Insuarnce Codal

8/12/2019 Insuarnce Codal

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Republic o f the P hilippinesCongress of the P hilippines

Metro ManilaFifteenth Congress

Third Regular Ses sion

Begun and h eld in Metro Manila, on Monday, the twenty-third d ay o fJuly, two thousand twelve.

[REPUBLIC ACT NO. 10607 ]

AN ACT STRENGTHENING THE INSURANCE INDUSTRY,FURTHER AMENDING PRESIDENTIAL DECREE NO. 612,OTHERWISE KNOWN AS THE INSURANCE CODE, AS

AMENDED BY PRESIDENTIAL DECREE NOS. 1141, 1280, 1455,

1460, 1814 AND 1981, AND BATAS PAMBANSA BLG. 874, ANDFOR OTHER PURPOSES

Be i t enacted by the Senate and House of Representatives o f thePhilippines i n Congress assembled:

SECTION 1. Presidential Decree No. 612, as a mended, is he rebyfurther amended to read as f ollows:

GENERAL PROVISIONS

SECTION 1. This Decree shall be kn own as The Insurance C ode.

SEC. 2. Whenever used in this C ode, the following terms sh all havethe respective meanings hereinafter set f orth or i ndicated, unless thecontext otherwise requires:

(a) A contract of insurance is an a greement whereby o ne u ndertakesfor a co nsideration to indemnify a nother against loss, damage o rliability arising from an unknown or con tingent eve nt.

A contract of suretyship shall be deemed to be an insurance contract,within the meaning of this C ode, only if made b y a s urety who or

which, as such, is d oing an insurance business as hereinafterprovided.

(b) Th e term doing an insurance business or transacting aninsurance bu siness , within the meaning of t his C ode, sha ll include:

(1) Making o r proposing to m ake, as i nsurer, any insurance contract;

(2) M aking o r proposing t o m ake, as surety, any co ntract of

suretyship a s a v ocation a nd n ot as merely incidental to a ny otherlegitimate business or activity o f the surety;

(3) D oing a ny kind of business, including a rei nsurance business,specically r ecognized as co nstituting the doing of an insurancebusiness w ithin the meaning of this C ode;

(4) D oing or pr oposing to do any b usiness i n substance equivalent toany o f the foregoing in a manner designed to e vade t he provisions o f

this C ode.

In the application of the provisions of this C ode, the fact that no protis d erived from the making of insurance contracts, agreements o rtransactions o r that no s eparate o r direct consideration is r eceivedtherefor, shall not be deemed conclusive to show that the makingthereof does n ot constitute the doing or transacting of an insurancebusiness.


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(c) A s u sed in this C ode, t he term Commissioner meansthe Insurance Commissioner .

CHAPTER I

THE CONTRACT OF INSURANCE

TITLE 1

WHAT MAY BE INSURED

SEC. 3. Any co ntingent or unk nown e vent, whether past or future,which may d amnify a person having an insurable interest, or cr eate aliability a gainst him, may be insured against, subject to the provisionsof this c hapter.

The c onsent of the s pouse is n ot necessary for t he v alidity o f aninsurance policy t aken out by a m arried p erson on h is o r her life o rthat of his o r her children.

All rights, title and interest in the policy of insurance taken out by a noriginal owner on the life or health of the person insured shallautomatically v est in the latter upon the death of the original owner,unless o therwise provided for in t he p olicy.

SEC. 4. The preceding section does n ot authorize a n insurance for oragainst the drawing of any lottery, or f or or ag ainst any chance orticket in a lottery d rawing a prize.

SEC. 5. All kinds o f insurance are s ubject to t he p rovisions o f thischapter so f ar as the provisions ca n apply.

TITLE 2

PARTIES TO THE CONTRACT

SEC. 6. Every corporation, partnership, or as sociation, dulyauthorized to transact insurance business a s e lsewhere provided inthis C ode, may b e a n insurer.

SEC. 7. Anyone except a pu blic ene my may be i nsured.

SEC. 8. Unless t he policy o therwise provides, where a mortgagor ofproperty e ffects i nsurance in his o wn name providing that the lossshall be p ayable t o t he m ortgagee, or ass igns a p olicy o f insurance toa m ortgagee, the insurance is de emed to b e u pon the interest of themortgagor, who d oes n ot cease t o b e a party to t he o riginal contract,and any act of his, prior to the loss, which would otherwise avoid theinsurance, will have the same effect, although the property is i n the

hands of the mortgagee, but any a ct which, under the contract ofinsurance, is t o b e performed by t he mortgagor, may b e p erformed bythe mortgagee t herein named, with the same e ffect as if it had b eenperformed by the mortgagor.

SEC. 9. If an insurer assents t o the transfer of an insurance from amortgagor to a mortgagee, and, at the time o f his as sent, imposesfurther ob ligations on the a ssignee, making a n ew contract with h im,the acts o f the mortgagor cannot affect the rights o f said assignee.

TITLE 3

INSURABLE INTEREST

SEC. 10. Every p erson h as a n insurable interest in t he l ife andhealth:

(a) Of himself, of his sp ouse and o f his c hildren;


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(b) Of any pe rson on whom he depends w holly or i n p art foreducation or sup port, or in w hom he has a p ecuniary i nterest;

(c) Of any p erson u nder a l egal obligation to h im for the p ayment ofmoney, or respecting property o r services, of which death or illnessmight delay o r prevent the performance; and

(d) O f any person upon w hose life any estate o r interest vested in h imdepends.

SEC. 11. The insured shall have t he right to change the beneciaryhe designated in the policy, unless h e has e xpressly w aived this ri ghtin said policy. Notwithstanding the foregoing, in the event the insureddoes not change t he b eneciary d uring his l ifetime, the designationshall be deemed irrevocable.

SEC. 12. The interest of a b eneciary in a life i nsurance policy shallbe forfeited when the beneciary i s t he principal, accomplice, oraccessory in willfully b ringing about the death of the insured. In such acase, the share forfeited shall pass on to the other be neciaries,unless o therwise disqualied. In t he a bsence of other be neciaries,the proceeds s hall be paid in accordance with the policy contract. Ifthe policy contract is s ilent, the proceeds s hall be paid to the estate ofthe i nsured.

SEC. 13. Every interest in property, whether real or person al, or anyrelation thereto, or l iability in respect t hereof, of such nature that acontemplated peril might di rectly damnify t he insured, is an insurableinteres t.

SEC. 14. An insurable interest in p roperty m ay consist in:

(a) A n existing interest;

(b) An inchoate interest founded on a n e xisting interest; or

(c) A n expectancy, coupled with an existing interest in that out ofwhich t he expectancy ari ses.

SEC. 15. A carrier or depository o f any kind has a n insurable interest

in a thing held by him as such, to the extent of his liability but not t oexceed the value thereof.

SEC. 16. A mere co ntingent or exp ectant interest in a ny t hing, notfounded on an actual right to the thing, nor upon any valid contract forit, is n ot insurab le.

SEC. 17. The measure of an insurable interest in property is t heextent to which the insured might be damnied by loss o r injury

thereof.

