INSURANCE FINALS TIPS

DISCLAIMER: The use, misuse, and nonuse of this reviewer shall be borne solely by the user. c. d. 7. The insured, the insurer and the beneficiaries The insured, the insurer and the reinsurer

MULTIPLE CHOICE QUESTIONS

1. The Philippine Insurance Law is based principally on: a. b. c. d. 2. Connecticut insurance Law California Insurance Law Insurance provisions of the Spanish Code of Commerce New York Insurance Law

Concealment of a disease as a ground for the rescission of an insurance contract must be: a. b. c. d. Intentional Fraudulent Intentional or unintentional Concealment of a disease that caused the death of the insured.

8.

Fire Insurance as understood in the Insurance Code includes: a. b. c. d. Fire only Fire or Lightning only Fire, lightning and earthquake only Fire, Lightning, thunderstorm, tornado, earthquake and other allied risks if they are extensions of the fire insurance policy or are taken separately

Insurance claim disputes PhP100,000 and below fall under: a. b. c. d. exclusive jurisdiction of the Insurance Commissioner concurrent jurisdiction of the Insurance Commissioner and the civil courts exclusive jurisdiction of the RTC exclusive jurisdiction of the MTC 9.

3.

An insurance contract where the insured has no insurable interest is: a. b. c. d. Void Rescissible Voidable Valid and binding until cancelled

An example of an insurance contract falling under the category of casualty insurance is: a. b. c. d. Marine protection and indemnity insurance policy Fire insurance policy Motor car insurance policy Life insurance policy

4.

A concealment, whether intentional or unintentional entitled the insured to: a. b. c. Annul the contract. Rescind the contract Declare the same void.

10. An insurance contract is necessarily: a. b. c. d. An open policy A valued policy A running policy A contract of adhesion

5.

The incontestable clause is required to be part of: a. b. c. d. All insurance contracts All non-life insurance contracts All personal accident insurance contracts All life insurance contracts

11. A public enemy who may not be insured is: a. b. c. d. A notorious person declared by the PNP as a public enemy A terrorist declared as such by the government like the Abu Sayyaf who kidnapped innocent victims A criminal duly convicted by the courts A citizen of a country at war with the Philippines

6.

The parties in an insurance contract are: a. b. The insured and the insurer The insured, the insurer and the Insurance Commissioner

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12. An insurance contract is a contract of adhesion because: a. b. c. d. The insured cannot understand the technical terms in the contract. The insured did not have a hand in the preparation of the contract The contract must be interpreted in favor of the insured The Insurance Commissioner pre-approved all insurance contracts b. c. No, the insurer is not the person who caused the insjuries. No, because although it is now established that the injured or the heirs of a deceased victim of a vehicular accident may sue directly the insurer of the vehicle, the third party liability is only up to the extent of the insurance policy and those required by law.

17. Insurance is said to be a contract of utmost good faith. This means, in entering into the contract: a. b. c. d. The insurer must possess good faith. The insured must have good faith. The insurer, the insured and the beneficiary must have good faith. The insured and the insurer must possess good faith.

13. In his life insurance application, Juan concealed the fact that he had diabetes. He died in an accident. The materiality of the concealment is determined solely by: a. b. c. d. The cause of Juans death The contribution to the accident that caused the death The existence of other diseases that Juan concealed The acceptability of Juan for insurance coverage by the insurer had it known he had diabetes.

18. Juan has 3 cars which are separately valued and insured under 1 motor car insurance policy. Juan sold 1 of the cars. a. b. c. d. The insurance coverage continues for the 3 cars until the expiry date of the policy. The insurance coverage becomes void for the car sold. The insurance coverage becomes void for the 2 remaining cars. The insurance coverage becomes void for the 3 cars.

14. Juan owns a Mercedes Benz which was insured for 1 year by Seguro Co. under a motor car policy. During the year, he sold the car to Pedro. A week after the sale was registered in Pedros name, the car was stolen. Who is entitled to the insurance proceeds, if any? a. b. c. d. Juan, because he owns the insurance policy Pedro, because he owns the car when it was lost Juan and Pedro should split the insurance proceeds, 50-50. Neither Juan nor Pedro can claim under Juans policy.

19. A marine insurance policy covers a vessel for total loss only. This means that under Philippine law, the insurer is liable: a. b. c. d. Only when the vessel sinks and cannot be salvaged. When the vessel is damaged to the extent of more than 75% of its value and is abandoned. When the vessel is damaged to the extent of 85% of its value and is abandoned. When the vessel is damaged to the extent of more than 50% of its value and is abandoned.

15. If Juan sold the Benz to Pedro, insured by Seguro Co., under a compulsory third party liability insurance (CTPL) and prior to registration and renewal of the registration with the LTO, the car hit a pedestrian. Can Pedro claim the proceeds? a. b. c. No, Pedro is still not the owner of the policy. Yes, Change in ownership will not affect the motor car policy. Yes, provided proper endorsement is made on the policy of the ownership change and the insurer agrees thereto, and a signed duplicate of such endorsement shall, within a reasonable time, be filed with the Land Transportation Commission. No. no insurable interest exists in his favor.

20. Under a fire insurance policy, the sale of an insured house after its kitchen was burned: a. b. c. d. Affects the right of the insured to claim on the loss of the kitchen. Does not affect the right of the insured to claim for the loss of the kitchen. Does not affect the right of the insured on future loss of the same house. Does not affect the right of the new owner on the loss of the kitchen.

d.

16. If a vehicle insured under a CMVLI, may the injured party claim the proceeds of the insurance, including damages, attorneys fees and costs adjudicated by the Court from the insurer? a. Yes. The liability of the insurer is direct and thus, upon the happening of the accident giving rise to the liability, the insured may be made to pay.

21. The insurable interest of the owner of an apartment leased to his tenants consists of: a. b. The value of the house only. The value of the house and its rentals.

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c. d. The value of the house minus the value of the lease. The value of the lease. a. b. c. Yes, because a change of interest by will or succession on the death of the insured does not avoid an insurance. Yes, because Pedros car loan was already fully liquidated. No, because Junior did not have insurable interest in the BMW at the time the policy took effect.

22. A representation may be made: a. b. c. d. At the time of the issuance of an insurance policy only. After an insurance policy takes effect only. At the time of issuance of an insurance policy or before its effectivity. At any time during the effectivity of the policy.

