December 18, 1974
ORDAINING AND INSTITUTING AN INSURANCE CODE OF THE PHILIPPINES
ORDAINING AND INSTITUTING AN INSURANCE CODE OF THE PHILIPPINES
GENERAL PROVISIONS
Sec. 1. This
Decree shall be known as "The Insurance Code".
Sec. 2. Whenever
used in this Code, the following terms shall have the respective meanings
hereinafter set forth or indicated, unless the context otherwise requires:
(1) 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.
(2) 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 therefore, shall not be deemed
conclusive to show that the making thereof does not constitute the doing or
transacting of an insurance business.
(3) As used
in this code, the term "Commissioner" means the "Insurance
Commissioner".
Chapter 1
THE CONTRACT OF INSURANCE
THE CONTRACT OF INSURANCE
Title 1
WHAT MAY BE INSURED
WHAT MAY BE INSURED
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 under a policy.
All rights,
title and interest in the policy of insurance taken out by an
original owner on 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.
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.
Sec. 5. All
kinds of insurance are subject to the provisions of this chapter so far as the
provisions can apply.
Title 2
PARTIES TO THE CONTRACT
PARTIES TO THE CONTRACT
Sec. 6. Every
person, partnership, association, or corporation duly authorized to transact
insurance business as elsewhere provided in this code, may be an insurer.
Sec. 7. Anyone
except a public enemy may be insured.
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.
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 obligation on the
assignee, making a new contract with him, the act of the mortgagor cannot
affect the rights of said assignee.
Title 3
INSURABLE INTEREST
INSURABLE INTEREST
Sec. 10. 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.
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.
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.
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.
Sec. 14. An
insurable interest in property may consist in:
(a) An
existing interest;
(b) An
inchoate interest founded on an existing interest; or
(c) An
expectancy, coupled with an existing interest in that out of which the
expectancy arises.
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.
Sec. 16. A
mere contingent or expectant interest in anything, not founded on an actual
right to the thing, nor upon any valid contract for it, is not insurable.
Sec. 17. The
measure of an insurable interest in property is the extent to which the insured
might be damnified 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.
Sec. 19. An
interest in property insured must exist when the insurance takes effect, and
when the loss occurs, but 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.
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 in 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.
Sec. 21. A
change in 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.
Sec. 22. A
change of interest in one or more several distinct things, separately insured
by one policy, does not avoid the insurance as to the others.
Sec. 23. A
change on interest, by will or succession, on the death of the insured, does
not avoid an insurance; and his interest in the insurance passes to the
person taking his interest in the thing insured.
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.
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.
Title 4
CONCEALMENT
CONCEALMENT
Sec. 26. A
neglect to communicate that which a party knows and ought to
communicate, is called a concealment.
Sec. 27. A
concealment whether intentional or unintentional entitles the injured
party to rescind a contract of insurance. (As amended by Batasang Pambansa Blg.
874)
Sec. 28. Each
party to a contract of insurance must communicated 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.
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.
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:
(a) Those
which the other knows;
(b) 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;
(c) Those of
which the other waives communication;
(d) Those
which prove or tend to prove the existence of a risk excluded by a warranty,
and which are not otherwise material; and
(e) Those
which relate to a risk excepted from the policy and which are not
otherwise material.
Sec. 31. Materiality
is to be determined not by the event, but solely by the probable and reasonable
influence of the facts upon the party to whom the communication is due, in
forming his estimate of the disadvantages of the proposed contract, or in
making his inquiries.
Sec. 32. Each
party to a contract of insurance is bound to know all 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.
Sec. 33. The
right to information of material facts may be waived, either by the terms of
the insurance or by neglect to make inquiry as to such facts, where they are
distinctly implied in other facts of which information is communicated.
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.
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.
Title 5
REPRESENTATION
REPRESENTATION
Sec. 36. A
representation may be oral or written.
Sec. 37. A
representation may be made at the time of, or before, issuance of the policy.
Sec. 38. The
language of a representation is to be interpreted by the same rules as the
language of contracts in general.
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.
Sec. 40. A
representation cannot qualify an express provision in a contract of insurance,
but it may qualify an implied warranty.
Sec. 41. A
representation may be altered or withdrawn before the insurance is effected,
but not afterwards.
Sec. 42. A
representation must be presumed to refer to the date on which the contract goes
into effect.
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.
Sec. 44. A
representation is to be deemed false when the facts fail to correspond with its
assertions or stipulations.
Sec. 45. If
a representation is 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. The right to rescind granted by this
Code to the insurer is waived by the acceptance of premium payments despite
knowledge of the ground for rescission. (As amended byBatasang Pambansa Blg.
874).
Sec. 46. The
materiality of a representation is determined by the same rules as the
materiality of a concealment.
Sec. 47. The
provisions of this chapter apply as well to a modification of a contract of
insurance as to its original formation.
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.
Title 6
THE POLICY
THE POLICY
Sec. 49. The
written instrument in which a contract of insurance is set forth, is
called a policy of insurance.
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.
Sec. 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.
Sec. 52. Cover
notes may be issued to bind insurance temporarily pending the issuance of the
policy. Within sixty days after the issue of the 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 therefore.
Cover notes
may be extended or renewed beyond such sixty 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.
Sec. 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.
Sec. 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.
Sec. 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.
Sec. 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.
Sec. 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.
Sec. 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.
Sec. 59. A
policy is either open, valued or running.
Sec. 60. An
open policy is one in which the value of the thing insured is not agreed upon,
but is left to be ascertained in case of loss.
Sec. 61. A
valued policy is one which expresses on its face an agreement that the thing
insured shall be valued at a specific sum.
Sec. 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.
Sec. 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
year from the time when the cause of action accrues, is void.
Sec. 64. 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) non-payment 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; or
(f) a determination
by the Commissioner that the continuation of the policy would violate or would
place the insurer in violation of this Code.
Sec. 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,
and shall state (a) which of the grounds set forth in section sixty-four 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.
Sec. 66. In
case of insurance other than life, unless the insurer at least forty-five 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 year shall be considered as if
written for a term of one year. Any policy written for a term longer than
one year or any policy with no fixed expiration date shall be considered as if
written for successive policy periods or terms of one year.
Title 7
WARRANTIES
WARRANTIES
Sec. 67. A
warranty is either expressed or implied.
Sec. 68. A
warranty may relate to the past, the present, the future, or to any or all of
these.
Sec. 69. No
particular form of words is necessary to create a warranty.
Sec. 70. Without
prejudice to section fifty-one, every express warranty, made at or before the
execution of a policy, must be contained in the policy itself, or in another
instrument signed by the insured and referred to in the policy as making a part
of it.
Sec. 71. A
statement in a policy of matter relating to the person or thing insured, or to
the risk, as a fact, is an express warranty thereof.
Sec. 72. A
statement in a policy which imparts that it is intended to do or not to do a
thing which materially affects the risk, is a warranty that such act
or omission shall take place.
Sec. 73. When,
before the time arrives for the performance of a warranty relating to the
future, a loss insured against happens, or performance becomes unlawful at the
place of the contract, or impossible, the omission to fulfill the warranty does
not avoid the policy.
Sec. 74. The
violation of a material warranty, or other material provision of a
policy, on the part of either party thereto, entitles the other to rescind.
Sec. 75. A
policy may declare that a violation of specified provisions thereof shall avoid it, otherwise
the breach of an immaterial provision does not avoid the policy.
Sec. 76. A
breach of warranty without fraud merely exonerates an insurer from the time
that it occurs, or where it is broken in its inception, prevents the policy
from attaching to the risk.
Title 8
PREMIUM
PREMIUM
Sec. 77. An
insurer is entitled to payment of the premium as soon as the thing insured is
exposed to the peril insured against. Notwithstanding any agreement to
the contrary, no policy or contract of insurance issued by an insurance company
is valid and binding unless and until the premium thereof has been paid, except
in the case of a life or an industrial life policy whenever the grace period
provision applies.
Sec. 78. An
acknowledgment in a policy or contract of insurance or the receipt of premium
is conclusive evidence of its payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be binding until the
premium is actually paid.
Sec. 79. A
person insured is entitled to a return of premium, as follows:
(a) To the whole
premium if no part of his interest in the thing insured be exposed to any of
the perils insured against;
(b) Where the
insurance is made for a definite period of time and the insured surrenders his
policy, to such portion of the premium as corresponds with the unexpired time,
at a pro rata rate, unless a short period rate has been agreed upon and appears
on the face of the policy, after deducting from the whole premium any claim for
loss or damage under the policy which has previously accrued; Provided, That no
holder of a life insurance policy may avail himself of the privileges of this
paragraph without sufficient cause as otherwise provided by law.
Sec. 80. If a peril insured against has existed, and the insurer has been liable for any period, however short, the insured is not entitled to return of premiums, so far as that particular risk is concerned.
Sec. 81. A
person insured is entitled to return of the premium when the contract is voidable,
on account of fraud or misrepresentation of the insurer, or of his agent, or on
account of facts, the existence of which the insured was ignorant without his
fault; or when by any default of the insured other than actual fraud, the
insurer never incurred any liability under the policy.
Sec. 82. In
case of an over-insurance by several insurers, the insured is entitled to a
ratable return of the premium, proportioned to the amount by which the
aggregate sum insured in all the policies exceeds the insurable value of the
thing at risk.
Title 9
LOSS
LOSS
Sec. 83. An
agreement not to transfer the claim of the insured against the insurer after
the loss has happened, is void if made before the loss except as
otherwise provided in the case of life insurance.
Sec. 84. Unless
otherwise provided by the policy, an insurer is liable for a loss of which a
peril insured against was the proximate cause, although a peril not
contemplated by the contract may have been a remote cause of the loss; but he
is not liable for a loss which the peril insured against was only a remote
cause.
Sec. 85. An
insurer is liable where the thing insured is rescued from a peril insured
against that would otherwise have caused a loss, if, in the course of such
rescue, the thing is exposed to a peril not insured against, which permanently
deprives the insured of its possession, in whole or in part; or where a loss is
caused by efforts to rescue the thing insured from a peril insured against.
Sec. 86. Where
a peril is especially excepted in a contract of insurance, a loss,
which would not have occurred but for such peril, is thereby excepted although
the immediate cause of the loss was a peril which was not excepted.
Sec. 87. An
insurer is not liable for a loss caused by the willful act or through the connivance
of the insured; but he is not exonerated by the negligence of the insured, or
of the insurance agents or others.
Title 10
NOTICE OF LOSS
NOTICE OF LOSS
Sec. 88. In
case of loss upon an insurance against fire, an insurer is exonerated, if
notice thereof be not given to him by an insured, or some person entitled to
the benefit of the insurance, without unnecessary delay.
Sec. 89. When
a preliminary proof of loss is required by a policy, the insured is not bound
to give such proof as would be necessary in a court of justice; but it is
sufficient for him to give the best evidence which he has in his power at the
time.
Sec. 90. All
defects in a notice of loss, or in preliminary proof thereof, which the insured
might remedy, and which the insurer omits to specify to him, without
unnecessary delay, as grounds of objection, are waived.
Sec. 91. Delay
in the presentation to an insurer of notice or proof of loss is waived if caused
by any act of him, or if he omits to take objection promptly and specifically
upon that ground.
Sec. 92. If
the policy requires, by way of preliminary proof of loss, the certificate or
testimony of a person other than the insured, it is sufficient for the insured
to use reasonable diligence to procure it, and in case of the refusal of such
person to give it, then to furnish reasonable evidence to the insurer that such
refusal was not induced by any just grounds of disbelief in the facts necessary
to be certified or testified.
Title 11
DOUBLE INSURANCE
DOUBLE INSURANCE
Sec. 93. A
double insurance exists where the same person is insured by several insurers
separately in respect to the same subject and interest.
Sec. 94. Where
the insured is overinsured by double insurance:
(a) The
insured, unless the policy otherwise provides, may claim payment from the
insurers in such order as he may select, up to the amount for which the
insurers are severally liable under their respective contracts;
(b) Where the
policy under which the insured claims is a valued policy, the insured must give
credit as against the valuation for any sum received by him under any other
policy without regard to the actual value of the subject matter insured;
(c) Where the
policy under which the insured claims is an unvalued policy he must give
credit, as against the full insurable value, for any sum received by him under
any policy;
(d) Where the
insured receives any sum in excess of the valuation in the case of valued
policies, or of the insurable value in the case of unvalued policies, he must
hold such sum in trust for the insurers, according to their right of
contribution among themselves;
(e) Each
insurer is bound, as between himself and the other insurers, to contribute
ratably to the loss in proportion to the amount for which he is liable under
his contract.
Title 12
REINSURANCE
REINSURANCE
Sec. 95. A
contract of reinsurance is one by which an insurer procures a third person to
insure him against loss or liability by reason of such original insurance.
Sec. 96. Where
an insurer obtains reinsurance, except under automatic reinsurance treaties, he
must communicate all the representations of the original insured, and also all
the knowledge and information he possesses, whether previously or subsequently
acquired, which are material to the risk.
Sec. 97. A
reinsurance is presumed to be a contract of indemnity against liability,
and not merely against damage.
Sec. 98. The
original insured has no interest in a contract of reinsurance.
Chapter II
CLASSES OF INSURANCE
CLASSES OF INSURANCE
Title I
MARINE INSURANCE
MARINE INSURANCE
Sub-Title 1-
A
DEFINITION
DEFINITION
Sec. 99. Marine
Insurance includes:
(1) Insurance
against loss of or damage to:
(a) Vessels,
craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects,
disbursements, profits, moneys, securities, choses in action,
evidences of debts, valuable papers, bottomry, and respondentia interests
and all other kinds of property and interests therein, in respect to,
appertaining to or in connection with any and all risks or perils of
navigation, transit or transportation, or while being assembled, packed,
crated, baled, compressed or similarly prepared for shipment or while awaiting
shipment, or during any delays, storage, transhipment, or reshipment
incident thereto, including war risks, marine builder's risks, and all personal
property floater risks;
(b) Person or
property in connection with or appertaining to a marine, inland marine, transit
or transportation insurance, including liability for loss of or damage arising
out of or in connection with the construction, repair, operation, maintenance
or use of the subject matter of such insurance (but not including life
insurance or surety bonds nor insurance against loss by reason of bodily injury
to any person arising out of ownership, maintenance, or use of automobiles);
(c) Precious
stones, jewels, jewelry, precious metals, whether in course of transportation
or otherwise;
(d) Bridges,
tunnels and other instrumentalities of transportation and communication
(excluding buildings, their furniture and furnishings, fixed contents and
supplies held in storage); piers, wharves, docks and slips, and other aids to
navigation and transportation, including dry docks and marine railways, dams
and appurtenant facilities for the control of waterways.
(2) "Marine
protection and indemnity insurance," meaning insurance against, or
against legal liability of the insured for loss, damage, or expense incident to
ownership, operation, chartering, maintenance, use, repair, or construction of
any vessel, craft or instrumentality in use of ocean or inland waterways,
including liability of the insured for personal injury, illness or death or for
loss of or damage to the property of another person.
Sub-Title 1-B
INSURABLE INTEREST
INSURABLE INTEREST
Sec. 100. The
owner of a ship has in all cases an insurable interest in it, even when it has
been chartered by one who covenants to pay him its value in case of loss:
Provided, That in this case the insurer shall be liable for only that part of
the loss which the insured cannot recover from the charterer.
Sec. 101. The
insurable interest of the owner of the ship hypothecated by bottomry is
only the excess of its value over the amount secured by bottomry.
Sec. 102. Freightage,
in the sense of a policy of marine insurance, signifies all the benefits
derived by the owner, either from the chartering of the ship or its employment
for the carriage of his own goods or those of others.
Sec. 103. The
owner of a ship has an insurable interest in expected freightage which
according to the ordinary and probable course of things he would have earned
but for the intervention of a peril insured against or other peril incident to
the voyage.
Sec. 104. The
interest mentioned in the last section exists, in case of a charter party, when
the ship has broken ground on the chartered voyage. If a price is to be
paid for the carriage of goods it exists when they are actually on board, or
there is some contract for putting them on board, and both ship and goods are
ready for the specified voyage.
Sec. 105. One
who has an interest in the thing from which profits are expected to proceed has
an insurable interest in the profits.
Sec. 106. The charterer of
a ship has an insurable interest in it, to the extent that he is liable to be damnified by
its loss.
Sub-Title 1-C
CONCEALMENT
CONCEALMENT
Sec. 107. In
marine insurance each party is bound to communicate, in addition to what is
required by section twenty-eight, all the information which he possesses,
material to the risk, except such as is mentioned in Section thirty, and to
state the exact and whole truth in relation to all matters that he represents,
or upon inquiry discloses or assumes to disclose.
