REINSURANCE insured will suffer a loss when it will be

required to pay the original insured.

Sec. 95. A contract of reinsurance is The risk of damage to the property
one by which an insurer procures a insured by the insurer is not assumed
third person to insure him against loss by the reinsurer although the same
or liability by reason of such original damage tirggers the liability of the
insurance. reinsurer.

Sec. 96. Where an insurer obtains Parties

reinsurance, except under automatic Reinsured or the ceding company or
reinsurance treaties, he must the directwriting company and the
communicate all the representations reinsurer.
of the original insured, and also all the
knowledge and information he No privity between the insured and
possesses, whether previously or the reinsurer.
subsequently acquired, which are
material to the risk. But the Insured may be allowed to
directly sue the reinsurer if the
Sec. 97. A reinsurance is presumed to reinsurance policy contains a
be a contract of indemnity against stipulation Pour autrui. The stipulation
liability, and not merely against must be clear and unmistakable.
damage.
Reinsurer is also not a party in an
Sec. 98. The original insured has no action against the insurer by the
interest in a contract of reinsurance. insured. But it may have the same
recourse to the defenses of the
Reinsurance-Defined as an agreement reinsured.
between two parties called the
reinsured (Ceding company) and Assignment. The insured may also
reinsurer, respectively. Whereby the sue the reinsurer if the insurer
reinsurer agrees to accept a certain assigned ths the proceeds of the
fixed share of the reinsured’s risk reinsurance policies to the original
upon terms set out in the agreement. insured.
The original insurer who, having
issued a policy to an insured to cover Double Reinsurance
a certain risk desires to relieve itself of insurance
part therof. It cannot exist without Insurer remains in Insurer becomes
original insurance. such capacity only an insured in the
insurance policy
NATURE There is only one There are two
Presumed to be a contract of insured separate insured
indemnity against liability and not The subject The subject
merely against damage. The peril matter is the matter is the
insured against is the risk that the property insured property of the
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 insured 2. Reinsureanc enables insurers to
The same interest Involves separate have a single risk capacity to
is insured interests accommodate policies of large
Same peril is Different perils amounts with the knowledge
insured against in insured against in that they can protect
different policies separate policies themselves against staggering
losses by adjusting risks in such
Reinsurance Co-insurance a manner as to reduce the
Two separate There is only one probability of serious inroad into
contracts are contract their capital and surplus.
involved
The liability is The obligation on KINDS
fixed in a the part of the
separate contract insured is fixed by Facultative reinsurance and
between different law or in a clause Automatic Treaty
parties stipulated upon
The insured will The insured will Facultative Reinsurance. Optional
not shoulder part sahere the loss and case to case . Reinsurer is under
of the loss contemplated by no obligation to accept the insurance.
contemplated by the original Reinsurance contract may be made to
the insurance contract fit a particular case.
contract Each risk to be reinsured is
Not mandated by Is provided by law individually offered to and accepted by
law in marine in marine or declined by the reinsurer.
insurance insurance Facultative means the reinsurer may
accept or not accept participation in
Function. The primary function of the risk insured. But once accepted,
reinsurance is to absorb those surplus the obligation is absoluite.
amounts on each risk accepted by the
reinsured which go beyond what it can Treaty. Automatic treaty- involves a
safely retain for its own account. Is a prior agreement between the insurer
method whereby an original insurer and the reinsurer that the reinsurer is
distributes its risks by giving off the compelled to accept what is being
whole or some portion thereof to ceded by the insurer.
another insurer with the object of
reducing the amount of its possible 1. Quota-Share. The insurer and
loss. the reinsurer agree to share
losses and premiums based on
Significant functions some proportion.
1. Gives insurers benefit of greater 2. Surplus share treaty- reinsurer
stability resulting from a accepts in excess of the ceding
widespread business. In company’s retention limit up to
catastrophic losses, the a maximum amount.
reinsured is protected.
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 3. Excess of loss treaty- Losses in of the original insured, and also all the
excess of the retention limit are knowledge and information he
paid by the reinsurer up to possesses, whether previously or
some maximum limit subsequently acquired, which are
4. Reinsurance pool – organization material to the risk.
of insurers that underwrites
reinsurance ona a joint basis. In facultative reinsurance the ceding
company must communicate
Insurable interest of reinsured. The 1. The representation of the
fact that the reinsured has issued the original insured
original policy and accepted liability to 2. And the knowledge and
its original insured. information he possesses
whether previously or
The reinsurer is obligated to pay the subsequently acquired.
insurer or ceding company the
moment the latter is exposed to Duty to communicate in a treaty
liability.
In the treaty the reinsurer will no
Measure of liability. The reinsurance longer decide whether or not to accept
cannot exceed the amount of the the contract of insurance. The
liability of the insurer under the representations or other information
orginal policy. The limit is the extent need not be disclosed by the insurer
of the liability of the reinsured. because the reinsurer is compelled to
Contract of indemnity. accept what is being ceded.
1. Insurer has duty to maintain
GOOD Faith. Ubirrimae fidae. good faith and disclose
Foundation of reinsurance information of all material facts
in the negotiations leading up to
1. Full information so far as the completion of the contract.
possessed by the reinsured as 2. Before entering into a treaty,
to the risk on which the the reinsurer is necessarily
reinsurance is requested. interested in acquiring general
2. Full information as to the knowledge of the reinsured and
amount retained by the must give information that
reinsured on the identical relates to :
property which the reinsurance a. Standing and reputation
is requested. of the reinsured
b. The experience and
Duty to communicate quality of its
management
Sec. 96. Where an insurer obtains c. The general underwriting
reinsurance, except under automatic policy of the reinsured
reinsurance treaties, he must d. The company’s retention
communicate all the representations and their relationship