27. Seguro Insurance Co. issued a PhP100 million single marine insurance policy on a shipment by sea from USA to Manila against total loss only, actual or constructive. The following amounts were stated in the policy: 1 container of laptop computers 1 container of cellphones 1 container office supplies Total PhP 70 million PhP20 million PhP10 million ____________ PhP100 million

23. A representation may be altered or withdrawn before the effectivity of an insurance contract but not afterwards because: a. b. c. d. Representations are presumed to refer to the date of effectivity of the contract. An oral representation cannot qualify any express provision of the contract. A representation cannot qualify a warranty Representations are not part of the insurance contract.

While at sea, the insured abandoned the laptop computers because of damages which rendered them entirely useless to him. Is the insurer liable? a. b. Yes, it is liable because the laptop computers were separately valued, and thus, were separately insured. No it is not liable because, the laptop computers were worth only PhP70 million, less than of the entire shipment of PhP100 million needed for constructive total loss. No, because there was no total loss amounting to PhP100 million.

24. In 2010, Juan, a married man, took a PhP10 million policy on his own life. On his death, several persons claimed to be entitled to a share in the insurance proceeds. Who is not entitled to a share in the proceeds? a. b. c. Maria, Juans legal wife, because she was not named as beneficiary. Junior, illegitimate son of Juan and Nita, because although an irrevocable beneficiary he is disqualified for being an illegitimate child. Juanito, legitimate son of Juan and Maria, because he is just a revocable beneficiary.

c.

25. Alex was issued a life insurance policy in 1991. 2 years and 3 months later, his policy lapsed but he had the same reinstated in 1993. Upon his death by accident in 1994, the insurer discovered that he concealed his confinement in a hospital for dengue before he applied for his insurance policy. Can the insurer still contest the claim? a. b. c. No, the policy is already incontestable having been originally issued 3 years ago. No, because the policy was not caused by the disease he concealed. Yes, because the policy is still contestable, having been reinstated 1 year ago.

28. Juan owns a house valued at PhP10 million and he insured the same for PhP5 million under a fire insurance policy with a co-insurance clause in case of underinsurance. The house was partially burned to the extent of PhP1 million. How much is payable under the policy? a. The entire PhP1 million partial loss is payable because in fire insurance the full amount of the partial loss is payable as long as it does not exceed the amount of insurance. Only of the partial loss of PhP1 million or PhP500,000 is payable because coinsurance was stipulated and the insured consequently became his own insurer for the difference between the value of the property insured and the amount of the insurance. Nothing is payable because partial losses in case of underinsurance can be collected only in marine insurance.

b.

26. Pedro insured under a Loss or Damage Coverage his car-financed BMW under a motorcar policy with a mortgage clause payable to Bata Financing Co. as its interest may appear. 6 months later, after he fully paid his car loan, he died leaving the car to his favorite son, Junior, in accordance with his will. A week after his death, the insured BMW was stolen and never recovered. Is the claim of Junior, Pedros son payable under Pedros motorca r insurance policy?

c.

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29. An insurance company got into a dispute with its agents. The insurance company filed a case before the insurance commissioner to settle the dispute. The Insurance Commissioner should: a. b. Dismiss the case, as he only has jurisdiction over matters involving insurance contracts, and disputes between the insured and the insurer. Take cognizance of the case as he is authorized to see that all laws relating to insurance, insurance companies and other insurance matters, are faithfully executed. Refer the matter to the Secretary of Finance.

c.

30. A was insured under a life insurance contract with ABC Insurance. Upon his death during the effectivity of the policy, his heirs filed a formal claim with the insurer for the proceeds of the policy, along with the proof of death. The insurance company failed to act on the claim within 60 days from the filing of the claim and the proof of death. Upon a finding by the court that there was unreasonable delay in the settlement of the claim, ABC Insurance will be liable for: a. b. c. The insurance proceeds only. The insurance proceeds plus interest at twice the ceiling rate provided by the BSP. They are not liable for anything, as they can validly deny claims.

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ESSAY
1. Mike owns a Honda CRV and he obtained a PhP50,000 compulsory motor vehicle liability insurance coverage from Tagal Bayad Ins. Co. While driving his CRV, he bumped a RAV 4 insured by Segurista Insurance Co. with the same insurance coverage as Mikes policy. Cesar, a passenger of the RAV 4, suffered bodily injuries amounting to PhP10,000. The RAV 4 was likewise damaged amounting to PhP15,000. a. Suppose the claimants want immediate payment but the responsibility for the accident cannot yet be established, which insurance company should pay the proper damages and how much should be paid? Explain. However, no immediate payment may be made for the damages of the RAV 4. The damages to the RAV 4 may not be claimed under the no fault indemnity clause, since such clause only covers physical injuries or death resulting from vehicular accidents. The clause does not cover rd damage to property, but only damage to 3 persons. b. Assuming that no payment had been advanced, and Mike was ultimately held responsible for Cesars injuries and damage to the RAV 4, which insurance company is liable and for how much? Explain.

SUGGESTED ANSWER: Tagal Bayad Insurance should be held liable only for the physical injuries sustained by Cesar, and not for the damage to the RAV 4. Being the insurer of Mike under CMVLI, it had rd assumed liability for Mikes liability to 3 persons arising from bodily injuries or death resulting from motor vehicle mishaps. Cesar may thus recover from Tagal Bayad the full amount of PhP10,000 as the amount he had to expend as a result of his injuries. The full amount of the expenses may be claimed as it had now been conclusively determined and proved that the negligent driver at fault is Mike and, his insurer may be held liable for the fault or negligence of the insured pursuant to damages caused which are covered by the policy it issued. On the other hand, compensation claimed for the damages caused to the RAV 4 may not be made the liability of Tagal Bayad, as CMVLI only covers bodily injuries and death to third persons, not including damage to property . Thus, no liability attached to Tagal Bayad for the damages sustained by the RAV 4, and it may not be held liable therefore. 2. Juan owns a house worth PhP 3 million and he insured the same under 3 fire insurance open policies, allowing double insurance but with co-insurance clause in case of underinsurance: Co. A PhP1 million Co. B PhP3 million Co. C PhP6 million Suppose the house burned and the claim adjusters determined the value of the house as 3 million. a) Against what insurance company may Juan claim his loss? Explain.

