INSURANCE insurer prevents the insured

from obtaining more than the

Subrogation- substitution of once
amount of his loss.
person in the place of another with - The right exists after indemnity
reference to a lawful claim or right so has been paid by the insurer.
that he who is substituted succeeds to - If the amount paid by the
the rights of the other in relation to a insurance company does not
debt or claim, including its remedies fully cover the loss, it is the
and securities. aggrieved part, not the insurer,
- Purpose: to make the persons who is entitled to recover the
who caused the loss, legally deficiency from the party at
responsible for it and to prevent fault.
the insured from receiving - Right of the insurer against third
double recovery from the wrong part is limited to amount
doer and the insurer. recoverable from the latter by
- The right of subrogation is not the insured.
defeated whenever the - Art. 2207: the insurance
wrongdoer settles with the company that has paid the
insured without the insurers indemnity shall be subrogated
consent and with knowledge of to the rights of the insured
the insurers payment. against the wrongdoer or the
- The right of subrogation is person who has violated the
applicable only to property contract.
insurance, not life insurance. - Limitations: 1) both the insurer
- Privity of contract by insured of and the consignee are bound by
claim not essential. Payment by the stipulations under the bill of
the insurer to the insured lading.
operates as an equitable 2) the insurer can be
assignment to the former of all subrogated only to the rights as
the remedies which the latter the insured may have against
may have against the third the wrongdoer.
party whose negligence or Sec. 2
wrongful act caused the loss.
- Subrogation receipt, by itself, is Contract of insurance- an
sufficient to establish not only agreement where by one undertakes
the relationship but also the for a consideration to indemnify
amount paid to settle the another against loss, damage or
insurance. liability arising from an unknown or
- Loss or injury for risk must be contingent event.
covered by the policy.
Doing an insurance business/
Otherwise, it will be a
transacting an insurance business
voluntary payment and the
insurer has no right of 1) Making or proposing to make,
subrogation against the third as insurer, any insurance
party liable for loss. contract;
- Principle of indemnity: the 2) Making or proposing to make,
right of subrogation given to the as surety, any contract of surety
 as vocation and not as merely or impairment of the interest by
incidental to any other business the happening of the
or activity of the surety. designated perils.
3) Doing any kind of business, 3) The insurer assumes that risk of
including reinsurance business loss.
- The fact that no profit is derived 4) The assumption of risk is part of
from the making of insurance a general scheme to distribute
contracts or direct consideration actual losses among a large
therefor, shall not be seemed group or substantial number of
conclusive to show that the persons.
making thereof does not 5) As consideration for the
constitute an insurance insurers promise, the insured
business. pays a premium.
- Even if the contracts are
Assurance- an event which must present, it may not be an
happen insurance contract if the
Insurance- a contingent event which parties purpose is rendering of
may or may not happen. services and not
indemnification.
Policy- written insurance contract.
Principle of risk distribution- broad
Elements: sharing of economic risk.
Subject matter- thing insured Coping with risks
Consideration- premium paid by the 1. Limiting the probability of loss
insured 2. Limiting the effects of loss
3. Self-insurance or self financing
Object and purpose- risk bearing 4. ignoring risks
contract; transfer and distribution of 5. Transferring risks to another
loss, damage or liability arising from a. Risk preferring- people
an unknown or contingent event would choose to forgo the
through the payment of consideration certain loss in the hope of
by the insured to the insurer. incurring no loss despite
Aleatory contract- one of the parties the equal probability of
or both reciprocally bind themselves to suffering a large loss
b. Risk neutral
give or to do something in
c. Risk adverse
consideration of what the other shall
give or do upon the happening of the Adverse selection- sub-
event. classification of risks; any group will
have a higher proportion of less
Elements of an insurance
desirable risks since more applications
contract:
for the insurance will tend to come
1) Insurable interest- interest from those who get a better bargain.
susceptible of pecuniary
Fields of insurance
estimation
2) The insured is subject to a risk 1. Voluntary
of loss through the destruction 2. Traditional
Classification of insurance specifically only if it
exempted results
1. Insurance against loss or
from the from
impairment of property interest
policy specifical
2. Insurance against loss of
- Not ly
earning power due to death
absolut identified
3. Insurance against contingent
e. *loss causes
liability to make payment to
due to listed in
another.
normal the
Modern categories: wear policy
and
1. Marine tear
2. Property
Burden Insurer Insured
3. Personal
of proof
4. Liability
Classification by interest
o a policy of insurance is a
- Distinction: no fault contract of adhesion- most of
insurance- the substitution of the terms in the contracts do
first-party insurance for tort not result from mutual
liability. negotiation between the parties
1. Frist party interest- the as they are prescribed by the
contract between the insurer insurer in final printed forms
and the insured is designed to which the insured may accept
indemnify the insured for the or reject.
loss directly suffered by the o Bargaining contract- both
insured. parties participate in
a. Property insurance formulating the terms and
b. Life insurance conditions of the contract.
c. Health insurance o Principal and purpose test- if
2. Third party insurance- the principal object is
Liability insurance; the indemnity, the contract
interest protected by the constitutes insurance.
contract are ultimately those of
third parties injured by the Sec. 3
insureds conduct.
Requisites of a contract of
All-risk Specified insurance:
insurance risk
1. Consideration- premium
insuranc 2. Meeting of minds
e 3. Subject matter- insurable
Distinctio Reimburses Covers interest
n the insured dameage 4. Promise to pay
for damage to the 5. E vent/ peril insured.
to the subject subject
matter of the matter of Subject matter:
policy; except the 1. Property
those policy 2. Life, health, accident
 3. Casualty insurance- use, or Sec. 6
the insureds risk of loss or
Insurer- a party who assumes or
liability, that he may suffer loss
accepts the risk of loss and undertakes
or be compelled to indemnity
for a consideration to indemnify the
for the loss suffered by a third
insured or to pay him a certain
person.
amount on the happening or a
Sec. 4 specified event.
Lottery- extends to all schemes for Insured- the person in whose favor
the distribution of prizes by chance. the contract is operative. This person
may be the beneficiary designated.
- Elements:
1. Consideration- prizes offered Capacity of party insured
come out of the funds raised
by the participants 1. Natural person
2. Prize a. He must be competent to
3. Chance make a contract
b. He must possess an
Gambling Insurance insurable interest.
Distinction Gain Distributio 2. Juridical person
through n of loss
Public enemy- a nation with whom
mere by reason
the Philippines is at war and it includes
chance of
every citizen or subject of each nation.
mischance
Fortune Increases Seeks to - A mob is not a public enemy.
the avoid
inequality misfortune Control test- a corporation is deemed
of fortune or to make to have the same citizenship as the
it equal controlling stockholders in time of war.
Essence Whatever Gain is not - Property insurance: the policy
one at the ceases to be valid and insurable
person expense of as soon as an insured becomes
wins is a another. a public enemy
lost - Life insurance: abrogated by
suffered reason of non payment of
by premium.
another. - The termination of the war does
Wager Risk of not revive the contract.
loss to
himself Sec. 8
Double insurance- both mortgagor
and mortgage take out separate
insurance policies on the same
property.