Insurance Law Flashcards
1
Q
It is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.
A
Contract of Insurance
2
Q
It is a contract whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event.
A
Insurance
3
Q
Those that are paid which is accumulated in a pool of funds from which payment of claims are to be obtained
A
Premiums
4
Q
What are the things that may be insured?
A
Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him.
5
Q
When can you become a beneficiary to your own policy proceeds?
A
In case you outlive your policy and if it is a term life insurance
6
Q
What are the Concept/Characteristics of Insurance? (6)
A
- Risk-distributing device
- Contract of adhesion
- Aleatory
- Contract of Indemnity (for property insurance)
- Contract of Utmost Good Faith (uberrimae fides contract)
- Personal Contract
7
Q
It serves to distribute the risk of economic loss among as many possible to those who are subject to the same kind of risk.
A
Risk-distributing Device
8
Q
Considering that usually it is the insurance company that prepares the terms and conditions of the contract and the other party merely “adheres” to the said contract.
Contract is presented on a take it or leave it basis, without negotiation.
A
Contract of Adhesion
9
Q
Considering that the payment of insurance claims is contingent upon the happening of an event which may or may not happen or that which may happen at an indeterminate time. Although it may be considered cumulative given that there is still equivalence in prestations as to the payment of premiums being equivalent to the protection given.
A
Aleatory
10
Q
Covers the loss/make good the value of the policy and not dependent on earning capacity of the insured at the time of death.
In the sense that the owner of the property may recover only up to the amount of actual loss sustained. - the burden to prove such is on him
A
Contract of Indemnity
11
Q
It is a contract of good faith which requires that applicant to make certain disclosures affecting risks of which he may be aware, or material facts, which the he knows or ought to know.
A
Contract of Utmost Good Faith (uberrimae fides contract)
12
Q
A contract of insurance is not transmissible since the personal qualifications of the applicant/insured were considered in the approval.
It is based on the principle of utmost good faith. There should be a high level of trust between the insured and the insurer.
A
Personal Contract
13
Q
What are the characteristics of an insurance contract (HO) - 7
A
- Consensual
- Voluntary
- Aleatory
- Executory
- Conditional
- Contract of indemnity
- Personal Contract
14
Q
Perfected by the meeting of the minds of the parties
A
Consensual
15
Q
Not compulsory–parties may incorporate such terms and conditions as they may deem convenient which will be binding provided they do not contravene to any provision of law and are not opposed to public policy.
A
Voluntary
16
Q
Insured when he experiences a loss, shall be paid out of his claims by the insurer while the insured has the obligation to pay his premiums. Until termination of the obligation subsists.
Both the insured and the insurer have reciprocal obligation of equal value to each other
Insurer pays for the loss, insured pays the premium
A
Executory (Synallagmatic)
17
Q
Subject to the happening of the event insured against insurer’s obligation to provide coverage and pay out claims is contingent upon certain conditions being met.
A
Conditional
18
Q
A contractual obligation in which one party, the surety agrees to be responsible for the debt, default or obligation of another party, known as the principal, to a third person, known as oblige.
A
Suretyship
19
Q
What does the surety do?
A
He guarantees the performance of another party called the principal obligor
20
Q
It is an agreement whereby a party called the surety guarantees the performance by another party called the principal or obligor of an obligation or undertaking in favor of a third party called the obligee. It includes official recognizances, stipulations, bonds or undertakings issued by any company by virtue of and under the provisions of Act No. 536, as amended by Act No. 2206.
A
Contract of suretyship
21
Q
Parties in a contract of suretyship
A
- Surety (can be a company)
- Principal or obligor
- Third party obligee
22
Q
What are the distinguishing elements of an Insurance Contract? (5)
A
- The insurer has insurable interest susceptible of pecuniary estimation;
- The insured is subject to a risk of loss by the happening of the designated peril; - must be indicated in the policy
- The insurer assumes the risk of loss;
- Such assumption of risk is part of the general scheme to distribute actual losses among a large group of persons bearing somewhat similar risks;
- In consideration of the insurer’s promise, the insured pays a premium (relatable contribution) to a general fund.
