PRELIMINARY CHAPTER
Section 1. The short title of this Act shall be "The Insurance Act."
CHAPTER I
Insurance in general
Definition of Insurance
Sec. 2. Insurance is a contract whereby one
undertakes for a consideration to indemnify another against loss,
damage, or liability arising from an unknown or contingent
event.
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.
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.
Parties to the Contract
Sec. 6. The person who undertakes to indemnify
another by a contract of insurance is called the insurer, and the
person indemnified is called the insured.
Sec. 7. Every person, company, corporation, or
association who holds a certificate of authority from the insurance
commissioner, as else where provided in this Act, may be an insurer.
Sec. 8. Anyone except a public enemy may be
insured.
Sec. 9. 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. 10. If an insurer assents to the transfer of
an insurance from a mortgagor to a mortgagee, and, at the time of his
assent, imposes further obligations on the assignee, making a new
contract with him, the acts of the mortgagor cannot affect the rights
of said assignee.
Insurable Interest
Sec. 11. Every person has an insurable interest in
the life and health .
(a) Of himself;
(b) Of any person on whom he depends wholly or in
part for education or support;
(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. 12. Every interest in property, whether real
or personal, or any relation thereto, or liability in respect thereof,
of such a nature that a contemplated peril might directly damnify the
insured, is an insurable interest.
Sec. 13. 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. 14. 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. 15. 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. 16. The measure of an insurable interest in
property is the extent to which the insured might be damnified by loss
or injury thereof.
Sec. 17. The sole object of insurance is the
indemnity of the insured, and if he has no insurable interest the
contract is void.
Sec. 18. An interest insured must exist when the
insurance takes effect, and when the loss occurs, but need not exist in
the meantime.
Sec. 19. Except in the cases specified in the next
four sections, and in the cases of life, accident, and health
insurance, a change of interest in any part of a thing insured
unaccompanied by a corresponding change of interest in the insurance,
suspends the insurance to an equivalent extent, until the interest in
the thing and the interest in the insurance are vested in the same
person.
Sec. 20. A change of interest in a thing insured,
after the occurrence of an injury which results in a loss, does not
affect the right of the insured to indemnify for the loss.
Sec. 21. A change of interest in one or more of
several distinct things, separately insured by one policy, does not
avoid the insurance as to the others.
Sec. 22. A change of 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. 23. 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. 24. Every stipulation in a policy of
insurance for the payment of loss whether the person insured has or has
not any interest in the subject matter of the insurance except in the
cases provided for in section one hundred and sixty-six or that the
policy shall be received as proof of such interest, and every policy
executed by way of gaming or wagering, is void.
Concealment and Representations
Sec. 25. A neglect to communicate that which a
party knows and ought to communicate, is called a concealment.
Sec. 26. A concealment, whether intentional or
unintentional, entitles the injured party to rescind a contract of
insurance.
Sec. 27. Each party to a contract of insurance
must communicate to the other, in good faith, all facts within his
knowledge which are material to the contract, and which the other has
not the means of ascertaining, and as to which he makes no warranty.
Sec. 28. 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. 29. 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. 30. 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. 31. 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 either the
political or material perils contemplated; and all general usages of
trade.
Sec. 32. The right to information of material
facts may be waived, either by the terms of insurance or by neglect to
make inquiries as to such facts, where they are distinctly implied in
other facts of which information is communicated.
Sec. 33. 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 forty-nine.
Sec. 34. Neither party to a contract of insurance
is bound to communicate, even upon inquiry, information of his own
judgment upon the matters in question.
Sec. 35. A representation may be oral or written.
Sec. 36. A representation may be made at the same
time with issuing the policy, or before it.
Sec. 37. The language of a representation is to be
interpreted by the same rules as the language of contracts in general.
Sec. 38. 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. 39. A representation cannot be allowed to
qualify an express provision in a contract of insurance; but it may
qualify an implied warranty.
Sec. 40. A representation may be altered or
withdrawn before the insurance is effected, but not afterwards.
Sec. 41. A representation must be presumed to
refer to the date on which the contract goes into effect.
Sec. 42. 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 intelligence.
Sec. 43. A representation is to be deemed false
when the facts fail to correspond with its assertions or stipulations.
Sec. 44. 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.
Sec. 45. The materiality of a representation is
determined by the same rules as the materiality of a concealment.
Sec. 46. The provisions of sections twenty-five to
forty-seven, inclusive, of this chapter apply as well to a modification
of a contract of insurance as to its original formation.
Sec. 47. 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.
The Policy
Sec. 48. The written instrument, in which a
contract of insurance is set forth, is called a policy of insurance.
Sec. 49. 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 rate of premium;
(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. 50. The insurance shall be applied
exclusively to the proper interest of the person in whose name it is
made unless otherwise specified in the policy.
Sec. 51. When an insurance is made by an agent or
trustee, the fact that his principal or beneficiary is the person
really insured may be indicated by describing him as agent or trustee,
or by other general words in the policy.
Sec. 52. To render an insurance, effected by one
partner or part owner, applicable to the interest of his copartners, or
of 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. 53. When the description of the insured in a
policy is so general that it may comprehend any person or any class of
persons, he only can claim the benefit of the policy who can show that
it was intended to include him.