SEC. 18. No co ntract or po licy o f insurance o n p roperty sh all beenforceable e xcept for t he benet of some p erson having an insurableinterest i n the property insured.

SEC. 19. An interest in property insured must exist when theinsurance takes e ffect, and when the loss o ccurs, but need not exist inthe meantime; and interest in the life or health of a person insured

must exist when the insurance t akes e ffect, but need not existthereafter or when the loss o ccurs.

SEC. 20. Except in the cases sp ecied in the next four sections, andin the cases o f life, acc ident, and health insurance, a change ofinterest in any p art of a thing insured unaccompanied by acorresponding change of i nterest in the insurance, susp ends theinsurance to an equivalent extent, until the interest i n the thing and theinterest in the insurance are vested in the same person.


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SEC. 21. A change of interest in a t hing insured, after the o ccurrenceof an injury w hich results i n a loss, does n ot aff ect the right of theinsured to indemnity for the l oss.

SEC. 22. A change of interest in one or m ore o f several distinctthings, separately insured by one p olicy, does not avoid the i nsurance

as t o the others.

SEC. 23. A change of interest , by will or suc cession, on the d eath o fthe insured, does not avo id an insurance; and his i nterest in theinsurance passes t o the person taking his i nterest in the thing insured.

SEC. 24. A transfer of interest by o ne of several partners, jointowners, or ow ners i n common, who are jointly insured, t o the others,does n ot avoid an insurance even though it has be en agreed that the

insurance shall cease upon a n a lienation o f the thing insured.

SEC. 25. Every s tipulation in a policy of insurance for the payment ofloss w hether the person insured has o r has n ot any interest in theproperty i nsured, or t hat the policy shall be received as p roof of suc hinterest, and every p olicy executed by way of gaming or w agering, isvoid.

TITLE 4

CONCEALMENT

SEC. 26. A neglect to communicate t hat which a party knows an dought to communicate, is ca lled a concealment.

SEC. 27. A concealment whether intentional or unintentional entitlesthe i njured party to res cind a c ontract of insurance.

SEC. 28. Each party to a contract of insurance must communicate t othe other, in good faith, all facts w ithin his k nowledge which arematerial to the contract and a s t o which h e m akes no warranty, andwhich the other has no t the means o f ascertaining.

SEC. 29. An intentional and fraudulent omission, on the part of one

insured, to c ommunicate i nformation o f matters p roving o r tending toprove the falsity o f a warranty, entitles the insurer to rescind.

SEC. 30. Neither party to a contract of insurance is b ound tocommunicate information o f the matters following, except in a nswer t othe inquiries o f the other:

(a) Those w hich t he other knows;

(b) T hose which, in the exercise of ordinary c are, t he other ought toknow, and of which t he former has no reason to su ppose him ignorant;

(c) Those of which the other waives communication;

(d) Th ose which prove or t end to p rove the e xistence of a ri skexcluded by a warranty, and which are no t otherwise material; and

(e) Th ose which relate to a risk e xcepted from the policy and which

are n ot otherwise material.

SEC. 31. Materiality i s t o be determined not by t he event, but sol elyby the probable a nd reasonable inuence o f the facts up on the partyto whom the communication is du e, in forming his e stimate o f thedisadvantages of the proposed contract, or in m aking his i nquiries.

SEC. 32. Each party to a contract of insurance is b ound to know allthe general causes w hich are open to his i nquiry, equally w ith that of


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reinstatement, the insurer cannot pr ove that the policy is vo id abinitio o r is resci ndable by reason of t he fraudulent concealment ormisrepresentation of the insured or his a gent.

TITLE 6

THE POLICY

SEC. 49. The w ritten instrument in w hich a c ontract of insurance isset forth, is c alled a policy of insurance.

SEC. 50. The policy sh all be in p rinted form which may c ontain blankspaces; and any word, phrase, clause, mark, sign, symbol, signature,number, or w ord ne cessary to co mplete t he contract of insurance s hallbe written on the blank s paces p rovided therein.

Any rider, clause, warranty o r endorsement purporting to be part ofthe c ontract of insurance and w hich is p asted o r attached to s aidpolicy is n ot binding on the i nsured, unless the descriptive title orname o f the rider, clause, warranty o r endorsement is a lso mentionedand w ritten on the b lank sp aces p rovided in t he p olicy.

Unless applied for by t he insured or ow ner, any rider, clause,warranty o r endorsement issued after the original policy shall be

countersigned by the insured or ow ner, which countersignature sh allbe t aken a s h is a greement to t he c ontents o f such rider, clause,warranty or endorsement.

Notwithstanding the foregoing, the policy may be in electronic f ormsubject to the pertinent provisions of Republic A ct No. 8792, otherwiseknown a s the Electronic C ommerce A ct and to su ch r ules a ndregulations as may b e p rescribed b y the Commissioner.

SEC. 51. A policy o f insurance must specify:

(a) The parties b etween whom the contract is m ade;

(b) The amount to b e insured e xcept in the cases of open or runningpolicies;

(c) The p remium, or if the i nsurance is o f a c haracter where t he exact

premium is o nly d eterminable upon the termination of t he contract, astatement of the basis an d rates u pon which t he nal premium is t o b edetermined;

(d) Th e property o r l ife insured;

(e) Th e interest of the insured in property i nsured, if he is not theabsolute owner thereof;

(f) The risks i nsured against; and

(g) Th e period d uring which the i nsurance is t o c ontinue.

SEC. 52. Cover not es may b e issued to bind insurance temporarilypending the issuance of the policy. Within sixty (60 ) days after issue ofa cover no te, a policy shall be issued in lieu thereof, including withinits t erms t he identical insurance bound under the cover note and thepremium therefor.

Cover notes m ay be extended or renewed beyond such sixty (60)days w ith the written approval of the Commissioner i f he determinesthat such extension is n ot contrary t o and is n ot f or the purpose ofviolating any provi sions of this C ode. The Commissioner maypromulgate rules and regulations g overning such extensions for t hepurpose of preventing such violations a nd may b y su ch rules andregulations dispense with the req uirement of written a pproval by h imin the case of extension in compliance with such rules and

regulations.


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SEC. 53. The insurance proceeds sh all be applied exclusively to theproper interest of the person in w hose name o r for w hose benet it ismade u nless ot herwise specied in the policy.

SEC. 54. When a n insurance contract is execu ted with a n a gent ortrustee as the insured, the fact t hat his principal or be neciary is the

real party in interest may be indicated by describing the insured asagent or t rustee, or by other ge neral words i n the policy.

SEC. 55. To render an insurance effected by o ne partner or part -owner, applicable to the interest of his c o-partners o r other part-owners, it is n ecessary that the terms o f the p olicy s hould b e s uch a sare applicable to the joint or common interest.

SEC. 56. When the description of the insured in a policy i s so general

that it may co mprehend any person or any cl ass of persons, only h ewho can sh ow that it was i ntended to include h im, can cl aim thebenet of the p olicy.

SEC. 57. A policy m ay be s o framed t hat it will inure to the b enet ofwhomsoever, during the continuance o f the risk, may b ecome t heowner of the interest insured.