23
Q
Which elements are known as risk shifting device?
A
- The insured possesses an insurable interest
- The insured is subject to risk of loss
- The insurer assumes that risk of loss
24
Q
Which elements are known as risk distributing device?
A
- It is part of a general scheme to distribute actual losses among a large group
- The insured pays premiums
25
Classes of Insurance Contracts under the Insurance Code (5)
1. Life Insurance
a. Individual Life
b. Group Life
c. Industrial Life
2. Non-life Insurance
a. Marine Insurance
b. Fire Insurance
c. Casuality
3. Contract of Suretyship
4. Microinsurance
5. Variable Insurance
26
A financial product or service that meets the risk protection needs of the poor where:
(a) the amount of contributions does not exceed 7.5% of the current daily minimum wage rate for nonagricultural workers in MM
(b) The maximum benefits is not more than 1,000 times of the CDM in MM
Microinsurance
27
A mutual agreement by which a party agrees to pay a given sum on the happening of a particular event contingent on the duration of human life, in consideration of the payment of a smaller sum immediately or in periodical payments.
Life insurance
28
Every person who has an insurable interest in the life and health:
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 in whom he has a pecuniary interest;
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 or prevent the performance; and
4. Of any person upon whose life any estate or interest vested in him depends.
29
What are the measures or conditions sine qua non (Life Insurance)? (2)
1. Positive: will you be benefited if the person does not die;
2. Negative: the amount of loss and effect of that loss, or the amount by which you will be damnified.
30
31
Is consent essential to the validity of an insurance taken by another?
Consent of the person whose life is insured is not essential to the validity of an insurance taken by another as long as the insured has a legal insurable interest at the inception of the policy.
32
Can a creditor insure the life of the debtor?
Yes, but the creditor may only insure the life of the debtor up to the amount of the debt. Such that if the debt has been paid prior to the death, the creditor can no longer recover.
However, if the debtor insures his own life for the benefit of the creditor, upon full payment of the debt, the insurance will inure to the benefit of the debtor’s estate upon death.
33
Can there be a policy or insurance for or against the drawing of any lottery, or for or against any game of chance?
No. Winnings from these lottery games and other games of chance are considered profits/gains hence it is inconsistent with the definition of insurance which pertains to indemnity to the insured against loss.
34
A coverage for a single person
Insurance on human lives and insurance appertaining thereto or connected therewith
Under a retirement program where a life insurance company manages or acts as a trustee
Individual Life
35
Usually provided by employers or organizations, or associations. It can be offered as a benefit. It entails lower premiums as the risk is spread across the entire group. The coverage would usually end if the member leaves the group or if it has an option to convert the coverage into another type.
Single contract that provides coverage for many employees
Group Life
36
In a group life insurance, this party acts as a functionary in the collection and payment of premiums and in performing related duties
Employer
37
Also known as burial insurance or final expense insurance. It is usually offered to an individual who may not qualify for traditional life insurance policies due to health issues or other factors.
Payable either monthly or oftener and should not be more than 500 times the current statutory minimum daily wage, industry policy must be printed upon the policy as part of the descriptive matter
Industrial Life
38
Special features of an industrial life insurance?
It shall not lapse for nonpayment of premium if company failed to collect such premium. However, this shall not apply when the policy remains unpaid for a period of 12 weeks or 3 months after the grace period has expired
39
Provides coverage for specified period of time. After paying period and the insured outlives the policy, it is usually converted into a permanent life insurance policy.
Term life
40
A type of permanent life insurance that offers more flexibility compared to traditional whole life insurance. It provides death benefits to beneficiary, but it includes savings component such as cash value, and the latter to earn interest over time. Insured may apply for loan or withdrawals subject to conditions and tax implications.
This is Life with accumulated savings over long period of time.
Universal Life
41
It is a type of permanent life insurance that provides coverage for the entire life of the insured individual, as long as the policy is in force, and it can include a cash value component.
