INSURANCE
CODE
OF
THE PHILIPPINES
Full Text
This web page
contains
the full text of
Presidential
Decree No. 612
December
18, 1974
THE
INSURANCE CODE OF THE PHILIPPINES
PRESIDENTIAL DECREE NO.
612 December
18, 1974
ORDAINING
AND INSTITUTING AN INSURANCE CODE OF THE PHILIPPINES
I, Ferdinand E. Marcos, President of the Philippines, by virtue of the
powers in me vested by the Constitution, do hereby decree and order the
following:chanroblesvirtuallawlibrary
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:chanroblesvirtuallawlibrary
(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:chanroblesvirtuallawlibrary
(a) making
or proposing to make, as insurer, any insurance contract;
(b) making
or
proposing to make, as surety, any contract of suretyship as a vocation
and not as merely incidental to any other legitimate business or
activity
of the surety;
(c) doing
any
kind of business, including a reinsurance business, specifically
recognized
as constituting the doing of an insurance business within the meaning
of
this Code;
(d) doing
or
proposing to do any business in substance equivalent to any of the
foregoing
in a manner designed to evade the provisions of this Code.
In the application
of the provisions of this Code the fact that no profit is derived from
the making of insurance contracts, agreements or transactions or that
no
separate or direct consideration is received therefor, shall not be
deemed
conclusive to show that the making thereof does not constitute the
doing
or transacting of an insurance business.
(3) As used
in this code, the term "Commissioner" means the "Insurance
Commissioner".
chanrobles virtual law library
Chapter 1
THE CONTRACT
OF INSURANCE
Title 1
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
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
Sec. 10. Every
person has an insurable interest in the life and health:chanroblesvirtuallawlibrary
(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:chanroblesvirtuallawlibrary
(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
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:chanroblesvirtuallawlibrary
(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
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 by Batasang 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
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:chanroblesvirtuallawlibrary
(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 therefor.
chanrobles
virtual law library
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:chanroblesvirtuallawlibrary
(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
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
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:chanroblesvirtuallawlibrary
(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
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
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
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:chanroblesvirtuallawlibrary
(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
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
Title I
MARINE INSURANCE
Sub-Title 1-
A
DEFINITION
Sec. 99. Marine
Insurance includes:chanroblesvirtuallawlibrary
(1) Insurance
against loss of or damage to:chanroblesvirtuallawlibrary
(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
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
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:chanroblesvirtuallawlibrary
(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
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
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:chanroblesvirtuallawlibrary
(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 or shipowner'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
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:chanroblesvirtuallawlibrary
(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
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:chanroblesvirtuallawlibrary
(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.
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.
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
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:chanroblesvirtuallawlibrary
(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
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:chanroblesvirtuallawlibrary
(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
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.
chanrobles
virtual law library
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
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, plate glassinsurance,
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
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.
chanrobles virtual law library
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 of
suretyship.
Title 5
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
Title 1
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 therefor 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, That the 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.
chanrobles
virtual law library
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 therefor, 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:chanroblesvirtuallawlibrary
(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:chanroblesvirtuallawlibrary
"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 therefor 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
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:chanroblesvirtuallawlibrary
(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
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:chanroblesvirtuallawlibrary
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:chanroblesvirtuallawlibrary
(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:chanroblesvirtuallawlibrary
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
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:chanroblesvirtuallawlibrary
(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:chanroblesvirtuallawlibrary
(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.
(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.
chanrobles
virtual law library
(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
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
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
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:chanroblesvirtuallawlibrary
(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
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 sypnosis of its annual financial
statement showing fully the conditions of its business, and setting
forth
its resources and liabilities.
Title 9
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:chanroblesvirtuallawlibrary
(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 therefor 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:chanroblesvirtuallawlibrary
(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
therefor
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.
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:chanroblesvirtuallawlibrary
(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:chanroblesvirtuallawlibrary
(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:chanroblesvirtuallawlibrary
(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 therefor 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:chanroblesvirtuallawlibrary
(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
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 The Investment 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 the broker, 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
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:chanroblesvirtuallawlibrary
(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
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
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
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
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
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:chanroblesvirtuallawlibrary
(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
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:chanroblesvirtuallawlibrary
(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 sharesholders;
(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.
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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:chanroblesvirtuallawlibrary
(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 authencity, 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 nonassessable 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 therefor 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.
chanrobles
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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.
Upon any such
order becoming final and from which no appeal is pending, or when the
time
to appeal therefrom has expired, each shareholder party to the
proceedings
shall transfer his shares to the insurer and surrender to the said
insurer
the certificates representing such shares and the insurer shall make
payment
therefor as provided in such order. Any shares so acquired by the
insurer
shall be assigned and transferred to the trustees and held by them as
shares
acquired pursuant to the plan.
Any shareholder
who does not apply to the Secretary of Finance in the manner and within
the time hereinbefore prescribed shall be deemed to have accepted the
offer
referred to above, effective, however, upon the expiration of the time
hereinabove prescribed for making such application, and such
shareholder's
time for accepting such offer shall, for that purpose only, be deemed
to
have been extended accordingly.
Any offer to
acquire shares made pursuant to this section shall, except as otherwise
provided herein, be irrevocable until all proceedings upon such offer
have
been completed or all shares have otherwise been earlier acquired by
the
insurer.
Any shareholder
who has expressly or impliedly accepted the plan or the offer to
acquire
his shares not theretofore acquired under the plan, and any shareholder
who has rejected such plan or such offer and has applied, as aforesaid,
to the Secretary of Finance for a determination of the fair value of
his
shares subsequent to which an agreement has been reached or a final
order
issued fixing such fair value but who fails to surrender his
certificates
for cancellation upon payment of the amount to which he is entitled,
may
be compelled to do so by an order of the Secretary of Finance for that
purpose and such order may provide that upon failure of such
shareholder
to surrender such certificates for cancellation such order shall stand
in lieu of such surrender and cancellation.(As
amended by Presidential Decree No. 1280).
Sec. 270. Such
insurer, after mutualization, shall be a continuation of the original
insurer,
and such mutualization shall not affect such insurer's certificate of
authority
nor existing suits, rights or contracts except as provided in said plan
for the acquisition of the outstanding shares of the capital stock of
such
insurer, approved as provided in this chapter. Such insurer, after
mutualization,
shall exercise all the rights and powers and shall perform all the
duties
conferred or imposed by law upon insurers writing the classes of
insurance
written by it, and to protect rights and contracts existing prior to
mutualization,
subject to the effect of said plan. The board of directors of such
insurer,
prior to mutualization, may adopt amendments to its by-laws to take
effect
upon mutualization.
Sec. 271. (1)
An annual meeting of members shall be held at ten o'clock in the
morning
of the fourth Tuesday of March of each year at the principal office of
the insurer, unless a different time or place be provided in the
by-laws.
(2) Special
meetings of the members, for any purpose or purposes whatsoever, may be
called at any time by the president, or by the board of directors, or
by
one or more members holding not less than one-fifth of the voting power
of such insurer, or by such other officers or persons as the by-laws
authorize.
(3) Notice of
all meetings of members whether annual or special shall be given in
writing
to the members entitled to vote by the secretary, or an assistant
secretary,
or other person charged with that duty, or if there be no such officer,
or in case of his neglect or refusal, by any director or member. At the
option of the insurer such notice may be imprinted on premium notices
of
receipts or on both.
A notice may
be given by such insurer to any member either personally, or by mail,
or
other means of written communication, charges prepaid, addressed to
such
member at his address appearing on the books of the insurer, or given
by
him to the insurer for the purpose of notice. If a member gives no
address,
notice shall be deemed to have been given him if sent by mail or other
means of written communication addressed to the place where the
principal
office of the insurer is situated, or if published at least once in
some
newspaper of general circulation in the place in which said office is
located.
Notice of any
meeting of members shall be sent to each member entitled thereto not
less
than seven days before such meeting, unless the by-laws provide
otherwise.
Notice of any
meeting of members shall specify the place, the day and the hour of the
meeting and the general nature of the business to be transacted.
Notice of an
annual meeting to be held at the time and place specified in
sub-paragraph
one of this section shall be sufficiently given if published at least
once
in each of four successive weeks in a newspaper of general circulation
in the place in which the principal office of such insurer is located,
and if so published no other notice of such meeting shall be required.
(4) The presence
in person or by proxy of five per centum of the members entitled
to vote at any meeting shall constitute a quorum for the transaction of
business, unless otherwise provided by the by-laws.
(5) Each such
member shall have one vote at any meeting of members regardless of the
number of policies or the amount of insurance that such member holds
and
regardless of whether such policies are policies of life insurance, or
of health and accident insurance, or both. Any member entitled to vote
shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such person or his duly
authorized
agent and filed with the secretary of such insurer.
(6) The directors
of the insurer in office at the time the insurer is mutualized as
provided
in this chapter shall continue in office until the first annual meeting
of members. At the first annual meeting of members and at each annual
meeting
thereafter directors shall be elected by the members for the term or
terms
authorized by this chapter.
(7) The articles
of incorporation or the bay-laws may provide that the directors may be
divided into two or more classes whose terms of office shall expire at
different times, but no terms shall continue longer than six years. In
the absence of such provisions, each director, except members of the
board
of directors at the time the insurer is mutualized, shall be elected
for
a term of one year. All directors shall hold office for a term for
which
they are elected and until their successors are elected and qualified.
A director may, but need not be a member or policyholder of the insurer
of which he is acting as director. Vacancies in the board of directors
may be filled by a majority of the remaining directors, though less
than
a quorum, and each director so elected shall hold office until the next
annual meeting.
(8) All insurers
mutualized under the provisions of this chapter shall be subject to all
other applicable provisions of this Code and of the Corporation
Law.
Sec. 272. The
provisions of Commonwealth Act No. 83, otherwise known as the Securities
Act, as amended, shall not apply to any of the following:chanroblesvirtuallawlibrary
(a) Shares
of the capital stock of such insurer acquired as provided in section
two
hundred sixty-six and assigned and transferred to the trustees as is
provided
in said section, and the assignment and transfer of said shares as so
provided;
(b) Any
certificate
or other instrument issued to a policyholder of such mutualized insurer
conferring or evidencing membership in such mutualized insurer or
conferring
or evidencing such member's right to participate in the profits or
share
in the assets of such mutualized insurer by the virtue of his
membership
therein, and the issuance of such certificate or other instrument;
(c) The
plan
for the acquisition of the outstanding shares of the capital stock of
such
insurer authorized by the provisions of this chapter, the submission of
said plan to the Commissioner and to the policyholders of such insurer
as provided in this chapter, and the approval and carrying out of said
plan or any part thereof in accordance with the provisions of this
chapter.
Title 18
WITHDRAWAL
OF FOREIGN INSURANCE COMPANIES
Sec. 273. A
foreign insurance company doing business in the Philippines, upon
payment
of the fee hereinafter prescribed and surrender to the Commissioner of
its certificate of authority, may apply to withdraw from the
Philippines.
Such application shall be duly executed in writing, accompanied by
evidence
of due authority for such execution, properly acknowledged.
Sec. 274. The
Commissioner shall publish the application for withdrawal daily for a
period
of one week in two newspapers of general circulation in the City of
Manila,
one in English and the other in Pilipino. The expenses of such
publication
shall be paid by the insurance company filing such application.
Sec. 275. Every
foreign insurance company desiring to withdraw from the Philippines
shall,
prior to such withdrawal, discharge its liabilities to policyholders
and
creditors in this country. In case of its policies insuring residents
of
the Philippines, it shall cause the primary liabilities under such
policies
to be reinsured and assumed by another insurance company authorized to
transact business in the Philippines. In the case of such policies as
are
subject to cancellation by the withdrawing company, it may cancel such
policies pursuant to the terms thereof in lieu of such reinsurance and
assumption of liabilities.
Sec. 276. The
Commissioner shall make an examination of the books and records of the
withdrawing company, and if, upon such examination, the Commissioner
finds
that the insurer has no outstanding liabilities to residents of the
Philippines,
it shall cancel the withdrawing company's certificate of authority, if
unexpired, and shall permit the insurer to withdraw. The cost and
expenses
of all such examination shall be paid as prescribed in section four
hundred
seventeen.
Sec. 277. Upon
the failure of such withdrawing insurance company or its agents in the
Philippines to pay the expenses of such publication within thirty days
after the presentation of the bill therefor, the Commissioner shall
collect
such fee from the deposit furnished in accordance with the provisions
of
section one hundred ninety-one.
Sec. 278. A
foreign life insurance company that withdraws from the Philippines
shall
be considered a "servicing insurance company" if its business
transactions
are confined to accepting periodic premium payments from, or granting
policy
loans and paying cash surrender values of outstanding policies to, or
reviving
lapsed policies of, Philippine policyholders, and such other related
services.
Sec. 279. No
company shall act as a servicing insurance company until after it shall
have obtained a special certification of authority to act as such from
the Commissioner upon application therefor and payment by the company
of
the fees hereinafter prescribed. Such certificate shall expire on the
last
day of June of each year and shall be renewed annually, while the
company
continues to service its policyholders, and to comply with all the
applicable
provisions of law and regulations.