Sec. 54. 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. 55. 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. 56. A policy is either open, valued, or
running.
Sec. 57. 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. 58. A valued policy is one which expresses on
its face an agreement that the thing insured shall be valued at a
specified sum.
Sec. 59. 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. 60. An acknowledgment in a policy of 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. 61. An agreement made before a loss, not to
transfer the claim of a person insured against the insurer, after the
loss has happened is void.
Warranties
Sec. 62. A warranty is either expressed or implied.
Sec. 63. A warranty may relate to the past, the
present, the future, or to any or all of these.
Sec. 64. No particular form of words is necessary
to create a warranty.
Sec. 65. 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. 66. A statement in a policy, of a matter
relating to the person or thing insured, or to the risk, as a fact, is
an express warranty thereof.
Sec. 67. A statement in a policy, which imports
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. 68. 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. 69. 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. 70. 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. 71. 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.
Premium
Sec. 72. An insurer is entitled to payment of the
premium soon, as the thing insured is exposed to the peril insured
against.
Sec. 73. A person insured is entitled to a return
of premium,
(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. 74. 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. 75. A person insured is entitled to a return
of the premium when the contract is voidable, on account of the 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. 76. 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,
Loss
Sec. 77. 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 of which the peril insured against was
only a remote cause.
Sec. 78. 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. 79. Where a peril is specially 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. 80. 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 his agents
or others.
Notice of Loss
Sec. 81. In case of loss upon an insurance against
fire, an insurer is exonerated, if notice thereof be not given to him
by some person insured, or entitled to the benefit of the insurance,
without unnecessary delay.
Sec. 82. When 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. 83. 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. 84. Delay in the presentation to an insurer
of notice or proof of loss is waived, if caused by any act of his, or
if he omits to take objection promptly and specifically upon that
ground.
Sec. 85. If a 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 a
reasonable diligence to procure it, and in case of the refusal of such
person to give it, then 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.
Double Insurance
Sec. 86. A double insurance exists where the same
person is insured by several insurers separately in respect to the same
subject and interest.
Sec. 87. 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 claim 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 other policy;
(d) Where the insured receives any sum in excess of
the valuation in the case of valued policies and 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.
Reinsurance
Sec. 88. 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. 89. Where an insurer obtains reinsurance, 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. 90. A reinsurance is presumed to be a
contract of indemnity against liability, and not merely against damage.
Sec. 91. The original insured has no interest in a
contract of reinsurance.
CHAPTER II
Marine insurance
Definition of Marine Insurance
Sec. 92. Marine insurance is an insurance against
risks connected with navigation, to which a ship, cargo, freightage,
profits, or other insurable interest in movable property, may be
exposed during a certain voyage or a fixed period of time.
Insurable Interest
Sec. 93. 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 of the loss
which the insured cannot recover from the charterer.
Sec. 94. The insurable interest of the owner of a
ship hypothecated by bottomry is only the excess of its value over the
amount secured by bottomry.
Sec. 95. Freightage, in the sense of a policy of
marine insurances signifies all the benefit 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. 96. 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. 97. The interest mentioned in the last
section exists, in the case of a charter party, when the ship has
broken ground on the chartered voyage, and if a price is to be paid for
the carriage of goods 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. 98. One who has an interest in the thing from
which profits are expected to proceed, has an insurable interest in the
profits.
Sec. 99. The charterer of a ship has an insurable
interest in it, to the extent that he is liable to be damnified by its
loss.
Concealment
Sec. 100. In marine insurance each party is bound
to communicate, an addition to what is required by section
twenty-seven, all the information which he possesses, material to the
risk, except such as is mentioned in section twenty-nine, 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. 101. In marine insurance, information of the
belief or expectation of a third person, in reference to a material
fact, is material.
Sec. 102. A person insured by a contract of marine
insurance is presumed to have had knowledge, at the time of insuring,
of a prior loss, of the information might possibly have reached him in
the usual mode of transmission, and at the usual rate of communication.
Sec. 103. 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; and
(e) The use of false and simulated papers.
Representations
Sec. 104. 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. 105. The eventual falsity of a representation
as to expectation does not, in the absence of fraud, avoid a contract
of insurance.
Implied Warranties
Sec. 106. In every marine insurance upon a ship or
freight, or freightage, or upon anything which is the subject of marine
insurance, a warranty is implied that the ship is seaworthy.
Sec. 107. A ship is seaworthy, when reasonably fit
to perform the services, and to encounter the ordinary perils of the
voyage, contemplated by the parties to the policy.
Sec. 108. An implied warranty of seaworthiness is
complied with if the ship be seaworthy at the time of the 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 she may undertake during
that time; and
(b) When the insurance is upon the cargo, which, by
the terms of the policy, or the description of the voyage, or the
established custom of the trade, is to be transshipped at an
intermediate port, the implied warranty is not complied with, unless
each vessel upon which the cargo is shipped, or transshipped, be
seaworthy at the commencement of its particular voyage.
Sec. 109. 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 ballast, cables, and anchors,
cordage and sails, food, water, fuel, and lights, and other necessary
or proper stores and implements for the voyage.
Sec. 110. 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. 111. When a ship becomes unseaworthy during
the voyage to which an insurance relates, an unreasonable delay in
repairing the defect exonerates the insurer from liability from any
loss arising therefrom.