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 with the total premium interests and all other kinds of
income. property and interests therein, in
e. The different areas from respect to, appertaining to or in
which the business is connection with any and all risks or
derived. perils of navigation, transit or
Bordereau. Shows loss history transportation, or while being
premium history with respect to assembled, packed, crated, baled,
specific risks. The reinsurer uses this compressed or similarly prepared for
information to establish the shipment or while awaiting shipment,
reinsurance premium. or during any delays, storage,
transhipment, or reshipment incident
Cancellation. Same causes of thereto, including war risks, marine
cancellation as ordinary insurance builder's risks, and all personal
policies. Eg. Non-payment of premium property floater risks;
or material misrepresentation or fraud.
(b) Person or property in
Cancellation of a reinsurance treaty connection with or appertaining to a
does not automatically result in the marine, inland marine, transit or
cancellation of the reinsurance transportation insurance, including
contracts entered in pursuant thereto. liability for loss of or damage arising
Reinsurance contracts may continue out of or in connection with the
despite the cancellation of the treaty. construction, repair, operation,
maintenance or use of the subject
Marine Insurance. matter of such insurance (but not
including life insurance or surety
Has not unified conception bonds nor insurance against loss by
reason of bodily injury to any person
Title I arising out of ownership, maintenance,
MARINE INSURANCE or use of automobiles);

Sub-Title 1- A (c) Precious stones, jewels,

DEFINITION jewelry, precious metals, whether in
course of transportation or otherwise;
Sec. 99. Marine Insurance includes:
(d) Bridges, tunnels and other
(1) Insurance against loss of or instrumentalities of transportation and
damage to: communication (excluding buildings,
their furniture and furnishings, fixed
(a) Vessels, craft, aircraft, contents and supplies held in storage);
vehicles, goods, freights, cargoes, piers, wharves, docks and slips, and
merchandise, effects, disbursements, other aids to navigation and
profits, moneys, securities, choses in transportation, including dry docks
action, evidences of debts, valuable and marine railways, dams and
papers, bottomry, and respondentia