Title 19
PROFESSIONAL
REINSURERS
Sec. 280. Except
as otherwise provided in this Code, no person, partnership, association
or corporation shall transact any business in the Philippines as a
professional
reinsurer until it shall have obtained a certificate of authority for
that
purpose from the Commissioner upon the application therefor and payment
by such person, partnership, association or corporation of the fees
hereinafter
prescribed. As used in this Code, the term "professional reinsurer"
shall
mean any person, partnership, association or corporation that transacts
solely and exclusively reinsurance business in the Philippines.
The Commissioner
may refuse to issue a certificate of authority to any such person,
partnership,
association or corporation if, in his judgment, such refusal will best
promote public interest. No such certificate of authority shall be
granted
to any such person, partnership, association or corporation unless and
until the Commissioner shall have satisfied himself by such examination
as he may make and such evidence as he may require that such person,
partnership,
association or corporation is qualified by the laws of the Philippines
to transact business therein as a professional reinsurer.
Before issuing
such certificate of authority of the Commissioner must be satisfied
that
the name of the applicant is not that of any other known company
transacting
insurance or reinsurance 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 such person, partnership, association, or
corporation
is continuing to comply with provisions of this Code, or the circulars,
instructions, rulings, or decisions of the Commissioner and such other
pertinent law, rules and regulations.
Every such person,
partnership, association, or corporation receiving such certificate of
authority shall be subject to the provisions of this Code and other
related
laws, and to the jurisdiction and supervision of the Commissioner.
Sec. 281. Any
person, partnership, association, or corporation authorized to transact
solely reinsurance business must have a paid-up capital stock of at
least
ten million pesos, twenty-five per centum of which must be invested 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,
and deposited with the Commissioner, and the remaining seventy-five per
centum in such other securities as may be allowed and permitted by
the Commissioner, which securities shall at all times be maintained
free
from any lien or encumbrance: Provided, That reinsurers already
doing business as such in the Philippines shall comply with the
requirement
of this section by increasing their respective capital as herein
provided
not later than December thirty-one, nineteen hundred eighty: Provided,
Further, That the provisions of this chapter applicable to
insurance
companies shall so far as practicable be likewise applicable to
professional
reinsurers.(As
amended by Presidential Decree No. 1455).
Title 20
HOLDING
COMPANIES
Sec. 282. As
used in this title, the following terms shall have the respective
meanings
hereinafter set forth unless the context shall otherwise require:chanroblesvirtuallawlibrary
(a) "Person"
means
an individual, partnership, firm, association, corporation, trust, any
similar entity or any combination of the foregoing acting in concert;
(b) "Control",
including the terms "controlling", "controlled by" and "under
common control with", means the possession directly or indirectly
of
the power to direct or cause the direction of the management and
policies
of a person, whether through the ownership of voting securities by a
contract
other than a commercial contract for goods or non-management services
or
otherwise. Subject to section two hundred eight-four, control shall be
presumed to exist if any person directly or indirectly owns, controls
or
holds with the power to vote forty per centum or more of the voting
securities
of any other person: Provided, That no person shall be deemed
to
control another person solely by reason of his being an officer or
director
of such other person;
(c) "Holding
company" means any person who directly or indirectly controls any
authorized
insurer;
(d) "Controlled
insurer" means an authorized insurer controlled directly or
indirectly
by a holding company;
(e) "Controlled
person" means any person, other than a controlled insurer, who is
controlled
directly or indirectly by a holding company;
(f) "Holding
company system" means a holding company together with its
controlled
insurers and controlled persons.
Sec. 283. Notwithstanding
paragraph (b) of section two hundred eighty-two, the Commissioner may
determine
after notice and opportunity to be heard, that a person exercises
directly
or indirectly either alone or pursuant to an agreement with one or more
other persons such a controlling influence over the management or
policies
of an authorized insurer as to make it necessary or appropriate in the
public interest or for the protection of policyholders or stockholders
of the insurer that the person be deemed to control the insurer.
Sec. 284. The
Commissioner may determine upon application that any person, either
alone
or pursuant to agreement with one or more other persons, does not or
will
not upon the taking of some proposed action control another person. The
filing of an application hereunder in good faith by any person shall
relieve
the applicant from any obligation or liability imposed by this title
with
respect to the subject of the application, except as contained in
section
two hundred ninety-four, until the Commissioner has acted upon the
application.
Within thirty days or such further period as he may prescribe, the
Commissioner
may prospectively revoke or modify his determination, after notice and
opportunity to be heard, whenever in his judgment revocation or
modification
is consistent with his title.
Sec. 285. Notwithstanding
any other provisions of this title, the following shall not be deemed
holding
companies:chanroblesvirtuallawlibrary
(a)
authorized
insurers or reinsurers or their subsidiaries;
(b) the
Government
of the Philippines, or any political subdivision, agency or
instrumentality
thereof, or any corporation which is wholly owned directly or
indirectly
by one or more of the foregoing.
The Commissioner
may conditionally or unconditionally exempt any specified person or
class
of persons from any of the obligations or liabilities imposed under
this
title, if and to the extent he finds the exemption necessary to
appropriate
in the public interest or not adverse to the interests of policyholders
or stockholders and consistent with the purposes of this title.
Sec. 286. (1)
Every person who on the date this Code takes effect is a controlled
insurer
and every person who thereafter becomes a controlled insurer, shall,
within
sixty days thereafter, or within thirty days after becoming a
controlled
insurer, whichever is later, register with the Commissioner. Such
registration
shall be amended within thirty days following any change in the
identity
of its holding company. The Commissioner may grant one or more
reasonable
extensions of the time to register.
(2) Every registrant
shall furnish the Commissioner with the following information
concerning
its holding company: (a) a copy of its charter or articles of
incorporation
and its by-laws, (b) the identities of its principal shareholders,
officers,
directors and controlled persons, and (c) information as to its capital
structure and financial condition, and a description of its principal
business
activities.
Sec. 287. Every
controlled insurer shall file with the Commissioner such reports or
material
as he may direct for the purpose of disclosing information concerning
the
operations of persons within the holding company system which may
materially
affect the operations, management or financial condition of the insurer.
Sec. 288. Every
holding company and every controlled person within a holding company
system
shall be subject to examination by order of the Commissioner if he has
cause to believe that the operations of such persons may materially
affect
the operations, management or financial condition of any controlled
insurer
with the system and that he is unable to obtain relevant information
from
such controlled insurer. The grounds relied upon by the Commissioner
for
such examination shall be stated in his order, which order shall be
subject
to judicial review only at the instance of the person sought to be
examined.
Such examination shall be confined to matters specified in the order.
The
cost of such examination shall be assessed against the person examined
and no portion thereof shall thereafter be reimbursed to it directly or
indirectly by the controlled insurer.
Sec. 289. The
Commissioner shall keep the contents of each report made pursuant to
this
title and any information obtained by him in connection therewith
confidential
and shall not make the same public without the prior written consent of
the controlled insurer to which it pertains unless the Commissioner
after
notice and an opportunity to be heard shall determine that the
interests
of policyholders, stockholders or the public will be served by the
publication
thereof. In any action or proceeding by the Commissioner against the
person
examined or any other person within the same holding company system a
report
of such examination published by him shall be admissible as evidence of
the facts stated therein.
Sec. 290. Transactions
within a holding company system to which a controlled insurer is a
party
shall be subject to the following:chanroblesvirtuallawlibrary
(a) The terms
shall be fair and equitable;
(b)
charges
or fees for services performed shall be reasonable;
(c)
expenses
incurred and payments received shall be allocated to the insurer on an
equitable basis in conformity with customary insurance accounting
practices
consistently applied.
The books, accounts
and records of each party to all such transactions shall be maintained
as to clearly and accurately disclose the nature and details of the
transactions
including such accounting information as is necessary to support the
reasonableness
of the charges or fees to the respective parties.
Sec. 291. The
prior written approval of the Commissioner shall be required for the
following
transactions between a controlled insurer and any person in its holding
company system: sales, purchases, exchanges, loans or extensions of
credit,
or investments, involving five per centum or more of the insurer's
admitted
assets as of the thirty-first day of December next preceding.
Sec. 292. The
following transactions between a controlled insurer and any person in
its
holding company system may not be entered into unless the insurer has
notified
the Commissioner in writing of its intention to enter into any such
transaction
at least thirty days prior thereto, or such shorter period as he may
permit,
and he has not disapproved it within such period:chanroblesvirtuallawlibrary
(a) sales,
purchases, exchanges, loans or extensions of credit, or investments,
involving
more than one-half of one per centum but less than five per centum of
the
insurer's admitted assets as of the thirty-first day of December next
preceding;
(b)
reinsurance
treaties or agreements;
(c)
rendering
of services on a regular or systematic basis; or
(d) any
material
transaction, specified by regulation, which the Commissioner determines
may adversely affect the interest of the insurer's policyholders or
stockholders
or of the public.
Nothing herein
contained shall be deemed to authorize or permit any transaction which,
in the case of a non-controlled insurer, would be otherwise contrary to
law.
Sec. 293. The
Commissioner, in reviewing transactions pursuant to sections two
hundred
ninety-one and two hundred ninety-two, shall consider whether the
transactions
comply with the standard set forth in section two hundred ninety and
whether
they may adversely affect the interests of policyholders. This section
shall not apply to transactions subject to other sections of this Code
which impose notice or approval requirements greater than those
prescribed
by this title.
Sec. 294. (1)
No person, other than an authorized insurer, shall acquire control of
any
domestic insurer, whether by purchase of its securities or otherwise,
except
(a) after twenty days written notice to its insurer or such shorter
period
as the Commissioner may permit, of its intention to acquire control,
and
(b) with the prior written approval of the Commissioner.
(2) The Commissioner
shall disapprove the acquisition of control of a domestic insurer if he
determines, after notice and an opportunity to be heard, that such
action
is reasonably necessary to protect the interest of the people of this
country.
The following shall be the only factors to be considered by him in
reaching
the foregoing determination:chanroblesvirtuallawlibrary
(a) the
financial
condition of the acquiring person or and the insurer;
(b) the
trustworthiness
of the acquiring person or any of its officers or directors;
(c) a plan
for
the proper and effective conduct of the insurer's operations;
(d) the
source
of the funds or assets for the acquisition;
(e) the
fairness
of any exchange of stock, assets, cash or other consideration for the
stock
or assets to be received;
(f)
whether
the effect of the acquisition may be substantially to lessen
competition
in any line of commerce in insurance or to tend to create a monopoly
therein;
and
(g)
whether
the acquisition is likely to be hazardous or prejudicial to the
insurer's
policyholders or stockholders.
(3) The following
conditions affecting any controlled insurer, regardless of when such
control
has been acquired, are violations of this title: (a) the controlling
person
or any of its officers or directors have demonstrated
untrustworthiness;
and (b) the effect of retention of control may be substantially to
lessen
competition in any line of commerce in insurance in this country or to
tend to create a monopoly therein. If, after notice and an opportunity
to be heard, the Commissioner determines that any of the foregoing
violations
exists, he shall reduce his findings to writing and shall issue an
order
based thereon and cause the same to be served upon the insurer and upon
all persons affected thereby directing any person found to be in
violation
thereof to take appropriate action to cure such violation. Upon the
failure
of any such person to comply with such order, section two hundred
ninety-eight
shall become applicable.
(4) The Commissioner
may require the submission of such information as he deems necessary to
determine whether any acquisition or retention of control complies with
this title and may require, as a condition of approval of such
acquisition
or retention of control, that all or any portion of such information be
disclosed to the insurer's stockholders.
(5) Unless subject
to registration under section two hundred eighty-six or unless
acquisition
of its control is subject to paragraphs one and two hereof, every
authorized
insurer shall, on or before the first day of July, nineteen hundred
seventy-five,
or within thirty days after any event requiring notice hereunder,
whichever
is later, notify the Commissioner in writing of the identity of any
person
whom the insurer then knows or has reason to believe controls or has
taken
any action, other than preliminary negotiations or discussion, to
acquire
control of the insurer.
Sec. 295. (1)
Notwithstanding the control of an authorized insurer by any person, the
officers and directors of the insurer shall not thereby be relieved of
any obligation or liability to which they would otherwise be subject by
law, and the insurer shall be managed so as to assure its separate
operating
identity consistent with this title.
(2) Nothing
herein shall preclude an authorized insurer from having or sharing a
common
management or cooperative or joint use of personnel, property or
services
with one or more other persons under arrangements meeting the standards
of section two hundred ninety.
Sec. 296. To
the extent that any information or material is set forth in forms or
other
matter on file with any government agency or in a registration form
filed
with the Commissioner by another person within the same holding company
system, the controlled insurer may comply with the registration or
reporting
requirements of this title by referring in its registration form or
report
to such other filed matter and attaching a copy thereof certified by
the
insurer as a true and complete copy, to such registration form or
report
or, if such other filed matter is on file with the Commissioner,
incorporating
such matter by reference.