SEC. 58. The mere transfer of a thing insured does not transfer t he

policy, but suspends i t until the same p erson becomes t he owner ofboth the policy a nd the thing insured.

SEC. 59. A policy i s e ither open, valued o r running.

SEC. 60. An open policy i s o ne in which the value of the thing insuredis no t agreed upon, and the amount of the insurance merelyrepresents t he insurers m aximum liability. The value of such thinginsured shall be ascertained at t he time of the loss.

SEC. 61. A valued policy is on e w hich e xpresses on its face a nagreement that the thing insured shall be valued at a specic su m.

SEC. 62. A running policy i s o ne which contemplates successiveinsurances, and which provides t hat the object of the policy may befrom time to time dened, especially a s t o the subjects o f insurance,

by additional statements o r indorsements.

SEC. 63. A condition, st ipulation, or agreement i n any policy ofinsurance, limiting the t ime for commencing a n a ction thereunder to aperiod of less t han o ne (1) year f rom the time w hen the cause o faction accrues, is vo id.

SEC. 64. No policy o f insurance other than life shall be cancelled bythe insurer except up on prior notice thereof to the insured, an d no

notice of cancellation shall be effective unless it is b ased o n t heoccurrence, after t he effective date of t he policy, of on e or more of thefollowing:

(a) Nonpayment of premium;

(b) C onviction of a crime arising out of acts i ncreasing the hazardinsured against;

(c) Discovery o f fraud o r material misrep resentation;

(d) Discovery o f willful or reckless acts o r omissions i ncrea sing thehazard insured against;

(e) P hysical changes i n the property insured which result in theproperty becoming uninsurable;

(f) Discovery o f other insurance coverage that makes t he total

insurance in excess of the value of the property insured; or


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(g) A determination b y the Commissioner t hat the c ontinuation of thepolicy would violate or w ould place the insurer i n violation of thisCode.

SEC. 65. All notices o f cancellation mentioned in the precedingsection shall be in writing, mailed or delivered to the named insured at

the address s hown in the policy, or t o his b roker provided the broker isauthorized in writing by the p olicy o wner to rec eive the n otice ofcancellation on his b ehalf, and shall state:

(a) W hich of the grounds s et forth in Section 64 is r elied upon; and

(b) T hat, upon written request of the named insured, the insurer w illfurnish the facts o n which the cancellation is b ased.

SEC. 66. In case of insurance other t han life, unless the insurer a tleast forty-ve (45) da ys in advance of the end of the policy periodmails o r delivers t o the named insured at the address sh own in thepolicy notice of its i ntention not to renew the policy or to condition itsrenewal upon reduction of l imits o r elimination of cove rages, thenamed insured shall be entitled to rene w the policy u pon p ayment ofthe premium due o n the effective d ate o f the renewal. Any p olicywritten for a t erm of less than one (1) year sh all be considered as i fwritten for a term of one (1) year. Any policy written for a term longer

than o ne (1) year or any policy w ith no xed e xpiration date shall beconsidered as if written for successive policy periods o r terms o f one(1) yea r.

TITLE 7

WARRANTIES

SEC. 67. A warranty is e ither expressed or i mplied.

SEC. 68. A warranty m ay relate to t he p ast, the present, the f uture, orto any or all of these.

SEC. 69. No p articular f orm of words i s n ecessary to create awarranty.

SEC. 70. Without pr ejudice to Section 51, every e xpress w arranty,made at or be fore the execution of a policy, must be contained in thepolicy itself, or in another instrument signed by the insured andreferred to in the policy as m aking a part of it.

SEC. 71. A statement in a policy, of a matter relating to the person orthing insured, or to the risk, as f act, is a n express warranty t hereof.

SEC. 72. A statement in a policy, which imparts t hat i t is i ntended to

do or no t to do a thing which materially a ffects t he risk, i s a warrantythat such act or omission shall take place.

SEC. 73. When, before t he time a rrives for t he performance of awarranty relating to the future, a loss insured against happens, orperformance becomes unlawful at the place o f the contract, orimpossible, the omission to fulll the warranty d oes not avo id thepolicy.

SEC. 74. The v iolation o f a m aterial warranty, or other materialprovision of a policy, on the part of either pa rty the reto, entitles theother to rescind.

SEC. 75. A policy m ay declare that a v iolation of specied p rovisionsthereof shall avoid it, otherwise the breach of an immaterial provisiondoes n ot avoid t he policy.


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SEC. 76. A breach of warranty w ithout fraud merely e xonerates aninsurer f rom the time that it occurs, or w here it is broken in itsinception, prevents t he policy from attaching to the risk.

TITLE 8

PREMIUM

SEC. 77. An insurer is en titled to p ayment of the premium as s oon a sthe t hing insured is e xposed to the p eril insured against.Notwithstanding a ny agreement to the c ontrary, no p olicy o r contractof insurance issued by a n insurance c ompany is val id a nd bindingunless a nd until the premium thereof has b een p aid, except in thecase of a life or an industrial life policy whenever t he grace periodprovision applies, or whenever und er the broker and a gency

agreements with duly l icensed intermediaries, a ninety (90 )-day creditextension is g iven. N o credit extension to a duly l icensed intermediaryshould exceed ninety (90) da ys f rom date of issuance of t he policy.

SEC. 78. Employees o f the Republic o f the Philippines, including itspolitical subdivisions and instrumentalities, and government-owned or-controlled corporations, may pay their insurance premiums a nd loanobligations through sa lary de duction: Provided , That the treasurer,cashier, paymaster or offi cial of t he entity e mploying the government

employee is a uthorized, notwithstanding the provisions o f any e xistinglaw, rules a nd regulations t o the contrary, to make deductions f rom thesalary, wage or i ncome of the latter pu rsuant to the agreementbetween the insurer and the government employee and to remit suchdeductions t o the insurer con cerned, and collect such reasonable feefor i ts s ervices.

SEC. 79. An a cknowledgment in a policy o r contract of insurance o rthe rece ipt of premium is co nclusive evidence of its p ayment, so far as

to m ake the p olicy b inding, notwithstanding a ny stipulation t herein t hatit shall not be binding until the premium is a ctually p aid.

SEC. 80. A person insured is e ntitled to a return o f premium, asfollows:

(a) To the w hole p remium if no part of his i nterest in the t hing insuredbe exposed to a ny of the p erils i nsured against;

(b) W here t he insurance is m ade f or a d enite p eriod of time a nd theinsured s urrenders h is p olicy, to s uch portion o f the premium ascorresponds w ith the unexpired time, at a pro rat a rate, unless a shortperiod rate h as b een a greed upon a nd appears on the face of thepolicy, after deducting from the w hole p remium any c laim for loss o rdamage under the policy w hich has p reviously a ccrued: Provided ,

That no holder o f a life insurance policy may avail himself of t heprivileges o f this p aragraph without sufficient cause as o therwiseprovided b y law.

SEC. 81. If a peril insured against has e xisted, and the insurer ha sbeen liable for any period, however short, the insured is n ot en titled toreturn of premiums, so far as that pa rticular r isk is concerned.