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appurtenant facilities for the control of and or the nature of water
waterways. being navigated
(2) "Marine protection and 2. Builder’s risk policy- relates to
indemnity insurance," meaning the construction conversion and
insurance against, or against legal repair of the hull.
liability of the insured for loss, 3. Port risk only policy – covers
damage, or expense incident to perils to which the vessel might
ownership, operation, chartering, be exposed while in port
maintenance, use, repair, or including fire, collision or
construction of any vessel, craft or damage while being transferred
instrumentality in use of ocean or from one dock to another
inland waterways, including liability of 4. Fleet policies- insurance covers
the insured for personal injury, illness a fleet of ships
or death or for loss of or damage to 5. Full form policies- covers both
the property of another person. total and partial loss
6. Total Loss only policy - insures
Kinds of marine insurance only total loss and resorted to
for the purpose of obtaining
1. Ocean marine insurance favorable premium rate
2. Inland marine insurance.
Against Liability
May also include Aircraft hull policy 1. Running down clause – insures
which is a type of aviation insurance. in case of collision
2. Marine protection and
OCEAN MARINE INSURANCE indemnity insurance- agains
legal liability of the insured for
1. Insurance over the vessel, craft loss damage or expense
and other conveyances incident to ownership operation,
2. Insurance for the protection of charterin, maintenance, use,
the carrier against liability to repair or construction
others for loss or damage to the 3. Excess protection- Covers
property of another excess of limited liability rule.
3. Insurance over cargoes that are 4. Water pollution – water pollution
being transported cases
4. Insurance over freight and
income OVER cargo. Aginst loss or damages.
Depending upon if on river, lake,
Insurance over the Vessel coastwise or international
1. Trip or single risk – Particular
1. Hull policies – insurance for the shipment of goods
loss or damage to the vessel 2. Open Cargo – insures all of its
and which are further classified shipments, irrespective of rout,
according to the type of vessel time of shipment or class of
approved vessel

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 3. contract for putting them on board,
and both ship and goods are ready for
the specified voyage.
Sub-Title 1-B
INSURABLE INTEREST Sec. 105. One who has an interest in
the thing from which profits are
Sec. 100. The owner of a ship has in expected to proceed has an insurable
all cases an insurable interest in it, interest in the profits.
even when it has been chartered by
one who covenants to pay him its Sec. 106. The charterer of a ship has
value in case of loss: Provided, That in an insurable interest in it, to the
this case the insurer shall be liable for extent that he is liable to be damnified
only that part of the loss which the by its loss.
insured cannot recover from the
charterer. Sub-Title 1-C
CONCEALMENT
Sec. 101. The insurable interest of the
owner of the ship hypothecated by Sec. 107. In marine insurance each
bottomry is only the excess of its party is bound to communicate, in
value over the amount secured by addition to what is required by section
bottomry. twenty-eight, all the information which
he possesses, material to the risk,
Sec. 102. Freightage, in the sense of a except such as is mentioned in Section
policy of marine insurance, signifies all thirty, and to state the exact and
the benefits derived by the owner, whole truth in relation to all matters
either from the chartering of the ship that he represents, or upon inquiry
or its employment for the carriage of discloses or assumes to disclose.
his own goods or those of others.
Sec. 108. In marine insurance,
Sec. 103. The owner of a ship has an information of the belief or
insurable interest in expected expectation of a third person, in
freightage which according to the reference to a material fact, is
ordinary and probable course of things material.
he would have earned but for the
intervention of a peril insured against Sec. 109. A person insured by a
or other peril incident to the voyage. contract of marine insurance is
presumed to have knowledge, at the
Sec. 104. The interest mentioned in time of insuring, of a prior loss, if the
the last section exists, in case of a information might possibly have
charter party, when the ship has reached him in the usual mode of
broken ground on the chartered transmission and at the usual rate of
voyage. If a price is to be paid for the communication.
carriage of goods it exists when they
are actually on board, or there is some