Sec. 108. In
marine insurance, information of the belief or expectation of a third person,
in reference to a material fact, is material.
Sec. 109. A
person insured by a contract of marine insurance is presumed to have knowledge,
at the time of insuring, of a prior loss, if the information might possibly
have reached him in the usual mode of transmission and at the usual rate of
communication.
Sec. 110. A
concealment in a marine insurance, in respect to any of the following
matters, does not vitiate the entire contract, but merely exonerates the
insurer from a loss resulting from the risk concealed:
(a) The
national character of the insured;
(b) The
liability of the thing insured to capture and detention;
(c) The
liability to seizure from breach of foreign laws of trade;
(d) The want
of necessary documents;
(e) The use
of false and simulated papers.
Sub-Title 1-D
REPRESENTATION
REPRESENTATION
Sec. 111. If
a representation by a person insured by a contract of marine insurance, is
intentionally false in any material respect, or in respect of any fact on which
the character and nature of the risk depends, the insurer may rescind the
entire contract.
Sec. 112. The
eventual falsity of a representation as to expectation does not, in the absence
of fraud, avoid a contract of marine insurance.
Sub-Title 1-E
IMPLIED WARRANTIES
IMPLIED WARRANTIES
Sec. 113. In
every marine insurance upon a ship or freight, or freightage, or upon any thing
which is the subject of marine insurance, a warranty is implied that
the ship is seaworthy.
Sec. 114. A
ship is seaworthy when reasonably fit to perform the service and to encounter
the ordinary perils of the voyage contemplated by the parties to the policy.
Sec. 115. An
implied warranty of seaworthiness is complied with if the ship be seaworthy at
the time of the of commencement of the risk, except in the following
cases:
(a) When the
insurance is made for a specified length of time, the implied warranty is not
complied with unless the ship be seaworthy at the commencement of
every voyage it undertakes during that time;
(b) When the
insurance is upon the cargo which, by the terms of the policy, description of
the voyage, or established custom of the trade, is to be transhipped at
an intermediate port, the implied warranty is not complied with unless each
vessel upon which the cargo is shipped, or transhipped, be seaworthy at
the commencement of each particular voyage.
Sec. 116. A
warranty of seaworthiness extends not only to the condition of the structure of
the ship itself, but requires that it be properly laden, and provided with a
competent master, a sufficient number of competent officers and seamen, and the
requisite appurtenances and equipment, such as ballasts, cables and anchors,
cordage and sails, food, water, fuel and lights, and other necessary or proper
stores and implements for the voyage.
Sec. 117. Where
different portions of the voyage contemplated by a policy differ in respect to
the things requisite to make the ship seaworthy therefor, a warranty of
seaworthiness is complied with if, at the commencement of each portion, the
ship is seaworthy with reference to that portion.
Sec. 118. When
the ship becomes unseaworthy during the voyage to which an
insurance relates, an unreasonable delay in repairing the defect
exonerates the insurer on ship orshipowner's interest from liability from
any loss arising therefrom.
Sec. 119. A
ship which is seaworthy for the purpose of an insurance upon the ship
may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for
the purpose of the insurance upon the cargo.
Sec. 120. Where
the nationality or neutrality of a ship or cargo is expressly warranted, it is
implied that the ship will carry the requisite documents to show such
nationality or neutrality and that it will not carry any documents which cast
reasonable suspicion thereon.
Sub-Title 1-F
THE VOYAGE AND DEVIATION
THE VOYAGE AND DEVIATION
Sec. 121. When
the voyage contemplated by a marine insurance policy is described by the places
of beginning and ending, the voyage insured in one which conforms to the course
of sailing fixed by mercantile usage between those places.
Sec. 122. If
the course of sailing is not fixed by mercantile usage, the voyage insured by a
marine insurance policy is that way between the places specified, which to a
master of ordinary skill and discretion, would mean the most natural, direct
and advantageous.
Sec. 123. Deviation
is a departure from the course of the voyage insured, mentioned in the last two
sections, or an unreasonable delay in pursuing the voyage or the commencement
of an entirely different voyage.
Sec. 124. A
deviation is proper:
(a) When
caused by circumstances over which neither the master nor the owner of the ship
has any control;
(b) When
necessary to comply with a warranty, or to avoid a peril, whether or not the
peril is insured against;
(c) When made
in good faith, and upon reasonable grounds of belief in its necessity to avoid
a peril; or
(d) When made
in good faith, for the purpose of saving human life or relieving another vessel
in distress.
Sec. 125. Every
deviation not specified in the last section is improper.
Sec. 126. An
insurer is not liable for any loss happening to the thing insured subsequent to
an improper deviation.
Sub-Title 1-G
LOSS
LOSS
Sec. 127. A
loss may be either total or partial.
Sec. 128. Every
loss which is not total is partial.
Sec. 129. A
total loss may be either actual or constructive.
Sec. 130. An
actual total loss is cause by:
(a) A total
destruction of the thing insured;
(b) The
irretrievable loss of the thing by sinking, or by being broken up;
(c) Any
damage to the thing which renders it valueless to the owner for the purpose for
which he held it; or
(d) Any other
event which effectively deprives the owner of the possession, at the port of
destination, of the thing insured.
Sec. 131. A
constructive total loss is one which gives to a person insured a right to
abandon, under Section one hundred thirty-nine.
Sec. 132. An
actual loss may be presumed from the continued absence of a ship without being
heard of. The length of time which is sufficient to raise this presumption
depends on the circumstances of the case.
Sec. 133. When
a ship is prevented, at an intermediate port, from completing the voyage, by
the perils insured against, the liability of a marine insurer on the cargo
continues after they are thus reshipped.
Nothing in this section shall prevent an insurer from requiring an additional premium if the hazard be increased by this extension of liability.
Nothing in this section shall prevent an insurer from requiring an additional premium if the hazard be increased by this extension of liability.
Sec. 134. In
addition to the liability mentioned in the last section, a marine insurer is bound
for damages, expenses of discharging, storage, reshipment, extra freightage,
and all other expenses incurred in saving cargo reshipped pursuant to the last
section, up to the amount insured.
Nothing in this or in the preceding section shall render a marine insurer liable for any amount in excess of the insured value or, if there be none, of the insurable value.
Nothing in this or in the preceding section shall render a marine insurer liable for any amount in excess of the insured value or, if there be none, of the insurable value.
Sec. 135. Upon
an actual total loss, a person insured is entitled to payment without notice of
abandonment.
Sec. 136. Where
it has been agreed that an insurance upon a particular thing, or class of
things, shall be free from particular average, a marine insurer is not liable
for any particular average loss not depriving the insured of the possession, at
the port of destination, of the whole of such thing, or class of things, even
though it becomes entirely worthless; but such insurer is liable for his
proportion of all general average loss assessed upon the thing insured.
Sec. 137. An
insurance confined in terms to an actual loss does not cover a constructive
total loss, but covers any loss, which necessarily results in depriving the
insured of the possession, at the port of destination, of the entire thing
insured.
Sub-Title 1-H
ABANDONMENT
ABANDONMENT
Sec. 138. Abandonment,
in marine insurance, is the act of the insured by which, after a constructive
total loss, he declares the relinquishment to the insurer of his interest in
the thing insured.
Sec. 139. A
person insured by a contract of marine insurance may abandon the thing insured,
or any particular portion thereof separately valued by the policy, or
otherwise separately insured, and recover for a total loss thereof, when
the cause of the loss is a peril insured against:
(a) If more
than three-fourths thereof in value is actually lost, or would have to be expended
to recover it from the peril;
(b) If it is
injured to such an extent as to reduce its value more than three-fourths;
(c) If the
thing insured is a ship, and the contemplated voyage cannot be lawfully
performed without incurring either an expense to the insured of more than
three-fourths the value of the thing abandoned or a risk which a prudent man
would not take under the circumstances; or
(d) If the
thing insured, being cargo or freightage, and the voyage cannot be performed,
nor another ship procured by the master, within a reasonable time and with
reasonable diligence, to forward the cargo, without incurring the like expense
or risk mentioned in the preceding sub-paragraph. But freightage cannot in any
case be abandoned unless the ship is also abandoned.
Sec. 140. An
abandonment must be neither partial nor conditional.
Sec. 141. An
abandonment must be made within a reasonable time after receipt of
reliable information of the loss, but where the information is of a doubtful
character, the insured is entitled to a reasonable time to make inquiry.
Sec. 142. Where
the information upon which an abandonment has been made proves
incorrect, or the thing insured was so far restored when the abandonment was
made that there was then in fact no total loss, the abandonment becomes
ineffectual.
Sec. 143. Abandonment
is made by giving notice thereof to the insurer, which may be done orally, or
in writing; Provided, That if the notice be done orally, a written
notice of such abandonment shall be submitted within seven days from such oral
notice.
Sec. 144. A
notice of abandonment must be explicit, and must specify the particular cause
of the abandonment, but need state only enough to show that there is probable
cause therefor, and need not be accompanied with proof of interest or of
loss.
Sec. 145. An
abandonment can be sustained only upon the cause specified in the notice
thereof.
Sec. 146. An
abandonment is equivalent to a transfer by the insured of his interest to
the insurer, with all the chances of recovery and indemnity.
Sec. 147. If
a marine insurer pays for a loss as if it were an actual total loss, he is
entitled to whatever may remain of the thing insured, or its proceeds or
salvage, as if there had been a formal abandonment.
Sec. 148. Upon
an abandonment, acts done in good faith by those who were agents of the insured
in respect to the thing insured, subsequent to the loss, are at the risk of the
insurer and for his benefit.
Sec. 149. Where
notice of abandonment is properly given, the rights of the insured are not
prejudiced by the fact that the insurer refuses to accept the abandonment.
Sec. 150. The
acceptance of an abandonment may be either express or implied from
the conduct of the insurer. The mere silence of the insurer for an unreasonable
length of time after notice shall be construed as an acceptance.
Sec. 151. The
acceptance of an abandonment, whether express or implied, is conclusive
upon the parties, and admits the loss and the sufficiency of the abandonment.
Sec. 152. An
abandonment once made and accepted is irrevocable, unless the ground upon which
it was made proves to be unfounded.
Sec. 153. On
an accepted abandonment of a ship, freightage earned previous to the loss
belongs to the insurer of said freightage; but freightage subsequently earned
belongs to the insurer of the ship.
Sec. 154. If
an insurer refuses to accept a valid abandonment, he is liable as upon actual
total loss, deducting from the amount any proceeds of the thing insured which
may have come to the hands of the insured.
Sec. 155. If
a person insured omits to abandon, he may nevertheless recover his actual loss.
Sub-Title 1-I
MEASURE OF INDEMNITY
MEASURE OF INDEMNITY
Sec. 156. A
valuation in a policy of marine insurance in conclusive between the parties
thereto in the adjustment of either a partial or total loss, if the insured has
some interest at risk, and there is no fraud on his part; except that when a
thing has been hypothecated by bottomry or respondentia, before
its insurance, and without the knowledge of the person actually procuring the
insurance, he may show the real value. But a valuation fraudulent in fact,
entitles the insurer to rescind the contract.
Sec. 157. A
marine insurer is liable upon a partial loss, only for such proportion of the
amount insured by him as the loss bears to the value of the whole interest of
the insured in the property insured.
Sec. 158. Where
profits are separately insured in a contract of marine insurance, the insured
is entitled to recover, in case of loss, a proportion of such profits
equivalent to the proportion which the value of the property lost bears to the
value of the whole.
Sec. 159. In
case of a valued policy of marine insurance on freightage or cargo, if a part
only of the subject is exposed to the risk, the evaluation applies only in
proportion to such part.
Sec. 160. When
profits are valued and insured by a contract of marine insurance, a loss of
them is conclusively presumed from a loss of the property out of which they are
expected to arise, and the valuation fixes their amount.
Sec. 161. In
estimating a loss under an open policy of marine insurance the following rules
are to be observed:
(a) The value
of a ship is its value at the beginning of the risk, including all articles or
charges which add to its permanent value or which are necessary to prepare it
for the voyage insured;
(b) The value
of the cargo is its actual cost to the insured, when laden on board, or where
the cost cannot be ascertained, its market value at the time and place of
lading, adding the charges incurred in purchasing and placing it on board, but
without reference to any loss incurred in raising money for its purchase, or to
any drawback on its exportation, or to the fluctuation of the market at the
port of destination, or to expenses incurred on the way or on arrival;
(c) The value
of freightage is the gross freightage, exclusive of primage, without
reference to the cost of earning it; and
(d) The cost
of insurance is in each case to be added to the value thus estimated.
Sec. 162. If
cargo insured against partial loss arrives at the port of destination in a
damaged condition, the loss of the insured is deemed to be the same proportion
of the value which the market price at that port, of the thing so damaged,
bears to the market price it would have brought if sound.
Sec. 163. A
marine insurer is liable for all the expenses attendant upon a loss which
forces the ship into port to be repaired; and where it is stipulated in the
policy that the insured shall labor for the recovery of the property, the
insurer is liable for the expense incurred thereby, such expense, in either
case, being in addition to a total loss, if that afterwards occurs.
Sec. 164. A
marine insurer is liable for a loss falling upon the insured, through a
contribution in respect to the thing insured, required to be made by him
towards a general average loss called for by a peril insured against; provided,
that the liability of the insurer shall be limited to the proportion of
contribution attaching to his policy value where this is less than the
contributing value of the thing insured.
Sec. 165. When
a person insured by a contract of marine insurance has a demand against others
for contribution, he may claim the whole loss from the insurer, subrogating him
to his own right to contribution. But no such claim can be made upon the
insurer after the separation of the interests liable to the contribution, nor
when the insured, having the right and opportunity to enforce the contribution
from others, has neglected or waived the exercise of that right.
Sec. 166. In
the case of a partial loss of ship or its equipment, the old materials are to
be applied towards payment for the new. Unless otherwise stipulated in the
policy, a marine insurer is liable for only two-thirds of the remaining cost of
repairs after such deduction, except that anchors must be paid in full.
Title 2
FIRE INSURANCE
FIRE INSURANCE
Sec. 167. As
used in this Code, the term "fire insurance" shall include
insurance against loss by fire, lightning, windstorm, tornado or earthquake and
other allied risks, when such risks are covered by extension to fire insurance
policies or under separate policies.
Sec. 168. An
alteration in the use or condition of a thing insured from that to which it is
limited by the policy made without the consent of the insurer, by means within
the control of the insured, and increasing the risks, entitles an insurer to
rescind a contract of fire insurance.
Sec. 169. An
alteration in the use or condition of a thing insured from that to which it is
limited by the policy, which does not increase the risk, does not affect a
contract of fire insurance.
Sec. 170. A
contract of fire insurance is not affected by any act of the insured subsequent
to the execution of the policy, which does not violate its provisions, even
though it increases the risk and is the cause of the loss.
Sec. 171. If
there is no valuation in the policy, the measure of indemnity in an insurance
against fire is the expense it would be to the insured at the time of the
commencement of the fire to replace the thing lost or injured in the condition
in which at the time of the injury; but if there is a valuation in a policy of
fire insurance, the effect shall be the same as in a policy of marine
insurance.
Sec. 172. 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. In the absence of
any change increasing the risk without the consent of the insurer or of fraud
on the part of the insured, then in case of a total loss under such policy, the
whole amount so insured upon the insured's interest in such building or
structure, as stated in the policy upon which the insurers have received a
premium, shall be paid, and in case of a partial loss the full amount of the
partial loss shall be so paid, and in case there are two or more policies
covering the insured's interest therein, each policy shall contribute pro rata
to the payment of such whole or partial loss. But in no case shall the insurer
be required to pay more than the amount thus stated in such policy. This
section shall not prevent the parties from stipulating in such policies
concerning the repairing, rebuilding or replacing of buildings or structures
wholly or partially damaged or destroyed.
Sec. 173. 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, and any such pledge, hypothecation, or transfer hereafter made
shall be void and of no effect insofar as it may affect other creditors of the
insured.
Title 3
CASUALTY INSURANCE
CASUALTY INSURANCE
Sec. 174. Casualty
insurance is insurance covering loss or liability arising from accident or
mishap, excluding certain types of loss which by law or custom are considered
as falling exclusively within the scope of other types of insurance such as
fire or marine. It includes, but is not limited to, employer's liability
insurance, motor vehicle liability insurance, plateglassinsurance, burglary and
theft insurance, personal accident and health insurance as written by non-life
insurance companies, and other substantially similar kinds of insurance.
Title 4
SURETYSHIP
SURETYSHIP
Sec. 175. A
contract of suretyship is an agreement whereby a party called the
surety guarantees the performance by another party called the principal or
obligor of an obligation or undertaking in favor of a third party called the obligee.
