cuevas- insurance- warranties to reinsurance

7/29/2019 CUEVAS- Insurance- Warranties to Reinsurance

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Warranties to Reinusrance

Zyra Cuevas

TITLE 7- WARRANTIES#67

Warranty defined

Warranty is a statement or promise by the insured set forth in the policyitself or incorporated in it by proper reference, the untruth or non-

fulfillment of which renders the policy voidable by the insurer (without

reference to whether the insurer was prejudiced by such untruth or

nonfulfillment) May also be made by the insurerKinds of Warranties

1. Express warranty- an agreement contained in the policy where the insuredstipulates that certain acts relating to the same subjects have been or shall

be done.

2. Implied warranty- a warranty embodied in the policy3.Affirmative warranty- is one which asserts the existence of a fact or

condition at the time it is made

4. Promissory warranty- is one where the insured stipulates that certain factsor conditions pertaining to the risk shall exist or that certain things with

reference thereto shall be done or omitted. It is in the nature of a condition

subsequent.

Warranty presumed affirmative, unless contrary intention appears

#68

Time to which warranty refers

It may relate to the past, present or the future, or to any or all of these

#69

Intention of parties governs

The word does not necessarily constitute a warranty nor is the use of the word

necessary to constitute a warranty

Warranties distinguished from representations

Warranties Representations

Considered parts of the contract Collateral inducements to a contract

Always written on the face of the

policy actually or by reference

May be oral or written in another paper

Must be strictly complied with Substantial truth is only requiredFalsity or nonfulfillmen operates

as a breach of contract

Falsity renders a policy void on the

ground of fraud

Presumed material Insurer must show materiality to defeat

an action on the policy

Before a representation will be considered a warranty, it must be expressly

included in the policy and the contract that the parties intended that the rights

of the insured would depend on the truth or fulfillment of the warranty.

#70

Express warranty, where contained

1. In the policy itself or another instrumentIn order that a stipulation may be considered a warranty, it must not only be

clearly shown that the parties intended it as such but it must also form a part of

the contract itself or if contained in another instrument, it must be signed by

the insured and referred to in the policy as making a part of it. Mere referencealone is not sufficient to give this effect.

#71

Express warranty regarding person, thing or risk

1. Statement must refer to fact, not as an opinion or belief2. Where the statement in the nature of an opinion- It is not a warranty of its truthfulness. It is a limited warranty as to the

honesty and good faith of the insured.

#72

Warranty of facts or omissions which materially affect the risk

- Breach of promises or agreements as to future acts will not avoid a policyunless the promises are material to the risk.

- The act or omission is material to the risk if it increases the risk, and onlysubstantial increase of risk works forfeiture of the policy which is avoided

for increase in hazard.

#73

When breach of warranty does not avoid policy

1. When loss occurs before time for performance2. When performance becomes unlawful3. When performance becomes impossible

Where insurer barred by waiver or estoppel

1. The omission to fulfill a warranty or condition will be excused wherethere is a waiver on the part of the insurer. There is an express or implied

intentional relinquishment of a known right.

2. Under estoppel, the insurer is precluded because of some action orinaction from relying on an otherwise valid defense as against the insured

who has been induced to enter into a contract by the insurers

representation or conduct.

#74

Right to rescind for violation of a material warranty

1. Recission by insured- The violation of the terms of a contract of insurance entitles either party to

terminate the contractual relations2. Recission by insurer- Insurer is entitled to rescind a contract of insurance for violation of a

warranty only if said warranty is material; otherwise, the breach thereof will

not avoid the policy.

- The right of the insurer to rescind exists even though the violation was notthe direct cause of the loss.

#75

When violation of immaterial provisions shall avoid policy

- Hence, a warranty as to any fact will preclude any inquiry as to themateriality of that fact. It need only be false

- However, the parties may expressly stipulate that the stipulation of aparticular provision (although immaterial) in the policy shall avoid it. By

such stipulation, the parties convert an immaterial warranty into a material

one.

#76

Effect of breach of warranty

1. Without fraud- The policy is avoided only from the time of breach2. With fraud- The policy is avoided ab initio, and the insured is not entitled to the return

of the premium paid

Conditions in insurance policy

- A condition is an event which is either an occurrence or a non-occurrencethat alters the previously existing legal relations of the parties to the

contract

1. Condition precedent- Calls for the happening of some event or the performance of some act after

the terms of the contract have been agreed upon, before the contract shall

be binding on the parties

2. Condition subsequent- That which pertains not to the attachment of the risk and the inception of

the policy, but to the contract of insurance after the risk has attached and

during the existence thereof

Warranties and conditions distinguished

1. As to effect- A warranty foes not suspend or defeat the operation of the contract, but a

breach affords either the remedy expressly provided in the contract or that

furnished by law.