SEC. 82. A person insured is e ntitled to a ret urn o f the premium when

the contract is vo idable, and s ubsequently a nnulled under t heprovisions o f the Civil Code; or on account of the fraud ormisreprese ntation of t he insurer, or of hi s agent, or on account offacts, or t he existence of which the insured was ignorant of without hisfault; or when by any default of the i nsured other than a ctual fraud, theinsurer never incurred any liability u nder the policy.

A person insured is n ot entitled to a return of premium if the policy isannulled, rescinded or i f a claim is d enied by reason of fraud.


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SEC. 83. In case of an over insurance by several insurers o ther thanlife, the insured is e ntitled to a ratable return of the premium,proportioned to the amount by which the aggregate s um insured i n a llthe policies e xceeds t he insurable value of the thing at risk.

SEC. 84. An insurer may co ntract and a ccept payments, in a ddition

to regular pr emium, for t he purpose of paying future p remiums o n thepolicy or t o increase the benets t hereof.

TITLE 9

LOSS

SEC. 85. An a greement not to transfer t he claim of the insuredagainst the insurer af ter the loss h as h appened, is vo id if made before

the loss e xcept as o therwise provided in the case of life insurance.

SEC. 86. Unless otherwise provided by the policy, an insurer i s l iablefor a l oss o f which a p eril insured against was t he p roximate c ause,although a peril not contemplated by the contract may h ave been aremote cause of t he loss; bu t he is n ot l iable for a loss of which theperil insured against was o nly a remote c ause.

SEC. 87. An insurer i s l iable w here t he t hing insured is r escued from

a peril insured against that would otherwise have caused a loss, if, inthe c ourse of such rescue, the thing is e xposed to a p eril not insuredagainst, which permanently d eprives t he insured of its p ossession, inwhole or i n part; or w here a loss i s ca used by efforts t o rescue thething insured fr om a p eril insured a gainst.

SEC. 88. Where a peril is e specially e xcepted in a c ontract ofinsurance, a loss, which would not have occurred but for such peril, isthereby exce pted although the immediate ca use o f the loss was a peril

which w as n ot excepted.

SEC. 89. An insurer is n ot l iable for a loss caused by the willful act orthrough the connivance of t he insured; but he is n ot exonerated by thenegligence of the insured, or of the insurance agents o r others.

TITLE 10

NOTICE OF LOSS

SEC. 90. In case of loss u pon an insurance against re, an insurer isexonerated, if written notice thereof be not given to him by an insured,or som e p erson e ntitled to t he b enet of the i nsurance, withoutunnecessary d elay. For ot her non-life insurance, t he Commissionermay specify t he period for the submission of the notice of loss.

SEC. 91. When a preliminary p roof of loss i s r equired by a p olicy, the

insured is n ot bound to give such proof as would be necessa ry in acourt of justice; but it is s ufficient for hi m to give the best evidencewhich he has i n his p ower at the time.

SEC. 92. All defects i n a notice of loss, or in preliminary p roofthereof, which the insured might remedy, and which the insurer omitsto specify to him, without unnecessary d elay, as g rounds o f objection,are waived.

SEC. 93. Delay in the presentation to an insurer of notice or proof ofloss i s w aived if caused by any a ct of hi m, or if he omits t o takeobjection promptly a nd specically u pon that ground.

SEC. 94. If the policy requires, by w ay of preliminary proo f of loss,the certicate or testimony of a person other than the insured, it issufficient f or the insured to use reasonable diligence to procure it, andin case of the refusal of such person to give it, then to furnishreasonable evidence to the insurer that such refusal was not induced


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by any just grounds o f disbelief in the facts n ecessary t o be certiedor testied.

TITLE 11

DOUBLE INSURANCE

SEC. 95. A double insurance e xists w here the same p erson isinsured by several insurers se parately in resp ect to t he same s ubjectand interest.

SEC. 96. Where the insured in a policy o ther than life is o ver insuredby d ouble insurance:

(a) Th e i nsured, unless t he p olicy o therwise provides, may c laim

payment from the insurers in su ch o rder as h e m ay se lect, up to theamount f or w hich the insurers are severally liable under t heirrespective c ontracts;

(b) W here the policy u nder w hich the insured claims i s a valuedpolicy, any su m received by him under any o ther policy s hall bededucted from the value of the policy without regard to the actualvalue of t he subject matter insured;

(c) Where t he policy u nder w hich the insured claims i s a n u nvaluedpolicy, any sum received by h im under any po licy sh all be deductedagainst the f ull insurable value, for an y su m received b y h im underany policy;

(d) W here the insured receives any su m in excess o f the valuation inthe case of valued policies, or of the insurable value in the case ofunvalued policies, he must hold such sum in trust for the insurers,according to their right of contribution among themselves;

(e) E ach insurer is b ound, as between himself and the other insurers,to c ontribute rat ably to the l oss in proportion to the a mount for whichhe is l iable under his c ontract.

TITLE 12

REINSURANCE

SEC. 97. A contract of reinsurance is o ne by which an insurerprocures a third person to insure him against loss or liability b y rea sonof su ch original insurance.

SEC. 98. Where a n insurer obtains r einsurance, except underautomatic r einsurance treaties, he must com municate all therepresentations o f the original insured, an d also all the knowledge and

information he possesses, whether previously o r subsequentlyacquired, which are material to t he ri sk.

SEC. 99. A reinsurance is presum ed to b e a contract of indemnityagainst liability, and not m erely a gainst damage.

SEC. 100. The original insured has n o interest in a contract ofreinsurance.

CHAPTER II

CLASSES OF INSURANCE

TITLE I

MARINE INSURANCE

SUB-TITLE 1-A


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DEFINITION

SEC. 101. Marine Insurance includes:

(a) I nsurance against loss o f or da mage to:

(1) V essels, craft , aircraft , vehicles, g oods, f reights, ca rgoes,merchandise, effects, disbursements, prots, moneys, securities,choses i n a ction, instruments o f debts, valuable papers, bottomry, andrespondentia interests a nd a ll other kinds o f property a nd intereststherein, in respect to, appertaining to or in connection with any and allrisks or pe rils of navigation, transit or t ransportation, or w hile beingassembled, packed, crated, baled, compresse d or si milarly p reparedfor shi pment or w hile awaiting shipment, or during a ny delays,storage, transhipment, or r eshipment incident thereto, including war

risks, m arine builders risks, an d all personal property oater r isks;

(2) P erson or property in connection w ith or appertaining to a m arine,inland marine, transit or t ransportation insurance, i ncluding liability forloss o f or da mage arising out of or in connection with the construction,repair, operation, maintenance or use of the s ubject matter of suchinsurance (but no t including life insurance or surety b onds norinsurance against loss by reason of bodily injury t o any person arisingout of ownership, maintenance, or use of automobiles);

(3) Precious st ones, jewels, jewelry, precious m etals, whether incourse of t ransportation or otherwise; and

(4) Bridges, tunnels a nd other instrumentalities o f transportation andcommunication (excluding buildings, their furniture and furnishings,xed c ontents an d s upplies h eld in st orage); piers, wharves, docksand s lips, and o ther aids t o navigation and transportation, includingdry d ocks a nd m arine railways, dams a nd appurtenant facilities for the

control of w aterways.