It includes official recognizances, stipulations, bonds or undertakings
issued by any company by virtue of and under the provisions of Act No. 536, as
amended by Act No. 2206.
Sec. 176. The
liability of the surety or sureties shall be joint and several with the obligor
and shall be limited to the amount of the bond. It is determined strictly by
the terms of the contract of suretyship in relation to the principal
contract between the obligor and the obligee. (As amended by
Presidential Decree No. 1455).
Sec. 177. The
surety is entitled to payment of the premium as soon as the contract of suretyship or
bond is perfected and delivered to the obligor. No contract of suretyship or
bonding shall be valid and binding unless and until the premium therefor has
been paid, except where the obligee has accepted the bond, in which
case the bond becomes valid and enforceable irrespective of whether or not the
premium has been paid by the obligor to the surety: Provided, That if the
contract of suretyship or bond is not accepted by, or filed with the obligee,
the surety shall collect only reasonable amount, not exceeding fifty per centum
of the premium due thereon as service fee plus the cost of stamps or other
taxes imposed for the issuance of the contract or bond: Provided, however, That
if the non-acceptance of the bond be due to the fault or negligence of the
surety, no such service fee, stamps or taxes shall be collected.
In the case
of a continuing bond, the obligor shall pay the subsequent annual premium as it
falls due until the contract of suretyship is cancelled by the obligee or
by the Commissioner or by a court of competent jurisdiction, as the case may
be.
Sec. 178. Pertinent
provisions of the Civil Code of the Philippines shall be applied in a suppletory character
whenever necessary in interpreting the provisions of a contract ofsuretyship.
Title 5
LIFE INSURANCE
LIFE INSURANCE
Sec. 179. Life
insurance is insurance on human lives and insurance appertaining thereto or
connected therewith.
Sec. 180. An
insurance upon life may be made payable on the death of the person, or on his
surviving a specified period, or otherwise contingently on the continuance or
cessation of life.
Every
contract or pledge for the payment of endowments or annuities shall be considered
a life insurance contract for purpose of this Code.
In the
absence of a judicial guardian, the father, or in the latter's absence or
incapacity, the mother, or any minor, who is an insured or a beneficiary under
a contract of life, health or accident insurance, may exercise, in behalf of
said minor, any right under the policy, without necessity of court authority or
the giving of a bond, where the interest of the minor in the particular act
involved does not exceed twenty thousand pesos. Such right may include, but
shall not be limited to, obtaining a policy loan, surrendering the policy,
receiving the proceeds of the policy, and giving the minor's consent to any
transaction on the policy.
Sec. 180-A. The
insurer in a life insurance contract shall be liable in case of suicides only
when it is committed after the policy has been in force for a period of two
years from the date of its issue or of its last reinstatement, unless the
policy provides a shorter period: Provided, however, That
suicide committed in the state of insanity shall be compensable regardless of
the date of commission. (As amended by Batasang Pambansa Blg.
874).
Sec. 181. A
policy of insurance upon life or health may pass by transfer, will or
succession to any person, whether he has an insurable interest or not, and such
person may recover upon it whatever the insured might have recovered.
Sec. 182. Notice
to an insurer of a transfer or bequest thereof is not necessary to preserve the
validity of a policy of insurance upon life or health, unless thereby expressly
required.
Sec. 183. Unless
the interest of a person insured is susceptible of exact pecuniary measurement,
the measure of indemnity under a policy of insurance upon life or health is the
sum fixed in the policy.
Chapter III
THE BUSINESS OF INSURANCE
THE BUSINESS OF INSURANCE
Title 1
INSURANCE COMPANIES, ORGANIZATION,
CAPITALIZATION AND AUTHORIZATION
INSURANCE COMPANIES, ORGANIZATION,
CAPITALIZATION AND AUTHORIZATION
Sec. 184. For
purposes of this Code, the term "insurer" or "insurance
company" shall include all individuals, partnerships, associations,
or corporations, including government-owned or controlled corporations or
entities, engaged as principals in the insurance business, excepting mutual
benefit associations. Unless the context otherwise requires, the terms shall
also include professional reinsurers defined in section two hundred
eighty. "Domestic company" shall include companies formed,
organized or existing under the laws of the Philippines."Foreign
company" when used without limitation shall include companies formed,
organized, or existing under any laws other than those of the Philippines.
Sec. 185. Corporations
formed or organized to save any person or persons or other corporations
harmless from loss, damage, or liability arising from any unknown or future or
contingent event, or to indemnify or to compensate any person or persons or
other corporations for any such loss, damage, or liability, or to guarantee the
performance of or compliance with contractual obligations or the payment of
debt of others shall be known as "insurance corporations".
The
provisions of the Corporation Law shall apply to all insurance corporations now
or hereafter engaged in business in the Philippines insofar as they
do not conflict with the provisions of this chapter.
Sec. 186. No
person, partnership, or association of persons shall transact any insurance
business in the Philippines except as agent of a person or corporation
authorized to do the business of insurance in the Philippines, unless possessed
of the capital and assets required of an insurance corporation doing the same
kind of business in the Philippines and invested in the same manner; nor unless
the Commissioner shall have granted to him or them a certificate to the effect
that he or they have complied with all the provisions of law which an insurance
corporation doing business in the Philippines is required to observe.
Every person,
partnership, or association receiving any such certificate of authority shall
be subject to the insurance laws of the Philippines and to the jurisdiction and
supervision of the Commissioner in the same manner as if an insurance
corporation authorized by the laws of the Philippines to engage in the business
of insurance specified in the certificate.
Sec. 187. No
insurance company shall transact any insurance business in the Philippines until
after it shall have obtained a certificate of authority for that purpose from
the Commissioner upon application therefore and payment by the company
concerned of the fees hereinafter prescribed.
The
Commissioner may refuse to issue a certificate of authority to any insurance
company if, in his judgment, such refusal will best promote the interest of the
people of this country. No such certificate of authority shall be granted to
any such company until the Commissioner shall have satisfied himself by such
examination as he may make and such evidence as he may require that such
company is qualified by the laws of the Philippines to transact business
therein, that the grant of such authority appears to be justified in the light
of economic requirements, and that the direction and administration, as well as
the integrity and responsibility of the organizers and administrators, the
financial organization and the amount of capital, notwithstanding the
provisions of section one hundred eighty-eight, reasonably assure the safety of
the interests of the policyholders and the public.
In order to
maintain the quality of the management of the insurance companies and afford
better protection to policyholders and the public in general, any person of
good moral character, unquestioned integrity and recognized competence may be
elected or appointed director or officer of insurance companies. The
Commissioner shall prescribe the qualifications of the executive officers and
other key officials of insurance companies for purposes of this section.
No person
shall concurrently be a director and/or officer of an insurance company and an
adjustment company.
Incumbent
directors and/or officers affected by the above provisions are hereby allowed
to hold on to their positions until the end of their terms or two years from
the effectivity of this decree, whichever is shorter.
Before
issuing such certificate of authority, the Commissioner must be satisfied that
the name of the company is not that of any other known company transacting a
similar business in the Philippines, or a name so similar as to be calculated
to mislead the public.
Such
certificate of authority shall expire on the last day of June of each year and
shall be renewed annually if the company is continuing to comply with the
provisions of this Code or the circulars, instructions, rulings or decisions of
the Commissioner. Every company receiving any such certificates of
authority shall be subject to the provisions of this Code and other related
laws and to the jurisdiction and supervision of the Commissioner.
No insurance
company may be authorized to transact in the Philippines the business
of life and non-life insurance concurrently unless specifically authorized to
do so: Provided, Thatthe terms "life" and "non-life" insurance
shall be deemed to include health, accident and disability insurance.
No insurance
company shall have equity in an adjustment company and neither shall an
adjustment company have an equity in an insurance company.
Insurance
companies and adjustment companies presently affected by the above provision
shall have two years from the effectivity of this Decree within which
to divest of their stockholdings. (As amended by Presidential Decree No.
1455).
Sec. 188. Except
as provided in section two hundred eighty-one, no domestic insurance company
shall, in a stock corporation, engage in business in the Philippines unless
possessed of a paid-up capital stock equal to at least five million pesos: Provided,
That a domestic insurance company already doing business in the Philippines
with a paid-up capital stock which is less than five million pesos shall have a
paid-up capital stock of at least three million pesos by December thirty-one,
nineteen hundred seventy-eight, four million pesos by December thirty-one,
nineteen hundred seventy-nine and five million pesos by December thirty-one,
nineteen hundred eighty: Provided, further, that the Secretary of
Finance may, upon recommendation of the Insurance Commissioner, increase such
minimum paid-up capital stock requirement, under such terms and conditions as
he may impose, to an amount which, in his opinion, would reasonably assure the
safety of the interests of the policyholders and the public.
The
Commissioner may, as a pre-licensing requirement of a new insurance company, in
addition to the paid-up capital stock, require the stockholders to pay in cash
to the company in proportion to their subscription interests a contributed
surplus fund of not less than one million pesos, in the case of a life
insurance company, or not less than five hundred thousand pesos, in the case of
an insurance company other than life. He may also require such company to
submit to him a business plan showing the company's estimated receipts and disbursements,
as well as the basis therefore, for the next succeeding three years.
If organized
as a mutual company, in lieu of such capital stock, it must have
available cash assets of at least five million pesos above all liabilities for
losses reported, expenses, taxes, legal reserve, and reinsurance of all
outstanding risks, and the contributed surplus fund equal to the amounts
required of stock corporations. A stock insurance company doing business in the
Philippines may, subject to the pertinent law and regulations which now are of
hereafter may be in force, alter its organization and transform itself into a
mutual insurance company. (As amended by Presidential Decree No. 1455).
Sec. 189. Every
company must, before engaging in the business of insurance in the Philippines,
file with the Commissioner the following:
(a) A
certified copy of the last annual statement or a verified financial statement
exhibiting the condition and affairs of such company;
(b) If
incorporated under the laws of the Philippines, a copy of the articles of
incorporation and by-laws, and any amendments to either, certified by the
Securities and Exchange Commission to be a copy of that which is filed in
its Office;
(c) If
incorporated under any laws other than those of the Philippines, a certificate
from the Securities and Exchange Commission showing that it is duly registered
in the mercantile registry of that Commission in accordance with the
Corporation Law. A copy of the articles of incorporation and by-laws, and any
amendments to either, if organized or formed under any law requiring such to be
filed, duly certified by the officer having the custody of same, or if not so
organized, a copy of the law, charter or deed of settlement under which the
deed of organization is made, duly certified by the proper custodian thereof,
or proved by affidavit to be a copy; also, a certificate under the hand and
seal of the proper officer of such state or country having supervision of
insurance business therein, if any there be, that such corporation or company
is organized under the laws of such state or country, with the amount of
capital stock or assets and legal reserve required by this Code;
(d) If not
incorporated and of foreign domicile, aside from the certificate mentioned in
paragraph (c) of this section, a certificate setting forth the nature and
character of the business, the location of the principal office, the name of
the individual or names of the persons composing the partnership or
association, the amount of actual capital employed or to be employed therein
and the names of all officers and persons by whom the business is or may be
managed.
The
certificate must be verified by the affidavit of the chief officer, secretary,
agent, or manager of the company; and if there are any written articles of
agreement of the company, a copy thereof must be accompany such certificate.
Sec. 190. The
Commissioner must require as a condition precedent to the transaction of
insurance business in the Philippines by any foreign insurance company, that
such company file in his office a written power of attorney designating some
person who shall be a resident of the Philippines as its general agent, on whom
any notice provided by law or by any insurance policy, proof of loss, summons
and other legal processes may be served in all actions or other legal
proceedings against such company, and consenting that service upon such general
agent shall be admitted and held as valid as if served upon the foreign company
at its home office. Any such foreign company shall, as further condition
precedent to the transaction of insurance business in the Philippines, make and
file with the Commissioner an agreement or stipulation, executed by the proper
authorities of said company in form and substance as follows:
"The
(name of company) does hereby stipulate and agree in consideration of the
permission granted by the Insurance Commissioner to transact business in the
Philippines, that if at any time said company shall leave the Philippines, or
cease to transact business therein, or shall be without any agent in the
Philippines on whom any notice, proof of loss, summons, or legal process may be
served, then in any action or proceeding arising out any business or
transaction which occurred in the Philippines, service of any notice provided
by law, or insurance policy, proof of loss, summons, or other legal process may
be made upon the Insurance Commissioner shall have the same force and effect as
if made upon the company."
Whenever such
service of notice, proof of loss, summons, or other legal process shall be made
upon the Commission, he must, within ten days thereafter, transmit by mail,
postage paid, a copy of such notice, proof of loss, summons, or other legal
process to the company at its home or principal office. The sending of such
copy by the Commissioner shall be a necessary part of the service of the
notice, proof of loss, or other legal process.
Sec. 191. No
insurance company organized or existing under the government or laws other than
those of the Philippines shall engage in business in the Philippines unless
possessed of paid-up unimpaired capital or assets and reserve not less than
that herein required of domestic insurance companies, nor until it shall have
deposited with the Commissioner for the benefit and security of the
policyholders and creditors of such company in the Philippines, securities
satisfactory to the Commissioner consisting of good securities of the
Philippines, including new issues of stock of "registered
enterprises", as this term is defined in Republic Act No. 5186, otherwise
known as the Investment Incentives Act, as amended, to the actual market
value of not less than the minimum paid-up capital required of domestic
insurance companies: Provided, That at least fifty per centum of
such securities shall consist of bonds or other evidences of debt of the
Government of the Philippines, its political subdivisions and
instrumentalities, or of government-owned or controlled corporations and
entities, including the Central Bank. The total investment of a foreign
insurance company in any registered enterprise shall not exceed twenty per
centum of the net worth of said foreign insurance company nor twenty per
centum of the capital of the registered enterprise, unless previously
authorized in writing by the Commissioner.
For purposes
of this Code, the net worth of a foreign insurance company shall refer only to
its net worth in the Philippines.
Sec. 192. The
Commissioner shall hold the securities, deposited as aforesaid, for the benefit
and security of all the policyholders of the company depositing the same, but
shall as long as the company is solvent, permit the company to collect the
interest or dividends on the securities so deposited, and, from time to time,
with his assent, to withdraw any of such securities, upon depositing with said
Commissioner other like securities, the market value of which shall be equal to
the market value of such as may be withdrawn. In the event of any company
ceasing to do business in the Philippines the securities deposited as aforesaid
shall be returned upon the company's making application therefore and proving
to the satisfaction of the Commissioner that it has no further liability
under any of its policies in the Philippines.
Sec. 193. Every
foreign company doing business in the Philippines shall set aside an amount
corresponding to the legal reserves of the policies written in the Philippines
and invest and keep the same therein in accordance with the provisions of this
section. The legal reserve therein required to be set aside shall be invested
only in the classes of the Philippine securities described in section two
hundred: Provided, however, That no investment in stocks or bonds of any
single entity shall, in the aggregate exceed twenty per centum of the
net worth of the investing company or twenty per centum of the capital of the
issuing company, whichever is the lesser unless otherwise approved in writing
by the Commissioner. The securities purchased and kept in the Philippines under
this section, shall not be sent out of the territorial jurisdiction of the Philippines without
the written consent of the Commissioner.
Title 2
MARGIN OF INSOLVENCY
MARGIN OF INSOLVENCY
Sec. 194. An
insurance company doing business in the Philippines shall at all times maintain
a margin of solvency which shall be an excess of the value of its admitted
assets exclusive of its paid-up capital, in the case of a domestic company, or
an excess of the value of its admitted assets in the Philippines, exclusive of
its security deposits, in the case of a foreign company, over the amount of its
liabilities, unearned premium and reinsurance reserves in the Philippines of at
least two per mille of the total amount of its insurance in force as of the
preceding calendar year on all policies, except term insurance, in the case of
a life insurance company, or of at least ten per centum of the total amount of
its net premium written during the preceding calendar year, in the case of a
company other than a life insurance company: Provided, That in either
case, such margin shall in no event be less than five hundred thousand pesos:
and Provided, further, That the term "paid-up capital" shall
not include contributed surplus and capital paid in excess of par value. Such
assets, liabilities and reserves shall exclude assets, liabilities and reserves
included in separate accounts established in accordance with section two
hundred thirty-seven. Whenever the aforementioned margin be found to be less
than that herein required to be maintained, the Commissioner shall forthwith
direct the company to make good any such deficiency by cash, to be contributed
by all stockholders of record in proportion to their respective interest, and
paid to the treasurer of the company, within fifteen days from receipt of the
order: Provided, That the company in the interim shall not be permitted to
take any new risk of any kind or character unless and until it make good any
such deficiency: Provided, further, that a stockholder who aside from
paying the contribution due from him, pays the contribution due from the
another stockholder by reason of the failure or refusal of the latter to do so,
shall have a lien on the certificates of stock of the insurance company
concerned appearing in its books in the name of the defaulting stockholder on
the date of default, as well as on any interests or dividends that have accrued
or will accrue to the said certificates of stock, until the corresponding
payment or reimbursement is made by the defaulting stockholder. (As
amended by Presidential Decree No. 1455).
