Insurance Code – Chapter II: Classes of Insurance
CHAPTER II — CLASSES OF INSURANCE
Title I MARINE INSURANCE
Sub‑Title 1‑ A DEFINITION
SECTION 99. Marine Insurance includes:
(1) Insurance against loss of or damage to:
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, securities, choses in action, evidences of debts, valuable papers, bottomry, & respondentia interests & all other kinds of property & interests therein, in respect to, appertaining to or in connection w/ any & all risks or perils of navigation, transit or transportation, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting shipment, or during any delays, storage, transhipment, or reshipment incident thereto, including war risks, marine builder’s risks, & all personal property floater risks;
(b) Person or property in connection w/ or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection w/ the construction, repair, operation, maintenance or use of the subject matter of such insurance (but not including life insurance or surety bonds nor insurance against loss by reason of bodily injury to any person arising out of ownership, maintenance, or use of automobiles);
(c) Precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise;
(d) Bridges, tunnels & other instrumentalities of transportation & communication (excluding buildings, their furniture & furnishings, fixed contents & supplies held in storage); piers, wharves, docks & slips, & other aids to navigation & transportation, including dry docks & marine railways, dams & appurtenant facilities for the control of waterways.
(2) “Marine protection & indemnity insurance,” meaning insurance against, or against legal liability of the insured for loss, damage, or expense incident to ownership, operation, chartering, maintenance, use, repair, or construction of any vessel, craft or instrumentality in use of ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person.
Sub‑Title 1‑B INSURABLE INTEREST
SECTION 100. The owner of a ship has in all cases an insurable interest in it, even when it has been chartered by one who covenants to pay him its value in case of loss: Provided, That in this case the insurer shall be liable for only that part of the loss w/c the insured cannot recover fr. the charterer.
SECTION 101. The insurable interest of the owner of the ship hypothecated by bottomry is only the excess of its value over the amount secured by bottomry.
SECTION 102. Freightage, in the sense of a policy of marine insurance, signifies all the benefits derived by the owner, either fr. the chartering of the ship or its employment for the carriage of his own goods or those of others.
SECTION 103. The owner of a ship has an insurable interest in expected freightage w/c according to the ordinary & probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage.
SECTION 104. The interest mentioned in the last section exists, in case of a charter party, when the ship has broken ground on the chartered voyage. If a price is to be paid for the carriage of goods it exists when they are actually on board, or there is some contract for putting them on board, & both ship & goods are ready for the specified voyage.
SECTION 105. One who has an interest in the thing fr. w/c profits are expected to proceed has an insurable interest in the profits.
SECTION 106. The charterer of a ship has an insurable interest in it, to the extent that he is liable to be damnified by its loss.
Sub‑Title 1‑C CONCEALMENT
SECTION 107. In marine insurance each party is bound to communicate, in addition to what is required by section twenty‑eight, all the information w/c he possesses, material to the risk, except such as is mentioned in Section thirty, & to state the exact & whole truth in relation to all matters that he represents, or upon inquiry discloses or assumes to disclose.
SECTION 108. In marine insurance, information of the belief or expectation of a third person, in reference to a material fact, is material.
SECTION 109. A person insured by a contract of marine insurance is presumed to have knowledge, at the time of insuring, of a prior loss, if the information might possibly have reached him in the usual mode of transmission & at the usual rate of communication.
SECTION 110. A concealment in a marine insurance, in respect to any of the following matters, does not vitiate the entire contract, but merely exonerates the insurer fr. a loss resulting fr. the risk concealed:
(a) The national character of the insured;
(b) The liability of the thing insured to capture & detention;
(c) The liability to seizure fr. breach of foreign laws of trade;
(d) The want of necessary documents;
(e) The use of false & simulated papers.
Sub‑Title 1‑D REPRESENTATION
SECTION 111. If a representation by a person insured by a contract of marine insurance, is intentionally false in any material respect, or in respect of any fact on w/c the character & nature of the risk depends, the insurer may rescind the entire contract.
SECTION 112. The eventual falsity of a representation as to expectation does not, in the absence of fraud, avoid a contract of marine insurance.
Sub‑Title 1‑E IMPLIED WARRANTIES
SECTION 113. In every marine insurance upon a ship or freight, or freightage, or upon any thing w/c is the subject of marine insurance, a warranty is implied that the ship is seaworthy.
SECTION 114. A ship is seaworthy when reasonably fit to perform the service & to encounter the ordinary perils of the voyage contemplated by the parties to the policy.