(b) Marine protection and indemnity insurance , meaning insuranceagainst, or against legal liability o f the insured for loss, damage, orexpense incident to o wnership, operation, chartering, maintenance,use, repair, or construction of any v essel, craft or instrumentality i nuse of ocean or inland waterways, including liability o f the insured forpersonal injury, illness o r death or for loss o f or damage to the

property o f another person.

SUB-TITLE 1-B

INSURABLE INTEREST

SEC. 102. The owner of a ship has i n all cases a n insurable interestin it, even when it has b een chartered by o ne who covenants t o p ayhim its v alue in case of loss: Provided , That in this c ase the insurer

shall be liable for only t hat part of the loss which the insured cannotrecover from the charterer.

SEC. 103. The insurable i nterest of the o wner of the s hiphypothecated b y bottomry is o nly the e xcess o f its va lue o ver theamount secured by bottomry.

SEC. 104. Freightage, i n the sense of a policy of marine insurance,signies a ll the benets d erived by the owner, either from the

chartering of the ship or its e mployment for the carriage of his o wngoods or t hose of others.

SEC. 105. The owner of a s hip h as a n insurable interest in e xpectedfreightage which according to the ordinary a nd probable course o fthings h e would have earned but for t he intervention of a peril insuredagainst or other peril incident to the voyage.

SEC. 106. The interest mentioned in the last section exists, in case of

a ch arter party, when the ship h as b roken g round on the chartered


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voyage. If a price is t o be paid for the carriage of goods i t exists w henthey are actually o n board, or there is so me contract for putting themon board, and both sh ip a nd goods ar e r eady for the specied voyage.

SEC. 107. One who has an interest in the thing from which p rots ar eexpected t o p roceed has a n insurable interest in the prots.

SEC. 108. The charterer of a ship has an insurable interest i n it, tothe e xtent that he i s l iable to be damnied by its l oss.

SUB-TITLE 1-C

CONCEALMENT

SEC. 109. In m arine insurance, each p arty is bo und to co mmunicate,

in a ddition to w hat is r equired by Section 2 8, all the information whichhe possesses, material to the risk, except such as is m entioned inSection 30, and to state the exact and whole truth in relation to allmatters t hat he represents, or up on inquiry d iscloses or assu mes todisclose.

SEC. 110. In marine insurance, information of the belief orexpectation of a third person, in reference to a material fact, ismaterial.

SEC. 111. A person insured b y a co ntract of marine insurance ispresumed to have knowledge, at the time of insuring, of a prior loss, ifthe information might possibly have reached him in the usual mode o ftransmission and a t the usual rate o f communication.

SEC. 112. A concealment in a marine insurance, in respect to a ny o fthe following matters, does n ot vi tiate the entire contract, but merelyexonerates t he insurer f rom a loss resu lting from the risk c oncealed:

(a) T he national charact er of the insured;

(b) Th e liability of the thing insured to capture and detention;

(c) T he liability to seizure from breach of foreign laws of trade;

(d) The want of necessa ry documents; and

(e) Th e use o f false and simulated papers.

SUB-TITLE 1-D

REPRESENTATION

SEC. 113. If a representation by a person insured by a contract of

marine insurance, is intentionally false in any material respect, or i nrespect of any fact on w hich the c haracter and n ature o f the ri skdepends, the i nsurer may resc ind the e ntire c ontract.

SEC. 114. The eventual falsity o f a representation as t o expectationdoes not, in the absence of f raud, avoi d a contract of m arineinsurance.

SUB-TITLE 1-E

IMPLIED WARRANTIES

SEC. 115. In every m arine insurance upon a ship or f reight, orfreightage, or up on a ny t hing w hich is t he s ubject of marine i nsurance,a warranty i s i mplied that t he ship is s eaworthy.

SEC. 116. A ship is se aworthy w hen reasonably t to perform theservice and to e ncounter the o rdinary p erils o f the v oyage

contemplated by the parties to the policy.


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SEC. 117. A n implied warranty o f seaworthiness is co mplied with ifthe ship be seaworthy a t the time of the commencement of the risk,except i n the following cases:

(a) W hen t he insurance is m ade f or a sp ecied length of time, theimplied warranty is n ot complied with unless t he ship be seaworthy at

the commencement of every voyag e i t undertakes du ring that time;

(b) When the insurance is up on the cargo which, by the terms of thepolicy, description of the voyage, or established custom of the trade, isto be transhipped at an intermediate port, the implied warranty i s n otcomplied with u nless ea ch ve ssel upon which the cargo is sh ipped, ortranshipped, be seaworthy a t the commencement of each particularvoyage.

SEC. 118. A warranty of seaworthiness ex tends n ot only to thecondition of the structure o f the ship itself, but requires that it beproperly laden, and p rovided w ith a competent master, a s ufficientnumber of competent officers an d se amen, and the requisiteappurtenances and equipment, such as ballasts, cables and anchors,cordage and sails, food, water, fuel and lights, and other necessary o rproper st ores and implements f or t he voyage.

SEC. 119. Where d ifferent portions o f the voyage c ontemplated by a

policy differ in respect to the things req uisite to make the shipseaworthy therefor, a warranty o f seaworthiness is c omplied with if, atthe commencement of each p ortion, the ship is se aworthy w ithreference to that portion.

SEC. 120. When the sh ip be comes un seaworthy during the voyag e towhich an insurance r elates, an u nreasonable d elay i n rep airing thedefect exonerates t he insurer on ship or shipowners i nterest fromliability fr om any loss arising therefrom.

SEC. 121. A ship which is se aworthy for t he purpose of an insuranceupon the ship may, nevertheless, by reason of being untted toreceive t he cargo, be unseaworthy for the purpose o f insurance u ponthe cargo.

SEC. 122. W here the nationality o r neutrality o f a ship or cargo is

expressly w arranted, it is i mplied that the ship will carry t he requisitedocuments t o show such nationality o r neutrality a nd that it will notcarry an y d ocuments w hich cast reasonable suspicion thereon.

SUB-TITLE 1-F

THE VOYAGE AND DEVIATION

SEC. 123. When the voyag e con templated b y a m arine insurance

policy i s d escribed by the places of beginning and ending, the voyageinsured is o ne which conforms t o the course o f sailing xed bymercantile u sage b etween those p laces.

SEC. 124. If the course of sailing is n ot xed by mercan tile usage, thevoyage insured by a marine insurance policy i s t hat way between theplaces specied, which to a master of ordinary skill and discret ion,would m ean the most natural, direct and a dvantageous.

SEC. 125. Deviation is a departure f rom the course o f the voyageinsured, mentioned in the l ast two (2) sections, or an unreasonabledelay i n p ursuing the voyage or t he commencement of an entirelydifferent voyage.

