Life Insurance Beneficiary

I got an interesting query on life insurance.
Here is the situation:
Tatay lived a colorful life. In his lifetime he had a legal wife and children.
Later tatay separated from his legitimate family and lived with a paramour.
Tatay and paramour bore a child named R-Jay.
While living with paramour, Tatay got a life insurance naming his paramour and their minor illegitimate child R-Jay as beneficiary.
Tatay died.
Two groups now seek to claim the proceeds of Tatay’s life insurance.
First, the legitimate family members (wife and children) claim they are entitled to the insurance proceeds being the legal hers.
On the other side is paramour (with her illegitimate child R-Jay) claiming they are entitled to the proceeds since they were the named beneficiaries.
The question posed to me was: who gets the insurance proceeds, the legitimates, the paramour and her child, or share in accordance with rules on succession?
There is a rule taken from American law that whoever is named as beneficiary gets the life insurance proceeds.
Insurance proceeds are likened to a donation, a gift out of liberality.
In our case, paramour is disqualified from becoming a beneficiary of a life insurance, even if she was expressly written as one.
The mandate of Article 2012 of the Civil Code cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of the person who cannot make the donation.
The Civil Code also bars donations between common law spouses (not married).
“Policy considerations and dictates of morality rightly justify the institution of a barrier between common law spouses in record to Property relations since such ultimately encroaches upon the nuptial and filial rights of the legitimate family,” said the Supreme Court.
The legitimates cannot also receive the insurance proceeds.
Life insurance proceeds out of special contract.
With a beneficiary, the proceeds will not belong to the category of “inheritable” items.
It is only in cases were there is no beneficiary or when the beneficiary is disqualified by law to receive the proceeds that the insurance policy proceeds shall redound to the benefit of the estate of the insured.
So it is the illegitimate child R-Jay who is entitled to the insurance proceeds.
“No legal prosprciption exists in naming as beneficiaries, children of illicit relations by the insured,” said the Supreme Court.
But since R-Jay is still a minor, someone, likely the paramour (mother) should have herself appointed by the court as legal guardian first.
Until the court appoints a guardian in behalf of the minor illegitimate, the insurance company can withhold the release of the check.

Carnapping industry

Carnapping has become a cottage industry in Metro Manila.
Here is one of the schemes of carnap syndicates.
When an insured car suffers a total loss, the insurance company pays the insured.
The insruance company seeks to salvage whatever losses it suffered out of paying the insured.
To salvage, the insurance company sells through public bidding the "total loss" car.
Here come the carnappers.
They buy these "total loss" cars sold by the insurance company.
These "total loss" cars are complete with legal papers.
The carnappers then steal another car of the same make and model.
The carnappers will use the engine of the "total loss" car they bought from the insurance company, and replace the engine of the stolen car.
As a result, they will now have a car complete with legal papers.
Authorities will not be able to determine that it is a hot car.
Meanwhile, the engine of the carnapped car, will be chopped into bits and sold in pieces.

Glorietta blast: Insurable or not?

There is a brewing controversy over insurance matters with respect to the fatally tragic Gloreitta blast in Makati last year.
Aside from the Ayala-owned properties that were adversely affected by the Glorietta explosion, there were spaces in the buildings that were leased by private third parties, and covered by insurance.
Now, these lessees are trying to claim their respective insurance proceeds as a result of the explosion.
The trouble is that there are two diverse theories that arose, pointing to the probable cause of the explosion.
The official theory of the Philippine National Police is that the explosion was caused by methane gas and probably diesel that was stored in the basement of the Glorietta II building.
This is being disputed by the Ayala property owner which advanced the theory that it was caused by explosives, raising the possibility of a terrorist attack.
Both theories are backed--supposedly--by international experts.
The position of insurance companies is a wait-and-see attitude pending the determinative outcome as to the real cause of the explosion.
So, insurance claims are at a standstill.
If the explosion indeed was casued by some explosive or bomb, and therefore likely a terrorist act, do the insurance policies cover perils arising out of terrorist acts?
Most policies exclude terrorist coverage, unless there is aggravated premium.
If the explosion was not done by an act of terror, is methane gas excluded or included among the covered causes of explosion?
Some fire insurance policies may or may not cover explosion caused by domestic gas like LPG, and sources of illumination.
But what about explosion caused by methane gas?
Aha! Better check the terms of the insurance policy.
The exclusions there are very specific.
So the finding by the Philippine National Police that the explosion was caused by methane gas, may not be helpful to insurance claimants.
Very interesting....

Insurance endorsements allowed

Let me post a reaction to my recent blog on insurance claims, in cases when the vehicle is sold from one owner to another:

I am an IBP member now based in the US.
In my humble opinion, and correct me if I'm wrong, the new owner may yet claim benefits under the insurance of the former owner. This is only possible if the former owner had endorsed his unexpired interest in the insurance in favor of the new owner.

Jay's reaction:

You are correct, Sir.
If there is an endorsement, and the insurance company doesn't object, the insurance company waives the protections of the insurance law.
In reality, the insurance company usually won't object to endorsements, if the one year period of coverage has not lapsed.
It's a good business decision because the insurance company is after the renewal of the insurance policy for the next year, this time by the new vehicle owner.

Can I claim car insurance procured by previous owner?

A client posed a query to me regarding his claim for insurance.
The client bought a second hand car.
This car, had been insured by the previous owner.
After the car was sold to the client, as a second hand car, the car was involved in a collision.
The client now asks whether he can claim the insurance that was procured by the previous owner.