Sec. 297. No
holding company or controlled person shall directly or indirectly or
through
another person do or cause to be done for or in behalf of the
controlled
insurer any act intended to affect the insurance operations of the
insurer
which, if done by the insurer, would violate any provision of this Code.
Sec. 298. In
addition to any other penalty provided by law, the Commissioner may,
upon
the willful failure of any person within a holding company system to
comply
with this title or any regulation or order promulgated hereunder:chanroblesvirtuallawlibrary
(a) proceed
under title fourteen or title fifteen, Chapter III, of this Code with
respect
to insurer within the holding company system; or
(b) revoke
or
refuse to renew the authority to do business in this country of an
insurer
within the holding company system or refuse to issue such authority to
any other insurer in the system; or
(c) direct
that,
in addition to any other penalty provided by law, such person forfeit
to
the people of this country a sum not exceeding five hundred pesos for a
first violation and two thousand five hundred pesos for any subsequent
violation. An additional sum not exceeding two thousand five hundred
pesos
shall be imposed for each month during which any such violation shall
continue.
Chapter
IV
SALES AGENCIES
AND TECHNICAL SERVICES
Title 1
INSURANCE
AGENTS
AND INSURANCE BROKERS
Sec. 299. No
insurance company doing business in the Philippines, nor any
agent
thereof, shall pay any commission or other compensation to any person
for
services in obtaining insurance, unless such person shall have first
procured
from the Commissioner a license to act as an insurance agent of such
company
or as an insurance broker as hereinafter provided.
No person shall
act as an insurance agent or as an insurance broker in the solicitation
or procurement of applications for insurance, or receive for services
in
obtaining insurance, any commission or other compensation from any
insurance
company doing business in the Philippines, or any agent thereof,
without
first procuring a license to act from the Commissioner, which must be
renewed
annually on the first day of January, or within six months thereafter.
Such license shall be issued by the Commissioner only upon the written
application of the person desiring it, such application if for a
license
to act as insurance agent, being approved and countersigned by the
company
such person desires to represent, and shall be upon a form prescribed
by
the Commissioner giving such information as he may require, and upon
payment
of the corresponding fee hereinafter prescribed. The Commissioner shall
satisfy himself as to competence and trustworthiness of the applicant
and
shall have the right to refuse to issue or renew and to suspend or
revoke
any such license in his discretion. No such license shall be valid
after
the thirtieth day of June of the year following its issuance unless it
is renewed.(As
amended by Presidential Decree No. 1455).
Sec. 300. Any
person who for compensation solicits or obtains insurance on behalf of
any insurance company or transmits for a person other than himself an
application
for a policy or contract of insurance to or from such company or offers
or assumes to act in the negotiating of such insurance shall be an
insurance
agent within the intent of this section and shall thereby become liable
to all the duties, requirements, liabilities and penalties to which an
insurance agent is subject.
Sec. 301. Any
person who for any compensation, commission or other thing of value
acts
or aids in any manner in soliciting, negotiating or procuring the
making
of any insurance contract or in placing risk or taking out insurance,
on
behalf of an insured other than himself, shall be an insurance broker
within
the intent of this Code, and shall thereby become liable to all the
duties,
requirements, liabilities and penalties to which an insurance broker is
subject.
Sec. 302. Every
applicant for an insurance broker's license shall file with the
application
and shall thereafter maintain in force while so licensed, a bond in
favor
of the people of the Republic of the Philippines executed by a company
authorized to become surety upon official recognizances, stipulations,
bonds and undertakings. The bond shall be in such amount as may be
fixed
by the Commissioner, but in no case less than one hundred thousand
pesos,
and shall be conditioned upon full accounting and due payment to the
person
entitled thereto of funds coming into the broker's possession through
insurance
transactions under license. The bond shall remain in force until
released
by the Commissioner, or until cancelled by the surety. Without
prejudice
to any liability previously incurred thereunder, the surety may cancel
the bond on thirty days advance written notice to both the broker and
the
Commissioner.
Upon approval
of the application, the applicant must also file two errors and
omissions
(professional liability or professional indemnity) policies issued
separately
by two insurance companies authorized to do business in the
Philippines,
satisfactory to the Commissioner to indemnify the applicant against any
claim or claims for breach of duty as insurance broker which may be
made
against him by reason of any negligent act, error or omission, whenever
or wherever committed or alleged to have been committed, on the part of
the applicant or any person who has been, is now, or may hereafter
during
the subsistence of the policies be employed by the said applicant in
his
capacity as insurance broker, provided that the filing of any claim or
claims under one of such policies shall preclude the filing of the said
claim or claims under the other policy. The said policies shall be in
such
amounts as may be prescribed by the Insurance Commissioner, depending
upon
the size or amount of the broking business of the applicant, but in no
case shall the amount of each of such policies be less than five
hundred
thousand pesos.(As
amended by Presidential Decree No. 1455).
Sec. 303. The
Commissioner shall, in order to determine the competence of every
applicant
to have the kind of license applied for, require such applicant to
submit
to a written examination and to pass the same to the satisfaction of
the
Commissioner. Such examination shall be held at such times and places
as
the Commissioner shall from time to time determine.
Sec. 304. An
applicant for the written examination mentioned in the preceding
section
must be of good moral character and must not have been convicted of any
crime involving moral turpitude. He must satisfactorily show to the
Commissioner
that he has been trained in the kind of insurance contemplated in the
license
applied for.
Such
examination
may be waived if it is shown to the satisfaction of the Commissioner
that
the applicant has undergone extensive education and/or training in
insurance.
Sec. 305. An
application for the issuance or renewal of a license to act as an
insurance
agent or insurance broker may be refused, or such license, if already
issued
or renewed, shall be suspended or revoked if the Commissioner finds
that
the applicant for, or holder of, such license:chanroblesvirtuallawlibrary
(a) has
willfully
violated any provision of this Code; or
(b) has
intentionally
made a material misstatement in the application to qualify for such
license;
or
(c) has
obtained
or attempted to obtain a license by fraud or misrepresentation; or
(d) has
been
guilty of fraudulent or dishonest practices; or
(e) has
misappropriated
or converted to his own use or illegally withheld moneys required to be
held in a fiduciary capacity;
(f) has
not
demonstrated trustworthiness and competence to transact business as an
insurance agent or insurance broker in such manner as to safeguard the
public; or
(g) has
materially
misrepresented the terms and conditions of policies or contracts of
insurance
which he seeks to sell or has sold; or
(h) has
failed
to pass the written examination prescribed, if not otherwise exempt
from
taking the same.
In addition to
the foregoing causes, no license to act as insurance agent or insurance
broker shall be renewed if the holder thereof has not been actively
engaged
as such agent or broker in accordance with such rules as the
Commissioner
may prescribe.(As
amended by Presidential Decree No. 1814).
Sec. 306. The
premium, or any portion thereof, which an insurance agent or insurance
broker collects from an insured and which is to be paid to an insurance
company because of the assumption of liability through the issuance of
policies or contracts of insurance, shall be held by the agent or
broker
in a fiduciary capacity and shall not be misappropriated or converted
to
his own use or illegally withheld by the agent or broker.
Any insurance
company which delivers to an insurance agent or insurance broker a
policy
or contract of insurance shall be deemed to have authorized such agent
or broker to receive on its behalf payment of any premium which is due
on such policy or contract of insurance at the time of its issuance or
delivery or which becomes due thereon.
Sec. 307. Any
provision of existing laws to the contrary notwithstanding, no person
shall,
within the Philippines, sell or offer for sale a variable contract or
do
or perform any act or thing in the sale, negotiation, making or
consummating
of any variable contract other than for himself unless such person
shall
have a valid and current license from the Commissioner authorizing such
person to act as a variable contract agent. No such license shall be
issued
unless and until the Commissioner is satisfied, after examination that
such person is by training, knowledge, ability and character qualified
to act as such agent. Any such license may be withdrawn and cancelled
by
the Commissioner after notice and hearing, if he shall find that the
holder
thereof does not then have the qualifications required for the issuance
of such license.
Sec. 308. It
shall be unlawful for any person, company or corporation in the
Philippines
to act as general agent of any insurance company unless he is empowered
by a written power of attorney duly executed by such insurance company,
and registered with the Commissioner to receive notices, summons and
legal
processes for and in behalf of the insurance company concerned in
connection
with actions or other legal proceedings against said insurance company.
It shall be the duty of said general agent to notify the Commissioner
of
his post office address in the Philippines, or any change thereof.
Notices,
summons, or processes of any kind sent by registered mail to the last
registered
address of such general agent of the company concerned or to the
Commissioner
shall be sufficient service and deemed as if served on the insurance
company
itself.
Sec. 309. Except
as otherwise provided by law or treaty, it shall be unlawful for any
person,
partnership, association or corporation in the Philippines, for himself
or itself, or for some other person, partnership, association or
corporation,
either to procure, receive or forward applications of insurance in, or
to issue or to deliver or accept policies or contracts of insurance of
or for, any insurance company or companies not authorized to transact
business
in the Philippines, covering risks, life or nonlife, situated in the
Philippines;
and any such person, partnership, association 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 ten thousand pesos, or imprisonment of six months, or both at
the discretion of the court: Provided, That the provisions of
this
section shall not apply to reinsurance.
Title 2
REINSURANCE
BROKERS
Sec. 310. Except
as provided in the next succeeding title, no person shall act as
reinsurance
broker in the Philippines unless he is authorized as such by the
Commissioner.
A reinsurance
broker is one who, for compensation, not being a duly authorized agent,
employee or officer of an insurer in which any reinsurance is effected,
act or aids in any manner in negotiating contracts of reinsurance, or
placing
risks of effecting reinsurance, for any insurance company authorized to
do business in the Philippines.
Sec. 311. Upon
application and payment of the corresponding fee hereinafter
prescribed,
and the filing of two errors and omissions (professional liability or
professional
indemnity) policies hereinafter described, a person may, if found
qualified,
be issued a license to act as reinsurance broker by the Commissioner.
No
such license shall be valid after the thirtieth day of June of the year
following its issuance unless it is renewed.(As
amended by Presidential Decree No. 1455).
The errors and
omissions (professional liability or professional indemnity) policies
mentioned
above shall indemnify the applicant against any claim or claims for
breach
of duty as reinsurance broker which may be made against him by reason
of
any negligent act, error or omission, whenever or wherever committed or
alleged to have been committed, on the part of the applicant or any
person
who has been, is now, or may hereafter during the subsistence of the
policies
be employed by the said applicant in his capacity as reinsurance
broker;
Provided, That the filing of any claim or claims under one of such
policies
shall preclude the filing of the said claim or claims under the other
policy.
The said policies shall be issued separately by two insurance companies
authorized to do business in the Philippines and shall be in such
amounts
as may be prescribed by the Insurance Commissioner, depending upon the
size or amount of the broking business of the applicant, but in no case
shall the amount of each of such policies be less than five hundred
thousand
pesos.
(As amended by Presidential Decree No. 1455).
Sec. 312. The
Commissioner may recall, suspend or revoke the license granted to a
reinsurance
broker for violation of any existing law, rule and regulation, or any
provision
of this Code after due notice and hearing.
Title 3
RESIDENT AGENTS
Sec. 313. No
person shall act as resident agent, as hereinafter defined, unless he
is
registered as such with the Commissioner.
Sec. 314. The
term "resident agent", as used in this title, is one duly
appointed
by a foreign insurer or broker not authorized to do business in the
Philippines
to receive in its behalf notices, summons and legal processes in
connection
with actions or other legal proceedings against such foreign insurer or
broker.
Sec. 315. The
application for a certificate of registration as resident agent filed
with
the Commissioner must be accompanied with:chanroblesvirtuallawlibrary
(a) a copy
of the power of attorney, duly notarized and authenticated by the
Philippine
Consul in the place where such foreign insurer or broker is domiciled,
empowering the applicant to act as resident agent and to receive
notices,
summons and legal processes for and in behalf of such foreign insurer
or
broker in connection with any action or legal proceeding against such
foreign
insurer or broker; and
(b) a copy
of
the corresponding certificate issued by the Board of Investments as
required
under Section 4 of Republic Act No. 5455, if such foreign insurer or
broker
is not otherwise exempt from such requirement.
Sec. 316. It shall
be the duty of such resident agent to notify immediately the
Commissioner
of any change of his office address.
Sec. 317. A
certificate of registration issued to a resident agent shall expire on
the thirtieth day of June of the year following its issuance unless it
is renewed.
The Commissioner
may, after due notice and hearing, recall or cancel the certificate of
registration issued to a resident agent for violation of any existing
law,
rule or regulation, or any provision of this Code.
(As amended by Presidential Decree No. 1455).
Title 4
NON-LIFE
COMPANY
UNDERWRITER
Sec. 318. No
person shall act, and no company shall employ any person, as non-life
company
underwriter, whose duty and responsibility it shall be to select,
evaluate
and accept risks for, and to determine the terms and conditions,
including
those pertaining to amounts of retentions, under which such risks are
to
be accepted by the company, unless such underwriter is registered as
such
with the Commissioner.