Sec. 195. No
domestic insurance corporation shall declare or distribute any dividend on its
outstanding stocks except from profits attested in a sworn statement to the
Commissioner by the president or treasurer of the corporation to be remaining
on hand after retaining unimpaired:
(a) The
entire paid-up capital stock;
(b) The
margin of solvency required by section one hundred ninety-four;
(c) In the
case of life insurance corporation, the legal reserve fund required by section
two hundred eleven;
(d) In the
case of corporations other than life, the legal reserve fund required by
section two hundred thirteen;
(e) A sum
sufficient to pay all net losses reported, or in the course of settlement, and
all liabilities for expenses and taxes.
Any dividend
declared or distributed under the preceding paragraph shall be reported to the
Commissioner within thirty days after such declaration or distribution.
If the
Commissioner finds that any such corporation has declared or distributed any
such dividend in violation of this section, he may order such corporation to
cease and desist from doing business until the amount of such dividend or the
portion thereof in excess of the amount allowed under this section has been
restored to said corporation.
Title 3
ASSETS
ASSETS
Sec. 196. In
any determination of the financial condition of any insurance company doing
business in the Philippines, there shall be allowed and admitted as assets
only such assets owned by the insurance company concerned and which consist of:
1. Cash in
the possession of the insurance company or in transit under its control, and
the true and duly verified balance of any deposit of such company in a financially
sound commercial bank or trust company.
2.
Investments in securities, including money market instruments, and in real
property acquired or held in accordance with and subject to the applicable
provisions of this Code and the income realized therefrom or accrued
thereon.
3. Loans
granted by the insurance company concerned to the extent of that portion
thereof adequately secured by non-speculative assets with readily realizable
values in accordance with and subject to the limitations imposed by applicable
provisions of this Code.
4. Policy
loans and other policy assets and liens on policies, contracts or certificates
of a life insurance company, in an amount not exceeding legal reserves and
other policy liabilities carried on each individual life insurance policy,
contract or certificate.
5. The net
amount of uncollected and deferred premiums and annuity considerations in the
case of a life insurance company which carries the full mean tabular reserve
liability.
6.
Reinsurance recoverable by the ceding insurer:
(a) from an
insurer authorized to transact business in this country, the full amount
thereof; or
(b) from an
insurer not authorized in this country, in an amount not exceeding the
liabilities carried by the ceding insurer for amounts withheld under a
reinsurance treaty with such unauthorized insurer as security for the payment
of obligations thereunder if such funds are held subject to
withdrawal by, and under the control of, the ceding insurer. The Commissioner
may prescribe the conditions under which a ceding insurer may be allowed
credit, as an asset or as a deduction from loss and unearned premium reserves,
for reinsurance recoverable from an insurer not authorized in this country but
which presents satisfactory evidence that it meets the applicable standards of
solvency required in this country.
7. Funds withheld by a ceding insurer under a reinsurance treaty, provided reserves for unpaid losses and unearned premiums are adequately provided.
8. Deposits
or amounts recoverable from underwriting associations, syndicates and
reinsurance funds, or from any suspended banking institution, to the extent
deemed by the Commissioner to be available for the payment of losses and claims
and values to be determined by him.
9. Electronic
data processing machines, as may be authorized by the Commissioner to be
acquired by the insurance company concerned, the acquisition cost of which to
be amortized in equal annual amounts within a period of five years from the
date of acquisition thereof.
10. Other
assets, not inconsistent with the provisions of paragraphs 1 to 9 hereof, which
are deemed by the Commissioner to be readily realizable and available for the
payment of losses and claims at values to be determined by him.
Sec. 197. In
addition to such assets as the Commissioner may from time to time determine to
be non-admitted assets of insurance companies doing business in the
Philippines, the following assets shall in no case be allowed as admitted
assets of an insurance company doing business in the Philippines, in any
determination of its financial condition:
1. Goodwill,
trade names, and other like intangible assets.
2. Prepaid or
deferred charges for expenses and commissions paid by such insurance company.
3. Advances
to officers (other than policy loans), which are not adequately secured and
which are not previously authorized by the Commissioner, as well as advances to
employees, agents, and other persons on mere personal security.
4. Shares of
stock of such insurance company, owned by it, or any equity therein as well as
loans secured thereby, or any proportionate interest in such shares of stock
through the ownership by such insurance company of an interest in another
corporation or business unit.
5. Furniture,
furnishing, fixtures, safes, equipment, library, stationery, literature, and
supplies.
6. Items of
bank credits representing checks, drafts or notes returned unpaid after the
date of statement.
7. The amount,
if any, by which the aggregate value of investments as carried in the ledger
assets of such insurance company exceeds the aggregate value thereof as
determined in accordance with the provisions of this Code and/or the rules of
the Commissioner.
All
non-admitted assets and all other assets of doubtful value or character
included as ledger or non-ledger assets in any statement submitted by an
insurance company to the Commissioner, or in any insurance examiner's report to
him, shall also be reported, to the extent of the value disallowed as
deductions from the gross assets of such insurance company, except where the
Commissioner permits a reserve to be carried among the liabilities of such
insurance company in lieu of any such deduction.
Title 4
INVESTMENTS
INVESTMENTS
Sec. 198. No
insurance company shall loan any of its money or deposits to any person,
corporation or association, except upon first mortgage or deeds of trust of
unencumbered, improved or unimproved real estate, including condominiums, in
cities and centers of population of municipalities in the Philippines when the
amount of such loan is not in excess of seventy per centum of the market value
of such real estate; or upon the security of first mortgages or deeds of trust
of actually cultivated, improved and unencumbered agricultural lands in the
Philippines when the amount of such loan is not in excess of forty per
centum of the market value of such land; or upon the purchase money
mortgages or like securities received by it upon the sale or exchange of real
property acquired pursuant to sections two hundred and two hundred two; or upon
bonds or other evidences of debt of the Government of the Philippines or its
political subdivisions authorized by law to issue bonds, or upon bonds or other
evidences of debt of government-owned or controlled corporations and instrumentalities
including the Central Bank or upon obligations issued or guaranteed by the
International Bank for Reconstruction and Development; or upon stocks, bonds or
other evidences of debt as are specified in section two hundred.
A life
insurance company, however, may lend to any of its policyholders upon the
security of the value of its policy such sum as may be determined pursuant to
the provisions of the policy.
Loans granted
upon the security of real estate for a period longer than five years shall be
amortized in monthly, quarterly, semi-annual or annual installments; Provided,
that no such loans shall have a maturity in excess of twenty years.
The phrase "improved
real estate" used above is hereby defined to mean land with permanent
building or buildings erected or being erected thereon. Except as otherwise
approved by the Commissioner, in case the building or buildings on land do not
belong to the owner of the latter, no loan shall be granted on the security of
the real estate in question unless both the owner of the building or buildings
and the owner of the land sign the deed of mortgage, and unless the owner of
the land is the Government of the Philippines or one of its political
subdivisions, in which event the owner is not required to sign the deed of
mortgage.
Sec. 199. No
loan by any insurance company on the security of real estate shall be made
unless the title to such real estate shall have first been registered in
accordance with the existing Land Registration Act, or shall be a titulo real duly
registered, or have been previously registered under the provisions of the
existing Mortgage Law.
Sec. 200. (1)
An insurance company may purchase, hold, own and convey such property, real and
personal, as may have been mortgaged, pledged, or conveyed to it in good faith
in trust for its benefit by reason of money loaned by it in pursuance of the
regular business of the company, and such real or personal property as may have
been purchased by it at sales under pledges, mortgages or deeds of trust for
its benefit on account of money loaned by it; and such real and personal
property as may have been conveyed to it by borrowers in satisfaction and
discharge of loans made by the company to them: Provided, however, That
any real estate purchased by an insurance company in payment or by reason of
any loan made by it shall be sold by the company within twenty years after the
title thereto has been vested in it.
(2) An
insurance company may purchase, hold, own and convey real and personal property
as follows:
(a) The lot
with building thereon in which the company conducts and carries on its
business.
(b) Bonds or
other evidences of debt of the Government of the Philippines or its
political subdivisions authorized by law to issue bonds at the reasonable
market value thereof.
(c) Bonds or
other evidences of debt of the government-owned or controlled corporations and
entities, including the Central Bank.
(d) Bonds,
debentures or other evidences of indebtedness of any solvent corporations or
institution created or existing under the laws of the Philippines: Provided,
however, That the issuing, assuming or guaranteeing entity or its
predecessors shall not have defaulted in the payment of interest on any of its
securities and that during each of any three including the last two of the five
fiscal years next preceding the date of acquisition by such insurance company
of such bonds, debentures, or other evidences of indebtedness, the net earnings
of the issuing, assuming or guaranteeing institution available for its fixed
charges, as hereinafter defined, shall have been not less than one and
one-quarter times the total of its fixed charges for such year; and Provided,
further, that no life insurance company shall invest in or loan upon the
obligations of any one institution in the kinds permitted under this
sub-section an amount in excess of twenty-five per centum of the total admitted
assets of such insurer as of December thirty-first next preceding the date of
such investment.
As used in
this sub-section the term "net earnings available for fixed
charges" shall mean net income after deducting operating and
maintenance expenses, taxes other than income taxes, depreciation and
depletion; but excluding extraordinary non-recurring items of income or expense
appearing in the regular financial statement of the issuing, assuming or
guaranteeing institution. The term "fixed charges" shall
include interest on funded and unfunded debt, amortization of debt discount,
and rentals for leased properties.
(e) Preferred
or guaranteed stocks of any solvent corporation or institution created or
existing under the laws of the Philippines: Provided, however, That the
issuing, assuming or guaranteeing entity or its predecessors has paid regular
dividends upon its preferred or guaranteed stocks for a period of at least
three years next preceding the date of investment in such preferred or
guaranteed stock: Provided, further, That if the stocks are guaranteed,
the amount of stocks so guaranteed is not excess of fifty per centum of the
amount of the preferred or common stocks, as the case may be, of the
guaranteeing corporation: and Provided, finally, That no life insurance
company shall invest in or loan upon obligations of any one institution in the
kinds permitted under this sub-section an amount in excess of ten per centum of
the total admitted assets of such insurer as of December thirty-first next
preceding the date of such investment.
(f) Common
stocks of any solvent corporation or institution created or existing under the
laws of the Philippines upon which regular dividends shall have been paid for
the three years next preceding the purchase of such stock: Provided,
however, That no life insurance company shall invest in or loan upon the
obligations of any one corporation or institution in the kinds permitted under
this sub-section an amount in excess of ten per centum of the total admitted
assets of such insurer as of December thirty-first next preceding the date of
such investment.
(g)
Certificates, notes and other obligations issued by the trustees or receivers
of any institution created or existing under the laws of the Philippines which,
or the assets of which, are being administered under the direction of any court
having jurisdiction; Provided, however, That such certificates, notes
or other obligations are adequately secured as to principal and interests.
(h) Equipment
trust obligations or certificates which are adequately secured or other
adequately secured instruments evidencing an interest in equipment wholly or in
part within the Philippines: Provided, however, That there is a right
to receive determined portions of rental, purchase or other fixed obligatory
payments for the use or purchase of such equipment.
(i) Any
obligation of any corporation or institution created or existing under the laws
of the Philippines which is, on the date of acquisition by the insurer,
adequately secured and has qualities and characteristics wherein the
speculative elements are not predominant.
(j) Such
other securities as may be approved by the Commissioner.
(3) Any
domestic insurer which has outstanding insurance, annuity or reinsurance
contracts in currencies other than the national currency of the Philippines may
invest in, or otherwise acquire or loan upon securities and investments in such
currency which are substantially of the same kinds, classes and investment
grades as those eligible for investment under the foregoing subdivisions of
this section; but the aggregate amount of such investment and of such cash in
such currency which is at anytime held by such insurer shall not exceed one and
one-half times the amount of its reserves and other obligations under such
contracts or the amount which such insurer is required by the law of any
country or possession outside the Republic of the Philippines to be invest in
such country or possession, whichever shall be greater.
Sec. 201. An
insurance company may (1) invest in equities of other financial institutions,
and (2) engage in the buying and selling of short-term debt instruments: Provided, that
any or all of such investments shall be with the prior approval of the
Commissioner.
Sec. 202. Any
life insurance company may:
(a) Acquire
or construct housing projects and, in connection with any such project, may
acquire land or any interest therein by purchase, lease or otherwise, or use
land acquired pursuant to any other provision of this Code. Such company may
thereafter own, maintain, manage, collect or receive income from, or sell and
convey, any land or interest therein so acquired and any improvements thereon.
The aggregate book value of the investments of any such company in all such
projects shall not exceed at the time of such investments twenty five per
centum of the total admitted assets of such company on the thirty-first day of
December next preceding;
(b) Acquire
real property, other than property to be used primarily for providing housing
and property for accommodation of its own business, as an investment for the
production of income, or may acquire real property to be improved or developed
for such investment purpose pursuant to a program therefor, subject to the
condition that the cost of each parcel of real property so acquired under the
authority of this paragraph (b), including the estimated cost to the company of
the improvement or development thereof, when added to the book value of all
other real property held by its pursuant to this paragraph (b), shall not
exceed twenty-five per centum of its admitted assets as of the
thirty-first day of December next preceding.
Sec. 203. Every
domestic insurance company shall, to the extent of an amount equal in value to
twenty-five per centum of the minimum paid-up capital required under section
one hundred eighty-eight, invest its funds only in securities, satisfactory to
the Commissioner, consisting of bonds or other evidences of debt of the
Government of the Philippines or its political subdivisions or
instrumentalities, or of government-owned or controlled corporations and
entities, including the Central Bank of the Philippines: Provided, That
such investments shall at all times be maintained free from any lien or
encumbrance; and Provided, further, That such securities shall be
deposited with and held by the Commissioner for the faithful performance by the
depositing insurer of all its obligations under its insurance contracts. The
provisions of section one hundred ninety-two shall, so far as practicable,
apply to the securities deposited under this section.
Except as
otherwise provided in this Code, no judgment creditor or other claimant shall
have the right to levy upon any of the securities of the insurer held on
deposit under this section or held on deposit pursuant to the requirement of
the Commissioner. (As amended by Presidential Decree No. 1455).
Sec. 204. After
satisfying the requirements contained in the preceding section, any domestic
non-life insurance company, shall invest, to an amount prescribed below, its
funds in, or otherwise, acquire or loan upon, only the classes of investments
described in section two hundred, including securities issued by any "registered
enterprise", as this term is defined in Republic Act No. 5186, otherwise
known as the Investment Incentives Act, and such other classes of investments
as may be authorized by the Commissioner for purposes of this section:Provided,
That (a) no more than twenty per centum of the net worth of such company as
shown by its latest financial statement approved by the Commissioner shall be
invested in the lot and building in which the insurance company conducts its
business and (b) the total investment of an insurance company in any registered
enterprise shall not exceed twenty per centum of the net worth of
said insurance company as shown by its aforesaid financial statement nor twenty per
centum of the paid-up capital of the registered enterprise excluding the
intended investment, unless previously authorized by the Commissioner: and, Provided,
further, That such investments free from any lien or encumbrance, shall be at
least equal in amount to the aggregate amount of (a) its legal reserve, as
provided in section two hundred thirteen, and (b) its reserve fund held for
reinsurance as provided for in the pertinent treaty provision in the case of
reinsurance ceded to authorized insurers. (As amended by Presidential
Decree No.1455).
Sec. 205. After
satisfying the requirements contained in sections one hundred ninety-one, one
hundred ninety-three, two hundred three and two hundred four, any non-life
insurance company may invest any portion of its funds representing earned
surplus in any of the investments described in sections one hundred
ninety-eight, two hundred and two hundred one, or in any securities issued by a "registered
enterprise" mentioned in the preceding sections: Provided, That
no investment in stocks or bonds of any single entity shall in the aggregate,
exceed twenty per centum of the net worth of the insurance company as shown in
its latest financial statement approved by the Commissioner or twenty per
centum of the paid-up capital of the issuing company, whichever is lesser, unless
otherwise approved by the Commissioner.
Sec. 206. After
satisfying the minimum capital investment required in section two hundred
three, any life insurance company may invest its legal policy reserve, as
provided in section two hundred eleven or in section two hundred twelve, in any
of the classes of securities or types of investments described in sections one
hundred ninety-eight, two hundred, two hundred one and two hundred two, subject
to the limitations therein contained, and in any securities issued by any "registered
enterprise" mentioned in section two hundred four, free from any lien
or encumbrance, in such amounts as may be approved by the Commissioner. Such
company may likewise invest any portion of its earned surplus in the aforesaid
securities or investments subject to the aforesaid limitations.