The answer is No.
Client cannot claim the insurance proceeds out of the insurance procured by the previous owner.
There is a rule in our insurance law that an interest in the property insured must exist when the insurance takes place, and when the loss occurs.
It is true that the client has interest over the second hand car at the time of the loss (collision).
Unfortunately the client did not have interest over the car when the insurance took place.
When the insurance policy for the car was procured, the one who had interest was the previous owner, not the client.
Thus, the client cannot claim the insurance proceeds.
If he makes a claim to the insurance company, the claim will be denied.

Carnap me scheme

One of the common modus operandi in insurance fraud is the "carnap-me" scheme.
This is a situation where a car owner insures his vehicle agasint theft or carnapping, then later, have the vehicle carnapped.
The vehicle owner will then report to the insurance company and claim for the insurance proceeds.
In this fradulent scheme, the vehicle owner earns money because of the carnapping.
The "carnapped" vehicle will either be re-sold, after making changes, or it will be chopped to pieces and sold by piece.
Either way the vehilce owner gets income from it.
Aside from this, the vehicle owner gets income from the insurance proceeds due to his fraudulent claim.
For this reason, insurance companies have expert and experienced evaluators to investigate on thier own, whether an insurance claim for theft is a carnap-me scheme.
If the insurance company evaluators discover badges of fraud, or indicators that a claim is a carnap-me scheme, the claim will be denied.
Goin to basics, Insurance is a concept that seeks to indemnify a person for loss arising from an unknown peril.
In carnap-me situations, the insurance is not payable or indemnifiable because the loss did not arise from an unknown peril, but from a previously known, well-planned peril.
As it has been said, insurance is a means to indemniify, not to enrich one person at the expense of another.

Policy Additions Endorsements

I handle a several insurance cases where the issue is the validity of endorsements, riders, attachments, added warranties to insurance policies.
The rule is that anything added, attached to the insurance policy, after its issuance, must be countersigned by the insured. Otherwise, any term, condition set forth in these additions, attachments, riders, warranties would not be binding.
The logic is simple.
Without any countersignature by the insured, there would be no evidence that the insured ever agreed to the additional terms and conditions in the riders, attachments, endorsements after the issuance of the policies.
That is fine.
But what if the terms and conditions added are favorable to the insured, but there is no countersignature by the insured.
Can the insured invoke the unsigned terms and condition in the rider, attachment, endorsement?
Can the insurer claim that the endorsement, rider, attachment, added warranties issued after the policy does not have eny effect because the insured did not counter-sign?
Remember in contracts, it takes two to tango.
A contract is a meeting of the minds between two persons.
If there is no evidence of any meeting of minds, i.e. no counter signature, are the endorsmements, riders, attachments, additional warranties binding?
This is the case I am handling right now.
My position is that if the additions to the policies bear no counter-signatures by the insured, they are non-binding.
Thus, if the insurer cannot invoke the terms and conditions contained in additions to policies that bear no counter-signatures of the insured, then too, the insured cannot invoke additions to policies to which he did not counter-sign.
My position is that what is sauce for the goose, should also be the sauce for the gander.
No person should be denied the equal protection of the laws.
Do you agree?

Car insurance fraud II

Let us discuss one of the simplest form of car insurance fraud.
In this type of fraud, this is a conspiracy between the car repair shop and the car owner.
The car owner meets an accident. He bumped a wall resulting in damage to the front bumper and perhaps the fender.
The car owner then brings it to the car repair shop.
Some unscrupulous car repair shops will intentionally cause more damage to some parts of the car.
For example, instead of just the bumper and the fender being damaged, the car repair shop will intentionally damage the headlights. The car owner will not object to this, thinking that this is to his advantage because he will get a new set of headlights, charge to the insurance company.
So, when a claim is made to the insurance company, it will not be just the bumper and fenders claimed for indemnification, but also the headlights which was not actually destroyed as a result of the accident.
Remember that car insurance, like any insurance is only an indemnification resulting from a peril.
Insurance is there to restore the insured to the same condition prior to the peril.
Insurance is not a scheme to enrich the insured.
Insurance companies have their own meticulous and highly experienced in-house adjusters and evaluators.
These claims evaluators can easily smell an anomaly, when there is one.
The claims evaluators will closely re-trace the point of impact and can determine which parts are affected for a particular impact.
They know which damaged parts are not accident-related, therefore not compensable.

Fraud in car insurance claims I

Just about anything in car insurance claims is prone to fraud.
Having handled car insurance cases for a number of years, I just get amused sometimes of the ingenuity of these defrauders in making car insurance claims.
It is not unusual that car repair shops are in cahoots with the policyholders themselves.
Worse, some may be in cahoots with crooks in the Land Transportation Office.
First, we need to discuss briefly the nature of the car insurance business
A car owner will have to insure his unit with a non-life insurance company.
This is to protect him, in the event of an unknown peril. If a car owner meets an accident, if his car is covered by insurance, then the insurance company will indemnify the owner, meaning the insurance company will pay the costs of repairing the car and restoring it to its condition previous to the accident.
In this simple example, it would be called “own-damage” claim.
Third party damage: A car owner will also insure his unit against third party property damage.
In other words, if a car will cause damage to somebody else’s property, naturally, he will have to pay the owner of the damaged property.
If the car is insured against third party property damage, the insurance company will shoulder the costs
There is also an insurance against third party injury.
If a car owner will meet an accident and causes injury to a third party, like bumping a pedestrian, then some form of payment will have to be given to the injured third party.
If the car is insured against third party injury, then the insurance company will indemnify for the damaged caused upon the third party.
What usually happens is that a car owned will just procure a “comprehensive” insurance on his car or vehicle.
In such case, he is covered by insurance for all the above perils, plus coverage against theft.