Insurance Reviewer | Rescission | Insurance

INSURANCE REVIEWER– Atty.

Quimson

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Most of the content of this reviewer was taken from the Reviewer of Johnbee Sioson (3-B,1994) edited to include new jurisprudence and subject matter discussed in class.

THE INSURANCE CODE OF 1976
(Presidential Decree No. 1460) GENERAL PROVISIONS
Section 1. This decree shall be known as the “Insurance Code of 1978” What is the principle behind insurance? Insurance is based upon the principle of aiding another from a loss caused by an unfortunate event. How old is the concept of insurance? Very old. Benevolent societies organized for the purpose of extending aid to their unfortunate members from a fund contributed by all, have been in existence from the earliest times. They existed among the Egyptians, the Chinese, the Hindus, the Romans, and are known to have been established among the Greeks as early as, believe it or not, 3 B.C. How did insurance develop in the Philippines? Pre-Spanish Era - there was no insurance; every loss was borne by the person or the family who suffered the misfortune. Spanish era – Insurance, in its present concept, was introduced in the Philippines when Lloyd’s of London appointed Strachman, Murray & Co., Inc. as its representative here. 1898 – Life insurance was introduced in this country with the entry of Sun Life Assurance of Canada in the local insurance market. 1906 – First domestic non-life insurance company, the Yek Tong Lin Insurance Company, was organized 1910 – First domestic life insurance company, the Insular Life Assurance Co., Ltd., was organized 1939 – Union Insurance Society of Canton appointed Russel & Surgis as its agent in Manila. The business transacted the Philippines was then limited to non-life insurance. 1936 – Social insurance was established with the enactment of Commonwealth Act no. 186 which created the Government Service Insurance System (GSIS) which started operations in 1937. The Act covers gov’t employees. 1949 – Government agency was formed to handle insurance affairs, where the Insular Treasurer was appointed commissioner ex-officio. 1950 – Reinsurance was introduced by the Reinsurance Company of the Orient when it wrote treaties for both life and non life. 1951 – First workmen’s compensation pool was organized as the Royal Group Incorporated. 1954 – RA 1161 was enacted which provided for the organization of the Social Security System (SSS) covering employees of the private sector. At present, there are 130 insurance companies registered with the Office of the Insurance Commissioner. Of these, 2 are composite insurance companies (engaged in both life and non-life insurance), 23 are life insurance companies, 101 are non-life insurance companies and 4 are reinsurance companies. How did insurance laws develop in the Philippines? During the Spanish Period, the laws on insurance were found in Title VII of Book II and Section III of Title III of Book III of the Spanish Code of Commerce; and in Chapters II and IV of Tile XII of Book IV of the Spanish Civil Code of 1889 (whew!) During the American Regime, on Dec. 11, 1914, the Phil Legislature enacted the Insurance Act (Act 2427). This Act which took effect on July 1, 1915 repealed the provisions of the Spanish Code of Commerce on Insurance. When the Civil Code of the Philippines (RA 386) took effect on August 30, 1950, the provisions of the Spanish Civil Code of 1889 were likewise repealed. For quite a long time, the Insurance Act was the governing law on insurance in the Philippines. On Dec. 18, 1974, PD 612 was promulgated, ordaining and instituting the Insurance Code of the Philippines, thereby repealing Act 2427. PD’s 63, 123 and 317 were issued, amending PD 612. Finally PD 1460 which took effect on June 11, 1976 consolidated all insurance laws into a single code and this is what we know now as the Insurance Code of 1978.

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INSURANCE REVIEWER– Atty. Quimson

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What are the present laws that govern insurance (also known as the laws we have to know for exams)? The laws we have to know are, of course, PD 1460, and Articles 2011-2012, 2021-2027 and 2166 of the New Civil Code. What do these Civil Code Provisions say? Art. 2011. The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code. Art. 2012. Any person who is forbidden from receiving any donation under Art. 739 cannot be named beneficiary of a life insurance policy by a person who cannot make any donation to him, according to said article. Art. 2021. The aleatory contract of life annuity binds the debtor to pay an annual pension or income during the life of one or more determinate persons in consideration of a capital consisting of money or other property, whose ownership is transferred to him at once with the burden of income. Art. 2022. The annuity may be constituted upon the life of the person who gives the capital, upon that of a third person, or upon the lives of various persons, all of whom must be living at the time the annuity is established. It may also be constituted in favor of the person or persons upon whose life or lives the contract is entered into, or in favor of another or other persons. Art. 2023. Life annuity shall be void if constituted upon the life of a person who was already dead at the time the contract was entered into, or who was at the that time suffering from an illness which caused his death within twenty days following said date. Art. 2024. The lack of payment of the income due does not authorize the recipient of the life annuity to demand the reimbursement of the capital or to retake possession of the property alienated, unless there is a stipulation to the contrary; he shall have only a right judicially to claim the payment of the income in arrears and to require a security for the future income, unless there is a stipulation to the contrary. Art. 2025. The income corresponding to the year in which the person enjoying it dies shall be pain in proportion to the days during which he lived; if the income should be paid by installments in advance, the whole amount of the installment which began to run during his life shall be paid. Art. 2026. He who constitutes an annuity by gratuitous title upon his property, may provide at the time the annuity is established that the same shall not be subject to execution or attachment on account of the obligations of the recipient of the annuity. If the annuity was constituted in fraud of creditors, the latter may ask for execution or attachment of the property. Art. 2027. No annuity shall be claimed without first proving the existence of the person upon whose life the annuity is constituted. What is so important about the Civil Code Provisions? Atty. Quimson never fails to ask about Art. 2012. Are there special laws that govern insurance? Yes, but Atty. Quimson did not tell us to look them up. However, for reference they are: 1. Revised GSIS Act of 1977 (PD 1146, as amended) 2. Social Security Act of 1954 ( RA 1161, (as amended) 3. The Property Insurance Law ( RA 656, as amended by PD 245) 4. Republic Act No. 4898 5. EO 250; and 6. RA 3591 How do we construe the provisions of the Insurance Code (IC)? Since our present IC is based mainly on the Insurance Act, which in turn was taken verbatim from the law of California (except for Chap V, which was taken from the law of NY), the courts should follow in fundamental

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points, at least, the construction placed by California Courts on California law (and the construction placed by the NY Courts on NY law). This is in accordance with the well settled rule in statutory construction that when a statute has been adopted from some other state or country, and said statute has previously been construed by the courts of such state or country, the statute is usually deemed to have been adopted with the construction so given. Cases: (1) Constantino v. Asia Life 87 PHIL 248 Facts:  Appeal consolidates two cases.  Asia life insurance Company (ALIC) was incorporated in Delaware.  For the sum of 175.04 as annual premium duly paid to ALIC, it issued Policy No. 93912 whereby it insured the life of Arcadio Constantino for 20 years for P3T with Paz Constantino as beneficiary. o First premium covered the period up to Sept. 26, 1942. No further premiums were paid after the first premium and Arcadio died on Sept. 22, 1944.


Due to Jap occupation, ALIC closed its branch office in Manila from Jan. 2 1942-1945. On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the lives of Spouses Tomas Ruiz and Agustina Peralta for the sum of P3T for 20 years. The annual premium stipulated was regularly paid from Aug. 1, 1938 up to and including Sept. 30, 1940. o Effective Aug. 1, 1941, the mode of payment was changed from annually to quarterly and such quarterly premiums were paid until Nov. 18, 1941. o Last payment covered the period until Jan. 31, 1942. o Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his beneficiary. Due to Jap occupation, it became impossible and illegal for the insured to deal with ALIC. Aside from this the insured borrowed from the policy P234.00 such that the cash surrender value of the policy was sufficient to maintain the policy in force only up to Sept. 7, 1942. Both policies contained this provision: All premiums are due in advance and any unpunctuality in making such payment shall cause this policy to lapse unless and except as kept in force by the grace period condition. Paz Constantino and Agustina Peralta claim as beneficiaries, that they are entitled to receive the proceeds of the policies less all sums due for premiums in arrears. They also allege that non-payment of the premiums were caused by the closing of ALIC’s offices during the war and the impossible circumstances by the war, therefore, they should be excused and the policies should not be forfeited. Lower court ruled in favor of ALIC.


Issue: May a beneficiary in a life insurance policy recover the amount thereof although the insured died after repeatedly failing to pay the stipulated premiums, such failure being caused by war? Held: NO. Due to the express terms of the policy, non-payment of the premium produces its avoidance. In Glaraga v. Sun Life, it was held that a life policy was avoided because the premium had not been paid within the time fixed; since by its express terms, non-payment of any premium when due or within the 31 day grace period ipso fact caused the policy to lapse. When the life insurance policy provides that non-payment of premiums will cause its forfeiture, war does NOT excuse non-payment and does not avoid forfeiture. Essentially, the reason why punctual payments are important is that the insurer calculates on the basis of the prompt payments. Otherwise, malulugi sila. It should be noted that the parties contracted not only as to peace time conditions but also as to wartime conditions since the policies contained provisions applicable expressly to wartime days. The logical inference therefore is that the parties contemplated the uninterrupted operation of the contract even if armed conflict should ensue. (2) Insular Life v. Ebrado 80 SCRA 181

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INSURANCE REVIEWER– Atty. Quimson

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Facts:  Buenaventura Ebrado was issued by Insular Life Assurance Co. a whole life plan for P5,882.00 with a rider for Accidental Death Benefits for the same amount.  Ebrado designated Carponia Ebrado as the revocable beneficiary in his policy, referring to her as his wife.  Ebrado died when he was accidentally hit by a falling branch of tree.  Insurer by virtue of the contract was liable for 11,745.73, and Carponia filed her claim, although she admitted that she and the insured were merely living as husband and wife without the benefit of marriage.  Pascuala Ebrado also filed her claim as the widow of the deceased insured.  Insular life filed an interpleader case and the lower court found in favor of Pascuala. Issue: Between Carponia and Pascuala, who is entitled to the proceeds? Held: Pascuala. It is quite unfortunate that the Insurance Act or our own Insurance Code does not contain a specific provision grossly resolutory of the prime question at hand. Rather, the general rules of civil law should be applied to resolve this void in the insurance law. Art. 2011 of the NCC states: The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code. When not otherwise specifically provided for in the insurance law, the contract of life insurance is governed by the general rules of civil law regulating contracts. Under Art. 2012, NCC: Any person who is forbidden from receiving any donation under Art. 739 cannot be named beneficiary of a life insurance policy by a person who cannot make any donation to him, according to said article. Under Art. 739, donations between persons who were guilty of adultery or concubinage at the time of the donation shall be void. In essence, a life insurance policy is no different from civil donations insofar as the beneficiary is concerned. Both are founded on the same consideration of liberality. A beneficiary is like a donee because from the premiums of the policy which the insured pays, the beneficiary will receive the proceeds or profits of said insurance. As a consequence, the proscription in Art. 739 should equally operate in life insurance contracts. Therefore, since common-law spouses are barred from receiving donations, they are likewise barred from receiving proceeds of a life insurance contract. (3) Qua Chee Gan v. Law Union Rock 98 PHIL 85 Facts:  Qua Chee Gan, a merchant, owned 4 warehouses in Albay which were used for the storage or copra and hemp in which the appelle deals with exclusively.  The warehouses together with the contents were insured with Law Union since 1937 and the loss made payable to PNB as mortgagee of the hemp and copra.  A fire of undetermined cause broke out in July 21, 1940 and lasted for almost 1 whole week.  Bodegas 1, 3, and 4 including the merchandise stored were destroyed completely.  Insured then informed insurer of the unfortunate event and submitted the corresponding fire claims, which were later reduced to P370T.  Insurer refused to pay claiming violations of the warranties and conditions, filing of fraudulent claims and that the fire had been deliberately caused by the insured.  Insured filed an action before CFI which rendered a decision in favor of the insured.

Issues and Resolutions: (1) WON the policies should be avoided for the reason that there was a breach of warranty. Under the Memorandum of Warranty, there should be no less than 1 hydrant for each 150 feet of external wall measurements of the compound, and since bodegas insured had an external wall per meter of 1640 feet, the insured should have 11 hydrants in the compound. But he only had 2.

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INSURANCE REVIEWER– Atty. Quimson

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Even so, the insurer is barred by estoppel to claim violation of the fire hydrants warranty, because knowing that the number of hydrants it demanded never existed from the very beginning, appellant nevertheless issued the policies subject to such warranty and received the corresponding premiums. The insurance company was aware, even before the policies were issued, that in the premises there were only 2 hydrants and 2 others were owned by the Municipality, contrary to the requirements of the warranties in question. It should be close to conniving at fraud upon the insured to allow the insurer to claim now as void the policies it issued to the insured, without warning him of the fatal defect, of which the insurer was informed, and after it had misled the insured into believing that the policies were effective. Accdg to American Jurisprudence: It is a well-settled rule that the insurer at the time of the issuance of a policy has the knowledge of existing facts, which if insisted on, would invalidate the contract from its very inception, such knowledge constitutes a waiver of conditions in the contract inconsistent with known facts, and the insurer is stopped thereafter from asserting the breach of such conditions. The reason for the rule is: To allow a company to accept one’s money for a policy of insurance which it knows to be void and of no effect, though it knows as it must that the insured believes it to be valid and binding is so contrary to the dictates of honesty and fair dealing, as so closely related to positive fraud, as to be abhorrent to fair-minded men. It would be to allow the company to treat the policy as valid long enough to get the premium on it, and leave it at liberty to repudiate it the next moment. Moreover, taking into account the well-known rule that ambiguities or obscurities must strictly be interpreted against the party that cause them, the memorandum of warranty invoked by the insurer bars the latter from questioning the existence of the appliances called for, since its initial expression “the undernoted appliances for the extinction of fire being kept on the premises insured hereby..” admits of the interpretation as an admission of the existence of such appliances which insurer cannot now contradict, should the parole evidence apply. (2) WON the insured violated the hemp warranty provision against the storage of gasoline since insured admitted there were 36 cans of gasoline in Bodega 2 which was a separate structure and not affected by the fire. It is well to note that gasoline is not specifically mentioned among the prohibited articles listed in the socalled hemp warranty. The clause relied upon by the insurer speaks of “oils”. Ordinarily, oils mean lubricants and not gasoline or kerosene. Here again, by reason of the exclusive control of the insurance company over the terms of the contract, the ambiguity must be held strictly against the insurer and liberally in favor of the insured, specially to avoid a forfeiture. Furthermore, the gasoline kept was only incidental to the insured’s business. It is a well settled rule that keeping of inflammable oils in the premises though prohibited by the policy does NOT void it if such keeping is incidental to the business. Also, the hemp warranty forbade the storage only in the building to which the insurance applies, and/or in any building communicating therewith; and it is undisputed that no gasoline was stored in the burnt bodegas and that Bodega No. 2 which was where the gasoline was found stood isolated from the other bodegas. (4) Ty v. Filipinas Compañia de Seguros 17 SCRA 364 Facts:  Ty was employed as a mechanic operator by Braodway Cotton Factory at Grace Park, Caloocan.  In 1953, he took personal accident policies from 7 insurance companies (6 defendants), on different dates, effective for 12 mos.  On Dec. 24. 1953, a fire broke out in the factory were Ty was working. A hevy object fell on his hand when he was trying to put out the fire.  From Dec. 1953 to Feb. 6, 1954 Ty received treatment at the Nat’l Orthopedic Hospital for six listed injuries. The attending surgeon certified that these injuries would cause the temporary total disability of Ty’s left hand.  Insurance companies refused to pay Ty’s claim for compensation under the policies by reason of said disability of his left hand. Ty filed a complaint in the municipal court who decided in his favor.

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INSURANCE REVIEWER– Atty. Quimson 

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CFI reversed on the ground that under the uniform terms of the policies, partial disability due to loss of either hand of the insured, to be compensable must be the result of amputation.

Issue: WON Ty should be indemnified under his accident policies. Held. NO. SC already ruled in the case of Ty v. FNSI that were the insurance policies define partial disability as loss of either hand by amputation through the bones of the wrist, the insured cannot recover under said policies for temporary disability of his left hand caused by the fractures of some fingers. The provision is clear enough to inform the party entering into that contract that the loss to be considered a disability entitled to indemnity, must be severance or amputation of the affected member of the body of the insured. In the words of Atty. Quimson: Aba gago pala siya, Sinabi ng loss by amputation, pinagpipilitan pa nyang fracture lang ang kailangan. (5) Del Rosario v. Equitable Insurance 118 PHIL 349 Facts:  Equitable Insurance issued a life Insurance policy to del Rosario binding itself to pay P1,000 to P3,000 as indemnity.  Del Rosario died in a boating accident. The heirs filed a claim and Equitable paid them P1,000.  The heir filed a complaint for recovery of the balance of P2,000, claiming that the insurere should pay him P3,000 as stated in the policy. Issue: WON the heir is entitled to recover P3,000. Held: YES. Generally accepted principles or ruling on insurance, enunciate that where there is an ambiguity with respect to the terms and conditions of the policy, the same shall be resolved against the one responsible thereof. The insured has little, if any, participation in the preparation of the policy. The interpretation of obscure stipulations in a contract should not favor the party who cause the obscurity. (6) Misamis Lumber v. Capital Insurance 123 Phil 1077 Facts:  Misamis lumber insured it’s motor car for P14T with Capital Insurance. The policy stipulated that the insured may authorize the repair of the vehicle necessitated by damage and the liability of the insured is limited to 150.  Car met an accident and was repaired by Morosi Motors at a total cost of P302.27. Misamis made a report of the accident to Capital who refused to pay the cost of the repairs. Issue: WON the insurer is liable for the total amount of the repair. Held: NO. The insurance policy stipulated that if it is the insured who authorized the repair, the liability of the insurer is limited to 150. The literal meaning of the stipulation must control, it being the actual contract, expressly and plainly provided for in the policy.

(7) Verendia v. CA 217 SCRA 1993 Facts:

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specifically Section 13 thereof which is expressed in terms that are clear and unambiguous. is proven by the fact that Verendia himself filed 3D SY 2004-2005 rhys alexei . Verendia. As it is also a contract of adhesion. insured the same property with two other insurance companies for a total coverage of around P900. 1981 covering Rafael (Rex) Verendia's residential in the amount of P385. a couple of days after the effectivity of the insurance policy. Quimson page 7      Fidelity and Surety Insurance Company (Fidelity) issued Fire Insurance Policy No. it appears that Robert Garcia was still within the premises. The Country Bankers Insurance for P56. More significantly.000. an insurance contract should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it .00 and The Development Insurance for P400. However. the building appeared to have "no occupants" and that Mr. the Provincial Assessor of Rizal had assessed the property's fair market value to be only P40.00. When the rented residential building was razed to the ground. Ironically. F-18876 effective between June 23.000. the lessor. he forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof that Fidelity waived such provision There is also no reason to conclude that by submitting the subrogation receipt as evidence in court. and created a dead-end for the adjuster by the disappearance of Robert Garcia. was occupying the building when it was burned. Fidelity's conclusions on these proven facts appear.INSURANCE REVIEWER– Atty. inflated the value of the property by the alleged monthly rental of P6.77. failed to explain why Marcelo had to sign his cousin's name when he in fact he was paying for the rent and why he (Verendia) himself. according to the investigation by the police. Considering. however. Verendia admitted that it was not Robert Garcia who signed the lease contract but it was Marcelo Garcia cousin of Robert. While the said receipt appears to have been a filled-up form of Fidelity. Verendia.500) when in fact. Designated as beneficiary was the Monte de Piedad & Savings Bank. 1980 to a certain Roberto Garcia. was entered into between him and one Robert Garcia. Fidelity refused payment under its policy. allowed such a ruse. namely. However. or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy". Verendia also insured the same building with two other companies.00. the same receipt states that Verendia had received the aforesaid amount. Fidelity bound itself to a "mutual agreement" to settle Verendia's claims in consideration of the amount of P142.00. the foregoing discussion pointing to the fact that Verendia used a false lease contract to support his claim under Fire Insurance Policy. Verendia failed to live by the terms of the policy. Held: NOPE.000 when it was accordingly informed of the loss. Despite demands. that all benefits under the policy shall be forfeited "if the claim be in any respect fraudulent.300. the terms of the policy should be strictly construed against the insured. who had also been paying the rentals all the while. Basically a contract of indemnity. to have sufficient bases: Verendia concocted the lease contract to deflect responsibility for the fire towards an alleged "lessee". during the trial. While the three fire insurance policies were in force. no representative of Fidelity had signed it. The contract of lease upon which Verendia relies to support his claim for insurance benefits.000.000 Fidelity. however. Its terms and conditions constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right to recovery from the. that Verendia maliciously represented that the building at the time of the fire was leased under a contract executed on June 25. 1980 and June 23. It is even incomplete as the blank spaces for a witness and his address are not filled up. Fidelity appraised the damage amounting to 385. averred that the policy was avoided by reason of over-insurance. that Verendia had not received the amount stated therein. or if any false declaration be made or used in support thereof.685. having presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract. when actually it was a Marcelo Garcia who was the lessee. therefore. Roberto Garcia was "renting on the otherside of said compound" These pieces of evidence belie Verendia's uncorroborated testimony that Marcelo Garcia whom he considered as the real lessee. Issue: WON Verendia can claim on the insurance despite the misrepresentation as to the lessee and the overinsurance.000. the insured property was completely destroyed by fire. an insurance contract is the law between the parties. thus prompting Verendia to file a complaint for the recovery of 385.

(c) Doing any kind of business including a reinsurance business. as such. credit and conduct of the other What are the elements of an insurance contract? 3D SY 2004-2005 rhys alexei . the fact that no profit is derived from the making of insurance contracts. (3) As used in this Code. or proposing to make. (2) The term “doing an insurance business” or “transacting an insurance business” withing the meaning of this Code. 4. He opines that the definition does Not include Life insurance which is a contract upon a condition rather than a contract to indemnify for nor recovery can fully repay a beneficiary for the loss of life which is beyond pecuniary value. to interpret Fidelity's presentation of the subrogation receipt in evidence as indicative of its accession to its "terms" is not only wanting in rational basis but would be substituting the will of the Court for that of the parties Section 2. is that of Vance who said that a “ contract of insurance is an agreement by which one party. 2 sufficient? De Leon believes that it is not. damage. Thus.000.” Is the definition of a contract of insurance under Sec. promises to pay money or its equivalent. A better definition he thinks. any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety. (b) Making. Quimson page 8 the complaint for the full amount of P385. the following terms shall have the respective meanings hereinafter set forth or indicated. but surely. within the meaning of this Code. as insurer. liability or disability arising from an unknown or contingent event. the subrogation receipt by itself does not prove that a settlement had been arrived at and enforced. Whenever used in this Code. as surety. It might be that there had been efforts to settle Verendia's claims. 7. unless the context otherwise requires: (1) A “Contract of Insurance” is an agreement whereby one undertakes for a consideration to indemnify another against loss. 5. Voluntary – it is not compulsory and the parties may incorporate such terms and conditions as they may deem convenient which will be binding provided they are not against the law or public policy Aleatory – depends upon some contingent event Executed – as to the insured after the payment of the premium Executory – as to the insurer as it is not executed until payment for a loss Conditional – subject to conditions the principal one of which is the happening of the event insured against Personal – each party in the contract have in view the character. the term “Commissioner” means the “Insurance Commissioner. is doing an insurance business as hereinafter provided. shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business. (d) Doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this code. In the application of the provisions of this Code.” What are the characteristics of an insurance contract? A contract of insurance has the following characteristics: 1. or to do some act valuable to the insured or his nominee. for a consideration. shall include: (a) Making or proposing to make. specifically recognized as constituting the doing of an insurance business within the meaning of this Code. A contract of suretyship shall be deemed to be an insurance contract. only if made by a surety who or which. any insurance contract.INSURANCE REVIEWER– Atty. agreements or transactions or that no separate or distinct consideration is received therefor. upon the happening of a loss. 3. damage or liability arising from an unknown or contingent event.00 stated in the policy. Consensual – perfected by the meeting of the minds of the parties 2. 6.

The parties who give their consent in this contract are the insurer and insured. Will any suretyship agreement amount to an insurance contract? No. Fact that no profit is derived from the contract or transaction or that no separate or direct consideration is received for such contract or transaction is NOT deemed conclusive to show that no insurance business was transacted.INSURANCE REVIEWER– Atty. Paterno sent a letter-complaint to the Insurance Commissioner alleging certain problems encountered by agents. damage. Quimson page 9 Like any other contract. b) Making. The object of the contract is the transferring or distributing of the risk of loss. Ansaldo 234 SCRA 509 Facts:   Ramon M. Commissioner requested petitioner Rodrigo de los Reyes. 227) b) Group Life (Sections 50 and 228) c) Industrial Life (Sections 229-231) 2) Non-Life Insurance Contracts a) Marine (Sections 99-166) b) Fire (Sections 167-173) c) Casualty (Section 174) 3) Contracts of Suretyship and bonding (Sections 175-178) How are insurance contracts construed? Ambiguities or obscurities must be strictly interpreted against the party that caused them. any insurance contract. In order for a suretyship agreement to come under the purview of the Insurance Code. (Qua Chee Gan) What does the term “doing insurance business” include? The term “doing an insurance business or “transacting an insurance business” includes: a) Making or proposing to make. The cause or consideration of the contract is the premium which the insured pays the insurer. d) Doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this code. to comment on respondent Paterno's letter. the Surety undertaking to ensure the performance of the obligations must be registered with the Insurance Commissioner and must have been issued by the latter with a certificate of authority. any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety. Does the fact that no profit was derived from the transaction nor a separate consideration received therefore mean that no insurance business was transacted? No. 3D SY 2004-2005 rhys alexei . as insurer. as surety. specifically recognized as constituting the doing of an insurance business within the meaning of this Code. c) Doing any kind of business including a reinsurance business. As the insurance policy is prepared solely by the insurer. the ambiguities shall be construed against it and in favor of the insured. What is an additional element of an insurance contract? Insurable Interest. in his capacity as Philamlife's president. the person acting as a surety is habitually engaged as such for a livelihood. liability or disability from the insured to the insurer. object and cause or consideration. Furthermore. or proposing to make. Cases: (8) Philamlife v. supervisors. an insurance contract must have consent of the parties. managers and public consumers of the Philamlife as a result of certain practices by said company. How are insurance contracts classified? Insurance contracts are classified as follows? 1) Life insurance contracts a) Individual (Sections 179-183. This means that the insured possesses an interest of some kind susceptible of pecuniary estimation.

(b) making. (d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code. for any willful failure or refusal to comply with. and/or conducting business in an unsafe or unsound manner as may be determined by the Insurance Commissioner. with interest at the prevailing rate reckoned from the date when they were deducted Manuel Ortega.INSURANCE REVIEWER– Atty. any contract of suretyship as a vocation and not as merely incidental of the surety. including a reinsurance business. as well as the implementing provisions as published in the agents' handbook. or proposing to make. (c) doing any kind of business. liver disease. Quimson page 10  The complaint prays that provisions on charges and fees stated in the Contract of Agency executed between Philamlife and its agents. asthma or peptic ulcer? (If Yes. their directors and/or officers and/or agents. cancer. The motion to quash was denied. Philamlife's Senior Assistant Vice-President and Executive Assistant to the President. Section 2 of the Insurance Code cannot be invoked to give jurisdiction over the same to the Insurance Commissioner. to wit: "The Insurance Commissioner shall have the duty to see that all laws relating to insurance. and b) suspension. heart trouble. or any order. insurance companies and other insurance matters. it does not have jurisdiction. The general regulatory authority of the Insurance Commissioner is described in Section 414 of the Insurance Code. In the standard application form. which is defined as follows: "(2) The term 'doing an insurance business' or 'transacting an insurance business. He also asked that the amounts of such charges and fees already deducted and collected by Philamlife in connection therewith be reimbursed to the agents. Insurance Commissioner set the case for hearing and sent subpoena to the officers of Philamlife. ." A plain reading of the above-quoted provisions show that the Insurance Commissioner has the authority to regulate the business of insurance. mutual benefit associations and trusts for charitable uses are faithfully executed and to perform the duties imposed upon him by this Code. applied for a health care coverage with Philamcare. shall include (a) making or proposing to make. agency bulletins and circulars. to impose upon insurance companies. Ortega filed a motion to quash the subpoena alleging that the Insurance company has no jurisdiction over the subject matter of the case and that there is no complaint sufficient in form and contents has been filed.' within the meaning of this Code. diabetes. . specifically recognized as constituting the doing of an insurance business within the meaning of this Code. (9) Philamcare v. CA 379 SCRA 356 (2002) Facts:  Ernani Trinos. or violation of any provision of this Code. Section 415 provides: "In addition to the administrative sanctions provided elsewhere in this Code. removal of directors and/or officers and/or agents. at his discretion. or any commission of irregularities. 2 [2]) Since the contract of agency entered into between Philamlife and its agents is not included within the meaning of an insurance business." On the other hand. Expressio unius est exclusio alterius. the Insurance Commissioner is hereby authorized. be declared as null and void. asked that the Commissioner first rule on the questions of the jurisdiction of the Insurance Commissioner over the subject matter of the letters-complaint and the legal standing of Paterno. he answered NO to the following question: “Have you or any of your family members ever consulted or been treated for high blood pressure. the following: a) fines not in excess of five hundred pesos a day. or after due hearing. (Insurance Code. any insurance contract.    Issue: WON the insurance commissioner had jurisdiction over the legality of the Contract of Agency between Philamlife and its agents. instruction. Held: No. regulation or ruling of the Insurance Commissioner. . as insurer. Sec. as surety. give details)” 3D SY 2004-2005 rhys alexei . .