Sec. 207. Any
investment made in violation of the applicable provisions of this title shall
be considered non-admitted assets.
Sec. 208. (1)
All bonds or other evidences of indebtedness having a fixed term and rate of
interest and held by any life insurance company authorized to do business in
this country, if amply secured and if not in default as to principal or
interest, shall be valued as follows: If purchased at par, at the par value; if
purchased above or below par, on the basis of the purchase price adjusted so as
to bring the value to par at maturity and so as to yield in the meantime the
effective rate of interest at which the purchase was made, or in the discretion
of the Commissioner, on the basis of the method of calculation commonly known
as the pro-rata method. In applying the foregoing rule the purchase price shall
in no case be taken at a higher figure than the actual market value at the time
of acquisition. The Commissioner shall have the power to determine the
eligibility of any such investments for valuation on the basis of amortization,
and may by regulation prescribe or limit the classes of securities so eligible
for amortization. All bonds or other evidences of indebtedness which in the
judgment of the Commissioner are not amply secured shall not be eligible for
amortization and shall be valued in accordance with paragraph two. The
Commissioner may, if he finds that the interest of policy holders so permit or
require, by official regulation permit or require any class or classes of
insurers, other than life insurance companies, authorized to do business in
this country, to value their bonds or other evidences of indebtedness in
accordance with the foregoing rule.
(2) The
investments of all insurers authorized to do business in this country, except
securities subject to amortization and except as otherwise provided in this
chapter, shall be valued, in the discretion of the Commissioner, at their
market value, or at their appraised value, or at prices determined by him as
representing their fair market value. If the Commissioner finds that in view of
the character of investments of any insurer authorized to do business in this
country it would be prudent for such insurer to establish a special reserve for
possible losses or fluctuations in the values of its investments, he may
require such insurer to establish such reserve, reasonable in amount, and may
require that such reserve be maintained and reported in any statement or report
of the financial condition of such insurer. The Commissioner may, in connection
with any examination or required financial statement of an authorized insurer,
require such insurer to furnish him complete financial statements and audited
report of the financial condition of any corporation of which the securities
are owned wholly or partly by such insurer and may cause an examination to be
made of any subsidiary or affiliate of such insurer.
(3) The stock
of an insurance company shall be valued at the lesser of its market value or
its book value as shown by its last approved annual statement or the last
report on examination, whichever is more recent. The book value of a share of
common stock of an insurance company shall be ascertained by dividing (a) the
amount of its capital and surplus less the value of all of its preferred stock,
if any, outstanding, by (b) the number of shares of its common stock issued and
outstanding.
Notwithstanding the foregoing provisions, an insurer may, at its option, value its holdings of stock in a subsidiary insurance company in an amount not less than acquisition cost if such acquisition cost is less than the value determined as hereinbefore provided.
Notwithstanding the foregoing provisions, an insurer may, at its option, value its holdings of stock in a subsidiary insurance company in an amount not less than acquisition cost if such acquisition cost is less than the value determined as hereinbefore provided.
(4) Real estate
required by foreclosure or by deed in lieu thereof, in the absence of a recent
appraisal deemed by the Commissioner to be reliable, shall not be valued at an
amount greater than the unpaid principal of the defaulted loan at the date of
such foreclosure or deed, together with any taxes and expenses paid or incurred
by such insurer at such time in connection with such acquisition, and the cost
of additions or improvements thereafter paid by such insurer and any amount or
amounts thereafter paid by such insurer on any assessments levied for
improvements in connection with the property.
(5) Purchase
money mortgages received on dispositions of real property held pursuant to
section one hundred ninety-eight shall be valued in an amount equivalent to
ninety per centum of the value of such real property. Purchase money mortgages
received on disposition of real property otherwise held shall be valued in an
amount not exceeding ninety per centum of the value of such real property as
determined by an appraisal made by an appraiser at or about the time of
disposition of such real property.
(6) The stock
of a subsidiary of an insurer shall be valued on the basis of the greater of (i)
the value of only such subsidiary of the assets of such subsidiary as would
constitute lawful investments for the insurer if acquired or held directly by
the insurer or (ii) such other value determined pursuant to standards and
cumulative limitations, contained in a regulation to be promulgated by the
Commissioner.
(7)
Notwithstanding any provision contained in this section or elsewhere in this
chapter, if the Commissioner find that the interests of policyholders so permit
or require, he may permit or require any class or classes of insurers
authorized to do business in this country to value their investments or any
class or classes thereof as of any date heretofore or hereafter in accordance
with any applicable valuation or method.
Sec. 209. It
shall be the duty of the officers of the insurance company to report within the
first fifteen days of every month all such investments as may be made by them
during the preceding month, and the Commissioner may, if such investments or
any of them seem injudicious to him, require the sale or disposal of the same.
The report shall also include a list of investments sold or disposed of by the
company during the same period.
Title 5
RESERVES
RESERVES
Sec. 210. Every
life insurance company, doing business in the Philippines, shall annually
make a valuation of all policies, additions thereto, unpaid dividends, and all
other obligations outstanding on the thirty-first day of December of the
preceding year. All such valuations shall be made upon the net premiums basis,
according to the standard adopted by the company, which standard shall be
stated in its annual report.
Such standard
of valuation whether of the net level premium, full preliminary term, any
modified preliminary term, or select and ultimate reserve basis, shall be
according to a standard table of mortality with interest at not more than six
per centum compound interest. When the preliminary term basis is
used, the term insurance shall be limited to the first policy year.
The results
of such valuations shall be reported to the Commissioner on or before the
thirtieth day of April of each year accompanied by a sworn statement of the
company's actuary certifying to the figures and stating upon what mortality
table it is based, upon what rate of interest the valuation is made, and the
methods used in arriving at the result obtained.
Sec. 211. The
aggregate net value so ascertained of the policies of such company shall be
deemed its reserve liability, to provide for which it shall hold funds in
secure investments equal to such net value, above all its other liabilities;
and it shall be the duty of the Commissioner, after having verified, to such an
extent as he may deem necessary, the valuation of all policies in force, to
satisfy himself that the company has such amount in safe legal securities after
all other debts and claims against it have been provided for.
The reserve
liability for variable contracts defined in section two hundred thirty-two
shall be established in accordance with actuarial procedures that recognize the
variable nature of the benefits provided, and shall be approved by the
Commissioner.
Sec. 212. Every
domestic life insurance company, conducted on the mutual plan or a plan in
which policyholders are by the terms of their policies entitled to share in the
profits or surplus shall, on all policies of life insurance heretofore or
hereafter issued, under the conditions of which the distribution of surplus is
deferred to a fixed or specified time and contingent upon the policy being in
force and the insured living at that time, annually ascertain the amount of the
surplus to which all such policies as separate class are entitled, and shall
annually apportion to such policies as a class the amount of the surplus so
ascertained, and carry the amount of such apportioned surplus, plus the actual
interest earnings and accretions to such fund, as a distinct and separate
liability to such class of policies on and for which the same was accumulated,
and no company or any of its officers shall be permitted to use any part of
such apportioned surplus fund for any purpose whatsoever other than for the
express purpose for which the same was accumulated.
Sec. 213. Every
insurance company, other than life, shall maintain a reserve for unearned
premiums on its policies in force, which shall be charged as a liability in any
determination of its financial condition. Such reserve shall be equal to forty
per centum of the gross premiums, less returns and cancellations, received on
policies or risks having not more than a year to run, and pro rata on all gross
premiums received on policies or risks having more than a year to run: Provided,
That for marine cargo risks the reserve shall be equal to forty per centum of
the premiums written in the policies upon yearly risks, and the full amount of
the premiums written during the last two months of the calendar year upon all
other marine risks not terminated.
Sec. 214. In
addition to its liabilities and reserves on contracts of insurance issued by
it, every insurance company shall be charged with the estimated amount of all
of its other liabilities, including taxes, expenses and other obligations due
or accrued at the date of statement, and including any special reserves
required by the Commissioner pursuant to the provisions of this Code.
Title 6
LIMIT OF SINGLE RISK
LIMIT OF SINGLE RISK
Sec. 215. No
insurance company other than life, whether foreign or domestic, shall retain
any risk on any one subject of insurance in an amount exceeding twenty per
centum of its net worth. For purposes of this section, the term "subject
of insurance" shall include all properties or risks insured by the
same insurer that customarily are considered by non-life company underwriters
to be subject to loss or damage from the same occurrence of any hazard insured
against.
Reinsurance
ceded as authorized under the succeeding title shall be deducted in determining
the risk retained. As to surety risk, deduction shall also be made of the
amount assumed by any other company authorized to transact surety business and
the value of any security mortgage, pledged, or held subject to the surety's
control and for the surety's protection.
Title 7
REINSURANCE TRANSACTIONS
REINSURANCE TRANSACTIONS
Sec. 216. An
insurance company doing business in the Philippines may accept reinsurances
only of such risks, and retain risk thereon within such limits, as it is
otherwise authorized to insure.
Sec. 217. No
insurance company doing business in the Philippines shall cede all or part of
any risks situated in the Philippines by way of reinsurance directly to any
foreign insurer not authorized to do business in the Philippines unless such
foreign insurer or, if the services of a non-resident broker are utilized, such
non-resident broker is represented in the Philippines by a resident agent duly
registered with the Commissioner as required in this Code.
The resident
agent of such unauthorized foreign insurer or non- resident broker shall
immediately upon registration furnish the Commissioner with the annual
statement of such insurer, or of such company or companies where such broker
may place Philippine business as of the year preceding such registration, and
annually thereafter as soon as available.
Sec. 218. All
insurance companies, both life and non-life, authorized to do business in the
Philippines shall cede their excess risks to other companies similarly
authorized to do business in the Philippines in such amounts and under such
arrangements as would be consistent with sound underwriting practices before
they enter into reinsurance arrangements with unauthorized foreign insurers.
Sec. 219. Any
insurance company doing business in the Philippines desiring to cede
their excess risks to foreign insurance or reinsurance companies not authorized
to transact business in the Philippines may do so under the following
conditions:
(1) Except in
facultative reinsurance and excess of loss covers, the full amount of the reserve
fund required by law shall be set up in the books of and held by the ceding
company for so long as the risk concerned is in force: Provided, That in
case of facultative insurance, the ceding company shall show to the
satisfaction of the Commissioner that the Philippine market cannot provide the
facilities sought abroad.
(2) The
reserve fund withheld shall be invested in bonds or other evidences of debt of
the Government of the Philippines or its political subdivisions or
instrumentalities, or of government-owned or controlled corporations and
entities, including the Central Bank, and/or other securities acceptable under
section two hundred.
Should any
reinsurance agreement be for any reason cancelled or terminated, the ceding
company concerned shall inform the Commissioner in writing of such cancellation
or termination within thirty days from the date of such cancellation or
termination or from the date notice or information of such cancellation or
termination is received by such company as the case may be.
Sec. 220. Every
insurance company authorized to do business in the Philippines shall report to
the Commissioner on forms prescribed by him the particulars of reinsurance
treaties as of the first day of January of the year following the approval of
this Code and shall thereafter similarly report to the Commissioner particulars
of any new treaties or changes in existing treaties.
Sec. 221. No
credit shall be allowed as an admitted asset or as a deduction from liability,
to any ceding insurer for reinsurance made, ceded, renewed, or otherwise
becoming effective after January first, nineteen hundred seventy-five, unless
the reinsurance shall be payable by the assuming insurer on the basis of the
liability of the ceding insurer under the contract or contracts reinsured
without diminution because of the insolvency of the ceding insurer nor unless
under the contract or contracts of reinsurance the liability for such
reinsurance is assumed by the assuming insurer or insurers as of the same
effective date; nor unless the reinsurance agreement provides that payments by
the assuming insurer shall be made directly to the ceding insurer or to its
liquidator, receiver, or statutory successor except (a) where the contract
specifically provides another payee of such reinsurance in the event of the
insolvency of the ceding insurer and (b) where the assuming insurer with the
consent of the direct insured or insureds has assumed such policy
obligations of the ceding insurer as direct obligations of the assuming insurer
to the payees under such policies and in substitution for the obligations of
the ceding insurer to such payees.
Sec. 222. No
life insurance company doing business in the Philippines shall reinsure its
whole risk on any individual life or joint lives, or substantially all of its
insurance in force, without having first obtained the written permission of the
Commissioner.
Title 8
ANNUAL STATEMENT
ANNUAL STATEMENT
Sec. 223. Every
insurance company doing business in the Philippines shall terminate its fiscal
period on the thirty-first day of December every year, and shall annually on or
before the thirtieth day of April of each year render to the Commissioner a
statement signed and sworn to by the chief officer of such company showing, in
such form and details as may be prescribed by the Commissioner, the exact
condition of its affairs on the preceding thirty-first day of December.
Any entry in
the statement which is found to be false shall constitute a misdemeanor and the
officer signing such statement shall be subject to the penalty provided for
under section four hundred nineteen.
Sec. 224. Every
insurance company authorized under title ten of this chapter to issue, deliver
or use variable contracts shall annually file with the Commissioner separate
annual statement of its separate variable accounts. Such statement shall be on
a form prescribed or approved by the Commissioner and shall include details as
to all of the income, disbursements, assets and liability items of and
associated with the said separate variable accounts. Said statement shall be
under oath of two officers of the company and shall be filed simultaneously
with the annual statement required by the preceding section.
Sec. 225. Within
thirty days after receipt of the annual statement approved by the Commissioner,
every insurance company doing business in the Philippines shall publish in two
newspapers of general circulation in the City of Manila, one published in
English and one in Pilipino, a full synopsis of its annual financial statement
showing fully the conditions of its business, and setting forth its resources
and liabilities.
Title 9
POLICY FORMS
POLICY FORMS
Sec. 226. No
policy, certificate or contract of insurance shall be issued or delivered
within the Philippines unless in the form previously approved by the
Commissioner, and no application form shall be used with, and no rider, clause,
warranty or endorsement shall be attached to, printed or stamped upon such policy,
certificate or contract unless the form of such application, rider, clause,
warranty or endorsement has been approved by the Commissioner.
Sec. 227. In
the case of individual life or endowment insurance, the policy shall contain in
substance the following conditions:
(a) A
provision that the policyholder is entitled to a grace period either of thirty
days or of one month within which the payment of any premium after the first
may be made, subject at the option of the insurer to an interest charge not in
excess of six per centum per annum for the number of days of grace
elapsing before the payment of the premium, during which period of grace the
policy shall continue in full force, but in case the policy becomes a claim
during the said period of grace before the overdue premium is paid, the amount
of such premium with interest may de deducted from the amount payable under the
policy in settlement;
(b) A
provision that the policy shall be incontestable after it shall have been in
force during the lifetime of the insured for a period of two years from its
date of issue as shown in the policy, or date of approval of last
reinstatement, except for non-payment of premium and except for violation of
the conditions of the policy relating to military or naval service in time of
war;
(c) A
provision that the policy shall constitute the entire contract between the
parties, but if the company desires to make the application a part of the
contract it may do so provided a copy of such application shall be indorsed
upon or attached to the policy when issued, and in such case the policy shall
contain a provision that the policy and the application therefore shall
constitute the entire contract between the parties;
(d) A
provision that if the age of the insured is considered in determining the
premium and the benefits accruing under the policy, and the age of the insured
has been misstated, the amount payable under the policy shall be such as the
premium would have purchased at the correct age;
(e) If the
policy is participating, a provision that the company shall periodically
ascertain and apportion any divisible surplus accruing on the policy under
conditions specified therein;
(f) A
provision specifying the options to which the policyholder is entitled to in
the event of default in a premium payment after three full annual premiums
shall have been paid. Such option shall consist of:
(1) A cash
surrender value payable upon surrender of the policy which shall not be less
than the reserve on the policy, the basis of which shall be indicated, for the
then current policy year and any dividend additions thereto, reduced by a
surrender charge which shall not be more than one-fifth of the entire reserve
or two and one-half per centum of the amount insured and any dividend additions
thereto;
(2) One or
more paid-up benefits on a plan or plans specified in the policy of such value
as may be purchased by the cash surrender value;
(g) A
provision that at anytime after a cash surrender value is available under the
policy and while the policy is in force, the company will advance, on proper
assignment or pledge of the policy and on sole security thereof, a sum equal
to, or at the option of the owner of the policy, less than the cash surrender
value on the policy, at a specified rate of interest, not more than the maximum
allowed by law, to be determined by the company from time to time, but not more
often than once a year, subject to the approval of the Commissioner; and that
the company will deduct from such loan value any existing indebtedness on the
policy and any unpaid balance of the premium for the current policy year, and
may collect interest in advance on the loan to the end of the current policy
year, which provision may further provide that such loan may be deferred for
not exceeding six months after the application therefore is made;
(h) A table
showing in figures cash surrender values and paid-up options available under
the policy each year upon default in premium payments, during at least twenty
years of the policy beginning with the year in which the values and options
first become available, together with a provision that in the event of the
failure of the policyholder to elect one of the said options within the time
specified in the policy, one of said options shall automatically take effect and
no policyholder shall ever forfeit his right to same by reason of his failure
to so elect;
(i) In case
the proceeds of a policy are payable in installments or as an annuity, a table
showing the minimum amounts of the installments or annuity payments;
(j) A
provision that the policyholder shall be entitled to have the policy reinstated
at any time within three years from the date of default of premium payment
unless the cash surrender value has been duly paid, or the extension period has
expired, upon production of evidence of insurability satisfactory to the
company and upon payment of all overdue premiums and any indebtedness to the
company upon said policy, with interest rate not exceeding that which would
have been applicable to said premiums and indebtedness in the policy years
prior to reinstatement.
