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Insurance - Title I - Introduction, Phoenicia (Lebanon) - Maritime…

- - - - Insurance works by gathering a common fund from the people exposed to said risk - small contributions from everyone (premium) serves as the common fund that shoulders the actual losses suffered.
        
        Small percentage of people contributing to the fund WILL suffer the loss. Insurance serves to make said loss a small and relatively manageable loss.
        
        Essentially, community bears the risks and costs associated with insurance - insurance costs shouldered by the goods or services insured.
    - - Stimulate Business & encourage business efficiency and enterprise - insurance allows businesses to minimize losses. Enables normally risky businesses to function. Also enables personnel to work without fear of huge loss.
        
        Promotes Loss Prevention - Insurance deals have stipulations that require people getting insurance to maintain non-risky behavior to preserve insurance claims. e.g. insured property must be periodically inspected, etc.
        
        Encourages Savings - because common fund unused until actual small loss - generally, funds invested in insurance are saved.
        
        Solves social problems - generally private and voluntary transaction. But, states can make insurance compulsory such as Motor Vehicle Liability Insurance OR states themselves provide insurance such as SSS, GSIS, Philhealth, etc.
      - Indirect Functions
        
        Investment of Funds - Insurance bonds used as instruments to invest.
        
        Use of reserve funds - Reserve insurance funds are invested, which earns insurance companies money. This lowers the price of insurance in general.
        
        Effect on prices - insured goods, even though they add the cost of insurance on top are cheaper than uninsured goods.
        
        Basis of Credit - Generally, creditors require that the undertaking for which the loan is taken out for is insured.
        
        Insurance Bonds - Bonds equivalent in money + insurance
- - - - 12th-15th century - Medieval Maritime States
        
        Medieval Maritime States of Italy (Venice, Florence, Genocia, etc.) - because maritime commerce, complementary trade of insurance sprang up
        
        Earliest known insurance policy - originated from Genoa, 1347 | Conflicting claim where, Prof. Melis of Florence discovered document in 1343 -
        
        Established breaks from Respondentia and Bottomry (Maritime Contracts) - because maritime contracts had high interest rates - primary purpose for loans was to supply funds on a partnership or profit-sharing basis
        Assumption of risk only incidental - thus grounds to differentiate creditors whose principal business was assumption of risk vs those in regular maritime loan contracts.
        
        Earliest insurance policy in law was in Florence, 1523 - insurance policy (policy - polizza(italian) - politicum (latin) - polypticum (greek)
        
        Practice of making mutual contract of insurances spread throughout the maritime states of Europe.
        
        Beecause sea-based trade, uniform practices led into the development of the law merchant (body of customary rules adopted by merchants to govern transactions) - later evolved into Napoleonic Code de Commerce
        Law merchant governed the overseas trading practices of maritime merchants (including insurance) - generally, governed by informal tribunals or Committee arbitration (because merchants were more knowledgeable than countrymen) - progenitor of the International Chamber of Commerce.
        
        12th - 15th century - England
        
        Friendly Societies - assumed the functions of crafstman guilds
        Adopted Insurance Policies in the late 1500s
        
        1601 - first English Insurance Act - created a special court for the trial of maritime insurance cases (because common law, admiralty courts were inadequate and merchant courts could not enforce their judgments) - however, merchants stuck with traditional courts
        
        1756 - William Murray (Lord Mansfield) was appointed as CJ of the Court of King's Bench - led to common-law courts gaining in favor with litigants in cases involving the law merchant. - Eventually, law-merchant itself was incorporated into the common law of England
        
        Lord Mansfield - eventually known as the father of englishc omercial law.
        
        Lloyd's of London (Underwriters) - insurance marketplace which regulated insurance transactions. - Market of Members, oldest non-incorporated association of subscribing members
        Underwriter. - originated in Lloyd's. Referred to individuals who were willing insurers of ventures - wrote names under the writing on the proposed insurance venture passed around Lloyds
        Structure - 164 underwriting syndicates - one active underwriter who is empowered to accept insurances in behalf of the members. - not a partnership, each member only liable for a fraction of any insurance - outsiders cannot transact directly with Lloyd's syndicates, instead must hire an approved Lloyd's broker as an intermediary
        Later incorporated by the Lloyd's Act of 1871
        
        NAMES - rich individuals backed Lloyd's policies - took on unlimited liability. However, eventual bankruptcy of names led to decline of Lloyd's. At present, only less than 2% of names are with unlimited liabillity.
        