Sec. 112. 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
insurance upon the cargo.
Sec. 113. 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.
The Voyage and Deviation
Sec. 114. When the voyage contemplated by a policy
is described by the places of beginning and ending, the voyage insured
is one which conforms to the course of sailing fixed by mercantile
usage between those places.
Sec. 115. If the course of sailing is not fixed by
mercantile usage, the voyage insured by a policy is the way between the
places specified which, to a master of ordinary skill and discretion,
would seem the most natural, direct, and advantageous.
Sec. 116. 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. 117. 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 insured against or not;
(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. 118. Every deviation not specified in the
last section is improper.
Sec. 119. An insurer is not liable for any loss
happening to a thing insured subsequently to an improper deviation.
Loss
Sec. 120. A loss may be either total or partial.
Sec. 121. Every loss which is not total is partial.
Sec. 122. A total loss may be either actual or
constructive.
Sec. 123. An actual total loss is caused by:
(a) A total destruction of the thing insured;
(b) The 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 purposes for which he held it; or
(d) Any other event which entirely deprives the owner
of the possession, at the port of destination, of the thing insured.
Sec. 124. A constructive total loss is one which
gives to a person insured a right to abandon, under section one hundred
and thirty-two.
Sec. 125. An actual loss may be presumed from the
continued absence of a ship without being heard of; and the length of
time which is sufficient to raise this presumption depends on the
circumstances of the case.
Sec. 126. When a ship is prevented, at an
intermediate port, from completing the voyage, by the perils insured
against, the master must make every exertion to procure, in the same or
a contiguous port, another ship, for the purpose of conveying the cargo
to its destination; and the liability of a marine insurer thereon
continues after they are thus reshipped.
Sec. 127. 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.
Sec. 128. Upon an actual total loss, a person
insured is entitled to payment without notice of abandonment.
Sec. 129. Where it has been agreed that an
insurance upon a particular thing, or a class of things, shall be free
from particular average, loss not depriving the insured of the
possession, at the port destination, of the whole of such thing, or
class of things, even though it becomes entirely worthless; but he is
liable for his proportion of all general average loss assessed upon the
thing insured.
Sec. 130. An insurance confined in terms to an
actual total 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.
Abandonment
Sec. 131. Abandonment is the act by which, after a
constructive total loss, a person insured by contract of marine
insurance declares to the insurer that he relinquishes to him his
interest in the thing insured.
Sec. 132. 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, being a ship, the
contemplated voyage cannot be lawfully performed without incurring an
expense to the insured of more than three-fourths the value of the
thing abandoned, or without incurring a risk which a prudent man would
not take under the circumstances; or
(d) If the thing insured, being cargo or freightage,
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. But freightage
cannot in any case be abandoned, unless the ship is also abandoned.
Sec. 133. An abandonment must be neither partial
nor conditional.
Sec. 134. And 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. 135. 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. 136. Abandonment is made by giving notice
thereof to the insurer, which may be done orally, or in writing.
Sec. 137. 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. 138. An abandonment can be sustained only
upon the cause specified in the notice thereof.
Sec. 139. 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. 140. 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. 141. 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. 142. 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. 143. The acceptance of an abandonment may be
either express or implied from the conduct of the insurer. The mere
silence of the insurer after notice is not to be construed as an
acceptance.
Sec. 144. 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. 145. An abandonment once made and accepted is
irrevocable, unless the ground upon which it was made proves to be
unfounded.
Sec. 146. 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. 147. If an insurer refuses to accept a valid
abandonment, he is liable as upon an actual total loss, deducting from
the amount any proceeds of the thing insured which may have come to the
hands of the insured.
Sec. 148. If a person insured omits to abandon, he
may nevertheless recover his actual loss.
Measure of Indemnity
Sec. 149. A valuation in a policy of marine
insurance is 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. 150. 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. 151. 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. 152. In case of a valued policy of marine
insurance on freightage or cargo, if a part only of the subject is
exposed to risk the valuation applies only in proportion to such part.
Sec. 153. 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 were expected to arise,
and the valuation fixes their amount.
Sec. 154. 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 cargo is its actual cost to the
insured, when laden on board, or where that 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 losses incurred in raising money for its purchase, or to any
drawback on its exportation, or to the fluctuations 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. 155. 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. 156. 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. 157. 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.
Sec. 158. 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 contribution, nor when the
insured, having the right and opportunity to enforce contribution from
others, has neglected or waived the exercise of that right.
Sec. 159. In the case of a partial loss of a ship
or its equipment, the old materials are to be applied towards payment
for the new, and unless other conditions are stipulated in the policy,
a marine insurer is liable for the remaining cost of repairs, less
deductions from such cost to be made in accordance with the following
rules:
1. In the case of iron or steel ships, from date of
original register to the date of accident:
(a) Up to one year old. — All repairs to be allowed
in full, except painting or coating of bottom, from which one-third is
to be deducted.
(b) Between one and three years. — One-third to be
deducted off repairs to and renewal of woodwork of hull, masts, and
spars, furniture, upholstery, crockery, metal and glassware, also
sails, rigging, ropes, sheets, and hawsers (other than wire and chain),
awnings, covers and painting.