SUGGESTED ANSWER: For the immediate payment of bodily injuries suffered by Cesar as passenger of the RAV 4, he rd can claim from the 3 party liability of Segurista Insurance Co. under the no fault indemnity clause and for compensation of only up to PhP5,000. The no fault indemnity clause is a provision under the CMVLI which allows 3 party claimants to claim damages from insurers without first proving the fault or negligence of the insured. The law provides, under Section 378, the requirements for claims under the no-fault indemnity clause: 1. 2. The total indemnity in respect of any person shall not exceed five thousand pesos; The following proofs of loss, when submitted under oath, shall be sufficient evidence to substantiate the claim: (a) Police report of accident; and (b) Death certificate and evidence sufficient to establish the proper payee; or (c) Medical report and evidence of medical or hospital disbursement in respect of which refund is claimed; Claim may be made against one motor vehicle only. In the case of an occupant of a vehicle, claim shall lie against the insurer of the vehicle in which the occupant is riding, mounting or dismounting from. In any other case, claim shall lie against the insurer of the directly offending vehicle. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident shall be maintained.
rd

3.

4.

Hence, Cesar, as passenger of the RAV 4 insured by Segurista Insurance may claim indemnity for his injuries under the no fault indemnity clause, which may be filed against the insurer of the vehicle in which he was a passenger, in an amount not exceeding PhP5,000, and provided he submit the requisite proofs required by the law.

SUGGESTED ANSWER: Section 94 of the Insurance Code provides that the insured may claim from the insurers in the order he selects up to the limits of the individual policies. Thus, Juan can claim the whole

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Php 3 million from Co. B or get PhP1 million form Co. A and the remaining PhP2 million from Co. B, or get only PhP3 million from Co. C, or any other combination he desires, as long as the insurance companies cannot be held liable for more than what their respective policies provide. In any case, if the insured received any sum in excess, he must hold it in trust for the insurers according to their right of contribution amongst themselves. Section 94 also provides that if the policy is undervalued, the insured shall give credit as against the full insurable value for sum received by him. In this case, the value of the property shall be determined by the amount needed to replace the property, at the time for the loss. Such amount, which has been here determined to be PhP3 million, will then be made the basis for crediting the amounts received by the insured from the different insurers. Thus, Juan can claim from any one of the insurers only up to the extent of PhP3 million, determined to be the value of the property at the time of the loss. After claiming from such insurers as he chooses, Co. A, B and C are then bound to contribute as between themselves the insurance paid in proportion to the insurable interest under their separate policies. b) How much is each insurer bound to contribute as between him and the other insurers? Show computation and explain. Hence, since the three companies must contribute ratably to the loss: Co. A having a 1/10 share in the liability must pay PhP300,000; Co. B with a share of 3/10 must contribute PhP900,000; and Co. C with the biggest share of 3/5, must contribute PhP1.8 million. 3. Suppose in the case above, the 3 million house is partially burned to the extent of only 1 million, as determined by the adjusters. a. How much is Juan entitled to if he filed his claim with Co. A only. Show Computation and explain.

Co. A will only be held liable for PhP333,333 of the partial loss. Section 172 of the Insurance Code provides that the full amount of partial loss is payable unless co-insurance is stipulated. In this case, there is under insurance of Php 2 million, derived from deducting the PhP1 million worth of insurance policy of Co. A from the PhP3 million value of the house. Hence, the co-insurance clause will apply. The insurer is bound to contribute in proportion to the amount of interest insured as the loss bears to the value of the property lost, thus:

SUGGESTED ANSWER: Section 94 provides that each insurer is bound to contribute ratably to the loss. Thus:

For Co. A

Because the co-insurance clause applies due to underinsurance, the insured will consequently become his own insurer for the difference between the value of the property insured and the amount of the insurance. Hence, Juan will have to bear the remaining amount of partial loss from the PhP1 million, which is PhP666,666.66. b. If he files a claim against Co. B only? Explain.

For Co. B SUGGESTED ANSWER: Co. B will be liable for the full amount of the partial loss which is Php 1 million. In this case, since the amount of insurance is Php 3 million is equal to the value of the house, there is no under insurance. Hence, the co-insurance clause will not apply. The insurer is bound to
contribute in proportion to the amount of interest insured as the loss bears to the value of the property lost, thus,

For Co. C

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from failure to pay his premiums upon due date. Such is an exception to the general rule that the insurance policy shall be considered without effect or to have lapsed due to nonpayment of premiums. During the 30 day-1 month period, the policy shall remain in force and effect. If the insured dies within this period, or the risk insured against happens, then the amount due, the interest on such amounts, and any indebtedness of the insured to the insurer, will be subtracted from the proceeds of the policy. Thus, the grace period allows the insured policy holders of life insurance policies to pay their premiums within the 30-day/1month period after due date, after the first premiums have been paid, and for the same policyholders to have the protection of their policies within the said period, despite nonpayment of the premium. 6. Enumerate the valid reasons which an insurer may use for cancelling a non-life insurance policy.

Thus, Co. B may be held liable for the full amount of the partial loss worth PhP1 million, which is the exact amount of the insurable interest covered in its insurance policy issued to Juan. 4. Pedro has a PhP10 million life insurance policy issued by XYZ Co. on June 1, 2001 which was in force at the time he deliberately killed himself on January 15, 2004, after having reinstated his policy barely 6 months earlier. How much is XYZ Co.s liability for his death, if any?

SUGGESTED ANSWER SUGGESTED ANSWER: XYZ Co. may not be held liable under the life insurance policy issued in favor of Pedro. Under Section 87 of the Insurance Code, it is provided that the insurer may not be held liable for the willful act of the insured which causes damage or injury. However, under Section 180-A of the same Code, it is provided that the insurer is liable for suicide by the insured if: 1. when the suicide is committed after the policy has been in force for at least 2 years from the date of its issue or last reinstatement unless a shorter period is stipulated Even within the said 2 year period, if the insured was insane when he committed suicide. A non-life insurance policy may be cancelled by the insurer, upon prior notice, for the one or more of the following: 1. 2. 3. 4. 5. 6. non-payment of premium; conviction of a crime arising out of acts increasing the hazard insured against; discovery of fraud or material misrepresentation; lawphi1.net discovery of willful or reckless acts or omissions increasing the hazard insured against; physical changes in the property insured which result in the property becoming uninsurable; or a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code.

2.