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        1795 - Lloyd's policy was made the standard form of policy for Marine Insurance - same;same; with the Marine Insurance act of 1906
        
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        United States (1700s-1900s)
        
        Introduction and Development of Insurance in the PH
        
        Pre-Spanish - lack of formal monetary system - led to no clear delineated insurances - instead, socio-cultural practices served as insurance - e.g. Bayanihan as Housing insurance, Abuloy as Funeral Insurance, etc.
        
        Spanish
        
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        Generally, insurance followed that of England's development. Save for Ocean marine Insurance which was dominated by British Underwriters.
        Inland Marine Insurance (transpo of goods over land)
        
        Fire Insurance - 1730 - Benjamin Franklin (Philly contributorship for the insurance of houses from loss by fire) - Reaction to great philly fire - Incorporated in 1752 - first fire insurance co. in America - coined the term An ounce of prevention is worth a pound of Cure
        
        1800s - many fires - led to bankruptcy of a lot of fire insurance companies - partly due to competition in insurance rates. - However, this led to standard fire insurance rates which helped insurance companies cope with later fires such as 1871 Chicago and 1906 San Fran quake
        
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        State Insurance Regulation - Generally, States regulate insurance. 1869 US SC ruling affirming this - 1944 US SC ruled that Federal Govt. Should be given power to regulate many kinds of insurance that were forms of interstate commerce. However, US Congress declined this power and passed laws to re-assert the power of States to regulate insurance
        1906 - NY Insurance code was passed - model for all life insurance regulation in US
        1907 - NY Senate - Armstrong Committee - to investigate abuses of Life Insurance companies - using money to lobby + company officials using connections with Banks engaged in underwriting securities to their personal advantage (relatives of Company officials were given high salaries despite inexperience)
        Armstrong recommendations later adopted by legislation - other states followed suit
        
        1900s - expansion and diversification of Insurance
        Medicine + decline in family provided care - Health Care Insurance
        Industrialization + work-related injuries - Worker's Compensation Insurance
        New types of transportation - Automative Coverage, Passenger and Cargo Insurance
        Social Welfare Legislation - Social Security and Medicare
        Legislation to control insurance of banking (federal reserve act of 1933) - Federal Deposit Insurance Corporation
      - Insurance Laws in the Philippines
        
        Sources of insurance (Jurisprudence)
        
        Ang Giok Chip v. Springfield Fire and Marine Insurance co (1931) - SC Ruled that PH Insurance Law lifted verbatim from California Law - referred to comments of code examiners of California - Ruled that (1) a rider provision is considered as part of the insurance policy itself, not a separate instrument. Thus, Sec. 65 of Insurance law in requiring that another instrument be signed in order to make a warranty effective referred not to rider provisions/slips pasted on insurance policy itself but entirely separate thing.
        (2) receipt of policy by the insured without objection binds the insured to the terms under Estoppel
        
        Republic v. Del Monte Motors, Inc. (2006) - Prof. Campos Insurance book - noted that Insurance Act of July 1, 1925 - verbatim from California Insurance Act - save for few provisions coming from NY Law
        
        SC therefore cited California Cases (1898) - where money required to be deposited by Insurance Companies was a trust or contingency funds for all policy holders. Thus, single claimant cannot lay stake on the deposit to the exclusion of all others.
        
        Established here that Insurance Commsr. has custody over securities of insurance companies as relating to claims of insured against insurer. - Commsr. is vested with custody of the security deposit, can make determination if and when it may be released without prejudicing rights of other policy holders.
        