(A)lthough false. the same was extended for another year from March 1. The amount of coverage was increased to a maximum sum of P75. treatment or any other medical advice or examination. Philamcare cannot rely on the stipulation regarding "Invalidation of agreement" which reads: Failure to disclose or misrepresentation of any material information by the member in the application or medical examination. whether ordinary or emergency. he was attended by a physical therapist at home. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. Later. According to Philamcare. especially coming from respondent's husband who was not a medical doctor. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. diabetic and asthmatic. Upon the termination of the agreement. medical or any other expense arising from sickness. 1990. the defense of concealment or misrepresentation no longer lie. 1990 to June 1. During the period of his coverage. and under such. Julita brought her husband home again. belief. raising the primary argument that a health care agreement is not an insurance contract. preventive health care and other out-patient services. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. had 12 mos from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma. Under the title Claim procedures of expenses. 1988 to March 1. he was admitted at the Chinese General Hospital (CGH). 1989. Ernani had fever and was feeling very weak. or its acceptance at a lower rate of premium. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. 1990. 1990. Philamcare. Where matters of opinion or judgment are called for. intention. Julita was constrained to bring him back to the CGH where he died on the same day. He was a issued Health Care Agreement. Once the member incurs hospital. there was concealment regarding Ernani's medical history. amounting to about P76.      Issues and Resolutions: Philamcare brought the instant petition for review. and this is likewise the rule although the 3D SY 2004-2005 rhys alexei . In the morning of April 13. Philamcare denied her claim saying that the Health Care Agreement was void.00 per disability. the health care provider must pay for the same to the extent agreed upon under the contract. which is primarily a contract of indemnity. 48 does not apply. This largely depends on opinion rather than fact. While her husband was in the hospital. he was entitled to avail of hospitalization benefits. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. 1989 to March 1. The periods having expired. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. opinion. Sec. Quimson page 11    The application was approved for a period of one year from March 1.00 After her husband was discharged from the MMC. Julita tried to claim the benefits under the health care agreement. o Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. Julita had no choice but to pay the hospitalization expenses herself. It appears that in the application for health coverage.000. Due to financial difficulties. An undisclosed or misrepresented information is deemed material if its revelation would have resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for. Petitioner argues that respondent's husband concealed a material fact in his application. She asked for reimbursement of her expenses plus moral damages and attorney's fees. listed therein. an action for damages against Philamcare. CA affirmed. RTC decided in favor of Julita. SC held that in the case at bar. then from March 1. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue.INSURANCE REVIEWER– Atty. The health care agreement was in the nature of non-life insurance. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. However. Thus. petitioners required respondent's husband to sign an express authorization for any person. hence the "incontestability clause" under the Insurance Code Title 6. whether intentional or unintentional. Julita instituted. 1990.000. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. injury or other stipulated contingent. a representation of the expectation. consultation. contrary to his answer in the application form.

as a matter of expectation or belief. CHAPTER 1 CONTRACT OF INSURANCE TITLE I – WHAT MAY BE INSURED Section 3. subject to the provisions of this chapter. The phraseology used in medical or hospital service contracts. petitioner is bound to answer the same to the extent agreed upon. whether past or future. with any insurance company duly authorized to do business in the Philippines. 4. 3D SY 2004-2005 rhys alexei . contract for life. None of the above pre-conditions was fulfilled in this case. Under Section 27 of the Insurance Code. health and accident insurance. petitioner is liable for claims made under the contract. child. Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. This is equally applicable to Health Care Agreements. When the terms of insurance contract contain limitations on liability. the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid. the terms of an insurance contract are to be construed strictly against the party which prepared the contract — the insurer. provided the insurance is taken on his own life and the beneficiary appointed is the minor’s estate or the minor’s father. The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. Must be in writing. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. 2. The married woman or the minor herein allowed to take out an insurance policy may exercise all the rights and privileges of an owner under a policy. since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true. to be actually untrue. but is obligated to make further inquiry. to furnish facts on which cancellation is based. may notwithstanding such minority. In the end. Having assumed a responsibility under the agreement. 3. "a concealment entitles the injured party to rescind a contract of insurance. no rescission was made. and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted. The consent of the husband is not necessary for the validity of an insurance policy taken out by the married woman on her life or that of her children. if the statement is obviously of the foregoing character. that which he then knows. especially to avoid forfeiture. or create a liability against him. Any contingent or unknown event. and exclusionary clauses of doubtful import should be strictly construed against the provider. or the impossibility of which is shown by the facts within his knowledge. husband. since in such case the insurer is not justified in relying upon such statement. In this case. brother or sister. the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. Being a contract of adhesion. which may damnify a person having an insurable interest. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned. mailed or delivered to the insured at the address shown in the policy. ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. wife. must be liberally construed in favor of the subscriber." The right to rescind should be exercised previous to the commencement of an action on the contract. mother. In any case. courts should construe them in such a way as to preclude the insurer from noncompliance with his obligation. such as the one at bar. may be insured against. Any minor of the age of eighteen years or more. Quimson page 12 statement is material to the risk.INSURANCE REVIEWER– Atty. with or without the authority to investigate. Prior notice of cancellation to insured. Besides.

Any contingent or unknown event. The spouses retain the ownership. even though there may have been no damage to the contracting parties: (1) Those where one of the parties is incapable of giving consent to a contract. What perils or risk may be insured? The following risks may be insured: 1. though foreseen. undue influence or fraud. 13. Quimson page 13 All rights. A married woman may take out an insurance on her life or that of her children even without the consent of her husband. Atty Quimson asked us to look at a few provisions of law with respect to this section. 3D SY 2004-2005 rhys alexei . could not be foreseen. Dec. This is an example of a past unknown event because the sinking of the ship is a past event at the time that the policy took effect. violence. 110 (FC). Case. The contract is valid and B Insurance Co. intimidation. or when it is otherwise declared by stipulation. Is B Insurance Co. 1390 (NCC). She may likewise take out an insurance on the life of her husband. Problem: A. administration and enjoyment of their exclusive properties. (2) Insane or demented persons. Without the knowledge of both parties. On August 14. on what? Yes. 14. no person shall be responsible for those events which. A insured the 5 vessels against perils of the South China Sea “Lost or Not Lost” with B Insurance Co. unless otherwise provided in the policy. whether past or future. Any contingent or unknown event whether past or future which may cause damage to a person having an insurable interest. They are susceptible of ratification. The following cannot give consent to a contract: (1) Unemancipated minors. or which. The following contracts are voidable or annullable. Except in cases expressly specified by the law. the ships had already sunk on Aug. title and interest in the policy of insurance taken out by an original owner on the life or health of a minor shall automatically vest in the minor upon the death of the original owner. However. unless they are annulled by a proper action in court. were inevitable. What are they? Art. A then sent 5 of his cargo vessels to Taiwan. since the age of majority is now 18 years old (RA 8809.INSURANCE REVIEWER– Atty. Either spouse may during the marriage. which may create liability against the person insured. 3 is no longer applicable. most if not all insurance companies no longer insure a past event since technology has progressed in such a manner that a ship’s current status can easily be known while the application is being processed. The ships left on August 9. An insurance against an unknown past event is peculiar only to marine insurance. May a minor take out an insurance? Third par of Sec. Art. her paraphernal property. (2) Those where the consent is vitiated by mistake. May a married woman take out an insurance? If so. and deaf-mutes who do not know how to write. is liable because he agreed to pay even though the ship be already lost. which shall be recorded in the registry of property of the place where the property is located. Art. or on property given to her by her husband. These contracts are binding. possession. Art. transfer the administration of his or her exclusive property to the other by means of a public instrument. 1327 (NCC). He placed a long distance phone call to Taiwan and talked to an exporter who willingly agreed to consign several tons of ginsengs with him on the condition that he will come and pick the goods up. 1174 (NCC). Quimson said in class that nowadays. wanted to open a medicinal herb shop. 1989). or 2. liable for the ships? Yes. Atty. or when the nature of the obligation requires the assumption of risk.

diabetic and asthmatic. hence the "incontestability clause" under the Insurance Code Title 6. he answered NO to the following question: “Have you or any of your family members ever consulted or been treated for high blood pressure. She asked for reimbursement of her expenses plus moral damages and attorney's fees. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. he was entitled to avail of hospitalization benefits. Quimson (10) Philamcare v. It appears that in the application for health coverage. 1989 to March 1. preventive health care and other out-patient services. petitioners required respondent's husband to sign an express authorization for any person. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. RTC decided in favor of Julita. 1988 to March 1. liver disease. raising the primary argument that a health care agreement is not an insurance contract. Philamcare cannot rely on the stipulation regarding "Invalidation of agreement" which reads: Failure to disclose or misrepresentation of any material information by the member in the application or medical examination. Once the member incurs hospital. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. amounting to about P76.000. he was attended by a physical therapist at home. diabetes. Julita brought her husband home again. 1990 to June 1. listed therein. give details)” The application was approved for a period of one year from March 1. The amount of coverage was increased to a maximum sum of P75. CA (repeat – Case #09) 379 SCRA 356 Facts: page 14  Ernani Trinos. heart trouble.000. An undisclosed or misrepresented information is deemed 3D SY 2004-2005 rhys alexei . The periods having expired. Later. an action for damages against Philamcare. In the standard application form.INSURANCE REVIEWER– Atty. cancer. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. the defense of concealment or misrepresentation no longer lie. According to Philamcare. injury or other stipulated contingent. Julita instituted. medical or any other expense arising from sickness. Due to financial difficulties. and under such. Petitioner argues that respondent's husband concealed a material fact in his application. asthma or peptic ulcer? (If Yes. During the period of his coverage. treatment or any other medical advice or examination. In the morning of April 13. Upon the termination of the agreement. SC held that in the case at bar.00 After her husband was discharged from the MMC. 1990. However. applied for a health care coverage with Philamcare. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization.         Issues and Resolutions: Philamcare brought the instant petition for review. Sec. then from March 1. the health care provider must pay for the same to the extent agreed upon under the contract. Julita had no choice but to pay the hospitalization expenses herself.00 per disability. Philamcare. whether ordinary or emergency. 48 does not apply. 1990. 1989. Julita was constrained to bring him back to the CGH where he died on the same day. 1990. consultation. had 12 mos from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma. CA affirmed. whether intentional or unintentional. Under the title Claim procedures of expenses. Julita tried to claim the benefits under the health care agreement. the same was extended for another year from March 1. Ernani had fever and was feeling very weak. 1990. there was concealment regarding Ernani's medical history. he was admitted at the Chinese General Hospital (CGH). o Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. Philamcare denied her claim saying that the Health Care Agreement was void. contrary to his answer in the application form. While her husband was in the hospital. The health care agreement was in the nature of non-life insurance. which is primarily a contract of indemnity. He was a issued Health Care Agreement. He was also entitled to avail of "out-patient benefits" such as annual physical examinations.

the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid. Quimson page 15 material if its revelation would have resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for. gift exhibition. must be liberally construed in favor of the subscriber.INSURANCE REVIEWER– Atty. Must be in writing. Is a contract of insurance a wagering or gambling contract? NO. None of the above pre-conditions was fulfilled in this case. such as the one at bar. mailed or delivered to the insured at the address shown in the policy. opinion. What is the concept of a lottery? The term “lottery” extends to all schemes for the distribution of prizes by chance. it is not a contract of chance. In the end. Where matters of opinion or judgment are called for. Being a contract of adhesion. The preceding section does not authorize an insurance for or against the drawing of any lottery. "a concealment entitles the injured party to rescind a contract of insurance. as a matter of expectation or belief. This is equally applicable to Health Care Agreements. 3. Besides. Having assumed a responsibility under the agreement. etc. a representation of the expectation. ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. The phraseology used in medical or hospital service contracts. but is obligated to make further inquiry. 2. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. intention. the terms of an insurance contract are to be construed strictly against the party which prepared the contract — the insurer. belief. and this is likewise the rule although the statement is material to the risk. to furnish facts on which cancellation is based. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. 3D SY 2004-2005 rhys alexei . courts should construe them in such a way as to preclude the insurer from noncompliance with his obligation. petitioner is bound to answer the same to the extent agreed upon. This largely depends on opinion rather than fact. especially coming from respondent's husband who was not a medical doctor. to be actually untrue. since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. and various forms of gambling. Thus. Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned. and exclusionary clauses of doubtful import should be strictly construed against the provider. or the impossibility of which is shown by the facts within his knowledge. that which he then knows. Under Section 27 of the Insurance Code. 4. Section 4. such as policy playing. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured. no rescission was made. Prior notice of cancellation to insured. petitioner is liable for claims made under the contract." The right to rescind should be exercised previous to the commencement of an action on the contract. and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true. with or without the authority to investigate. In this case. prize concerts. (A)lthough false. raffles at fairs. since in such case the insurer is not justified in relying upon such statement. A contract of insurance is a contract of indemnity and not a wagering or gambling contract. or for against any chance or ticket in a lottery drawing a prize. if the statement is obviously of the foregoing character. or its acceptance at a lower rate of premium. especially to avoid forfeiture. In any case. When the terms of insurance contract contain limitations on liability. Although it is true that an insurance contract is also based on a contingency.

Section 5. B. the promise being condition upon the payment of. The failure to win a prize would not damnify or create a liability against him. Gambler courts fortune Tends to increase the inequality of fortune. In purchasing insurance. A.(Sec. Suppose A. Tends to equalize fortune. one party may receive more.INSURANCE REVIEWER– Atty. It cannot be said that he suffered a “loss” of prize when he did not win. or agreement to pay. In either case. There is consideration of price aid if it appears that the prizes offered by whatever name they may be called came out of the fund raised by the sale of chances among the participants in order to win the prizes. resorts to a scheme which envisions the giving away for free of certain prizes for the purchase of said products. The parties are now contemplating a gain based upon uncertain events. Essence is whatever one person wins from a wager is lost by the other wagering party. out of which one is reimbursed for the losses that he may suffer. All kinds of insurance are subject to the provisions of this chapter so far as the provisions can apply. The distinctions are the following: Insurance Contract Parties seek to distribute loss by reason of mischance Insured avoids misfortune. Purchase of insurance does not create a new and non-existing risk of loss to the purchaser. C.000 each to a fund available for the use of any member who is injured in the contest. the funds which make possible the payment of all claims. C and D decided to join a bungee jumping competition. the insurer faces an already existing risk of economic loss. a stipulated amount by the other party to the contract. Is this insurance or gambling? This is an insurance contract. Ex: A company. 25) White it is based on a contingency. The entire group of insureds provides through the premiums paid. What are the distinctions between an insurance contract and a wagering contract? A contract of insurance is a contract of indemnity and not a wagering. They contributed P1. What are the similarities between an insurance contract and a gambling contract? They are similar in only one respect. prizes and chance. As soon as a party makes a wager. Each member contributes to a common fund. Problems. Is this insurance or gambling? This is now a gambling contract. Quimson page 16 What are the three essential elements of lottery? Consideration. one party promises to pay a given sum to the other upon the occurrence of a given future event. no consideration has been paid and consequent. it is not a contract of chance and is not used for profit. B. to promote the sale of certain products. Can a sweepstakes holder insure himself against the failure of his ticket to win? NO. much more. for the participants are not required to pay more than the usual price o the products. What one insured gains is not at the expense of another insured. he creates a risk of loss to himself where no such risk existed previously. than he paid or agreed to pay. or gambling contract. In both. Are all prizes equivalent to a lottery? If the prizes do not come out of the fund or contributions by the participants. and D agree that the whole amount of 4T would be given to the one who swings nearest to the ground. there is no lottery. Gambling contract Parties contemplate gain through mere chance or the occurrence of a contingent event. What is the applicability of the provisions of Chapter 1? 3D SY 2004-2005 rhys alexei .

association or corporation duly authorized to transact insurance business as elsewhere provided in this Code. partnership. the insure is also the assured where the proceeds are payable to him. 1 of the Insurance Code. the contract is operative and who is indemnified against. 167-173). subject to the conditions of the policy and NOT that of trustee and cestui que trust. the pertinent provisions of the CC shall be applied. like fire insurance. and to any other kind of insurance (Sec. So. The business of insurance may be carried on by individuals just as much as by corporations and associations. Is the insured always the person to whom the proceeds are paid? No. Assured is also used sometimes as a synonym of “beneficiary. 99-166). The state itself may go into insurance business. and the husband the insured. an insurance contract under RA 1611 (Social Security Act of 1954) shall be governed primarily by the said law and subsidiarily by Chap. Casualty Insurance (Sec. In property insurance. 174). 2) so far as said provisions can apply. 187) 3D SY 2004-2005 rhys alexei . TITLE II – PARTIES TO THE CONTRACT Section 6. 179-183). How are the terms assurer. Who are the parties to the contract of insurance? The Insurer is the party who assumes or accepts the risk of loss and undertakes for a consideration to indemnify the insured or to pay him a certain sum on the happening of a specified contingency or event. may be an insurer. The wife is the owner of the policy but she is not the insured. Fire insurance (Secs. What is the nature of the relationship between the insurer and the insured? It is that of a contingent debtor and creditor. while “assured” refers to the person for whose benefit the insurance is granted. or the second party to the contract. The wife is the assured. Insurer is synonymous with the term “assurer” or “underwriter”. whose benefit the policy is issued and to whom the loss is payable. The person paid may be the beneficiary designated in the policy. 175-178). and in the absence of the applicable provisions in both laws. He is the third party in a contract of life insurance. is the person in whose favor.” The beneficiary is the person designated by the terms of the policy as the one to receive the proceeds of the insurance. insured and assured used in insurance? Accdg to Black’s Law. Every person. For ex: A wife insures the life of her husband for her own benefit. the term “insured” refers to the owner of the property insured or the person whose life is the subject of the contract of insurance. or is to receive a certain sum upon the happening of a specified contingency or event. The insured. He is the person whose loss is the occasion for the payment of the insurance proceeds by the insurer. Life Insurance (Secs. Suretyship (Secs. A common example of this situation is a life insurance policy where the proceeds are not given to the insured but to a third party designated by the insured. Quimson page 17 Provisions of Chap 1 on “The Contract of Insurance” (Secs 1-98) are also applicable to marine Insurance (Secs. The terms “insured” and “assured” are generally used interchangeably. but strictly speaking. Matters not expressly provided for in the Insurance Code and special laws are regulated by the CC. Who may be an insurer? A foreign or domestic insurance company may transact business in the Philippines but must first obtain a certificate of authority for that purpose from the Insurance Commissioner who has the discretion to refuse to issue such certificate if it will best promote the interests of the people of this country. (Sec.INSURANCE REVIEWER– Atty.

Atty. partnerships. associations or corporations. the term “insurer” or “insurance company” shall include all individuals. 184186) What is an insurance corporation? IC defines it as one formed or organized to save any person or persons or other corporations harmless from loss. organized or existing under the laws of the Philippines. the term shall also include professional reinsurers defined in Sec. The Commissioner may refuse to issue a certificate of authority to any insurance company if. “ Domestic Company” shall include companies formed. 175) What does the term “insurer” and “insurance company” include? It includes individuals. provided he holds a certificate of authority from the Insurance Commissioner. or existing under any lws other than those of the Philippines. It shall also include professional reinsurers as defined in Sec. engaged as principals in the insurance business. Sec. notwithstanding the provisions of section 188. as well as the integrity and responsibility of the organizers and administrators. Sec. engaged as principals in the insurance business. (Sec. in his judgment. 184. “ Foreign Company. 184) Is the Business of Insurance affected with public interest? Yes. or to indemnify or to compensate any person or persons or other corporations for any such loss. organized.” when used without limitation. 280 (Sec.INSURANCE REVIEWER– Atty. or liability. or liability arising from any unknown or future or contingent event. or to guarantee the performance of or compliance with contractual obligations or the payment of debts of others. including GOCC’s or entities. Unless the context otherwise requires. damage. damage. associations. any person of good moral character. It is therefore. 187 for the certificate of authority required to transact insurance business. subject to regulation and control by the state by virtue of the exercise of its police power or in the interest of public convenience and the general good of the people. reasonably assure the safety of the interests of the policyholders and the public. 280. “insurance company”. and provided further that he is possessed of the capital assets required of an insurance corporation doing the same kind of business in the Philippines and invested in the same manner. damage. or to guarantee the performance of or compliance with contractual obligations or the payment of debts of others shall be known as “insurance corporations. excepting mutual benefit associations. 184-185 for the meaning of “insurer”. For the purposes of this Code. In order to maintain the quality of the management of insurance companies and afford better protection of policyholders and the public in general. unquestioned integrity and recognized competence may be elected or appointed director or officer of insurance companies. (Sec. damage. Quimson asked us to look at Sec. shall include companies formed. and that the direction and administration. 185. (Secs. and “Insurance corporation”. or to indemnify or to compensate any person or persons or other corporations for any such loss. the financial organization and the amount of capital. partnerships. The 3D SY 2004-2005 rhys alexei . and Sec. 185) The last part of the statement refers to suretyship. What do these sections provide? Sec. that the grant of such authority appears to be justified in the light of local economic requirements. such refusal will best promote the interests of the people of this country. 187.” The provisions of the Corporation Law shall apply to all insurance corporations now or hereafter engaged in business in the Philippines in so far as they do not conflict with the provisions of this chapter. Corporations formed or organized to save any person or persons or other corporations harmless from loss. or liability. No such certificate of authority shall be granted to any such company until the Commissioner shall have satisfied himself by such examination as he may make and such evidence as he may require that such company is qualified by the laws of the Philippines to transact business therein. No insurance company shall transact any insurance business in the Philippines until after it shall have obtained a certificate of authority for that purpose from the Commissioner upon application therefore and payment by the company concerned of the fees hereinafter prescribed. Quimson page 18 An individual may also be an insurer. except mutual benefit associations. or corporations including government-owned or controlled corporations or entities. or liability arising from any unknown or future or contingent event.

Quimson page 19 Commissioner shall prescribe the qualifications of the executive officers and other key officials of insurance companies for the purposes of this section. The privilege of renewing the contract for each succeeding year by paying the premium for that year at the time agreed upon. accident and disability insurance. What are the requisites in order that a person may be insured in a contact of insurance? There are 3 requisites namely: c) He must be competent to enter into a contract. the nonperformance of which (as when the performance would be illegal) necessary defeats the right to renew the contract. Section 7. rulings or decisions of the Commissioner. Accdg. What is the effect of war on the existing insurance contracts between the Philippines and a citizen or subject of a public enemy. Anyone except a public enemy may be insured. Before issuing such certificate of authority. unless specifically authorized to do so. No insurance company may be authorized to transact in the Philippines the business of life and non-life insurance concurrently.INSURANCE REVIEWER– Atty. Every company receiving any such certificate of authority shall be subject to the provisions of this Code and other related laws and to the jurisdiction and supervision of the Commissioner. 3D SY 2004-2005 rhys alexei . with respect to property insurance? With respect to property insurance. What is a public enemy? It is a nation with whom the Philippines is at war. Such certificate of authority shall expire on the last day of June of each year and shall be renewed annually if the company is continuing to comply with the provisions of this Code or the circulars. d) He must possess an insurable interest in the subject of insurance. that the terms “life” and “non-life” insurance shall e deemed to include health. instructions. whichever is shorter. the payments of the premiums are a condition precedent. provided however. (1) Connecticut Rule – there are two elements in the consideration for which the annual premium is paid: a. and b. with respect to life insurance? Three doctrines have arisen. the Commissioner must be satisfied that the name of the company is not that of any other known company transacting a similar business in the Philippines. No person shall concurrently be a director and/or officer of an insurance company and an adjustment company. Insurance companies and adjustment companies presently affected by the above provisions shall have two years from the effectivity of the Decree within which to divest of their stockholdings. What is the effect of war on the existing insurance contracts between the Philippines and a citizen or subject of a public enemy. or a name so similar as to be calculated to mislead the public. and it includes every citizen or subject of such nation. the rule adopted in the Phil is that an insurance policy ceases to be valid and enforceable as soon as the insured becomes a public enemy. Incumbent directors and/or officers affected by the above provisions are hereby allowed to hold on to their positions until the end of their terms or two years from the effectivity of the Decree. The mere protection for the year. No insurer company shall have any equity in an adjustment company and neither shall an adjustment company have an equity in an insurance company. to this view. e) He must NOT be a public enemy.

The purpose of the war is to cripple the power ad exhaust the resources of the enemy. Problem. 1941. SC ruled that said corporation became an enemy corporation upon the war between the US and Germany. the insurance is deemed to be upon the interest of the 3D SY 2004-2005 rhys alexei . after payment of the premium. (3) We follow the US Rule. Section 8. or assigns a policy of insurance to a mortgagee. This being so. It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy. 7 speaks of a public enemy only in reference to a nation with whom the Phil is at war and every citizen and or subject thereof. Unless the policy otherwise provides. 1941 should be returned by Filipinas. 1941 by Filipinas had ceased to be valid and enforceable. Christern submitted to Filipinas its claim. during the Jap occupation. 1. Issue: WON Filipinas is liable to Christern. Because he was previously indicted for many other crimes including illegal possession of balisongs. 8 provides that anyone except a public enemy may be insured. 1942. However. War between the states in which the parties reside merely suspends the contracts of life insurance and that upon the tender of premiums due by the insured or his representatives after the war has terminated revives the contract which becomes fully operative.  Filipinas denied liability on the ground that Christern was an enemy corp and cannot be insured. 1. and it is inconsistent that one country should destroy its enemy property and repay in insurance the value of what has been so destroyed. 10. the building and the insured merchandise were burned. 27. Huenfeld & Co. and during the war. 29333 for P100T covering merchandise contained in a building located in Binondo. the insurance policy issued in his favor on Oct. 10. US Rule – declared the contract not merely suspended but is abrogated by reason of non-payment of premiums. 1941. since the time of the payment is peculiarly of the essence of the contract. he was declared Metro Manila’s Public Enemy No. or that it should in such manner increase the resources of the enemy or render it aid. exist as to each other.INSURANCE REVIEWER– Atty. the insured is entitled to the cash or reserve value of the policy (if any) which is the excess of the premiums paid over the actual risk carried during the years when the policy had been in force. may the insurer refuse on the grounds that B is a public enemy and therefore may not be insured under Sec. Quimson page 20 (2) New York Rule – apparently followed by the number of decisions. 10. All individuals who compose the belligerent powers. Christern was NOT entitled to any indemnity under said policy from Filipinas. Elementary rules of justice require that the premium paid by Christern for the period covered by the policy from Dec. 1941. Majority of the stockholders of Christern were German subjects. The Phil Insurance Law in Sec. and since the insured goods were burned after Dec.1.  On Feb. Christern Huenfeld & Co. If A wants to secure insurance on the life of B. Domestic Corp Christern. 80 PHIL 54 Facts:  Oct. obtained from Filipinas. Held: NO.  Salvaged goods were sold and the total loss of Christern was P92T. in a state of utter exclusion and are public enemies. where a mortgagor of the property effects insurance in his own name providing that a loss shall be payable to the mortgagee. Christern having become an enemy corporation on Dec. (11) Filipinas Cia de Seguros v. Cases. B is sideswiped by a balut vendor. Sec. fire policy no. 7 of the IC? NO.

