I'm Giancarlo Enrico S. Pozon, a Wushu instructor, investor and Barrister... That's right, Barrister; I graduated from law school and took the Bar Exams, now I'm waiting for the results. I created this blog to make Philippine Law easy to understand for the average person. It's all about free legal advice. There are many law blogs. But the problem is that many of them are written for lawyers and law students. They use words that can't be understood by ordinary people.
Many lawyers, judges and law students consider themselves as superior to most human beings because of their knowledge of the law. It bothers me since the law is supposed to serve society. Since the law is meant to serve society as a whole, it is important that is must be understood by everybody.
This does not mean that we should all become lawyers. It means that although law is a highly specialized profession, the first duty of everybody in this profession is to make the law understandable to all; that's why all these articles are free legal advice.
Like I said, this blog is about law -but it's for the ordinary people, not the lawyers. It's for the ordinary folk so they will know what is good and bad for them, and that making them aware of the law will help us all improve society as a whole. This is free legal advice for everybody!
Double Insurance and Over-insurance
Double (or multiple) insurance happens when a single person is insured by 2 or more insurers separately with regard to the same subject matter and interest. Over-insurance, on the other hand, happens when the amount of the insurance is greater than the insured's insurable interest. Both double and over-insurance may or may not exist together; it depends on the insured himself.
In case there is over-insurance because of double/multiple insurance, the insurers are not required to pay for the whole loss. Their obligation is only pro-rata. The insured, on the other hand, isn't allowed to recover more than his insurable interest.
To illustrate, let's say this guy Bob owns a house worth Php5,000,000.00. He takes a fire insurance on it for Php5,000,000.00 from Big Auntie Insurance and paid Php5,000.00 in premiums and another one from Big Uncle Insurance for Php5,000,000.00 also with Php5,000.00 in premiums The house is then burned down by by a nut who threw a lighted cigarette into the window and set fire to the living room. The ratable contributions will be computed like this:
Big Auntie:
5,000,000.00 x 5/10 = 2,500,000.00
Big Uncle:
5,000,000.00 x 5/10 = 2,500,000.00
So both Big Uncle and Big Auntie are liable only for Php2,500,000.00 each.
The premiums to be returned to Bob will be computed this way:
Big Auntie: 5,000 x (5,000,000/10,000,000) = 2,500
Big Uncle: 5,000 x (5,000,000/10,000,000) = 2,500
Therefore both Big Auntie and Big Uncle will return Php2,500.00 each to Bob.
Reinsurance
Contrary to what the name implies, it doesn't mean that the insurance contract is renewed. Instead, it means the insurer draws up a second insurance contract with a third person to insure him (the insurer) against loss/liability due to the original insurance. The original insured isn't a party to the second insurance contract so he will only have a cause of action in either of the following cases:
1.) The reinsurance contract has a stipulation favoring the original insured
2.) It novates the original insurance contract
The law requires non-life insurance companies to take reinsurance when they assume a risk on a subject whose worth exceeds their retention limit (20% of the insurance company's net worth.) So if a non-life insurance company with a net worth of Php1 billion insures a hotel building worth Php250 million, it has to draw up a contract or reinsurance for the Php50 million with another insurance company because its retention limit is Php200 million.
1 comments:
Thanks for sharing. Here I found a useful blog about Insurance scams in the Philippines.
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