        Present Governing Laws
        
        Insurance Code of 1978 (PD 1460, as amended by PD 1814, 1981 and BP 84 and RA 10607)
        
        Civil Code (RA 386) - Art. 2011;2012 in relation to 739 (Forbidden Donations) - 2021-2027 (on the Aleatory Contract of Life Annuity); Art. 2186 (Motor Vehicle Bonds); Art. 2207 (Subrogation)
        
        Other Special laws -
        Revised Govt. Service Insurance Act of 1977 (PD 1460)
        Social Security Act of 1954 (RA 1161)
        Property Isurance Law (PD 245)
        RA 4898 as amended by RA 5756 - life, disability and accident insurance for baranggay officials
        RA 3591 - created PH Deposit Insurance Corporation
        RA 9829 - Pre-Need Code of the PH
        RA 10606 - National Health Insurance Act of 2013
        
        Office of the Insurance Commisisoner
        
        General Duty and Function - regulate and supervise the transaction of insurance business to protect public interest + execute insurance laws - to see violations of insurance laws properly punished.
        
        Administrative Agency has both Regulatory (Sec. 437 of Code) and Quasi-Judicial Adjudicatory Powers (Sec. 439 of Insurance Code)
        
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        Insurance Code - Ch. 1 Sec. 5
        
        Provides that all kinds of insurance are subject to the provisions of Ch. 1 so far as provisions can apply
        
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    - - Prof. Charles Trennery - evidence of contracts of loan on BOTTOMRY and RESPONDENTIA - earliest forms of maritime loan contracts (Mutuum Nauticum)
        
        Bottomry - Contract whereby ship's OWNER either directly or through shipmaster borrows money using the ship (bottom) as the collateral. - Usually invoked when ship required urgent repairs or emergency occurs during a voyage. - (Think Aria Stark clamshell job) - Money lent + Interest must be repaid after certain period after the return of the ship. If ship is lost, then loan need not be repaid.
        
        Respondentia - Bottomry both ship and cargo are put up as collateral.
        
        Both Contracts - Premium/Interest on the Loan is extremely high, because lender takes on the high risk of a ship making it to port safely despite perilous nature of sea travel.
        Fun Fact: Insurance Code 101, 103 and 158 governs bottomry and respondentia
        
        Babylon (Iraq) - large portion of economy dealt with import trading. - Initially, slaves or relatives were responsible for transporting product. However, owner would then bear loss. - Led profession of Darmatha - Darmathas were traders who went on trade tours in behalf of other merchants given a loan or goods. They were paid either value of the loan + capital value of the goods advanced OR 1/2 of the profits whichever was worth more. High premium because high risk (brigandage)
        In return, Darmatha put up himself and his family as security - if goods were lost, then Darmatha and family would become slaves to the lender.
        Eventually amended, whereby if loss of goods was without negligence or connivance - then no need to pay both the capital borrowed and the interest. (similar to bottomry)
        Recorded in Code of Hammurabi (1792-1750 BC) origin of Bottomry.
        Babylon was landlocked, thus trade there was mostly land based.
        
        Babylon - Great Land Traders of Asia Minor, Phonicia were great oversea traders and carriers (during 1500-1300 BC)
        
        India - Babylon traded with India on its western side | Traded with Phoenicia on its eastern side. - Institutes of Menu (Laws of Manu) - 600 BC - amended Bottomry - both sea and land trade - Interest, varied depending on risk involved and length of time that the money was required - Expert valuers of interest, rate of interest specified in the contract - borrower was excused from payment if robbed or if goods did not arrive in good order at the time and place agreed upon
        
        China - Insurance post 2,500 BC - civilization there originated from Babylonian civilization migrating from the Euphrates valley.
        
        Egypt - No bottomry as: (a) Egypts mostly dealt with agricultural/pastoral professions - no finance/trading therefore no need for bottomry; (b) Egyptians gravitated towards art and philosophy, money-making and trade seen as for slaves or lower castes; (c) Religious concerns - priests strongly opposed to use of money as an interest earning machine.
- - - - Note on ordnary business sense and morality and religion. e.g. usury rates being applied due to concerns over unreasonable interest vs having higher risk therefore higher interest.