The house was mortgaged to B as security for a loan of P750T. And in case both of them take out separate insurance policies on the same property. while the insurable interest of B. and to the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged. growing fruits. and (5) Upon recovery by the mortgagee to the extent of his credit. What is the extent of the insurable interest of the mortgagee? The mortgagee or his assignee has an insurable interest in the mortgaged property to the extent of the debt secured. Quimson wants us to look at Art. will have the same effect. 2127. Is it alright if both the mortgagor and the mortgage insure the same property? YES. as owner has an insurable interest to the extent of the value of the property. what are the effects of insurance when the mortgagor effects insurance in his own name and provides that the loss be payable to the mortgagee? The legal effects of this are: (1) The contract is deemed to be upon the interest of the mortgagor. the same is not open to the objection that there is double insurance. but any act which. 2127 CC. or it passes into the hands of a third person. under the contract of insurance. is to be performed by the mortgagor. A is the owner of a house worth 10T which he mortgaged to B to secure a loan of 5T. What is the effect if the mortgagee effects insurance on behalf of the mortgagor? Practically the same rules apply. The mortgage extends to the natural accession. insurance taken by one in his own name only and in his favor alone does not inure to the benefit of the other. or in virtue of expropriation for public use. to the improvements. the debt is extinguished. may be performed by the mortgagee therein named. who does not cease to be a party to the original contract. the mortgagee is entitled to the proceeds to the extent of his credit. Quimson page 21 mortgagor. What is the insurable interests of each? Insurable interest of A.INSURANCE REVIEWER– Atty. such interest continues until the mortgage debt is extinguished. and this interest is separate and distinct from the other. Such payment operates to discharge the debt. What does it say? Art. and the rents or income not yet received when the obligation becomes due. amplifications and limitations established by law. It was totally destroyed by accidental fire. with the same effect as if it had been performed by the mortgagor. and the mortgagee cannot recover in excess of the credit at the time of the loss. 8. A insured for 1M her house with the policy providing that the loss shall be payable to B. What is the extent of the insurable interest of the mortgagor? The mortgagor of the property. whether the estate remains in the possession of the mortgagor. Problems. Up to what extent can each recover? The mortgagor cannot recover upon the insurance beyond the full amount of the loss. Consequently. and any act of his. although the property is in the hands of the mortgagee. Under Sec. or one policy covering their respective interests. even if the mortgage debt is equal to such value. mortgagee is P5T. (3) Any act which under the contract of insurance is to be performed by the mortgagor. (2) Any action of the mortgage prior to the loss which would otherwise avoid the insurance affects the mortgagee even if the property is in the hands of the mortgagee. Who may recover on the policy? 3D SY 2004-2005 rhys alexei . Atty. The reason is that the loss or destruction of the property insured will NOT extinguish the mortgage debt. hence he does NOT cease to be a party to the contract. (4) In case of loss. then the mortgagee is entitled to receive the proceeds equal to the amount of the mortgage credit. which would otherwise avoid the insurance. The mortgagor and the mortgagee have each an insurable interest in the property mortgaged. mortgagor is P10T. with the declarations. prior to the loss. Upon the destruction of the property. may be performed by the mortgagee.

Harding was made a defendant because by virtue of the sale. who. Quimson page 22 B.  Dunn likewise authorized SMB to take out the insurance policy for him. Suppose it was B. not wanting to issue a policy for the entire amount. the excess of P250T. In the application. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof. Also it is provided in the IA that the insurance shall be applied exclusively to the proper interest of the person in whose name it is made. Trial court ruled against Harding. But B can only recover P750T. but no assignment of the policies was made to the latter. when he acquired the property. authorizing SMB to choose the insurers and to receive the proceeds thereof and retain so much of the proceeds as would cover the mortgage debt.   Brias. mortgagee who insured the house for 1M. Cases: (12) San Miguel Brewery v. although the policies were issued in SMB’s name. if at all. It is important to note that it was B. SMB’s general manager. Supposing before the fire occurred B had already been paid. In 1917. but it could NOT. the amount of her credit.500 and procured another policy of equal amount from Filipinas Cia de Seguros.INSURANCE REVIEWER– Atty. and he shall hold as trustee for A.  Mortgage contract stated that Dunn was to have the property insured at his own expense. SMB as the mortgagee of the property. neither Dunn nor Harding could have recovered from the two policies. Harding was left to fend for himself. Will A get the proceeds? No. the policies were renewed. mortgagor. With respect to Harding. Insurance Companies contended that they were not liable to Harding because their liability under the policies was limited to the insurable interests of SMB only. Upon payment of the debt. The reason is that A effected the insurance in his own name and he did NOT cease to be a party to the contract although it was provided that the indemnity be paid to B.       Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies. approached Law Union for insurance to the extent of 15T upon the property. issued one for P7. had an insurable interest therein. 1918. Property was destroyed by fire. Hence the appeal. SMB filed an action in court to recover on the policies. If the loss occurred before B was paid who is entitled to receive the proceeds? B. Under the Insurance Act. Undoubtedly. he became the owner of the property. an any event. Law Union. mortgagee who effected the insurance. the mortgagee may receive the 1M but is entitled only to the extent of his credit of P750T. will receive the proceeds? A will receive the proceeds. Held: NOPE. A year later. SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. Brias stated that SMB’s interest in the property was merely that of a mortgagee. SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. Premiums were paid by SMB and charged to Dunn. can he still receive the proceeds? No. What if the loss occurred after B was paid. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. By virtue of the Insurance Act. no change or assignment of the policies had been 3D SY 2004-2005 rhys alexei . Because A was never a party to the contract. recover upon the two policies an amount in excess of its mortgage credit. B lost his insurable interest in the property. Dunn sold the property to Harding. 12. Both policies required assignments to be approved and noted on the policy. Law Union Rock Insurance Company 40 PHIL 674 Facts:  On Jan. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty.

Notice of the cancellation was sent to PNB in writing and was received by the bank on Nov. (13) Saura Import Export Co. the amount involved in the policy subject matter of this case. On Oct. may become owner of the interest insured” . Saura filed a claim with PISC and mortgagee bank. 1954. Both the PSIC and the PNB failed. 1954. but this was not done. as far as Saura herein is concerned. was erected on the parcel of land and the building had always been covered by insurance even before the execution of the mortgage contract. Saura mortgaged to PNB its registered parcel of land in Davao to secure the payment of a promissory note of P27T. 1955. it would have proved an intention to insure the entire interest in the property. Saura learned for the first time that the policy had been previously canceled by PISC. barely 13 days after the issuance of the fire insurance. If the wording had been: “Payable to SMB. This being the case. But notice to the bank. 15. payable to PNG as their interest may appear. However. wittingly or unwittingly to notify Saura of the cancellation made.685 were burned. PISC is then ordered to pay Saura P29T. Issue: WON there was proper cancellation of the policy? Held. this was not what was stated in the policies. The Insurance Law does not likewise provide for such notice.      The mortgage also required Saura to endorse the insurance policy to PNB. regarding cancellation of the insurance policy by the insurer. conditions and warranties of this policy. The insurer contends that it gave notice to PNB as mortgagee of the property and that was already substantial compliance with its duty to notify the insured of the cancellation of the policy. subject to the terms. On Apr. when Saura’s folder in the bank’s file was opened and the notice of the cancellation by PISC was found. the building and its contents worth P4. its form or period. 1985. 1952. 8. NO. The notice should be personal to the insurer and not to and/or through any unauthorized person by the policy. mortgagee.INSURANCE REVIEWER– Atty. On April 11. 26. 2. 1954. PISC canceled the same.  A building of strong materials which was also owned by Saura. in case of loss. Upon presentation of notice of loss with PNB. during the continuance of the risk. there is no clear and satisfactory proof that the policies failed to reflect the real agreement between the parties that would justify the reformation of these two contracts. effective as of the date of issue. (14) Palilieo v. 6. The policies might have been worded differently so as to protect the owner. v. Actual notice of cancellation in a clear and unequivocal manner. NOT merely SMB’s and would have shown to whom the money. as its interests may appear.  Pursuant to the mortgage agreement which required Saura to insure the building and its contents. it obtained a fire insurance for P29T from PISC for a period of 1 year starting Oct. should be paid. the lower court would have been able to order that the contract be reformed to give effect to them in the sense that the parties intended to be bound. The policy was delivered to PNB by Saura. it devolves upon the Court to apply the generally accepted principles of insurance. Quimson page 23 undertaken. The policy in question does NOT provide for the notice of cancellation. Philippine International Surety 118 PHIL 150 Facts:  On Dec. Unfortunately. the parties had agreed that even the owner’s interest would be covered by the policies. If during the negotiation for the policies. Cosio 97 PHIL 919 Facts: 3D SY 2004-2005 rhys alexei . remainder to whomsoever. preferably in writing should be given by the insurer to the insured so that the latter might be given an opportunity to obtain other insurance for his own protection. The memo stated: Loss if any. and the policies had inadvertently been written in the form in which they were eventually issued. is not effective notice.

18.       3D SY 2004-2005 rhys alexei . Leuterio was not physically healthy when he applied for an insurance coverage and insisted that Dr. the difference between the indebtedness and the amount of insurance received by Cosio.000) be refunded to Palileo Issue: WON the trial court was justified in considering the obligation of Palileo fully compensated by the insurance amount that Cosio was able to collect from Associated. Dr. since it is DBP who insured the life of Dr. Palileo demanded from Cosio that she be credited with the necessary amount to pay her obligation out of the insurance proceeds. and WON the trial court was correct in requiring Cosio to refund the excess of P1. Trial Court found that the debt had an unpaid balance of P12T. but Cosio refused to do so.00) pesos. Dr. In an application form. Grepalife denied the claim alleging that Dr. independently of the mortgagor. to the extent of his DBP mortgage indebtedness amounting to eighty-six thousand. Palileo obtained from Cosio a loan of P12T. but her claim against Palileo should be considered assigned to the insurance company who is deemed subrogated to the rights of Cosio to the extent of the money paid as indemnity. such non-disclosure constituted concealment that justified the denial of the claim. was called to testify. the correct solution would be that the proceeds of the Insurance be delivered to Cosio.107. RTC ruled in favor of widow and against Grepalife. Hernando Mejia. Leuterio died due to "massive cerebral hemorrhage. The building was partly destroyed by fire and after proper demand. cancer. Cosio required Palileo to sign a document known as “conditional sale of residential building”. Quimson page 24        On Dec. other causes were not ruled out. The inference was not conclusive because Dr. which caused his death. stated that Dr. Cosio was able to collect from the insurance company an indemnity of P13.107 – 12. but is passed by subrogation to the insurer to the extent of the money paid. Leuterio answered questions concerning his health stating that he is in good health and has never consulted a physician for or a heart condition. filed a complaint against Grepalife for "Specific Performance with Damages. he is entitled to the insurance proceeds in case of loss. 1951. After execution of the document. with a right to repurchase (on the part of Palileo). Dr. Allegedly. purporting to convey to Cosio. hence." Consequently. but in such case. CA 316 SCRA 677 Facts:   A contract of group life insurance was executed between Grepalife and DBP.INSURANCE REVIEWER– Atty.107 to Palileo. insures the mortgaged property in his own name and for his own interest. he is not allowed to retain his claim against the mortgagor. It declared the obligation of Palileo to Cosio fully compensated by virtue of the proceeds collected by Cosio and further held that the excess of P1. Cosio insured the building against fire with Associated Insurance & Surety Co. lung. Held. Dr. The rule is that “where a mortgagee. To secure payment. Leuterio. DBP submitted a death claim to Grepalife. Leuterio was not autopsied. Mejia’s findings.200. Leuterio did not disclose that he had been suffering from hypertension. Leuterio. In the light of this ruling. (15) Grepalife v. Leuterio complained of headaches presumably due to high blood pressure. Grepalife issued the insurance coverage of Dr. Leuterio. (Associated) for 15T. a physician and a housing debtor of DBP applied for membership in the group life insurance plan. The insurance policy was issued in the name of Cosio. who issued the death certificate. diabetes. two hundred (P86. Dr.107 (13. The widow of the late Dr. based partly from the information given by the widow. Wilfredo Leuterio. Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. high blood pressure. Grepalife appealed contending that the wife was not the proper party in interest to file the suit. kidney or stomach disorder or any other physical impairment." During the trial. a two-story building of strong materials belonging to Palileo.” The lower court erred in declaring that the proceeds of the insurance taken out by Cosio on the property insured to the benefit of Palileo and in ordering the former to deliver to the latter. NO and NO.

If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee. such loss-payable clause does not make the mortgagee a party to the contract. otherwise known as the "mortgage redemption insurance. What is the significance of this provision? 3D SY 2004-2005 rhys alexei ." When DBP submitted the insurance claim against petitioner. making the loss payable to the mortgagee. at the time of his assent. and at the time of his assent the insurer imposes further obligation on the Mee. and is therefore liable to pay the proceeds of the insurance Section 9. thereby relieving the heirs of the mortgagor from paying the obligation. the policy stating that: "In the event of the debtor’s death before his indebtedness with the Creditor [DBP] shall have been fully paid. if there is any. we must consider the insurable interest in mortgaged properties and the parties to this type of contract. What does this provision say? Under this section. the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. not the real party in interest. DBP collected the debt from the mortgagor and took the necessary action of foreclosure on the residential lot of private respondent And since a policy of insurance upon life or health may pass by transfer. the appellant had not proven nor produced any witness who could attest to Dr. whether he has an insurable interest or not. Leuterio’s medical history. Leuterio may file the suit against the insurer. making a new contract with him. Consequently. and a new contract is created between them. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured. In this type of policy insurance. shall then be paid to the beneficiary/ies designated by the debtor. Aside from the statement of the insured’s widow who was not even sure if the medicines taken by Dr. hence the trial court acquired no jurisdiction over the case. It argues that when the Court of Appeals affirmed the trial court’s judgment. Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP. ample protection is given to the mortgagor under such a concept so that in the event of death. and the mortgagor continues to be a party to the contract. Grepalife. and. Thereafter. the proceeds from such insurance will be applied to the payment of the mortgage debt. CA held as affirmed by the SC that contrary to Grepalife’s allegations. In the case at bar. The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract. where an insurer assents to the transfer of an insurance from a Mortgagor (Mor) to a Mortgage (Mee)." is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee. Leuterio. the latter denied payment thereof. and such person may recover it whatever the insured might have recovered. The acts of the Mor cannot anymore affect the rights of the Mee. the indispensable party who was not joined in the suit. The rationale of a group insurance policy of mortgagors. the acts of the mortgagor cannot affect the rights of said assignee. interposing the defense of concealment committed by the insured. will or succession to any person. Held: YES. In a similar vein. Leuterio were for hypertension. the mortgagee is simply an appointee of the insurance fund. 14 the widow of the decedent Dr. the petitioner failed to clearly and satisfactorily establish its defense.INSURANCE REVIEWER– Atty. To resolve the issue. The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance. imposes further obligations on the assignee. a new and distinct consideration passed from the Mee to the insurer. there was no sufficient proof that the insured had suffered from hypertension. Grepalife alleges that the complaint was instituted by the widow of Dr. Quimson page 25 Issue: WON the widow is the real party in interest. where the mortgagor pays the insurance premium under the group insurance policy. (not DBP) and has legal standing to file the suit. the insurance is on the mortgagor’s interest. As to the question of whether there was concealment.

What is insurable interest? Insurable interest is one the most basic of all requirements in insurance. contractual or by blood or affinity. and another insurance on the life of Y in consideration of “love and affection” with A as a beneficiary. and of course. it goes without saying that one has an insurable interest in his own life and health. On the basis of such application. on Oct. TITLE III – INSURABLE INTEREST Section 10. 934943 effective July 18. When is there insurable interest in life insurance? In life insurance. Atty. Which of the two insurances. 8 that all acts of the mortgagor affects the mortgagee? Well. of his spouse and of his children. Feb. the insurance taken by A on the life of Y is VOID because “love and affection for the insured” n the part of the person insuring is NOT sufficient ground to qualify as insurable interest. or in whom he has a pecuniary interest. this provision provides the exception to the rule. Of which death or illness might delay or prevent the performance.  The policy applied for and issued was on a 20-yr endowment plan for the sum of P25T with double indemnity in case of accidental death. A takes an insurance policy on his life and names his friend X as beneficiary. (b) Of any person on whom he depends wholly in part for education or support.95. 16. a person is deemed to have insurable interest in the subject matter insured where he ha a relation or connection with or concern in it that he will derive pecuniary benefit or advantage from its preservation and will suffer pecuniary loss or damage from its destruction. and (d) Of any person upon whose life any estate or interest vested in him depends. is void? The Insurance taken on A on his life is VALID. Why is this section important? Other than it discusses the concept of keyman insurance. (hmmm… sounds fishy…) 3D SY 2004-2005 rhys alexei . Castro v. About 3 months later. because the beneficiary need not have an insurable interest in the life of the insured. asking the students to Quote the provision. Why must there be an insurable interest? It is essential for validity and enforceability of the contract or policy. if any. Cases: (16) Col. In general. 1979. Quimson page 26 Remember we said in Sec. It must be the one insuring who has an insurable interest in the life of the person he is insuring.INSURANCE REVIEWER– Atty. Insurable interest exists where there is reasonable ground founded on the relations of the parties whether pecuniary. ON the other hand. C. if any. the insured driver was allegedly shot to death by unknown persons. or respecting property or services. and to expect some benefit or advantage from the continuance of the life of the insured. 16. (c) Of any person under a legal obligation to him for the payment of money. 1959. A policy issued to a person without interest in the subject matter is a mere wager policy or contract. 1981 Facts:  Castro applied for insurance on the life of his driver. Quimsons asked this in a past mid-term exam. Every person has an insurable interest in the life and health: (a) Of himself. 55836. Insular Life issued policy No. Insurance Commissioner GR. Problem. termination or injury by the happening of the event insured against. is valid and which.  Castro paid the first quarterly premium of P309.

 The insurance companies refused to pay on the ground that the employer had no insurable interest in the life of the employee. It is held that a life insurance policy of a husband made payable to his wife as a beneficiary is the separate property of the beneficiary and beyond the control of the husband. It must be shown that the destruction of the life of the insured would cause pecuniary loss to the complainant. purportedly that of the insured employee. administrator of Gercio. To sustain a contract of this character it must appear that there is a real concern in the life of the party whose death would be the cause of substantial loss to those who are named as a beneficiary. NO. It was established that the insured could not have afforded the insurance policies drawn on his life. based on the circumstances and evidence. NOPE. Mere relationship of uncle and nephew. San Juan CA GR 34588-88. employer and employee is NOT sufficient to provide an insurable interest on the life of the insured. 1971 Facts:  An employer insured the life of the employee with two insurance companies. It was found that the various postal money orders issued in payment of the premiums were made by the employer. Castro failed to prove. 27. The requirement of insurable interest to support a contract of insurance is based upon consideration of public policy which renders wager policies INVALID.  The wife was convicted of adultery and a decree of divorce was issued. Issue: WON Castro has an insurable interest in his driver. otherwise to the executor. then to his wife Andrea. Held: NO. (NOTE: this case is based on the old rule under the Insurance Act) 3D SY 2004-2005 rhys alexei . Many more policies were found to have been issued with the employee/tenant as insured and the employer and his wife as beneficiaries. It appears that.  Gercio notified Sunlife that he had revoked his donation in favor of Andrea and that he had designated his present wife Adela as his beneficiary. the insured cannot make such change.  Sunlife refused to change the beneficiary.  The policy did not include any provision reserving to Gercio the right to change the beneficiary. Issue: WON the employer can recover the proceeds of a life insurance policy of his employee. Nov.INSURANCE REVIEWER– Atty. 1930 or if he should die before said date.  The insurance totaled 200T and the only beneficiaries were the employer and his wife. The insured was a tenant in a coconut land owned by the employer and his earning were barely that of a farm laborer. the insurance was really taken out by the employer. 1. Insular life denied the claim on the ground that the policy was VOID. This. Insular instead refunded to Castro the premiums he had paid. Held. Held. Quimson   page 27 Castro then filed a claim for the total benefits of 50T under the policy. The policies were also found to have been acquired in quick succession.  A severed head was later found. Issue: WON Gercio may change the beneficiary in the policy. Sun Life 48 PHIL 53 Facts:  Sunlife issued a life insurance policy to Gercio. the former agreeing to insure the life of Gercio for 2T to be paid to him on Feb. If the policy contains no provision authorizing a change of beneficiary without the beneficiary’s consent. (18) Gercio v. (17) Lincoln National Life v. should she survive him.

United States currency designating itself as the beneficiary. give details)” The application was approved for a period of one year from March 1. took out the insurance on the life of its manager. applied for a health care coverage with Philamcare. Quimson page 28 Court also held that the designation of a beneficiary that is originally valid does NOT render it invalid dut to a subsequent cessation of the interests between the beneficiary and insured.000. . in Chapter II On Corporations. aggregating P104. It is not so certain that the proceeds of life insurance policies paid to corporate beneficiaries upon the death of the insured are likewise exempt. Velhagen in 1929. collected. together with the interests and the dividends accruing thereon. provides the exemptions under the law. We do not believe that this fact signifies that when the plaintiff received P104. procured from the Manufacturers Life Insurance Co. It is certain that the proceeds of life insurance policies paid to individual beneficiaries upon the death of the insured are exempt. In Chapter I of the Tax Code. it is sufficient for our purposes to direct attention to the anomalous and vague condition of the law. he was entitled to avail of hospitalization benefits. thru its local agent E. he answered NO to the following question: “Have you or any of your family members ever consulted or been treated for high blood pressure. E. 1988 to March 1. Under the view we take of the case. Elser. Canada.957. assessed. who had had more than thirty-five (35) years of experience in the manufacture of cigars in the Philippines. .957. speaks of the proceeds of life insurance policies as income.88 from the insurance on the life of its manager. as amended. (20) Philamcare v. . what the plaintiff received was in the nature of an indemnity for the loss which it actually suffered because of the death of its manager. and under such. A. Posadas 56 PHIL 147 (1931) Facts:  El Oriente in order to protect itself against the loss that it might suffer by reason of the death of its manager. 1989. it thereby realized a net profit in this amount. In reality. but this is a very slight indication of legislative intention.. the El Oriente received all the proceeds of the said life insurance policy.  3D SY 2004-2005 rhys alexei . and paid annually upon the total net income received in the preceding calendar year from all sources by every corporation . . who had had more than thirty-five years' experience in the manufacture of cigars in the Philippines. He was a issued Health Care Agreement. It is true that the Income Tax Law. an insurance policy on the life of the said A. But at least. Velhagen. In the standard application form. is to be found section 4 which provides that. liver disease." Section 10. .INSURANCE REVIEWER– Atty. cancer.88 CIR assessed El Oriente for deficiency taxes because El Oriente did not include as income the proceeds received from the insurance.a tax of three per centum upon such income .    Issue: WON the proceeds of insurance taken by a corporation on the life of an important official to indemnify it against loss in case of his death. in exempting individual beneficiaries. it may be said that the law is indefinite in phraseology and does not permit us unequivocally to hold that the proceeds of life insurance policies received by corporations constitute income which is taxable It will be recalled that El Oriente. CA (repeat – Case # 09) 379 SCRA 356 Facts:  Ernani Trinos. of Toronto. heart trouble." Section 11 in the same chapter. Upon the death of A. asthma or peptic ulcer? (If Yes. to protect itself against the loss it might suffer by reason of the death of its manager. (19) El Oriente v. but neither here nor in any other section is reference made to the provisions of section 4 in Chapter I. . "The following incomes shall be exempt from the provisions of this law: (a) The proceeds of life insurance policies paid to beneficiaries upon the death of the insured . El Oriente paid for the premiums due thereon and charged as expenses of its business all the said premiums and deducted the same from its gross incomes as reported in its annual income tax returns. Velhagen for the sum of $50. provides that. which deductions were allowed upon a showing that such premiums were legitimate expenses of its business. diabetes. " There shall be levied. are taxable as income under the Philippine Income Tax Law Held: NOT TAXABLE.

petitioners required respondent's husband to sign an express authorization for any person. the same was extended for another year from March 1. 1990. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. 1990. Julita brought her husband home again.      Issues and Resolutions: Philamcare brought the instant petition for review. especially coming from respondent's husband who was not a medical doctor. (A)lthough false. or its acceptance at a lower rate of premium. since in such case the insurer is not justified in relying upon such statement. 1989 to March 1. Due to financial difficulties. SC held that in the case at bar. During the period of his coverage. In the morning of April 13. if the statement is obviously of the foregoing character. 1990. consultation.000. an action for damages against Philamcare. the defense of concealment or misrepresentation no longer lie.00 After her husband was discharged from the MMC. She asked for reimbursement of her expenses plus moral damages and attorney's fees. which is primarily a contract of indemnity. and this is likewise the rule although the statement is material to the risk. injury or other stipulated contingent. Ernani had fever and was feeling very weak. amounting to about P76. Julita tried to claim the benefits under the health care agreement. there was concealment regarding Ernani's medical history. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. belief. Later. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. a representation of the expectation. but is obligated to make further 3D SY 2004-2005 rhys alexei . The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. Julita instituted. An undisclosed or misrepresented information is deemed material if its revelation would have resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for.00 per disability. then from March 1. hence the "incontestability clause" under the Insurance Code Title 6. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. Philamcare denied her claim saying that the Health Care Agreement was void. Once the member incurs hospital. However. CA affirmed. diabetic and asthmatic. raising the primary argument that a health care agreement is not an insurance contract. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. 48 does not apply.INSURANCE REVIEWER– Atty. The periods having expired. It appears that in the application for health coverage. Julita was constrained to bring him back to the CGH where he died on the same day. While her husband was in the hospital. Thus. Upon the termination of the agreement. intention. The amount of coverage was increased to a maximum sum of P75. Quimson page 29   whether ordinary or emergency. medical or any other expense arising from sickness. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. Where matters of opinion or judgment are called for. contrary to his answer in the application form. 1990 to June 1. had 12 mos from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma. According to Philamcare. 1990. This largely depends on opinion rather than fact. preventive health care and other out-patient services. he was admitted at the Chinese General Hospital (CGH). and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. opinion. RTC decided in favor of Julita. listed therein. whether intentional or unintentional. Sec. Julita had no choice but to pay the hospitalization expenses herself. he was attended by a physical therapist at home. Philamcare cannot rely on the stipulation regarding "Invalidation of agreement" which reads: Failure to disclose or misrepresentation of any material information by the member in the application or medical examination. o Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. the health care provider must pay for the same to the extent agreed upon under the contract.000. Philamcare. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. The health care agreement was in the nature of non-life insurance. treatment or any other medical advice or examination. Petitioner argues that respondent's husband concealed a material fact in his application. Under the title Claim procedures of expenses.

The insured shall have the right to change the beneficiary he designated in the policy. When the terms of insurance contract contain limitations on liability. In the end. "a concealment entitles the injured party to rescind a contract of insurance. 2. courts should construe them in such a way as to preclude the insurer from noncompliance with his obligation. or the impossibility of which is shown by the facts within his knowledge. since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. that which he then knows. unless he has expressly waived his right in the said policy. The phraseology used in medical or hospital service contracts. and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted. ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. In case of adultery. mailed or delivered to the insured at the address shown in the policy. they may be made beneficiaries. such as the one at bar. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned. They cannot be named beneficiaries of a life insurance policy by the person who cannot make any donation to him. None of the above pre-conditions was fulfilled in this case. Prior notice of cancellation to insured. In any case. Section 11. as a matter of expectation or belief. and as such. the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid. the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. This is equally applicable to Health Care Agreements. Having assumed a responsibility under the agreement. Must be in writing. with or without the authority to investigate. Quimson page 30 inquiry." The right to rescind should be exercised previous to the commencement of an action on the contract. 739. What is the old rule regarding revocability of designation of beneficiary as enunciated in the case of Gercio v. 4. petitioner is bound to answer the same to the extent agreed upon. Being a contract of adhesion. The disqualification does not extend to the children. 3D SY 2004-2005 rhys alexei . Are there any exceptions? Yes. The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract.INSURANCE REVIEWER– Atty. Who can be a beneficiary? Any person in general can be a beneficiary. Under Section 27 of the Insurance Code. What is a beneficiary? A beneficiary is a person whether natural or juridical for whose benefit the policy is issued and is the recipient of the proceeds in the insurance. concubinage does the disqualification extend to the illegitimate children? NO. no rescission was made. and exclusionary clauses of doubtful import should be strictly construed against the provider. such designation is irrevocable and he cannot change his beneficiary without the consent of the latter. The only persons disqualified from being a beneficiary are those not qualified to receive donations under Art. 3. to furnish facts on which cancellation is based. Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. the terms of an insurance contract are to be construed strictly against the party which prepared the contract — the insurer. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. petitioner is liable for claims made under the contract. to be actually untrue. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true. Sunlife? The OLD rule is: When the insured did NOT expressly reserve his right to revoke the designation of his beneficiary. must be liberally construed in favor of the subscriber. Besides. In this case. especially to avoid forfeiture. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured.