- Condition precedent is one without the performance of which the contract,although in form executed by the parties and delivered, does not spring into

life. It is a limitation to attachment of risk

ExceptionsThese are inserted into a contract of insurance for the purpose of withdrawing

from the coverage of the policy, as delimited by the general language

describing the risk assumed, some specific risks which the insurer declares

himself unwilling to undertake.

Effects of breach on legal relations of parties

1. On binding force of contract- The occurence of breach, although temporary, renders the entire contract

defeasible or voidable, and even though such breach may not have affected

the risk or contributed to the loss in any way.

- But the occurence of an excepted peril, does not affect the binding force ofthe contract. If a loss happense during such vacancy, it falls outside the

coverage of the policy and the insurer is not liable.

2. On liability where there is waiver- Such breach may be waived without consideration, but the insurer does not

become liable for an excepted loss by waiver unless such waiver amounts to

a new contract on valuable consideration.


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Title 8- PREMIUM

#77

Premium defined

An insurance premium is defined as the agreed price for assuming and carrying

the risk, that is, the consideration paid an insurer for undertaking to indemnify

the insured against a specified peril.

Where only one premium is paid for several things not separately valued, the

contract is entire or indivisible. It is immaterial that they are shipped ortransported separately.

Assessment defined

An assessment is a sum specifically levied by a mutual insurance companies or

associations, on a fixed and definite plan, to pay losses and expenses.

A policy is issued on the assessment plan is one where the payment of the

benefit is in any manner or degree dependent on the collection of an

assessment upon persons holding similar policies.

Premium distinguished from assessment

All payments of premiums and assessments are but contributions from all

members of the insuring organization to make good the losses of individual

members.

Premium Assessment

Levied an paid to meet

anticipated losses

Collected to meet actual losses

Payment, after the first is not

enforceable against the insured

Are legally enforceable once levied

Is not a debt If properly levied, unless otherwise

expressly agreed, is a debt

Payment of premium ordinarily not a debt or obligation

1. In fire, casualty and marine insurance- The premium payable becomes a debt as soon as the risk attaches. It is

assumed that the contract is perfected which takes place when the

applicants offer is accepted by the insurer.

- Where there was not only a perfected contract of insurance but a partiallyperformed one as far as the payment of the agreed premium was

concerned, the obligation of the insurer to pay the insured the amount for

which the policy was issued in case the conditions therefor had beencomplied with, arose and became binding upon iy,

- While the obligation of the insured to pay the remainder of the totalamount of the premium due became demandable.

- Nonpayment of the balance of the premium due does not produce thecancellation of the contract of insurance in the sense that it can no longer

be enforced. A contrary rule would place exclusively in the hands of the

insured the right to decide whether the contract should stand or not.

2. In life insurance- The premium becomes a debt only when in the case of the first premium,

the contract has become binding, and in the case of subsequent premiums,

when the insurer has continued the insurance after maturity of the

premium, in consideration of the insureds express or implied promise to

pay.

- There is usually no duty assumed by the insured to pay any premiumssubsequent to the first. Insofar as the contract is executory, the ordinary life

insurance is purely unilateral. The insurer therefore, cannot compel the

insured to pay the premium because the insured is by no means a debtor of

the insurer, nor is the insurer the creditor of the insured.

Effect of nonpayment of premium

As a general principal, the time specified for the payment of premiums is of the

essence of the contract. The ability of the insurer to meet its contingent

obligations to the public depends on the prompt payment of all premiums due

it.

1. First premium- Nonpayment of the first premium unless waived prevents the contract from

becoming binding notwithdtanding the acceptance of the application nor

the issuance of the policy.

- But non-payment of the balance of the premium due does not produce thecancellation of the contract

2. Subsequent premiums- Nonpayment does not affect the validity of the contracts unless, by expressstipulation, it is provided that the policy shall in the event it be suspended

or shall lapse.

- In the case of life insurance, the policyholder is entitled to a grace period.Excuses for nonpayment of premiums

1. Fortuitous events- This will not prevent the forfeiture of the policy2. Condition, conduct or default of insurer- No excuse will avail to prevent a forfeiture except only when the

nonpayment has in some way been induced by the condition, conduct or

default of the insurer

- But the insurer will not be deemed to have waived his privilege of forfeitureby mere inaction or silence. While the insured has the privilege of

continuing the policy in force by making premium payments, the insurer

cannot ordinarily force the insured to make these payments

Validity of policy where credit extension granted to insured?

