ASCERTAINING
AND
CONTROLLING
RISKS
A Continuation
JAVIER-BARBACENA,
Ma. Cristina
Law 3B
Topics:
Other Devices
Conditions
Exceptions, Exclusion, or Exemption
Incontestable Clause
Mandatory Incontestable Clause
Rationale
When Inapplicable
CONDITIONS
Ininsurance parlance, the printed conditions on the
inside of the policy which serve generally as
limitation of risk or of liability or impose various
conditions requiring compliance from the insured.
Conditions are in the nature of collateral terms.
CONDITIONS
These include the following:
1. Promises or obligations regarding claims
procedure that are not fundamental to the validity
of the contract; and
2. Conditions conferring more rights to the insurer
enlarging or repeating the minimum rights
provided by law.
CASE:
Perla Compania De Seguros, Inc. v. CA
SC considered as VALID the provision in an
insurance against liability to third person as provided
in the provisions.
If the Company shall make any payment in settlement
of any claim, and such payment includes ant amount
not covered by the policy, the INSURED shall repay
the Company the amount not so covered.
EXCEPTION, EXCLUSION, OR
EXEMPTION
Exception- an exclusion of one or
more risks
Exclusion – is a provision which
eliminates coverage where were it
not for exclusion, coverage would
have existed
EXCEPTION, EXCLUSION, OR
EXEMPTION
The insurer may provide for exemptions or
exceptions in the policy.
RULE: If the insurer desires to limit or restrict the
operation of the general provisions of its contract
by special proviso, exception, or exemption, the
policy should express such limitation in CLEAR
and UNMISTAKEABLE language.
Article 1377 of the Civil Code of the Philippines
provides that the interpretation of obscure words
or stipulations in a contract shall not favor the
party who caused the obscurity.
Contracts of Insurance are to be construed
liberally in favor of the insured and strictly
against the insurer. Further ambiguity in the
words of an insurance contract should be
interpreted in FAVOR of its beneficiary
CASE:
Paris-Manila Perfume Co. v. Phoenix Assurance Company, Ltd.
A fire insurance policy excludes from the coverage of the policy
damages resulting from explosion. SC sustained the claim
because the insurer FAILED to prove that the cause of the loss
was explosion.
CASE: Finman General Assurance Corp. v. CA and Julia
Surposa
The personal accident insurance policy specifically enumerated
only 10 circumstances wherein no liability attaches to the
insurance company for any injury, disability or loss suffered by
the insured as a result of any stipulated causes.
SC observed the principle expressio unius est exclusio alterius-
the mention of one thing implies the exclusion of another thing
INCONTESTABLE CLAUSE
Section 48. Insurance Code
Whenever a right to rescind a contract of insurance is given
to the insurer, such right must be exercised previous to the
commencement of an action on the contract. 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 2 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.
Mandatory Incontestable Clauses
Section 233(b) – Individual Life and Endowment
Policy
Section 234(b) – Group Insurance Policies
Section 236(b) – Industrial Life Insurance Policy
RATIONALE
The incontestability clause is upheld in law not for
the purpose of upholding fraud but for the purpose
of shutting off harassing defenses.
The clause is designed to induce the insurer to
investigate and act with reasonable promptness if
it wishes to avoid the policy.
CASE:
Manila Bankers Life Insurance Corp. v. Aban
SC explained that the ultimate aim of Section
48 of the Insurance Code is to compel insurers
to solicit business from or provide insurance
coverage only to legitimate clients, by requiring
them to thoroughly investigate those they
insure within two years from effectivity of the
policy and while the insured is still alive.
Requisites for Incontestability
1. The policy is a life insurance policy;
2. It is payable on the death of the insured; and
3. It has been in force during the lifetime of the
insured for at least two(2) years from its date of
issue or of its last reinstatement.
CASE:
Emilio Tan, et al. v. CA
The policy can still be rescinded or the claim can still be
denied if the insured dies within the two-year period
provided for in Section 48 of the Insurance Code
CASE:
Sun Life of Canada (Phils), Inc. v. Sibya
SC ruled that the death of the insured within the two-
year period will render the right of the insurer to rescind
the policy NUGATORY-of no value or importance.
Insurance Commission Circular Letter
No. 2016-11 dated March 8, 2016
The incontestability period is one year for a
Term Insurance coverage under a Group Life
Insurance Policy that is required to cover plan
holders of Pre-Need Plans. The one-year
contestability period is part of the Standard
Contract Provisions for Health, Pension and
Memorial pre-need plans that are required by the
Insurance Commission.
Effects when policy becomes
incontestable
When a policy of life insurance becomes
incontestable, the insurer may not refuse to pay the
same claiming that:
1. the policy is void ab initio; or
2. it is rescissible by reason of the fraudulent
concealment of the insured or his agent, no matter
how patent or well-founded; or
3. it is rescissible by reason of the fraudulent
misrepresentations of the insured or his agent.
CASE:
Manila Bankers Life Insurance Corp. v.
Aban
If insurers cannot vouch for the integrity
and honesty of their agents/salesmen and
the insurance policies they issue, then they
should cease doing business. They only
have themselves to blame.
WHEN INAPPLICABLE
1. Non-payment of premium;
2. Violation of conditions of the policy relating to military or
naval service in times of war;
3. Property insurance;
4. Absence of Insurable Interest;
5. When vicious fraud was employed in obtaining the policy as
in the case of fraudulent impersonation and the case where
the policy was taken as part of the scheme to murder the
insured;
WHEN INAPPLICABLE
6. Where the cause of the loss is an excepted risk;
7. Where the beneficiary feloniously kills the
insured;
8. The beneficiary failed to comply with conditions
subsequent like failure to submit notice of loss;
and
9. If the claims is barred by extinctive prescription.