SEC. 126. A deviation is p roper:

(a) When ca used by circumstances o ver which n either the master northe owner of the ship h as any co ntrol;


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(b) W hen n ecessary to c omply with a warranty, or t o a void a peril,whethe r or not the peril is i nsured against;

(c) When made in good faith, and upon reasonable grounds o f beliefin its necessity to avoid a peril; or

(d) W hen m ade i n g ood faith, for t he purpose of saving human life o rrelieving another ve ssel in distress.

SEC. 127. Every d eviation not specied in the last section isimproper.

SEC. 128. An insurer i s n ot liable for any loss h appening to the thinginsured subsequent to a n improper deviation.

SUB-TITLE 1-G

LOSS

SEC. 129. A loss m ay be either total or partial.

SEC. 130. Every loss which is n ot total is p artial.

SEC. 131. A total loss m ay be e ither actual or constructive.

SEC. 132. An actual total loss i s ca used by:

(a) A total destruction of the thing insured;

(b) The irretrievable loss of the thing by s inking, or by being brokenup;

(c) Any damage to the thing which renders i t valueless t o the owner

for t he purpose for which he held it; or

(d) A ny other event w hich effectively deprives the owner of thepossession, at the port of destination, of the thing insured.

SEC. 133. A constructive total loss i s o ne which gives to a personinsured a right to a bandon, under Section 141.

SEC. 134. An a ctual loss m ay be presumed from the continuedabsence of a ship without bei ng heard o f. The length of time which issufficient to rai se this p resumption depends o n the circumstances ofthe case.

SEC. 135. When a ship is preven ted, at an intermediate p ort, fromcompleting the voyage, by the perils insured against, the liability of amarine insurer on the cargo continues after t hey a re thus r eshipped.

Nothing in this s ection s hall prevent an insurer from requiring anadditional premium if the h azard b e i ncreased b y this ex tension o fliability.

SEC. 136. In addition to the liability mentioned in the last sec tion, amarine insurer is bo und for dam ages, expenses of discharging,storage, r eshipment, extra freightage, and all other exp enses i ncurredin saving cargo reshipped pursuant t o the last section, up to theamount insured.

Nothing in this o r in the preceding section shall render a marineinsurer liable for any amount in excess of the insured value or, if therebe none, of t he insurable value.

SEC. 137. Upon an actual total loss, a person insured is e ntitled topayment without notice of abandonment.

SEC. 138. Where it has be en agreed that an insurance upon a

particular t hing, or cl ass of things, sh all be free from particular


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average, a m arine i nsurer is n ot liable for any particular average lossnot de priving the i nsured of the possession, at the port of destination,of t he whole of such thing, or cl ass o f things, even though it becomesentirely worthless; but such insurer i s liable for hi s proportion of allgeneral average loss assessed upon the thing insured.

SEC. 139. An insurance conned in terms t o a n a ctual loss d oes no tcover a c onstructive total loss, but covers a ny loss, which necessarilyresults i n depriving the insured of the possession, at the port ofdestination, of the entire thing insured.

SUB-TITLE 1-H

ABANDONMENT

SEC. 140. Abandonment, in m arine insurance, is t he act of theinsured by w hich, after a constructive total loss, he declares t herelinquishment to the insurer of hi s interest i n the thing insured.

SEC. 141. A person insured by a contract of marine insurance m ayabandon the thing insured, or any particular po rtion thereof separatelyvalued by the policy, or otherwise separately i nsured, and recover fora total loss thereof, when the cause of the loss is a peril insuredagainst:

(a) If more than three-fourths ( ) thereof in value is a ctua lly l ost, orwould have to be expended to recover it from the peril;

(b) If it is i njured to such an extent as t o reduce its v alue more thanthree-fourths ( );

(c) If the thing insured is a ship, and t he contemplated voyage cannotbe lawfully p erformed without i ncurring either an expense to the

insured of more than three-fourths ( ) the value of the thing

abandoned or a r isk w hich a prudent man would not take under t hecircumstances; or

(d) I f the thing insured, be ing cargo or f reightage, and the voyagecannot be performed, nor another ship procured by the master, withina reasonable time and with reasonable diligence, t o forward t he cargo,

without incurring the like expense or r isk m entioned in the precedingsubparagraph. But freightage ca nnot in a ny cas e b e a bandonedunless the ship is a lso abandoned.

SEC. 142. An a bandonment must be neither partial nor conditional.

SEC. 143. An a bandonment must be made within a reasonable t imeafter r eceipt of reliable information of the loss, but where theinformation is o f a doubtful character, the insured is e ntitled to a

reasonable t ime t o make inquiry.

SEC. 144. Where the information upon which an a bandonment hasbeen made proves incorrect, or t he thing insured was so far r estoredwhen the abandonment was m ade that there was t hen in fact no totalloss, the abandonment becom es ineffectual.

SEC. 145. Abandonment is m ade b y giving notice t hereof to theinsurer, which may be done o rally, or in writing: Provided , That if the

notice be done orally, a written notice of such abandonment shall besubmitted within seven (7) da ys from such oral notice.

SEC. 146. A notice o f abandonment must be explicit, and m ustspecify t he particular cau se of t he abandonment, but need state onlyenough to sh ow that there is proba ble ca use t herefor, and n eed n ot beaccompanied with proof of interest or of loss.

SEC. 147. An a bandonment can b e sust ained only upon the cause

specied in the notice thereof.


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SEC. 148. An a bandonment is eq uivalent to a transfer by the insuredof his i nterest to the insurer, with all the chances o f recovery a ndindemnity.

SEC. 149. If a marine insurer pays for a l oss a s i f it were an actualtotal loss, he is e ntitled to whatever may remain of the thing insured,

or i ts p roceeds or sal vage, as i f there had been a formalabandonment.

SEC. 150. Upon a n a bandonment, acts do ne in g ood faith by thosewho w ere a gents o f the i nsured in resp ect to the t hing insured,subsequent to the loss, are at the risk of the insurer, and for hisbenet.

SEC. 151. Where n otice of abandonment is prope rly g iven, the rights

of the insured are not prejudiced by the fact that the insurer refuses t oaccept the abandonment.

SEC. 152. The a cceptance of an abandonment may be eitherexpress o r implied from the conduct of t he insurer. The mere si lenceof the insurer f or a n unreasonable length of time after not ice shall beconstrued a s an acceptance.

SEC. 153. The a cceptance of an a bandonment, whether expr ess or

implied, is co nclusive upon t he p arties, and a dmits t he l oss a nd t hesufficiency of the abandonment.

SEC. 154. An ab andonment once m ade and accepted is irrevocable,unless t he ground upon which it was m ade proves t o be u nfounded.

SEC. 155. On an accepted abandonment of a ship, freightage earnedprevious t o the loss belongs t o the insurer of said freightage; butfreightage s ubsequently e arned b elongs t o t he insurer of the ship.

SEC. 156. If an insurer refuses to accept a valid abandonment, he isliable as upon an actual total loss, deducting from the amount anyproceeds of the thing insured which m ay h ave co me to the hands ofthe insured.

SEC. 157. If a p erson insured omits to a bandon, he may

nevertheless recover hi s actual loss.