Any of the
foregoing provisions or portions thereof not applicable to single premium or
term policies shall to that extent not be incorporated therein; and any such
policy may be issued and delivered in the Philippines which in the opinion of
the Commissioner contains provisions on any one or more of the foregoing
requirements more favorable to the policyholder than hereinbefore required.
This section shall not apply to policies of group life or industrial life insurance.
This section shall not apply to policies of group life or industrial life insurance.
Sec. 228. No
policy of group life insurance shall be issued and delivered in the Philippines
unless it contains in substance the following provisions, or provisions which
in the opinion of the Commissioner are more favorable to the persons insured,
or at least as favorable to the persons insured and more favorable to the
policy-holders:
(a) A
provision that the policyholder is entitled to a grace period of either thirty
days or of one month for the payment of any premium due after the first, during
which grace period the death benefit coverage shall continue in force, unless
the policyholder shall have given the insurer written notice of discontinuance
in advance of the date of discontinuance and in accordance with the terms of
the policy. The policy may provide that the policyholder shall be liable for
the payment of a pro rata premium for the time the policy is in force during
such grace period;
(b) A
provision that the validity of the policy shall not be contested, except for
non-payment of premiums after it has been in force for two years from its date
of issue; and that no statement made by any insured under the policy relating
to his insurability shall be used in contesting the validity of the insurance
with respect to which such statement was made after such insurance has been in
force prior to the contest for a period of two years during such person's
lifetime nor unless contained in written instrument signed by him;
(c) A
provision that a copy of the application, if any, of the policyholder shall be
attached to the policy when issued, that all statements made by the
policyholder or by persons insured shall be deemed representations and not
warranties, and that no statement made by any insured shall be used in any
contest unless a copy of the instrument containing the statement is or has been
furnished to such person or to his beneficiary;
(d) A
provision setting forth the conditions, if any, under which the insurer
reserves the right to require a person eligible for insurance to furnish evidence
of individual insurability satisfactory to the insurer as a condition to part
or all of his coverage;
(e) A
provision specifying an equitable adjustment of premiums or of benefits or of
both to be made in the event that the age of a person insured has been
misstated, such provision to contain a clear statement of the method of
adjustment to be used;
(f) A
provision that any sum becoming due by reason of death of the person insured
shall be payable to the beneficiary designated by the insured, subject to the
provisions of the policy in the event that there is no designated beneficiary,
as to all or any part of such sum, living at the death of the insured, and
subject to any right reserved by the insurer in the policy and set forth in the
certificate to pay at its option a part of such sum not exceeding five hundred
pesos to any person appearing to the insurer to be equitably entitled thereto
by reason of having incurred funeral or other expenses incident to the last
illness or death of the person insured;
(g) A
provision that the insurer will issue to the policyholder for delivery to each
person insured an individual certificate setting forth a statement as to the
insurance protection to which he is entitled, to whom the insurance benefits
are payable, and the rights set forth in paragraphs (h), (i) and (j) following;
(h) A
provision that if the insurance, or any portion of it, on a person covered
under the policy ceases because of termination of employment or of membership
in the class or classes eligible for coverage under the policy, such person
shall be entitled to have issued to him by the insurer, without evidence of
insurability, an individual policy of life insurance without disability or
other supplementary benefits, provided application for the individual policy
and payment of the first premium to the insurer shall be made within thirty
days after such termination and provided further that:
(1) the
individual policy shall be on any one of the forms, except term insurance, then
customarily issued by the insurer at the age and for an amount not in excess of
the coverage under the group policy; and
(2) the premium
on the individual policy shall be at the insurer's then customary rate
applicable to the form and amount of the individual policy, to the class of
risk to which such person then belongs, and to his age attained on the
effective date of the individual policy.
(i) A provision that if the group policy terminates or is amended so as to terminate the insurance of any class of insured persons, every person insured thereunder at the date of such termination whose insurance terminates and who has been so insured for five years prior to such termination date shall be entitled to have issued to him by the insurer an individual policy of life insurance subject to the same limitations as set forth in paragraph (h), except that the group policy may provide that the amount of such individual policy shall not exceed the smaller of (a) the amount of the person's life insurance protection ceasing less the amount of any life insurance for what he is or becomes eligible under any group policy issued or reinstated by the same or another reinsurer within thirty days after such termination, and (b) two thousand pesos;
(j) A
provision that if a person insured under the group policy dies during the
thirty-day period within which he would have been entitled to an individual
policy issued to him in accordance with (h) and (i) above and before such
individual policy shall have become effective, the amount of life insurance
which he would have been entitled to have issued to him as an individual policy
shall be payable as a claim under the group policy whether or not application
for the individual policy or the payment of the first premium has been made;
(k) In the
case of a policy issued to a creditor to insure debtors of such creditor, a
provision that the insurer will furnish to the policyholder for delivery to
each debtor insured under the policy a form which will contain a statement that
the life of the debtor is insured under the policy and that any death benefit
paid thereunder by reason of his death shall be applied to reduce or
extinguish indebtedness.
The
provisions of paragraphs (f) to (j) shall not apply to policies issued to a
creditor to insure his debtors. If a group life policy is on a plan of
insurance other than term, it shall contain a non-forfeiture provision or
provisions which in the opinion of the Commissioner is or are equitable to the
insured or the policyholder: Provided, That nothing herein contained shall
be so construed as to require group life policies to contain the same
non-forfeiture provisions as are required of individual life policies.
Sec. 229. The
term "industrial life insurance" as used in this Code shall
mean that form of life insurance under which the premiums are payable either
monthly or oftener, if the face amount of insurance provided in any policy is
not more than five hundred times that of the current statutory minimum daily
wage in the City of Manila, and if the words "industrial policy" are
printed upon the policy as part of the descriptive matter.
An industrial
life policy shall not lapse for non-payment of premium if such non-payment was
due to the failure of the company to send its representative or agent to the
insured at the residence of the insured or at some other place indicated by him
for the purpose of collecting such premium: Provided, That the provisions
of this paragraph shall not apply when the premium on the policy remains unpaid
for a period of three months or twelve weeks after the grace period has
expired.
Sec. 230. In
the case of industrial life insurance, the policy shall contain in substance
the following provisions:
(a) A
provision that the insured is entitled to a grace period of four weeks within
which the payment of any premium after the first may be made, except that where
premiums are payable monthly, the period of grace shall be either one month or
thirty days; and that during the period of grace, the policy shall continue in
full force, but if during such grace period the policy becomes a claim, then
any overdue and unpaid premiums may be deducted from any amount payable under
the policy in settlement;
(b) A
provision that the policy shall be incontestable after it has been in force
during the lifetime of the insured for a specified period, not more than two
years from its date of issue, except for non-payment of premiums and except for
violation of the conditions of the policy relating to naval or military
service, or services auxiliary thereto, and except as to provisions relating to
benefits in the event of disability as defined in the policy, and those
granting additional insurance specifically against death by accident or by
accidental means, or to additional insurance against loss of, or loss of use
of, specific members of the body;
(c) A
provision that the policy shall constitute the entire contract between the
parties, or if a copy of the application is endorsed upon and attached to the
policy when issued, a provision that the policy and the application therefor shall
constitute the entire contract between the parties, and in the latter case, a
provision that all statements made by the insured shall, in the absence of
fraud, be deemed representations and not warranties;
(d) A
provision that if the age of the person insured, or the age of any person,
considered in determining the premium, or the benefits accruing under the
policy, has been misstated, any amount payable or benefit accruing under the
policy shall be such as the premium paid would have purchased at the correct
age;
(e) A
provision that if the policy is a participating policy, the company shall
periodically ascertain and apportion any divisible surplus accruing on the
policy under the conditions specified therein;
(f) A
provision that in the event of default in premium payments after three full
years' premiums have been paid, the policy shall be converted into a stipulated
form of insurance, and that in the event of default in premium payments after
five full years' premiums have been paid, a specified cash surrender value
shall be available, in lieu of the stipulated form of insurance, at the option
of the policyholder. The net value of such stipulated form of insurance and the
amount of such cash value shall not be less than the reserve on the policy and
dividend additions thereto, if any, at the end of the last completed policy
year for which premiums shall have been paid (the policy to specify the
mortality table, rate of interest and method of valuation adopted to compute
such reserve), exclusive of any reserve on disability benefits and accidental
death benefits, less an amount not to exceed two and one-half per centum of
the maximum amount insured by the policy and dividend additions thereto, if
any, at the end of the last completed policy year for which premiums shall have
been paid (the policy to specify the mortality table, rate of interest and
method of valuation adopted to compute such reserve), exclusive of any reserve
on disability benefits and accidental death benefits, less an amount not to
exceed two and one-half per centum of the maximum amount insured by the policy
and dividend additions thereto, if any, when the issue age is under ten years,
and less an amount not to exceed two and one-half per centum of the
current amount insured by the policy and dividend additions thereto, if any, if
the issue age is ten years or older, and less any existing indebtedness to the
company on or secured by the policy;
(g) A
provision that the policy may be surrendered to the company at its home office
within a period of not less than sixty days after the due date of a premium in
default for the specified cash value, provided that the insurer may defer
payment for not more than six months after the application therefore is made;
(h) A table
that shows in figures the non-forfeiture benefits available under the policy
every year upon default in payment of premiums during at least the first twenty
years of the policy, such table to begin with the year in which such values
become available, and a provision that the company will furnish upon request an
extension of such table beyond the year shown in the policy;
(i) A
provision that specifies which one of the stipulated forms of insurance
provided for under the provision of paragraph (f) of this section shall take
effect in the event of the insured's failure, within sixty days from the due
date of the premium in default, to notify the insurer in writing as to which
one of such forms he has selected;
(j) A
provision that the policy may be reinstated at any time within two years from
the due date of the premium in default unless the cash surrender value has been
paid or the period of extended term insurance expired, upon production of
evidence of insurability satisfactory to the company and payment of arrears of
premiums with interest at a rate not exceeding six per centum per annum payable
annually;
(k) A
provision that when a policy shall become a claim by death of the insured,
settlement shall be made upon receipt of due proof of death, or not later than
two months after receipt of such proof;
(l) A title
on the face and on the back of the policy correctly describing its form;
(m) A space
on the front or the back of the policy for the name of the beneficiary
designated by the insured with a reservation of the insured's right to
designate or change the beneficiary after the issuance of the policy. The
policy may also provide that no designation or change of beneficiary shall be
binding on the insurer until endorsed on the policy by the insurer, and that
the insurer may refuse to endorse the name of any proposed beneficiary who does
not appear to the insurer to have an insurable interest in the life of the
insured. Such policy may also contain a provision that if the beneficiary
designated in the policy does not surrender the policy with due proof of death
within the period stated in the policy, which shall not be less than thirty
days after the death of the insured, or if the beneficiary is the estate of the
insured, or is a minor, or dies before the insured, or is not legally competent
to give valid release, then the insurer may make any payment thereunder to
the executor or administrator of the insured, or to any of the insured's
relatives by blood or legal adoption or connections by marriage or to any
person appearing to the insurer to be equitably entitled thereto by reason of
having incurred expense for the maintenance, medical attention or burial of the
insured; and
(n) A
provision that when an industrial life insurance policy is issued providing for
accidental or health benefits, or both, in addition to life insurance, the
foregoing provisions shall apply only to the life insurance portion of the
policy.
Any of the
foregoing provisions or portions thereof not applicable to non-participating or
term policies shall to that extent not be incorporated therein. The foregoing
provisions shall not apply to policies issued or granted pursuant to the
non-forfeiture provisions prescribed in provisions of paragraphs (f) and (i) of
this section, nor shall provisions of paragraphs (f), (g), (h), and (i) hereof
be required in term insurance of twenty years or less but such term policies
shall specify the mortality table, rate of interest, and method of computing
reserves.
Sec. 231. No
policy of industrial life insurance shall be issued or delivered in the Philippines if
it contains any of the following provisions:
(a) A
provision that gives the insurer the right to declare the policy void because
the insured has had any disease or ailment, whether specified or not, or
because the insured has received institutional, hospital, medical or surgical
treatment or attention, except a provision which gives the insurer the right to
declare the policy void if the insured has, within two years prior to the
issuance of the policy, received institutional hospital, medical or surgical
treatment or attention and if the insured or the claimant under the policy
fails to show that the condition occasioning such treatment or attention was not
of a serious nature or was not material to the risk;
(b) A
provision that gives the insurer the right to declare the policy void because
the insured has been rejected for insurance, unless such right be conditioned
upon a showing by the insurer that knowledge of such rejection would have led
to a refusal by the insurer to make such contract;
(c) A
provision that allows the company to pay the proceeds of the policy at the
death of the insured to any person other than the named beneficiary, except in
accordance with a standard provision as specified under the provisions of
paragraph (m) of the preceding section;
(d) A
provision that limits the time within which any action at law or in equity may
be commenced to less than six years after the cause of action shall accrue; and
(e) A
provision that specifies any mode of settlement at maturity of less value than
the amount insured by the policy plus dividend additions, if any, less any
indebtedness to the company on the policy and less any premium that may by the
terms of the policy be deducted, payments to be made in accordance with the
terms of the policy.
Nothing
contained in this section nor in the provision of paragraph (b) of the
preceding section, relating to incontestability, shall be construed as prohibiting
the life insurance company from placing in its industrial life policies
provisions limiting its liability with respect to: (1) death resulting from
aviation other than as a fare-paying passenger on a regularly scheduled route
between definitely established airports; and (2) military or naval service: Provided, That
if the liability of the company is limited as herein provided, such liability
shall in no event be fixed at an amount less than the reserve on the policy
(excluding the reserve for any additional benefits in the event of death by
accident or accidental means or for benefits in the event of any type of
disability), less any indebtedness on or secured by such policy; nor shall any
provision of this section apply to any provision in an industrial life
insurance policy for additional benefits in the event of death by accident or
accidental means.
Title 10
VARIABLE CONTRACTS
VARIABLE CONTRACTS
Sec. 232. (1)
No insurance company authorized to transact business in the Philippines shall
issue, deliver, sell or use any variable contract in the Philippines, unless
and until such company shall have satisfied the Commissioner that its financial
and general condition and its methods of operations, including the issue and
sale of variable contracts, are not and will not be hazardous to the public or
to its policy and contract owners. No foreign insurance company shall be
authorized to issue, deliver or sell any variable contract in the Philippines,
unless it is likewise authorized to do so by the laws of its domicile.
(2) The term "variable
contract" shall mean any policy or contract on either a group or on
an individual basis issued by an insurance company providing for benefits or
other contractual payments or values thereunder to vary so as to
reflect investment results of any segregated portfolio of investments or of a
designated separate account in which amounts received in connection with such
contracts shall have been placed and accounted for separately and apart from
other investments and accounts. This contract may also provide benefits or
values incidental thereto payable in fixed or variable amounts, or both. It
shall not be deemed to be a "security" or "securities" as
defined in The Securities Act, as amended, or in the TheInvestment Company
Act, as amended, nor subject to regulation under said Acts.
(3) In
determining the qualifications of a company requesting authority to issue,
deliver, sell or use variable contracts, the Commissioner shall always consider
the following: (a) the history, financial and general condition of the company: Provided,
That such company, if a foreign company, must have deposited with the
Commissioner for the benefit and security of its variable contract owners in
the Philippines, securities satisfactory to the Commissioner consisting of
bonds of the Government of the Philippines or its instrumentalities with an
actual market value of two million pesos; (b) the character, responsibility and
fitness of the officers and directors of the company; and (c) the law and
regulation under which the company is authorized in the state of domicile to
issue such contracts.