Whole Life
42
It is a type of permanent life insurance that offers both a death benefit and a cash value component that can fluctuate based on the performance of underlying investment options, such as mutual funds.
It refers to any policy or contract issued by an insurance company providing for benefits under such contract that reflects investment results to a group or individual.
it may either be investment-linked or equity-linked.
this covers portfolio accounts.
Variable Insurance
43
It provides protection against losses or damages to ships and cargoes, terminals, and any transport or cargo by which property is transferred, acquired or held between points of origin and the final destination. It covers risks associated with marine activities, such as theft to cargoes, damage to vessel, collisions, injuries or damages to third persons,
It can include hull insurance- covering the ship itself, cargo, or covering legal liabilities arising from marine activities.
Marine Insurance
44
It covers primarily the land or over the land transportation perils of property shipped by railrods, motor trucks, airplanes, and other means of transportation. It also covers risks of lake, river, or other inland waterway transportation and other waterbase perils outside of those risks that fall definitely within the ocean marine category.
Inland Marine Insurance
45
What is included in Fire insurance?
Insurance against the loss by fire, lightning, windstorm, tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies.
It covers losses and damages caused by fire, to buildings, structures, and personal properties. Damage by smoke and firefighting efforts are covered, it can also include coverage for living expenses if the property becomes uninhabitable due to fire damage.
46
Casualty or a liability insurance covers?
Covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope or other types of insurance such as fire or marine.
47
When is an Insurance Contract perfected?
At the moment there is a meeting of the minds with respect to the object and the cause or consideration;
Meeting of the minds pertains to the offer and acceptance upon the thing and the cause which are to constitute the contract
48
The offer and acceptance must be?
The offer must be certain and the acceptance must be absolute
49
Constitutes a counter offer
Qualified acceptance
50
Offers can be done through?
An agent or in person (same with acceptance)
51
What is the cognition theory?
An acceptance made by the letter of offer shall bind the person except from the time it came to his knowledge
52
Written contract of insurance?
Policy
53
Who are the parties to an insurance contract?
The insurer and the insured
54
The person who receives the proceeds or benefits of an insurance policy upon its maturity
Beneficiary
55
Who can be a beneficiary?
Family members, relatives, friends, organizations, such as charities, trusts or businesses provided they are so named in the policy
56
Can the beneficiary be changed or replaced?
Yes, unless the insurer expressly waives this right and designates an irrevocable beneficiary
57
Someone who cannot be removed or changed by the policyholder without their agreement.
Can be removed with the beneficiary's consent
Irrevocable beneficiary
58
Why is assigning an irrevocable beneficiary usually done in estate planning?
To minimize estate taxes and protect assets
59
Any person, company, corporation, association provided they hold a certificate of authority from the commissioner
Insurer
60
Who can be insured?
Anyone except a public enemy
61
A citizen (or subject) of a country in which we are at war or the Philippines is at war
Public enemy
62
Why can't a public enemy be insured?
The purpose of war is to destroy the resources of the enemy thus it is inconsistent with the principle of preservation
It is absurd paying the value of what has been destroyed intentionally due to war
63
When is there insurable interest?
When the insured has such a relation or connection with, or concern in, such subject matter that he will derive pecuniary benefit or advantage from its preservation or will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the vent insured against.
64
Under what circumstances will the interest of a beneficiary in a life insurance policy be forfeited?
When he is the principal, accomplice, or accessory in willfully bringing about the death of the insured
- Passes on to other beneficiaries or to the estate of the insured
65
Every interest in property where a contemplated peril might directly damnify the insured is considered an?
Insurable interest
66
An insurable interest may be?
An existing interest, an inchoate interest founded on an existing interest, expectancy
67
Refers to an interest that is not yet fully developed or perfected but is expected to become vested or realized in the future.
Inchoate interest founded on an existing interest
68
Coupled with an existing interest in that out of which the expectancy arises.
Expectancy
69
What is the measure of an insurable interest in property?
The extent to which the insured might be damnified by loss or injury thereof
70
The legitimate interest on the property may be temporarily lost or passed on the duration of the policy but it must be present at crucial times which is the inception of the policy or at the occurrence of the loss.