SUB-TITLE 1-I

MEASURE OF INDEMNITY

SEC. 158. A valuation in a policy o f marine i nsurance is co nclusivebetween the parties t hereto in the adjustment of either a partial or totalloss, if the i nsured has so me interest at risk, and t here i s n o fr aud o n

his pa rt; except that when a thing has be en hypothecated by b ottomryor r espondentia, before i ts insurance, and without the k nowledge o fthe person actually p rocuring the insurance, he may s how the realvalue. But a valuation fraudulent in fact, entitles t he insurer to rescindthe contract.

SEC. 159. A marine insurer is l iable upon a partial loss, on ly for suchproportion of the amount insured by him as the loss b ears t o the valueof the whole i nterest of the i nsured in the property insured.

SEC. 160. Where prots a re separately insured in a contract ofmarine insurance, the insured is e ntitled to recover, in case of loss, aproportion of such prots e quivalent to the proportion which the valueof t he property lost bears t o the value of the whole.

SEC. 161. In ca se o f a va lued p olicy o f marine insurance o nfreightage or cargo, if a part only o f the subject i s e xposed to risk, thevaluation applies o nly in p roportion t o s uch part.


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SEC. 162. When p rots ar e va lued a nd insured by a contract ofmarine insurance, a loss of them is co nclusively p resumed from a lossof the p roperty o ut of which they are e xpected to a rise, and t hevaluation xe s their amount.

SEC. 163. In e stimating a loss un der an open policy o f marine

insurance the f ollowing rul es a re t o b e o bserved:

(a) Th e value of a ship is i ts v alue at the beginning of the risk,including all articles o r charges w hich add to its p ermanent val ue orwhich are necessary t o prepare it for t he voyage insured;

(b) T he value of the cargo is i ts a ctual cost to the insured, when ladenon board, or w here the cost cannot be ascertained, its m arket value atthe t ime a nd p lace o f lading, adding the c harges incurred in

purchasing and p lacing it on b oard, but without reference to a ny lossincurred in rai sing money for i ts p urchase, or to a ny drawback o n itsexportation, or to the uctuation of the market at the port ofdestination, or t o expenses i ncurred on the way or on arrival;

(c) T he value of freightage is t he gross freightage, exclusive ofprimage, without reference to the cost of earning i t; and

(d) Th e c ost of insurance is i n e ach c ase t o be added to the value

thus e stimated.

SEC. 164. If cargo insured against partial loss arrives a t the port ofdestination in a damaged condition, the loss o f the insured is d eemedto be the same proportion of t he value which the market price at t hatport, of the thing so damaged, bears t o the market price it would havebrought i f sound.

SEC. 165. A marine insurer is l iable for al l the expenses a ttendant

upon a loss w hich forces the ship into port to be repaired; and where it

is s tipulated in the policy that the insured shall labor for the recoveryof the property, the insurer i s liable for t he expense incurred thereby,such expense, in either ca se, being in addition to a total loss, if thatafterwards o ccurs.

SEC. 166. A marine insurer i s l iable for a loss falling upon the

insured, through a contribution in respect to the thing insured, requiredto be made by h im towards a general average loss called for by a perilinsured against: Provided , That the liability o f the insurer sh all belimited to the proportion of contribution attaching to his p olicy valuewhere this i s l ess than the contributing value of the thing insured.

SEC. 167. When a person insured by a contract of marine insurancehas a d emand a gainst others for contribution, he may cl aim the wholeloss from the insurer, subrogating him to his o wn right to contribution.

But no such claim can be made u pon the insurer af ter t he separationof the interests l iable to contribution, nor when the insured, having theright and o pportunity to e nforce contribution from others, hasneglected or w aived the exercise of that right.

SEC. 168. I n the case of a partial loss of shi p or its e quipment, theold materials a re t o b e a pplied towards p ayment for t he new. Unlessotherwise stipulated in the policy, a marine insurer is l iable for onlytwo-thirds (2/ 3) of the remaining cost of repairs a fter such deduction,

except that anchors m ust be paid in full.

TITLE 2

FIRE INSURANCE

SEC. 169. As use d in this C ode, the term re insurance sh all includeinsurance against loss by re, lightning, windstorm, tornado orearthquake and other allied risks, when such risks a re covered by

extension to re insurance policies o r under sep arate policies.


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SEC. 170. An alteration in the use or co ndition of a thing insured fromthat to which it is l imited by the policy made without t he consent of theinsurer, by means w ithin the control of the insured, an d increasing therisks, en titles an insurer t o rescind a contract of re i nsurance.

SEC. 171. An alteration in the use or co ndition of a thing insured from

that to which it is l imited by the policy, which does n ot increa se therisk, do es n ot affect a contract of re insurance.

SEC. 172. A contract of re insurance is n ot affected by any a ct of theinsured subsequent t o the execution of t he policy, which does notviolate its p rovisions, eve n though it increa ses the risk and is t hecause of the loss.

SEC. 173. If there i s n o valuation in the policy, the measure of

indemnity in a n insurance against re i s t he expense i t would b e t o theinsured at the time of the commencement of the re to replace thething lost or injured in the condition in which it was at the time of theinjury; but if there is a valuation in a policy of re i nsurance, the effectshall be the same a s i n a p olicy o f marine insurance.

SEC. 174. Whenever the insured desires t o have a valuation namedin his p olicy, insuring any building or structure against re, he mayrequire such building or st ructure t o b e e xamined by an independent

appraiser and t he value of the i nsureds i nterest therein may t hen b exed as between the insurer and the insured. The cost of suchexamination shall be p aid for by the insured. A clause shall beinserted in such policy stating substantially that the value of theinsureds i nterest in s uch building or structure has b een thus xed. Inthe absence of any ch ange increasing the risk w ithout the consent ofthe insurer or of fraud on the part of the insured, then in case of a totalloss under such policy, the whole amount so insured upon theinsureds i nterest in such building or structure, as s tated in the policy

upon which the insurers h ave received a premium, shall be paid, and

in case of a partial loss the full amount of the partial loss shall be sopaid, and in case there a re t wo (2) or more policies covering theinsureds i nterest t herein, each policy shall contribute pro rata to thepayment of such whole or partial loss. But in no case shall the insurerbe required to p ay m ore t han t he amount thus st ated in such policy.This s ection shall not prevent the parties f rom stipulating in such

policies concerning the repairing, rebuilding or r eplacing of buildingsor st ructures w holly o r partially d amaged or destroyed.

SEC. 175. No p olicy o f re insurance s hall be pledged, hypothecated,or t ransferred to a ny p erson, rm or com pany w ho acts a s a gent for orotherwise represents t he issuing company, and any su ch pledge,hypothecation, or transfer herea fter made s hall be vo id a nd o f noeffect insofar as i t may affect other cr editors of t he insured.

TITLE 3

CASUALTY INSURANCE

SEC. 176. C asualty insurance is insurance covering loss or l iabilityarising from accident or mishap, excluding certain types o f loss w hichby law or custom are considered as f alling exclusively w ithin the scopeof ot her types o f insurance such as re or marine. It includes, but i snot limited to, employers liability i nsurance, motor ve hicle liability

insurance, plate glass insurance, burglary and theft insurance,personal accident and health insurance as written by non-lifeinsurance companies, and other substantially s imilar kinds o finsurance.