When policy valid and binding

notwithstanding nonpayment of premium

1. In case of life or industrial policy when the grace period applies2. Where there is an acknowledgement in the contract or policy that thepremium had already been paid

3. If the parties have agreed to payment in installments and partial paymenthas been made at the time of the loss

4. Where a credit term was agreed upon5. Where the parties are barred by estoppelOnce a policy has been issued, the presumption lies that the premium has been

duly paid, and where the nonpayment of the premium is attributable to the

fault or misrepresentation of the insurer, the insured is entitled to recover in

case of loss.

#78

Effect of acknowledgement of receipt of premium in policy

1. Waiver of condition of prepayment- The insurer cannot deny the truth of the receipt of the premium in an action

against him on the policy even if it is actually unpaid and notwithstandingany stipulation making prepayment of the premium a condition precedent

to the binding effect of the policy

- Reason: when the policy contains such written acknowledgement, it ispresumed that the insurer has waived the condition of prepayment, the

acknowledgement being declared by law to be conclusive evidence of

premium payment.

2. Recovery of premium if unpaid- The conclusive presumption extends only to the question of the binding

effect of the policy. As far as the payment of the premium itself is

concerned, the acknowledgement is only a prima facie evidence of the fact

of such payment.

- In other words, the insurer may still dispute its acknowledgement but onlyfor the purpose of recovering the premium due & unpaid.

Effect of acceptance of premium

Acceptance of premium within the stipulated period for payment thereof,

including the agreed period of grace, merely assures continued effectivity of

the insurance policy in acc with its terms.

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When insured entitled to recover the whole of premiums paid

1. When no part of the thing insured has been exposed to any of the perilsinsured against.

- Approval of application or acceptance of policy absent- Loss occurs before effective date- Insured and insurer become public enemies2. When the contract is voidable due to fraud or misrepresentation of the

insurer or his agents

3. When the contract is voidable because of the existence of facts of whichthe insured was ignorant without his fault.

4. When the insurer never incurred liability because of the default of theinsured other than actual fraud.5. When recission is granted due to the insurers breach of contract.When insured entitled to his premiums pro-rata

1. When the insurance is for a definite period and the insured surrenders hispolicy before the termination thereof. The insurer shall refund the

unearned premium in proportion to the unexpired period, retaining only

the earned portion corresponding to the portion expired. But there shall

be deducted from the whole premiums any claim for loss or damage

under the policy which has previously accrued (except where insurance is

not for a short period, or where a short rate period is agreed on, or where

a policy is life insurance)

Where short rate period has been stipulated

- The pro rata return of premium will not be allowed if the policy stipulates ashort period rate, in which case, the insured is entitled to return of the

premium in the proprotion stipulated

Right to recover premiums as to life insurance

- Recovery of premiums paid is not allowed if the insured surrenders hispolicy. The reason is that life insurance is not a divisible contract. It is not an

insurance for a single year, with a privilege of renewal from year to year by

paying the annual premium but that it is an entire contract of insurance for

life subject to discontinuance and forfeiture for nonpayment of any of the

stipulated premiums.

- There is no proper relation between the annual premium and the risk ofassurance for the year in which it is paid.

Where risk has attached


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1. Whole premium considered as earned- The general rule is that the insurance granted is the entire consideration for

the premium received; hence if the risk has attached by reason of the

contracts becoming binding on the insurer, the whole premium must be

considered as earned and therefore, cannot be apportioned in case the risk

terminates before the end of the term for which the insurance was granted.

- In the absence of any agreement to the contrary, if a peril insured againsthas existed, and the insurer has been liable to pay for any period, howevershort, the insured is not entitled to return of premiums so far as that

particular risk is concerned

2. Where insurance divisible- If the contract of insurance is divisible, consisting of several distinct risks for

which different amounts of premiums have been paid, the premium paid for

any particular risk is not earned until that risk has attached.

Where the contract is voidable

1. Fraud or misrepresentation of the insurer or his agent- Thus inducing the policy, the insured may rescind the contract and demand

return of the premiums paid by him

2. Fraud of the insured- The insured is not entitled to a return of the premiums paid if the policy is

annulled by reason of the fraud or misrepresentation of the insured.

Where there is over-insuranceThe insurer is not liable for the total amount of the insurance taken, his liability

being limited to the amount of the insurable interest on the property insured.

