ORDAINING AND INSTITUTING AN INSURANCE CODE OF THE PHILIPPINES

• Number: Presidential Decree No. 612
• Sections: 429

Preamble

I, FERDINAND E. MARCOS, President of the Philippines, by

virtue of the powers in me vested by the Constitution, do hereby decree

and order the following:

GENERAL PROVISIONS

SUB-TITLE 1-A. — Definition

Organization, Capitalization and Authorization

Brokers

Powers

Section 1

SECTION 1. This Decree shall be known as "The Insurance Code".

Section 2

SEC. 2. Wherever used in this Code, the following terms

shall have the respective meanings hereinafter set forth or indicated,

unless the context otherwise requires:

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.

A contract of suretyship shall be deemed to be an insurance contract,

within the meaning of this Code, only if made by a surety who or which,

as such, is doing an insurance business as hereinafter provided.

The term "doing an insurance business" or "transacting an

insurance business", within the meaning of this Code, shall include (a)

making or proposing to make, as insurer, any insurance contract; (b)

making, or proposing to make as surety, any contract of suretyship as a

vocation and not as merely incidental to any other legitimate business

or activity of the surety; (c) doing any kind of business, including a

reinsurance business, specifically recognized as constituting the doing

of an insurance business within the meaning of this Code; (d) doing or

proposing to do any business in substance equivalent to any of the

foregoing in a manner designed to evade the provisions of this Code.

In the application of the provisions of this Code the fact that no

profit is derived from the making of insurance contracts, agreements or

transactions or that no separate or direct consideration is received

therefor, shall not be deemed conclusive to show that the making thereof

does not constitute the doing or transacting of an insurance business.

As used in this Code, the term "Commissioner" means the

"Insurance Commissioner".

Section 3

SEC. 3. Any contingent or unknown event, whether past or future,

which may damnify a person having an insurable interest, or create a

liability against him, may be insured against, subject to the provisions

of this chapter.

The consent of the husband is not necessary for the validity of an

insurance policy taken out by a married woman on her life or that of her

children.

Any minor of the age of eighteen years or more, may, notwithstanding

such minority, contract for life, health and accident insurance, with

any insurance company duly authorized to do business in the Philippines,

provided the insurance is taken on his own life and the beneficiary

appointed is the minor's estate or the minor's father, mother, husband,

wife, child, brother or sister.

The married woman or the minor herein allowed to take out an insurance

policy may exercise all the rights and privileges of an owner a policy.

All rights, title and interest in the policy of insurance taken out by

an original owner of the life or health of a minor shall automatically

vest in the minor upon the death of the original owner, unless otherwise

provided for in the policy.

Section 4

SEC. 4. The preceding section does not authorize an insurance for

or against the drawing of any lottery, or for or against any chance or

ticket in a lottery drawing a prize.

Section 5

SEC. 5. All kinds of insurance are subject to the

provisions of this chapter so far as the provisions can apply.

Section 6

SEC. 6. Every person, partnership, association, or corporation

duly authorized to transact insurance business as elsewhere provided in

this Code, may be an insurer.

Section 7

SEC. 7. Anyone except a public enemy may be insured.

Section 8

SEC. 8. Unless the policy otherwise provides, where a

mortgagor of property effects insurance in his own name providing that

the loss shall be payable to the mortgagee, or assigns a policy of

insurance to a mortgagee, the insurance is deemed to be upon the

interest of the mortgagor, who does not cease to be a party to the

original contract, and any act of his, prior to the loss, which would

otherwise avoid the insurance, will have the same effect, although the

property is in the hands of the mortgagee, but any act which, under the

contract of insurance, is to be performed by the mortgagor, may be

performed by the mortgagee therein named, with the same effect as if it

had been performed by the mortgagor.

Section 9

SEC. 9. If an insurer assents to the transfer of an

insurance from a mortgagor to a mortgagee, and, at the time of his

assent, imposes further obligations on the assignee, making a new

contract with him, the acts of the mortgagor cannot affect the rights of

said assignee.

Section 10

SEC. 10. Every person has an insurable interest in the life and

health:

Of himself, of his spouse and of his children;

Of any person on whom he depends wholly or in part for education

or support, or in whom he has a pecuniary interest;

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

Of any person upon whose life any estate or interest vested in

him depends.

Section 11

SEC. 11. The insured shall have the right to change the

beneficiary he designated in the policy, unless he has expressly waived

this right in said policy.

Section 12

SEC. 12. The interest of a beneficiary in a life

insurance policy shall be forfeited when the beneficiary is the

principal, accomplice, or accessory in willfully bringing about the

death of the insured; in which event, the nearest relative of the

insured shall receive the proceeds of said insurance if not otherwise

disqualified.

Section 13

SEC. 13. Every interest in property, whether real or

personal, or any relation thereto, or liability in respect thereof, of

such nature that a contemplated peril might directly damnify the

insured, is an insurable interest.

Section 14

SEC. 14. An insurable interest in property may consist in:

An existing interest;

An inchoate interest founded on an existing interest; or

An expectancy, coupled with an existing interest in that out of

which the expectancy arises.

Section 15

SEC. 15. A carrier or depository of any kind has an insurable

interest in a thing held by him as such, to the extent of his liability

but not to exceed the value thereof.

Section 16

SEC. 16. A mere contingent or expectant interest in any

thing, not founded en an actual right to the thing, nor upon any valid

contract for it, is not insurable.

Section 17

SEC. 17. The measure of an insurable interest in property

is the extent to which the insured might be damaged by loss or injury

thereof. SEC. 18. No contract or policy of insurance on property

shall be enforceable except for the benefit of some person having an

insurable interest in the property insured.