One-sixth to be deducted off wire rigging, wire ropes, and wire
hawsers, chain cables and chains, donkey engines, steam winches and
connections, steam cranes and connections; other repairs in full.
(c) Between three and six years. — Deductions as
above under clause (b), except that one-sixth be deducted off ironwork
of masts and spars and machinery (inclusive of boilers and their
mountings).
(d) Between six and ten years. — Deductions as above
under clause (c), except that one-third be deducted off ironwork of
masts and spars, repairs to and renewal of all machinery (inclusive of
boilers and their mountings), and all hawsers, ropes, sheets, and
rigging.
(e) Between ten and fifteen years. — One-third to be
deducted off all repairs and renewals, except ironwork of hull and
cementing and chain cables, from which one-sixth to be deducted.
Anchors to be allowed in full.
(f) Over fifteen years. — One-third to be deducted
off all repairs and renewals. Anchors to be allowed in full. One-sixth
to be deducted off chain cables.
(g) Generally. — The deductions (except as to
provisions and stores, machinery, and boilers) to be regulated by the
age of the ship, and not the age of the particular part of her to which
they apply. No painting bottom to be allowed if the bottom has not been
painted within six months previous to the date of accident. No
deduction to be made in respect of old material which is repaired
without being replaced by new, and provisions and stores which have not
been in use.
2. In the case of wooden or composite ships:
When a ship is under one year old from date of original register at the
time of accident no deduction new for old shall be made. After that
period a deduction of one third shall be made, with the following
exceptions:
Anchors shall be allowed in full. Chain cables shall be subject to a
deduction of one-sixth only.
No deduction shall be made in respect of provisions and stores which
had not been in use.
Metal sheathing shall be dealt with by allowing in full the cost of a
weight equal to the gross weight of metal sheathing stripped off, minus
the proceeds of the old metal. Nails, felt, and labor metalling are
subject to a deduction of one-third.
CHAPTER III
Fire Insurance
Sec. 160. 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 risk, entitles an insurer to rescind a
contract of fire insurance.
Sec. 161. 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. 162. 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 a loss.
Sec. 163. 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 it was at
the time of the injury; but the effect of a valuation in a policy of
fire insurance is the same as in a policy of marine insurance.
Sec. 164. 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 the insurer and the value of the insured's interest therein shall be
thereupon fixed by the parties. 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 buildings or structures wholly or
partially damaged or destroyed.
CHAPTER IV
Life and Health Insurance
Sec. 165. 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 the purposes of this
Act.
Sec. 166. 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. 167. 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. 168. 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 V
Insurance Companies
Sec. 169. In addition to the duties now imposed
upon him by law, the Insular Treasurer shall act as Insurance
Commissioner and in addition to his present official title he shall
hereafter be designated as Insurance Commissioner ex officio.
Sec. 170. For the purposes of this chapter unless
the context otherwise requires the terms "company" or "insurance
company" shall include all corporations, associations, partnerships, or
individuals engaged as principals in the insurance business, excepting
fraternal and benevolent orders and societies. "Domestic companies"
shall include companies formed, organized or existing under the laws of
the Philippine Islands. "Foreign companies" when used without
limitation shall include companies formed, organized, or existing under
any laws other than those of the Philippine Islands.
Sec. 171. It shall be the duty of the Insurance
Commissioner to see that all laws relating to insurance and insurance
companies are faith fully executed and perform the duties imposed upon
him by this Act.
He may issue such rulings, instructions, and orders as he may deem
necessary to secure the enforcement of the provisions of this Act,
subject to the approval of the Secretary of Finance and
Justice.
Sec. 172. After the becoming effective of this
Act, no foreign or domestic insurance company shall transact any new
business in the Philippine Islands until after it shall have obtained a
certificate of authority for that purpose from the Insurance
Commissioner. No such certificate of authority shall be granted to any
such company until the Insurance 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 Philippine
Islands to transact business herein. Said 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 all of the
provisions of this chapter. Before issuing such certificate of
authority, the Insurance Commissioner must be satisfied that the name
of the company is not that of any other known company transacting a
similar business, or a name so similar as to be calculated to mislead
the public. Every company receiving any such certificate of authority
shall be subject to the insurance laws of the Philippine Islands and to
the jurisdiction and supervision of the Insurance Commissioner. An
appeal may be taken from any decision of the Insurance Commissioner,
refusing to grant such certificate of authority to the Secretary of
Finance and Justice whose decision shall be final.
Sec. 173. The Insurance Commissioner shall require
each insurance company to keep its books, records, accounts, and
vouchers in such manner that he or his authorized representatives may
readily verify its annual statement and ascertain whether the company
is solvent and has complied with the provisions of this chapter.
Sec. 174. The Insurance Commissioner shall at
least once a year and whenever he considers the public interest so
demands, cause an examination to be made into the financial condition
of every domestic insurance company. Such company 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
corporation under oath touching its business and financial condition,
and the authority of any such company to transact business in the
Philippine Islands that refuses to allow such examination, shall be
revoked by the Insurance Commissioner, and such company shall not
thereafter be allowed to transact further business in the Philippine
Islands until it has fully complied with the provisions of this section.