Sec. 319. Every
non-life insurance company doing business in the Philippines must
maintain
at all times a register of risks accepted and a claims register for
each
line of risks engaged in by such non-life insurance company with such
entries
therein as are now or as may hereafter be required by the Commissioner,
and it shall be the responsibility of the underwriter on the particular
line or risk involved to see to it that the said registers are well
maintained
and kept, and that all entries therein are properly and correctly
recorded.
Such registers shall be open to inspection and examination of duly
authorized
representative of the Commissioner at all times during business hours.
Sec. 320. No
person shall be registered with the Commissioner, unless such person
shall
be at least twenty-one years of age on the date of such registration; a
resident of the Philippines; of good moral character and with no
conviction
of any crime involving moral turpitude; has had at the time such
registration
is made at least two years of underwriting work in the particular line
or risk involved; and has passed such qualifying written examination
that
the Commissioner shall conduct at such time and in such place as he may
decide to hold for applicants desiring to act as underwriters.
Such
examination
shall not be required of any person who has served as non-life company
underwriter for a period of at least five years, if the Commissioner is
satisfied of the applicant's competence as shown by the results of his
underwriting work in the non-life insurance company or companies that
employed
him in that capacity. The minimum underwriting experience herein
required
may be reduced or waived if it is shown to the satisfaction of the
Commissioner
that the non-life company underwriter has undergone extensive education
and/or training in insurance.
Sec. 321. Any
applicant who misrepresents or omits any material fact in his
application
for registration as a non-life company underwriter, or commits any
dishonest
act in taking or in connection with the qualifying written examination
for underwriters, shall be barred from being registered as such
non-life
company underwriter and, if already registered, his registration shall
be cancelled and the certificate of registration issued in his favor
shall
be recalled immediately by the Commissioner.
In the event
that the certificate of authority of a non-life insurance company to
transact
business is suspended or revoked due to business failure arising
largely
from the imprudent and injudicious acceptance of risks by the
underwriter
concerned, the registration of such underwriter shall likewise be
cancelled
and his certificate of registration shall be recalled by the
Commissioner,
and no similar certificate shall thereafter be issued in his favor.
Sec. 322. No
certificate of registration issued to an underwriter shall be valid
after
the thirtieth day of June of the year following its issuance unless it
is renewed.
The
Commissioner
may, after due notice and hearing, also suspend or cancel such
certificate
for violation of existing laws, rules and regulations or of any
provisions
of this Code.
(As amended by Presidential Decree No. 1455).
Title 5
ADJUSTERS
Sec. 323. No
person, partnership, association, or corporation shall act as an
adjuster,
as hereinafter defined, unless authorized so to act by virtue of a
license
issued or renewed by the Commissioner pursuant to the provisions of
this
Code: Provided, That in the case of a natural person, he must
be
a Filipino citizen and in the case of a partnership, association or
corporation,
at least sixty per centum of its capital must be owned by citizens of
the
Philippines.
Sec. 324. An
adjuster may be an independent adjuster or a public adjuster.
The term "independent
adjuster" means any person, partnership, association or
corporation
which, for money, commission or any other thing of value, acts for or
on
behalf of an insurer in the adjusting of claims arising under insurance
contracts or policies issued by such insurer.
The term "public
adjuster" means any person, partnership, association or corporation
which, for money, commission or any other thing of value, acts on
behalf
of an insured in negotiating for, or effecting, the settlement of a
claim
or claims of the said insured arising under insurance contracts or
policies,
or which advertises for or solicits employment as an adjuster of such
claims.
Sec. 325. For
every line of insurance claim adjustment, adjusters shall be licensed
either
as independent adjusters or as public adjusters. No adjuster shall act
on behalf of an insurer unless said adjuster is licensed as an
independent
adjuster; and no adjuster shall act on behalf of an insured unless said
adjuster is licensed as a public adjuster: Provided, however,
That
when a firm or person has been licensed as public adjuster, he shall
not
be granted another license as independent adjuster and vice versa.
No license,
however, shall be required of any company adjuster who is a salaried
employee
of an insurance company for the adjustment of claims filed under
policies
issued by such insurance company.
Sec. 326. Such
license or any renewal thereof may be issued by the Commissioner upon
written
application filed by the person interested on the form or forms
prescribed
by the Commissioner, which shall contain such information as he may
require,
and upon payment of the corresponding fee hereinafter prescribed.
Sec. 327. The
Commissioner shall conduct, at such times, and in such places as he may
decide to hold, written examinations to determine the competence and
ability
of applicants desiring to act as adjuster of insurance claims.
Sec. 328. Every
adjuster's license issued hereunder shall be valid until after the
thirtieth
day of June of the year following the issuance of such license unless
it
is renewed.(As
amended by Presidential Decree No. 1455).
Sec. 329. Nothing
contained in this title shall apply to any duly licensed
attorney-at-law
who acts or aids in adjusting insurance claims as an incident to the
practice
of his profession and who does not advertise himself as an adjuster.
Sec. 330. The
Commissioner may suspend or revoke any adjuster's license if, after
giving
notice and hearing to the adjuster concerned, the Commissioner finds
that
the said adjuster:chanroblesvirtuallawlibrary
(1) has
violated
any provision of this Code and of the circulars, rulings and
instructions
of the Commissioner or has violated any law in the course of his
dealings
as an adjuster; or
(2) has
made
a material misstatement in the application for such license; or
(3) has
been
guilty of fraudulent or dishonest practices; or
(4) has
demonstrated
his incompetence or untrustworthiness to act as adjuster; or
(5) has
made
patently unjust valuation of loss; or
(6) has
failed
to make a report of the adjustment he proposed within sixty days from
the
date of the filing of the claim by the insured with the insurer, unless
prevented so to do by reasons beyond his control; or
(7)
has
refused to allow an examination into his affairs or method of doing
business
as hereinafter provided.
Sec. 331. Every
adjuster shall submit to the Commissioner a quarterly report of all
losses
which are the subject of adjustment effected by him during each month
in
the form prescribed by the Commissioner. The report shall be filed
within
one month after the end of each quarter.
Sec. 332. Every
adjuster shall keep his or its books, records, reports, accounts, and
vouchers
in such manner that the Commissioner or his duly authorized
representatives
may readily verify the quarterly reports of the said adjuster and
ascertain
whether the said adjuster has complied with the provisions of law or
regulations
obligatory upon him or whether the method of doing business of the said
adjuster has been fair, just and honest.
Sec. 333. 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
and method of doing business of every adjuster.
Sec. 334. Any
violation of any provision of this title shall be punished by a fine of
not more than ten thousand pesos, or by imprisonment in the discretion
of the court; Provided, That, in case of a partnership, association or
corporation, the said penalty shall be imposed upon the partner,
president,
manager, managing director, director or person in charge of its
business
or responsible for the violation.
Title 6
ACTUARIES
Sec. 335. No
life insurance company shall be licensed to do business in the
Philippines
nor shall any life insurance company doing business in the Philippines
be allowed to continue doing such business unless they shall engage the
services of an actuary duly accredited with the Commissioner who shall,
during his tenure of office, be directly responsible for the direction
and supervision of all actuarial work connected with or that may be
involved
in the business of the insurance company.
Sec. 336. Any
person may be officially accredited by the Commissioner to act as any
actuary
in any life insurance company or in any mutual benefit association
authorized
to do business in the Philippines upon application therefor and the
payment
of the corresponding fee hereinafter prescribed: Provided,
That:
(1) he is a fellow of good standing of the Acturial Society of the
Philippines
at the time of his appointment and remains in such good standing during
the tenure of his engagement; or (2) in the case of one who is not a
fellow
of the Acturial Society of the Philippines, he meets all the
requirements
of the said Society for accreditation as a fellow of the Society, and
has
been given permission by the pertinent government authorities in the
Philippines
to render services in the Philippines, in the event that he is not a
citizen
of the Philippines.
No certificate
of registration issued under this title shall be valid after the
thirtieth
day of June of the year following its issuance unless it is renewed.(As
amended by Presidential Decree No. 1455).
Sec. 337. The
following documents, which are from time to time submitted to the
Commissioner
by a life insurance company authorized to do business in the
Philippines,
shall be duly certified by an accredited actuary employed by such
company:chanroblesvirtuallawlibrary
1. Policy
reserves
and net due and deferred premiums.
2.
Statements
of bases and net premiums, loading for gross premiums, and on
non-forfeiture
values and reserves, when applying for approval of gross premiums,
reserves
and non-forfeiture values.
3.
Policies
of insurance under any plan submitted to the Commissioner as required
by
law.
4. Annual
statements
and valuation reports submitted to the Commissioner as required by law.
5.
Financial
projection showing the probable income and outgo and reserve
requirements,
enumerating the acturial assumptions and bases of projections.
6.
Valuation
of annuity funds or retirement plans.
Any life
insurance
company authorized to do business in the Philippines may employ any
person
who is not officially accredited under either of the qualifications for
any kind of acturial work, provided that he shall not, at any time,
have
the authority to certify to the correctness of the foregoing documents.
Sec. 338. No accredited
actuary shall serve more than one client or employer at the same time.
However, one already in the employ of an insurance company may be
allowed
by the Commissioner to serve a mutual benefit association or any other
insurance company, provided the following conditions are first complied
with: (a) that the request to engage his services by the other employer
is in writing; (b) that his present employer acquiesced to it in
writing;
and (c) that he furnishes the Commissioner with copies of said request
and acquiescence. Title 7
RATING
ORGANIZATION
AND RATE MAKING
Sec. 339. Every
organization which now exists or which may hereafter be formed for the
purpose of making rates to be used by more than one insurance company
authorized
to do business in the Philippines shall be known as a "rating
organization."
The term "rate" as used in this title shall generally mean the
ratio
of the premium to the amount insured and shall include, as the context
may require, either the consideration to be paid or charged for
insurance
contracts, including surety bonds, or the elements and factors forming
the basis for the determination or application of the same, or both.
Sec. 340. Every
rating organization which now exists or which may hereafter be formed
shall
be subject to the provisions of this title.
Sec. 341. No
rating organization hereafter formed shall commence rate-making
operations
until it shall have obtained a license from the Commissioner. Before
obtaining
such license, such rating organization shall file with the Commissioner
a notice of its intention to commence rate-making operations, a copy of
its constitution, articles of agreement or association, or of
incorporation,
and its by-laws, a list of insurance companies that have agreed to
become
members or subscribers, and such other information concerning such
rating
organization and its operations as may be required by the Commissioner.
If the Commissioner finds that the organization has complied with the
provisions
of law and that it has a sufficient number of members or subscribers
and
is otherwise qualified to function as a rating organization, the
Commissioner
may issue a license to such rating organization authorizing it to make
rates for the kinds of insurance or subdivisions thereof as may be
specified
in such license. No license issued to a rating organization shall be
valid
after the thirtieth day of June of the year following its issuance
unless
it is renewed. No rating organization which now exists and is not
licensed
pursuant to this section shall continue rate-making operations until it
shall have obtained from the Commissioner a license which he may issue
if satisfied that such organization is complying with the provisions of
this title. Every rating organization shall notify the Commissioner
promptly
of every change in (1) its constitution, its articles of agreement or
association
or its certificate of incorporation, and its by-laws rules and
regulations
governing the conduct of its business, and (2) its list of members and
subscribers.
A "member"
means
an insurer who participates in or is entitled to participate in the
management
of a rating organization.
A "subscriber"
means an insurer which is furnished at its request with rates and
rating
manuals by a rating organization of which it is not a member.
(As amended by Presidential Decree No. 1455).
Sec. 342. Each
rating organization shall furnish its rating service without
discrimination
to all of its members and subscribers, and shall, subject to reasonable
rules and regulations, permit any insurance company doing business in
the
Philippines, not admitted to membership, to become a subscriber to its
rating services for any kind of insurance or subdivisions thereof.
Notice
of proposed changes in such rules and regulations shall be given to
subscribers.
The reasonableness of any rule or regulation in its application to
subscribers,
or the refusal of any rating organization to admit an insurance company
as a subscriber, shall, at the request of any subscriber or any such
insurance
company, be reviewed by the Commissioner at a hearing held upon at
least
ten days' written notice to such rating organization and to such
subscriber
or insurance company. The Commissioner may, after such hearing, issue
an
appropriate order.
Sec. 343. No
rating organization or any other association shall refuse to do
business
with, or prohibit or prevent the payment of commissions to, any person
licensed as an insurance broker pursuant to the provisions of title one
of this chapter.
Sec. 344. Rating
organization shall be subject to examination by the Commissioner, as
often
as he may deem such examination expedient, pursuant to the provisions
of
this Code applicable to the examination of insurance companies. He
shall
cause such an examination of each rating organization to be made at
least
once in every five years.
Sec. 345. The
Commissioner may suspend or revoke the license of any rating
organization
which fails to comply with his order within the time limited by such
order,
or any extension thereof which he may grant. The Commissioner may
determine
when a suspension of license shall become effective and it shall remain
in effect for the period fixed by him, unless he modifies or rescinds
such
suspension.