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Sec. 110. A concealment in a marine marine insurance, a warranty is
insurance, in respect to any of the implied that the ship is seaworthy.
following matters, does not vitiate the
entire contract, but merely exonerates Sec. 114. A ship is seaworthy when
the insurer from a loss resulting from reasonably fit to perform the service
the risk concealed: and to encounter the ordinary perils of
the voyage contemplated by the
(a) The national character of the parties to the policy.
insured;
Sec. 115. An implied warranty of
(b) The liability of the thing insured seaworthiness is complied with if the
to capture and detention; ship be seaworthy at the time of the of
commencement of the risk, except in
(c) The liability to seizure from the following cases:
breach of foreign laws of trade;
(a) When the insurance is made for
(d) The want of necessary a specified length of time, the implied
documents; warranty is not complied with unless
the ship be seaworthy at the
(e) The use of false and simulated commencement of every voyage it
papers. undertakes during that time;

Sub-Title 1-D (b) When the insurance is upon the

REPRESENTATION cargo which, by the terms of the
policy, description of the voyage, or
Sec. 111. If a representation by a established custom of the trade, is to
person insured by a contract of marine be transhipped at an intermediate
insurance, is intentionally false in any port, the implied warranty is not
material respect, or in respect of any complied with unless each vessel upon
fact on which the character and nature which the cargo is shipped, or
of the risk depends, the insurer may transhipped, be seaworthy at the
rescind the entire contract. commencement of each particular
voyage.
Sec. 112. The eventual falsity of a
representation as to expectation does Sec. 116. A warranty of seaworthiness
not, in the absence of fraud, avoid a extends not only to the condition of
contract of marine insurance. the structure of the ship itself, but
requires that it be properly laden, and
Sub-Title 1-E provided with a competent master, a
IMPLIED WARRANTIES sufficient number of competent
officers and seamen, and the requisite
Sec. 113. In every marine insurance appurtenances and equipment, such
upon a ship or freight, or freightage, or as ballasts, cables and anchors,
upon any thing which is the subject of cordage and sails, food, water, fuel

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and lights, and other necessary or insured in one which conforms to the
proper stores and implements for the course of sailing fixed by mercantile
voyage. usage between those places.

Sec. 117. Where different portions of Sec. 122. If the course of sailing is not
the voyage contemplated by a policy fixed by mercantile usage, the voyage
differ in respect to the things requisite insured by a marine insurance policy
to make the ship seaworthy therefor, a is that way between the places
warranty of seaworthiness is complied specified, which to a master of
with if, at the commencement of each ordinary skill and discretion, would
portion, the ship is seaworthy with mean the most natural, direct and
reference to that portion. advantageous.

Sec. 118. When the ship becomes Sec. 123. Deviation is a departure
unseaworthy during the voyage to from the course of the voyage insured,
which an insurance relates, an mentioned in the last two sections, or
unreasonable delay in repairing the an unreasonable delay in pursuing the
defect exonerates the insurer on ship voyage or the commencement of an
or shipowner's interest from liability entirely different voyage.
from any loss arising therefrom.
Sec. 124. A deviation is proper:
Sec. 119. A ship which is seaworthy for
the purpose of an insurance upon the (a) When caused by circumstances
ship may, nevertheless, by reason of over which neither the master nor the
being unfitted to receive the cargo, be owner of the ship has any control;
unseaworthy for the purpose of the
insurance upon the cargo. (b) When necessary to comply with
a warranty, or to avoid a peril,
Sec. 120. Where the nationality or whether or not the peril is insured
neutrality of a ship or cargo is against;
expressly warranted, it is implied that
the ship will carry the requisite (c) When made in good faith, and
documents to show such nationality or upon reasonable grounds of belief in
neutrality and that it will not carry any its necessity to avoid a peril; or
documents which cast reasonable
suspicion thereon. (d) When made in good faith, for
the purpose of saving human life or
Sub-Title 1-F relieving another vessel in distress.
THE VOYAGE AND DEVIATION
Sec. 125. Every deviation not specified
Sec. 121. When the voyage in the last section is improper.
contemplated by a marine insurance
policy is described by the places of Sec. 126. An insurer is not liable for
beginning and ending, the voyage any loss happening to the thing

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insured subsequent to an improper raise this presumption depends on the
deviation. circumstances of the case.