Sec. 175. If the Insurance Commissioner is of the
opinion upon examination or other evidence that any foreign or domestic
insurance company is in an unsound condition, or that it has failed to
comply with any provision of law obligatory upon it, or that its
condition is such as to render its proceedings hazardous to the public
or to its policy holders or that its actual assets exclusive of its
capital are less than its liabilities, including unearned premiums and
reinsurance reserve, the Insurance Commissioner is authorized, subject
to appeal to the Secretary of Finance and Justice, to revoke or suspend
all certificates of authority granted to such insurance company, its
officers or agents, and no new business shall thereafter be done by
such company or for such company by its agents in the Philippine
Islands while such revocation, suspension or disability continues or
until its authority to do business is restored by the Insurance
Commissioner.
The decision of the Secretary of Finance and Justice in all such cases
shall be final.
Sec. 176. The Insurance Commissioner must cause
every company, before engaging in the business of insurance, to file in
his office as follows:
(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 Philippine
Islands, a copy of the articles of incorporation and by-laws and any
amendments to either, certified by the chief of the division of
archives, patents, copyrights, and trademarks to be a copy of that
which is filed in his office.
(c) If incorporated under any laws other than those
of the Philippine Islands, 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
Act.
(d) If not incorporated, a certificate setting forth
the nature and character of the business, the location of the principal
office, the names of the persons and of those composing the company,
firm, 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 or company, a copy thereof must accompany
such certificate.
Sec. 177. The Insurance Commissioner must require
as a condition precedent to the transaction of insurance business in
the Philippine Islands 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 Philippine Islands, on whom any
notice provided by law or by any insurance policy, proof of loss,
summons, and other process may be served in all actions or other legal
proceedings against such company, and consenting that service upon such
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 a
further condition precedent to the transaction of insurance business in
the Philippine Islands, make and file with the Insurance Commissioner
an agreement or stipulation, executed by the proper authorities of said
company in form and substance as follow:
"The (name of company) does hereby stipulate and agree in consideration
of the permission granted by the Insurance Commissioner to it to
transact business in the Philippine Islands, that if at any time said
company shall leave the Philippine Islands, or cease to transact
business therein, or shall be without an agent in the Philippine
Islands on whom any notice, proof of loss, summons, or other legal
process may be served, then in any action or proceeding arising out of
any business or transactions which occurred in the Philippine Islands,
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, and that such service upon the 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 Insurance Commissioner, he must, within ten days
thereafter, transmit by mail, postage paid, a copy of such notice,
proofs of loss, summons, or either 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. 178. No foreign insurance company shall
engage in business in the Philippine Islands unless possessed of paid
up unimpaired capital (or assets) and reserve not less than that herein
required of domestic insurance companies; and no insurance company
organized or existing under the government or laws other than those of
the Philippine Islands or any state of the United States shall engage
in business in the Philippine Islands until it shall have deposited
with the Insurance Commissioner for the benefit and security of its
policy holders and creditors in the Philippine Islands securities,
satisfactory to the Insurance Commissioner consisting of bonds of the
United States or of the Philippine Islands or of the city of Manila or
of municipalities in the Philippine Islands authorized by law to issue
bonds, or of the government in which such company is organized, or
other good securities to the actual market value of one hundred
thousand pesos:
Provided, That if a company organized or existing under the laws of any
government outside of the United States and the Philippine Islands
shall have made a deposit with the insurance department of some one of
the States of the United States of securities of the character above
described to the actual market value of at least four hundred thousand
pesos, in exclusive trust for the benefit and security of all the
company's policy holders and creditors in the United States and its
possessions, each deposit shall be held to be in lieu of the deposit
required by this
And Provided, Further, That it shall be a sufficient compliance with
the provisions of this section if the deposit herein required be made
with the Chief of the Bureau of Insular Affairs of the War Department
at Washington or with a safe deposit company designated by that
officer, which company shall agree to hold the securities so deposited
subject to the control of the Chief of the Bureau of Insular Affairs as
the representative of the insurance commissioner of the Philippine
Islands.
Sec. 179. The Insurance Commissioner shall hold
the securities deposited as aforesaid, for the benefit and security of
all the policy holders of the company depositing the same, but shall,
so long as the company shall continue 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
Philippine Islands the securities deposited as aforesaid shall be
returned upon the company's making application therefor and proving to
the satisfaction of the Insurance Commissioner that it has no further
liability under any of its policies in the Philippine Islands.
Sec. 180. Every insurance company, doing business
in the Philippine Islands, shall annually on or before the thirtieth
day of April, of each year, render to the Insurance Commissioner a
statement signed and sworn to by the chief officer of such company
showing, in such form and detail as may be prescribed by the Insurance
Commissioner, the exact condition of its affairs on the preceding
thirty-first day of December. Provided, That in case the fiscal year of
an insurance company does not terminate with the thirty-first day of
December, it shall be deemed a sufficient compliance with this section
if the report is made to coincide with the regular fiscal year of the
company. In such case the report of the company shall be filed with the
Insurance Commissioner within four months after the close of its fiscal
year. And Provided, Further, That the Insurance Commissioner may in his
discretion, and upon approval of the Secretary of Finance and Justice,
grant an extension of not exceeding three months, to any company, upon
his being satisfied that the period of four months granted by this
section is inadequate with regard to said company.