SECTION 115. An implied warranty of seaworthiness is complied w/ if the ship be seaworthy at the time of the of commencement of the risk, except in the following cases:
(a) When the insurance is made for a specified length of time, the implied warranty is not complied w/ unless the ship be seaworthy at the commencement of every voyage it undertakes during that time;
(b) When the insurance is upon the cargo w/c, by the terms of the policy, description of the voyage, or established custom of the trade, is to be transhipped at an intermediate port, the implied warranty is not complied w/ unless each vessel upon w/c the cargo is shipped, or transhipped, be seaworthy at the commencement of each particular voyage.
SECTION 116. A warranty of seaworthiness extends not only to the condition of the structure of the ship itself, but requires that it be properly laden, & provided w/ a competent master, a sufficient number of competent officers & seamen, & the requisite appurtenances & equipment, such as ballasts, cables & anchors, cordage & sails, food, water, fuel & lights, & other necessary or proper stores & implements for the voyage.
SECTION 117. Where different portions of the voyage contemplated by a policy differ in respect to the things requisite to make the ship seaworthy therefor, a warranty of seaworthiness is complied w/ if, at the commencement of each portion, the ship is seaworthy w/ reference to that portion.
SECTION 118. When the ship becomes unseaworthy during the voyage to w/c an insurance relates, an unreasonable delay in repairing the defect exonerates the insurer on ship or shipowner’s interest fr. liability fr. any loss arising therefr..
SECTION 119. A ship w/c is seaworthy for the purpose of an insurance upon the ship may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for the purpose of the insurance upon the cargo.
SECTION 120. Where the nationality or neutrality of a ship or cargo is expressly warranted, it is implied that the ship will carry the requisite documents to show such nationality or neutrality & that it will not carry any documents w/c cast reasonable suspicion thereon.
Sub‑Title 1‑F THE VOYAGE AND DEVIATION
SECTION 121. When the voyage contemplated by a marine insurance policy is described by the places of beginning & ending, the voyage insured in one w/c conforms to the course of sailing fixed by mercantile usage between those places.
SECTION 122. If the course of sailing is not fixed by mercantile usage, the voyage insured by a marine insurance policy is that way between the places specified, w/c to a master of ordinary skill & discretion, would mean the most natural, direct & advantageous.
SECTION 123. Deviation is a departure fr. the course of the voyage insured, mentioned in the last two sections, or an unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage.
SECTION 124. A deviation is proper:
(a) When caused by circumstances over w/c neither the master nor the owner of the ship has any control;
(b) When necessary to comply w/ a warranty, or to avoid a peril, whether or not the peril is insured against;
(c) When made in good faith, & upon reasonable grounds of belief in its necessity to avoid a peril; or
(d) When made in good faith, for the purpose of saving human life or relieving another vessel in distress.
SECTION 125. Every deviation not specified in the last section is improper.
SECTION 126. An insurer is not liable for any loss happening to the thing insured subsequent to an improper deviation.
Sub‑Title 1‑G LOSS
SECTION 127. A loss may be either total or partial.
SECTION 128. Every loss w/c is not total is partial.
SECTION 129. A total loss may be either actual or constructive.
SECTION 130. An actual total loss is cause by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by being broken up;
(c) Any damage to the thing w/c renders it valueless to the owner for the purpose for w/c he held it; or
(d) Any other event w/c effectively deprives the owner of the possession, at the port of destination, of the thing insured.
SECTION 131. A constructive total loss is one w/c gives to a person insured a right to abandon, under Section one hundred thirty‑nine.
SECTION 132. An actual loss may be presumed fr. the continued absence of a ship without being heard of. The length of time w/c is sufficient to raise this presumption depends on the circumstances of the case.
SECTION 133. When a ship is prevented, at an intermediate port, fr. completing the voyage, by the perils insured against, the liability of a marine insurer on the cargo continues after they are thus reshipped.
Nothing in this section shall prevent an insurer fr. requiring an additional premium if the hazard be increased by this extension of liability.
SECTION 134. In addition to the liability mentioned in the last section, a marine insurer is bound for damages, expenses of discharging, storage, reshipment, extra freightage, & all other expenses incurred in saving cargo reshipped pursuant to the last section, up to the amount insured.
Nothing in this or in the preceding section shall render a marine insurer liable for any amount in excess of the insured value or, if there be none, of the insurable value.
SECTION 135. Upon an actual total loss, a person insured is entitled to payment without notice of abandonment.