Sub-Title 1-G Sec. 133. When a ship is prevented, at

LOSS an intermediate port, from completing
the voyage, by the perils insured
Sec. 127. A loss may be either total or against, the liability of a marine
partial. insurer on the cargo continues after
they are thus reshipped.
Sec. 128. Every loss which is not total Nothing in this section shall prevent
is partial. an insurer from requiring an additional
premium if the hazard be increased by
Sec. 129. A total loss may be either this extension of liability.
actual or constructive.
Sec. 134. In addition to the liability
Sec. 130. An actual total loss is cause mentioned in the last section, a
by: marine insurer is bound for damages,
expenses of discharging, storage,
(a) A total destruction of the thing reshipment, extra freightage, and all
insured; other expenses incurred in saving
cargo reshipped pursuant to the last
(b) The irretrievable loss of the section, up to the amount insured.
thing by sinking, or by being broken Nothing in this or in the preceding
up; section shall render a marine insurer
liable for any amount in excess of the
(c) Any damage to the thing which insured value or, if there be none, of
renders it valueless to the owner for the insurable value.
the purpose for which he held it; or
Sec. 135. Upon an actual total loss, a
(d) Any other event which person insured is entitled to payment
effectively deprives the owner of the without notice of abandonment.
possession, at the port of destination,
of the thing insured. Sec. 136. Where it has been agreed
that an insurance upon a particular
Sec. 131. A constructive total loss is thing, or class of things, shall be free
one which gives to a person insured a from particular average, a marine
right to abandon, under Section one insurer is not liable for any particular
hundred thirty-nine. average loss not depriving the insured
of the possession, at the port of
Sec. 132. An actual loss may be destination, of the whole of such thing,
presumed from the continued absence or class of things, even though it
of a ship without being heard of. The becomes entirely worthless; but such
length of time which is sufficient to insurer is liable for his proportion of all

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general average loss assessed upon value of the thing abandoned or a risk
the thing insured. which a prudent man would not take
under the circumstances; or
Sec. 137. An insurance confined in
terms to an actual loss does not cover (d) If the thing insured, being
a constructive total loss, but covers cargo or freightage, and the voyage
any loss, which necessarily results in cannot be performed, nor another ship
depriving the insured of the procured by the master, within a
possession, at the port of destination, reasonable time and with reasonable
of the entire thing insured. diligence, to forward the cargo,
without incurring the like expense or
Sub-Title 1-H risk mentioned in the preceding sub-
ABANDONMENT paragraph. But freightage cannot in
any case be abandoned unless the
Sec. 138. Abandonment, in marine ship is also abandoned.
insurance, is the act of the insured by
which, after a constructive total loss, Sec. 140. An abandonment must be
he declares the relinquishment to the neither partial nor conditional.
insurer of his interest in the thing
insured. Sec. 141. An abandonment must be
made within a reasonable time after
Sec. 139. A person insured by a receipt of reliable information of the
contract of marine insurance may loss, but where the information is of a
abandon the thing insured, or any doubtful character, the insured is
particular portion thereof separately entitled to a reasonable time to make
valued by the policy, or otherwise inquiry.
separately insured, and recover for a
total loss thereof, when the cause of Sec. 142. Where the information upon
the loss is a peril insured against: which an abandonment has been
made proves incorrect, or the thing
(a) If more than three-fourths insured was so far restored when the
thereof in value is actually lost, or abandonment was made that there
would have to be expended to recover was then in fact no total loss, the
it from the peril; abandonment becomes ineffectual.

(b) If it is injured to such an extent Sec. 143. Abandonment is made by

as to reduce its value more than giving notice thereof to the insurer,
three-fourths; which may be done orally, or in
writing; Provided, That if the notice be
(c) If the thing insured is a ship, done orally, a written notice of such
and the contemplated voyage cannot abandonment shall be submitted
be lawfully performed without within seven days from such oral
incurring either an expense to the notice.
insured of more than three-fourths the