Sec. 181. Immediately upon approval of the annual
statements by the Insurance Commissioner, every insurance company doing
business in the Philippine Islands shall publish in two papers of
general circulation in the city of Manila, one published in English and
one in the Spanish language, a full synopsis of its annual financial
statement showing fully the condition of its business, and setting
forth its resources and liabilities.
Sec. 182. Every life insurance company, doing
business in the Philippine Islands, 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 premium
basis, according to the standard adopted by the company, which standard
shall be stated in its annual report.
Such standard of valuation, whether on the net level premium,
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 less than three nor more than six per cent
compound interest. When the preliminary term basis is used the term
insurance shall be limited to the first policy year.
The results of such valuation shall be reported to the Insurance
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 results obtained: Provided, That in case the fiscal
year of a life insurance company does not terminate with the
thirty-first day of December, it shall be deemed a sufficient
compliance with this section if the valuation herein required is made
to coincide with the regular fiscal year of the company. In such case
the result of such valuation shall be reported to the Insurance
Commissioner within four months after the close of its fiscal year: And
Provided Further, That the Insurance Commissioner may in his
discretion, and upon approval of the Secretary of Finance and Justice,
grant an extension of not exceeding three months, to any company, upon
his being satisfied that the period of four months granted by this
section is inadequate with regard to said company.
Sec. 183. The aggregate net value of the policies
of such company so ascertained 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 Insurance 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.
Sec. 184. Hereafter no policy of life or endowment
insurance shall be issued or delivered within the Philippine Islands
unless it shall contain in substance the following provisions:
(a) A provision that the insured is entitled to a
grace either of thirty days or of one month within which the payment of
any premium after the first year may be made, subject at the option of
the company to any 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 or the deferred premiums of
the current policy year if any are paid, the amount of such premiums,
with interest on any overdue premium, may be deducted from any amount
payable under the policy in settlement.
(b) A provision that the policy shall, in the absence
of fraud, be incontestable after five years from its date of issue
except for nonpayment of premiums 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 therefor shall constitute the entire
contract between the parties.
(d) A provision that if 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) A provision that the policy shall participate in
the surplus of the company.
(f) A provision specifying the options to which the
policy-holder is entitled in the event of default in a premium payment
after three full annual premiums shall have been paid.
(g) A provision that after three full years' premiums
have been paid, the company at any time, while the policy is in force,
will advance, on proper assignment or pledge of the policy and on the
sole security thereof, at a specified rate of interest, a sum equal to,
or at the option of the owner of the policy less than, the reserve at
the end of the current policy year on the policy and on any dividend
additions thereto, less a sum not more than two and one-half per centum
of the amount insured by the policy and of any dividend additions
thereto; 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 therefor is made. A company
may, in lieu of the provision hereinabove permitted for the deduction
from a loan on the policy of a sum not more than two and one-half per
centum of the amount insured by the policy and of any dividend
additions thereto, insert in the policy a provision that one-fifth of
the entire reserve may be deducted in case of a loan under the policy,
or may provide therein that the deduction may be the said two and
one-half per centum or the one-fifth of the said entire reserve at the
option of the company.
(h) A table showing in figures the loan values, if
any, and the options available under the policy each year upon default
in premium payments, during at least the first twenty years of the
policy.
(i) In case the proceeds of a policy are payable in
installments or as an annuity, a table showing the amounts of the
installments or annuity payments.
(j) A provision that the holder of a policy shall be
entitled to have the policy reinstated at any time within three years
from the date of default unless the cash value has been duly paid, or
the extension period expired, upon the production of evidence of
insurability satisfactory to the company and the payment of all overdue
premiums and any other indebtedness to the company upon said policy
with interest at a rate which shall be stipulated in the policy and not
exceeding ten per centum per annum, payable annually.
Any of the foregoing provisions or portions thereof not applicable to
single premium or non participating or term policies shall to that
extent not be incorporated therein; and any such policy may be issued
or delivered in the Philippine Islands which in the opinion of the
insurance commissioner contains provisions on any one or more of the
several foregoing requirements more favorable to the policy holder than
hereinbefore required. The provisions of this section shall not apply
to policies of reinsurance.
Sec. 185. Every domestic life insurance company,
conducted on the mutual plan or a plan in which policy holders 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 a 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 of such fund, as a distinct and separate liabilities of 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. 186. To determine the liability upon the
contracts of insurance of any foreign or domestic insurance company,
other than life, the Insurance Commissioner shall require such
companies to charge as the liabilities for reinsurance of its
outstanding policies, in addition to the capital stock and all
outstanding claims, a sum equal to fifty per cent of the gross premiums
received on policies or risks having not more than a year to run, and
pro rata on all gross premiums received having more than a year to run:
Provided, That for marine risks the insuring company shall be required
to charge as the liability for reinsurance fifty per centum of the
premiums written in the policies upon yearly risks, and the full amount
of the premiums written in the policies upon all other marine risks not
terminated.
Sec. 187. No fire or marine insurance corporation
whether foreign or domestic shall insure on any one risk or hazard to
an amount exceeding ten per cent of its net assets unless it has
provided for reinsurance of the excess over said limit to take effect
simultaneously with the original contract.
Sec. 188. 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 in so far as it may affect other creditors of the
insured.
