Act of God Coverage in Philippine Insurance

"A society is not only defined by what it creates,
but by what it refuses to destroy."
John Sawhill

With the onslaught of Ondoy and Pepeng, and with Ramil threatening the Philippines again, are your properties really protected?

This is the question worthy of contemplation, as billions of pesos worth of cars and houses that were damaged by the onslaught of Tropical Strom Ondoy, are in peril of being lost forever because their owners were not insured against "acts of God," despite having comprehensive insurance policies. What does this mean? In this article, I shall aim to discuss the said coverage vis-a-vis the Insurance Code (which I just finished studying) and other relevant laws of the land.

In legal parlance, the term "acts of God" should be understood in the light of Article 1174 of the Civil Code which states that: “Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.” In law school, we are taught that such events are classified either as force majeure or fortuitous events. The latter refers to acts of God such as typhoons, floods and earthquakes which are unforeseeable while the former pertains to acts of man like invasions, accidents and the like which though foreseen, are inevitable.

Under the law, no person is liable for fortuitous events, because to do so would be to penalize a person for something natural, which he did not intend to happen, can not reasonably foresee, or that which he could not prevent. However, the law did provide certain exceptions to that rule, as when the law expressly provides liability in case of fortuitous events (like delay in the return of things subject of loan) or when the parties expressly stipulated in their agreement that either parties are liable for acts of God. The last exception would be especially important for this discussion, as the law provides liability when the nature of the obligation requires the assumption of risk.

Insurance, as defined by the Insurance Code of the Philippines, is a contract of indemnity, whereby one party, for consideration, bounds to indemnify the other, for loss, damage or liability, arising from an unknown or contingent event. A contract of insurance, has dual essence - a contract against risks on the part of the insured and a contract assuming the risk on the part of the insurer. Hence, in plain and simple analysis, a fortuitous event which although would not generally cause liability, since an insurance company is in the business of insuring the public against risk, the nature of their obligation requires them to indemnify the insured even in cases of acts of God.

However, under the Insurance Code, an insurer may except certain risks from the policy. As revealed by the present dilemna facing many Filipinos, insurance companies have classified a comprehensive insurance coverage into two - regular and true. The former only assumes third party liability, while the latter includes those which are unforeseen like Acts of God. A confusion on the terminology resulted to disenfranchising the victims of natural calamities and the possibility of losing their properties forever, by failing to pay additional premium for a truly comprehensive insurance policy.

What now happens to the thousands of Filipinos seeking compensation for loss or damage caused by the Acts of God whose policy does not cover it?

The insured may go to his insurance company and kindly request for indemnification. Good will and human nature dictates that we aid those who were victims of natural calamities. If it does not work, go back to the date when you procured the policy. If the insurance company or its agent fails, neglects or withholds a FACT, which a PARTY knows and ought to communicate, they are liable for concealment (Section 26, Insurance Code). The concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. Hence, the failure to differentiate a regular from a truly comprehensive insurance policy, would necessarily give rise to an arguable cause of action on material concealment.

In closing, natural calamities are a way of life. Despite our best preparations, we can only do so much. We must therefore, hope for the best, but must likewise prepare for the worst. It is the reason we procure for ourselves, certain back-up plans to insure us against what we never expected. So a word of advice, check what is excepted before you get you car insurance. Because the next time, God may not be so kind.