SECTION 136. Where it has been agreed that an insurance upon a particular thing, or class of things, shall be free fr. particular average, a marine insurer is not liable for any particular average loss not depriving the insured of the possession, at the port of destination, of the whole of such thing, or class of things, even though it becomes entirely worthless; but such insurer is liable for his proportion of all general average loss assessed upon the thing insured.
SECTION 137. An insurance confined in terms to an actual loss does not cover a constructive total loss, but covers any loss, w/c necessarily results in depriving the insured of the possession, at the port of destination, of the entire thing insured.
Sub‑Title 1‑H ABANDONMENT
SECTION 138. Abandonment, in marine insurance, is the act of the insured by w/c, after a constructive total loss, he declares the relinquishment to the insurer of his interest in the thing insured.
SECTION 139. 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, & recover for a total loss thereof, when the cause of the loss is a peril insured against:
(a) If more than three‑fourths thereof in value is actually lost, or would have to be expended to recover it fr. the peril;
(b) If it is injured to such an extent as to reduce its value more than three‑fourths;
(c) If the thing insured is a ship, & the contemplated voyage cannot be lawfully performed without incurring either an expense to the insured of more than three‑fourths the value of the thing abandoned or a risk w/c a prudent man would not take under the circumstances; or
(d) If the thing insured, being cargo or freightage, & the voyage cannot be performed, nor another ship procured by the master, within a reasonable time & w/ reasonable diligence, to forward the cargo, without incurring the like expense or risk mentioned in the preceding sub‑paragraph. But freightage cannot in any case be abandoned unless the ship is also abandoned.
SECTION 140. An abandonment must be neither partial nor conditional.
SECTION 141. An abandonment must be made within a reasonable time after receipt of reliable information of the loss, but where the information is of a doubtful character, the insured is entitled to a reasonable time to make inquiry.
SECTION 142. Where the information upon w/c an abandonment has been made proves incorrect, or the thing insured was so far restored when the abandonment was made that there was then in fact no total loss, the abandonment becomes ineffectual.
SECTION 143. Abandonment is made by giving notice thereof to the insurer, w/c may be done orally, or in writing; Provided, That if the notice be done orally, a written notice of such abandonment shall be submitted within seven days fr. such oral notice.
SECTION 144. A notice of abandonment must be explicit, & must specify the particular cause of the abandonment, but need state only enough to show that there is probable cause therefor, & need not be accompanied w/ proof of interest or of loss.
SECTION 145. An abandonment can be sustained only upon the cause specified in the notice thereof.
SECTION 146. An abandonment is equivalent to a transfer by the insured of his interest to the insurer, w/ all the chances of recovery & indemnity.
SECTION 147. If a marine insurer pays for a loss as if it were an actual total loss, he is entitled to whatever may remain of the thing insured, or its proceeds or salvage, as if there had been a formal abandonment.
SECTION 148. Upon an abandonment, acts done in good faith by those who were agents of the insured in respect to the thing insured, subsequent to the loss, are at the risk of the insurer & for his benefit.
SECTION 149. Where notice of abandonment is properly given, the rights of the insured are not prejudiced by the fact that the insurer refuses to accept the abandonment.
SECTION 150. The acceptance of an abandonment may be either express or implied fr. the conduct of the insurer. The mere silence of the insurer for an unreasonable length of time after notice shall be construed as an acceptance.
SECTION 151. The acceptance of an abandonment, whether express or implied, is conclusive upon the parties, & admits the loss & the sufficiency of the abandonment.
SECTION 152. An abandonment once made & accepted is irrevocable, unless the ground upon w/c it was made proves to be unfounded.
SECTION 153. On an accepted abandonment of a ship, freightage earned previous to the loss belongs to the insurer of said freightage; but freightage subsequently earned belongs to the insurer of the ship.
SECTION 154. If an insurer refuses to accept a valid abandonment, he is liable as upon actual total loss, deducting fr. the amount any proceeds of the thing insured w/c may have come to the hands of the insured.
SECTION 155. If a person insured omits to abandon, he may nevertheless recover his actual loss.
Sub‑Title 1‑I MEASURE OF INDEMNITY
SECTION 156. A valuation in a policy of marine insurance in conclusive between the parties thereto in the adjustment of either a partial or total loss, if the insured has some interest at risk, & there is no fraud on his part; except that when a thing has been hypothecated by bottomry or respondentia, before its insurance, & without the knowledge of the person actually procuring the insurance, he may show the real value. But a valuation fraudulent in fact, entitles the insurer to rescind the contract.