Art. The following donations shall be void: (1) Those made between persons who were guilty of adultery or concubinage at the time of the donation. Quimson said that the designation of the public officer MUST be by reason of his office and NOT all public officers are disqualified from being beneficiaries of a life insurance policy. as long as the designation was not made in consideration of an act done by the public officer by reason of his office in favor of the insured. who will get the insurance proceeds? Jane. Art. 50. The effects provided for by paragraph (4) of Art. who gets the proceeds? There is a divergence of opinion. or his wife. When Jef dies. Art. Any person who is forbidden from receiving any donation under Art. Such right must be exercised specifically in the manner set forth in the policy or contract. What are the other provisions of law that Atty. 739. the innocent spouse may revoke the designation of the offending spouse as beneficiary in any insurance policy. FC. (4) The innocent spouse may revoke the designation of the other spouse who acted in bad faith as a beneficiary in any insurance policy even if such designation be stipulated as irrevocable. Jef secured a life insurance policy and named Jane as beneficiary. Jane cannot be named as a beneficiary in a life insurance policy because she is forbidden by law to receive a donation from Jef since they were both guilty of adultery. 739 is named a beneficiary of a life insurance policy by the person who cannot make any donation to him. descendants and ascendants by reason of his office. In other words. FC. The termination of subsequent marriage produces the following effects: xxx. Pao and Jane are husband and wife. 739 cannot be named a beneficiary of a life insurance policy by the person who cannot make any donation to him. It is of course. Art. Pao and Jane are husband and wife. according to said article. notwithstanding the fact that Jane is guilty of adultery. What if the beneficiary dies before the insured and the insured did not change the designation. Problems. Jef secured a life insurance and named Jane as beneficiary. the insured has no power to make such change without the consent of the beneficiary. (2) Those made between persons found guilty of the same criminal offense. FC. 40 & 45. Under the current rule. whether or not such power is reserved in the policy. but the general trend is to give it to the estate of the beneficiary. Jef and Jane engaged in adulterous relations. 64. 43 xxx shall also apply in the proper cases to marriages which are declared void ab initio or annulled by final judgment under Art. The law prohibits the situation wherein a person who is forbidden from receiving a donation under Art. 43. Jane can still be a beneficiary of Jef since the law provides that Jane cannot be a beneficiary of a life insurance 3D SY 2004-2005 rhys alexei .* *Atty. 2012.INSURANCE REVIEWER– Atty. who will get the insurance proceeds? Jojo. Jef and Jojo are also husband and wife (yihee…). Jef and Jojo are also husband and wife. Quimson page 31 What is the current rule? The rule now is: The insured has the power to revoke the designation of the beneficiary even without the consent of the latter. Jane engaged in adulterous relaions with Van. (3) Those made to a public officer. When Jef dies. CC. extinguished at his death and CANNOT be exercised by his personal representatives or assignees. Quimson required us to read? Art. in consideration thereof. according to said article. The revocation of or change in the designation of the insurance beneficiary shall take effect upon written notification to the insured. when does the insured lose the right to change the beneficiary? When the right to change the beneficiary is expressly waived in the policy. After the finality of the decree of legal separation.

 Insurer by virtue of the contract was liable for 11. Since Jane is not the concubine. Jane engages in adulterous relations with Van. the contract of life insurance is governed by the general rules of civil law regulating contracts. Jef has a concubine named Maui Taylor. 739 cannot be named beneficiary of a life insurance policy by a person who cannot make any donation to him. and Carponia filed her claim. the general rules of civil law should be applied to resolve this void in the insurance law. WhenJef dies. Jef and Jojo are also husband and wife. who is entitled to the proceeds? Held: Pascuala. 739 is named a beneficiary of a life insurance policy by the person who cannot make any donation to him.73. Jef thereafter secures a life insurance policy and names Jane as a beneficiary. Jef and Jojo are also husband and wife. When Jef dies who will get the insurance proceeds? Pao. 739. Disclaimer: Any resemblance to real and living persons are purely coincidental. The law only prohibits the situation wherein a person who is forbidden from receiving a donation under Art. although she admitted that she and the insured were merely living as husband and wife without the benefit of marriage. Under Art. When Jef dies. Jef thereafter secures a life insurance policy and names Pao as his beneficiary.  Ebrado died when he was accidentally hit by a falling branch of tree.  Ebrado designated Carponia Ebrado as the revocable beneficiary in his policy. Art. they are not forbidden because Jef is not the one engaged in an adulterous relationship with Jane. then the only solution to this problem is to consider the designation of the beneficiary as a contract which is valid and binding between the insurer and the insured.745. Cases.  Pascuala Ebrado also filed her claim as the widow of the deceased insured. Jef has a concubine named Maui Taylor. according to said article. Art. according to said article. Jef and Pao become lovers. Jef and Jojo are also husband and wife. Matters not expressly provided for in such special laws shall be regulated by this Code.00 with a rider for Accidental Death Benefits for the same amount. Quimson page 32 policy if the person who names her as beneficiary is forbidden to give her a donation under Art. Jane can still be a beneficiary. according 3D SY 2004-2005 rhys alexei . 739 does not apply. Since there is no law prohibiting Jef from donating to Pao. 2012. Art. Jef thereafter secured a life insurance policy and named Jane as beneficiary. referring to her as his wife. Pao and Jane are husband and wife.INSURANCE REVIEWER– Atty. Pao and Jane are husband and wife. Hahahaha. When not otherwise specifically provided for in the insurance law..  Insular life filed an interpleader case and the lower court found in favor of Pascuala. because both of them are neither guilty of adultery nor concubinage. Ebrado (repeated case – case #2) 80 SCRA 181 Facts:  Buenaventura Ebrado was issued by Insular Life Assurance Co. who will get the insurance proceeds? Jane. Rather. and she is not the concubine of Jef. NCC: Any person who is forbidden from receiving any donation under Art. Issue: Between Carponia and Pascuala. who will get the insurance proceeds? Jane. 739 is named a beneficiary of a life insurance policy by the person who cannot make any donation to him. 739 is therefore not applicable in the situation at bar.882. a whole life plan for P5. 739 will not apply and Jef is not forbidden from giving a donation to Jane. Art. (21) Insular Life v. 2011 of the NCC states: The contract of insurance is governed by special laws. right. The law only prohibits the situation wherein a person who is forbidden from receiving a donation under Art. Pao and Jane are husband and wife. Notwithstanding that both parties are guilty of adultery and concubinage respectively. It is quite unfortunate that the Insurance Act or our own Insurance Code does not contain a specific provision grossly resolutory of the prime question at hand. Notwithstanding that Jef is guilty of concubinage.

without considering the intimation in the brief for Maloles that Golpeo. 739 should equally operate in life insurance contracts. if he chooses. Held: NO. Her husband Delfin and their unemancipated son Ernesto were her revocable beneficiaries. and her children o Elsie Hicban. Both are founded on the same consideration of liberality. donations between persons who were guilty of adultery or concubinage at the time of the donation shall be void. SLEA then filed an action for interpleader against the 3 conflicting claimants. Quimson page 33 to said article. put down his common law wife and/or children he had with her as his beneficiaries.). A beneficiary is like a donee because from the premiums of the policy which the insured pays. After his death. and her child. and one of its purposes is mutual aid of its members and their dependents in case of death. the NCC recognizes certain successional rights of illegitimate children. the lower court did not consider the association as a regular insurance company. legal wife.  Roman Concepcion was a member until his death in 1950. She argues that: o The insurance code does not apply since the association is not an insurance company but a mutual benefit association. Golpeo 96 PHIL 83 Facts:  SLEA is composed of laborers and employees of the LTBC and BTC (now BLTB Co. Philamlife Insurance Company 20 SCRA 434 Facts:  Mrs. (23) Nario v. pursuant to Art. SLEA was able to collect voluntary contribution from its members amounting to P2. 503617) by PHILAMLIFE under a 20-yr endowment plant. the legal wife is entitled to the amount. by her silence and actions had acquiesced in the illicit relations between her husband and Maloles. Trial court rendered a decision declaring Maloles and her children the sole beneficiaries of the amount citing Del Val v. the common law wife. Therefore. (22) Souther Luzon Employee’s Association v.    In 1949. they are likewise barred from receiving proceeds of a life insurance contract. In essence. 739. First of all. but merely ruled that the death benefit in question is analogous to insurance. public morals and public policy. Del Val. since common-law spouses are barred from receiving donations. As a matter of fact. Under Art.INSURANCE REVIEWER– Atty. with a face value of 5T. Roman listed as his beneficiaries Aquilina Maloles and their 4 children. and her children o Aquilina Maloles.205. 739 of the CC ( donations between persons guilty of concubinage at the time of donation are void)    Issue: WON Golpeo. Nario applied for and was issued a life Insurance policy (no. Three sets of claimants to the amount presented themselves to the association namely: o Juanita Golpeo. the proscription in Art. Besides. SLEA adopted a resolution providing that: A member may. As a consequence. Only Golpeo appealed. o The stipulation between SLEA and Roman was void for being contrary to law. a life insurance policy is no different from civil donations insofar as the beneficiary is concerned. Golpeo’s argument would certainly NOT apply to the children of Maloles likewise named beneficiaries by the deceased. Secondly. the beneficiary will receive the proceeds or profits of said insurance. 3D SY 2004-2005 rhys alexei . even the Administrative Code describes a mutual benefit company as one which provides any method of life insurance among its members out of dues or assessments collected from its membership. another common law wife of Roman. and such person so named by the member will be the sole persons to be recognized by SLEA regarding claims for condolence contributions.

31. 320 of the CC. In 1940. Esparanza’s brother. and other for 3T maturing Mar. PHILAMLIFE contends that the loan application and the surrender of the policy involved acts of disposition and alienation of the property rights of the minor. one for 2T. maturing April 1. 1943. The application bore the written signature and consent of Delfin in 2 capacities o As one of the irrevocable beneficiaries of the policy o As father-guardian of Ernesto and also the legal administrator of the minor’s properties pursuant to Art. said beneficiaries are paid on the basis of its face value and in case the insured should discontinue paying premiums. Assuming that the propty of the ward was less than 2T. but their acts as legal administrators are only limited to acts of management or administration and not to acts of encumbrance or disposition. the beneficiaries may continue paying it and are entitled to automatic extended term or paid-up insurance options and that said vested right under the policy cannot be divisible at any given time. and he was substituted as beneficiary under the policies by Mariano. for in case of death of the insured. the father did not file any petition for guardianship nor post a guardianship bond. The purpose of such loan was for the school expenses of Ernesto. said acts are not within the power of administrator granted under Art. the effect would be the same. (24) Villanueva v. or the father of the insured immediately upon receipt of the proof of death of Esperanza. PHILAMLIFE denied the loan application contending that written consent of the minor son must not only be given by his father as legal guardian but it must also be authorized by the court in a competent guardianship proceeding. hence court authority is required. Bartolome died. Nario then signified her decision to surrender her policy and demand its cash value which then amounted to P 520. since the parents would only be exempted from filing a bond and judicial authorization. after the policy has been in force for 3 years. In the case at bar. and when the propty of the child is worth more than P2T (as in the case at bar. 320 in relation to art. West agreed to pay 2T either to Esperanza if still living on Apr 1. the father a must file a petition for guardianship and post a guardianship bond. 1943. or to beneficiary Bartolome Villanueva. Nario then applied for a loan on the above policy with PHILAMLIFE w/c she is entitled to as policy holder. Quimson  page 34       Mrs. The consent give for and in behalf of the son without prior court authorization to the loan application and the surrender was insufficient and ineffective and PHILAMLIFE was justified in disapproving the said applications. PHILAMLIFE also denied the surrender of the policy on the same ground as that given in disapproving the loan application. Held: YES.INSURANCE REVIEWER– Atty.500 his ½ share as beneficiary). Oro 81 PHIL 464 Facts:  West Coast Life Insurance Company issued two policies of insurance on the life of Esperanza Villanueva. Under the laws (CC and rules of Court) The father is constituted as the minor’s legal administrator of the propty. SC agreed with the trial court that the vested interest or right of the beneficiaries in the policy should be measured on its full face value and not on its cash surrender value. 326 CC. 1943. and as such cannot possibly exercise the powers vested on him as legal administrator of the minor’s property. SC also agreed with TC that the said acts (loan app and surrender) constitute acts of disposition or alienation of property rights and not merely management or administration because they involve the incurring or termination of contractual obligations.    In both policies. Issue: WON PHILAMLIFE was justified in refusing to grant the loan application and the surrender of the policy. the minor’s propty was worth 2. Nario sued PHILAMLIFE praying that the latter grant their loan application and/or accept the surrender of said policy in exchange for its cash value. Mrs. The policy also gave her the right to change the beneficiary. Mrs. 3D SY 2004-2005 rhys alexei .

based on the said provision of the contract. Upon the insured’s death. Davao 17 SCRA 863 Facts:  Davac was an SSS member. Issue: Who is entitled to the SSS benefits? Held: Candelaria.” This conclusion tallies with American Authorities who say that: The interest of the insured in the proceeds of the insurance depends upon his survival of the expiration of the endowment period. the beneficiary as recorded by the employee’s employer is the one entitled to the death benefits. Quimson page 35   Esperanza died in 1944 without having collected the insurance proceeds. and vice versa. Under the policies.INSURANCE REVIEWER– Atty. the beneficiary will take.  Due to the conflicting claims. the SSS filed a petition praying that both of them be required to interplead and litigate the conflicting claims. Held: NO. Held: YES. To sustain the beneficiary’s claim would be to altogether eliminate from the policies the condition that the insurer “agrees to pay to the insured if living. Dimayuga filed a petition in court to amend the designation of the beneficiaries in his policy from irrevocable to revocable. Candelaria filed claims for the death benefits. The contract between the parties is the law binding on them. Under the SSS Act. hence they should go to Candelaria. (This case rule is no longer controlling under the Insurance Code. both his first wife. notwithstanding a beneficiary is designated in the policy. or (2) the beneficiary if the insured died during the continuance of the policies. his alleged wife. In other words. The beneficiary could be entitled to said proceeds only in default of the first contingency.) (26) SSS v. The policy contract states that the designation of the beneficiaries is irrevocable. the benefits are payable to him or to his assignee. 22.  When he died.  Lower Court granted the petition. (AmJur and Couch Cyclopedia of Insurance Law) (25) Philamlife v.  The death benefits were awarded to Candelaria Davac. the insurer obligated itself to pay the insurance proceeds to: (1) the insured if the latter lived on the dates of maturity. the proceeds are payable exclusively to her or to her estate unless she had before her death otherwise assigned the matured policies. Adverse claims for the proceeds were presented by the estate of Esperanza on one hand and by Mariano on the other. Pineda 175 SCRA 416 Facts:  On Jan. 739 of the 3D SY 2004-2005 rhys alexei . Therefore. Lourdes contends that the designation made in the person of Candelaria who is party in a bigamous marriage is null and void for being against Art. 1980. as the insured Esperanza was living on April 1 and March 31. Dimayuga processed an ordinary life insurance policy from Philamlife and designated his wife and children as irrevocable beneficiaries. 1943. Issue: WON the beneficiary is entitled to the proceeds. it is only with the consent of all the beneficiaries that any change or amendment in the poicy may be legally and validly effected. within the period. 15 1963.  On Feb. as against the personal representatives the endowment period. Lourdes and his second wife. as his beneficiary. Under the Insurance Act. and designated Candelaria Davac. the beneficiary designated in a life insurance contract cannot be changed without the consent of the beneficiary because he has a vested interest in the policy. CFI held that the estate of Esperanza was entitled to the proceeds to the exclusion of the beneficiary. Issue: WON the court erred in granting Dimayuga’s petition. The first contingency excludes the second. not to mention the law then applicable.

each family will be entitled to one-half of the estate. Changliongco. he contracted two marriages: o First – Rosario Diaz. for which no beneficiary was designated. as in the case of a life insurance policy if NO beneficiary is named in the insurance policy. or before 1943. (27) In Re: Mario Chanliongco 79 SCRA 364 Facts:  Atty.  He failed or overlooked to state in his application for membership with the GSIS the beneficiary or beneficiaries of his retirement benefits should he die before the retirement.  Since he was in the gov’t service for 22. the proceeds of his life insurance were paid by the GSIS to Berdin and her children who were the beneficiaries named in the policy. and Pedro but both predeceased him o 2nd – Basilia Berdin. 11(b) clearly indicates that there is need for the employee to file an application for retirement insurance benefits when he becomes a GSIS member and to state his beneficiary. (29) Gercio v. Quimson page 36 CC. designated his beneficiaries in his life insurance. In case of failure to name a beneficiary in an insurance policy. (this was contracted in GF while the first marriage subsisted)  Being a GSIS member when he died. case #18) 48 PHIL 53 Facts: 3D SY 2004-2005 rhys alexei .  Both families filed their claims with the GSIS. because she was not guilty of concubinage . 1951. during the early part of 1943. Sec.  When he was still alive. Issue: Who will benefit from the proceeds? Held: The retirement benefits shall accrue to his estate and be distributed among his legal heirs in accordance with the law on intestate succession. each to receive an equal share of 1/16. SC held that the disqualification mentioned in Art. died ab intestate. CFI affirmed GSIS decision. he could NOT have intended those beneficiaries of his life insurance as also the beneficiaries of his retirement insurance because the provisions on retirement insurance under the GSIS came about only when CA 186 was amended by RA 660 on June 18.5028 years.INSURANCE REVIEWER– Atty. 2 children = Jose Consuegra Jr. an atty of the SC and a GSIS member. GSIS 37 SCRA 315 Facts:  Jose Consuegra was employed as a shop foreman of the Office of the District Engineer in Surigao Del Norte. Issue: To whom should the retirement insurance benefits be paid? Held: Both families are entitled to half of the retirement benefits. (28) Vda. And when there exists two marriages. he was entitled to retirement insurance benefits. 739 is NOT applicable to Candelaria. which ruled that the legal heirs were Diaz who is entitled to one-half or 8/16 of the retirement benefits and Berdin and her children were entitled to the remaining half. When Consuegra. 7 children. The beneficiary named in the life insurance does NOT automatically become the beneficiary in the retirement insurance. De Consuegra v. Sun Life (repeat.  Berdin went to CFI on appeal. the proceeds will accrue to the estate of the insured. The life insurance and the retirement insurance are two separate and distinct systems of benefits paid out from 2 separate and distinct funds. there bieing NO proof that she had actual knowledge of the previous marriage of her husband.

Nephews and nieces 7. 4. the insured cannot make such change. and 3D SY 2004-2005 rhys alexei . the STATE shall be entitled to receive the insurance proceeds. the surviving spouse 6) Collateral relatives to wit: a) Kuya. The policy did not include any provision reserving to Gercio the right to change the beneficiary. administrator of Gercio. The illegitimate children. Who are the “nearest relatives” mentioned here? Those related to the decedent in the order mentioned under the rules of intestate succession such as: (the order of the following relatives are as follows) 1. Section 12. In default of the above. if living. It is held that a life insurance policy of a husband made payable to his wife as a beneficiary is the separate property of the beneficiary and beyond the control of the husband. and 6. The surviving spouse. Quimson  page 37     Sunlife issued a life insurance policy to Gercio. accomplice or accessory in willfully bringing about the death of the insured. the legitimate child 2) Jor-el and Kyla. the legitimate father and mother 3) Lolo and Lola. NO. 5. 1. The legitimate children. However. Brothers and sisters of the half-blood. grandfather and grandmother (or ascendants in the nearest degree) 4) Bastardo. 1930 or if he should die before said date. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal. Gercio notified Sunlife that he had revoked his donation in favor of Andrea and that he had designated his present wife Adela as his beneficiary. The grandfather and grandmother. If the policy contains no provision authorizing a change of beneficiary without the beneficiary’s consent. His nearest relatives are: 1) Anakin. Held. Problem: Clark is insured. The father and mother. brother of full blood b) Alf. 2. if living. 3. then to his wife Andrea. should she survive him. (NOTE: this case is based on the old rule under the Insurance Act) Court also held that the designation of a beneficiary that is originally valid does NOT render it invalid dut to a subsequent cessation of the interests between the beneficiary and insured.INSURANCE REVIEWER– Atty. in which event. Issue: WON Gercio may change the beneficiary in the policy. Suppose that Lois Lane masterminded a plan to kill Clark and Anakin carried it out. the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise qualified. to wit: a. Sunlife refused to change the beneficiary. Anakin and Lois were convicted of murder. they are also instituted as beneficiaries in the insurance policy of Clark. or ascendants nearest in degree. brother of half blood c) Nep. The wife was convicted of adultery and a decree of divorce was issued. otherwise to the executor. the illegitimate child 5) Lois Lane. the former agreeing to insure the life of Gercio for 2T to be paid to him on Feb. The collateral relatives. b. Brothers and sisters of the full blood. and c. nephew What if all of the above are nowhere to be found? Then the State of Krypton is entitled to the proceeds.

Sec. the legitimate child and Lois. 1024 of the CC. Elle Driver. O-Ren now claims the proceeds of the insurance. the proceeds must be divided between the legitimate parents (Jor-el and Kyla) who get ½ of the proceeds and the Illegitimate child (Bastardo) who gets the other half. 12 can operate to disqualify or forfeit the interests of Anakin and Lois. in order to find out if Anakin is qualified. 12 is no longer the relevant provision. whether real or personal. it is only the interest of the beneficiary which is forfeited. but both are instituted as beneficiaries of Clark. Remember that the insurance contract is the law between the parties and hence it must be followed by the insurance company. and according to Art. In cases falling under Nos. meaning her. who is entitled to get the proceeds? O-Ren Ishi gets the proceeds because it was stipulated in the contract of insurance (I think she’ll use it to surgically graft her scalp back since it was sliced by Beatrix using a Hatori Hanzo Sword). his qualifications at the time of the death of the decedent shall be the criterion. 12. Same facts above. or liability in respect thereof. All three are instituted as beneficiaries of Bill. Elle fails to qualify since she is Bill’s concubine. can they still collect the proceeds? There is no law or jurisprudence that treats of this situation. the surviving spouse are no longer entitled to the proceeds. Quimson page 38 the proceeds are the only properties available for distribution to the heirs. According to Art. Atty. the provisions relating to incapacity by will are equally applicable to intestate succession. However. Bill’s legitimate daughter who contends that according to Sec. then following the rules on intestate succession. Quimson said in class that there must be a conviction before Sec. What is the importance of this provision? It defines insurable interest in PROPERTY . 1032 to apply. it shall be necessary to wait until final judgment is rendered. 3D SY 2004-2005 rhys alexei . In case Anakin and Lois are not convicted.(Cue Kill Bill soundtrack…) Section 13. can they now collect the proceeds? In this case. 12 speaks of “principals. then his interest is still intact. which states: ” the nearest relative of the insured shall received the proceeds of said insurance if not otherwise qualified” . used the “5 point exploding heart technique” she learned from Pai Mei. HOWEVER. Art. devisee or legatee. of such nature that a contemplated peril might directly damnify the insured. 1032 (2) of the CC. eager to claim the insurance proceeds. any person who has been convicted of an attempt against the life of the testator is incapable of succeeding by reason of unworthiness. Suppose Anakin and Lois are not convicted and they are not instituted as beneficiaries of Clark. there is a proviso in Sec. Sec. it is submitted (by JohnBee Sioson) that there must be a final conviction in order for Art. Between BB and O-Ren. it is the nearest relative who should get the proceeds.INSURANCE REVIEWER– Atty. Hence. 12 ONLY applies if there is NO stipulation in the contract of insurance as to who are the other beneficiaries of the proceeds. and since Anakin was not instituted as beneficiaries. 2. is an insurable interest. reference must be made to laws of succession. i. killing Bill. In case all three are convicted who gets the proceeds? Since Anakin. accomplice or accessory”. Beatrix Kiddo & O-Ren Ishi are all creditors of Bill. 1032 (2). Sec. because according to Section 12.. Furthermore. Every interest in property. However. but Art. Anakin is not entitled to the proceeds and subsequently the insurance proceeds will be divided as provided for in the first answer. but it was only Lois Lane who was instituted as beneficiary. the correct answer to this problem is NO. Is Anakin still entitled to the insurance proceeds? At first glance the answer might be YES. or any relation thereto. Meaning. Beatrix on the other hand. 3 & 5 of Art. to bar Anakin and Lois from collecting on the ground of unworthiness. her claim is opposed by BB.e. However. 1034 says: In order to judge the capacity of the heir. and there must therefore be a conviction of the beneficiaries as either of the three to the crime against the insured. 1032. 12.

Quimson page 39 Cases: (30) Harvardian Colleges v.    On Aug. Union Surety 51 OG 1905 3D SY 2004-2005 rhys alexei . On March 12. What is an inchoate interest? It is an interest which has not yet ripened. Here Harvardian was not only in possession of the building but was in fact using the same for several years with the knowledge and consent of Ildefonso Yap. Issue: WON Harvardian colleges has a right to the proceeds. Virginia King Yap and their children. 9. 1 CARA 2 Facts:  Harvardian is a family corporation. the stockholders of which are Ildefonso Yap. Held: Harvardian has a right to the proceeds. or a workman insuring the building which he was contracted to repair. Country Bankers issued to Harvardian a fire insurance policy. Examples would be: a farmer insuring future crops that he will grow on his land. an agent of Country Bankers proposed to Harvardian to insure its school building. It is reasonably fair to assume that had the building not been burned. (b) An inchoate interest founded on an existing interest.500. 9. Country Bankers Insurance Corp.000 for which Harvardian paid an annual premium of P2. 1979. or (c) An expectancy.INSURANCE REVIEWER– Atty. The test in determining insurable interest in property is whether one will derive pecuniary benefit or advantage from its preservation. 1980. What is existing interest? Existing interest in property is the legal or equitable title on the property. A claim was made by plaintiff upon defendant but defendant denied it contending that plaintiff had no insurable interest over the building constructed on the piece of land in the name of the late Ildefonso Yap as owner. Regardless of the nature of the title of the insured or even if he did not have title to the property insured. Harvardian would have been allowed the continued use of the same as the site of its operation as an educational institution. Although at first reluctant. Section 14. 1979. Cases: (31) Suter v. It was contended that both the lot and the building were owned by Ildefonso Yap and NOT by the Harvardian Colleges.  Prior to Aug. such as the interest of a stockholder in the property of the corporation which he owns stocks. Harvardian agreed. Harvardian therefore would have been directly benefited by the preservation of the property. coupled with an existing interest in that out of which the expectancy arises. and certainly suffered a pecuniary loss by its being burned. termination or injury by the happening of the event insured against. (39 days before I was born… hehehehe )during the effectivity of said insurance policy. out of which such expectancy arises.  Country Banks sent an inspector to inspect the school building and agreed to insure the same for P500. In what kind of expectancy may insurable interest consist? The expectancy MUST be coupled with an existing interest in that. An insurable ineters in property may consist in: (a) An existing interest. the contract of fire insurance should still be upheld if his interest in or his relation to the property is such that he will be benefited in its continued existence or suffer a direct pecuniary loss from its destruction or injury. or will suffer pecuniary loss or damage from its destruction. the insured property was totally burned rendering it a total loss.