Hence, he is not entitled to that portion of the premium corresponding to the

exess of the insurance over the insurable interest of the insured.

Where insurance is void because it is illegal

The general rule is that the premiums cannot be recovered. But if the parties

are not in pari delicto, the law will allow an innocent insured to take again his

premiums.

Basis of right to recover premiums

1. Insurer could have been called to pay the whole sum insured2. Insurer could have been called to pay only part of the whole sum insured

Title 9- LOSS#83Effect of agreement not to transfer claim of insured after a loss

The insured has an absolute right to transfer his claim against the insurer after

a loss has occurred. A stipulation which attempts to prohibit such transfer of a

policy is void.

1. Agreement hinders free transmission of property- Such a stipulation is void as against public policy for it hinders the free

transmission of property from one person to another.

2. Transfer incolves but money claim or right of action- It is not the personal contract which is being assigned, but a money claim

under or a right of action on the policy

3. Transfer involves no question of moral hazard- Because it cannot increase the insurers rish for a loss that has already

occurred.

#84Loss in insurance defined

Loss may be defined as the injury, damage or liability sustained by the insured

in consequence of the happening of one or more of the perils against which the

insurer, in consideration of the premium, has undertaken to indemnify the

insured.

Scope of loss

This word embraces bodily injury, including death or property damage or

destruction. It also includes loss of income or profits and legal liability to a third

party.

Liability of insurer for loss

1. Extent of loss- The loss may be total, partial or constructive total. It is satisfired by

payment of the loss, reinstatement (repair or restoration)of the property

lost or damaged, or its replacement with another similar property.

2. Cause of loss- The insurer assumes liability only for a loss proximately caused by the perils

insured against although a peril not insured against may have been a

remote cause of the loss. But the insurer is still liable even if the proximate

cause is not the peril insured against if the immediate cause is the peril

insured against.

3. Burden of proof where loss has occured- The insurer has the burden of proof to show that he is not liable.Meaning of proximate caise.

- It is that which in a natural and continuous sequence, unbroken by any newindependent cause, produces an event and without which the event would

not have occured.

- It is the efficient cause, the one that sets others in motion-to which the lossis to be attributed, although other and incidental causes may be nearer in

time to the result and operate more immediately in producing the loss.

- Proximate cause is not equivalent to immediate cause.#85

1. Where the loss took place while being rescued form the peril insuredagainst

- The insurer is liable where the insured is permanently deprived of thepossession of the thing insured by a peril not insured against provided it is

shown that the said property would have been lost by the peril insured

against had there been no attempt to rescue it.

2. Where the loss is caused by efforts to rescue the thing insured from aperil insured against

- But the insured is bound to excercise a reasonable defree of care inremoving the goods. The necessity for removal is to be determined not by

the result alone but by the circumstances as they appear to the interested

persons at the time of the loss,

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Where proximate cause is an excepted peril

The insurer is not liable if the proximate cause of the loss is a peril excepted

from the policy although the immediate cause is a peril not excepted.

#87

Loss by willful act or through connivance of insured

The insurer is not liable for a loss caused by the intentional act of the insured or

through his connivance. Such loss is not within the contemplation of a contract

of insurance one of the requisites of which is that the risk should not be subject

in any wise to the control of the parties

Loss caused by negligence of insured

1. Where there is ordinary negligence- One of the purposes for taking out insurance is to protect the insured

against the consequences of his own negligence and that of his agents.

2. Where there is gross negligence- But gross negligence or recklessness on the part of the insured the

consequences of which must have been palpably obvious to him at the time

will relieve the insurer from liability.

Title 10-NOTICE AND PROOF OF LOSS

#88-89

Conditions before loss

- As a condition precedent to the right of recovery, there must be complianceon the part of the insured with the terms of the policy.

- If he has violated or failed to perform the conditions of the contract, andsuch a violation or want of performance has not been waived by the insurer,

the insured cannot be recover.

- The terms of the contract constitute the measure of the insurers liabilityand noncompliance therewith by the insured bars his right of recovery.

- Where the policy provides that it shall be void if the insured shall procureany other insurance on the property without the consent of the insurer, the

violation of the condition renders ipso fact the policy void.

Conditions after loss1. Notice and proof of loss- Notice of loss must be given to the insurer and when required by the policy,

a preliminary proof of loss must be given.

- While an insured, in submitting his proof is not bound to give such as wouldbe necessary in courts, he is not justified in submitting false proofs

2. Nature- While in the forms of conditions precedent, they are in nature conditions

subsequent, the breach of which affects a right that has already accrued.

