E. Policy

E. Policy

R.A. No. 10607, Sections 49-66

"THE POLICY

"Section 49¹. The written instrument in which a contract of insurance is set forth, is called a policy of insurance.

"Section 50. The policy shall be in printed form which may contain blank spaces; and any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blank spaces provided therein.

"Any rider, clause, warranty or endorsement purporting to be part of the contract of insurance and which is pasted or attached to said policy is not binding on the insured, unless the descriptive title or name of the rider, clause, warranty or endorsement is also mentioned and written on the blank spaces provided in the policy.

"Unless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the insured or owner, which countersignature shall be taken as his agreement to the contents of such rider, clause, warranty or endorsement.

"Notwithstanding the foregoing, the policy may be in electronic form subject to the pertinent provisions of Republic Act No. 8792, otherwise known as the ‘Electronic Commerce Act’² and to such rules and regulations as may be prescribed by the Commissioner.

"Section 51. A policy of insurance must specify:

"(a) The parties between whom the contract is made; "(b) The amount to be insured except in the cases of open or running policies; "(c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined; "(d) The property or life insured; "(e) The interest of the insured in property insured, if he is not the absolute owner thereof; "(f) The risks insured against; and "(g) The period during which the insurance is to continue.

"Section 52. Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. Within sixty (60) days after issue of a cover note, a policy shall be issued in lieu thereof, including within its terms the identical insurance bound under the cover note and the premium therefor.

"Cover notes may be extended or renewed beyond such sixty (60) days with the written approval of the Commissioner if he determines that such extension is not contrary to and is not for the purpose of violating any provisions of this Code. The Commissioner may promulgate rules and regulations governing such extensions for the purpose of preventing such violations and may by such rules and regulations dispense with the requirement of written approval by him in the case of extension in compliance with such rules and regulations.

"Section 53. The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy.

"Section 54. When an insurance contract is executed with an agent or trustee as the insured, the fact that his principal or beneficiary is the real party in interest may be indicated by describing the insured as agent or trustee, or by other general words in the policy.

"Section 55. To render an insurance effected by one partner or part-owner, applicable to the interest of his co-partners or other part-owners, it is necessary that the terms of the policy should be such as are applicable to the joint or common interest.

"Section 56. When the description of the insured in a policy is so general that it may comprehend any person or any class of persons, only he who can show that it was intended to include him, can claim the benefit of the policy.

"Section 57. A policy may be so framed that it will inure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured.

"Section 58. The mere transfer of a thing insured does not transfer the policy, but suspends it until the same person becomes the owner of both the policy and the thing insured.

"Section 59. A policy is either open, valued or running.

"Section 60. An open policy is one in which the value of the thing insured is not agreed upon, and the amount of the insurance merely represents the insurer’s maximum liability. The value of such thing insured shall be ascertained at the time of the loss.

"Section 61. A valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specific sum.

"Section 62. A running policy is one which contemplates successive insurances, and which provides that the object of the policy may be from time to time defined, especially as to the subjects of insurance, by additional statements or indorsements.

"Section 63. A condition, stipulation, or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one (1) year from the time when the cause of action accrues, is void.

"Section 64³. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following:

"(a) Nonpayment of premium; "(b) Conviction of a crime arising out of acts increasing the hazard insured against; "(c) Discovery of fraud or material misrepresentation; "(d) Discovery of willful or reckless acts or omissions increasing the hazard insured against; "(e) Physical changes in the property insured which result in the property becoming uninsurable; "(f) Discovery of other insurance coverage that makes the total insurance in excess of the value of the property insured; or "(g) A determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code.

"Section 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the named insured at the address shown in the policy, or to his broker provided the broker is authorized in writing by the policy owner to receive the notice of cancellation on his behalf, and shall state:

"(a) Which of the grounds set forth in Section 64 is relied upon; and "(b) That, upon written request of the named insured, the insurer will furnish the facts on which the cancellation is based.

"Section 66. In case of insurance other than life, unless the insurer at least forty-five (45) days in advance of the end of the policy period mails or delivers to the named insured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages, the named insured shall be entitled to renew the policy upon payment of the premium due on the effective date of the renewal. Any policy written for a term of less than one (1) year shall be considered as if written for a term of one (1) year. Any policy written for a term longer than one (1) year or any policy with no fixed expiration date shall be considered as if written for successive policy periods or terms of one (1) year.

No-Action Clause

A no-action clause is a requirement in a policy of liability insurance which provides that a suit must first be instituted, and a final judgment be first obtained against the insured before the person injured can recover on the policy.

However, a no-action clause cannot prevail over Rules of Court provisions which are aimed at avoiding multiplicity of suits. Parties (i.e. the insured and the insurer) may be joined as defendants in a case commenced by the third party claiming under a liability insurance, as the right to relief in respect to the same transactions is alleged to exist [Sec. 6, Rule 3, 2019 Rules of Civil Procedure⁵; Dionisia v. Del Monte, G.R. No. L-22042, 17 August 1967⁶].

SURETYSHIP

R.A. No. 10607, Sections 177-180⁷

Measure of Indemnity

In an open policy, only the expense necessary to replace the thing lost or injured in the condition it was at the time of the injury will be paid.

In a valued fire insurance policy, the parties are bound by the agreed valuation, in the absence of fraud or mistake [Insurance Code, Sec. 172]¹¹.

The parties may provide for an option-to-rebuild clause concerning the repairing, rebuilding, or replacing of buildings or structures wholly or partially damaged [Insurance Code, Sec. 173]¹².

Note: 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 [Sec. 175]¹³.

Open policy

In the absence of express valuation in a fire insurance policy, the insured is only entitled to recover the amount of actual loss sustained and the burden of proof is upon him to establish the amount of such loss by preponderance of evidence.

In an open policy, the actual loss, as determined, will represent the total indemnity due the insured except only that the total indemnity shall not exceed the total value of the policy [Development Insurance Corporation v. Intermediate Appellate Court, G.R. No. L-71360, 16 July 1986]¹⁴.

Valued policy

If there is an agreed valuation, it is conclusive between the parties in adjusting the loss, as in marine insurance [Insurance Code, Sec. 172]¹⁵.

Option-to-rebuild clause

Agreed valuation of a building

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 and the value of the insured’s interest therein may then be fixed as between the insurer and 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 [Sec. 173]¹⁶.