The value of the property is determine at the time it was insured and not the time it was acquired. the latter denying the claims on the grounds that: o The properties were allegedly overvalued.  Issue: WON plaintiff can claim the insurance proceeds. No.000. Manila. Suter now claims from Union Surety. denominated as Equipment Floater Policy covering a Kato Bachoe including its accessories and appurtenances thereof. YES. Before the policy was issued. from loss of damage. Golangco 95 PHIL 826 Facts:  A decision was rendred in Civil Case No. The Insurance Commission 87 OG 6249 Facts:   Zenith entered into an insurance contract. it refused and failed to settle and pay complainant’s insurance claim. Held. shipping cost. Quimson page 40 Facts:    Suter. (2) WON Suter had insurable interest. Traders denied any liability on the ground that since Golangco was not the owner of the premises then he had no insurable interest in the same and consequently. While acquisition cost is only P774.  3D SY 2004-2005 rhys alexei . 6306 granting Golangco the right to collect rentals from a building in Sta. insured two juke boxes with Union Surety for P4. being the managing partner will clearly benefit in the juke boxes’ preservation and would also be affected by its destruction. siya din yung sa Tax 2 diba? Yung pinakasalan yung partner niyang si Spirig?) Subsequently. and hence he had an insurable interest therein.. Suter had insurable interest. v. collecting rentals from its occupant.   Golangco then sought fire insurance from Traders. It seems plain that if the premises were destroyed as they were. YES. Within the period of effectivity of the policy. (33) Zenith Insurance Corporation v. it having been proven that the juke boxes cost only P774. Issues and Resolutions: (1) Whether or not the juke boxes were overvalued. i. (32) Traders Insurance and Surety Co. and other improvements made thereon. Golangco would be. by fire. the managing partner of Morcoin Co. Golangco made a full and clear exposal of his interests in the premises. (btw. this does not include taxes.00. Both at the time of the issuance of the policy and at the time of the fire.e. the two pieces of hydraulic wheel gear pumps. which are considered appurtenances and/or parts attached to and/or installed in the Kato BAchoe were lost.00 o Suter had no insurable interest since the properties insured belong to Morcoin Co. Complainant paid the stipulated premiums therefore. as he was. The building burned down in a fire and Golangco sought to collect from Traders. freight insurance. that he was not the owner. Cruz.INSURANCE REVIEWER– Atty. The fire policy that defendant issued covered only all of Golangco’s interest in the premises and his right to collect the rentals. the two juke boxes were destroyed by fire. stolen and/or illegally detached by unknown thieves or malefactors Despite repeated assurances by Zenith’s soliciting agent. Suter. he could not collect the insurance proceeds. The test for insurable interest in property is whether or not the insured will benefit in the property’s reservation or continued existence. or suffer a direct pecuniary loss in its destruction. directly damnified thereby. plaintiff Golangco was in legal possession of the premises.

in its express terms. The complainant has insurable interest in the insured property at the time of the procurement of the insurance policy. the property still hot having been delivered to him. mere possession of an equitable title. it not having been expressly mentioned o Loss nevertheless is excluded under the exception of “infidelity exclusion” by the operator who left it unguarded. Razon. considering that Zenith’s agent had been fully apprised of the circumstances prior to the actual issuance of the policy and the endorsement. henceforth. Thailand to Manila against all risks under warehouse to warehouse terms. it cannot now allege that complainant has no insurable interest on the property insured. Inc. like that pertaining to the buyer. unattended and deserted while entrusted to him. Zenith is now precluded by the equitable principle of estoppel from impugning and dishonoring the very insurance policy contract it issued and the endorsement and increase in the coverage made through its duly authorized agent. This is true because insurance contracts are essentially contracts of adhesion and applicants for insurance have no choice but to accept the terms and conditions in the policy even if they are not in full accord therewith. as reiterated by the SC. 3D SY 2004-2005 rhys alexei . Zenith on the other hand contends that: o Complainant is not the real party in interest since the policy carries with it a designated loss payee. it does NOT. CA 179 SCRA 638 Facts:     The Chao Tiek Seng a consignee of the shipment of fishmeal loaded on board the vessel SS Bougainville and unloaded at the Port of Manila on or about December 11.568.940 metric tons not 600 tons at $395.653. seeking judgment against the third party defendants in case judgment is rendered against it. (2) WON the complainant was with insurable interest therein when the said policy contract was procured. etc. and litigation expenses. hence the complainant’s claim for damages is compensable. because at the time it became operative. and BA finance had no insurable interest yet. Quimson page 41   Complainant seeks not only the payment of said insurance claim of 70T plus legal interest. Filipino brought a third party complaint against Compagnie Maritime Des Chargeurs Reunis and/or E. 1976 and seeks to recover from Filipino the amount of P51.INSURANCE REVIEWER– Atty. and for failure to give timely notice of loss o Complainant and/or BA Finance is guilty of concealment and misrepresentation at the time they secured the policy. the complainant was NOT yet the owner of the property insured. but also the revocation or cancellation of the license of Zenith to do insurance business. The Insurance Commissioner. “the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. Furthermore. As this is the case. what was imported was 59. (34) Filipino Merchants v. or upon any valid contract.” and Sec. while theft or robbery is NOT insured against in the policy. found for the complainant in this wise: While the policy enumerated the risks covered. Actually. gives rise to insurable interest in the property in which such title inheres. however. Issues and Resolutions: (1) WON the loss through theft or robbery claimed is within the coverage of the policy.42 a ton. limit compensability to that stated in the enumeration. atty’s fees.59 for the goods described as 600 metric tons of fishmeal in gunny bags of 90 kilos each from Bangkok.62 representing damages to said shipment which has been insured by Filipino. the contract of insurance was VOID AB INITIO for lack of insurable interest at the time the insurance took effect. It appears from the evidence presented that Chao insured said shipment with Filipino for the sum of P267. the BA Finance Corp o The policy insures against loss or damage caused by fire and lightning. 15 of the IC allows the insurance of a mere contingent or expectant interest in anything if the same is founded on an actual right to the thing. The foregoing policy is supported by the long time honored doctrine of “contra proferentem: which provides that: “any ambiguity in the policy shall be resolved in favor of the insured and against the insurer”. As the CC provides. The enumerated risks excluded did not include theft or robbery committed or perpetrated by an unidentified culprit.

or lien upon or possession of the property." "casualty" or "accidental cause" to which the alleged loss is attributable and the failure of herein private respondent. The perfected contract of sale even without delivery vests in the vendee an equitable title.O. Insurable interest in property may consist in (a) an existing interest. therefore. The terms "accident" and "accidental".B. of such nature that a contemplated peril might directly damnify the insured. without intention and design. An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses by an accidental cause of any kind. Quimson page 42   The fishmeal in 666 gunny bags were unloaded from the ship on December 11. Section 13 of the Insurance Code defines insurable interest in property as every interest in property. as consignee of the goods in transit under an invoice containing the terms under "C & F Manila. His interest over the goods is based on the perfected contract of sale. is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit. and Filipino’s surveyor ascertained and certified that in such discharge 105 bags were in bad order condition as jointly surveyed by the ship's agent and the arrastre contractor. and which is unexpected. the burden is shifted to the insurer to prove that the loss was due to excepted perils. Inc.F.INSURANCE REVIEWER– Atty. whether under F. Chao. an existing interest over the goods sufficient to be the subject of insurance 3D SY 2004-2005 rhys alexei .. as used in insurance contracts. as in this case. whether real or personal. An accident is an event that takes place without one's foresight or expectation." has insurable interest in said goods. or any relation thereto. The contract of shipment. or liability in respect thereof. In the present case. In principle. 1976 at Manila unto the arrastre contractor E. the terms have been taken to mean that which happens by chance or fortuitously. or is an unusual effect of a known cause and. to adduce evidence showing that the alleged loss to the cargo in question was due to a fortuitous event precludes his right to recover from the insurance policy. The burden of the insured. Thereafter. C. is to prove merely that the goods he transported have been lost. Coverage under an "all risks" provision of a marine insurance policy creates a special type of insurance which extends coverage to risks not usually contemplated and avoids putting upon the insured the burden of establishing that the loss was due to the peril falling within the policy's coverage. an event that proceeds from an unknown cause. Issues & Resolutions: Filipino contends that an "all risks" marine policy has a technical meaning in insurance in that before a claim can be compensable it is essential that there must be "some fortuity. upon whom lay the burden. the insurer can avoid coverage upon demonstrating that a specific provision expressly excludes the loss from coverage. the insurer is liable under the policy Filipino contends that Chao does not have insurable interest. anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction whether he has or has not any title in. and covers all losses except such as arise from the fraud of the insured. A marine insurance policy providing that the insurance was to be "against all risks" must be construed as creating a special insurance and extending to other risks than are usually contemplated. unusual and unforeseen. or C. Anent the issue of insurable interest. To impose on the insured the burden of proving the precise cause of the loss or damage would be inconsistent with the broad protective purpose of "all risks" insurance. there being no showing that the loss was caused by any of the excepted perils. SC upheld the ruling of the CA that Chao.62. being only a consignee of the goods. Based on said computation the Chao made a formal claim against the Filipino for P51. or (c) an expectancy. & F. but the Filipino refused to pay the claim. not expected.568. Razon. destroyed or deteriorated.I.. as vendee/consignee of the goods in transit has such existing interest therein as may be the subject of a valid contract of insurance. Thus. SC did not uphold this contention. The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before he performed the conditions of the sale. therefore. (b) an inchoate interest founded on an existing interest. They are construed by the courts in their ordinary and common acceptance. have not acquired any technical meaning. coupled with an existing interest in that out of which the expectancy arises. A formal claim statement was also presented by the plaintiff against the vessel.

40 in his name. 15.INSURANCE REVIEWER– Atty. Issue: WON Del Rosario acted as the agent of Lopez in taking out the insurance on the contents of the warehouse or whether she acted as the reinsurer of the copra. in favor of Compania Copra de Tayabas. equally and proportionately to the benefit of all owners of the property insured. the latter authorized Atty. Hence. When Bayne. The court awarded him the sum of P88. However. a carrier has insurable interest in a thing held by him as such. The vessel was hit by lightning. the owner of 14 warehouse receipts with a declared value of P107. Since the value of the goods is only 1M. Quimson page 43 Section 15. Under any aspect. Decide. What is the reason for this provision? The loss of the thing may make the carrier or depositary liable to the owner of the goods. adjustments of loss made by an expert or by a board of arbitrators may be submitted to the court NOT as evidence of the facts stated therein. The agency can be deduced from the warehouse receipts. Del Rosario is liable. to the extent of his liability but not to exceed the value thereof. valued at 1M with A.) for 40T. A. The claims by different people who had stored copra in the warehouse were settled with the exception of Friolan Lopez. it has been held by a reputable court that the warehouseman is liable to the owner of such stored goods for his share.MAY because the policy stated that the loss due to lightning is compensable. Even if one secured insurance covering his own goods and goods stored with him. Mary Jane has insurable interest over the goods of Peter Parker.  All policies were in the name of Del Rosario. and did not ratify it before the payment of the loss. or as obligatory. caught fire. the insurance policies and the circumstances surrounding the transaction.492. except for one (with Nat’l Insurance Co. The law is that a policy effected by a bailee and covering by its terms in his own property and property held in trust. M/V Mary Jane. but for the purpose of assisting the court in calculating the amount of liability. to the extent of the value of the goods. a common carrier. According to Sec. the same provision also states that such insurable interest is only up to the extent of his liability and not to exceed the value of the thing. and the law therefore allows such a carrier or depositary to insure his possible liability therefor. In a case of contributing policies.MAY Insurance Company for 2M. in the event of loss. and (2) Mary Jane cannot claim more than the value of the goods lost. 3D SY 2004-2005 rhys alexei . and sank. Fisher to negotiate with the Companies.21 with legal interest. and even if the owner of the stored goods did not request or know the insurance.  The warehouse and its contents were destroyed by fire. Mary Jane is now claiming 2M from A. then Mary Jane can only collect 1M. Case: (35) Lopez v.990.MAY denies liability on the ground that: (1) Mary Jane is not the owner of the goods and therefore has no insurable interest. failed to effect a settlement between the Insurance companies and Del Rosario. insured Peter Parker’s goods. inures.  An agreement was reached to submit the matter to arbitration. Held: She acted as the agent of Lopez. A carrier or depository of any kind has an insurable interest in a thing held by him as such.  Del Rosario secured insurance on the warehouse and its contents with 5 different insurance companies in the amount of P404. a fire loss adjuster. Del Rosario 44 PHIL 98 Facts:  Benita Del Rosario is the owner of a bonded warehouse in Manila where copra and other merchandise are deposited.800. Problem.  A case was filed in CFI by Lopez.  Among those who had copra deposited in the warehouse was Froilan Lopez.

Brias stated that SMB’s interest in the property was merely that of a mortgagee. the reason being. A finished the house on July 13. The reason why he is entitled to the whole 4M is. authorizing SMB to choose the insurers and to receive the proceeds thereof and retain so much of the proceeds as would cover the mortgage debt.  Dunn likewise authorized SMB to take out the insurance policy for him. A insured his property valued at P100. Law Union Rock Insurance Company (repeat – case #12) 40 PHIL 674 Facts:  On Jan.500 and procured another policy of equal amount from Filipinas Cia de Seguros. notwithstanding the fact that he has received from Z 1M as advance payment. 12. Examples: A son cannot insure the property of his father which he expects to inherit from the latter. Problems. the house burned down. How much is he entitled to recover? A is entitled to recover only the value of his loss which is 100T and not 120T because it is against public policy to profit from a loss. 1993. Hence the insurer is liabile for 20T. Both policies required assignments to be approved and noted on the policy. issued one for P7. the policies were renewed. reduces and diminished the amount which the insurer is bound to pay. Cases: (36) San Miguel Brewery v.  In 1917. but no assignment of the policies was made to the latter. Anything that reduces or diminishes the loss. What if the one who caused the damage.  Brias. 1993 so he insured the house against fire for 4M. Dunn sold the property to Harding. not founded on an actual right to the thing. not wanting to issue a policy for the entire amount. In other words. he has to replace the house destroyed with another house worth 4M as per the contract. Quimson page 44 Section 16. B paid A P80.  Premiums were paid by SMB and charged to Dunn. or a husband insuring the paraphernal property of his wife. 1918. SMB’s general manager. is not insurable.000 for P120. The measure of an insurable interest in the property is the extent to which the insured might be damnified by loss or injury thereof. approached Law Union for insurance to the extent of 15T upon the property. their interest is merely an expectancy of inheriting.  Law Union. Section 17. What is the extent of the insurable interest of A? It is still 4M. A year later. and the rights to succession are transmitted only from the moment of the death of the decedent. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty.INSURANCE REVIEWER– Atty. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T.  Mortgage contract stated that Dunn was to have the property insured at his own expense. A mere contingent or expectant interest in anything. 13. Under a building contract. What does this section mean? Mere hope or expectation of benefit which may be frustrated by the happening of some event uncoupled with any present legal right will not support a contract of insurance.000. the balance to be paid upon deliver of the house on Aug. not one valued at only 3M. In the application. A constructed a house in Ayala Alabang for 4M for Z who made an advance payment of 1M. A suffered a total loss. nor upon any valid contract for it. 3D SY 2004-2005 rhys alexei . 4M was the extent to which A was damnified by the loss of the house. Before delivery of the house in August.000? What is the liability of the Insurance Company? The insurance claim is reduced in the same amount of 80T.

If the wording had been: “Payable to SMB. Cha 277 SCRA 690 (1997) Facts: 3D SY 2004-2005 rhys alexei . as its interests may appear. it would have proved an intention to insure the entire interest in the property. However. had no insurable interest over the property. no change or assignment of the policies had been undertaken. (38) Cha v. Issue: WON a mere possessor has insurable interest over the property. Quimson  page 45    Property was destroyed by fire. With respect to Harding. although the policies were issued in SMB’s name. SMB filed an action in court to recover on the policies. NOT merely SMB’s and would have shown to whom the money. this was not what was stated in the policies. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof. Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies. The policies might have been worded differently so as to protect the owner. during the continuance of the risk. Held: NOPE.  Phoenix denied liability on the ground that Ang was not the owner but a mere possessor and as such. The reason is that even if a person is NOT interested in the safety and preservation of material in his possession because they belong to 3 rd parties. Undoubtedly. should be paid. Also it is provided in the IA that the insurance shall be applied exclusively to the proper interest of the person in whose name it is made. remainder to whomsoever. Insurance Companies contended that they were not liable to Harding because their liability under the policies was limited to the insurable interests of SMB only. but it could NOT. said person still has insurable interest. recover upon the two policies an amount in excess of its mortgage credit. may become owner of the interest insured” . A person having a mere right or possession of property may insure it to its full value and in his own name. Phoenix Assurance 1 CARA 704 Facts:  Ang Ka Yu had a piece of property in his possession. Held: Yes. Unfortunately. Harding was made a defendant because by virtue of the sale. (37) Ang Ka Yu v. because he stands either to benefit from their continued existence or to be prejudiced by their destruction. neither Dunn nor Harding could have recovered from the two policies. SMB as the mortgagee of the property.INSURANCE REVIEWER– Atty. Trial court ruled against Harding. SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. in case of loss. an any event. Harding was left to fend for himself. Hence the appeal. and the policies had inadvertently been written in the form in which they were eventually issued. even when he is not responsible for its safekeeping. the lower court would have been able to order that the contract be reformed to give effect to them in the sense that the parties intended to be bound. he became the owner of the property.  The property was lost. the parties had agreed that even the owner’s interest would be covered by the policies. there is no clear and satisfactory proof that the policies failed to reflect the real agreement between the parties that would justify the reformation of these two contracts. but this was not done. so Ang Ka Yu sought to claim the proceeds. had an insurable interest therein. mortgagee. when he acquired the property. By virtue of the Insurance Act. Under the Insurance Act. If during the negotiation for the policies. He insured it with Phoenix.

based on its lease contract with the Cha spouses.    Issue: WON CKS can claim the proceeds of the fire insurance.000. 18. it cannot be denied that CKS has no insurable interest in the goods and merchandise inside the leased premises under the provisions of Section 17 of the Insurance Code which provide: "Section 17. goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent and approval of the LESSOR. the provision states that? NO insurable interest = NO contract of Insurance. . The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella UyCha (herein co-petitioners). Hence. textiles. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof. fire broke out inside the leased premises. . merchandise. United refused to pay CKS. as lessor. Quimson page 46   Spouses Nilo Cha and Stella Uy-Cha. v.INSURANCE REVIEWER– Atty." A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity. 64 SCRA 258 Facts:  Sharuff and Eskenazi were doing business under the firm name Sharuff and Co. Simplified. entered into a lease contract with CKS Development Corporation (CKS). the Cha spouses. The automatic assignment of the policy to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy. On the day that the lease contract was to expire. The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured. . Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs. This insurable interest over said merchandise remains with the insured. under the Insurance Code — a special law — be validly a beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise. 3D SY 2004-2005 rhys alexei . The LESSEE shall not insure against fire the chattels. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured. Section 18. as lessees. CKS has no insurable interest." Notwithstanding the above stipulation. Held: NO. In the present case.00) with the United Insurance without the written consent CKS. CKS cannot. alleging that the latter had no insurable interest. If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit. When CKS learned of the insurance earlier procured by the Cha spouses (without its consent). Baloise Fire Insurance Co. . One of the stipulations of the one (1) year lease contract states: "18. The basis of such requirement of insurable interest in property insured is based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property. it wrote the United a demand letter asking that the proceeds of the insurance contract (between the Cha spouses and United) be paid directly to CKS." Therefore. . the latter filed a complaint against the Cha spouses and United. Cases: (39) Sharuff and Co. . 18 of the Insurance Code provides: "Sec. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured. Sec. the Cha spouses insured against loss by fire their merchandise inside the leased premises for Five Hundred Thousand (P500.

In case of property insurance. but need not exist thereafter or when the loss occurs. Problem. Because of the effects of Sec. Held: YES. but need not exist in the meantime. so he could not have noticed the error of the insurance company. During the effectivity of the policy. Is the Insurer liable notwithstanding the transfer of interest from Beatrix to Bill during the effectivity of the policy? Yes. Beatrix had insurable interest on the house as she was the owner at the time the insurance took effect. Quimson    page 47 They insured their merchandise with Baloise. HongKong Fire and Marine Insurance Co.  Said policy was later on assigned by Garcia to PNB to secure a loan. PNB acknowledged receipt of said policy. Beatrix insured her house for 1T. Sharuff and Eskenazi filed their claim against the insurance company. Issue: WON the partnership can claim the proceeds of the policy. the insurance was suspended. At that time. An interest in property insured must exist when the insurance takes effect. It cannot deny such allegation due to the fact that it even confirmed with PNB the nature of said policy when it was endorsed. (The building was not owned by Garcia)  The policy was written in English. 45 PHIL 122 Facts:  Garcia had his merchandise insured by Hongkong Fire and Marine Insurance Co. 20. Held: YUP. Therefore. but did not transfer the policy. and not Sharuff and Eskenazi. The law says Beatrix need not have insurable interest in the meantime. A week later. Garcia could not have noticed the mistake due to his ignorance of the English language. Beatrix realized how much she missed the house and bought it from Bill for 3T. The next day.  The insurance company however made a mistake and issued a policy covering the building where the merchandise was stored. and interest in the life or health of a person insured must exist when the insurance takes effect. Baloise refused to pay on the ground that the policy was issued in the name of Sharuff and Co. the house burned down. and when the loss occurs.  The building which housed the merchandise was later razed by fire. she sold the house to Bill for 2T. When must insurable interest exist? In case of life insurance at the time the insurance takes effect. The mistake was obviously on the part of the insurer when it issued a wrong policy. such change of firm name was not made to defraud the insurance company or some other person. notwithstanding 3D SY 2004-2005 rhys alexei . Issue: WON Garcia can collect. The merchandise insured was subsequently destroyed by fire. Later on. She also had insurable interest on the house at the time of the loss since she had already reacquired it from Bill. and the time of the loss. referring to it as a policy covering the merchandise. The insurance company refused to pay due to the fact that the policy indicates insurance on the building and not on the merchandise. she was the owner of the house. Furthermore. Section 19.INSURANCE REVIEWER– Atty.  The insurance company made the necessary endorsements to PNB. at the time the insurance takes effect AND at the time of the loss. The defense of the insurer is purely technical. Sharuff and Eskenazi entered into a contract of partnership and thereby changed the firm name to Sharuff and Eskenazi. (40) Garcia v. but it need not exist in the meantime. The people involved are actually the same. of which Garcia was ignorant. or during the intervening period between the time of effectivity of the insurance. The subsequent partnership did not alter the composition of the firm.

where a change of interest does NOT suspend the insurance are: 1. Case: (42) Bachrach v. Cases: (41) Tai Tong Chua Che & Co. or might lessen the interest of the insurer in protecting and guarding it. a change of interest in any part of a thing insured. Quimson page 48 the ownership of Bill during the intervening period. as Beatrix had insurable interest at the two points in time required by law. unaccompanied by a corresponding change of interest in the insurance. then the insurer is liable. until the interests in the thing and the interest in the insurance are vested in the same person. and 3D SY 2004-2005 rhys alexei . Issue: WON Taitong can collect the proceeds. Taitong on the other hand presented evidence. claiming that Taitong had no more insurable interest in the property since Palomo had allegedly paid the mortgaged debt already. 17 PHIL 555 Facts:  Bachrach insured properties of its general furniture shop with British. o Insured stored gasoline in the building. What are the exceptions to the general rule? The exceptions. Change of interest by will or succession on the death of the insured (Sec.  Bachrach claims from the insurance company. he mortgaged a parcel of land with a building. health and accident insurance (Sec. to the other (Sec. Change of interest in one or more of several things separately insured by one policy (Sec. The properties were subsequently destroyed by fire. Taitong claimed the proceeds from the insurance company. 23) 5. Section 20. and in the cases of life. British American Insurance Co. joint owners or owners in common who are jointly insured.  The insured property was razed by fire. 20) 2. The term “ change of interest” in this section means absolute transfer of the property insured such as the conveyance of the property insured by means of an absolute deed of sale. Insurance Commission 158 SCRA 366 Facts:  Palomo obtained a loan from Taitong for 100T. The claim was denied on the ff grounds: o The policy was allegedly forfeited because the insured stored varnishes and paints within the premises. suspends the insurance to an equivalent extent. Life. 22) 4. Transfer of interest by one of several partners. 21) 3. 24) What is the reason for this provision suspending the insurance in case of change of interest? The object of the provision is to provide against changes which might supply a motive to destroy the property. Change of interest in the thing insured occurs after the injury which results in a loss (Sec. The allegation of the insurance company that the debt had already been paid was NOT proved. To secure this.  Travelers refused to pay. namely the contract of mortgage which does not appear to have been canceled or released. Taitong insured the mortgaged property with Travelers Multi-Indemnity Corp for 100T.INSURANCE REVIEWER– Atty. What is the general rule embodied in this section? The General Rule is that the mere transfer of the thing insured does not transfer the policy but suspends it until the same person becomes the owner of both the policy and the thing insured. v. Except in the cases specified in the next four sections. Held: Yes. accident and health insurance.

Harding was left to fend for himself. issued one for P7. Undoubtedly. Brias stated that SMB’s interest in the property was merely that of a mortgagee. but this was not done. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof. remainder to whomsoever. in case of loss. approached Law Union for insurance to the extent of 15T upon the property. If the wording had been: “Payable to SMB.  Mortgage contract stated that Dunn was to have the property insured at his own expense. The policy was NOT forfeited due to the strong paints and varnishes. Held: Yes. the policies were renewed. Both policies required assignments to be approved and noted on the policy. recover upon the two policies an amount in excess of its mortgage credit. he became the owner of the property. Law Union Rock Insurance Company (repeat – case #12) 40 PHIL 674 Facts:  On Jan. mortgagee. during the continuance of the risk.  SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. The gasoline stored within the premises was in the reservoir of the car and thus does not violate any provision in the policy. as its interests may appear. authorizing SMB to choose the insurers and to receive the proceeds thereof and retain so much of the proceeds as would cover the mortgage debt.  In 1917. SMB as the mortgagee of the property. SMB’s general manager. In the application. Also it is provided in the IA that the insurance shall be applied exclusively to the proper interest of the person in whose name it is made. should be paid.500 and procured another policy of equal amount from Filipinas Cia de Seguros.  Property was destroyed by fire. SMB filed an action in court to recover on the policies. although the policies were issued in SMB’s name. The policies might have been worded differently so as to protect the owner.  Brias. With respect to Harding. neither Dunn nor Harding could have recovered from the two policies. not wanting to issue a policy for the entire amount. There was no express provision pertaining to it and these paints and varnishes are incidental to the business of the insured to keep the furniture in a saleable condition.  Insurance Companies contended that they were not liable to Harding because their liability under the policies was limited to the insurable interests of SMB only. Dunn sold the property to Harding. when he acquired the property.  Law Union. Harding was made a defendant because by virtue of the sale. Unfortunately. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. but no assignment of the policies was made to the latter. this was not what was stated in the policies.INSURANCE REVIEWER– Atty.  Dunn likewise authorized SMB to take out the insurance policy for him. an any event. Held: NOPE. 3D SY 2004-2005 rhys alexei . 1918. NOT merely SMB’s and would have shown to whom the money. Issue: WON Bachrach can claim the proceeds of the policy. no change or assignment of the policies had been undertaken.  Premiums were paid by SMB and charged to Dunn. (43) San Miguel Brewery v. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty. Trial court ruled against Harding. By virtue of the Insurance Act. A year later. 12. There is no express prohibition against the execution of a chattel mortgage on the property insured. but it could NOT. Hence the appeal. had an insurable interest therein.  SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. it would have proved an intention to insure the entire interest in the property. Quimson o page 49 Bachrach executed a chattel mortgage on the properties insured without the consent of the insured. may become owner of the interest insured” . Under the Insurance Act. Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies.