In this case, when Pedro committed suicide, barely 6 months had passed from the last reinstatement of the policy. Thus, the case does not fall under the first exception. There is also no indication that it falls under the second exceptions are the facts do not show that Pedro was insane. Although generally, the basic instinct for self-preservation would militate against the presumption of suicide, once it is proven that suicide was deliberately made and not among the exceptions provided by the law to make an insurer liable for suicide, then the insurer may not be held liable. Thus, XYZ Co. may not be held liable for the suicide of Pedro which was deliberately made, well within the 2 year period from its last reinstatement. 5. Explain the Grace Period Clause in the proper insurance contract.

7.

Seguro Insurance Co. issued a PhP100 million single marine insurance policy on a shipment by sea from USA to Manila against total loss only, actual or constructive. The following amounts were stated in the policy: 1 container of car parts 1 container of computers 1 container medical supplies Total PhP 70 million PhP20 million PhP10 million ____________ PhP100 million

SUGGESTED ANSWER: A grace period clause is a provision which must be included in life, group life or industrial life insurance contract, whereby the insured is provided a period or 30 days or 1 month

The 3 container vans were loaded in the S.S. President Kennedy. Because of the rough seas, damage resulted in the complete loss of the car parts. The owner of the shipment filed a claim against the insurance company but Seguro Insurance Company denied the claim.

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Is the insurance company liable under its policy? Explain using the applicable law provision. SUGGESTED ANSWER: Yes, Seguro Insurance is liable because the car parts were separately valued, and thus, were separately insured. Section 139 of the Insurance Code provides that abandonment may be done when more than (more than 75%) of the value is lost or will be suffered or spent by the insured to recover the thing insured or its equivalent. The insured may abandon the thing insured, the particular portion separately valued or the thing separately insured and such abandonment entitles the insured to recover a constructive total loss. In this case, if we take the whole shipment as a whole, the value of the loss would not be more than which would entitle the insured to recover a constructive total loss. However, the car parts, computers and medical supplies here were separately valued and separately insured. Hence, abandonment may be done since there was complete loss of the car parts (100% of the value) and the insured may recover for total loss from Seguro Insurance. 8. What acts constitute unfair claims settlement practices of insurance companies? Under what conditions do they become unfair practices? What are the legal sanctions imposed on erring insurance companies for engaging in these practices? 9. 1. 2. Sanctions; or Revocation of the insurance companys certificate of authority 1. 2. Committed without just cause Committed with such frequency as to constitute a general practice

The sanctions imposed against erring insurance companies shall be

What is deviation and what is its relevance in a marine insurance contract? When is deviation proper and when is it improper?

SUGGESTED ANSWER: Deviation is the departure from the course of the voyage, unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage. It is relevant because under Section 126, an insurer is not liable for any loss happening to the thing insured subsequent to an improper deviation. A deviation is proper when: 1. 2. 3. 4. When caused by circumstances beyond the control of the master or shipowner To comply with a warranty or to avoid a peril when necessary To avoid a peril insured or not, when made in good faith or reasonable belief in its necessity To save human life or save a ship in distress when made in good faith.

SUGGESTED ANSWER: Any of the following acts constitute unfair claim settlement practices: 1. 2. 3. 4. 5. Knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverages Failure to acknowledge with reasonable promptness communications with respect to claims Failure to adopt and implement reasonable standards for prompt investigation of claims Not attempting in good faith to effect prompt, fair, and equitable settlement of claims where liability has become reasonably clear Compelling policyholders to institute suits to recover amounts due by offering substantially less than the amounts ultimately due them

The abovementioned enumeration is exclusive. If it is not enumerated in Section 124, the deviation is improper. 10. In 1986, Juan constructed a house worth P5 million which he insured for that amount under a fire insurance policy with a co-insurance clause. The insurance coverage for the same amount was renewed every year. In 1996, when the house was already worth P10 million on account of inflation, 1/5 of the house was destroyed by fire. Assuming that Juan was completely blameless and that there was nothing illegal about the contract how much, if any, can Juan successfully recover from the insurance company. a. If Juans fire assurance policy is a valued policy? Please explain.

In order for the aforementioned acts to be considered unfair claim settlement practices, they must be:

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SUGGESTED ANSWER Section 171 of the Insurance Code provides that if there is a valuation (valued policy), the valuation stated on the face of the policy is conclusive between the parties. In this case, the valuation stated on the policy is P5 million and the loss is 1/5 of the house. Thus, Section 93 and 94, clearly recognizes its existence by providing for the instances when a double insurance exists and the consequences of over insurance in case of double insurance. Moreover, in this case, there is no double insurance to begin with. Section 93 provides that a double insurance exists when: 1. 2. 3. 4. 5. The same person is insured By several insurers, separately Subject insured is the same The interest insured is the same The peril insured against is the same

Thus, Juan can recover Php 1 million pesos. b. If the fire policy is an open policy? Please explain

Section 171 of the Insurance Code provides that if there is no valuation in the policy (open policy), the measure of indemnity is its replacement cost at the commencement of the fire. In this case, the value of the house (replacement cost) at the time of the commencement of the fire is Php 10 million and the loss is 1/5 of the house. Thus,

Here, the person insured in the insurance policy with First Insurance is the businessman while with Second Insurance, the person insured is the creditor. Also, the insurance policy with First insurance was on the interest as an owner while the policy with Second Insurance was on the interest as a creditor.

6.

Suppose you are the judge, how much, if any, would you allow the businessman and/or the creditor to recover from their respective insurers. Please explain.

SUGGESTED ANSWER As the Judge, I would allow the businessman to recover his total loss of Php 5 million representing the full value of his goods which were lost through fire and I would allow the creditor to recover the amount to the extent of the credit he extended to the businessman for the stocks-in-trade which were mortgaged by the businessman to him. This decision is based upon the finding that since no double insurance exists in this case as the interest insured here are not the same, one being interest as an owner and the other interest as creditor, the basic rules in insurance will apply. Hence, since insurance on property is a contract of indemnity, the insured is entitled to recover the amount of loss he actually suffered. In this case, the businessman lost Php 5 million worth of goods. On the other hand, a mortgagor may only recover up to the extent of his credit. In this case, the creditor may only recover what portion of the Php 5 million he actually loaned to the businessman or if the full amount was loaned, then he may recover the full value.

Thus, Juan can recover Php 2 million pesos. 11. A business man in the grocery business obtained from First Insurance a fire insurance policy for P5 million to fully cover his stocks-in-trade. Three months thereafter, a fire of accidental origin broke out and completely destroyed the grocery including his stocksin-trade. The businessman filed with First Insurance a claim for P5 million representing the full value of his goods. First Insurance denied the claim because it discovered that at the time of the loss, the stocks-in-trade were mortgaged to a creditor who likewise obtained from Second Insurance Company fire insurance coverage for the stocks at their full value of Php5 million. 1. First Insurance refused to pay claiming that double insurance is contrary to law. Is this contention tenable? Please explain.

