Insurance Law

Contract of insurance

An agreement where one party agrees to indemnify another against loss, damage, or liability arising from an unknown or contingent event.

Doing an insurance business

Includes making insurance contracts, making surety contracts as a vocation, doing any recognized insurance business, or engaging in business equivalent to insurance in order to evade the provisions of the Insurance Code.

Commissioner

Refers to the Insurance Commissioner.

Insurable interest

The legal or financial interest that a person has in the life, health, or property of another person, which allows them to obtain insurance coverage.

Beneficiary

The person designated to receive the proceeds of a life insurance policy upon the death of the insured.

Concealment

The act of intentionally or unintentionally withholding information that is material to an insurance contract.

Representation

A statement made by the insured, either orally or in writing, that forms part of the insurance contract.

Policy of insurance

The written document that outlines the terms and conditions of an insurance contract.

Policy

A printed form that contains the contract of insurance and may have blank spaces for necessary information.

Rider, Clause, Warranty, or Endorsement

Additional provisions or modifications to the insurance contract that must be written on the blank spaces provided in the policy to be binding on the insured.

Countersignature

The agreement of the insured or owner of the policy to the contents of any rider, clause, warranty, or endorsement issued after the original policy by signing it.

Electronic Form

The policy may be in electronic form, subject to the provisions of the Electronic Commerce Act and regulations set by the Commissioner.

Parties

The individuals or entities between whom the insurance contract is made.

Amount Insured

The specified amount of coverage, except in the case of open or running policies.

Premium

The cost of the insurance, either determined at the time of contract or based on a statement of basis and rates for final determination.

Property or Life Insured

The specific property or life covered by the insurance.

Interest of the Insured

The insured's stake or ownership in the property insured, if they are not the absolute owner.

Risks Insured Against

The specific risks or perils covered by the insurance.

Period of Insurance

The duration or time frame during which the insurance coverage is in effect.

Cover Note

A temporary document issued to provide insurance coverage until the policy is issued.

Valued Policy

A policy that specifies a specific sum at which the insured property is valued.

Running Policy

A policy that allows for successive insurances and can be modified or defined over time through additional statements or endorsements.

Warranty

A statement or agreement in the insurance policy that creates an obligation or condition.

Express Warranty

A warranty explicitly stated in the policy or another signed instrument referred to in the policy.

Implied Warranty

A warranty that is not explicitly stated but is understood to be part of the insurance contract.

Return of Premium

The entitlement of the insured to a refund of the premium under certain circumstances.

Notice of Cancellation

A written notice from the insurer to the insured stating the grounds for canceling the policy.

Notice of Non-Renewal

A written notice from the insurer to the insured stating the intention not to renew the policy or to renew it with certain conditions.

Acknowledgment of Premium Payment

An acknowledgment in the policy or receipt of premium that serves as evidence of payment and makes the policy binding.

Over Insurance

When the aggregate sum insured in multiple policies exceeds the insurable value of the property at risk, the insured is entitled to a ratable return of the premium.

Transfer of Claim

An agreement not to transfer the insured's claim against the insurer after the loss has occurred, except in the case of life insurance.

Proximate Cause

The peril insured against that is the direct or immediate cause of the loss, even if other perils were remote causes.

Rescue from Peril

The insurer is liable for a loss if the insured property is rescued from a peril insured against but is exposed to an uninsured peril that permanently deprives the insured of its possession.

Willful Act or Connivance

The insurer is not liable for a loss caused by the intentional act or collusion of the insured, but negligence does not exonerate the insurer.

Loss Notice

Written notice of loss must be given to the insurer without unnecessary delay in case of loss upon an insurance against fire.

Preliminary Proof of Loss

The insured is not required to provide proof of loss as would be necessary in a court of justice, but must provide the best evidence available at the time.

Waiver of Defects

Any defects in a notice of loss or preliminary proof thereof that the insured could remedy, and which the insurer fails to specify as grounds of objection without unnecessary delay, are waived.

Waiver of Delay

Delay in presenting notice or proof of loss is waived if caused by the insurer or if the insurer fails to promptly and specifically object on that ground.

Certificate/Testimony

If the policy requires a certificate or testimony from a person other than the insured, the insured must use reasonable diligence to procure it, and if the person refuses, provide reasonable evidence to the insurer that the refusal was not justified.