However. Thereafter. In this case. 10. 2004. joint owner. 2004. In case he sells the Feroza without the insurer’s consent. A is the owner of a Feroza and a Civic. A change in interest in one or more of several distinct things. 23 says so. If he sells the Feroza without the insurer’s consent. He institutes B as his universal heir. is the insurer liable in case the Civic is lost? NO. Quimson page 50 If during the negotiation for the policies. What is the reason for the rule? 3D SY 2004-2005 rhys alexei . A is the owner of a Feroza and a Civic. does not affect the right of the insured to indemnity for the loss. Section 23. He insured the Feroza and the Civic for 350T under a single policy for which he paid a premium of 20T. the liability of the insurer became fixed and from that day onward. Problem: A insured his house for 10T. Upon the occurrence of the risk insured against. joint owners. A change of interest. the sale of one distinct thing does NOT avoid the insurance as to the others. the lower court would have been able to order that the contract be reformed to give effect to them in the sense that the parties intended to be bound. Problem. The change of interest was made after the occurrence of the injury which resulted in a partial loss. the sale of one thing affects the insurance of the others. he became duty bound to indemnify A for his loss. the house was partially damaged by fire. does not avoid the insurance. On Aug. Section 21. there is no clear and satisfactory proof that the policies failed to reflect the real agreement between the parties that would justify the reformation of these two contracts. A transfer of interest by one of several partners. Since the vehicles are separately insured. by will or succession on the death of the insured. after the occurrence of an injury which results in a loss.INSURANCE REVIEWER– Atty. his only property. A dies and B inherits the hut. he sold the same house so partially damaged to C. Section 22. 22. A insures his nipa hut. Section 24. What does this section provide? It provides that a transfer of interest in the insured property by a partner. and his interest in the insurance passes to the person taking his interest in the thing insured. Since the two cars are not separately valued in the policy and the premium was meant to cover both vehicles. If the hut burns down can B collect? Yes. separately insured by one policy. even though it has been agreed that the insurance shall cease upon the alienation of the thing insured. Under Sec. A change of interest in a thing insured. the parties had agreed that even the owner’s interest would be covered by the policies. is the insurer liable in case the Civic is lost? Yes. Sec. He has no compulsory heirs. does not avoid the insurance as to the others. does not avoid the insurance. Problem. to the others. or owner in common to the others who are jointly insured. who are jointly insured. On Aug. and the policies had inadvertently been written in the form in which they were eventually issued. He insures the Feroza for 200T and the Civic for 150T under a single policy for which he paid a total premium of 20T. 15. Can A collect on the insurance after selling the house? Yes. will NOT avoid the insurance. or owners in common. The rule is the same even if there is a stipulation that the insurance will cease upon the alienation of th thing insured.

since Doc Ock is a stranger. must stipulate in the policy that “any sale of the property or any interest therein avoids the policy. is void. (Sec. If using the same facts. MJ. or owner or owner in common is interested in the whole property and hazard is NOT increased because the purchasing partner has acquired a greater interest in the property by a transfer of his co-partner’s chare. Harry sells to Peter. to Peter. A fire insurance policy was issued by Spiderman Insurance Co. the contract will be avoided because the risk is already affected since a new party is brought into the contract of insurance. Is there an exception to the rule? Yes. However. and every policy executed by way of gaming or wagering. the parties have four primary concerns to wit: 3D SY 2004-2005 rhys alexei . such insurance will be void and cease. or of any undivided interest therein.” This is the only way the insurer cannot be held liable. 83) TITLE IV – CONCEALMENT Section 26. Stipulation that the policy will be received as proof of insurable interest What is the reason for voiding such stipulations? As to the 1st stipulation. or that the policy shall be received as proof of such interest. In case of fire is the insurer liable to Doc Ock? NO. Harry sold his interest to Doc Ock. Stipulation for the payment of loss WON the person insured has any interest in the subject matter of the insurance (exception: life insurance) 2. joint owners or owners in common.” What is the effect if the sale was made to a stranger? All the more. the transfer does not affect the risk because NO NEW PARTY is brought into the contractual relationship with the insurer. In other words. Every stipulation in a policy of insurance for the payment of loss whether the person insured has or the payment of loss whether the person insured has or has not any interest in the property insured. If the policy contains the stipulation that “in case of ANY sale or transfer or change of title of any property insured by this company. However. who are partners. Peter is a partner. such sale to a stranger ends the contract of insurance only as to the interest of the transferor and does NOT affect the insurance of the other partners. This section avoids two types of stipulations in an insurance policy.INSURANCE REVIEWER– Atty. As to the 2nd stipulation. Is the insurer liable to Peter? Yes. we must remember that insurable interest is a requisite of a valid contract of insurance. and Harry. What are they? 1. What are the four primary concerns of parties to an insurance contract? In making a contract so highly aleatory such as that of insurance. What must the insurer do to avoid the policy? Spiderman Insurance Co. the law permits the insurer to show lack of insurable interest on the part of the insured. Lack of this requisite avoids the contract. even after the issuance of a policy of insurance to avoid liability. A neglect to communicate that which a party knows and ought to communicate is called a concealment. the Section 25.(Furthermore arch-enemy siya ni spiderman…hehehe) insurer is liable to Peter and MJ whose insurance was not affected by the sale of Harry. Problems. Quimson page 51 The underlying principle is that each partner.

must the insurer prove fraud? NO. 3D SY 2004-2005 rhys alexei . relying upon the belief that the insured will disclose every material fact within his actual or presumed knowledge. and Determining whether a loss occurred. and 4) The other party has no means of ascertaining the fact concealed Section 27. The reason is that insurance policies are traditionally contracts uberrime fidae. and if so. What is the reason behind Sec. and if so. Under Sec. is misled into a belief that the circumstance withheld does NOT exist. What is the criterion then if we were to apply Sec. contracts of the outmost good faith. necessarily depends on the answer to this question. the amount of such loss. A did not reveal the fact that he was suffering from a certain ailment. 2) Such party concealing duty bound to disclose such fact to the other 3) Such party concealing makes no warranty of the fact concealed. In order to rescind a contract on the ground of concealment. is that in cases of concealment. 3. What are the requisites of concealment? There can be no concealment unless: 1) A party knows the fact which he neglects to communicate or disclose to the other. you have to prove intention to deceive. even when there is no intention to deceive. Sec. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. Such control of the risk after it is assumed as will enable the insurer to guard against the increase of the risk because of change in conditions. the insurer is misled or deceived into accepting the risk . Is there concealment if the ailment was not material to the contract? Whether or not A was aware of the ailment.INSURANCE REVIEWER– Atty. And it is so hard to prove intention to deceive because we are not mind-readers. Why does the law make no distinction between international and unintentional concealment? Because you have to prove fraud. or accepting it at the rate of premium agreed upon. page 52 The correct estimation of the risk which enables the insurer to decide whether he is willing to assume it. known to the insured only. and the insurer. 27 provides that the effect of concealment is the same regardless of whether the concealment is intentional or unintentional. In his application for life insurance. failure on the part of the insured to disclose conditions affecting the risk of which he is aware. makes the contract voidable at the insured’s option. 2. What is the effect of concealment? As a rule. The precise delimitation of the risk which determines the extent of the contingent duty to pay undertaken by the insurer. 27? The reason behind the Sec. must rely primarily upon the information supplied to him by the appellant. And if you have to prove fraud. 27? We must ask ourselves the question: Was the insurer misled or deceiving into entering a contract obligation or in fixing the premium of insurance by the withholding of material information or facts within the insured’s knowledge or presumed knowledge? The application of Sec 27. as a rule. Quimson 1. The insurer. Problems. in deciding whether or not to accept a risk. and he is thereby induced to estimate the risk upon a false basis. there is no concealment if the ailment is not material to the contract. 27. What is concealment? Concealment is a neglect to communicate that which a party knows and ought to communicate. the insurer need not prove fraud in order to rescind a contract on the ground of concealment. The duty of communication is independent of the intention and is violated by the fact of concealment. This doctrine is essential on account of the fact that the full circumstances of the subject-matter of insurance are. that is. 4. at what rate or premium.

 Eng subsequently died of medullary carcinoma.  Cheng claims the proceeds of the policy. o “What physician have you consulted or been treated by within the last 5 years and for what illness or ailment?” she answered “none”  It is however. Saturnino was operated on for cancer.  It is admitted that in the Medical Examiner’s report. advanced and lesser curvature. Quimson Same facts as above but the ailment is material to the contract. However. Vicenta. found in the right armpit. He answered “ No”. If A. Bernardo is barred from recovery. Philamlife 7 SCRA 316 Facts:  2 months prior to the insurance of the policy. spirits and other intoxicants?” she answered “beer only in small quantities”. Bernardo claimed payment but was refused. including the pectoral muscles and the glands. 18. Thereafter. Held: YES. we can distinguish. 51 PHIL 725 Facts:  A joint life insurance policy was issued to Bernardo Argente and his wife Vicenta upon payment of premium. 3D SY 2004-2005 rhys alexei . her replies were as follows: o “How frequently do you use beer. refused payment on the ground that the policy was void due to the concealment. 1925. Held: YES. there is fraudulent concealment. CA 105 PHIL 1930 Facts:  Yu Pang Eng obtained a life insurance policy naming his brother Yu Pang Cheng as beneficiary. West Coast Life Insurance Co. If the policy was procured by fraudulent misrepresentations. Grade 4. Vicenta died of cerebral apoplexy. In an action on a life insurance policy where the evidence conclusively shows that the answers to questions concerning diseases were untrue. Issue: WON on the bais of the misrepresentations of Vicenta. (46) Saturnino v. by West Coast. The court found that the representations made by Vicenta in his application for life insurance were false with respect to her state of health and that she knew and was aware that the representations so made by her were false.INSURANCE REVIEWER– Atty. Vicenta was taken to a hospital for what was first diagnosed as alcoholism and later changed to manic-depressive psychosis and then again changed to pscyhonuerosis. but honestly believed that it was not material. not disputed that in 1924. But if A was aware of the materiality of the ailment. the effect is the same. Eng was asked whether he had been ill or had consulted a doctor due to symptoms or illnesses enumerated in the questionnaire. Issue: WON the policy is void. when in fact he was hospitalized seven months prior to his application for the said policy. It entitles the insurer to rescind the contract. the truth or falsity of the answer becomes the determining factor. There is concealment. In the application for the policy. wine.  On Nov. during the effectivity of the policy. the insurance would never have been granted. the concealment is not fraudulent or intentional. the contract of insurance apparently set forth therein was never legally existent. Nevertheless. in response to the question asked by the medical examiner. Cases: (44) Argente v. (45) Yu Pang Cheng v.  Insurance co. It can be fairly assumed that had the true facts been disclosed by the insured. Is there concealment? page 53 YES. involving complete removal of the right breast. was aware of the ailment.

the waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered. but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due. (47) Grepalife v. In this jurisdiction. it is not necessary to show actual fraud on the part of the insured. The question to determine is: Are the facts then falsely represented material? The Insurance Law provides that “materiality is to be determined not by the event. that the disease for which she had been operated on was cancer. Saturnino did not make a disclosure thereof in her application for insurance. and he is thereby induced to estimate the risk upon a false basis that it does not exist. concealment. in forming his estimate of the proposed contract. a binding deposit receipt was issued to HIng by the branch manager of the insurer in Cebu. The contention of appellants is that the facts subject of the representation were not material in view of the non-medical nature of the insurance applied for. concealment of the fact of the operation itself was fraudulent. uterus and menstrual disorders. In the first place. The SC was of the firm belief that Ngo Hing had deliberately concealed the state of health and physical condition of his daughter Helen. that she had not consulted any physician. undergone any operation or suffered any injury within the preceding 5 years. as there could not have been any mistake about it. Issue: WON Grepalife is liable to HIng. for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not.  On May 28. Secondly.INSURANCE REVIEWER– Atty. whether intentional or unintentional entitled the insurer to rescind the contract of insurance. Held: NO. When he supplied the required essential data for the insurance form. There was concealment. but the latter denied liability on the ground of concealment. nor did she ever have any illness or disease peculiar to her sex. The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy. 1957.  Hing filed a claim with Grepalife. concealment being defined as “negligence to communicate that which a party knows and ought to communicate. Held: YES. that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5 years.  Upon payment of the insurance premium. The contention is without merit. ovaries. nor had she ever had. or making his inquiries. or accepting it at a rate of premium agreed upon. Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself did not know. in order to avoid a policy. since her doctor never told her. She stated therein that she did not have. CA (repeat – case #15) Facts:  On Mar 4. Helen died of influenza with complication of broncho pneumonia. no matter what the ailment. Quimson   page 54   Notwithstanding the fact of her operation. The insurer. he was fully aware that Helen was a mongoloid. 1957. is misled into a belief that the circumstances withheld does not exist. relying upon the belief that the insured will disclose every material fact within his actual or presumed knowledge. particularly of the breast. Issue: WON the insured made such false representation of material facts as to avoid the policy. which does away with the usual requirement of medical examination before the policy is issued. among others listed in the application.” The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk. She also stated that she had never been treated for. namely. If anything. Ngo Hing filed an application with Grepalife for a 20-yr endowment policy for P50T on the life of his 1-yr old daughter Helen Go. cancer or other tumors. 3D SY 2004-2005 rhys alexei . There can be no dispute that the information given by her in the application for insurance was false.

each of them being the beneficiary of the other. enlarged liver and hernia. Concealment entitles the insurer to resolve the contract of insurance. Quimson page 55 Such a congenital defect could not be ensconced or disguised. Rosario died of acute dilatation of the heart. in order to entitle the latter to rescind the contract. but in the application for reinstatement. or in making his inquiries. and they were furnished at the same time long-form health certificates for the reinstatement of the policies. the insured need not have died of the very diseases he had failed to reveal to the insurance company. According to Sec. (50) Bautista v. Philamlife 56 OG 7328 Facts:  Celestino Henson was insured by Philamlife in 1954 upon his application or a 20-yr endowment life policy. US Life 104 PHIL 1046 Facts:  US Life issued a 20yr endowment life policy on the joint lives of Patricio Soliman and his wife Rosario. (48) Henson v. Grepalife would have verified the same and would have had no obvious choice but to disapprove the application outright. in apparent gad faith.  Patricio claims that the answers to the questions in the health certificates were made by US Life’s agent. Capital Insurance 1 CA Rep. and his beneficiaries’ claim was rejected by Philamlife on the ground of concealment.  In March 1949. Henson died. the spouses were informed that the premium for Jan 1949 was still unpaid notwithstanding that the 31-day grace period had already expired.  In Jan. Henson did not disclose the fact that he had been previously diagnosed for pyelonephritis.  In Aprl 1949. the policy lapsed due to non-payment of the premiums. and thereafter Patricio filed a claim for the proceeds of the insurance. In essence therefore.  US Life denied the claim and it filed a case for rescission on the ground that the health certificates failed to disclose that Rosario had been suffering from bronchial asthma for three years prior to the submission. Held: NO. 1950. 26 provides that “a concealment whether intentional or unintentional entitles the injured party to rescind the contract of insurance”. (49) Soliman v. Nonetheless. Sec. And aside from this. intent.  Upon payment of the premiums due.  In 1956. The spouses in allowing the agent to answer some of the blanks in the certificates and afterwards stamping their signature thereon are presumed to have at least acquiesced in and approved all that had bee stated therein in their behalf. the policy was reinstated.INSURANCE REVIEWER– Atty. 30 of the Insurance Code: Materiality is to be determined not by the event. being a state of the mind is hard to prove. 228 3D SY 2004-2005 rhys alexei . Held: YES. He also did not disclose that he had been examined by a physician. Beneficiaries’ contend that the intent to conceal must be proven to warrant rescission. but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due. Issue: WON the policy can be rescinded.  The company then filed for rescission.  In 1955. It is sufficient that his non-revelation had misled the insurer in forming its estimate of the disadvantages of the proposed policy reinstatement or in making its inquiries. they submitted the health certificates and paid the premium due up to said month. Had he divulged said significant fact in the insurance form. Issue: WON there is need to prove intent to conceal to warrant rescission. in forming his estimate of the disadvantages of the proposed contract. withheld such fact which is material to the risk to be assumed by the insurance company. Ngo Hing.

" Mr. the building and the goods stored therein burned."    On the next day. Issue: WON Capital may rescind the contract. Held: It can. filed a claim with Grepalife which the insurer denied on the ground that the insured had concealed material information from it. Manuel Leyson. Such misrepresentation is fatal.  There was a provision in the policy that should there be any insurance already effected or to be subsequently procured.  3D SY 2004-2005 rhys alexei . soles and canvass were stored therein. Subsequently. Issue: WON General Insurance can refuse to pay the proceeds. Held: Yes. but the latter denied her claim on the ground of breach of warranty." The wife as beneficiary. the house was destroyed by fire.  Ng Hua declared that there was non. she is presumed to know the contents of the contract and to have assented to them. and that the policy was in English (which she did not understand) and was never read to her. (51) Gen. The very next day. page 56      The policy described the building as “occupied as dwelling only”.INSURANCE REVIEWER– Atty." and "chronic anemia. Grepalife was ordered to pay the widow by the Insurance Commissioner holding that there was no intentional concealment on the Part of Canilang and that Grepalife had waived its right to inquire into the health condition of the applicant by the issuance of the policy despite the lack of answers to "some of the pertinent questions" in the insurance application. NG Hua 106 PHIL 1117 Facts:  In 1952. CA reversed. Vda Canilang filed a complaint with the Insurance Commissioner against Grepalife contending that as far as she knows her husband was not suffering from any disorder and that he died of kidney disorder. Failure to read the policy is negligence." "anemia.700. rubber heels. as his beneficiary. Violation of the statement which is to be considered a warranty entitles the insurer to rescind the contract of insurance. Canilang applied for a "non-medical" insurance policy with Grepalife naming his wife. 4 August 1982. the claim of Ng Hua for the proceeds was denied by General since it discovered that Ng Hua had obtained an insurance from General Indemnity for the same goods and for the same period of time. Bautista was bound to know the contents of the policy in accepting it. Claudio and was diagnosed as suffering from "sinus tachycardia. who used it as a factory for the manufacture of shoes. On 5 August 1983. CA 223 SCRA 443 (1993) Facts:  Canilang consulted Dr. Bautista’s lessee. Canilang died of "congestive heart failure. Insurance & Surety Corp v. upon PIlar Bautista’s house. De Canilang v. and the insured is regarded as having assumed the risk of the falsity or misstatements of its contents. There was a stipulation to the effect that any misrepresentation of material fact or misdescription of the property shall render the insurer not liable for its loss. subleased the ground floor to ONg. Bautista filed her claims with Capital Insurance. A month later. a contract of insurance was entered by the parties.  Subsequently. Canilang was issued ordinary life insurance with the face value of P19. but of the insurance agent. Bautista said that the statement “occupied as dwelling only” was not hers. the insured shall give notice to the insurer. Quimson Facts:  In 1952. (52) Vda. In the absence of fraud. Canilang consulted the same doctor again on 3 August 1982 and this time was found to have "acute bronchitis. Before the policy was issued however. General issued a fire policy to Ng Hua to cover the contents of the Central Pomade Factory owned by him.

that the insured did not disclosed material facts relevant to the issuance of the policy. In its letter. except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Bacani was examined and confined at the Lung Center of the Philippines. SC found it difficult to take seriously the argument that Grepalife had waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilang's failure to set out answers to some of the questions in the insurance application. filed an action for specific performance against Sun Life. the deceased was subjected to urinalysis. RTC ruled for Bernarda holding that the facts concealed by the insured were made in good faith and under the belief that they need not be disclosed. 1987. He was issued a life insurance policy with double indemnity in case of accidental death. Quimson page 57 Issue: WON Grepalife is liable. Sun Life informed Berarda. the insured died in a plane crash. in the insurance application." that is to say. Sun Life conducted an investigation and its findings prompted it to reject the claim. the diagnosis made and the medicines prescribed by such doctor. He did not reveal such fact in his application. CA 245 SCRA 268 (1995) Facts:    On April 15. Had Canilang disclosed his visits to his doctor. Such failure precisely constituted concealment on the part of Canilang. Under the relevant provisions of the Insurance Code. Sun Life discovered that 2 weeks prior to his application. A check representing the total premiums paid in the amount of P10.INSURANCE REVIEWER– Atty. if accepted. by the judge ultimately." CA affirmed. A man's state of mind or subjective belief is not capable of proof in our judicial process. thus rendering the contract of insurance voidable. that "probable and reasonable influence of the facts" concealed must. Bernarda and her husband. Neither does materiality depend upon the actual or physical events which ensue. The designated beneficiary was his mother. Moreover. ultra-sonography and hematology tests.   Issue: WON the beneficiary can claim despite the concealment. Bernarda. the information concealed must be information which the concealing party knew and "ought to [have] communicate[d]. Wilfredo B.172. it held that the health history of the insured was immaterial since the insurance policy was "non-medical. it may be reasonably assumed that Grepalife would have made further inquiries and would have probably refused to issue a non-medical insurance policy or. The materiality of the information withheld by Canilang from Grepalife did not depend upon the state of mind of Jaime Canilang. The information which Canilang failed to disclose was material to the ability of Grepalife to estimate the probable risk he presented as a subject of life insurance. Bernarda Bacani filed a claim with Sun Life. Bacani procured a life insurance contract for himself from Sun Life. During his confinement. Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the communication should have been made. Held: SC took note of the fact that Canilang failed to disclose that hat he had twice consulted Dr. information which was "material to the contract. where he was diagnosed for renal failure. would obviously erase Section 27 from the Insurance Code of 1978. be determined objectively. 1986.00 was attached to said letter. of course. Petitioner's argument. in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance. at the very least. (53) Sun Life v. 3D SY 2004-2005 rhys alexei . required a higher premium for the same coverage. Held: NOPE. On June 26. seeking the benefits of the insurance. Claudio who had found him to be suffering from "sinus tachycardia" and "acute bronchitis.

if such fact is material to the risk assumed by the insurer. Each party to a contract of insurance must communicate to the other. It is far-fetched to require disclosing such information if he is applying for fire or marine insurance. how will A know if the fact is material or not? The fact must be related to the insurance applied for. though unasked. GOOD FAITH requires him to disclose that circumstance. The insured is specifically required to disclose to the insurer matters relating to his health. all facts within his knowledge which are material to the contract and as to which he makes no warranty. 28. The insurer has the right to rely upon the statements of the insured for he knows the facts and the insurer does not. but solely by the probable and reasonable influence of the facts upon the party to whom communication is due. and which the other has no means of ascertaining. all facts within his knowledge which are material to the contract and as to which he makes no warranty. and 2. 3D SY 2004-2005 rhys alexei . such fact is material in cases of life or health insurance and may even be material up to a certain extent for accident insurance. The information which the insured failed to disclose were material and relevant to the approval and the issuance of the insurance policy. Sec 31) The terms of the contract are clear. Thus. and which the other has not the means of ascertaining. can the Insured be excused for his concealment and deny the remedy of rescission to the insurer? NO. What is the test to determine whether or not one must communicate the facts to the other party? The test is: If the applicant is aware of the existence of some circumstance which he knows would influence the insurer in acting upon his application. According to Sec. The matters concealed would have definitely affected petitioner's action on his application. No such obligation exists on the part of the insurer. The insured's failure to disclose the fact that he was hospitalized for two weeks prior to filing his application for insurance. in forming his estimate of the disadvantages of the proposed contract or in making his inquiries (The Insurance Code. Quimson page 58 Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other. B for treatment of syphilis and gonorrhea when must A disclose the fact? He must disclose such fact even if not inquired into. 30. What if the insurer with reasonable diligence could have known or discovered such facts for himself. It appears that such concealment was deliberate on his part. either by approving it with the corresponding adjustment for a higher premium or rejecting the same. in good faith. Materiality is to be determined not by the event. In the problem above. the party with the duty to communicate makes no warranty. raises grave doubts about his bonafides. "good faith" is no defense in concealment. Problem. Section 28. The effect of the material concealment cannot be avoided by the allegation that the insurer could have known and discovered a fact which the insured had concealed. in good faith. a disclosure may have warranted a medical examination of the insured by petitioner in order for it to reasonably assess the risk involved in accepting the application. the other party has no means of ascertaining the facts Any exceptions to the duty to communicate? Those falling under Sec. Moreover. In the above example. If A consulted Dr. what are the matters that must be communicated by the party to the other? This section makes it the duty of each party to a contract of insurance to communicate in good faith all facts that are material to the contract within his knowledge when: 1. An allegation like this implies that there is an obligation on the part of the insurance company to verify all the statements made by the insured in his application.INSURANCE REVIEWER– Atty.

 The insurance was executed and approved for a year from Sept. entitles the insurer to rescind. After it had led Federico Songco to believe that he could qualify under the common carrier liability insurance policy. in the exercise of ordinary care. Cases: (54) Fieldman’s Insuranc v. induced Songco. (b) Those which. The company is estopped from asserting that the vehicle was not covered. What does this provision say? Sec. Its agent Sambat twice exerted the utmost pressure on the insured.INSURANCE REVIEWER– Atty. Issue: WON the Songcos’ can claim the insurance proceeds despite the fact that the vehicle concerned was an owner and not a common carrier. except such as is mentioned in Section thirty. What is an example of this kind of concealment? In every contract of marine insurance. in addition to what is required by section twenty-eight. The intentional and fraudulent omission on the part of the insured to communicate the fact that his ship is in distress or in special peril entitles the insurer to rescind because the concealment refers to matters proving or tending to prove the falsity of the warranty that the ship is seaworthy. it could not thereafter be permitted to change its stand to the detriment of the heirs of the insured. on the part of one insured. 107. a man of scant education to enter into a common carrier insurance contract with Fieldman. there is an implied warranty of seaworthiness of the vessel. and to enter into a contract of insurance paying the premiums due. Neither party to a contract of insurance is bound to communicate information of the matters following. Sambat. the other ought to know. 1961. Songco 25 SCRA 70 Facts:  In 1960. Section 30. or upon inquiry discloses or assumes to disclose. a man of scant education. and the company did not object to this. 107 provides that “in marine insurance each party is bound to communicate. and to state the exact and whole truth in relation to all matters that he represents. material to the risk. all the information which he possesses. Sonco died. an agent of Fieldman’s Insurance. Unlike the ordinary concealment provided for in Sec. Held: Yes. 3D SY 2004-2005 rhys alexei . 31. The remaining members of the family claimed the proceeds of the insurance with the company but it refused to pay on the ground that the vehicle was not a common carrier.  In Oct. It was renewed in 1961 for another year.  Sambat answered that it did not matter because the insurance company was not owned by the government and therefore had nothing to do with rules and regulations of the latter (Fieldman). the non-disclosure under this section must be intentional and fraudulent in order that the contract may be rescinded. and of which the former has no reason to suppose him ignorant. 27. to communicate information of matters proving or tending to prove the falsity of a warranty. What type of concealment is referred to here? The type of concealment referred to here relates to the “falsity of a warranty”. except in answer to the inquiries of the other: (a) Those which the other knows. Section 29. Quimson What is deemed material? See sec.  During the inducement. a son of Songco butted in and said that they could not accept the type of insurance offered because theirs was an owner-type jeepney and not a common carrier. page 59 Atty Quimson asked us to look at Sec. It knew all along that Frederico owned a private vehicle. the jeepney collided with a car in Bulacan and as a result. An intentional and fraudulent omission. 1960-1961.

He knew that his answers would be the basis for the policy. he made them his own agents for that purpose and he was responsible for their acts in that connection. They act as general representatives of insurance companies. and was required with his signature to vouch for their truth. (Evaristo could not read and understand English)  When Evaristo died.  After that. IN the case at bar.  It appears that during that time. Agents who solicit contracts are paid large commissions on the policies secured by them. Hence. He was not supposed to sign the application in blank. Held: NO (what the f…?) There was collusion between Evaristo and the agent and the medical examiner in making it appear that Evaristo was a fit subject for insurance. Such fact appeared during the medical exam. Held: Yes.INSURANCE REVIEWER– Atty. the insured becomes duty bound to communicate such information. the plot thickens… Hmm…. and (e) Those which relate to a risk excepted from the policy and which are not otherwise material. What is the general rule? Communicate the necessary material facts.. If they falsified the answers for him. Issue: WON Insular Life was bound by their agent’s acts. (bakit kaya nagreverse?. When Evaristo authorized them to write the answers for him. Nowadays. 30 (exception to the exception)? If the insurer asks about them. and which are not otherwise material. The insurance business has grown so vast and lucrative within the past century. Quimson page 60 (c) Those of which the other waives communication. even people of modest means enter into insurance contracts.. it is the one who drafted and accepted the policy and consummated the contract. Feliciano 74 PHIL 4681 Facts:  Insular life filed a motion for reconsideration of the decision in the preceding case. (56) Insular life v.) 3D SY 2004-2005 rhys alexei . What is the exception? Those provided for under Section 30. Issue: WON Insular Life was bound by their agent’s acts. It seems reasonable that as between the two of them. (d) Those which prove or tend to prove the existence of a risk excluded by a warranty. and Insular Life is absolved from liability. Feliciano 73 PHIL 201 Facts:  Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of its agents. but the examiner and the company’s agent ignored it. The situation is one in which of two innocent parties must bear a loss for his reliance upon a third person. he could not evade liability for the falsification. the true state of health of the insured was concealed by the agents of the insurer. Evaristo was already suffering from tuberculosis. The judgment rendered therefore in the preceding case is thus reversed. When will the insured be required to communicate information covered by Sec. The insurer’s medical examiner approved the application knowing fully well that the applicant was sick. In this case. Insular life refused to pay the proceeds because of concealment. Cases: (55) Insular Life v. Insular is liable to the beneficiaries. Evaristo was made to sign an application form and thereafter the blank spaces were filled by the medical examiner and the agent making it appear that Evaristo was a fit subject of insurance. the one who employed and gave character to the third person as its agent should be the one to bear the loss.

that she had not consulted any physician. to which he answered that in 1947. that fact is material. ovaries. Held: Yes.  When Aranilla died of cirrhosis of the liver.  The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy. In his application. Saturnino did not make a disclosure thereof in her application for insurance. Materiality is to be determined not by the event. o WON he has been confined in a hospital for consultation and treatment. Section 31. even if the cause of the loss which subsequently occurred be unconnected with the fact concealed. or in making his inquiries. involving complete removal of the right breast.  She stated therein that she did not have. undergone any operation or suffered any injury within the preceding 5 years. Cases: (58) Saturnino v. obligation or in fixing the premium of insurance by a withholding of material information or facts within the insured’s actual or presumed knowledge? If so. This is because materiality is to be determined NOT by the event but ONLY by the probable and reasonable influence of the facts upon the party to whom the communication is due. these 2 questions appeared: o WON he has suffered from any disease of the kidney and urinary tract. in forming his estimate of the disadvantages of the proposed contract. or in any wise affect the risk. a disease of the kidney and urinary tract. uterus and menstrual disorders. among others listed in the application. in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. even if the insured died of an ailment which has NO connection with the specific questions falsely answered by him. he was confined and treated for nephritis. 3D SY 2004-2005 rhys alexei . What is the test of materiality? The test is simply: IF the knowledge of a fact would cause the insurer to reject the risk .  She also stated that she had never been treated for. then the contract is avoided. 4 637 Facts:  In 1959. he was confined due to influenza. found in the right armpit. Quimson page 61 (57) Aranilla v. cancer or other tumors.  Notwithstanding the fact of her operation. Insular LIfe 69 OG No. Saturnino was operated on for cancer. nor did she ever have any illness or disease peculiar to her sex. What is the principal question that must be asked? The principal question in determining whether the concealment is material is: Was the insurer misled or deceived into entering a contract. but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due. Issue: WON the contract can be rescinded. Issue: WON the insured made such false representation of material facts as to avoid the policy. nor had she ever had.  The truth however. was that a few months prior to his application. though it may not even remotely contribute to the contingency upon which the insurer would become liable. it is a concealment of a material fact which entitles the insurer to rescind. including the pectoral muscles and the glands. and he was accordingly informed of the cause. particularly of the breast.INSURANCE REVIEWER– Atty. Philamlife (repeat – case #46) 7 SCRA 316 Facts:  2 months prior to the insurance of the policy. or to accept it only at a higher premium rate. Insular refused to pay the proceeds due to concealment. If an answer given by the insured to a specific question asked by the insurer in an application for life insurance turns out to be false. to which he answered NO. Jose Aranilla applied for life insurance with Insular.