(4) If after
notice and hearing, the Commissioner shall find that the company is qualified
to issue, deliver, sell or use variable contracts in accordance with this Code
and the regulations and rules issued thereunder, the corresponding order
of authorization shall be issued. Any decision or order denying authority to
issue, deliver, sell or use variable contracts shall clearly and distinctly
state the reasons and grounds on which it is based.
Sec. 233. Any
insurance company issuing variable contracts pursuant to this Code may in its
discretion issue contracts providing a combination of fixed amount and variable
amount of benefits and for option lump-sum payment of benefits.
Sec. 234. Every
variable contract form delivered or issued for delivery in the Philippines, and
every certified form evidencing variable benefits issued pursuant to any such
contract on a group basis, and the application, rider and endorsement forms
applicable thereto and used in connection therewith, shall be subject to the
prior approval of the Commissioner.
Sec. 235. Illustration
of benefits payable under any variable contract shall not include or involve
projections of past investment experience into the future and shall conform with the
rules and regulations promulgated by the Commissioner.
Sec. 236. Variable
contracts may be issued on the industrial life basis, provided that the
pertinent provisions of this Code and of the rules and regulations of the
Commissioner governing variable contracts are complied with in connection with
such contracts.
Sec. 237. Every
life insurance company authorized under the provisions of this Code to issue,
deliver, sell or use variable contracts shall, in connection with same,
establish one or more separate accounts to be known as separate variable
accounts. All amounts received by the company in connection with any such
contracts which are required by the terms thereof, to be collected or applied
to one or more designated separate variable accounts shall be placed in such
designated account or accounts. The assets and liabilities of each such
separate variable account shall at all times be clearly identifiable and
distinguishable from the assets and liabilities in all other accounts of the
company. Notwithstanding any provision of law to the contrary, the assets held
in any such separate variable account shall not be chargeable with liabilities
arising out of any other business the company conduct but shall be held and
applied exclusively for the benefit of the owners or beneficiaries of the
variable contracts applicable thereto. In the event of the insolvency of the
company, the assets of each such separate variable account shall be applied to
the contractual claims of the owners or beneficiaries of the variable contracts
applicable thereto. Except as otherwise specifically provided by the contract,
no sale, exchange or other transfer of assets may be made by a company, between
any of its separate accounts or between any other investment account and one or
more of its separate accounts, unless in the case of a transfer into a separate
account, such transfer is made solely to establish the account or to support
the operation of the contracts with respect to the separate account to which
the transfer is made, or in case of a transfer from a separate account, such
transfer would not cause the remaining assets of the account to become less
than the reserves and other contract liabilities with respect to such separate
account. Such transfer, whether into or from a separate account, shall be made
by a transfer of cash, or by a transfer of securities having a valuation which
could be readily determined in the market place, provided that such transfer of
securities is approved by the Commissioner. The Commissioner may authorize
other transfers among such accounts, if, in his opinion, such transfer would
not be inequitable. All amounts and assets allocated to any such separate
variable account shall be owned by the company and with respect to same the
company shall not be nor hold itself out to be a trustee.
Sec. 238. Any
insurance company which has established one or more separate variable accounts
pursuant to the preceding section may invest and re-invest all or any part of
the assets allocated to any such account in the securities and investments
authorized by sections one hundred ninety-eight, two hundred, two hundred one
and two hundred two for any of the funds of an insurance company in such amount
or amounts as may be approved by the Commissioner. In addition thereto, such
company may also invest in common stocks or other equities which are listed on
or admitted to trading in a securities exchange located in the Philippines, or
which are publicly held and traded in the "over-the-counter
market" as defined by the Commissioner and as to which market
quotations have been available: Provided, however, That no such company
shall invest in excess of ten per centum of the assets of any such separate
variable accounts in any one corporation issuing such common stock. The assets
and investments of such separate variable accounts shall not be taken into
account in applying the quantitative investment limitations applicable to other
investments of the company. In the purchase of common capital stock or other
equities, the insurer shall designate to thebroker, or to the seller if
the purchase is not made through a broker, the specific variable account for
which the investment is made.
Sec. 239. Assets
allocated to any separate variable account shall be valued at their market
value on the date of any valuation, or if there is no readily available market
then in accordance with the terms of the variable contract applicable to such
assets, or if there are no such contract terms then in such manner as may be
prescribed by the rules and regulations of the Commissioner.
Sec. 240. The
reserve liability for variable contracts shall be established in accordance
with actuarial procedures that recognize the variable nature of the benefits
provided, and shall be approved by the Commissioner.
Title 11
CLAIMS SETTLEMENT
CLAIMS SETTLEMENT
Sec. 241. (1)
No insurance company doing business in the Philippines shall refuse, without
just cause, to pay or settle claims arising under coverages provided
by its policies, nor shall any such company engage in unfair claim settlement
practices. Any of the following acts by an insurance company, if committed
without just cause and performed with such frequency as to indicate a general
business practice, shall constitute unfair claim settlement practices:
(a) knowingly misrepresenting
to claimants pertinent facts or policy provisions relating to coverage at
issue;
(b) failing to
acknowledge with reasonable promptness pertinent communications with respect to
claims arising under its policies;
(c) failing to
adopt and implement reasonable standards for the prompt investigation of claims
arising under its policies;
(d) not
attempting in good faith to effectuate prompt, fair and equitable settlement of
claims submitted in which liability has become reasonably clear; or
(e) compelling policyholders
to institute suits to recover amounts due under its policies by offering
without justifiable reason substantially less than the amounts ultimately
recovered in suits brought by them.
(2) Evidence
as to numbers and types of valid and justifiable complaints to the Commissioner
against an insurance company, and the Commissioner's complaint experience with
other insurance companies writing similar lines of insurance shall be
admissible in evidence in an administrative or judicial proceeding brought
under this section.
(3) If it is
found, after notice and an opportunity to be heard, that an insurance company
has violated this section, each instance of non-compliance with paragraph (1)
may be treated as a separate violation of this section and shall be considered
sufficient cause for the suspension or revocation of the company's certificate
of authority.
Sec. 242. The
proceeds of a life insurance policy shall be paid immediately upon maturity of
the policy, unless such proceeds are made payable in installments or as an
annuity, in which case the installments, or annuities shall be paid as they
become due: Provided, however, That in the case of a policy maturing by
the death of the insured, the proceeds thereof shall be paid within sixty days
after presentation of the claim and filing of the proof of the death of the
insured. Refusal or failure to pay the claim within the time prescribed herein
will entitle the beneficiary to collect interest on the proceeds of the policy
for the duration of the delay at the rate of twice the ceiling prescribed by
the Monetary Board, unless such failure or refusal to pay is based on the
ground that the claim is fraudulent.
The proceeds
of the policy maturing by the death of the insured payable to the beneficiary
shall include the discounted value of all premiums paid in advance of their due
dates, but are not due and payable at maturity.
Sec. 243. The
amount of any loss or damage for which an insurer may be liable, under any
policy other than life insurance policy, shall be paid within thirty days after
proof loss is received by the insurer and ascertainment of the loss or damage
is made either by agreement between the insured and the insurer or by
arbitration; but if such ascertainment is not had or made within sixty days
after such receipt by the insurer of the proof of loss, then the loss or damage
shall be paid within ninety days after such receipt. Refusal or failure to pay
the loss or damage within the time prescribed herein will entitle the assured
to collect interest on the proceeds of the policy for the duration of the delay
at the rate of twice the ceiling prescribed by the Monetary Board, unless such
failure or refusal to pay is based on the ground that the claim is fraudulent.
Sec. 244. In
case of any litigation for the enforcement of any policy or contract of
insurance, it shall be the duty of the Commissioner or the Court, as the case
may be, to make a finding as to whether the payment of the claim of the insured
has been unreasonably denied or withheld; and in the affirmative case, the
insurance company shall be adjudged to pay damages which shall consist of
attorney's fees and other expenses incurred by the insured person by reason of
such unreasonable denial or withholding of payment plus interest of twice the
ceiling prescribed by the Monetary Board of the amount of the claim due the
insured, from the date following the time prescribed in section two hundred
forty-two or in section two hundred forty-three, as the case may be, until the
claim is fully satisfied; Provided, That the failure to pay any such claim
within the time prescribed in said sections shall be considered prima facie
evidence of unreasonable delay in payment.
Title 12
EXAMINATION OF COMPANIES
EXAMINATION OF COMPANIES
Sec. 245. The
Commissioner shall require every insurance company doing business in the
Philippines to keep its books, records, accounts and vouchers in such manner
that he or his authorized representatives may readily verify its annual
statements and ascertain whether the company is solvent and has complied with
the provisions of this Code or the circulars, instructions, rulings or
decisions of the Commissioner.
Sec. 246. The
Commissioner shall at least once a year and whenever he considers the public
interest so demands, cause an examination to be made into the affairs,
financial condition and method of business of every insurance company
authorized to transact business in the Philippines and of any other person,
firm or corporation managing the affairs and/or property of such insurance
company. Such company, as well as such managing person, firm or corporation,
shall submit to the examiner all such books, papers and securities as he may
require and such examiner shall also have the power to examine the officers of such
company under oath touching its business and financial condition, and the
authority to transact business in the Philippines of any such company shall be
suspended by the Commissioner if such examination is refused and such company
shall not thereafter be allowed to transact further business in the Philippines
until it has fully complied with the provisions of this section.
Government-owned
or controlled corporations or entities engaged in social private insurance
shall similarly be subject to such examination by the Commissioner unless their
respective charters otherwise provide.
Title 13
SUSPENSION OR REVOCATION OF AUTHORITY
SUSPENSION OR REVOCATION OF AUTHORITY
Sec. 247. If
the Commissioner is of the opinion upon examination of other evidence that any
domestic or foreign insurance company is in an unsound condition, or that it
has failed to comply with the provisions of law or regulations obligatory upon
it, or that its condition or method of business is such as to render its
proceedings hazardous to the public or to its policyholders, or that its
paid-up capital stock, in the case of a domestic stock company, or its
available cash assets, in the case of a domestic mutual company, or its
security deposits, in the case of a foreign company, is impaired or deficient,
or that the margin of solvency required of such company is deficient, the
Commissioner is authorized to suspend or revoke all certificates of authority
granted to such insurance company, its officers and agents, and no new business
shall thereafter be done by such company or for such company by its agent in
the Philippines while such suspension, revocation or disability continues or
until its authority to do business is restored by the Commissioner. Before
restoring such authority, the Commissioner shall require the company concerned
to submit to him a business plan showing the company's estimated receipts and
disbursements, as well as the basis therefor, for the next succeeding
three years. (As amended by Presidential Decree No. 1455).
Title 14
APPOINTMENT OF CONSERVATOR
APPOINTMENT OF CONSERVATOR
Sec. 248. If
at any time before, or after, the suspension or revocation of the certificate
of authority of an insurance company as provided in the preceding title, the
Commissioner finds that such company is in a state of continuing inability or
unwillingness to maintain a condition of solvency or liquidity deemed adequate
to protect the interest of policy holders and creditors, he may appoint a
conservator to take charge the assets, liabilities, and the management of such
company, collect all moneys and debts due said company and exercise all powers
necessary to preserve the assets of said company, reorganize the management
thereof, and restore its viability. The said conservator shall have the power
to overrule or revoke the actions of the previous management and board of
directors of the said company, any provision of law, or of the articles of
incorporation or by-laws of the company, to the contrary notwithstanding, and
such other powers as the Commissioner shall deem necessary.
The
conservator may be another insurance company doing business in the Philippines,
by officer or officers of such company, or any other competent and qualified
person, firm or corporation. The remuneration of the conservator and other
expenses attendant to the conservation shall be borne by the insurance company
concerned.
The
conservator shall not be subject to any action, claim or demand by, or
liability to, any person in respect of anything done or omitted to be done in
good faith in the exercise, or in connection with the exercise, of the powers
conferred on the conservator.
The
conservator appointed shall report and be responsible to the Commissioner until
such time as the Commissioner is satisfied that the insurance company can
continue to operate on its own and the conservatorship shall likewise
be terminated should be Commissioner, on the basis of the report of the
conservator or of his own findings, determine that the continuance in business
of the insurance company would be hazardous to policy holders and creditors, in
which case the provisions of Title 15 shall apply.
Title 15
PROCEEDINGS UPON INSOLVENCY
PROCEEDINGS UPON INSOLVENCY
Sec. 249. Whenever,
upon examination or other evidence, it shall be disclosed that the condition of
any insurance company doing business in the Philippines is one of insolvency,
or that its continuance in business would be hazardous to its policyholders and
creditors, the Commissioner shall forthwith order the company to cease and
desist from transacting business in the Philippines and shall designate a
receiver to immediately take charge of its assets and liabilities, as
expeditiously as possible collect and gather all the assets and administer the
same for the benefit of its policyholders and creditors, and exercise all the
powers necessary for these purposes including, but not limited to, bringing
suits and foreclosing mortgages in the name of the insurance company.
The
Commissioner shall thereupon determine within thirty days whether the insurance
company may be reorganized or otherwise placed in such condition so that it may
be permitted to resume business with safety to its policyholders and creditors
and shall prescribe the conditions under which such resumption of business
shall take place as well as the time for fulfillment of such conditions. In
such case, the expenses and fees in the collection and administration of the
insurance company shall be determined by the Commissioner and shall be paid out
of the assets of such company.
If the
Commissioner shall determine and confirm within the said period that the
insurance company is solvent, as defined hereunder, or cannot resume business
with safety to its policyholders and creditors, he shall, if the public
interest requires, order its liquidation, indicate the manner of its
liquidation and approve a liquidation plan and implement it immediately. The
Commissioner shall designate a competent and qualified person as liquidator who
shall take over the functions of the receiver previously designated and, with
all convenient speed, reinsure all its outstanding policies, convert the assets
of the insurance company to cash, or sell, assign or otherwise dispose of the
same to the policyholders, creditors and other parties for the purpose of
settling the liabilities or paying the debts of such company and he may, in the
name of the company, institute such actions as may be necessary in the
appropriate Court to collect and recover accounts and assets of the insurance
company, and to do such other acts as may be necessary to complete the
liquidation as ordered by the Commissioner.
The provisions
of any law to the contrary notwithstanding, the actions of the Commissioner
under this Section shall be final and executory, and can be set aside by
the Court upon petition by the company and only if there is convincing proof
that the action is plainly arbitrary and made in bad faith. The Commissioner,
through the Solicitor General, shall then file the corresponding answer
reciting the proceeding taken and praying the assistance of the Court in the
liquidation of the company. No restraining order or injunction shall be issued
by the Court enjoining the Commissioner from implementing his actions under
this Section, unless there is convincing proof that the action of the
Commissioner is plainly arbitrary and made in bad faith and the petitioner or
plaintiff files with the Clerk or Judge of the Court in which the action is
pending a bond executed in favor of the Commissioner in an amount to be fixed
by the Court. The restraining order or injunction shall be refused or, if
granted, shall be dissolved upon filing by the Commissioner, if he so desires,
of a bond in an amount twice the amount of the bond of the petitioner or
plaintiff conditioned that it will pay the damages which the petition or
plaintiff may suffer by the refusal or the dissolution of the injunction. The
provisions of Rule 58 of the New Rules of Court insofar as they are applicable
shall govern the issuance and dissolution of the restraining order or
injunction contemplated in this Section.
All
proceedings under this Title shall be given preference in the Courts. The
Commissioner shall not be required to pay any fee to any public officer for
filing, recording, or in any manner authenticating any paper or instrument
relating to the proceedings.
As used in
this Title, the term "Insolvency" shall mean the inability
of an insurance company to pay its lawful obligations as they fall due in the
usual and ordinary course of business as may be shown by its failure to
maintain the margin of solvency required under Section 194 of this Code. (As
amended by Presidential Decree No. 1141 and further amended by Presidential
Decree No. 1455).
Sec. 250. In
case of liquidation of an insurance company, after payment of the cost of the
proceedings, including reasonable expenses and fees incurred in the liquidation
to be allowed by the Court, the Commissioner shall pay all allowed claims
against such company, under order of the Court, in accordance with their legal
priority.
Sec. 251. The
receiver or the liquidator, as the case may be, designated under the provisions
of this title shall not be subject to any action, claim or demand by, or
liability to, any person in respect of anything done or omitted to be done in
good faith in the exercise, or in connection with the exercise, of the powers
conferred on such receiver or liquidator.