Agents
Sec. 189. No insurance company doing business
within the Philippine Islands, nor any agent thereof, shall pay any
commission or other compensation to any person for services in
obtaining new insurance unless such person shall have first procured
from the Insurance Commissioner a certificate of authority to act as an
agent of such company hereinafter provided. No person shall act as
agent, subagent, or broker, in the solicitation or procurement of
applications for insurance, or receive for services in obtaining new
insurance any commission or other compensation from any insurance
company doing business in the Philippine Islands, or agent thereof,
without first procuring a certificate of authority so to act from the
Insurance Commissioner, which must be renewed annually on the first day
of January, or within six months thereafter. Such certificate shall be
issued by the Insurance Commissioner only upon the written application
of persons desiring such authority such application being approved and
countersigned by the company such person desires to represent, and
shall be upon a form approved by the Insurance Commissioner, giving
such information as he many require. The Insurance Commissioner shall
have the right to refuse to issue or renew and to revoke any such
certificate in his discretion. No such certificate shall be valid,
however, in any event after the first day of July of the year following
the issuing of such certificate. Renewal certificates may be issued
upon the application of the company.
Any person or company violating the provisions of this section shall be
fined in the sum of five hundred pesos. On the conviction of any person
acting as agent, subagent, or broker, of the commission of any offense
connected with the business of insurance, the Insurance Commissioner
shall immediately revoke the certificate of authority issued to him and
no such certificate shall thereafter be issued to such convicted person.
Sec. 190. No insurance company, engaged in
business in the Philippine Islands, or any agent thereof, shall make
any contract of insurance, or agreement as to policy contract, other
than is plainly expressed in the policy issued thereon; nor shall any
such company or agent, pay or allow, or offer to pay or allow, as
inducement to insurance, any rebate of premiums payable on the policy,
nor shall any particular policy holder of the same class be allowed any
advantage in the dividends or other benefits to accrue thereon, or any
valuable consideration or inducement whatever not specified in the
policy contract of insurance.
Sec. 191. No agent, subagent, broker, or other
person, representing any insurance company doing business in the
Philippine Islands shall in any way, directly or indirect-divide or
offer to divide his commission or other remuneration, or give or offer
to give any part of his commission or other remuneration, or any other
consideration as an inducement to insurance; nor shall any such company
or any agent thereof, as to any new policies of insurance hereafter
issued, make any discrimination against any citizen of the Philippine
Islands whereby such citizen of the Philippine Islands is given less
advantageous rates, dividends or other policy conditions or privileges
than are accorded to Cauns because of his race. Whoever violates this
or the preceding section shall be fined in the sum of two hundred pesos
for each such offense and upon conviction the certificate of authority
of the company, agent, subagent, or broker as the case may be shall be
revoked by the Insurance Commissioner.
Sec. 192. It shall be unlawful for any person,
company or corporation in the Philippine Islands either to procure,
receive, or forward applications for insurance in or to issue or to
deliver or accept policies of or for any company or companies not
having been legally authorized to transact business in the Philippine
Islands, as provided in this chapter; and any such person, company or
corporation violating the provisions of this section shall be deemed
guilty of a penal offense, and, upon conviction thereof, shall for each
such offense, be punished by a fine of two hundred pesos, or
imprisonment for two months, or both in the discretion of the court;
Provided, That insurance companies not authorized to transact business
in the Philippine Islands may be placed upon terms and conditions as
follows:
The Insurance Commissioner may issue a certificate of authority to any
regularly authorized fire or marine insurance agent of the Philippine
Islands, subject to revocation at any time, permitting the person named
therein to procure policies of insurance on risks located in the
Philippine Islands for companies not authorized to transact business in
the Philippine Islands.
Before the agent named in such certificate of authority shall procure
any insurance in such company there shall be executed and filed in each
case with the Insurance Commissioner by the agent and by the party
desiring the insurance affidavits setting forth that the party desiring
insurance is after diligent effort unable to procure, in any of the
companies authorized to do business in the Philippine Islands, the
amount of insurance necessary.
Every such agent shall keep a separate account of the business done
under the authority of this section, open at all times to the
inspection of any authorized Government officer; showing the exact
amount and character of such insurance placed for any person, firm or
corporation, the gross premium charged thereon, the companies with
which the same is placed, the dates of the policies, the terms thereof,
and the location of the insured property.
Such agent shall likewise make a yearly report to the Collector of
Internal Revenue at the time and in the manner prescribed in section
eighty-one of Act Numbered Twenty-three hundred and thirty-nine,
showing the entire amount of all premiums received by the company he
represents under the authority of this section. And such agent shall
pay to the Collector of Internal Revenue a tax equal to twice the tax
imposed by section seventy-nine of Act Numbered Twenty-three hundred
and thirty-nine, which tax shall be paid at the same time and be
subject to the same penalty for delinquency as the tax imposed by said
Act Numbered Twenty-three hundred and thirty-nine: Provided, However,
That the provisions of this section shall not apply to reinsurance.
Insurance Corporations
Sec. 193. The provisions of Act Numbered Fourteen
hundred and fifty-nine, known as "The Corporation Law" and its
amendments, shall apply to all incorporated insurance companies now or
hereafter engaged in business in the Philippine Islands in so far as
they do not conflict with the provisions of this chapter.