Sec. 346. Any
rating organization may subscribe for or purchase acturial, technical
or
other services, and such services shall be available to all members and
subscribers without discrimination.
Sec. 347. Any
rating organization may provide for the examination of policies, daily
reports, binders, renewal certificates, endorsements or other evidences
of insurance, or the cancellation thereof, and may make reasonable
rules
governing their submission. Such rules shall contain a provision that
in
the event an insurance company does not within sixty days furnish
satisfactory
evidence to the rating organization of the correction of any error or
omission
previously called to its attention by the rating organization, it shall
be the duty of the rating organization to notify the Commissioner
thereof.
All information so submitted for examination shall be confidential.
Sec. 348. Cooperation
among rating organizations or among rating organizations and insurers
in
rate making or in other matters within the scope of this title is
hereby
authorized, provided the filings resulting from such cooperation are
subject
to all provisions of this title which are applicable to filings
generally.
The Commissioner may review such cooperative activities and practices
and
if he finds that any such activity or practice is unfair or
unreasonable
or otherwise inconsistent with the provisions of this title, he may
issue
a written order specifying in what respects such activity or practice
is
unfair or unreasonable or otherwise inconsistent with the provisions of
this title, and requiring the discontinuance of such activity or
practice.
Sec. 349. Every
rating organization and every insurance company which makes and files
its
own rates, shall make rates for all risks rated by such organization or
insurance company in accordance with the following provisions:chanroblesvirtuallawlibrary
(a) Basic
classification,
manual, minimum, class, or schedule rates or rating plans, shall be
made
and adopted for all such risks. Any departure from such rates shall be
in accordance with schedules, rating plans and rules filed with the
Commissioner;
(b) Rates
shall
be reasonable and adequate for the class of risks to which they apply;
(c) No
rate
shall discriminate unfairly between risks involving essentially the
same
hazards and expense elements or between risks in the application of
like
charges and credits;
(d)
Consideration
shall be given to the past and prospective loss experience, including
the
conflagration and catastrophe hazards, if any, to all factors
reasonably
attributable to the class of risks, to a reasonable profit, to
commissions
paid during the most recent annual period and to past and prospective
other
expenses. In case of fire insurance rates, consideration shall be given
to the experience of the fire insurance business during a period of not
less than five years next preceding the year in which the review is
made;
(e) Risk
may
be grouped by classifications for the establishment of rates and
minimum
premiums. Classification rates may be modified to produce rates for
individual
risks in accordance with rating plans which establish standards for
measuring
variations in hazards or expense provisions, or both. Such standards
may
measure any difference among risks that can be demonstrated to have a
probable
effect upon losses or expenses.
Sec. 350. No rating
organization and no insurance company which makes and files its own
rates
shall make or promulgate any rate or schedule of rates which is to be
applied
to any fire risk on the condition that the whole amount of insurance on
any risk or any specified part thereof shall be placed with the members
of or subscribers to such rating organization or with such insurer.
Sec. 351. Every
insurance company doing business in the Philippines shall annually file
with the rating organization of which it is a member or subscriber, or
with such other agency as the Commissioner may designate, a statistical
report showing a classification schedule of its premiums and losses on
all kinds or types of insurance business to which section three hundred
forty-nine is applicable, and such other information as the
Commissioner
may deem necessary or expedient for the administration of the
provisions
of this title.
Sec. 352. Every
non-life rating organization and every non-life insurance company doing
business in the Philippines shall file with the Commissioner, except as
to risks which by general custom of the business are not written
according
to manual rates or rating plans, every rate manual, schedule of rates,
classification of risks, rating plan, and every other rating rule and
every
modification of any of the foregoing which it proposes to use. An
insurance
company may satisfy its obligation to make such filings for any kind or
type of insurance by becoming a member of or subscriber to a rating
organization
which makes such filings for such kind or type of insurance, and by
authorizing
the Commissioner to accept such filings of the rating organization on
behalf
of such insurance company.
Sec. 353. Every
manual or schedule of rates and every rating plan filed as provided in
the preceding section shall state or clearly indicate the character and
extent of the coverage to which any such rate or any modification
thereof
will be applied.
Sec. 354. The
Commissioner shall review filings as soon as reasonably possible after
they have been made in order to determine whether they meet the
requirements
of this title. When a filing is not accompanied by the information upon
which the insurance company supports such filing, and the Commissioner
does not have sufficient information to determine whether such filing
meets
the requirements of this title, he shall require such insurance company
to furnish the information upon which it supports such filing. The
information
furnished in support of a filing may include: (1) the experience or
judgment
of the insurance company or rating organization making the filing; (2)
its interpretation of any statistical data it relies upon; (3) the
experience
of other insurance companies or rating organization; or (4) any other
relevant
factors.
Sec. 355. If
the Commissioner finds that any rate filings theretofore filed with him
do not comply with the provisions of this title or that they provide
rates
or rules which are inadequate, excessive, unfairly discriminatory or
otherwise
unreasonable, he may order the same withdrawn and at the expiration of
sixty days thereafter the same shall be deemed no longer on file.
Before
making any such finding and order, the Commissioner shall give notice,
not less than ten days in advance, and a hearing, to the rating
organization,
or to the insurer, which filed the same. Such order shall not affect
any
contract or policy made or issued prior to the expiration of such sixty
day period.
Sec. 356. No
member or subscriber of a rating organization, and no insurance company
doing business in the Philippines, or agent, employee or other
representative
of such company, and no insurance broker shall charge or demand a rate
or receive a premium which deviates from the rates, rating plans,
classifications,
schedules, rules and standards, made and last filed by a rating
organization
or by or on behalf of the insurance company, or shall issue or make any
policy or contract involving violation of such rate filings.
Sec. 357. Notwithstanding
any other provisions of this title, upon the written application of the
insurer, stating his reasons therefor, filed with and approved by the
Commissioner,
a rate in excess of that provided by a filing otherwise applicable may
be used on any specific risk.
Sec. 358. Whenever
the Commissioner shall determine, after notice and a hearing, that the
rates charged or filed on any class of risks are excessive,
discriminatory,
inadequate or unreasonable, he shall order that such rates be
appropriately
adjusted. For the purpose of applying the provisions of this section,
the
Commissioner may from time to time approve reasonable classifications
of
risks for any or all such classes, having due regard to the past and
prospective
loss experience, including conflagration or catastrophe hazards, if
any,
to all other relevant factors and to a reasonable profit.
Sec. 359. Nothing
contained in this title shall be construed as requiring any insurer to
become a member of or subscriber to any rating organization.
Sec. 360. Agreements
may be made among insurance companies with respect to the equitable
apportionment
among them of insurance which may be afforded applicants who are in
good
faith entitled to but are unable to procure such insurance through
ordinary
methods and such insurance companies may agree among themselves on the
use of reasonable rates and modifications for such insurance, such
agreements
and rate modifications to be subject to the approval of the
Commissioner;
Provided,
however, That the provisions of this section shall not be deemed to
apply to workmen's compensation insurance.
Sec. 361. No
insurance company doing business in the Philippines or any agent
thereof,
no insurance broker, and no employee or other representative of any
such
insurance company, agent, or broker, shall make, procure or negotiate
any
contract of insurance or agreement as to policy contract, other than is
plainly expressed in the policy or other written contract issued or to
be issued as evidence thereof, or shall directly or indirectly, by
giving
or sharing a commission or in any manner whatsoever, pay or allow or
offer
to pay or allow to the insured or to any employee of such insured,
either
as an inducement to the making of such insurance or after such
insurance
has been effected, any rebate from the premium which is specified in
the
policy, or any special favor or advantage in the dividends or other
benefits
to accrue thereon, or shall give or offer to give any valuable
consideration
or inducement of any kind, directly or indirectly, which is not
specified
in such policy or contract of insurance; nor shall any such company, or
any agent thereof, as to any policy or contract of insurance issued,
make
any discrimination against any Filipino in the sense that he is given
less
advantageous rates, dividends or other policy conditions or privileges
than are accorded to other nationals because of his race.
Sec. 362. No
insurance company doing business in the Philippines, and no officer,
director,
or agent thereof, and no insurance broker or any other person,
partnership
or corporation shall issue or circulate or cause or permit to be issued
or circulated any literature, illustration, circular or statement of
any
sort misrepresenting the terms of any policy issued by any insurance
company
of the benefits or advantages promised thereby, or any misleading
estimate
of the dividends or share of surplus to be received thereon, or shall
use
any name or title of any policy or class of policies misrepresenting
the
true nature thereof; nor shall any such company or agent thereof, or
any
other person, partnership or corporation make any misleading
representation
or incomplete comparison of policies to any person insured in such
company
for the purpose of inducing or tending to induce such person to lapse,
forfeit, or surrender his said insurance.
Sec. 363. If
the Commissioner, after notice and hearing, finds that any insurance
company,
rating organization, agent, broker or other person has violated any of
the provisions of this title, it shall order the payment of a fine not
to exceed five hundred pesos for each such offense, and shall
immediately
revoke the license issued to such insurance company, rating
organization,
agent, or broker. The issuance, procurement or negotiation of a single
policy or contract of insurance shall be deemed a separate offense.
Title 8
PROVISION
COMMON
TO AGENTS, BROKERS,
AND ADJUSTERS
Sec. 364. A
license issued to a partnership, association or corporation to act as
an
insurance agent, general agent, insurance broker, reinsurance broker,
or
adjuster shall authorize only the individual named in the license who
shall
qualify therefor as though an individual licensee. The Commissioner
shall
charge, and the licensee shall pay, a full additional license fee as to
each respective individual so named in such license in excess of one.
Licenses and
certificates of registration issued under the provisions of this
chapter
may be renewed by the filing of notices of intention on forms to be
prescribed
by the Commissioner and payment of the fees therefor.
(As amended by Presidential Decree No. 1455).
Chapter
V
SECURITY FUND
Sec. 365. There
is hereby created a fund to be known as the "Security Fund"
which
shall be used in the payment of allowed claims against an insurance
company
authorized to transact business in the Philippines remaining unpaid by
reason of the solvency of such company. The said Fund may also be used
to reinsure the policy of the insolvent insurer in any solvent insurer
authorized to do business in the Philippines as provided in section two
hundred forty-nine. In the event of national emergency or calamity, the
Fund may likewise be used to pay insured claims which otherwise would
not
be compensable under the provisions of the policy. No payment from the
Security Fund shall, however, be made to any person who owns or
controls
ten per centum or more of the voting shares of stock of the insolvent
insurer
and no payment on any one claim shall exceed twenty thousand pesos.
Sec. 366. Such
Fund shall consist of all payments made to the Fund by insurance
companies
authorized to do business in the Philippines. Payments made by life
insurance
companies shall be treated separately from those made by non-life
insurance
companies and the corresponding fund shall be called "Life Account"
and "Non-Life Account", respectively, and shall be held and
administered
as such by the Commissioner in accordance with the provisions of this
title.
The "Life Account" shall be utilized exclusively for
disbursements
that refer to life insurance companies, while the "Non-Life
Account"
shall
be utilized exclusively for disbursements that refer to non-life
insurance
companies.
Sec. 367. All
insurance companies doing business in the Philippines shall contribute
to the Security Fund, Life or Non-Life Account, as the case may be, on
or before the fifteenth day of June, nineteen hundred and seventy-five,
the aggregate amount of five million pesos for each Account. The
contributions
of the life insurance companies and of the non-life insurance companies
shall be in direct proportion to the ratio between a particular life
insurance
company or a particular non-life insurance company's net worth and the
aggregate net worth of all life insurance companies or all non-life
insurance
companies, as the case may be, as shown in their latest financial
statements
approved by the Commissioner. This proportion applied to the five
million
pesos shall be the contribution of a particular company to the
corresponding
Account of the Security Fund.
The amount of
five million pesos in each Account shall be in the form of a revolving
trust fund. The respective contributions of the companies shall remain
as admitted assets in their books and any disbursement therefrom shall
be deducted proportionately from the contributions of each company
which
will be allowed as deductions for income tax purposes. Any earnings of
the Fund shall be turned over to the contributing companies in
proportion
to their contributions.
In the case
of disbursements of funds from the Fund as provided in the foregoing
paragraph,
the life and non-life companies, as the case may be, shall replenish
the
amount disbursed in direct proportion to the individual company's net
worth
and the aggregate net worth of the life or non-life companies, as the
case
may be. However, in no case shall the Fund exceed the aggregate amount
of ten million pesos, or five million pesos for each Account.
Should the
Fund, Life of Non-Life Account, as the case may be, be inadequate for a
disbursement as provided for, then the Life or Non-Life companies, as
the
case may be, shall contribute to the Fund their respective shares in
the
proportion previously mentioned.
Sec. 368. The
Commissioner may adopt, amend, and enforce all reasonable rules and
regulations
necessary for the proper administration of the Fund and of the
Accounts.