Title 16
CONSOLIDATION AND MERGER OF INSURANCE COMPANIES
CONSOLIDATION AND MERGER OF INSURANCE COMPANIES
Sec. 252. Upon
prior notice to the Commissioner, two or more domestic insurance companies,
acting through their respective boards of directors, may negotiate to merge
into a single corporation which shall be one of the constituent corporations,
or consolidate into a single corporation which shall be a new corporation to be
formed by the consolidation. A common agreement of the proposed merger or
consolidation shall be drawn up for submission to the stockholders or members
of the constituent companies for adoption and approved in accordance with the
provisions of the respective by-laws of the constituent companies and all
existing laws that may be pertinent.
Sec. 253. Such
agreement shall include, aside from the proposed merger or consolidation,
provisions relative to the manner of transfer of assets to and assumption of
liabilities by the absorbing or acquiring company from the absorbed or
dissolved company or companies; the proposed articles of merger or
consolidation and by-laws of the surviving or acquiring company; the corporate
name to be adopted which should not be that of any other existing company
transacting similar business or one so similar as to be calculated to mislead
the public; the rights of the stockholders or members of the absorbed or
dissolved companies; date of effectivity of the merger or
consolidation; and such particulars as may be necessary to explain and make
manifest the objects and purposes of the absorbing or acquiring company.
Sec. 254. Upon
execution of such agreement to merge or consolidate by and between or among the
boards of directors of the constituent companies, notice thereof shall be
mailed immediately to their policyholders and creditors. The company or
companies to be absorbed or dissolved shall discharge all its accrued
liabilities; otherwise, such liabilities shall, with the consent of its
creditors, be transferred to and assumed by the absorbing or acquiring company,
or such liabilities be reinsured by the latter. In the case of such policies as
are subject to cancellation by the company or companies to be absorbed or
dissolved, same may be cancelled pursuant to the terms thereof in lieu of such
transfer, assumption, or reinsurance.
Sec. 255. Upon
approval or adoption in the meetings of the stockholders or members called for
the purpose in each of the constituent companies of the agreement to merge or
consolidate, all stockholders or members dissenting or objecting to merger or
consolidation shall be paid the value of their shares by the company concerned
in accordance with the by-laws thereof.
Sec. 256. Upon
the approval or adoption of the agreement to merge or consolidate by the
stockholders or members of the constituent companies, the corresponding
articles of merger or of consolidation shall be duly executed by the presidents
and attested by the corporate secretaries and shall bear the corporate seals of
the merging or consolidating companies setting forth:
(1) The plan
of merger or the plan of consolidation;
(2) As to
each corporation, the number of shares outstanding, or in case of mutual
corporations, the number of members; and
(3) As to
each corporation, the number of shares or members voted for and against such
plan respectively. Thereafter, a certified copy of such articles of merger or
consolidation, together with a certificate of approval or adoption by the
stockholders or members of such articles of merger or consolidation, verified
by affidavits of such officers and under the seal of the constituent companies,
shall be submitted to the Commissioner, together with such other papers or
documents which the Commissioner may require, for his consideration.
Sec. 257. The
articles of merger or of consolidation, signed and verified as
hereinabove required, shall be filed with the Securities and Exchange
Commission for its examination and approval.
Sec. 258. Upon
receipt from the Securities and Exchange Commission of the certificate of
merger or of consolidation, the constituent companies shall surrender to the
Commissioner their respective certificates of authority to transact insurance
business. The absorbing or surviving company in case of merger, or the newly
formed company in case of consolidation, shall immediately file with the
commissioner the corresponding application for issuance of a new certificate of
authority to transact insurance business, together with a certified copy of the
certificate of merger or of consolidation, and of the certificate of increase
of stocks, if there is any, issued by the Securities and Exchange Commission.
Sec. 259. Nothing
in this title shall be construed to enlarge the powers of the absorbing or
surviving company in case of merger, or the newly formed company in case of consolidation,
except those conferred by the certificate of merger or of consolidation and the
articles of merger of consolidation, or the amended articles of incorporation,
as registered with the Securities and Exchange Commission.
Sec. 260. No
director, officer, or stockholder of any such constituent companies shall
receive any fee, commission, compensation, or other valuable consideration
whatsoever, directly or indirectly, or in any manner aiding, promoting or
assisting in such merger or consolidation.
Sec. 261. The
merger of consolidation of companies under, this Code shall be subject to the
provisions of the Corporation Law, and, in those cases specified in Republic
Act No. 5455, as amended, be further subject to the provisions of said law.
Title 17
MUTUALIZATION OF STOCK LIFE INSURANCE COMPANIES
MUTUALIZATION OF STOCK LIFE INSURANCE COMPANIES
Sec. 262. Any
domestic stock life insurance company doing business in the Philippines may
convert itself into an incorporated mutual life insurer. To that end it may
provide and carry out a plan for the acquisition of the outstanding shares of
its capital stock for the benefit of its policyholders, or any class or classes
of its policyholders, by complying with the requirements of this chapter.
Sec. 263. Such
plan shall include appropriate proceedings for amending the insurer's articles
of incorporation to give effect to the acquisition, by said insurer, for the
benefit of its policyholders or any class or classes thereof, of the
outstanding shares of its capital stock and the conversion of the insurer from
a stock corporation into a non-stock corporation for the benefit of its
members. The members of such non-stock corporation shall be the policyholders
from time to time of the class or classes for whose benefit the stock of the
insurer was acquired, and the policyholders of such other class or classes as
may be specified in such corporation's articles of incorporation as they may be
amended from time to time. Such plan shall be:
(1) Adopted
by a vote of a majority of the directors;
(2) Approved
by the vote of the holders of at least a majority of the outstanding shares at
a special meeting of shareholders called for that purpose, or by the written
consent of such shareholders;
(3) Submitted
to the Commissioner and approved by him in writing;
(4) Approved
by a majority vote of all the policyholders of the class or classes for whose
benefit the stock is to be acquired voting at an election by the
policyholders called for that purpose, subject to the provisions of section two
hundred sixty-five. The terms "policyholder" or "policyholders" as
used in this chapter shall be deemed to mean the person or persons insured
under an individual policy of life insurance, or of health and accident
insurance, or of any combination of life, health and accident insurance. They
shall also include the person or persons to whom any annuity or pure endowment
is presently or prospectively payable by the terms of an individual annuity or
pure endowment contract, except where the policy or contract declares some
other person to be the owner or holder thereof, in which case such other person
shall be deemed policyholder. In any case where a policy or contract names two
or more persons as joint insured, payees, owners or holders thereof, the
persons so named shall be deemed collectively to be one policyholder for the
purpose of this chapter. In any case where a policy or contract shall have been
assigned by assignment absolute on its face to an assignee other than the
insurer, and such assignment shall have been filed at the principal office of
the insurer at least thirty days prior to the date of any election or meeting
referred to in this chapter, then such assignee shall be deemed at such
election or meeting to be the policyholder. For the purpose of this chapter the
terms "policyholder" and "policyholders" include
the employer to whom, or a president, secretary or other executive officer of
any corporation or association to which a master group policy has been issued,
but exclude the holders of certificates or policies issued under or in connection
with a master group policy. Beneficiaries under unmatured contracts
shall not as such be deemed to be policyholders;
(5) Filed
with the Commissioner after having been approved as provided in this section.
Sec. 264. The
Commissioner shall examine the plan submitted to him under the provisions of
sub-paragraph three of section two hundred sixty-three. He shall not approve
such plan unless in his opinion the rights and interest of the insurer, its
policyholders and shareholders are protected nor unless he is satisfied that
the plan will be fair and equitable in its operation.
Sec. 265. The
election prescribed by sub-paragraph four of section two hundred sixty-three
shall be called by the board of directors or the president, and every
policyholder of the class or classes for whose benefit the stock is to be
acquired, whose insurance shall have been in force for at least one year prior
to such election shall have one vote, regardless of the number of policies or
amount of insurance he holds, and regardless of whether such policies are
policies of life insurance or policies of health and accident insurance or
annuity contracts. Notice of such election shall be given to policyholders
entitled to vote by mail from the principal office of such insurer at least thirty
days prior to the date set for such election, in a sealed envelope, postage
prepaid, addressed to each such policyholder at his last known address.
Voting shall
be by one of the following methods:
(1) At a
meeting of such policyholders, held pursuant to such notice, by ballot in
person or by proxy.
(2) If not by
the method described in the preceding sub-paragraph, then by mail pursuant to a
procedure and on forms to be prescribed by such plan.
Such election
shall be conducted under the direction and supervision of three impartial and
disinterested inspectors appointed by the insurer and approved by the
Commissioner. In case any person appointed as inspector fails to appear at such
meeting or fails or refuses to act at such election, the vacancy, if occurring
in advance of the convening of the meeting or in advance of the opening of the
mail vote, may be filled in the manner prescribed for the appointment of
inspectors and, if occurring at the meeting or during the canvass of the mail
vote, may be filled by the person acting as chairman of said meeting or
designated for that purpose in such plan. The decision, act or certificate of a
majority of the inspectors shall be effective in all respects as the decision,
act or certificate of all. The inspectors of election shall determine the
number of policyholders, the voting power of each, the policyholders
represented at the meeting or voting by mail, the existence of a quorum and the
authenticity, validity and effect of proxies. They shall receives votes, hear
and determine all challenges and questions in any way arising in connection
with the right to vote, count and tabulate all votes, determine the result, and
do such other acts as are proper to conduct the vote with fairness to all
policyholders. The inspectors of election shall, before commencing performance
of their duties, subscribe to and file with the insurer and with the
Commissioner on oath that they, and each of them, will perform their duties
impartially, in good faith, to the best of their ability and as expeditiously
as in practicable. On the request of the insurer, the Commissioner, a
policyholder or his proxy, the inspectors shall make a report in writing of any
challenge or question or matter determined by them and execute a
certificate of any fact found by them. They shall also certify the result of
such vote to the insurer and to the Commissioner. Any report or certificate
made by them shall be prima facie evidence of facts stated therein.
All necessary expenses incurred in connection with such election shall be paid
by the insurer. For the purpose of this section, a quorum shall consist of five per
centum of the policyholders of such insurer entitled to vote at such
election.
Sec. 266. In
carrying out any such plan, the insurer may acquire any shares of its own stock
by gift, bequest or purchase. Any shares so acquired shall, unless as a result
of such acquisition all of the shares of the insurer shall have been acquired,
be acquired in trust for the policyholders of the class or classes for whose
benefit the plan provides that the stock of the insurer shall be acquired as
hereinafter provided. Such shares shall be assigned and transferred on the
books of such insurer and approved by the Commissioner. Such trustees shall
hold such stock in trust until all of the outstanding shares of capital stock
of such insurer have been acquired, but for not longer than thirty years with
such extensions of not more than five years each as may be granted by the
Commissioner. Such extensions may be granted by the Commissioner if the plan so
provides and if in his opinion the plan of acquisition of all of such stock can
be completed within a reasonable period. Such trustees shall vote such stock at
all corporate meetings at which stockholders have the right to vote. When all
the outstanding shares of capital stock of such insurer have been acquired, all
said shares shall be cancelled, the certificate of amendment of the insurer's
articles of incorporation giving effect thereto shall be filed in accordance
with the provisions of the Corporation Law, and the insurer shall become a
non-stock corporation for the profit of its members and such trust shall
thereupon terminate. Thereafter such corporation shall be conducted for the
mutual benefit, ratably, of its policyholders of the class or classes for whose
benefit the stock was acquired and shall have power to issue non-assessable
policies on a reserve basis subject to all provisions of law applicable to
incorporated life insurers issuing non-assessable policies on a reserve basis.
Policies so issued may be upon the basis of full or partial participation
therein as agreed between the insurer and the insured.
Upon the
termination of any such voting trust, either in accordance with its terms or as
hereinabove provided, such plan of mutualization shall terminate,
unless theretofore completed. Upon such termination, unless the plan of mutualization provides
for the disposition of the shares acquired by the insurer under such plan or
for the disposition of the proceeds thereof, the shares held by such trustees
shall be disposed of in accordance with an order of the court of competent
jurisdiction in the judicial district in which is located the principal office
of such insurer, made upon a verified petition of the Commissioner.
Sec. 267. Any
such plan of mutualization may provide for the creation of a voting
trust under a trust agreement for the holding and voting by three or more
trustees of any portion or all of the shares of the insurer not required upon
the adoption of such plan. The voting trustees shall be named in accordance
with such plan or, if no provision is made therein for the naming of such
trustees, then by the insurer. The voting trust agreement and voting trustees
shall be subject to the approval of the Commissioner. Any or all of the
trustees under such voting trust agreement may be the same person or persons as
any or all of the trustees referred to in section two hundred sixty-six. Such
voting trust agreement shall provide that in the event of acquisition by the
insurer of any of the shares of stock held thereunder in accordance
with the provisions of the plan, such shares so acquired together with the
voting rights thereof shall be transferred by the trustees named under the
provisions of this section to the trustees named under the provisions of
section two hundred sixty-six. Any voting trust agreement created pursuant to
the provisions of this section may be made irrevocable for not longer than
thirty years and thereafter until the termination of the trust provided for in
section two hundred sixty-six. The trust created pursuant to the provisions of
this section shall terminate in any event upon termination of the trust
provided for in section two hundred sixty-six. Upon the termination of the
trust created pursuant to the provisions of this section, any shares held in
such trust shall revert to the persons entitled thereto by law.
Sec. 268. Every
payment for the acquisition of any shares of the capital stock of such insurer,
the purchase price of which is not fixed by such plan, shall be subject to the
prior approval of the Commissioner. Neither such plan, nor any such payment,
may be approved by the Commissioner unless he finds that the rights and
interests of the insurer, its policyholders, and shareholders are protected.
Sec. 269. The
trustees referred to in section two hundred sixty-six shall file with such
insurer and with the Commissioner a verified acceptance of their appointments
and verified declarations that they will faithfully discharge their duties as
such trustees. All dividends and other sums received by said trustees on the
shares held by them, after paying the necessary expenses of executing their
trust, shall be immediately repaid to such insurer for the benefit of all who
are, or may become, policyholders of such insurance of the class or classes for
whose benefit the stock of such insurer was acquired and entitled to
participate in the profits thereof and shall be added to and become part of the
assets of such insurer.
Sec. 269-A. If,
at any time within the period provided in the plan for the acquisition of the
outstanding shares of stock of the insurer, ninety percent thereof has already
been acquired and transferred to the trustees under the plan, the insurer by a
vote of a majority of the directors may determine to make an offer, with the
permission of the Commissioner and subject to such requirement as he may
specify, to acquire by purchase all of the shares not theretofore acquired
under the plan, at a specified price which the insurer considers to be their
fair value as of the date of making such offer.
If the offer
to acquire is permitted by the Commissioner, the insurer shall make a written
offer by registered mail to each shareholder whose shares have not theretofore
been acquired under the plan or otherwise, offering to acquire all his shares
at such price if accepted in writing within thirty days after the mailing of
such offer. Any shareholder accepting such offer, within the time therefore
shall, within sixty days after his acceptance, transfer to the insurer the
certificates representing such shares and, upon doing so, shall be paid by the
insurer the amount of such offer for his shares. Any share so acquired shall be
assigned and transferred to the trustees under the plan and held by them as
shares acquired pursuant to the plan.
Each
shareholder who does not accept such offer to acquire his shares within the
time stated in such offer for acceptance thereof shall within fifteen days
after the expiration of such offer apply to the Secretary of Finance for
determination of the fair value of his shares as of the date of making such
offer. The Secretary of Finance may himself, after due notice and hearing,
determine upon the evidence received the fair value of the shares as of the
date of making such offer, or appoint three impartial and disinterested persons
to appraise the fair value of such shares with such direction as he shall deem
proper and necessary to expedite the proceedings. Upon completion of the
appraisal proceedings, the appraisers shall file with the Secretary of Finance
their report in writing stating the fair value of such shares as of the date of
the making of such offer and setting forth their findings in support of such
statement. The appraisers shall furnish each party to the proceedings a copy of
their appraisal report, and within ten days after receipt thereof any such
party may signify his objection, if any, to the report or move for the approval
thereof. Upon the expiration of the period of ten days referred to above, the
report shall be set for hearing, after which the Secretary of Finance shall
issue an order adopting, modifying or rejecting the report in whole or in part
or he may receive further evidence or may recommit it with instructions.
Whenever the Secretary of Finance shall determine in any manner, as aforesaid,
the fair value of such shares, he may also determine the terms of payment
thereof by the insurer. The expenses incidental to the proceedings including
charges of the appraisers, if any, shall be paid equally by the insurer and the
shareholder.
The findings
of the Secretary of Finance on all questions of fact raised at the hearing of
the application for determination of the fair value of such shares shall be
conclusive upon all parties to the proceedings. The order of the Secretary of
Finance determining the fair value of the shares and the terms of payment
thereof shall have the force and effect of a judgment which shall be appealable on
any question of law. Such order shall become final and executory fifteen
days after receipt thereof by the parties to the proceedings.
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