SUGGESTED ANSWER: No, First insurances contention that double insurance is contrary to law must fail. There is no law which provides that double insurance is illegal per se. In fact, the Insurance Code, under

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12. Suppose that Fortune owns a house valued at P600,000 and insured the same against fire with three (3) insurance companies as follows: X Y Z a. P400,000 P200,000 P600,000 For Y

For Z

In the absence of any stipulation in the policies, from which insurance company or companies may Fortune recover in case fire should destroy his house completely? Please explain Hence, out of Xs maximum liability of Php 400,000 (the face amount of the policy), Fortune may recover Php 333,333.33. c. If each of the policies obtained by Fortune in problem a) above is an open policy and it was immediately determined after the fire that the value of Fortunes house was P2.4 million, how much may he collect from X, Y and Z? Please explain

SUGGESTED ANSWER: Fortune may recover from X, Y, and Z insurance companies. Section 94 provides that, as a consequence of over-insurance in case of double insurance, unless otherwise provided in the policy, the insured may claim from the insurers in the order he selects up to the limits of the individual policies. In this case, Fortune may recover from X, Y, and Z up to the amount for which they are severally liable under their respective contracts. Fortune may recover from any of them up to the extent of their maximum liability under their respective contracts and among the insurers, each insurer is bound to contribute ratably to the loss in proportion to the amount for which he is liable under his contract. b. If each of the fire insurance policies obtained by Fortune in problem a) is a valued policy and the value of his house was fixed in each of the policies at P1 million, how much would Fortune recover from X if he has already obtained full payment on the insurance policies issued by Y and Z? Please explain

Section 171 of the Insurance Code provides that if there is no valuation in the policy (open policy), the measure of indemnity is its replacement cost at the commencement of the fire. And in Section 172, it states that if there are 2 or more policies, each policy contribute prorata to the payment of such loss. In this case, the ascertained value of the house at the commencement of the fire was P2.4 million and each of the policy must contribute pro-rata to this loss. Thus,

Section 171 of the Insurance Code provides that if there is a valuation (valued policy), the valuation stated on the face of the policy is conclusive between the parties. And in Section 172, it states that if there are 2 or more policies, each policy contribute pro-rata to the payment of such loss. In this case, the valuation of Php 1 million is conclusive upon X, Y and Z and each of the insurers must contribute pro-rate to the loss. Thus,

For X

For Y

For X

For Z

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However, Fortune cannot recover the abovementioned pro-rata contributions. Section 172 provides that in no case shall the insurer be required to pay more than the amount stated in the policy. The face amount of the policy is the maximum amount of the insurers liability. Hence, Fortune can only recover Php 400,000 from X, Php 200,000 from Y and Php 600,000 from Z. d. In problem a), what is the extent of liability of the insurance companies among themselves? SUGGESTED ANSWER: Nom Fortune may not keep the entire amount he was able to collect from Y and Z insurance companies. Section 94 provides that if the insured received any sum in excess, he must hold it in trust for insurers according to their right of contribution among themselves. Hence, Fortune is obliged to hold in trust the following:

SUGGESTED ANSWER: Section 94 provides that among themselves, each insurer should contribute ratably to the loss or in proportion to the amount for which he is liable under his contract, thus: Amount to be held in trust For Y

For X

For Y

Amount to be held in trust for Z

For Z Hence, Fortune cannot keep the full amount of Php 200,000 from Y and Php 600,000 from Z but is instead bound to hold in trust Php 100,000.01 for Y and Php 300,000 for Z in accordance with their right of contribution. Since the three companies must contribute ratably to the loss: X will be liable for Php 199,999.99, Y will be liable for Php 99,999.999 and Z will be liable for Php 300,000. e. Supposing in problem a) above, Fortune was able to collect from both Y and Z, may he keep the entire amount he was able to collect from the said two insurance companies? Please explain 13. Ricardo insured his brand new car with Beta Insurance Company for comprehensive coverage wherein the Insurance Company undertook to indemnify him against loss or damage to the car (a) by accidental collision xxx; (h) by tire, external explosion, burglary, or theft, and (c) by malicious act. The car was carnapped while parked in front of the Intercontinental Hotel in Makati. Ricardos wife, who was driving the said car before it was carnapped, reported immediately the incident to various government agencies in compliance with Insurance requirements. Because the car could not be recovered, Ricardo filed a claim for the loss of the car with the insurance company. It

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was denied on the ground that his wife had an expired drivers license, a violation of the authorized driver clause of the motor car insurance policy a. May the Insurance company be held liable to indemnify Ricardo for the loss of the insured vehicle? Please explain of its issue or its last reinstatement, unless the policy provides a shorter period. Provided, however, that suicide committed in a state of insanity shall be compensable regardless of the date of commission. (Sec. 180-A, IC) c. No Fault indemnity clause

SUGGESTED ANSWER Yes. Under the authorized driver clause, the driver must be permitted by the insured to drive the motor car and it is likewise essential that the driver is permitted by law and regulations to drive the motor vehicle and is not disqualified from doing so under any regulation. The insurance company denies liability because, in this case, the wife drove the vehicle with an expired drivers license a violation of the authorized drivers clause. This contention must fail as jurisprudence provides that the authorized driver clause is not applicable in case of theft. When a car is admittedly unlawfully and wrongfully taken without the owners consent or knowledge, such taking constitutes theft and it is the theft clause and not the authorized driver clause that should apply. Hence, Beta Insurance is liable to indemnify Ricardo for the loss of the vehicle. 14. Explain the following using the proper insurance contracts: a. Incontestable clause

SUGGESTED ANSWER The no fault indemnity clause applies in Compulsory Motor Vehicle Liability Insurance, or rd CMVLI. Sec. 378 of the IC provides that, any claim for death or injury to any passenger of 3 party pursuant to the provisions of the IC on CMVLI, shall be paid without the necessity of proving the fault or negligence of any kind. Provided, however, that for purposes of the said provision, that: 1. 2. The total indemnity in respect of any person shall not exceed PhP5,000 The following proofs, when submitted under oath, shall be sufficient evidence to substantiate the claim: Police report of the accident, or Death certificate and evidence sufficient to establish the proper payee; or Medical report and evidence of medical or hospital confinement in respect of which the refund is claimed. The claim may be made against one motor vehicle only. In case of an occupant of the vehicle, the claim shall lie against the insurer of the vehicle he/she is riding, mounting or dismounting from. In any other case, the claim shall lie against the insurer of the directly offending vehicle. In all cases, the right of the party paying the claim to recover against the owner of the vehicle responsible for the accident shall be maintained. Security Fund

3. SUGGESTED ANSWER Sec. 48, Par. 2: After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. The so-called incontestability clause precludes the insurer from raising the defense of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least 2 years during the insured s life time. The phrase during the lifetime simply means that the policy is no longer considered in force after the insured has died. The key phrase is for a period of 2 years. (Tan v CA) b. Suicide Clause

d.