In the event any insurer shall fail to make any payment required by
this
title, or that any payment made is incorrect, he shall have full
authority
to examine all the books and records of the insurer for the purpose of
ascertaining the facts and shall determine the correct amount to be
paid
and may proceed in any court of competent jurisdiction to recover for
the
benefit of the Fund or of the Account concerned any sum shown to be due
upon such examination and determination. Any insurer which fails to
make
any payment to the Fund or to the Account concerned when due, shall
thereby
forfeit to said Fund or Account concerned a penalty of five per centum
of the amount determined to be due as provided by this title, plus one
per centum of such amount for each month of delay or fraction thereof,
after the expiration of the first month of such delay, but the
Commissioner,
if satisfied that the delay was excusable, may remit all or any part of
such penalty. The Commissioner, in his discretion, may suspend or
revoke
the certificate of authority to do business in the Philippines of any
insurance
company which shall fail to comply with this title or to pay any
penalty
imposed in accordance therewith.
Sec. 369. The
Accounts created by this title shall be separate and apart from each
other
and from any other fund. The Treasurer of the Philippines shall be the
custodian of the Life Account and Non-Life Account of the Security
Fund;
and all disbursements from any Account shall be made by the Treasurer
of
the Philippines upon vouchers signed by the Commissioner or his deputy,
as hereinafter provided. The moneys of said Account may be invested by
the Commissioner only in bonds or other evidences of debt of the
government
of the Philippines or its political subdivisions or instrumentalities.
The Commissioner may sell any of the securities in which an Account is
in vested, if advisable, for its proper administration or in the best
interest
of such Account.
Sec. 370. Payments
from either the Life Insurance Account or Non-Life Account, as the case
may be, shall be made by the Treasurer of the Philippines to the
Commissioner,
upon the authority of appropriate certificate filed with him by the
Commissioner
acting in such capacity.
Sec. 371. The
Commissioner may, in his discretion, designate or appoint a duly
authorized
representative or representatives to appear and defend before any court
or other body or official having jurisdiction any or all actions or
proceedings
against principals or assureds on insurance policies or contracts
issued
to them where the insurer has become insolvent or unable to meet its
insurance
obligations. The Commissioner shall have, as of the date of insolvency
of such insurer or as of the date of its inability meet its insurance
obligations,
only the rights which such insurer would have had if it had not become
insolvent or unable to meet its insurance obligations. For the purpose
of this title the Commissioner shall have power to employ such counsel,
clerks and assistants as he may deem necessary.
Sec. 372. The
expense of administering an Account shall be paid out of the Account
concerned.
The Commissioner shall serve as administrator of the Fund and of the
Accounts
without additional compensation, but may be allowed and paid from the
Account
concerned expenses incurred in the performance of his duties in
connection
with said Account. The compensation of those persons employed payable
from
the Account concerned. The Commissioner shall include in his annual
report
to the Secretary of Finance a statement of the expenses of
administration
of the Fund and of the Life Account and Non-Life Account for the
preceding
year.
Chapter
VI
COMPULSORY
MOTOR VEHICLE
LIABILITYINSURANCE
Sec. 373. For
purposes of this chapter:chanroblesvirtuallawlibrary
(a) "Motor
Vehicle" is any vehicle as defined in section three, paragraph (a)
of Republic Act Numbered Four Thousand One Hundred Thirty-Six,
Otherwise
known as the "Land Transportation and Traffic Code."
(b) "Passenger"
is any fare paying person being transported and conveyed in and by a
motor
vehicle for transportation of passengers for compensation, including
persons
expressly authorized by law or by the vehicle's operator or his agents
to
ride without fare.
(c) "Third-Party"
is any person other than a passenger as defined in this section and
shall
also exclude a member of the household, or a member of the family
within
the second degree of consanguinity or affinity, of a motor vehicle
owner
or land transportation operator, as likewise defined herein, or his
employee
in respect of death, bodily injury, or damage to property arising out
of
and in the course of employment.(As
amended by Presidential Decree No. 1814 and 1981).
(d) "Owner"
or "motor vehicle owner" means the actual legal owner of a
motor
vehicle, in whose name such vehicle is duly registered with the Land
Transportation
Commission;
(e) "Land
transportation operator" means the owner or owners of motor
vehicles
for transportation of passengers for compensation, including school
buses;
(f) "Insurance
policy" or "Policy" refers to a contract of insurance
against
passenger and thirty-party liability for death or bodily injuries and
damaged
to property arising from motor vehicle accidents.(As
amended by Presidential Decree No. 1455 and 1814).
Sec. 374. It
shall be unlawful for any land transportation operator or owner of a
motor
vehicle to operate the same in the public highways unless there is in
force
in relation thereto a policy of insurance or guaranty in cash or surety
bond issued in accordance with the provisions of this chapter to
indemnify
the death, bodily injury, and/or damage to property of a third-party or
passenger, as the case may be, arising from the use thereof.(As
amended by Presidential Decree No. 1455 and 1814).
Sec. 375. The
Commissioner shall furnish the Land Transportation Commissioner with a
list of insurance companies authorized to issue the policy of insurance
or surety bond required by this chapter.(As
amended by Presidential Decree No. 1814).
Sec. 376. The
Land Transportation Commission shall not allow the registration or
renewal
of registration of any motor vehicle without first requiring from the
land
transportation operator or motor vehicle owner concerned the
presentation
and filing of a substantiating documentation in a form approved by the
Commissioner evidencing that the policy of insurance or guaranty in
cash
or surety bond required by this chapter is in effect.(As
amended by Presidential Decree No. 1455).
Sec. 377. Every
land transportation operator and every owner of a motor vehicle shall,
before applying for the registration or renewal of registration of any
motor vehicle, at his option, either secure an insurance policy or
surety
bond issued by any insurance company authorized by the Commissioner or
make a cash deposit in such amount as herein required as limit of
liability
for purposes specified in section three hundred seventy-four.
(1) In the case
of a land transportation operator, the insurance guaranty in cash or
surety
bond shall cover liability for death or bodily injuries of
third-parties
and/or passengers arising out of the use of such vehicle in the amount
not less than twelve thousand pesos per passenger or third party and an
amount, for each of such categories, in any one accident of not less
than
that set forth in the following scale:chanroblesvirtuallawlibrary
(a) Motor
vehicles
with an authorized capacity of twenty-six or more passengers: Fifty
thousand
pesos;
(b) Motor
vehicles
with an authorized capacity of from twelve to twenty-five passengers:
Forty
thousand pesos;
(c) Motor
vehicles
with an authorized capacity of from six to eleven passengers: Thirty
thousand
pesos;
(d) Motor
vehicles
with an authorized capacity of five or less passengers: Five thousand
pesos
multiplied by the authorized capacity.
Provided, however,
That
such cash deposit made to, or surety bond posted with, the Commissioner
shall be resorted to by him in cases of accidents the indemnities for
which
to third-parties and/or passengers are not settled accordingly by the
land
transportation operator and, in that event, the said cash deposit shall
be replenished or such surety bond shall be restored with sixty days
after
impairment or expiry, as the case may be, by such land transportation
operator,
otherwise, he shall secure the insurance policy required by this
chapter.
The aforesaid cash deposit may be invested by the Commissioner in
readily
marketable government bonds and/or securities.
(2) In the case
of an owner of a motor vehicle, the insurance or guaranty in cash or
surety
bond shall cover liability for death or injury to third parties in an
amount
not less than that set forth in the following scale in any one accident:chanroblesvirtuallawlibrary
The Commissioner
may, if warranted, set forth schedule of indemnities for the payment of
claims for death or bodily injuries with the coverages set forth herein.
(As amended by Presidential Decree No. 1455 and 1814).
Sec. 378. Any
claim for death or injury to any passenger or third party pursuant to
the
provisions of this chapter shall be paid without the necessity of
proving
fault or negligence of any kind; Provided, That for purposes of this
section:chanroblesvirtuallawlibrary
(i) The total
indemnity in respect of any person shall not exceed five thousand pesos;
(ii) The
following
proofs of loss, when submitted under oath, shall be sufficient evidence
to substantiate the claim:chanroblesvirtuallawlibrary
(a) Police
report of accident; and
(b)
Death certificate
and evidence sufficient to establish the proper payee; or
(c)
Medical
report and evidence of medical or hospital disbursement in respect of
which
refund is claimed;
(iii) Claim
may be made against one motor vehicle only. In the case of an occupant
of a vehicle, claim shall lie against the insurer of the vehicle in
which
the occupant is riding, mounting or dismounting from. In any other
case,
claim shall lie against the insurer of the directly offending vehicle.
In all cases, the right of the party paying the claim to recover
against
the owner of the vehicle responsible for the accident shall be
maintained.
Sec. 379. No land
transportation operator or owner of motor vehicle shall be unreasonably
denied the policy of insurance or surety bond required by this chapter
by the insurance companies authorized to issue the same, otherwise, the
Land Transportation Commission shall require from said land
transportation
operator or owner of the vehicle, in lieu of a policy of insurance or
surety
bond, a certificate that a cash deposit has been made with the
Commissioner
in such amount required as limits of indemnity in section three hundred
seventy-seven to answer for the passenger and/or third-party liability
of such land transportation operator or owner of the vehicle.
No insurance
company may issue the policy of insurance or surety bond required under
this chapter unless so authorized under existing laws.
The authority
to engage in the casualty and/or surety lines of business of an
insurance
company that refuses to issue or renew, without just cause, the
insurance
policy or surety bond therein required shall be withdrawn immediately.(As
amended by Presidential Decree No. 1455 and 1814).
Sec. 380. No
cancellation of the policy shall be valid unless written notice thereof
is given to the land transportation operator or owner of the vehicle
and
to the Land Transportation Commission at least fifteen days prior to
the
intended effective date thereof.
Upon receipt
of such notice, the Land Transportation Commission, unless it receives
evidence of a new valid insurance or guaranty in cash or surety bond as
prescribed in this chapter, or an endorsement of revival of the
cancelled
one, shall order the immediate confiscation of the plates of the motor
vehicle covered by such cancelled policy. The same may be re-issued
only
upon presentation of a new insurance policy or that a guaranty in cash
or surety band has been made or posted with the Commissioner and which
meets the requirements of this chapter, or an endorsement or revival of
the cancelled one.(As
amended by Presidential Decree No. 1455).
Sec. 381. If
the cancellation of the policy or surety bond is contemplated by the
land
transportation operator or owner of the vehicle, he shall, before the
policy
or surety bond ceases to be effective, secure a similar policy of
insurance
or surety bond to replace the policy or surety bond to be cancelled or
make a cash deposit in sufficient amount with the Commissioner and
without
any gap, file the required documentation with the Land Transportation
Commission,
and notify the insurance company concerned of the cancellation of its
policy
or surety bond.(As
amended by Presidential Decree No. 1455).
Sec. 382. In
case of change of ownership of a motor vehicle, or change of the engine
of an insured vehicle, there shall be no need of issuing a new policy
until
the next date of registration or renewal of registration of such
vehicle,
and provided that the insurance company shall agree to continue the
policy,
such change of ownership or such change of the engine shall be
indicated
in a corresponding endorsement by the insurance company concerned, and
a signed duplicate of such endorsement shall, within a reasonable time,
be filed with the Land Transportation Commission.
Sec. 383. In
the settlement and payment of claims, the indemnity shall not be
availed
of by any accident victim or claimant as an instrument of enrichment by
reason of an accident, but as an assistance or restitution insofar as
can
fairly be ascertained.
Sec. 384. Any
person having any claim upon the policy issued pursuant to this Chapter
shall, without any unnecessary delay, present to the insurance company
concerned a written notice of claim setting forth the nature, extent
and
duration of the injuries sustained as certified by a duly licensed
physician.
Notice of claim must be filed within six months from date of accident,
otherwise, the claim shall be deemed waived. Action or suit for
recovery
of damage due to loss or injury must be brought, in proper cases, with
the Commissioner or the Courts within one year from denial of the
claim,
otherwise, the claimant's right of action shall prescribe.(As
amended by Presidential Decree 1814 and Batas Pambansa Blg. 874).
Sec. 385. The
insurance company concerned shall forthwith ascertain the truth and
extent
of the claim and make payment within five working days after reaching
an
agreement. If no agreement is reached, the insurance company shall pay
only the "no-fault" indemnity provided in section three hundred
seventy-eight without prejudice to the claimant from pursuing his claim
further, in which case, he shall not be required or compelled by the
insurance
company to execute any quit claim or document releasing it from
liability
under the policy of insurance or surety bond issued.
(As amended by Presidential Decree No. 1455).
In case of any
dispute in the enforcement of the provisions of any policy issued
pursuant
to this chapter, the adjudication of such dispute shall be within the
original
and exclusive jurisdiction of the Commissioner, subject to the
limitations
provided in section four hundred sixteen.
Sec. 386. It
shall be unlawful for a land transportation operator or owner of motor
vehicle to require his or its drivers or other employees to contribute
in the payment of premiums.
Sec. 387. No
government office or agency having the duty of implementing the
provisions
of this chapter nor any official or employee thereof shall act as agent
in procuring the insurance policy or surety bond provided for herein.