Double Insurance

Double insurance exists when the same person is insured by several insurers separately for the same subject and interest.

Order of Payment

In the case of overinsurance by double insurance, the insured may claim payment from the insurers in any order up to the amount for which each insurer is liable under their respective contracts.

Deduction of Sum

If the insured receives any sum in excess of the valuation or insurable value, the insured must hold such sum in trust for the insurers according to their right of contribution among themselves.

Reinsurance

Reinsurance is a contract by which an insurer procures a third person to insure them against loss or liability from the original insurance.

Communication of Representations

When obtaining reinsurance, the insurer must communicate all representations of the original insured and any knowledge or information material to the risk.

Reinsurance as Indemnity

Reinsurance is presumed to be a contract of indemnity against liability, not merely against damage.

Insurable Interest

Marine insurance includes insurance against loss or damage to various types of property and interests related to navigation, transit, or transportation.

Owner's Insurable Interest

The owner of a ship has an insurable interest in it, even if it has been chartered by someone who agrees to pay its value in case of loss.

Freightage

Freightage refers to the benefits derived by the owner from chartering the ship or using it for the carriage of goods.

Expected Freightage

The owner of a ship has an insurable interest in expected freightage that they would have earned but for the intervention of an insured peril or other peril incident to the voyage.

Concealment

In marine insurance, each party is obligated to communicate all material information and state the exact truth in relation to all matters represented or disclosed.

Falsity of Representation

If a representation by the insured is intentionally false in any material respect, the insurer may rescind the entire contract.

Implied Warranty of Seaworthiness

In marine insurance, a warranty is implied that the ship is seaworthy, meaning it is reasonably fit to perform the service and encounter ordinary perils of the voyage.

Proper Deviation

Deviation from the course of the insured voyage is proper when caused by circumstances beyond the control of the master or owner, necessary to comply with a warranty, to avoid a peril, or made in good faith to save human life or relieve another vessel in distress.

Loss

A loss in marine insurance can be total or partial, and a total loss can be actual (total destruction or irretrievable loss) or constructive.

Constructive total loss

A loss that gives the insured the right to abandon the insured thing.

Actual loss

A loss that can be presumed from the continued absence of a ship without being heard of.

Liability of marine insurer

The marine insurer is liable for damages, expenses, and all other costs incurred in saving cargo that is reshipped due to perils insured against.

Abandonment

The act of the insured relinquishing their interest in the thing insured after a constructive total loss.

Notice of abandonment

A notice given by the insured to the insurer, either orally or in writing, declaring the abandonment of the thing insured.

Acceptance of abandonment

The acceptance of an abandonment by the insurer, either express or implied, is conclusive and admits the loss and sufficiency of the abandonment.

Measure of indemnity

The valuation in a policy of marine insurance is conclusive in the adjustment of a partial or total loss, except in cases of fraud or when the insured can show the real value.

Contribution in general average loss

A marine insurer is liable for a loss falling upon the insured through a contribution required by the insured towards a general average loss.

Fire insurance

Insurance against loss by fire, lightning, windstorm, tornado, earthquake, and other allied risks.

Alteration in use or condition

An alteration in the use or condition of a thing insured without the insurer's consent, which increases the risks, entitles the insurer to rescind a contract of fire insurance.

Pledge, hypothecation, or transfer

The act of assigning or transferring a policy of fire insurance to another person or entity.

Casualty insurance

Insurance that covers loss or liability arising from accidents or mishaps, excluding certain types of loss covered by other types of insurance such as fire or marine insurance.

Suretyship

A contract in which a party called the surety guarantees the performance of an obligation or undertaking by another party called the principal or obligor in favor of a third party called the obligee.

Premium

The payment made by the insured to the surety for the contract of suretyship or bond.

Continuing bond

A bond that requires the obligor to pay subsequent annual premiums until the contract of suretyship is cancelled.

Life insurance

Insurance on human lives and insurance related to human lives, including contracts for the payment of annuities and contracts for the payment of lump sums under a retirement program.

Insurable interest

The legal interest that a person has in the life or health of another person, which justifies the person's right to take out an insurance policy on that other person's life or health.

Microinsurance

A financial product or service that provides risk protection to the poor, with contributions or premiums not exceeding a certain percentage of the daily minimum wage rate and guaranteed benefits not exceeding a certain multiple of the daily minimum wage rate.