SECTION 157. A marine insurer is liable upon a partial loss, only for such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the property insured.
SECTION 158. Where profits are separately insured in a contract of marine insurance, the insured is entitled to recover, in case of loss, a proportion of such profits equivalent to the proportion w/c the value of the property lost bears to the value of the whole.
SECTION 159. In case of a valued policy of marine insurance on freightage or cargo, if a part only of the subject is exposed to the risk, the evaluation applies only in proportion to such part.
SECTION 160. When profits are valued & insured by a contract of marine insurance, a loss of them is conclusively presumed fr. a loss of the property out of w/c they are expected to arise, & the valuation fixes their amount.
SECTION 161. In estimating a loss under an open policy of marine insurance the following rules are to be observed:
(a) The value of a ship is its value at the beginning of the risk, including all articles or charges w/c add to its permanent value or w/c are necessary to prepare it for the voyage insured;
(b) The value of the cargo is its actual cost to the insured, when laden on board, or where the cost cannot be ascertained, its market value at the time & place of lading, adding the charges incurred in purchasing & placing it on board, but without reference to any loss incurred in raising money for its purchase, or to any drawback on its exportation, or to the fluctuation of the market at the port of destination, or to expenses incurred on the way or on arrival;
(c) The value of freightage is the gross freightage, exclusive of primage, without reference to the cost of earning it; &
(d) The cost of insurance is in each case to be added to the value thus estimated.
SECTION 162. If cargo insured against partial loss arrives at the port of destination in a damaged condition, the loss of the insured is deemed to be the same proportion of the value w/c the market price at that port, of the thing so damaged, bears to the market price it would have brought if sound.
SECTION 163. A marine insurer is liable for all the expenses attendant upon a loss w/c forces the ship into port to be repaired; & where it is stipulated in the policy that the insured shall labor for the recovery of the property, the insurer is liable for the expense incurred thereby, such expense, in either case, being in addition to a total loss, if that afterwards occurs.
SECTION 164. A marine insurer is liable for a loss falling upon the insured, through a contribution in respect to the thing insured, required to be made by him towards a general average loss called for by a peril insured against; provided, that the liability of the insurer shall be limited to the proportion of contribution attaching to his policy value where this is less than the contributing value of the thing insured.
SECTION 165. When a person insured by a contract of marine insurance has a demand against others for contribution, he may claim the whole loss fr. the insurer, subrogating him to his own right to contribution. But no such claim can be made upon the insurer after the separation of the interests liable to the contribution, nor when the insured, having the right & opportunity to enforce the contribution fr. others, has neglected or waived the exercise of that right.
SECTION 166. In the case of a partial loss of ship or its equipment, the old materials are to be applied towards payment for the new. Unless otherwise stipulated in the policy, a marine insurer is liable for only two‑thirds of the remaining cost of repairs after such deduction, except that anchors must be paid in full.
Title II FIRE INSURANCE
SECTION 167. As used in this Code, the term “fire insurance” shall include insurance against loss by fire, lightning, windstorm, tornado or earthquake & other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies.
SECTION 168. An alteration in the use or condition of a thing insured fr. that to w/c it is limited by the policy made without the consent of the insurer, by means within the control of the insured, & increasing the risks, entitles an insurer to rescind a contract of fire insurance.
SECTION 169. An alteration in the use or condition of a thing insured fr. that to w/c it is limited by the policy, w/c does not increase the risk, does not affect a contract of fire insurance.
SECTION 170. A contract of fire insurance is not affected by any act of the insured subsequent to the execution of the policy, w/c does not violate its provisions, even though it increases the risk & is the cause of the loss.
SECTION 171. If there is no valuation in the policy, the measure of indemnity in an insurance against fire is the expense it would be to the insured at the time of the commencement of the fire to replace the thing lost or injured in the condition in w/c at the time of the injury; but if there is a valuation in a policy of fire insurance, the effect shall be the same as in a policy of marine insurance.