The
commission of an agent procuring the said policy or bond shall in no
case
exceed ten per centum of the amount of the premiums therefor.
Sec. 388. Any
land transportation operator or owner of motor vehicle or any other
person
violating any of the provisions of the preceding sections shall be
punished
by a fine of not less than five hundred pesos but not more than one
thousand
pesos and/or imprisonment for not more than six months. The violation
of
section three hundred seventy-seven by a land transportation operator
shall
be a sufficient cause for the revocation of the certificate of public
convenience
issued by the Board of Transportation covering the vehicle concerned.
Sec. 389. Whenever
any violation of the provisions of this chapter is committed by a
corporation
or association, or by a government office or entity, the executive
officer
or officers of said corporation, association or government office or
entity
who shall have knowingly permitted, or failed to prevent, said
violation
shall be held liable as principals.
Chapter VII
MUTUAL BENEFIT
ASSOCIATIONS AND
TRUSTS FOR
CHARITABLE USES
Title 1
MUTUAL BENEFIT
ASSOCIATIONS
Sec. 390. Any
society, association or corporation, without capital stock, formed or
organized
not for profit but mainly for the purpose of paying sick benefits to
members,
or of furnishing financial support to members while out of employment,
or of paying to relatives of deceased members of fixed or any sum of
money,
irrespective of whether such aim or purpose is carried out by means of
fixed dues or assessments collected regularly from the members, or of
providing,
by the issuance of certificates of insurance, payment of its members of
accident or life insurance benefits out of such fixed and regular dues
or assessments, but in no case shall include any society, association,
or corporation with such mutual benefit features and which shall be
carried
out purely from voluntary contributions collected not regularly and or
no fixed amount from whomsoever may contribute, shall be known as a
mutual
benefit association within the intent of this Code.
Any society,
association, or corporation principally organized as labor union shall
be governed by the Labor
Code notwithstanding any mutual benefit feature provisions in its
charter
as incident to its organization.
In no case
shall a mutual benefit association be organized and authorized to
transact
business as a charitable or benevolent organization, and whenever it
has
this feature as incident to its existence, the corresponding charter
provision
shall be revised to conform with the provision of this section. Mutual
benefit association, already licensed to transact business as
such
on the date this Code becomes effective, having charitable or
benevolent
feature shall abandon such incidental purpose upon effectivity of this
Code if they desire to continue operating as such mutual benefit
associations.
(As amended by Presidential Decree No. 1455).
Sec. 391. A
mutual benefit association, before it may transact as such, must first
secure a license from the Commissioner. The application for such
license
shall be filed with the Commissioner together with certified true
copies
of the articles of incorporation or the constitution and by-laws of the
association, and all amendments thereto, and such other documents or
testimonies
as the Commissioner may require.
No license shall
be granted to a mutual benefit association until the Commissioner shall
have been satisfied by such examination as may make and such evidence
as
he may require that the association is qualified under existing laws to
operate and transact business as such. The Commissioner may refuse to
issue
a license to any mutual benefit association if, in his judgment, such
refusal
will best promote the interest of the members of such association and
of
the people of this country. Any license issued shall expire on the last
day of June of the year following its issuance and, upon proper
application,
may be renewed if the association is continuing to comply with existing
laws, rules and regulations, orders, instructions, rulings and
decisions
of the Commissioner. Every association receiving any such license shall
be subject to the supervision of the Commissioner: Provided,
That
no such license shall be granted to any such association if such
association
has no actuary.
All mutual benefit
association existing and licensed as such under the provisions of
Article
Eight, Chapter Forty-One of the Revised
Administrative Code, as amended by Act No. 3612, shall, upon
effectivity
of this Code, surrender their respective licenses to the Commissioner
and
apply for new licenses under the provisions of this code if they still
desire to continue operating as such mutual benefit associations.
Sec. 392. No
mutual benefit association shall be issued a license to operate as such
unless it has constituted and established a Guaranty Fund by depositing
with the Commissioner an initial minimum amount of ten thousand pesos
in
cash, or in government securities with a total value equal to such
amount,
to answer for any valid benefit claim of any of its members.
All moneys received
by the Commissioner for this purpose must be deposited by him in
interest-bearing
deposits with any bank or banks authorized to transact business in the
Philippines for the account of the particular association constituting
the Guaranty Fund.
Any accrual
to such fund, be it interest earned or dividend additions on moneys or
securities so deposited, may, with the prior approval of the
Commissioner,
be withdrawn by the association if there is no pending benefit claim
against
it, including interest thereon or dividend additions thereto.
The Commissioner,
prior to or after licensing a mutual benefit association, may require
such
association to increase its Guaranty Fund from the initial minimum
amount
required to an amount equal to at least ten per centum of its assets,
if
such assets exceed one hundred thousand pesos, but in no case shall
such
increase exceed the maximum amount of capital investment required of a
domestic insurance company under section two hundred and three of this
Code.(As
amended by Presidential Decree No. 1455).
Sec. 393. Every
mutual benefit association licensed to do business as such shall issue
membership certificates to its members specifying the benefits to which
such members are entitled.
Such certificates,
together with the articles of incorporation of the association or its
constitution
and by-laws, and all existing laws as may be pertinent shall constitute
the agreement, as of the date of its issuance, between the association
and the member. The membership certificate shall be in a form
previously
approved by the Commissioner.
Sec. 394. A
mutual benefit association may, by reinsurance agreement, cede in whole
or in part any individual risk or risks under certificates of insurance
issued by it, only to a life insurance company authorized to transact
business
or to a professional reinsurer authorized to accept life risks in the
Philippines:
Provided,
That copy of the draft of such reinsurance agreement shall be submitted
to the Commissioner for his approval. The association may take credit
for
the reserves on such ceded risks to the extent reinsured.
Sec. 395. The
constitution or by-laws of a mutual benefit association must distinctly
state the purpose for which dues and/or assessments are made and
collected
and the portion thereof which may be used for expenses.
Death benefit
and other relief funds shall be created and used exclusively for paying
benefits due the members under their respective membership
certificates.
A general fund shall likewise be created and used for expenses of
administration
of the association.
Sec. 396. Every
outstanding membership certificate must have, after three full years of
being continuously in force, an equity value equivalent to at least
fifty
per centum of the total membership dues collected thereon.
Sec. 397. Every
mutual benefit association must accumulate and maintain, out of the
periodic
dues collected from its members, sufficient reserves for the payment of
claims or obligations for which it shall hold funds in securities
satisfactory
to the Commissioner consisting of bonds of the Government of the
Philippines,
or any of its political subdivisions and instrumentalities, or in such
other good securities as may be approved by the Commissioner.
The reserve
liability shall be established in accordance with acturial procedures
and
shall be approved by the Commissioner.
The articles
of incorporation or the constitution and by-laws of a mutual benefit
association
must provide that if its reserve as to all or any class of certificates
becomes impaired, its board of directors or trustees may require that
there
shall be paid by the members to the association the amount of the
members'
equitable proportion of such deficiency as ascertained by said board
and
that if the payment be not made it shall stand as an indebtedness
against
the membership certificates of the defaulting members and draw interest
not to exceed five per centum per annum compounded annually.
Sec. 398. A
mutual benefit association may invest such portion of its funds as
shall
not be required to meet pending claims and other obligations in any of
the classes of investments or types of securities in which life
insurance
companies doing business in the Philippines may invest.
It may also
grant loans to members on the security of a pledge or chattel mortgage
of personal properties of the borrowers, or in the absence thereof, on
the security of the membership certificate of the borrowing members, in
which event such loan shall become a first lien on the proceed thereof.
Sec. 399. The
Commissioner or any of his duly designated representatives, shall have
the power of visitation, audit and examination into the affairs,
financial
condition, and methods of doing business of all mutual benefit
associations,
and he shall cause such examination to be made at least once every two
years or whenever it may be deemed proper and necessary. Free access to
the books, records and documents of the association shall be accorded
to
the Commissioner, to his representatives, in such manner that the
Commissioner
or his representatives may readily verify or determine the true
affairs,
financial condition, and method of doing business of such association.
In the course of such examination, the Commissioner or his duly
designated
representatives shall have authority to administer oaths and take
testimony
or other evidence on any matter relating to the affairs of the
association.
All minutes
of the proceedings of the board of directors or trustees of the
association,
and those of the regular or special meetings of the members, shall be
take,
and a copy thereof, in English or in Pilipino, shall be submitted to
the
Commissioner's representatives or examiners in the course of such
examination.
A copy of the
findings of such examination, together with the recommendations of the
Commissioner, shall be furnished the association for its information
and
compliance, and the same shall be taken up immediately in the meetings
of the board of directors or trustees and of the members of the
association.
Sec. 400. Every
mutual benefit association shall, annually on or before the thirtieth
day
of April of each year, render to the Commissioner an annual statement
in
such form and details as may be prescribed by the Commissioner, signed
and sworn to by the president, secretary, treasurer, and actuary of the
association, showing the exact condition of its affairs on the
preceding
thirty-first day of December.
Sec. 401. No
money, aid or benefit to be paid, provided or tendered by any mutual
benefit
association, shall be liable to attachment, garnishment, or other
process,
or be seized, taken, appropriated, or applied by any legal or equitable
process to pay any debt of liability of a member or beneficiary, or any
other person who may have a right thereunder, either before or after
payment.
Sec. 402. Any
member of a mutual benefit association shall have the right at all
times
to change the beneficiary or beneficiaries or add another beneficiary
or
other beneficiaries in accordance with the rules and regulations of the
association unless he has expressly waived this right in the membership
certificate. Every association may, under such rules as it may adopt,
limit
the scope of beneficiaries and provide that no beneficiary shall have
or
obtain any vested interest in the proceeds of any certificate until the
certificate has become due and payable under the terms of the
membership
certificate.
Sec. 403. Any
chapter affiliate independently licensed as a mutual benefit
association
may consolidate or merge with any other similar chapter affiliate or
with
the mother association.
Sec. 404. Any
mutual benefit association may be converted into and licensed as a
mutual
life insurance company by complying with the requirements of the
pertinent
provisions of this Code and submitting the specific plan for such
conversion
to the Commissioner for his approval. Such plan, as approved, shall
then
be submitted to the members either in the regular meeting or in a
special
meeting called for the purpose for their adoption. The affirmative vote
of at least two-thirds of all the members shall be necessary in order
to
consider such plan as adopted.
No such conversion
shall take effect unless and until approved by the Commissioner.
Sec. 405. No
mutual benefit association shall be dissolved without first notifying
the
Commissioner and furnishing him with a certified copy of the resolution
authorizing the dissolution, duly adopted by the affirmative vote of
two-thirds
of the members at a meeting called for that purpose, the financial
statements
as of the date of the resolution, and such other papers or documents as
may be required by the Commissioner.
No dissolution
shall proceed until and unless approved by the Commissioner and all
proceedings
in connection therewith shall be witnessed and attested by his duly
designated
representative.
No mutual benefit
association shall be officially declared as dissolved until after the
Commissioner
so certifies that all outstanding claims against the association have
been
duly settled and liquidated.
Sec. 406. The
Commissioner shall after notice and hearing, have the power either to
suspend
or revoke the licensed issued to a mutual benefit association if he
finds
that the association has:chanroblesvirtuallawlibrary
(a) failed
to comply with any provision of this Code;
(b) failed
to
comply with any other law or regulation obligatory upon it;
(c) failed
to
comply with any order, ruling, instruction, requirement, or
recommendation
of the Commissioner;
(d)
exceeded
its power to the prejudice of its members;
(e)
conducted
its business fraudulently or hazardously;
(f)
rendered
its affairs and condition to one of insolvency; or
(g) failed
to
carry out its aims and purposes for which it was organized due to any
cause.
After receipt of
the order from the Commissioner suspending or revoking the license, the
association must immediately exert efforts to remove such cause or
causes
which brought about the order, and, upon proper showing, may apply with
the Commissioner for the lifting of the order and restoration or
revival
of the license so revoked or suspended.
Sec. 407. For
failure to remove such cause or causes which brought about the
suspension
or revocation of the license of a mutual benefit association, the
Commissioner
shall apply under this Code for an order from the proper court to
liquidate
such association.
The provisions
of titles fourteen and fifteen, chapter three, pertaining to the
appointment
of a conservator and proceedings upon insolvency of an insurance
company,
shall, insofar as practicable, apply to mutual benefit associations.
Sec. 408. To
secure the enforcement of any provision under this title, the
Commissioner
may issue such rules, rulings, instructions, orders and circulars,
subject
to the approval of the Secretary of Finance.
Sec. 409. The
violation of any provision of this title shall subject the person
violating
or the officer of the association responsible therefor to a fine of not
exceeding one thousand pesos, or imprisonment of not exceeding three
years,
or both such fine and imprisonment, at the discretion of the court.