SUGGESTED ANSWER The insurer in a life insurance contract shall be liable in case of suicide by the insured only when it is committed after the policy has been in force for a period of 2 years form the date

Chapter V of the IC created what is now called the security fund, which shall be used in the payment of allowed claims against an insurance company authorized to transact business in the Philippines remaining unpaid by reason of the solvency of such company. The said Fund may also be used to reinsure the policy of the insolvent insurer in any solvent insurer authorized to do business in the Philippines as provided in section two hundred forty-nine. In the event of national emergency or calamity, the Fund may likewise be used to pay insured claims which otherwise would not be compensable under the provisions of the policy. No payment from the Security Fund shall, however, be made to any person who owns or controls ten per centum or more of the voting shares of stock of the insolvent insurer and no payment on any one claim shall exceed twenty thousand pesos.

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15. Insurance is contract uberrimae fidei. Please explain. SUGGESTED ANSWER SUGGESTED ANSWER A contract of insurance is said to be a contract of utmost good faith or uberrimae fidei, not just on the part of the insurer, but also on the part of the insured. Sec. 28 of the IC provides that each party to a contract of insurance must communicate to the other, in good faith, all fact within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining. 16. Property insurance is strictly a contract of indemnity, but life insurance is not strictly a contract of indemnity. Please explain. SUGGESTED ANSWER: The measure of insurable interest in property is the extent to which the insured might be damnified by the loss or peril insured against, as provided by Sec. 17 of the IC. On the other hand, Sec. 28 of the same Code provides that the measure of indemnity in life insurance is the amount fixed in the policy, unless the interest of one insured is measurable, such as in the cases of life insurance taken out by the creditor on the life of his creditor, which in such case, the creditor may claim a specific amount which is the debt of the insured debtor. Thus, in life insurance there is really no actual measure of indemnity, except for the amount of stated in the policy, which may or may not be the amount of the loss. thus, though property insurance is strictly a contract of indemnity, such that the insured may recover the amount of loss, provided it does not exceed the amount in the policy, in life insurance, the amount stated in the policy which is recoverable upon the happening of the risk insured against, may not even be equal to the amount of the loss suffered, thus making it one which is not strictly a contract of indemnity. 17. An insurance contract is contra preferentem. Please explain. SUGGESTED ANSWER An insurance contract is similar to other contracts, which, in case of ambiguity therein, would be interpreted against the person causing the ambiguity. Most insurance contracts are contracts of adhesion, which are prepared by the insured, for signature or conformity only of the insurer. Thus, any ambiguity resulting form such contract would be interpreted against the person causing such ambiguity, which is the insurer. (Art. 1377 of the Civil Code) Art. 2011 of the Civil Code provides that The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code, thus, in case of absence of any provision in the IC, the Civil Code will govern. And in case of ambiguities in the contract, the provision under Art. 1377 of the CC may be applied. If the contention of Y Insurance is that the contract is void, as the Insuarance Code provides , under Sec. 7 that anyone who is not a public enemy may be insured, and under such provision, being public enemy no. as classified by the NBI amounts to being a public enemy, then such contention is incorrect. As explained in the case of Filipinas Cia. De Sguros v Chirstern Huenefeld, a public enemy is a nation with whom the Philippines is at war, and includes the citizens and subjects of such nation. In this case, since B is only classified as public enemy no. 1, and not a subject of a nation with whom the Philippines is at war, then an insurance contract may be properly taken out on his life. However, if the claim of Y Insurance was that the insurance policy is rescindable by reason of the fraudulent concealment or misrepresentation of the insured, then such defense may be raised against the claim for the proceeds, as the policy is not yet incontestable. Sec. 48 of the IC provides that after a policy of life insurance made payable upon the death of the insured As a general rule, any person may be a beneficiary under an insurance policy. However, as an exception, since the Civil Code provisions apply suppletorily to Insurance contracts in the absence of a provision in the IC which is resolutory of the issue at hand, the provisions of the Civil Code may apply such that the only persons disqualified from being a beneficiary are those not qualified to receive donations under Art. 739 of the Civil Code. They cannot be named beneficiaries of a life insurance policy by the person who cannot make any donation to him. This is so because, Art. 2011 of the same Code provides: Any person who is forbidden from receiving any donation under Art. 739 cannot be named a beneficiary of a life insurance policy by the person who cannot make any donation to him, according to said article. Art. 739 provides the following as unqualified from receiving the proceeds of a life insurance policy taken out by the person who may not give a donation to him/her: (1) Those persons who were guilty of adultery or concubinage at the time of the donation (or designation as a beneficiary); (2) Those persons found guilty of the same criminal offense, in consideration thereof; (3) A public officer, or his wife, descendants and ascendants by reason of his office. 19. A convicted murderer, and acknowledged by the NBI as public enemy No. 1, insured his life with Y Insurance Co. 4 months later, he was shot dead. After identifying his identity, Y Insurance refused to give the insurance proceeds to the beneficiary on the ground that it is not within the Insurance Code, and the contract is void ab initio. Is Y Insurance correct? Please explain. SUGGESTED ANSWER 18. Enumerate those disqualified by law from becoming beneficiaries in a life insurance policy