SECTION 172. Whenever the insured desires to have a valuation named in his policy, insuring any building or structure against fire, he may require such building or structure to be examined by an independent appraiser & the value of the insured’s interest therein may then be fixed as between the insurer & the insured. The cost of such examination shall be paid for by the insured. A clause shall be inserted in such policy stating substantially that the value of the insured’s interest in such building or structure has been thus fixed. In the absence of any change increasing the risk without the consent of the insurer or of fraud on the part of the insured, then in case of a total loss under such policy, the whole amount so insured upon the insured’s interest in such building or structure, as stated in the policy upon w/c the insurers have received a premium, shall be paid, & in case of a partial loss the full amount of the partial loss shall be so paid, & in case there are two or more policies covering the insured’s interest therein, each policy shall contribute pro rata to the payment of such whole or partial loss. But in no case shall the insurer be required to pay more than the amount thus stated in such policy. This section shall not prevent the parties fr. stipulating in such policies concerning the repairing, rebuilding or replacing of buildings or structures wholly or partially damaged or destroyed.
SECTION 173. No policy of fire insurance shall be pledged, hypothecated, or transferred to any person, firm or company who acts as agent for or otherwise represents the issuing company, & any such pledge, hypothecation, or transfer hereafter made shall be void & of no effect insofar as it may affect other creditors of the insured.
Title III CASUALTY INSURANCE
SECTION 174. Casualty insurance is insurance covering loss or liability arising fr. accident or mishap, excluding certain types of loss w/c by law or custom are considered as falling exclusively within the scope of other types of insurance such as fire or marine. It includes, but is not limited to, employer’s liability insurance, motor vehicle liability insurance, plate glassinsurance, burglary & theft insurance, personal accident & health insurance as written by non‑life insurance companies, & other substantially similar kinds of insurance.
Title IV SURETYSHIP
SECTION 175. A contract of suretyship is an agreement whereby a party called the surety guarantees the performance by another party called the principal or obligor of an obligation or undertaking in favor of a third party called the obligee. It includes official recognizances, stipulations, bonds or undertakings issued by any company by virtue of & under the provisions of Act No. 536, as amended by Act No. 2206.
SECTION 176. The liability of the surety or sureties shall be joint & several w/ the obligor & shall be limited to the amount of the bond. It is determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor & the obligee. (As amended by Presidential Decree No. 1455)
SECTION 177. The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected & delivered to the obligor. No contract of suretyship or bonding shall be valid & binding unless & until the premium therefor has been paid, except where the obligee has accepted the bond, in w/c case the bond becomes valid & enforceable irrespective of whether or not the premium has been paid by the obligor to the surety; Provided, That if the contract of suretyship or bond is not accepted by, or filed w/ the obligee, the surety shall collect only reasonable amount, not exceeding fifty per centum of the premium due thereon as service fee plus the cost of stamps or other taxes imposed for the issuance of the contract or bond; Provided, however, That if the non‑acceptance of the bond be due to the fault or negligence of the surety, no such service fee, stamps or taxes shall be collected.
In the case of a continuing bond, the obligor shall pay the subsequent annual premium as it falls due until the contract of suretyship is cancelled by the obligee or by the Commissioner or by a court of competent jurisdiction, as the case may be.
SECTION 178. Pertinent provisions of the Civil Code of the Philippines shall be applied in a suppletory character whenever necessary in interpreting the provisions of a contract of suretyship.
Title V LIFE INSURANCE
SECTION 179. Life insurance is insurance on human lives & insurance appertaining thereto or connected therewith.
SECTION 180. An insurance upon life may be made payable on the death of the person, or on his surviving a specified period, or otherwise contingently on the continuance or cessation of life.
Every contract or pledge for the payment of endowments or annuities shall be considered a life insurance contract for purpose of this Code
In the absence of a judicial guardian, the father, or in the latter’s absence or incapacity, the mother, or any minor, who is an insured or a beneficiary under a contract of life, health or accident insurance, may exercise, in behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond, where the interest of the minor in the particular act involved does not exceed twenty thousand pesos. Such right may include, but shall not be limited to, obtaining a policy loan, surrendering the policy, receiving the proceeds of the policy, & giving the minor’s consent to any transaction on the policy.
SECTION 180‑A. The insurer in a life insurance contract shall be liable in case of suicides only when it is committed after the policy has been in force for a period of two years fr. the date of its issue or of its last reinstatement, unless the policy provides a shorter period: Provided, however, That suicide committed in the state of insanity shall be compensable regardless of the date of commission. (As amended by Batasang Pambansa Blg. 874)
SECTION 181. A policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, & such person may recover upon it whatever the insured might have recovered.
SECTION 182. Notice to an insurer of a transfer or bequest thereof is not necessary to preserve the validity of a policy of insurance upon life or health, unless thereby expressly required.
SECTION 183. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy.
Reference: University of the Philippines