- Until a loss occurs through a peril covered by the policy, the insurersliability under his contract is altogether contingent but with the happening

of the capital fact of loss, his liability arises and becomes properly fixed.

Meaning and purpose of notice of loss

1. Notice of loss is the more or less formal notice given the insurer by theinsured or claimant under a policy of the occurence of the loss insured

against

2. The purpose is to approse the insurance company with the occurence ofthe loss so that it may gather info and make proper investigation while

the evidence is still fresh, and take such action as may be necessary to

protect its interest from fraud; in the case of property insurance, to

prevent further loss to the property.

Necessity of notice of loss

The insurer cannot be liable to pay a claim unless he receives a notice of that

claim. A formal notice of loss is not necessary if the insurer already has actual

notice.


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Time for giving notice of loss

The notice must be given without unnecessary delay, or must be made within a

reasonable amount of time

Meaning and nature of proof of loss

1. Proof of loss is the more or less formal evidence given the company bythe insured or claimant under a policy of the occurence of the loss, the

particulars thereof and the data necessary to enable the company todetermine its liability and the amount thereof.

2. Loss and its amount may be determined on the bases of such proof asmay be offered by the insured which need not be of such persuasiveness

as is required in judicial proceedings.

Form of notice or proof of loss

The law does not make any requirement as to the form in which notice or proof

of loss must be given. However, it is advisable to give the notice or proof in

writing for the protection of the insured or his beneficiary.

Purpose of proof of loss

- The notice of loss is distinct from the proof of loss. The requirement ofnotice is intended merely to give the insurer information on which he may

act promptly in protecting the property from further loss for which he may

be liable or to enable him to take any other immediate steps that his

interests may require- The statement of loss is more formal req, and is intended to:1. To give the insurer information by which he may determine the extent of

his liability

2. To afford him a means of detecting fraud3. To operate as a check on extravagant claimsBurden of proof of loss in court action

It devolves upon the plaintiff to prove the amount of his loss by a

preponderance of evidence.

Excuses for non-compliance with conditions

Timely compliance with the conditions is required as a condition precedent to

the right to recover under the policy. However, a failure on the part of the

insured to comply strictly with their terms will be excused when the

circumstances were as such to make strict compliance impossible.

#90

When defects in notice or proof deemed waived

Proofs of loss satisfactory to the insurer are required to be given. It is the duty

of the dissatisfied insurer to indicate the defects in the proofs of loss as given,

so that the deficiencies may be supplied. His retention of the defective proods

constitute a waiver of his objections.

#91

When delay in presentation of notice or proof deemed waived

1. By an act of the insurer2. By failure to take objection promptly and specifically on that groundIf the insured has attempted to comply with the stipulations of the policy and

the company makes objections which necessitate amended or supplemental

proofs, the insured will be allowed a reasonable time after which to remedy

the defects regardless of the time prescribed by the policy for furnishingproofs.

#92

Effect of failure to secure certificate or testimony of third person

The insured is only required to excercise due diligence to procure it. In the

event of the refusal of such person to give the certificate or testimony, the

insured must furnish reasonable evidence to the insurer that the persons

refusal was not induced by any just grounds of disbelief of said person in the

truth of such facts necessary to be certified but because of other grounds.

Title 11- DOUBLE INSURANCE

#93

Double Insurance defined

This exists ehere the same person is insured by several insurers separately in

respect to the same subject and interest

Requisites

1. The person insured is the same2. Two or more insurers insuring separately3. The subject matter is the same4. The interest insured is also the same; and5. The risk or peril insured against is likewise the same

Double insurance distinguished from Over insurance

Double Insurance Over insurance

There may be no over-insurance as

when the sum total of the amounts of

the policies issued does not exceed

the insurable interests of insured

When the amount of the insurance is

beyond the value of the insureds

insurable interest

There are always several insurers There may be only one insurer

These may exist at the same time. Double insurance is the term used instead

of coinsurance when the sums insured exceed the insurable interest. In such

case, there is overinsurance by double insurance

Binding effect of stipulation against Double insurance

A policy which contains no stipulation against additional insurance is not

invalidated by the procuring of such insurance

1. Additional insurance obtained by the insured- It is valid an reasonable, and in the absence of consent, waiver or estoppel

on the part of the insurer, a breach thereof will prevent a recovery on the

policy. However, in order to constitute a violation, the other insurance must

be on the same subject matter, the same interest therein, and the same risk

2. Additional insurance obtained by a third person- THe good or bad faith of the insured is usually immaterial. However,

insurance obtained by a third person without the knowledge or consent of

the insured will not affect his rights under the policy in the absence of

ratification.

