboat or demise charter, the charterer always hires his own master and crew other
    than those of the shipowner.
    b. In a bareboat Or demise charter, the charterer becomes the owner pro hac vice of
    the vessel.
    c. In a voyage or time charter, the shipowner becomes a private carrier.
    d. None of the foregoing.

Answer 39

b. In a bareboat Or demise charter, the charterer becomes the owner pro hac vice of
the vessel.

Question 40

40. Which of the following acts shall not constitute concealment or misrepresentation in marine insurance?
    a. The agent of the shipowner failed to notify the insurer of a material fact regarding the vessel
    which the shipowner is ignorant of.
    b. Failure of the shipowner to notify the insurer of the opinion of a third person on a material
    fact affecting the vessel.
    c. Failure to inform the insurer of the nature and amount Of the cargo where no overloading was made.
    d. Failure to inform the insurer as to the particular condition of the vessel.

Answer 40

c. Failure to inform the insurer of the nature and amount Of the cargo where no overloading was made.

Question 41

41. Which of the following cases avoids the marine insurance on the vessel insured?
    a. Vessel was seaworthy at the commencement of the voyage but was unseaworthy while it
    was in transit.
    b. Vessel contracted under a time charter was seaworthy at the commencement of the voyage
    but was unseaworthy while it was in transit.
    c. Vessel deviated from its designated course in order to assist another vessel in distress.
    d. Vessel deviated from its designated voyage in order to save some property stranded in an uninhabited island.

Answer 41

d. Vessel deviated from its designated voyage in order to save some property stranded in an uninhabited island.

Question 42

42. X took a marine insurance policy for P4,000,000 on sea vessel valued at P6,000,000. The vessel
    suffered partial loss amounting to P 3,000,000.
    The insurance proceeds shall be:
    a. P4,000,000
    b. P3,000,000
    c. P2,000,000
    d. None of the foregoing

Answer 42

c. P2,000,000

Question 43

43. Assume the same facts in Q. 42, except that fire insurance was taken on a building. The
    insurance proceeds shall be:
    a. P4,000,000
    b. P3,000,000
    c. P2,000,000
    d. None of the foregoing

Answer 43

b. P3,000,000

Question 44

44. Which of the following damages and expenses constitutes general average?
    a. Jettisoning cargo in order to save the vessel from sinking.
    b. Damage to the cargo when it was unloaded.
    c. Additional compensation of the crew when the vessel was detained by the authorities for
    suspicion of unlawful venture.
    d. None of the foregoing

Answer 44

a. Jettisoning cargo in order to save the vessel from sinking.

Question 45

45. Which of the following is not a characteristic of abandonment in marine insurance?
    a. It is essential where the shipowner intends to declare constructive total loss in the thing
    insured.
    b. It cannot apply to freightage unless the vessel is likewise to be abandoned.
    c. It requires acceptance on the part of the insurer.
    d. The insured may no longer withdraw a valid abandonment made where the insured property
    was thereafter recovered.

Answer 45

c. It requires acceptance on the part of the insurer.

Question 46

46. X took an open fire insurance policy on his commercial building. At the time the policy first took effect the property had a fair market value of P2,000,000. Five (5) years later, 75% (or ¾) of the property was burned and damaged. At the time of the loss, it would take P4,000,000 to rebuild the same building due to increase in construction materials in the market.
    X can recover from the insurer the amount of:
    a. P1,500,000
    b. P2,000,000
    c. P3,000,000
    d. P4,000,000

Answer 46

c. P3,000,000

Question 47

47. Which of the following cases shall make the insurer liable on an Accident & Health Insurance?
    a. Insured played “Russian roulette” with some friends resulting into a fatal gunshot wound
    b. Insured was stabbed to death by several robbers who entered his house at night.
    c. Insured fell while climbing a very steep hill without any safety gear that resulted to his death.
    d. Insured, while cleaning his pistol, pointed it to his forehead and playfully pulled
    the trigger thinking it was not loaded, causing his death.

Answer 47

d. Insured, while cleaning his pistol, pointed it to his forehead and playfully pulled
the trigger thinking it was not loaded, causing his death.

Question 48

48. Which of the following cases relative to suicide shall exonerate the insurer from liability in a life insurance policy?
    a. The insured who was sane committed suicide on the 3rd year from the time the policy had
    been in force.
    b. The insured who was sane committed suicide on the 2nd year from the time the policy had
    been in force (the period was stipulated to be 1 year).
    c. The insured who was insane committed suicide on the 1st year from the time the policy had
    been in force, and suicide is not an excepted risk in the policy.
    d. None of the foregoing

Answer 48

d. None of the foregoing

Question 49

49. X rode a passenger jeepney. An over. speeding motorcycle suddenly made a turn without proper warning that prompted the jeepney driver to swerve his vehicle to the side of the road to avoid collision. Y, a cigarette vendor, was hit by the jeepney and suffered arm and shoulder injuries. X, among others, suffered head injuries. ABC Insurance is the insurer of the passenger jeepney while FGH Insurance is the insurer of the motorcycle. For purposes of the “no-fault” indemnity claim under the Compulsory Motor Vehicle Liability
    Insurance (CMVLI), against whom shall the claims of X and Y be made?
    a. X shall make his claim against ABC Insurance, while Y shall make his claim against FGH
    Insurance.
    b. X shall make his claim against FGH Insurance, while Y shall make his claim against ABC
    Insurance.
    c. X and Y shall make their claims against ABC Insurance.
    d. X and Y shall make their claims against FGH Insurance.

Answer 49

c. X and Y shall make their claims against ABC Insurance.

Question 50

50. The vehicular accident occurred on February 200A. The victim/claimant filed his written claim
    with the insurer on April 1, 200A. The insurer denied his claim on junê 1, 200A. Under the
    Compulsory Motor Vehicle Liability Insurance, the claimant may file an action in cot against the
    insurer not later than:
    a. February 1, 200B
    b. April 1, 200B
    c. June 1,200B
    d. None of the foregoing

Answer 50

c. June 1,200B