Henson died. but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due. whether intentional or unintentional entitled the insurer to rescind the contract of insurance. The question to determine is: Are the facts then falsely represented material? The Insurance Law provides that “materiality is to be determined not by the event. no matter what the ailment. In the first place. The insurer. Sec.  Upon payment of the premiums due. (59) Henson v.  In 1955. It is sufficient that his non-revelation had misled the insurer in forming its estimate of the disadvantages of the proposed policy reinstatement or in making its inquiries. and his beneficiaries’ claim was rejected by Philamlife on the ground of concealment. relying upon the belief that the insured will disclose every material fact within his actual or presumed knowledge. which does away with the usual requirement of medical examination before the policy is issued.” The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk. Henson did not disclose the fact that he had been previously diagnosed for pyelonephritis. If anything. CA (repeat – Case # 53) 3D SY 2004-2005 rhys alexei . in forming his estimate of the proposed contract. as there could not have been any mistake about it. concealment of the fact of the operation itself was fraudulent. According to Sec. for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not.  In 1956. intent. that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5 years. or accepting it at a rate of premium agreed upon.INSURANCE REVIEWER– Atty. 26 provides that “a concealment whether intentional or unintentional entitles the injured party to rescind the contract of insurance”. concealment being defined as “negligence to communicate that which a party knows and ought to communicate. The contention of appellants is that the facts subject of the representation were not material in view of the non-medical nature of the insurance applied for. the waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered. that the disease for which she had been operated on was cancer. but in the application for reinstatement. in order to entitle the latter to rescind the contract. In this jurisdiction. it is not necessary to show actual fraud on the part of the insured. and he is thereby induced to estimate the risk upon a false basis that it does not exist. the policy lapsed due to non-payment of the premiums. the insured need not have died of the very diseases he had failed to reveal to the insurance company. Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself did not know. but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due. The contention is without merit. Issue: WON there is need to prove intent to conceal to warrant rescission. is misled into a belief that the circumstances withheld does not exist. the policy was reinstated. Philamlife (repeat – case #48) 56 OG 7328 Facts:  Celestino Henson was insured by Philamlife in 1954 upon his application or a 20-yr endowment life policy. namely. He also did not disclose that he had been examined by a physician. There can be no dispute that the information given by her in the application for insurance was false. Quimson page 62 Held: YES. in forming his estimate of the disadvantages of the proposed contract. being a state of the mind is hard to prove.  The company then filed for rescission. in order to avoid a policy. Held: NO. In essence therefore. And aside from this. or in making his inquiries. 30 of the Insurance Code: Materiality is to be determined not by the event. since her doctor never told her. (60) Sun Life v. Secondly. enlarged liver and hernia. or making his inquiries. concealment. Beneficiaries’ contend that the intent to conceal must be proven to warrant rescission.

in forming his estimate of the disadvantages of the proposed contract or in making his inquiries (The Insurance Code. either by approving it with the corresponding adjustment for a higher premium or rejecting the same. and which may affect the political or material perils contemplated. Bacani procured a life insurance contract for himself from Sun Life.172. It appears that such concealment was deliberate on his part. Thus. 1986.INSURANCE REVIEWER– Atty. Bernarda. The designated beneficiary was his mother. He did not reveal such fact in his application. but solely by the probable and reasonable influence of the facts upon the party to whom communication is due. all facts within his knowledge which are material to the contract and as to which he makes no warranty. During his confinement. Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other. b) Which may affect either the political or material perils contemplated. Sun Life conducted an investigation and its findings prompted it to reject the claim. where he was diagnosed for renal failure. Bacani was examined and confined at the Lung Center of the Philippines." CA affirmed. raises grave doubts about his bonafides. equally with that of the other. The matters concealed would have definitely affected petitioner's action on his application. ultra-sonography and hematology tests. The insured is specifically required to disclose to the insurer matters relating to his health. What is the import of the aforementioned rules? 3D SY 2004-2005 rhys alexei . and all general usages of trade. Section 32. Each party to a contract of insurance is bound to know all the general causes which are open to his inquiry. and which the other has no means of ascertaining.00 was attached to said letter. Quimson 245 SCRA 268 (1995) Facts: page 63    On April 15. 1987. it held that the health history of the insured was immaterial since the insurance policy was "non-medical. thus rendering the contract of insurance voidable. what is each party to a contract of insurance bound to know? There are two matters that each party to a contract of insurance is bound to know. Moreover. General usages of trade. the insured died in a plane crash. Sec 31) The terms of the contract are clear. "good faith" is no defense in concealment. namely: 1. In its letter. On June 26. Under this section. Bernarda and her husband. Materiality is to be determined not by the event. A party however. The insured's failure to disclose the fact that he was hospitalized for two weeks prior to filing his application for insurance. Moreover. that the insured did not disclosed material facts relevant to the issuance of the policy. Sun Life informed Berarda. The information which the insured failed to disclose were material and relevant to the approval and the issuance of the insurance policy. RTC ruled for Bernarda holding that the facts concealed by the insured were made in good faith and under the belief that they need not be disclosed. is not bound to know all the classes of general clauses but only such general causes: a) Which are open to his inquiry. A check representing the total premiums paid in the amount of P10. Bernarda Bacani filed a claim with Sun Life. the deceased was subjected to urinalysis. Sun Life discovered that 2 weeks prior to his application. seeking the benefits of the insurance. in good faith.   Issue: WON the beneficiary can claim despite the concealment. General clauses 2. filed an action for specific performance against Sun Life. Held: NOPE. He was issued a life insurance policy with double indemnity in case of accidental death. a disclosure may have warranted a medical examination of the insured by petitioner in order for it to reasonably assess the risk involved in accepting the application. equally with that of the other.

If the applicant has answered the questioned asked in the application. If the insurer does not inquire for the cause of the long confinement. or 2) Impliedly.  He stated in his application that he was operated on for tumor of the stomach associated with ulcer. Likewise.INSURANCE REVIEWER– Atty. it is required that a policy of an insurance must specify the interest of the insured in the property insured. The right to information of material facts may be waived either: 1) Expressly. that there is NO NEED to disclose the interest in the property insured if the interest is absolute. Cases: (61) Ng Gan Zee v. Kwong did not have sufficient knowledge as to distinguish between a tumor and a peptic ulcer. if he is not the absolute owner thereof. Kwong died of cancer of the liver with metastasis. by neglect to make inquiry as to the facts already communicated. or what the law is. and that during the operation what was removed from Kwong’s body was actually a portion of the stomach and not tumor. 51(e). Problem: 3D SY 2004-2005 rhys alexei . he is justified in assuming that no further information is desired. Asian should have made an inquiry as to the illness and operation of Kwong when it appeared on the face of the application that a question appeared to be imperfectly answered. Asian’s failure to inquire constituted a waiver of the imperfection in the answer. either by the terms of the insurance or by neglect to make inquiry as to such facts. the sources of this information being equally open to the insurer who is also presumed to know such events. So a mortgagee must disclose his particular interest even if no inquiry is made by the insurer in relation thereto. Information of the nature or amount of the interest of one insured need not be communicated unless in answer to an inquiry. Ng Gan Zee as the beneficiary. the insurer is charged with the knowledge or general trade usages and rules of navigation. His statement therefore was made in good faith. This section therefore says. by the terms of the insurance. then he is deemed to have waived the information. Such requirement is made so that the insurer may determine the extent of the insured’s insurable interest. where they are distinctly implied in other facts of which information is communicated. Section 33. except as prescribed by section fifty-one. The exception of course is the insurer asks.  It was found that prior to his application. Quimson page 64 The insured need not communicate public events such as that the nation is at war. Asian Crusader LIfe 122 SCRA 61 Facts:  In 1962. Asian refused to pay on the ground of alse information. kinds of seasons and all the risks connected with navigation. What is an example of the operation of this provision? The insurer asks the insured if he was ever confined in a hospital for more than a month and the insured says “YES”. Issue: WON the contract may be rescinded on the ground of the imperfection in the application form. or political conditions in other countries. The right to information of material facts may be waived. Section 34. Held: NO. Kwon Nam applied for a 20yr endowment insurance on his life with his wife. What does this provision provide? Under Sec. May the right to information be waived? Yes. Kwong was diagnosed to have peptic ulcers.  In 1963.

To what is the duty to disclose confined? The duty to disclose is confined to facts. although the policy is not thereby rendered void ab initio. even upon inquiry. There is no duty to disclose mere opinion. her error in answering that question which called for an expression of an opinion does not constitute fraud in law. What is a representation? A representation is a factual statement made by the insured at the time of. She should have disclosed the nature of her interest in the property in as much as she was not the absolute owner thereof. Imelda represented herself as owner. while a representation may be made at the time of the issuance of the contract. information of the belief or expectation of a third person. “As long as the moon rises over the grave of Pai Mei” and she dies the next day. Atty. or prior to. But actually. As a fact of something which is untrue 2. De Leon book says misrepresentation is an active form of concealment. (not the point of the article) HOWEVER. in reference to a material fact. What is the duty of the person applying for insurance? It is duty to give the insurer all such information concerning the risk as will be of use to the latter in estimating its character and in determining whether or not to assume it. What is a misrepresentation? A Misrepresentation is a statement: 1. information to the insurer and otherwise induce him to enter into the insurance contract. A representation may be oral or written. is material. 108. Quimson page 65 A fire insurance policy was issued in which Imeda (insured) was described as the owner of the insured residential property. information of his own judgment upon the matters in question. What is the effect of a misrepresentation? A misrepresentation by the insured renders the insurance contract voidable at the option of the insurer. Where such fact in either case is material to the risk. Example? Beatrix Kiddo was asked by the insurer: How long do you think you will live? If Beatrix uses the 5-point exploding heart technique on the insurer. Imelda was only given the privilege of occupying the house rent-free for life. What does it say? Section 108 provides that “In marine insurance.INSURANCE REVIEWER– Atty. the issuance of the policy to give. meaning it is the failure to do something which is required while representation is positive act as the insured volunteers such facts. Is the policy valid? NO. She is guilty of misrepresentation. This is true even if the insured is asked. if she said. Neither party to a contract of insurance is bound to communicate. Concealment usually occurs prior to making of the insurance contract. intention or expectation. she will be convicted of murder…. speculation. What is the difference between a representation and concealment? A concealment is a negative act. This information may be given 3D SY 2004-2005 rhys alexei . Is misrepresentation synonymous with concealment? NO.” TITLE V – REPRESENTATION Section 36. Section 35. and 3. Quimsons asked us to look at Sec. Which the insured stated with knowledge that it is untrue and with an intent to deceive or which he states as true without knowing it to be true and which has the tendency to mislead.

A representation may be made at the time of. What is a promissory representation? A promissory representation is any promise to be fulfilled after the contract has come into existence or any statement concerning what is to happen during the existence of the insurance. The language of a representation is to be interpreted by the same rules as the language of contracts in general. or before. What are the different kinds of representations? They may either be: 1. 41.” Section 38. Quimson wants us to look at Sec. marks out and defines the risk assumed. 2. How can a representation be substantially true and not literally true? De Leon cites two examples: If one is asked if he drinks. An example would be when the insured states that the house subject of the insurance is used only for residential purposes. Made at the time of the issuance of the policy or before. It describes. unless it appears that it was merely a statement of belief or expectation. So if you drink only when there is an occasion. Section 39. the house was made of nipa. Can you give an example of misrepresentations such that the insurer avoids any liability to the insured? If the insurer was made to believe that he was insuring a brick house when in truth and in fact. Oral or written. The non-performance of such a promise CANNOT be shown by the insurer in 3D SY 2004-2005 rhys alexei . issuance of the policy. the question will be construed as referring to habitual use. local disease or injury in any organ. but NOT incorporated in the policy. Sometimes. it used to indicate a parol or oral promise made in connection with the insurance.INSURANCE REVIEWER– Atty. A representation as to the future is to be deemed a promise. Affirmative or promissory What is an affirmative representation? It is any allegation as to the existence or non-existence of a fact when the contract begins. It is sufficient that they be substantially true. Section 37. Hence the untruthfulness of any representation will necessarily avoid the contract. they you can say NO. Quimson page 66 orally or written in papers not connected with the contract such as in the application or examiner’s report. Must the representations be literally true? No. If you are asked if you had any illnesses. it may appear on the policy itself. How are misrepresentations construed? They are construed liberally in favor of the insured. What does it say? Section 41 provides that “A representation may be altered or withdrawn before the insurance is effected. 3. you can still say NO even if three weeks before you were suffering from LBM because you ate one kaing of avocados. What is the nature of a promissory representation? First. or when the insurer insured a man of thirty and it turns out that the man who dies was a 130. Atty. Why is such information important? The information forms the basis of the contract as made. but not afterwards.

saranghameda po…” Does a false representation based on an opinion or expectation avoid the policy? IT DEPENDS.. A representation cannot qualify an express provision in a contract of insurance. is the insurer free from liability because of the misrepresentation? No. belief opinion or judgment of the insured. Allan is guilty of fraudulent misrepresentation of a material fact. He should have disclosed that he doesn’t know how to drive. Quimson page 67 defense to an action on the policy. is called a promissory representation. In such a case. he doesn’t know how to drive and after a few minutes he crashed into the car of Arvin.INSURANCE REVIEWER– Atty. Is the insurer liable despite John’s misrepresentation? NO. any representation made by the insured prior to the issuance of the policy to the effect that the 3D SY 2004-2005 rhys alexei . substantially a condition or a warranty. Why is it that a representation cannot qualify an express provision in a contract of insurance? A representation cannot qualify an express provision or an express warranty in a contract of insurance because a representation is not a part of the contract but only a collateral inducement to it. but it may qualify an implied warranty. An applicant for fire insurance on a building orally promised to install two fire extinguishers within the bldg. 2. An applicant for fire insurance on a building orally promised that the building will be occupied. all the insurer needs to prove is its falsity and materiality. Problems. and not properly a representation. Mary applied for insurance. or condition over which the insured has no control. 3. When asked if he knew how to drive. intention. which will avoid a contract ONLY when made in bad faith. Second. What must the insurer then to do to avoid liability? The insurer must prove both the materiality of the insured’s opinion and the latter’s intent to deceive. The intent to deceive is already presumed. The insurer knows that the insured’s opinion may be mistaken after all. but proof that the promise was made with fraudulent intent and will serve to defeat the insurance.” It turned out. but NOT specifically made a warranty. If it turns out that Mary is wrong. It is however in such a case merely an executory term of the contract. with reference to property or life insured will be deemed a mere expression of opinion. no one can be certain about anything. Can you give two examples? 1) If the policy expressly provides that the house insured is used as a warehouse.. will NOT avoid the policy of insurance if there is NO actual fraud in inducing the acceptance of the risk or its acceptance at a lower rate of premium and this is likewise the rule although the statement is material to the risk. The insurer should have subjected Mary to a battery of tests before entering into a contract. A TV hostess saying “Will be back. although false. Section 40. A promissory representation. John applied for a motor vehicle insurance. the insurer is not justified in relying upon such statement but is obligated to make further inquiry. If the representation is one of fact. When asked if she was HIV-positive. When is a representation deemed a mere expression of opinion? An oral representation as to a future event. Can you give examples of promissory representations? 1. it is an undertaking by the insured. she said that her body was wholly free from the HIV virus. he said “I’m a very good driver. is therefore. inserted in the policy. promise. A representation of an expectation.

Although the representation was false at the time it was made. ON Aug. 5.INSURANCE REVIEWER– Atty. Here there is false representation. Section 42. 17. when the policy was delivered to her on Dec. 2004. Is the insurer correct? 3D SY 2004-2005 rhys alexei . When is there false representation? There is NO false representation if the representation was true at the time the contract takes effect. 2004. it is but logical that representations may not be altered or withdrawn after the insurance is affected. Problems: A represented that his yacht was in Taiwan when in fact it was in HK. A representation may be altered or withdrawn before the insurance is effected. the insurer denied liability on the ground of false representation. We earlier said that promissory statements of conditions that exist subsequent to the completion of the contract are conditions or warranties and not representations (See annotations under Sec. the yacht had already reached the port in Taiwan. Section 41. 2004. we refer ONLY to conditions represented as ALREADY EXISTING. A became afflicted with an enumerated disease in the policy. But now. 30. the representation although true when made. Quimson page 68 house was used only as a residence is NOT a defense in the action for the recovery of the amount of the insurance. Is Insurer liable? NO. it subsequently became false at the time the contract took effect. she had already turned 25. although it became false at the time it was made. A represented that his yacht was in Taiwan and in fact it was in Taiwan. A representation must be presumed to refer to the date on which the contract goes into effect. it was already true at the time when the contract took effect. 39). A had never suffered from any of the diseases enumerated in the policy by the insurer. She said that she was 24. he completely recovered. A did not disclose his having been sick. What is the reason for this provision? As representations induce the insurer in assuming the risk insured against and in issuing the insurance policy. This time. 2004. 5. When B applied for a life insurance policy on Nov. she was asked to state her age. 2) The representation of the insured to the effect that the last time the vessel was drydocked was six months ago would NOT qualify the implied warranty that the vessel is seaworthy. To what time does representation refer? Representations refer only to the time of making the contract. When time to collect the proceeds of the insurance. 2004. B was no longer 24 yrs old as she alleged. Was there false representation? NO. Is there false representation? YES. These conditions must exist during the making of the contract. because at the time the policy took effect. But at the taking effect of the contract. When the policy was delivered and the first premium paid on Aug. At the time he applied for a life insurance policy on Aug 10. But at the taking effect of the contract the yacht had already sailed to HK and then it was shipwrecked. subsequently became false at the time the contract took effect. There is false representation if although the representation was true at the time it was made. Fortunately. However. but not afterwards.

a captain of the ship is bound to communicates its loss to the owner. In which case. If the representation turns out to be false. A is the captain of Titanic. who together with the manager of LUneta.INSURANCE REVIEWER– Atty. James is the shipowner. He then gave the car to his wife Mrs.. 2004. Harding signed. Mrs. Can James still recover on the policy? NO. and it is possible for the agent under such circumstances in the exercise of due diligence to have made such communication before the making of the contract. the latter induced Mrs. the car was damaged by fire.8T and not 3T. to the insurer. When a person insured has no personal knowledge of a fact. Held: Commercial is liable. A already knew that the ship was lost at sea but did not tell James. It would e absurd to say that this representation was fatally false because at the time of the acceptance of the application and the completion of the contract it was no longer true. he may report information obtained from friends and relatives if he likes. whose duty it is to give the information. or he may submit the information. James apples for an insurance upon Titanic “Lost or Not Lost” with Jack and Rose Insurance Co. whose duty it is in the ordinary course of business to communicate such information to his principal. Harding was having the car repaired at the Luneta Garage (Luneta was an agent of Smith Bell and Co. the insured will be liable for the truth. Section 43.    While Mrs. he is NOT responsible therefor. 19. On Sept. Case: (62) Harding v. and Smith Bell sent an agent to Luneta Garage. with the explanation that he does so on the information of others. Commercial refused to pay because the car’s present value was only 2. This amt was written in the proposal form which Mrs. Harding. 16. and in neither case is he responsible for its truth. and if the latter effects an insurance on the ship “lost or not lost” in ignorance of the antecedent loss due to the fraud or negligence of the captain. Commercial Union Assurance Company 38 PHIL 464 Facts:  Henry Harding bought a car for 2T in 1915. unless it proceeds from an agent of the insured. However as of Sept. Harding agreed. in its whole extent. Quimson page 69 The insurer is stupid. provided he gives the explanation that he represents so on the information of others. The truth of the statement made by the insured at the date of the application of her age is surely to be tested as of the date of the application. the insured cannot recover on the policy. and which he believes to be true. Problem. What is the effect where information is obtained from third persons? Under Sec. Example? If the insured has no personal knowledge of the causes of the death of his parents because they died when the injured was still an infant. which in turn is Commercial Union’s agent). he is not responsible for the truth of the information. appraised the car and declared that its present value was P3T. 3D SY 2004-2005 rhys alexei . 2004. Subsequently. he may nevertheless repeat information which he has upon the subject. the insured is given discretion to communicate to the insurer what he knows of a matter of which he has no personal knowledge. What is the effect where information is obtained from the agent of the insured? If the information proceeds from an agent of the insured. Issue: WON Commercial is liable. 43. Harding to insure the care with Commercial.

that she had not consulted any physician. in the absence of willful misstatement. Section 44. cancer or other tumors. fraudulent intent is IMMATERIAL. or upon inquiry. And not that the false representation MUST be material. Held: YES. What is the importance of Sec. Philamlife (repeat – case # 46) 7 SCRA 316 Facts:  2 months prior to the insurance of the policy. It is sufficient that representations are substantially true. In marine insurance. Representations are not required to be literally true unlike warranties which must be literally true. including the pectoral muscles and the glands.  She stated therein that she did not have. Accdg. Saturnino was operated on for cancer. particularly of the breast. under this section. it must be relied upon and be falise in a substantial and material respect. found in the right armpit. In other words. whether affirmative or promissory. A representation is to be deemed false when the facts fail to correspond with its assertions or stipulations. When will a representation relied upon avoid a policy? In order that a representation shall avoid a policy.INSURANCE REVIEWER– Atty. the injured party is entitled to rescind the contract from the time when the representation becomes false. undergone any operation or suffered any injury within the preceding 5 years. while signed by the insured was made out by the person authorized to solicit the insurance (Luneta and Smith Bell) the facts stated in the proposal. even if incorrect. And ordinarily. ovaries. nor did she ever have any illness or disease peculiar to her sex. 874) What does this section provide? It provides that the falsity of a representation entitles the injured party to rescind the contract from the time when the representation becomes false. among others listed in the application. Under such circumstances. The right to rescind granted by this Code to the insurer is waived by the acceptance of premium payments despite knowledge of the ground for rescission. 107. Quimson page 70 Where it appears that the proposal form. to Sec. discloses or assumes to disclose. the substantial truth of a representation is NOT sufficient. Issue: WON the insured made such false representation of material facts as to avoid the policy.  Notwithstanding the fact of her operation. See Section 38. Section 45. 44? This defines misrepresentation.  The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy. uterus and menstrual disorders. 3D SY 2004-2005 rhys alexei . Is the same true in cases of marine insurance? NO. involving complete removal of the right breast. the proposal is to be regarded as the act of the insurer. (63) Saturnino v.  She also stated that she had never been treated for. nor had she ever had. will not be regarded as warranted by the insured. the injured party can rescind the contract of insurance where there is a misrepresentation even without fraud. the insured is required to state the exact and whole truth in relation to all matters that he represents. If a representation is false in a material point. Must representation be literally true? No. Saturnino did not make a disclosure thereof in her application for insurance. (As amended by Batasang Pambansa Blg.

INSURANCE REVIEWER– Atty. So when he died in 1942. relying upon the belief that the insured will disclose every material fact within his actual or presumed knowledge. If anything. (65) Insular Life v. because the insurance company by reasons of such statement accepted the risk which it would otherwise have rejected. yet. as there could not have been any mistake about it. The question to determine is: Are the facts then falsely represented material? The Insurance Law provides that “materiality is to be determined not by the event. 61 PHIL 864 Facts:   Arsenio Garcia was insured by West Coast twice in 1931. Evaristo was made to sign an application form and thereafter the blank spaces were filled by the medical examiner and the agent making it appear that Evaristo was a fit subject of insurance. Evaristo was already suffering from tuberculosis. (64) Musngi v. Issue: WON the answer given by Arsenio in the policies justifies the company’s refusal to pay? Held: YES. that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5 years. (Evaristo could not read and understand English) 3D SY 2004-2005 rhys alexei . it is not necessary to show actual fraud on the part of the insured. and he is thereby induced to estimate the risk upon a false basis that it does not exist. and for what illness or ailment? In both policies. is misled into a belief that the circumstances withheld does not exist. that the disease for which she had been operated on was cancer. Aresenio knoew that he was suffering from a number of ailments. The contention is without merit. he concealed this. In this jurisdiction. whether intentional or unintentional entitled the insurer to rescind the contract of insurance. he answered in the negative.” The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk. concealment. In the first place. namely. or making his inquiries. in order to avoid a policy. he was asked to answer the question: “what physician or practitioners have you consulted or been treated by. West Coast Life Assurance Co. Feliciano (repeat – case # 56) 73 PHIL 201 Facts:  Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of its agents. since her doctor never told her. concealment being defined as “negligence to communicate that which a party knows and ought to communicate. The insurer. but the examiner and the company’s agent ignored it. The contention of appellants is that the facts subject of the representation were not material in view of the non-medical nature of the insurance applied for. Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself did not know. in forming his estimate of the proposed contract. It turned out that from 1929 to 1939. Secondly. concealment of the fact of the operation itself was fraudulent. which does away with the usual requirement of medical examination before the policy is issued.  It appears that during that time. In both policies. Such fact appeared during the medical exam. but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due. the company refused to pay the proceeds of the insurance. he went to see several physicians for a number of ailments. for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not.  After that. Such concealment and his false statements constituted fraud. Quimson page 71 There can be no dispute that the information given by her in the application for insurance was false. the waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered. or accepting it at a rate of premium agreed upon. no matter what the ailment.

Despite such information. (67) Gonzalez Lao v.INSURANCE REVIEWER– Atty. it was because Manila Bankers was willing to waive such disqualifications or it simply overlooked such fact. Held: Yes. he made them his own agents for that purpose and he was responsible for their acts in that connection. 1969. The insurer’s medical examiner approved the application knowing fully well that the applicant was sick. They act as general representatives of insurance companies. 3D SY 2004-2005 rhys alexei . as beneficiary claimed the proceeds of the insurance. He was not supposed to sign the application in blank. Held: NO. (bakit kaya nagreverse?. The judgment rendered therefore in the preceding case is thus reversed. page 72 Issue: WON Insular Life was bound by their agent’s acts. If it failed to act. 1904 (around 64 yrs old). Feliciano (repeat – case # 57) 74 PHIL 4681 Facts:  Insular life filed a motion for reconsideration of the decision in the preceding case. Insular life refused to pay the proceeds because of concealment. Manila Bankers Life Insurance Corp. Issue: WON Insular Life was bound by their agent’s acts. Hence. When Evaristo authorized them to write the answers for him. the true state of health of the insured was concealed by the agents of the insurer. In this case. the one who employed and gave character to the third person as its agent should be the one to bear the loss. It seems reasonable that as between the two of them. In the application she stated the date of her birth as July 11. he could not evade liability for the falsification. Held: NO (what the f…?) There was collusion between Evaristo and the agent and the medical examiner in making it appear that Evaristo was a fit subject for insurance. Quimson  When Evaristo died. The policy was thereafter issued. The situation is one in which of two innocent parties must bear a loss for his reliance upon a third person. in May 1969. Nowadays. the plot thickens… Hmm….. and was required with his signature to vouch for their truth.  Subsequently. Agents who solicit contracts are paid large commissions on the policies secured by them.  Manila Bankers refused to pay because the certificate of insurance contained a provision excluding it’s liability to pay claims to persons under 16 or over 60. (65) Insular life v. The insurance business has grown so vast and lucrative within the past century. Yek Tong Lin Fire & Marine Insurance 55 PHIL 386 Facts:  Gonzales was issued 2 fire insurance policies by Yek for 100T covering his leaf tobacco prducts. Insular is liable to the beneficiaries. Manila Bankers accepted the premium and issued the policy. 117 SCRA 187 Facts:  In Apr. It is therefore estopped from disclaiming any liability. Her sister. Her application form indicated her true age. Carmen Lapuz applied for insurance with Manila Bankers. Carmen died of a car accident. even people of modest means enter into insurance contracts. IN the case at bar. and Insular Life is absolved from liability.) (66) Edillon v. Issue: WON the policy is void considering that the insured was over 60 when she applied. He knew that his answers would be the basis for the policy.. it is the one who drafted and accepted the policy and consummated the contract. If they falsified the answers for him. The age of Carmen was not concealed to the insurance company. It had all the time to process the application and notice the applicant’s age.