Purpose of prohibition against double insuranceTo prevent overinsurance and thus avert the perpetration of fraud

#94

Rules for payment of claims

where there is over-insurance by double insurance

As the contract of insurance is a contract of indemnity, the insured can recover

no more than the amount of his insurable interest whether the insurance is

contained in one policy or in several policies.

Principle of contribution, which requires each insurer to contribute ratably to

the loss or damage considering that the several insurances cover the same

subject matter and interest against the same peril. They apply only where there

is over-insurance by double insurance, that, is, the insurance is contained in

several policies the total amount of which is in excess of the insurable interest

of the insured.

Title 12- Reinsurance

#95

Reinsurance is a contract where one party, the reinsurer, agrees to indemnify

another, the reinsured (original insurer), either in whole or in part, against loss

or liability which the latter may sustain or incur under a separate and original

contract of insurance with a third party, the original insured.

It is referred as an insurance of an insurance.

The reinsurance of an insurance is called retrocession

Reinsurance distinguished from Double insurance

Double Insurance Reinsurance

The insurer remains as the insurer

of the original insured

The insurer becomes the insured,

insofar as the reinsurer is concerned

The subject of the insurance is

property

It is the original insurers risk

Is an insurance of the same interest Is an insurance of a diff interest

The insured is the party in interestin all the contracts

The original insured has no interest inthe contract of reinsurance which is

independent of the original contract of

insurance

The insured has to give his consent The consent of the original insured is

not necessary

Value of reinsurance

1. From the standpoint of the insurer- Every insurance company, in accordance with its financial strength,

establishes a limit on the max claim it wishes to pay out of its own

resources. This limit is called a retention. Through the use of reinsurance,

then, an insurer is able to issue policies for amounts in excess of its

retention limit or beyond the capacity of its financial resources in care of a


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loss, rather than inconvenience a client by referring him to other insurance

companies.

2. From the standpoint of the insured- It gives insurance companies that practice in greater financial stability and

thus makes the insureds individual policy more reliable. If a large amount of

insurance is needed, the insured may obtain it without negotiating with

numerous companies.

#96Duty of reinsured to disclose facts

Where an underwriter is seeking to insure his risks, his duty to disclose all

material facts is no less than the similar duty imposed on a person seeking an

original insurance; the duty in both cases is one of the strictest good faith since

the risk insured against in a contract of reinsurance is the probability that the

original insurer may be compelled to indemnify for the loss under the policy

issued by him.

Thus a policy may be avoided where the reinsured conceals the fact that a loss

has taken place or that the property is overinsured where he has knowledge

thereof.

Automatic and Facultative methods of ceding reinsurance

Automatic Reinsurance Facultative Insurance

THe ceding company

(reinsured) is bound to

cede (give off by way of

reinsurance) and

reinsurer is obligated to

accept a fixed share of

the risk which has to be

reinsured under the

contract

Covers liability on individual risk, there is no

obligation either to cede or to accept

participation in the risk insured, each party having

a free choice.

But once the share is accepted, the obli is

absolute and the liability assumed thereunder can

be discharged by payment of the share of the

losses.

There is no alternative or substitute prestation

The main advantage is

the avoidance of any

delay in issuing its policy.

THe advantage to the insurer is that it receives

the reinsurers underwriting opinion before the

policy is issued

Reinsurance treaty distinguished from reinsurance policy

Reinsurance Policy Reinsurance Treaty

Is a contract of indemnity

one insurer makes with

another to protect the firstinsurer from a risk it has

already assumed

Is merely an agreement between two

isnurance companies where one agrees to cede

and the other to accept reinsurance businesspursuant to provisions specified in the treaty

Contracts of Insurance Contracts for Insurance

#97

Nature of contract of reinsurance

1. Contract, one of indemnity against liability2. Contract, separate from original insurance policy3. Contract based on original policy4. Insurable interest requirement applicable5. Rule on subrogation applicable

#98

Rights of original insured in contract of reinsurance

No privity of contract between original reinsured & reinsurer.

Liability of reinsurer to original insured

1. Contract of reinsurance solely between insurer and reinsurer2. Contract of reinsurance with stipulation in favor of original insured3. Contract of reinsurance amounting to novation of original contract

cuevas- insurance- warranties to reinsurance

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