Practice question
Insurer A reinsures its entire covered liability but obtains no release or novation of its direct policy. A tells the policyholder that one-hundred-percent cession necessarily extinguishes A’s obligation. Which is correct?
- The cession percentage alone does not extinguish A’s direct contractual liability.
- A is automatically discharged at any cession percentage
- The policyholder automatically becomes the reinsured insurer
- Only the broker remains liable in every case
- A mailing receipt proves novation
Legal references
- Artex Development Co. v. Wellington Insurance Co., G.R. No. L-29508, June 27, 1973, main decision: https://lawphil.net/judjuris/juri1973/jun1973/gr_29508_1973.html
- Insurance Code, as amended by RA 10607, Sections 26-48 and 97-100: https://lawphil.net/statutes/repacts/ra2013/ra_10607_2013.html
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