Property Insurance
71
Neglect to communicate that which a party knows and ought to communicate.
Withholding or failure to disclose material information by the insured to the insurer during the application or underwriting process.
Concealment
72
Statements or assertions made by the insured during application or underwriting process.
Representations
73
Any fact that could influence the insurer’s decision to issue a policy or determine the terms and premium rates.
Material information
74
Can concealment be unintentional?
Yes
75
Deliberate action to hide or withhold information.
Intentional
76
What is the consequence if it is proven that there is concealment and misrepresentation?
It entitles the injured party to rescind the contract of insurance, or deny a claim
- Reinforces maintaining good faith and integrity of the parties
77
Exists where the same person is insured by several insurers separately in respect to the same subject and interest.
Double insurance
78
What happens in the case of double insurance? (other than life)
Insured may claim payment from the insurers in such order as he may select, up to the amount the insurers are severally liable under their respective contracts
79
Valued policy vs unvalued policy
VP: Any sum received from any policy shall be deducted against the value of the policy without regard to the actual value
UP: Against the full insurable value
80
What happens if the insured receives a sum in excess of the valued policy?
He must hold such sum in trust for the insurers, according to their right of contribution among themselves
81
How should the insurers contribute in the case of double insurance?
Ratably to the loss in proportion to the amount for which he is liable under his contract
82
One by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance.
Contract of reinsurance
83
What should an insurer communicate to a reinsurer?
(1) all representations of the original insured
(2) all the knowledge and information he possesses, whether previously or subsequently acquired, which are material to the risk
84
Presumed to be a contract of indemnity against liability, and not merely against damage.
Reinsurance
85
The process of legal substitution where the insurer steps into the shoes of the insured and he avails of the latter’s rights against the wrongdoer at the time of loss.
Principle of subrogation
86
How is the principle of subrogation assigned?
It inures to the insurer without any formal assignment or any express stipulation to that effect in the policy
87
What makes the insurer a subrogee in equity?
Payment of the insured
88
What is the purpose of the principle of subrogation?
1.) To make the person who caused the loss legally responsible
2.) To prevent the insured from receiving a double recovery from the wrongdoer and the insurer.
3.) To prevent tort-feasors from being free from liabilities and is thus founded on consideration and public policy.
89
Subrogation only applies to?
Property insurance
90
When can there be no subrogation?
1.) Waiver to the third person by the insured
2.) When the insurer pays without notifying the carrier as to the value of the loss—prov.
The carried acted in good faith
3.) Insured pays for the loss
4.) In life insurance
5.) Loss in in excess of the insurance coverage
91
All activities of the insurer or its agent which are related directly or indirectly to the determination of the compensation that is due under the coverage afforded by the insurance policy or insurance contract.
Claims settlement
92
What are the parts of claims settlement?
- Preparation of estimate
- Submission of incident report
- Regular requirement
- Surrender of policy
93
What is the time frame to settle claims?
Paid immediately upon maturity (except if dependent on death)
94
Time frame to settle claims if dependent on death?
Within 60 days after presentment of proof of claim and death certification
95
Exemptions to general rule on settlement period?
Unless it is payable on an installment basis or an annuity where the policy could provide that payment be made yearly for the next 5 or 10 years
96
Failure to settle?
Requires insurer to pay interest to the insured or the beneficiary of interest of twice the ceiling prescribed by the monetary board (unless claim seems fraudulent(
97
Who determine if the claim is fraudulent?
The commissioner or the court
98
Settlement period for insurance other than life?
30 days upon agreement of the parties as to settlement, if by agreement or arbitration
99
Exemption to GR on settlement period of insurance other than life
If within 60 days no ascertainment has been obtained by arbitration or agreement the claim should be settled within 90 days
100
Rules regarding assignee - property vs life?
P: must have insurable interest and must be with consent of the insurer
L: need not have insurable interest
101
General rule on the effect of a change in interest in insured property?
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
102
103
When there is an express prohibition against alienation and it occurs regardless?
Contract is avoided