Title 2
TRUSTS FOR
CHARITABLE USES
Sec. 410. The
term "trust for charitable uses", within the intent of this
Code,
shall include, all the real or personal properties or funds, as well as
those acquired with the fruits or income therefrom or in exchange or
substitution
thereof, given to or received by any person, corporation, association,
foundation, or entity, except the National Government, its
instrumentalities
or political subdivisions, for charitable, benevolent, educational,
pious,
religious, or other uses for the benefit of the public at large or a
particular
portion thereof or for the benefit of an indefinite number of persons.
Sec. 411. The
term "trustee" shall include any individual, corporation,
association,
foundation, or entity, except the National Government, its
instrumentalities
or political subdivisions, in charge of, or acting for, or concerned
with
the administration of, the trust referred to in the section immediately
preceding and with the proper application of trust property.
Sec. 412. The
term "trust property" shall include all real or personal
properties
or funds pertaining to the trust as well as those acquired with the
fruits
or income therefrom or in exchange or substitution thereof.
Sec. 413. All
trustees shall, before entering in the performance of the duties of
their
trust, obtain a certificate of registration from the Commissioner.
Trustees who
are already discharging the duties of their trust on the date this Code
becomes effective may continue as such, subject to the provisions of
this
Code.
All provisions
of this Code governing mutual benefit associations and such other
provisions
herein, whenever practicable and necessary, shall be applicable to
trusts
for charitable uses.
Chapter VIII
THE INSURANCE
COMMISSIONER
Title 1
ADMINISTRATIVE
AND ADJUDICATORY POWERS
Sec. 414. The
Insurance Commissioner shall have the duty to see that all laws
relating
to insurance, insurance companies and other insurance matters, mutual
benefit
associations, and trusts for charitable uses are faithfully executed
and
to perform the duties imposed upon him by this Code, and shall,
notwithstanding
any existing laws to the contrary, have sole and exclusive authority to
regulate the issuance and sale of variable contracts as defined in
section
two hundred thirty-two and to provide for the licensing of persons
selling
such contracts, and to issue such reasonable rules and regulations
governing
the same.
The Commissioner
may issue such rulings, instructions, circulars, orders and decision as
he may deem necessary to secure the enforcement of the provisions of
this
Code, subject to the approval of the Secretary of Finance. Except as
otherwise
specified, decisions made by the Commissioner shall be appealable to
the
Secretary of Finance.
Sec. 415. In
addition to the administrative sanctions provided elsewhere in this
Code,
the Insurance Commissioner is hereby authorized, at his discretion, to
impose upon the insurance companies, their directors and/or officers
and/or
agents, for any willful failure or refusal to comply with, or violation
of any provision of this Code, or any order, instruction, regulation,
or
ruling of the Insurance Commissioner, or any commission or
irregularities,
and/or conducting business in an unsafe or unsound manner as may be
determined
by the Insurance Commissioner, the following:chanroblesvirtuallawlibrary
(a) fines not
in excess of five hundred pesos a day; and
(b)
suspension,
or after due hearing, removal of directors and/or officers and/or
agents.
Sec. 416. The Commissioner
shall have the power to adjudicate claims and complaints involving any
loss, damage or liability for which in insurer may be answerable under
any kind of policy or contract of insurance, or for which such insurer
may be liable under a contract of suretyship, or for which a reinsurer
may be sued under any contract of reinsurance it may have entered into;
or for which a mutual benefit association may be held liable under the
membership certificates it has issued to its members, where the amount
of any such loss, damage or liability, excluding interest, cost and
attorney's
fees, being claimed or sued upon any kind of insurance, bond,
reinsurance
contract, or membership certificate does not exceed in any single claim
one hundred thousand pesos.
The insurer
or surety may, in the same action file a counterclaim against the
insured
or the obligee.
The insurer
or surety may also file a cross-claim against a party for any claim
arising
out of the transaction or occurrence that is the subject matter of the
original action or of a counterclaim therein.
With leave of
the Commissioner, an insurer or surety may file a third-party complaint
against its reinsurers for indemnification, contribution, subrogation
or
any other relief, in respect of the transaction that is the subject
matter
of the original action filed with the Commissioner.
The party filing
an action pursuant to the provisions of this section thereby submits
his
person to the jurisdiction of the Commissioner. The Commissioner shall
acquire jurisdiction over the person of the impleaded party or parties
in accordance with and pursuant to the provisions of the Rules
of Court.
The authority
to adjudicate granted to the Commissioner under this section shall be
concurrent
with that of the civil courts, but the filing of a complaint with the
Commissioner
shall preclude the civil courts from taking cognizance of a suit
involving
the same subject matter.
Any decision,
order or ruling rendered by the Commissioner after a hearing shall have
the force and effect of a judgment. Any party may appeal from a final
order,
ruling or decision of the Commissioner by filing with the Commissioner
within thirty days from receipt of copy of such order, ruling or
decision
a notice of appeal to the Intermediate Appellate Court in the manner
provided
for in the Rules
of
Court for appeals from the Regional Trial Court to the Intermediate
Appellate Court.(As
amended by Batas Pambansa Blg. 874).
As soon as a
decision, order or ruling has become final and executory, the
Commissioner
shall motu proprio or on motion of the interested party, issue
a
writ of execution requiring the sheriff or the proper officer to whom
it
is directed to execute said decision, order or award, pursuant to Rule
thirty-nine of the Rules
of Court.
For the purpose
of any proceeding under this section, the Commissioner, or any officer
thereof designated by him, empowered to administer oaths and
affirmation,
subpoena witnesses, compel their attendance, take evidence, and require
the production of any books, papers, documents, or contracts or other
records
which are relevant or material to the inquiry. In case of contumacy by,
or refusal to obey a subpoena issued to any person, the Commissioner
may
invoke the aid of any court of first instance within the jurisdiction
of
which such proceeding is carried on, where such person resides or
carries
on his own business, in requiring the attendance and testimony of
witnesses
and the production of books, papers, documents, contracts or other
records.
And such court may issue an order requiring such person to appear
before
the Commissioner, or officer designated by the Commissioner, there to
produce
records, if so ordered or to give testimony touching the matter in
question.
Any failure to obey such order of the court may be published by such
court
as a contempt thereof.
A full and complete
record shall be kept of all proceedings had before the commissioner, or
the officers thereof designated by him, and all testimony shall be
taken
down and transcribed by a stenographer appointed by the Commissioner.
A transcribed
copy of the evidence and proceeding, or any specific part thereof, of
any
hearing taken by a stenographer appointed by the Commissioner, being
certified
by such stenographer to be a true and correct transcript of the
testimony
on this hearing of a particular witness, or of a specific proof
thereof,
carefully compared by him from his original notes, and to be a correct
statement of evidence and proceeding had in such hearing so purporting
to be taken and subscribed, may be received as evidence by the
Commissioner
and by any court with the same effect as if such stenographer were
present
and testified to the facts so certified.
(As amended by Presidential Decree No. 1455).
Title 2
FEES AND OTHER
SOURCES OF FUNDS
Sec. 417. (1)
For the issuance or renewal of certificates of authority, licenses and
certificates of registration, pursuant to pertinent provisions of this
Code, the Commissioner shall collect and receive fees which shall be
not
less than the following:chanroblesvirtuallawlibrary
For each
certificate
of authority issued to an insurance company doing business in the
Philippines,
two hundred pesos.
For each
special
certificate of authority issued to a servicing insurance company, one
hundred
pesos.
For each
license
issued to a general agent of an insurance company, fifty pesos.
For each
license
issued to an insurance agent, twenty-five pesos.
For each
license
issued to an agent of variable contract policy, twenty-five pesos.
For each
license
issued to an insurance broker, one hundred pesos.
For each
license
issued to an reinsurance broker, one hundred pesos.
For each
license
issued to an insurance adjuster, one hundred pesos.
For each
certificate
of registration issued to an actuary, fifty pesos.
For each
certificate
of registration issued to a resident agent, fifty pesos.
For each
license
issued to a rating organization, one hundred pesos.
For each
certificate
of registration issued to a non-life company underwriter, fifty pesos.
For each
license
issued to a mutual benefit association, ten pesos.
For each
certificate
of registration issued to a trust for charitable uses, ten pesos.
All certificates
of authority and all other licenses, as well as all certificates of
registration,
issued to any person, partnership, association or corporation under the
pertinent provisions of this Code for which no expiration date has been
prescribed, shall expire on the last day of June of each year and shall
be renewed annually upon application therefor and payment of the
corresponding
fee, if the licensee or holder of such license or certificate is
continuing
to comply with all the applicable provisions of existing laws, and of
rules,
instructions, orders and decisions of the Commissioner.
(2) For the
filing of the annual statement referred to in section two hundred
twenty-three,
the Commissioner shall collect and receive from the insurance company
so
filing a fee of five hundred pesos: Provided, That a fine of
one
hundred pesos shall be imposed and collected by the Commissioner for
each
week of delay, or any fraction thereof, in the filing of the annual
statement.
For the filing
of annual statement referred to in section four hundred, the
Commissioner
shall collect and receive from the mutual benefit association so filing
a fee of ten pesos: Provided, That a fine of ten pesos shall be
imposed and collected by the Commissioner for each week of delay, or
any
fraction thereof, in the filing of the annual statement.
(3) For the
examination prescribed in section two hundred forty-six, the
Commissioner
shall collect and receive fees according to the amount of its total
assets,
in the case of a domestic company, or of its assets in the Philippines,
in the case of a foreign company, as follows:chanroblesvirtuallawlibrary
(a) Two
million
pesos or more but less than four million pesos, Four hundred pesos;
(b) Four
million
pesos or more but less than six million pesos, Eight hundred pesos;
(c) Six
million
pesos or more but less than eight million pesos, One thousand two
hundred
pesos;
(d) Eight
million
pesos or more but less than ten million pesos, One thousand six hundred
pesos;
(e) Ten
million
pesos or more, Two thousand pesos;
Provided,
That if the said examination is made in places outside the Metropolitan
Manila area, besides these fees, the Commissioner shall require of the
company examined the payment of the actual and necessary travelling and
subsistence expenses of the examiner or examiners concerned.
For the examination
prescribed in section three hundred ninety-nine, the Commissioner shall
collect and receive a minimum fee of one hundred pesos from the mutual
benefit association examined: Provided, That if such
association
has total assets of more than one hundred thousand pesos, an additional
fee of ten pesos for every fifty thousand pesos in excess thereof shall
be imposed: Provided, further, That such fee shall not exceed
two
thousand pesos.
(4) For the
filing of an application to withdraw from the Philippines under title
eighteen,
the Commissioner shall collect and receive from the foreign company so
withdrawing a fee of one thousand pesos.
(5) The Commissioner
may fix and collect fees or charges for documents, transcripts, or
other
materials which may be furnished by him not in excess of reasonable
cost.(As
amended by Presidential Decree No. 1455).
Sec. 418. If
the total expenses of the Insurance Commissioner for every fiscal year
exceed the aggregate amount of the fees collected under the pertinent
provisions
of this Code, the excess shall be charged against the Insurance Fund,
which
shall hereafter be created out of the proceeds of taxes on insurance
premiums
mentioned in section two hundred fifty-five of the National
Internal Revenue Code, as amended: Provided, however, That
pending
the creation of said Insurance Fund, the provisions of section two,
three
and four of Republic Act Numbered Two Hundred Seventy-Five, shall
continue
to remain in force and effect.
MISCELLANEOUS
PROVISIONS
Sec. 419. Any
person, company or corporation subject to the supervision and control
of
the Commissioner who violates any provision of this Code, for which no
penalty is provided, shall be deemed guilty of a penal offense, and
upon
conviction be punished by a fine not exceeding ten thousand pesos or
imprisonment
of six months, or both, at the discretion of the court.
If the offense
is committed by a company or corporation, the officers, directors, or
other
persons responsible for its operation, management, or administration,
unless
it can be proved that they have taken no part in the commission of the
offense, shall likewise be guilty of a penal offense, and upon
conviction
be punished by a fine not exceeding ten thousand pesos or imprisonment
of six months, or both, at the discretion of the court.
Sec. 420. All
criminal actions for the violation of any of the provisions of this
Code
shall prescribed after three years from the discovery of such
violation:
Provided,
That such actions shall in any event prescribe after ten years from the
commission of such violation.
Sec. 421. Any
person, partnership, association or corporation heretofore authorized,
licensed or registered by the Insurance Commissioner shall be deemed to
have been authorized, licensed or registered under the provisions of
this
Code and shall be governed by the provisions thereof: Provided,
however,
That
where any such person, partnership, association or corporation is
affected
by the new requirements of this Code, said person, partnership
association
or corporation shall, unless otherwise herein provided, be given a
period
of one year from the effectivity of this Code within which to comply
with
the same.
Sec. 422. Except
as expressly provided by this Code, all laws or parts thereof
inconsistent
with any provision of this Code shall be deemed repealed.
Sec. 423. Should
any provisions of this Code or any part thereof be declared invalid,
the
other provisions, so far as they are separable from the invalid ones,
shall
remain in force.
Sec. 424. This
Code shall take effect immediately.
DONE in the City of Manila, this 18th day of December, in the year of
Our
Lord, nineteen hundred and seventy-four.
FERDINAND
E. MARCOS
President
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