Section 19

SEC. 19. An interest in property insured must exist when

the insurance takes effect, and when the loss occurs, but need not exist

in the meantime; and 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.

Section 20

SEC. 20. Except in the cases specified in the next four

sections, and in the cases of life, accident, and health insurance, a

change of interest in any part of a thing insured unaccompanied by a.

corresponding change of interest in the insurance, suspends the

insurance to an equivalent extent, until the interest in the thing and

the interest in the insurance are vested in the same person.

Section 21

SEC. 21. A change of interest in a thing insured, after

the occurrence of an injury which results in a loss, does not affect the

right of the insured to indemnity for the loss.

Section 22

SEC. 22. A change of interest in one or more of several

distinct things, separately insured by one policy, does not avoid the

insurance as to the others.

Section 23

SEC. 23. A change of interest, by will or succession, on

the death of the insured, does not avoid an insurance; and Ms interest

in the insurance passes to the person taking his interest in the thing

insured.

Section 24

SEC. 24. A transfer of interest by one of several

partners, joint owners, or owners in common, who are jointly insured, to

the others, does not avoid an insurance even though it has been agreed

that the insurance shall cease upon an alienation of the thing insured.

Section 25

SEC. 25. Every stipulation in a policy of insurance for

the payment of loss whether the person insured has or has not any

interest in the property insured, or that the policy shall be received

as proof of such interest, and every policy executed by way of gaming or

wagering, is void.

Section 26

SEC. 26. A neglect to communicate that which a party-knows and

ought to communicate, is called a concealment.

Section 27

SEC. 27. A concealment entitles the injured party to

rescind a contract of insurance.

Section 28

SEC. 28. Each party to a contract of insurance must

communicate to the other, in good faith, all facts within his knowledge

which are material to the contract and as to which he makes no warranty,

and which the other has not the means of ascertaining.

Section 29

SEC. 29. An intentional and fraudulent omission, on the

part of one insured, to communicate information of matters proving or

tending to prove the falsity of a warranty, entitles the insurer to

rescind.

Section 30

SEC. 30. Neither party to a contract of insurance is bound

to communicate information of the matters following, except in answer

to the inquiries of the other:

Those which the other knows;

Those which, in the exercise of ordinary care, the other ought to

know, and of which the former has no reason to suppose him ignorant;

Those of which the other waives communication;

Those which prove or tend to prove the existence of a risk

excluded by a warranty, and which are not otherwise material; and

These which relate to a risk excepted from the policy and which

are not otherwise material.

Section 31

SEC. 31. Materiality is to be determined not by the event, In:

solely by the probable and reasonable influence of the facts upon the

party to whom the communication is due, in fuming his estimate of the

disadvantages of the proposed contract, or in making his inquiries.

Section 32

SEC. 32. Each party to a contract of insurance is bound to

know ail the general causes which are open to his inquiry, equally with

that of the other, and which may affect the political or material

perils contemplated; and all general usages of trade.

Section 33

SEC. 33. The right to information of material facts may be

waived, either by the terms of insurance or by neglect to make inquiry

as to such facts, where they are distinctly implied in other facts of

which information is communicated.

Section 34

SEC. 34. Information of the nature or amount of the

interest of one insured need not be communicated unless in answer to an

inquiry, except as prescribed by section fifty-one.

Section 35

SEC. 35. Neither party to a contract of insurance is bound

to communicate, even upon inquiry, information of his own judgment upon

the matters in question.

Section 36

SEC. 36. A representation may be oral or written.

Section 37

SEC. 37. A representation may be made at the time of, or

before, issuance of the policy.

Section 38

SEC. 38. The language of a representation is to be

interpreted by the same rules as the language of contracts in general.

Section 39

SEC. 39. A representation as to the future is to be

deemed a promise, unless it appears that it was merely a statement of

belief or expectation.

Section 40

SEC. 40. A representation cannot qualify an express

provision in a contract of insurance, but it may quality an implied

warranty.

Section 41

SEC. 41. A representation may be altered or withdrawn

before the insurance is effected, but not afterwards.

Section 42

SEC. 42. A representation must be presumed to refer to the

date on which the contract goes into effect.

Section 43

SEC. 43. When a person insured has no personal knowledge

of a fact, he may nevertheless repeat information which he has upon the

subject, and which he believes to be true, with the explanation that he

does so on the information of others; or he may submit the information,

in its whole extent, to the insurer; and in neither case is he

responsible for its truth, unless it proceeds from an agent of the

insured, whose duty it is to give the information.

Section 44

SEC. 44. A representation is to be deemed false when the

facts fail to correspond with its assertions or stipulations.

Section 45

SEC. 45. If a representation is intentionally false in a

material point, whether affirmative or promissory, the injured party is

entitled to rescind the contract from the time when the representation

becomes false.

Section 46

SEC. 46. The materiality of a representation is

determined by the same rules as the materiality of a concealment.

Section 47

SEC. 47. The provisions of this chapter apply as well to a

modification of a contract of insurance as to its original formation.

Section 48

SEC. 48. Whenever a right to rescind a contract of

insurance is given to the insurer by any provision of this chapter, 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 two 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 rescindible by reason of the fraudulent concealment or

misrepresentation of the insured or his agent.

Section 49

SEC. 49. The written instrument in which a contract of insurance

is set forth, is called a policy of insurance.

Section 50

SEC. 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.

Group insurance and group annuity policies, however, may be typewritten

and need not be in printed form.