Sec. 194. Corporations formed or organized to save
any person or persons or other corporation 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
corporation for any such loss, damage, or liability, or to guarantee
the contractual obligations or debts of others, shall be known as
insurance corporations for the purposes of this chapter.
Domestic Insurance Corporations
Sec. 195. Every insurance corporation hereafter
formed or organized under the laws of the Philippine Islands shall, if
a stock corporation, have a subscribed capital stock equal to at least
two hundred and fifty thousand pesos, fifty per centum of which must be
paid up in cash previous to the issuance of any policy, and the residue
within twelve months from the date of filing its articles of
incorporation. For failure to have its capital stock paid up within the
time prescribed the corporation shall not be permitted to take any new
risks of any kind or character. If organized as a mutual company, in
lieu of such capital stock, it must have available cash assets of at
least two hundred and fifty thousand pesos above all liabilities for
losses reported, expenses, taxes, legal reserve, and reinsurance of all
outstanding risks.
Any officer, official, or director of the corporation taking or
authorizing the taking of any risk for the corporation in violation of
the terms of this section shall be punished by imprisonment for not
less than one year nor more than five years and by a fine of not less
than one thousand nor more than five thousand pesos.
Sec. 196. No domestic insurance corporation shall
adopt the name of any existing company transacting a similar business
or any name so similar as to be calculated to mislead the public.
Sec. 197. No insurance corporation shall loan any
of its money or deposits except upon first mortgages or deeds of trust
of unencumbered improved real estate, in cities and centers of
population of municipalities in the Philippine Islands when the amount
of such loan is not in excess of sixty per centum of the 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 Philippine Islands when the amount of such loans is not in excess
of forty per centum of the value of such land, or upon bonds or other
evidence of debt of the Government of the United States, or of the
Philippine Islands, or of the city of Manila, or of municipalities in
the Philippine Islands authorized by law to issue bonds, or such other
securities, deposited as collateral, as may be approved by the
Insurance Commissioner: Provided However, That a life insurance
corporation may loan its money upon the security of a policy to an
amount not exceeding the net reserve value of the policy at the time
said loan is made.
Sec. 198. No loan by any insurance corporation 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 Land
Registration Act, or shall be a titulo real duly registered, or have
been previously registered under the provisions of the Mortgage Law;
that is, under the system of registration established by the laws in
force on the date of the passage of Act Numbered Four hundred and
ninety-six, entitled "The Land Registration Act."
Sec. 199. It shall be the duty of the officers of
the corporation to report quarterly on the first days of January,
April, July and October of each year to the Insurance Commissioner a
list of such investments as may be made by them, and the Insurance
Commissioner may, if such investments, or any of them, seem injudicious
to him, require the sale of the same.
Sec. 200. Insurance corporations may purchase,
hold, own and convey real and personal property as follows.
(a) The lot with the building thereon in which the
corporation conducts and carries on its business.
(b) 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 corporation, 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 corporation to them:
Provided, However, That any real estate purchased by said corporation
in payment or by reason of any loan made by said corporation shall be
sold by the corporation within five years after the title thereto has
been vested in it.
(c) Bonds and other evidences of debt of the
Government of the United States or of the Philippine Islands or of the
city of Manila or of any municipality in the Philippine Islands
authorized by law to issue bonds at the reasonable market value
thereof, and such other securities as may be approved by the Insurance
Commissioner.
Sec. 201. No insurance corporation shall declare
any dividend except from profits remaining on hand after retaining
unimpaired:
(a) The entire paid up capital stock.
(b) In the case of life insurance corporations the
legal reserve fund required by section one hundred and eighty-three of
this Act.
(c) In the case of corporations other than life the
legal reserve fund required by section one hundred and eighty-six of
this Act.
(d) A sum sufficient to pay all losses reported, or
in the course of settlement, and all liabilities for expenses and taxes.
Conduct of Insurance Business by
Persons Not Incorporated
Sec. 202. No person, partnership, or association
of persons shall engage in the business of insurance in the Philippine
Islands except as agent of a person or corporation authorized to do the
business of insurance in the Philippine Islands, unless possessed of
the capital and assets required of an insurance corporation doing the
same kind of business in the Philippine Islands and invested in the
same manner; nor unless the Insurance 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 Philippine Islands is required to observe.
Every person, partnership, or association receiving any such
certificate of authority shall be subject to the insurance laws of the
Philippine Islands and to the jurisdiction and supervision of the
Insurance Commissioner in the same manner as if an insurance
corporation authorized by the laws of the Philippine Islands to engage
in the business of insurance specified in the certificate.
General Penalty
Sec. 203. Any person who knowingly violates any
provision of this chapter for which no penalty is provided, shall upon
conviction punished by a fine not exceeding five hundred pesos or by
imprisonment not exceeding five months or by both such fine and
imprisonment in the discretion of the court.
CHAPTER VI
Final Provision
Sec. 204. The provisions of sections one hundred
and forty-seven to one hundred and fifty-three, inclusive, of Act
Numbered Fourteen hundred and fifty-nine; Title Eight of Book Two;
Section Third of Title Three, Book Three of the Code of Commerce; and
all laws or parts of laws in conflict or inconsistent with this Act,
are hereby repealed.
Sec. 205. This Act shall be in effect on and after
the first day of July, nineteen hundred and fifteen.
ENACTED, December 11, 1914.
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