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Sec. 144. A notice of abandonment time after notice shall be construed as
must be explicit, and must specify the an acceptance.
particular cause of the abandonment,
but need state only enough to show Sec. 151. The acceptance of an
that there is probable cause therefor, abandonment, whether express or
and need not be accompanied with implied, is conclusive upon the parties,
proof of interest or of loss. and admits the loss and the
sufficiency of the abandonment.
Sec. 145. An abandonment can be
sustained only upon the cause Sec. 152. An abandonment once made
specified in the notice thereof. and accepted is irrevocable, unless
the ground upon which it was made
Sec. 146. An abandonment is proves to be unfounded.
equivalent to a transfer by the insured
of his interest to the insurer, with all Sec. 153. On an accepted
the chances of recovery and abandonment of a ship, freightage
indemnity. earned previous to the loss belongs to
the insurer of said freightage; but
Sec. 147. If a marine insurer pays for a freightage subsequently earned
loss as if it were an actual total loss, belongs to the insurer of the ship.
he is entitled to whatever may remain
of the thing insured, or its proceeds or Sec. 154. If an insurer refuses to
salvage, as if there had been a formal accept a valid abandonment, he is
abandonment. liable as upon actual total loss,
deducting from the amount any
Sec. 148. Upon an abandonment, acts proceeds of the thing insured which
done in good faith by those who were may have come to the hands of the
agents of the insured in respect to the insured.
thing insured, subsequent to the loss,
are at the risk of the insurer and for Sec. 155. If a person insured omits to
his benefit. abandon, he may nevertheless
recover his actual loss.
Sec. 149. Where notice of
abandonment is properly given, the Sub-Title 1-I
rights of the insured are not MEASURE OF INDEMNITY
prejudiced by the fact that the insurer
refuses to accept the abandonment. Sec. 156. A valuation in a policy of
marine insurance in conclusive
Sec. 150. The acceptance of an between the parties thereto in the
abandonment may be either express adjustment of either a partial or total
or implied from the conduct of the loss, if the insured has some interest
insurer. The mere silence of the at risk, and there is no fraud on his
insurer for an unreasonable length of part; except that when a thing has
been hypothecated by bottomry or

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respondentia, before its insurance, all articles or charges which add to its
and without the knowledge of the permanent value or which are
person actually procuring the necessary to prepare it for the voyage
insurance, he may show the real insured;
value. But a valuation fraudulent in
fact, entitles the insurer to rescind the (b) The value of the cargo is its
contract. actual cost to the insured, when laden
on board, or where the cost cannot be
Sec. 157. A marine insurer is liable ascertained, its market value at the
upon a partial loss, only for such time and place of lading, adding the
proportion of the amount insured by charges incurred in purchasing and
him as the loss bears to the value of placing it on board, but without
the whole interest of the insured in the reference to any loss incurred in
property insured. raising money for its purchase, or to
any drawback on its exportation, or to
Sec. 158. Where profits are separately the fluctuation of the market at the
insured in a contract of marine port of destination, or to expenses
insurance, the insured is entitled to incurred on the way or on arrival;
recover, in case of loss, a proportion of
such profits equivalent to the (c) The value of freightage is the
proportion which the value of the gross freightage, exclusive of primage,
property lost bears to the value of the without reference to the cost of
whole. earning it; and

Sec. 159. In case of a valued policy of (d) The cost of insurance is in each
marine insurance on freightage or case to be added to the value thus
cargo, if a part only of the subject is estimated.
exposed to the risk, the evaluation
applies only in proportion to such part. Sec. 162. If cargo insured against
partial loss arrives at the port of
Sec. 160. When profits are valued and destination in a damaged condition,
insured by a contract of marine the loss of the insured is deemed to be
insurance, a loss of them is the same proportion of the value
conclusively presumed from a loss of which the market price at that port, of
the property out of which they are the thing so damaged, bears to the
expected to arise, and the valuation market price it would have brought if
fixes their amount. sound.

Sec. 161. In estimating a loss under an Sec. 163. A marine insurer is liable for
open policy of marine insurance the all the expenses attendant upon a loss
following rules are to be observed: which forces the ship into port to be
repaired; and where it is stipulated in
(a) The value of a ship is its value the policy that the insured shall labor
at the beginning of the risk, including for the recovery of the property, the

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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.

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