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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. (Sec. 2(a) of R.A. No. No. 10607, also known as “The Insurance Code”)
For an insurer to be held liable for a loss, all the elements of an insurance contract must be present.
What are the elements of an insurance contract?
Jurisprudence says:
An insurance contract exists where the following elements concur:
- The insured has an insurable interest;
- The insurable interest is subject to a risk of loss by the happening of the designated peril;
- The insurer’s promise is in consideration of the payment of a premium;
- The insurer assumes the risk; and
- Such assumption of risk is part of a risk-distribution scheme. (Gulf Resorts, Inc. v. Philippine Charter Insurance Corporation, G.R. No. 156167, May 16, 2005)
What is an insurable interest?
Jurisprudence says:
Insurable interest is that interest which a person is deemed to have in the subject matter insured, where he has a relation or connection with or concern in it, such that the person will derive pecuniary benefit or advantage from the preservation of the subject matter insured and will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the event insured against. The existence of an insurable interest gives a person the legal right to insure the subject matter of the policy of insurance. (Violeta R. Lalican vs. The Insular Life Assurance Company Limited, G.R. No. 183526, August 25, 2009)
In LIFE INSURANCE, who has an insurable interest?
Jurisprudence says:
Every person has an insurable interest in the life and health:
(a) Of himself, of his spouse and of his children;
(b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;
(c) Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance; and
(d) Of any person upon whose life any estate or interest vested in him depends. (PHILAMCARE HEALTH SYSTEMS, INC. vs. COURT OF APPEALS and JULITA TRINOS, G.R. No. 125678 March 18, 2002)
In PROPERTY INSURANCE, who has an insurable interest?
Jurisprudence says:
Under Section 14 of the same Code, an insurable interest in property may consist in:
(a) an existing interest;
(b) an inchoate interest founded on existing interest; or
(c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.
Therefore, an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or possession of, the subject matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of such an interest, it is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be injured or destroyed by the peril against which it is insured.
Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction. Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has any interest therein, in other words, so long as he would suffer by its destruction, as where he has a vendor’s lien. (GAISANO CAGAYAN, INC.vs. INSURANCE COMPANY OF NORTH AMERICA, G.R. No. 147839, June 8, 2006)
At what time should insurable interest already exist?
According to Section 19 the Insurance Code, an interest in property insured must exist when the insurance takes effect, and when the loss occurs, but need not exist in the meantime.
On the other hand, interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.
RELATED ARTICLES:
Matters Involving Enforceability of Insurance Policies – Alburo Law
Characteristics of Insurance Contracts – ALBURO ALBURO AND ASSOCIATES LAW OFFICES (alburolaw.com)
Basics of an Insurance Contract | Alburo Law Offices
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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