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has been in force during the lifetime of the insured for a period of 2 years from the date of issue or its last reinstatement, the insurer cannot prove that such contract is void, of that is it rescindable by reason of the fraudulent concealment or misrepresentation of the insured. Such provision is not applicable in this case, as the policy was only in force for 4 months from its issuance until the time the insured was shot dead. Thus, the insurer may still contest the validity of the policy, however, it may not raise the defense of the contract being void as A is not a public enemy. 20. A took a life insurance policy and named B, a BIR examiner as his sole beneficiary as a reward for his help in lowering his tax liabilities. Is the life insurance policy valid? Explain. SUGGESTED ANSWER The life insurance policy is not void, but the designation of B as beneficiary is void. It is provided that in case of absence of a provision relating to an issue between the parties to an insurance contract, then the provisions of the Civil Code will apply. Since the IC failed to designate who are qualified to be beneficiaries, the Civil Code provisions on such will apply. Sec 2011 provides that any person who is forbidden from receiving any donation under Art. 739 cannot be named a beneficiary of a life insurance policy by the person who cannot make any donation to him, according to said article. Art. 739 provides that the following donations are void: (1) Those made between persons who were guilty of adultery or concubinage at the time of the donation; (2) Those made between persons found guilty of the same criminal offense, in consideration thereof; (3) Those made to a public officer, or his wife, descendants and ascendants by reason of his office. In this case, A cannot make B the beneficiary of his life insurance policy, since the designation of B as such is due to an act done by B by reason of his office, in favor of the insured A. thus, B rd falls within the 3 prohibition, and thus making the designation of B as a beneficiary as void. In such a case, jurisprudence provides that if there are no other qualified beneficiarie, then the proceeds of the policy will inure to the benefit of the estate of the deceased, which shall be then be distributed to the heirs, along with his other properties. 21. Under an insurance policy, the insurer A undertook to pay among other disabilities, for loss of a leg due to amputation. The insured B suffered injuries to his left leg on which a heavy object had fallen. The leg was not amputated but the insured B was actually disabled to perform his usual work for 12 months. Insurer A refused to pay claiming that this type of disability was not payable within the policy terms while the insured B insisted that what was insured against was disability and in case of doubt, it should be resolved in his favor. Decide the case and explain. SUGGESTED ANSWER The insurer may validly deny the claim of the insured in this case. Since the provisions of the Civil Code are suppletorily applicable to insurance contracts, the provisions of the Civil Code on contracts may be used in this case. Art. 1377 of the Civil Code provides that the interpretation of contracts, the court shall not favor the one who caused the obscurity. Thus, for any ambiguities, which, by the exclusive control of the insurance company over the terms and phraseology of the contract, the ambiguity must be strictly interpreted against the insurer, most especially to avoid forfeiture of the proceeds thereof. (Qua Chee Can v Law Union) On the other hand, if there is no ambiguity, and the insurance contract is clear, then there is no room for interpretation, in line with the rules of statutory construction. (Ty v Filipinas Cia. De Seguros) Thus, in this case, the contract of insurance specifically and clearly provided that the loss covered by the said contract would only involve loss of a leg due to amputation. Since the contract is specific, and clearly provided for the coverage of the policy, there is no room for interpretation, and the contract must be applied as it stands. Thus, because the disability of B was not due to amputation, then such disability is not covered by his policy, and the insurer A, may validly deny the claim. 22. X insured his house against fire for P1 million on Sept. 1, 1994. The house is now worth Ph2 million. On said date, X obtained a loan of P500,000 from Y. On September 10, 1994, X sold the house to Z. On Sept. 27, 1991, the house was totally burned by fire of accidental origin. What are the rights of X, Y and Z on the insurance policy? Please explain. SUGGESTED ANSWER As to X, the insured, he may not file a claim due to the fire which occurred on Sept. 27, 1991, as he had already sold the house to Z. this is so because, Under Sec. 19 of the insurance code, an interest on the property insured must exist when the insurance takes effect, and when the loss occurs, but not exist in the meantime. Thus, in order for him to be entitled to a claim he must both have insurable interest therein at the time of issuance of the policy and at the time of the loss. since he only had insurable interest at the time of the issuance of the policy being the owner of the house at the time, and not at the time of the loss or fire for having sold it to Z, then, according to Sec. 18, the contract of insurance on the said property is unenforceable as to him, for having no insurable interest. Thus, since the contract is unenforceable as to him, he may not claim proceeds on the policy. As to Y, he may not claim on the fire insurance policy on the burned house. This is so because he has no insurable interest in the property. Sec. 17 provides that an insurable interest in the property is the extent to which an insured may be damnified by loss or injury thereof. in this

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case, even if the house is totally burned, Y will not suffer any loss or injury because, he has no interest on such property, not being an owner, mortgagee, or any person having interest thereon. Although Sec. 14 provides that insurable interest in property may consist of an inchoate interest or an expectancy, such must be coupled with an existing interest, which Y does not have, merely being a creditor of X. he has no existing interest on the property, as the property was not even mortgaged to him to secure the unpaid loan of X. As to Z, Z may also not claim the proceeds of the fire insurance policy. This is so because insurable interest in property must exist both at the time of the issuance of the policy and at the time of the loss. Sec. 20 provides that any change in interest in any part of the thing insured unaccompanied by the corresponding change in interest in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing insured and the interest in the insurance are vested in the same person. Since the ownership of the property was transferred to the new owner Z, but the policy remained with X, the insurance is suspended, and no claims may be brought against such policy. This is reiterated in sec. 58, whereby it is provided that the transfer of a thing insured does not automatically transfer the policy. This being the case, Z may not claim the proceeds of the policy issued in the name of X, in the absence of any corresponding transfer of the policy in the name of Z. 23. X applied for a life insurance policy on Oct. 12, 1990, stating at the time that he had never suffered from any typhoid fever. On Nov. 3, 1990, he became ill with typhoid fever and completely recovered on Nov. 18, 1990. On Dec. 15, 1990, the date of issue, the policy was delivered amid the first premium paid by him without disclosure of the rd typhoid illness. On Dec. 15, 1992, X failed to pay the 3 annual premium and his policy lapsed. In his application for reinstatement which was approved on March 15, 1993, he answered truthfully all questions about his health since the date of issue, Dec. 15, 1990. X died from appendicitis on March 30, 1993. Can the insurer refuse to pay the claim? Please explain. SUGGESTED ANSWER The claim is payable as the insurer had already waived the representation at the time of the reinstatement. In this case, there was an admitted representation at the time of the issuance of the policy, on Dec. 15, 1990. As stated in Sec. 37, a representation is made at the time of, or before the issuance of a policy, thus, when X failed to disclose his typhoid fever after the application and before the issuance of the policy, there was misrepresentation. But, the misrepresentation, prior to the reinstatement may no longer be invoked by the insurer in denying the claim on the reinstated policy. It is held by jurisprudence (Gua Chee Can v Law Union) that where the insurer, at the time of the issuance of a policy of insurance, has knowledge of existing facts which, if insisted on, would invalidate the contract form its inception and fails to inquire thereon, such knowledge constitutes a waiver of conditions in the contract inconsistent with the facts, and the insurer is estopped from asserting the breach of such conditions. When the insurer in this case approved the reinstatement of the policy, the insurer already had knowledge of the prior misrepresentation when X admitted in the application of reinstatement all of his previous illnesses, including the typhoid fever. Therefore, the insurer is estopped form asserting misrepresentation to deny the claim of X. Also, the misrepresentation on the previous lapsed policy can no longer be used to invalidate the reinstated policy, most especially since the insurer now had knowledge of facts, which the insured failed to diclose at the time of the issuance of the previous policy. 24. Alpha Co. issued a single marine insurance policy covering a shipment by sea from USA against total loss only, actual or constructive valued as follows:

1 box of textbooks 1 million 1 box of office supplies 2 million 1 box of med equipment 7 million TOTAL = 10M The boxes were loaded in 2 vessels, the first with textbooks and office supplies and the second with the medical equipment. Because of the rough seas, damage was caused to the second vessel, resulting in the loss of the box of medical equipment. The owner of the shipment filed a claim against the insurance for total loss but Alpha company denied the claim, on the ground that there was partial loss only. Is the insurance company liable under this policy? SUGGESTED ANSWER: YES. In this case, there was constructive total loss of the medical equipment. Sec 131 of the Insurance Code provides that a constructive total loss is one which gives to a person insured a right to abandon. In relation to Sec 131, Sec 139 provides that a person insured by a contract of marine insurance may abandon the thing insured, or any particular portion thereof separately valued by the policy, or otherwise separately insured and recover for a total loss thereof, when the cause of the loss is a peril insured against. Thus, in this case, the insurance company is liable because the medical equipment were separately valued, and thus, separately insured.

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25. GA Inc, a general agent of ABC Non-Life Insurance Co. was authorized to issue insurance policies and collect the corresponding premiums in behalf of ABC. On Feb 15, 1991, ABC and GA mutually agreed to terminate their agency agreement. ABC thereupon sent a statement of account to GA asking, among other things, the remittance of 200,000 in overdue and uncollected premiums on fire insurance policies issued to several clients by GA in behalf of ABC. GA refused to pay. How much can ABC collect from GA, if any? SUGGESTED ANSWER Sec 77 provides that no policy or contract of insurance is valid and binding unless and until the premium has been paid. Since the premiums have not been paid, the policies therefore issued by ABC have lapsed. The insurance coverage did not go into effect and the obligation of GA as insurer ceased. Hence, since GA would not be liable under the insurance policies, it follows that it cannot ask from ABC for the unpaid premiums. It would also be the height of injustice and unfair dealing [Valenzuela v. CA, G.R. 83122 in relation to Sec 77] 26. In 1990, Pedro insured his forbes park mansion under a fire insurance policy with Beta Co. Three months later, he died and in accordance with his will, he left the mansion to his son Junior. Unfortunately, fire burned down the mansion after a month. Is the claim payable under Juans fire insurance policy? Can Juniors claim f or the loss prosper under said insurance policy? alighted was guilty of negligence in unloading in the middle of the street and that the driver of Pedro was not at fault. a. Is General Insurance correct?

SUGGESTED ANSWER Not entirely. Under Sec 378, a claim for death/bodily injuries shall be paid without necessity of proving fault or negligence. However, the amount is limited to P5,000 per person. Thus, General Insurance must pay the first PhP5,000 claim of Bert. With respect however, to the other 5,000, the no-fault indemnity clause will not apply as General Insurance may avail of the finding of fault/negligence. b. What are other options open to Bert?

SUGGESTED ANSWER It must be reiterated that Sec 378 provides that a claim may be made against one motor vehicle only. Second, Bert preserves his right to after the owner of the vehicle responsible for the accident. In this case therefore, Bert can go after Okay Insurance, the insurer of the vehicle which he was dismounting or alighting from. He can also go after General Insurance, the insurer of the jeep which bumped him. However, going after one insurer will preclude him from going after the other. 28. Pedro has a 1M life insurance policy issued by XYZ on June 1, 1990, which was in force at the time he died in January 15, 1992. How much is XYZ Cos liability for his death, if any, a. If Pedro shot himself while insane?

SUGGESTED ANSWER Yes. The insurance code provides that a change of interest by will or succession on the death of the insured does not void an insurance. In this case, the policy remains to be valid even if Junior inherited it by will as Junior has insurable interest in the mansion. 27. Pedro owns and operates several passengers jeeps in Metro Manila. He entered into a contract with General Insurance Company insuring the operation of his jeepneys under the CMVLI. During the effectivity of his policy, one of his jeepneys bumped Bert who had just alighted from another passenger jeepney likewise insured with Okay Insurance, whose driver unloaded passengers in the middle of the street. Bert suffered injuries as a consequence and filed a claim for 10,000 against General Insurance. The latter refused to pay on the ground that the driver of the jeepney from which Bert

SUGGESTED ANSWER Sec 180-A provides that suicide while insane is compensable regardless of date of commission of the suicide. Therefore, XYZ is liable for the full amount of the insurance policy. b. If he hanged himself presuming he was sane?

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SUGGESTED ANSWER However, if he was not insane, the suicide clause provided by Sec 180-A, which must be incorporated in life insurance contracts, provide that the insurer is liable only for suicide when it is committed after the policy has been in force for a period of 2 years from issue or from last reinstatement, unless a shorter period is stipulated. In this case therefore, XYZ is not liable since the policy has not yet been in force for 2 years from its issue. 29. Pedro has a 50,000 life insurance policy which he has been paying religiously for the nd past year. On January 15, 1990, Pedros first quarterly premium on the 2 year of the policy was due but Pedro failed to pay it. He died in an accident on January 30, 1990, without paying the premium due amounting to 1,000. What is the liability of the insurance company, if any? SUGGESTED ANSWER The grace period rule will apply in this particular case. A grace period entitles the insured either 30 days or 1 month within which the insurance contract shall still continue in full force and effect notwithstanding the non-payment of premium (after the first). In the sample Life Insurance Contract given in class, it is also provided that if death occurs within the grace period, the unpaid premiums shall be deducted from the amount payable under the policy Therefore, if that clause is present, then the liability of the insurance company is 49,000. If not, then it is 50,000 (the whole amount)

GOOD LUCK!

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