Financial reporting framework

A set of accounting and reporting principles, standards, interpretations, and pronouncements that must be followed in preparing and submitting statutory financial statements and reports required by the insurance commission.

Insurer or insurance company

Any partnership, association, cooperative, or corporation engaged in the insurance business, excluding mutual benefit associations.

Certificate of authority

A document issued by the insurance commissioner granting an insurance company the authority to transact insurance business in the Philippines.

Paid-up capital

The amount of capital that a domestic insurance company must have in a stock corporation in order to engage in business in the Philippines.

Net worth

The value of a company's assets minus its liabilities, used as a measure of its financial strength.

Contributed Surplus Fund

A fund required by the Commissioner as a pre-licensing requirement for a new insurance company, in addition to the paid-up capital stock, to be paid in cash by the stockholders in proportion to their subscription interests.

Business Plan

A plan that a new insurance company may be required to submit to the Commissioner, showing the company's estimated receipts and disbursements for the next three years.

Mutual Company

A type of insurance company that, if organized as such, must have available total members' equity and a contributed surplus fund, in lieu of net worth, as determined by the Insurance Commission.

Risk-Based Capital Approach

An approach that the Commissioner may require insurance companies to adopt for compliance with capital build-up requirements, based on internationally accepted forms of capital framework.

Net Worth

For the purpose of this section, net worth of an insurance company consists of paid-up capital, retained earnings, unimpaired surplus, and revaluation of assets approved by the Commissioner.

General Agent

A person designated by a foreign insurance company as its resident general agent in the Philippines, on whom any notice, proof of loss, summons, and other legal processes may be served in all actions or legal proceedings against the company.

Legal Reserves

An amount corresponding to the legal reserves of policies written in the Philippines that a foreign insurance company must set aside and invest in accordance with the provisions of the Code.

Solvency Requirements

Minimum paid-up capital and net worth requirements that an insurance company must maintain at all times, based on internationally accepted solvency frameworks and adopted after consultation with insurance industry associations.

Dividend

A distribution of profits by a domestic insurance corporation to its stockholders, subject to meeting the minimum paid-up capital and net worth requirements, solvency requirements, legal reserve funds, and liabilities for losses, expenses, and taxes.

Assets

In the determination of the financial condition of an insurance company, assets include cash, investments in securities and real property, loans, policy loans and other policy assets, and net uncollected and deferred premiums and annuity considerations.

Reinsurance recoverable by the ceding insurer

The amount of money that the ceding insurer can recover from another insurer, either authorized or unauthorized, as security for the payment of obligations under a reinsurance treaty.

Funds withheld by a ceding insurer

The amount of money that the ceding insurer holds as reserves for unpaid losses and unearned premiums.

Deposits or amounts recoverable from underwriting associations, syndicates, and reinsurance funds

The deposits or amounts that the insurer can recover from these entities, which can be used to pay losses and claims.

Electronic data processing machines

Machines authorized by the Commissioner that an insurance company can acquire and amortize over a period of five years.

Investments in mutual funds, real estate investment trusts, salary loans, unit investment trust funds, and special deposit accounts

Investments that an insurance company can make, subject to conditions set by the Commissioner.

Other assets

Assets deemed by the Commissioner to be readily realizable and available for the payment of losses and claims, as determined by circular, rule, or regulation.

Non-admitted assets

Assets that are not allowed to be considered as admitted assets of an insurance company in determining its financial condition, including goodwill, prepaid expenses, advances to officers and employees, and certain types of property.

Loans to policyholders

The amount of money that a life insurance company can lend to its policyholders, secured by the value of their policies.

Security for loans

The types of security that an insurance company can accept for loans, including real estate mortgages, government bonds, obligations of financial intermediaries, and other approved securities.

Conditions for loans

The conditions that loans secured by real estate mortgages, shares of stock, or chattel mortgages must meet, such as loan-to-value ratios and maturity periods.

Property owned by insurance companies

The types of property that an insurance company can purchase, hold, and own, including real properties, government bonds, corporate bonds, and other approved securities.

Domestic insurer

An insurance company operating within the country of the Philippines.

Investment grade

A rating given to securities and investments that indicates a low risk of default.