TITLE 4

SURETYSHIP


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SEC. 177. A contract of suretyship is a n agreement whereby a partycalled the surety g uarantees t he performance by another party ca lledthe principal or obligor of an obligation or un dertaking in favor of athird party c alled the obligee. It includes o fficial recognizances,stipulations, bonds o r undertakings i ssued by a ny c ompany by v irtueof and under the provisions of Act No. 536, as a mended by Act No.

2206.

SEC. 178. The liability o f the surety or suret ies shall be joint andseveral with t he obligor and shall be l imited to t he amount of the b ond.It is determined strictly by the terms of the contract of su retyship inrelation to the principal contract between the obligor and t he o bligee.

SEC. 179. The surety is e ntitled to payment of the premium as soonas t he contract of sur etyship or bond is p erfected and delivered to the

obligor. No contract of suretyship or bo nding shall be valid and bindingunless a nd until the premium therefor has b een p aid, except wherethe obligee has accepted the bond, in which case the bond b ecomesvalid and enforceable irrespective of w hether or no t the premium hasbeen paid by the obligor to the surety: Provided , That if the contract ofsuretyship or bond is n ot acc epted by, or led with the obligee, t hesurety s hall collect only a reasonable amount, not exceeding ftypercent (50%) of the premium due thereon as s ervice fee plus thecost of st amps or ot her taxes i mposed for t he issuance of t he contract

or bond: Provided, however , That if the nonacceptance of the bond bedue to the fault or ne gligence of the surety, no such service fee,stamps o r taxes sh all be c ollected.

In the case of a continuing bond, the obligor shall pay t he subsequentannual premium as i t falls d ue until the contract of suretyship iscancelled by t he obligee o r by t he Commissioner or by a court ofcompetent jurisdiction, as the case may be.

SEC. 180. P ertinent provisions of the Civil Code of the Philippinesshall be applied in a suppletory ch aracter w henever ne cessary ininterpreting the provisions of a contract of su retyship.

TITLE 5

LIFE INSURANCE

SEC. 181. Life insurance is insurance o n human lives a nd insuranceappertaining thereto or con nected t herewith.

Every c ontract or undertaking for the payment of annuities i ncludingcontracts f or the payment of lump sums u nder a r etirement programwhere a l ife insurance c ompany m anages or act s as a t rustee for suchretirement pr ogram shall be considered a life insurance contract for

purposes o f this C ode.

SEC. 182. An insurance u pon life m ay be made payable o n the d eathof t he person , or on his su rviving a specied period, or otherwisecontingently o n t he c ontinuance or cessation o f life.

Every con tract or pledge for the payment of endowments or annuitiesshall be c onsidered a l ife insurance contract for purposes o f thisCode.

In the absence of a judicial guardian, the father, or i n the lattersabsence or i ncapacity, the mother, of any m inor, who is a n insured ora b eneciary u nder a contract of life, health, or accident insurance,may exercise, in b ehalf of said m inor, any right under the p olicy,without necessity o f court authority o r the giving of a bond, where theinterest of the minor i n the particular act i nvolved does n ot exce edFive h undred thousand pesos ( P500,000.00) or in su ch r easonableamount as m ay be de termined by t he C ommissioner. Such right may

include, but shall not be limited to, obtaining a policy loan,


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surrendering the policy, receiving the proce eds of t he Policy, andgiving the minors c onsent to any transaction on the policy.

In the absence or in case of the incapacity o f the father or m other, thegrandparent, the e ldest brother or sister at least eighteen (18 ) years o fage, or any rel ative who has a ctual custody o f the minor insured or

beneciary, shall act as a guardian without need o f a c ourt order or judicial appoinent

otherwise disqualied or i ncapacitated. Payment made by t he insurerpursuant to this s ection shall relieve such insurer of any l iability u nderthe c ontract.

SEC. 183. The insurer in a l ife insurance contract shall be liable incase of suicide only w hen it is co mmitted after t he policy h as b een inforce for a p eriod of two (2) yea rs fr om the date of its i ssue or of its

last reinstatement, unless t he policy provides a shorterperiod: Provided, however , That suicide committed in the state ofinsanity sh all be compensable r egardless o f the date o f commission.

SEC. 184. A policy o f insurance u pon life o r health m ay p ass bytransfer, will or succession to a ny person, whether he h as a n insurableinterest or not , and s uch p erson may recove r upon it whatever theinsured might have recovered.

SEC. 185. Notice to an insurer of a t ransfer or bequest thereof is n otnecessary to preserve t he validity o f a p olicy of insurance upon l ife orhealth, unless thereby e xpressly required.

SEC. 186. Unless t he interest of a p erson insured is su sceptible ofexact pecuniary measurement, the measure o f indemnity under apolicy of i nsurance upon life or health is t he sum xed in the policy.

TITLE 6

MICROINSURANCE

SEC. 187. Microinsurance is a nancial product or servi ce that meetsthe risk protection needs o f the poor w here:

(a) Th e amount of contributions, premiums, fees o r charges ,

computed on a d aily basis, does n ot exceed se ven and a half percent(7.5%) of the c urrent daily m inimum wage rate f or nonagriculturalworkers in Metro Manila; and

(b) The m aximum sum of guaranteed be nets is not more than onethousand (1,000) t imes of the current daily m inimum wage rate f ornonagricultural workers i n Metro Manila.

SEC. 188. No insurance company o r mutual benet association shall

engage in the business of microinsurance unless i t possesses a ll therequirements as may b e p rescribed by the Commissioner. TheCommissioner sha ll issue su ch rules and regu lations g overningmicroinsurance.

CHAPTER II-A

FINANCIAL REPORTING FRAMEWORK

SEC. 189. All companies regulated by the Commission, unlessotherwise required b y law, should c omply with t he nancial reportingframeworks ad opted by the Commission for purposes o f creating thestatutory n ancial reports an d the annual statements t o b e s ubmittedto the Commission. Financial reporting framework m eans a set ofaccounting a nd rep orting p rinciples, standards, interpretations a ndpronouncements t hat must be adopted in the preparation andsubmission of the s tatutory n ancial statements a nd reports r equiredby the Commission. This na ncial reporting framework i s no t the same

as the nancial reporting framework us ed to prepare t he nancial


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statements t hat the Securities and Exchange Commission mayrequire. The m ain p urpose of the statutory st atements i s t o p resentimportant information about the level of risk a nd solvency situation o finsurers. I n prescribing the applicable statutory nancial reportingframework, the C ommissioner sha ll take i nto a ccount internationalstandards co ncerning solvency a nd insurance c ompany reporting as

well as generally accepted actuarial principles concerning nancialreporting promulgated by the Actuarial Society o f the Philippines.

The assets an d investments di scussed in S ections 20 4 to 2 15 shallbe a ccounted for i n a ccordance w ith this se ction.

The valuation of r eserves shall be accounted for i n accordance withTitle 5 of this C ode.

Insuarnce Codal

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