Without such requisite. (69) Qua Chee Gan v. for the simple reason that the minds of the parties never met and never agreed upon the terms and conditions of the contract.. a merchant. if the defendant never made or entered into the contract in question. and that is the question which it seeks to have litigated by its special defense. there is no contract to rescind. Quimson  They were stored in Gonzales’ building on Soler St. no valid contract was ever made. 1928. (68) Tan Chay Heng v. but we are clear that section 47 does not apply to the allegations made in the answer. Issue: WON Yek is still entitled to annul the contract. Held: NOPE. Issue: WON West Coast’s action for rescission is therefore barred by the collection suit filed by Tan Chay. or that any such a contract ever existed. West Coast Life 51 Phil 80 Facts:       In 1926. such policy will be regarded as null and void and the insured will be deprived of all rights of indemnity in case of loss. the latter denied any liability on the ground of violation of Art. As stated. and therefore. Trial court found for Tan Chay holding that an insurer cannot avoid a policy which has been procured by fraud unless he brings an action to rescind it before he is sued thereon. page 73    Art. We are clearly of the opinion that. Tan Chay contends that West Coast may not rescind the contract because an action for performance has already been filed. and. hence. Upon the question as to whether or not they are or are not true. section 47 upon which the lower court based its decision in sustaining the demurrer does not apply. burned down. Tan Chay Heng sued West Coast on the policy allegedly issued to his “uncle”. Gonzales however proved that the insurer knew of the other insurance policies obtained by him long efore the fire. Tan Caeng who died in 1925. and that the trial court erred in sustaining the demurrer. a laborer. Precisely. When he sought to claim from Yek after the fire. West Coast refused on the ground that the policy was obtained by Tan Caeng with the help of agents Go Chuilian. In the instant case. The action by the insurance company of taking the premiums of the insured notwithstanding knowledge of violations of the provisions of the policies amounted to waiver of the right to annul the contract of insurance. there was no valid contract of insurance. which on Jan. Held: NO. when in fact he was married. Locsin of West Coast. West Coast said that it was made to appear that Tan Caeng was single. In the very nature of things. health and not a drug user. it will be noted that even in its prayer. 47.INSURANCE REVIEWER– Atty. we do not at this time have or express any opinion. West Coast now denies liability based on these misrepresentations. and the insurer did NOT rescind the insurance polices in question but demanded and collected from the insured the premiums. He was the sole beneficiary thereof. Gonzales entered into other insurance contracts. suffering form tuberculosis and addicted to drugs. West Coast’s defense is not barred by Sec. Hence. If all of the material matters set forth and alleged in the defendant's special plea are true.” Notwithstanding said provision. Its action then cannot be fore rescission because an action to rescind is founded upon and presupposes the existence of the contract. if such matters are known to exist by a preponderance of the evidence. 3 of the said policies. the defendant does not seek to have the alleged insurance contract rescinded. 11. It denies that it ever made any contract of insurance on the life of Tan Caeng. 3 of the Insurance policies provided that: “ Any insurance in force upon all or part of the things unsured must be declared in writing by the insured and he (insured) should cause the company to insert or mention it in the policy. they would constitute a valid defense to plaintiff's cause of action. the policy is void ab initio. Law Union & Rock Insurance 3D SY 2004-2005 rhys alexei . an action to rescind a contract is founded upon and presupposes the existence of the contract which is sought to be rescinded. Francisco Sanchez and Dr. the defense of West Cast was that through fraud in its execution.

must be equally rejected. which the 3D SY 2004-2005 rhys alexei . Quimson 98 PHIL 85 Facts: page 74    Before the last war. but the same was dismissed by the trial court. contrary to the requirements of the warranty in question. the record is preponderant that the same was organized. 3 and 4. They had been. since there are only 2 and another 2 in a further area owned by the municipality. and lasted almost one week. and drilled. with the merchandise stored therein. altho not maintained as a permanently separate unit. since the appellant's argument thereon is based on the assumption that the insured was bound to maintain no less than eleven hydrants (one per 150 feet of wall). 1 to 4) in Tabaco. and the loss made payable to the Philippine National Bank as mortgagee of the hemp and copra. in which he dealt extensively. Law Union refused to pay contending that Qua purposely set fire to his bodegas and violation of warranties and conditions as agreed. from time to give. and on the next day. o Qua Chee failed to maintain the agreed water pressure and the 100 feet of fire hose o He did maintain 20 fire brigade men within the premises Insurer also averred that Qua Chee violated the provision of the Hemp Warranty which prohibits the storage of oils when he stored gasoline in bodega 2. Qua Chee thereafter instituted this civil case for the collection of the proceeds of insurance.INSURANCE REVIEWER– Atty. of which it was informed. and the fire fighting equipment available The alleged violation of the warranty of 100 feet of fire hose for every two hydrants. As defense. The loss was estimated at 370T. for the reason that knowing fully all that the number of hydrants demanded therein never existed from the very beginning. used for the storage of stocks of copra and of hemp. It would be perilously close to conniving at fraud upon the insured to allow Law Union to claim now as void ab initio the policies that it had issued to the plaintiff without warning of their fatal defect. 1. and after it had misled the defendant into believing that the policies were effective. when the warranty called for 200 gallons a minute. That such inspection was made is moreover rendered probable by its being a prerequisite for the fixing of the discount on the premium to which the insured was entitled. the insurer sent fire adjusters to estimate the loss. gutted and completely destroyed Bodegas Nos. owned by the municipality of Tabaco. the Law Union nevertheless issued the policies in question subject to such warranty. insured with Law Union since 1937. The insurance company was aware. Fire broke out in. and the simple denials of appellant's representative (Jamiczon) can not overcome that proof. that Serra repeatedly refused and professed inability to estimate the rate of discharge of the water. Qua Chee Gan owned 4 warehouses or bodegas (designated as Bodegas nos. even before the policies were issued. Obviously. Albay. which requirement appellant is estopped from enforcing. that in the premises insured there were only two fire hydrants installed by Qua Chee Gan and two others nearby. baled and loose. Such fact appears from positive testimony for the insured that appellant's agents inspected the premises. Law Union is barred by waiver (or rather estoppel) to claim violation of the so. to the extent of its interest. Law Union Rock contends that Qua Chee violated the provisions agreed upon in a rider in the insurance policy where: o a fire hydrants should be placed every 150 feet of the external wall measurement. 1940. appellant thereupon inferring that the maximum quantity obtainable from the hydrants was 100 gallons a minute. with their contents. that the water supply could fill a 5-gallon can in 3 seconds. The supposed breach of the water pressure condition is made to rest on the testimony of witness Serra. and only gave the "5-gallon per 3-second" rate because the insistence of appellant's counsel forced the witness to hazard a guess. the testimony is worthless and insufficient to establish the violation claimed. As to maintenance of a trained fire brigade of 20 men.called fire hydrants warranty. however. The transcript shows. Held: NO. since the discount depended on the number of hydrants. Qua informed the insurer by telegram on the same date.     Issue: WON the company can rescind the contract on the basis of such alleged violation. Law Union then filed a criminal case for arson. specially since the burden of its proof lay on appellant. and received the corresponding premiums.

He stated that he was as of Nov. 3D SY 2004-2005 rhys alexei . are in a position to understand or determine "flash point below 003° Fahrenheit. it would be unreasonable to expect the insured to maintain for his compound alone a fire fighting force that many municipalities in the Islands do not even possess. Collado contends that Insular life had waived the right to rescine the policy in view of its repeated acceptance of the overdue premiums for the second and third years. There is no merit in appellant's claim that subordinate membership of the business manager (Co Cuan) in the fire brigade. Furthermore. It is enormously clear that when the deceased applied for a reinstatement of his policy in Nov." The cause relied upon by the insurer speaks of "oils (animal and/or vegetable and/or mineral and/or their liquid products having a flash point below 300° Fahrenheit". The acceptance of Insular life of the overdue premiums did not necessarily deprive it of the right to cancel the policy in case of default incurred by the Insured in the payment of future premiums. Insular life sent him a notice canceling the policy. Insular Life 51 OG (No 12) 6269 Facts:   Vivencio Collado applied for an insurance contract with Insular life in 1948. of 1951 and tendered the amount of premium for the years 1950-1951. it may well be wondered. he defaulted and the insurance was cancelled. The reinstatement was approved. A business manager is not necessarily adept at fire fighting. he was already sick of a fatal disease known as carcinoma of the liver and that 4 days prior to his application for insurance. Quimson page 75 warranty did not require. Here. the qualities required being different for both activities. 1951 of good health. 1951 and as such. he had already been afflicted with the fatal ailment for a period of about four months. It is well to note that gasoline is not specifically mentioned among the prohibited articles listed in the socalled "hemp warranty. Vivencio again failed to pay the premiums for the last quarter of Nov. for in ordinary parlance. specially to avoid a forfeiture (70) Colado v.       Issue: WON Insular life was estopped and could no longer cancel the contract due to the fact that it accepted the tender of overdue payments from Vivencio. a health statement to the effect that he was in good health. Held: NO. Insular refused to pay claiming concealment on the part of Vivencio. by its acceptance of its overdue premiums is deemed to have waived its right to rescind the policy. "Oils" mean "lubricants" and not gasoline or kerosene. However. renders the testimony improbable. by reason of the exclusive control of the insurance company over the terms and phraseology of the contract. Anyway. And how many insured. the ambiguity must be held strictly against the insurer and liberally in favor of the insured. However. when Vivencio applied for the reinstatement. ailments or illnesses and had not been sick for any case since 1948 (his medical check up when he applied for insurance) and that he had not consulted any physician or practitioner for any case since the date of such latest medical exam. he consulted a doctor regarding his condition.INSURANCE REVIEWER– Atty. and is decidedly ambiguous and uncertain. 1951. Vivencio then died. and that he had no injuries. for the. The beneificiaries instituted the present action to recover from Insular life the death benefits of a life insurance policy valued at 2T. He then applied for the reinstatement of his insurance policy in Nov. Insular. Municipal court of Manila found for Collado and Insular filed an appeal with CFI of Manila. CFI rendered judgment in favor of Insular and dismissed Collado’s complaint. The case would be different had the insured died at any time after the payment of overdue premiums but previous to the reinstatement of the policy. Vivencio concealed the material fact that he had consulted a doctor and was then found to be afflicted with the malady. while its direction was entrusted to a minor employee. again. in submitting together with his application for reinstatement. His application was approved and he began started making premium payments.

It is NOT left to the insurance company to say after the loss has occurred that it would or would not have issued the policy had an answer been truly given. 3D SY 2004-2005 rhys alexei .. 26 to 35 governing concealment and Sec. but solely by the probable and reasonable influence of the facts upon the party to whom the representation is made. What does this section mean? This section means that the provisions of Sec. mas malala pa sa reviewer na Xerox) Section 46. Rules on concealment and representation apply likewise to the insurer since the contracts of insurance is said to be one of utmost good faith on part of both parties to the agreement.) CONCEALMENT Insured withholds information of material facts from the insurer MISREPRESENTATION Insured makes erroneous statements of facts with the intent of inducing the insurer to enter into the insurance contract. Whether intentional or not intentional. 36-48 governing representation apply NOT ONLY to the original formation of the contract but also to a modification of the same during the time it is in force. The provisions of this chapter apply as well to a modification of a contract of insurance as to its original formation. Who determines materiality? It is a judicial question. When must the insurer exercise his right to rescind? In a non-life insurance policy. Quimson page 76 The evidence at hand shows that insofar as the payment of the last quarterly premium for 1951 was concerned. the injured party is entitled to rescind the contract of insurance on ground of concealment or false representation. The matter misrepresented must be of that character which the court can say would reasonably affect the insurer’s judgment. sobrang pangit yung copya nung case. Section 47.. the insurer may rescind a contract of insurance prior to the commencement of an action on the contract. but for the convenience of all… presented in a logical format. such right must be exercised previous to the commencement of an action on the contract. Section 48. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement. The materiality of a representation is determined by the same rules as the materiality of a concealment. What is the test of materiality? The materiality of the representation is to be determined NOT by the event. Insular had availed of the right to rescind the policy by notifying the Insured that the policy had lapsed. in forming his estimates of the disadvantages of the proposed contract or in making his inquiries.. the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter.INSURANCE REVIEWER– Atty. (I’m sorry kung magulo yung digest. nde ko mabasa. Concealment on the part of the insured has the same effect as a misrepresentation and gives the insurer the right to rescind the contract. Materiality is determined by the same rules applied in cases of misrepresentation. What are the differences and similarities between a concealment and misrepresentation? (already discussed in prior sections.

48 par. 5) That the fraud is of a particularly vicious type. etc. 228(b)]. What are the requisites in order that the insurer may rescind a life insurance policy? 1) There must be a basis for the rescission (breach of warranty. and 3) It has been in force during the lifetime of the insured for at least 2 years from its date of issue or of its last reinstatement. 77. the insurer may rescind the contract of insurance during the first two years when the policy was in force during the lifetime of the insured from the date of its issue or of its last reinstatement. or by defense to a suit brought on the life policy by the beneficiary. 228(b). 230(b)]. no matter how patent or well-founded. What is the effect when the life insurance policy becomes incontestable? The insurer may NOT refuse to pay the same by claiming that: 1) The policy is void ab initio. Quimson page 77 In a life insurance policy. What are the requisites for INCONTESTABILITY? 1) The policy is a life insurance policy 2) It is payable on the death of the insured. the rescission is not effective) 3) The rescission must be exercised within the two years that the insurance is in force during the lifetime of the insured.INSURANCE REVIEWER– Atty. (without this. or where the insured substitutes another person for the medical examination. Quimson said in class) What is an “Incontestability Clause”? Incontestability clauses are those clauses in life insurance policies stipulating that the policy shall be incontestable after a stated period. 3) That the premiums have not been paid [Secs. 2) Cause of death of the insured is an expected risk. 277(b). As to the insured. misrepresentation. or 2) It is rescissible by reason of the fraudulent misrepresentations of the insured or his agent. What is the reason for this incontestability? As to the Insurer The insurer is given a reasonable opportunity to investigate the statements which the applicant makes in procuring his policy and that after the definite period. Sec. 3D SY 2004-2005 rhys alexei . or where the beneficiary feloniously kills the insured. either by affirmative action. 227(b). or 3) It is rescissible by reason of the fraudulent misrepresentations of the insured agent.) 2) The rescission must be coupled with a check for the amount of premiums already paid. Such clauses give assurance to the policy holder that his beneficiaries would receive payment without question as to the validity of the policy or the existence of the coverage once the period of contestability passes. It is designed to protect the policyholder or beneficiary from a lawsuit contesting the validity of the policy after a considerable time has passed and evidence of the facts surrounding the purchase may be unavailable. 4) That the conditions of the policy relating to military or naval service have been violated [Sec. What does the phase “during the lifetime” of the insured mean? Simply means that the policy is no longer considered in force after the insured has died. What are the defenses that the insurer may raise to avoid liability even after the lapse of the 2 years? 1) That the person taking the insurance lacked insurable interest as required by law. May the period of 2 years be shortened by agreement between the insurer and the insured? It may be shortened but it cannot be extended by stipulation. concealment. (I just tried to put together all of what Atty. the insurer should not be permitted to question the validity of the policy. 2 now requires that the incontestability of a life insurance policy starts after the lapse of the 2 years that the insurance was in force during the life time of the insured. as where the policy was taken out in furtherance of a scheme to murder the insured.

He attested that he was in good health which was true. what is important is the fact that two years have already lapsed and has cured the fraud committed by A. In the case of industrial life insurance. and those granting additional insurance specifically against death by accident or by accidental means. or to additional insurance against loss of. The death of the insured makes the policy no longer “in force” and the insurer can still rescind the contract. In the case of individual life or endowment insurance. specific members of the body. or services auxiliary thereto. 2001. or at least as favorable to the persons insured and more favorable to the policy-holders: xxx (b) A provision that the validity of the policy shall not be contested. or provisions which in the opinion of the Commissioner are more favorable to the persons insured. his beneficiary filed a claim against the insurance company. Whether A is dead or alive is immaterial. B was diagnosed with cancer and only had 2 years to live. or date of approval of last reinstatement. In Mar 2001. Is C correct? 3D SY 2004-2005 rhys alexei . B submitted that a certificate stating that he is still in good health. B applied for the reinstatement of his life insurance policy tendering the overdue amounts. As required. B procured a life insurance in Jan 2000. Sec. Quimson page 78 6) That the beneficiary failed to furnish proof of death or to comply with any condition imposed by the policy after the loss has happened (Sec. the policy shall contain in substance the following provisions: xxx (b) A provision that the policy shall be incontestable after it has been in force during the lifetime of the insured for a specified period. 2003 and C. What if the two years had already lapsed? Then the insurer cannot exercise his right of rescission anymore. and that no statement made by any insured under the policy relating to his insurability shall be used in contesting the validity of the insurance with respect to which such statement was made after such insurance has been in force prior to the contest for a period of two years during such person's lifetime nor unless contained in written instrument signed by him.INSURANCE REVIEWER– Atty. except for non-payment of premiums and except for violation of the conditions of the policy relating to naval or military service. Section 228. Section 230. C contends that the 2 years counting from Jan 2000 had already lapsed and therefore the insurance company cannot contest the concealment made by B. or loss of use of. A procured insurance on his life through fraudulent concealment or misrepresentation. 242) 7) That the action was not brought within the time specified. What does Sec. and the insurer learned of the concealment or misrepresentation? His beneficiary cannot recover on the policy because the law says that the policy must have been in force during the lifetime of the insured for a period of two years. and except as to provisions relating to benefits in the event of disability as defined in the policy. 227(b). The insurance was reinstated on April 2001. The truth however was that in Feb. not more than two years from its date of issue. The latter refused claiming that B concealed the fact that he was afflicted with cancer. No policy of group life insurance shall be issued and delivered in the Philippines unless it contains in substance the following provisions. 230 (b) provide? Section 227. 228 (b) and Sec. What is the effect if A dies within two year from the issuance of the policy. Problems. B died on Feb. Before 2000 ended. except for non-payment of premiums after it has been in force for two years from its date of issue. B defaulted in the payment of the premium and thereafter the insurance company cancelled his policy. except for non-payment of premium and except for violation of the conditions of the policy relating to military or naval service in time of war. the policy shall contain in substance the following conditions: xxx (b) A provision that the policy shall be incontestable after it shall have been in force during the lifetime of the insured for a period of two years from its date of issue as shown in the policy.

1989. 1990.000. heart trouble. US Life) Counting from Apr. (Soliman v. 48 provides that the two years are counted from the time the date of its issue or of its last reinstatement. According to Philamcare.00 After her husband was discharged from the MMC. hence the "incontestability clause" under the Insurance Code Title 6. The insurer is once again given two years from the date of reinstatement to investigate the veracity of the facts represented by the insured in the application for reinstatement. C can now collect from the insurance company. and under such. CA (repeat – case #9) 379 SCRA 356 (2002) Facts:  Ernani Trinos. preventive health care and other out-patient services. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. amounting to about P76. the two year period has lapsed and the policy has become incontestable. Same facts. diabetic and asthmatic. cancer. 1988 to March 1. whether ordinary or emergency. 2001. He was a issued Health Care Agreement. the health care provider must pay for the same to the extent agreed upon under the contract. an action for damages against Philamcare. While her husband was in the hospital.INSURANCE REVIEWER– Atty. In the standard application form.00 per disability. Due to financial difficulties. Julita was constrained to bring him back to the CGH where he died on the same day. Julita instituted. he was entitled to avail of hospitalization benefits. Ernani had fever and was feeling very weak. he was admitted at the Chinese General Hospital (CGH). there was concealment regarding Ernani's medical history. which is primarily a contract of indemnity. SC held that in the case at bar. Cases: (71) Philamcare v. Since the date of reinstatement was April 2001. applied for a health care coverage with Philamcare. and the insurer can raise the defense of concealment. the same was extended for another year from March 1. injury or other stipulated contingent. Once the member incurs hospital. medical or any other expense arising from sickness. 1990. give details)” The application was approved for a period of one year from March 1. he was attended by a physical therapist at home. asthma or peptic ulcer? (If Yes. it is approximately 1 year and 10 mos up until the death of B. CA affirmed. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. During the period of his coverage. But instead. Is the answer still the same? This time. Julita tried to claim the benefits under the health care agreement. The health care agreement was in the nature of non-life insurance. the counting of the two-year period should start from there. raising the primary argument that a health care agreement is not an insurance contract. 2001. Later. She asked for reimbursement of her expenses plus moral damages and attorney's fees. Upon the termination of the agreement. then from March 1. 1989 to March 1.000. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. o Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. he answered NO to the following question: “Have you or any of your family members ever consulted or been treated for high blood pressure. B died on December 2003. contrary to his answer in the application form. Julita brought her husband home again. Julita had no choice but to pay the hospitalization expenses herself. Since the reinstatement was made in Apr. Philamcare denied her claim saying that the Health Care Agreement was void. liver disease. Sec. 1990. 1990 to June 1. RTC decided in favor of Julita. diabetes. The amount of coverage was increased to a maximum sum of P75. 1990. listed therein. and B died in December 2003. The concealment that B made when he applied for the reinstatement is not incontestable.         Issues and Resolutions: Philamcare brought the instant petition for review. Sec. In the morning of April 13. Quimson page 79 No. However. 48 does not apply. 3D SY 2004-2005 rhys alexei .

In any case. the terms of an insurance contract are to be construed strictly against the party which prepared the contract — the insurer. the defense of concealment or misrepresentation no longer lie. the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. Quimson page 80 Under the title Claim procedures of expenses. but is obligated to make further inquiry. "a concealment entitles the injured party to rescind a contract of insurance. and if doubtful or 3D SY 2004-2005 rhys alexei . or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. The phraseology used in medical or hospital service contracts. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. especially coming from respondent's husband who was not a medical doctor. In this case. belief. since in such case the insurer is not justified in relying upon such statement. Thus. Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. or its acceptance at a lower rate of premium. especially to avoid forfeiture. with or without the authority to investigate. Philamcare. 4. 2. It appears that in the application for health coverage." The right to rescind should be exercised previous to the commencement of an action on the contract. a representation of the expectation. Having assumed a responsibility under the agreement. opinion. petitioner is liable for claims made under the contract. Petitioner argues that respondent's husband concealed a material fact in his application. intention. Where matters of opinion or judgment are called for. if the statement is obviously of the foregoing character. (A)lthough false. This largely depends on opinion rather than fact. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned. had 12 mos from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma. None of the above pre-conditions was fulfilled in this case. ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. mailed or delivered to the insured at the address shown in the policy. that which he then knows. treatment or any other medical advice or examination. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. An undisclosed or misrepresented information is deemed material if its revelation would have resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for. must be liberally construed in favor of the subscriber. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. In the end. such as the one at bar. Besides. the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid. This is equally applicable to Health Care Agreements. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. petitioner is bound to answer the same to the extent agreed upon. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true. Prior notice of cancellation to insured. Under Section 27 of the Insurance Code. The periods having expired. Being a contract of adhesion. to furnish facts on which cancellation is based. no rescission was made. Philamcare cannot rely on the stipulation regarding "Invalidation of agreement" which reads: Failure to disclose or misrepresentation of any material information by the member in the application or medical examination. When the terms of insurance contract contain limitations on liability. 3.INSURANCE REVIEWER– Atty. or the impossibility of which is shown by the facts within his knowledge. Must be in writing. to be actually untrue. since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. courts should construe them in such a way as to preclude the insurer from noncompliance with his obligation. consultation. whether intentional or unintentional. as a matter of expectation or belief. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured. petitioners required respondent's husband to sign an express authorization for any person. and this is likewise the rule although the statement is material to the risk.

Held: Yes. CA 174 SCRA 403 Facts:  Tan Lee Siong was issued a policy by Philamlife on Nov. par. they submitted the certificates and paid the premiums.INSURANCE REVIEWER– Atty. 2. (72) Soliman v. He was the sole beneficiary thereof. The key phrase in the second paragraph is “for a period of two years”. 2003. 1975 denying their claim and rescinding the contract on the ground of misrepresentation.  In Mar. the spouses were informed that the premium for Jan 1949 was still unpaid notwithstanding that the 31-day grace period has already expired. What is a simpler illustration of the ruling in Tan v. The phrase “during the lifetime” found in Sec. 48 simply means that the policy is no longer in force after the insured has died. 1. 1. Locsin of West Coast. Hence. two years had not yet elapsed. The insurer is once again given two years from the date of reinstatement to investigate into the veracity of the facts represented by the insured in the application for reinstatement. So if for example the policy was issued/reinstated on Jan 1. Issue: WON the contract can still be rescinded.  West Coast refused on the ground that the policy was obtained by Tan Caeng with the help of agents Go Chuilian. Rosario died of acute dilation of the heart. US Life 104 PHIL 1046 Facts:  US Life issued a 20 yr endowment life policy on the joint lives of Patricio Soliman and his wife Rosario. and they were furnished at the same time long-form health certificates for the reinstatement of the policies. REGARDLESS of whether the insured died before or after Jan. 1975. When US life sought to rescind the contract on the ground of concealment/misrepresentation. 1949. The beneficiaries contend that Philamlife can no longer rescind the contract on the ground of misrepresentation as rescission must allegedly be done “during the lifetime of the insured” within two years and prior to the commencement of the action following the wording of Sec. 6. and thereafter. the contract can still be rescinded. Tan died of hepatoma. West Coast Life (repeat – case #68) 51 PHIL 80 Facts:  In 1926. Tan Caeng who died in 1925.  US life denied the claim and filed for the rescission of the contract on the ground that the certificates failed to disclose that Rosario had been suffering from bronchial asthma for 3 years prior to their submission. 1950. 1973. CA? The period to consider in a life insurance poiicy is “two years” from the date of issue or of the last reinstatement. each of them being the beneficiary of the other. 2000. the insurer can still exercise his right to rescind up to Jan. Francisco Sanchez and Dr. 2003 or two years from the date of issue/reinstatement. Tan Chay Heng sued West Coast on the policy allegedly issued to his “uncle”.  On Aprl 26. and exclusionary clauses of doubtful import should be strictly construed against the provider. 48. Patricio filed a claim for the proceeds of the insurance.  Philamlife wrote the beneficiaries in Sep. 3D SY 2004-2005 rhys alexei . (74) Tan Chay Heng v.  In Jan.  In Apr 1949. Quimson page 81 reasonably susceptible of two interpretations the construction conferring coverage is to be adopted. (73) Tan v. His beneficiaries then filed a claim with Philamlife for the proceeds of the insurance. Held: YES. Issue: WON Philamlife can rescind the contract.

INSURANCE REVIEWER– Atty. Quimson    

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West Coast said that it was made to appear that Tan Caeng was single, a merchant, health and not a drug user, when in fact he was married, a laborer, suffering form tuberculosis and addicted to drugs. West Coast now denies liability based on these misrepresentations. Tan Chay contends that West Coast may not rescind the contract because an action for performance has already been filed. Trial court found for Tan Chay holding that an insurer cannot avoid a policy which has been procured by fraud unless he brings an action to rescind it before he is sued thereon.

Issue: WON West Coast’s action for rescission is therefore barred by the collection suit filed by Tan Chay. Held: NO. Precisely, the defense of West Cast was that through fraud in its execution, the policy is void ab initio, and therefore, no valid contract was ever made. Its action then cannot be fore rescission because an action to rescind is founded upon and presupposes the existence of the contract. Hence, West Coast’s defense is not barred by Sec. 47. In the instant case, it will be noted that even in its prayer, the defendant does not seek to have the alleged insurance contract rescinded. It denies that it ever made any contract of insurance on the life of Tan Caeng, or that any such a contract ever existed, and that is the question which it seeks to have litigated by its special defense. In the very nature of things, if the defendant never made or entered into the contract in question, there is no contract to rescind, and, hence, section 47 upon which the lower court based its decision in sustaining the demurrer does not apply. As stated, an action to rescind a contract is founded upon and presupposes the existence of the contract which is sought to be rescinded. If all of the material matters set forth and alleged in the defendant's special plea are true, there was no valid contract of insurance, for the simple reason that the minds of the parties never met and never agreed upon the terms and conditions of the contract. We are clearly of the opinion that, if such matters are known to exist by a preponderance of the evidence, they would constitute a valid defense to plaintiff's cause of action. Upon the question as to whether or not they are or are not true, we do not at this time have or express any opinion, but we are clear that section 47 does not apply to the allegations made in the answer, and that the trial court erred in sustaining the demurrer.

TITLE VI – THE POLICY
Section 49. The written instrument in which a contract of insurance is set forth, is called a policy of insurance. Section 50. The policy shall be in printed form which may contain blank spaces; and any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blank spaces provided therein. Any rider, clause, warranty or endorsement purporting to be part of the contract of insurance and which is pasted or attached to said policy is not binding on the insured, unless the descriptive title or name of the rider, clause, warranty or endorsement is also mentioned and written on the blank spaces provided in the policy. Unless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the insured or owner, which countersignature shall be taken as his agreement to the contents of such rider, clause, warranty or endorsement. Group insurance and group annuity policies, however, may be typewritten and need not be in printed form. What is a policy of insurance? Sec. 49 defines a policy of insurance as a written instrument in which the contract of insurance is set forth. Who signs the policy of insurance:

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Generally, only the insurer or his duly authorized agent signs the policy. It need not be singed by the insured EXCEPT where the express warranties are contained in a separate instrument forming part of the policy, in which case, Sec. 70 requires that the instrument be so signed. Why are the terms of the policy important? They are important because they measure the liability of the insurer on one hand, and the other hand, strict compliance with the terms are required for the recovery on the part of the insured. Is the policy and the Contract one and the same thing? NOPE. A contract is a meeting of the minds of the insured and the insurer. (Remember CLV?) The policy ONLY the formal written instrument evidencing the contract. What is usually the best evidence that a contract has been entered into between the insurer and the insured? Delivery of the policy by the insurer to the insured. What are the effects of the delivery of the policy? If the delivery is conditional, non-fulfillment of the condition bars the contract from taking effect. If the deliver is unconditional, the insurance becomes effective at the time of delivery. What is a rider? It is a printed or typed stipulation contained on a slip of paper attached to the policy and forming an integral part of the policy. Riders are usually attached to the policy because they constitute additional stipulations between the parties. What happens if there is an inconsistency between the policy and the rider? RIDER prevails, as being a more deliberate expression of the agreement of the contracting parties. What are the requirements in order that a rider be binding upon the insured? 1) Descriptive title or name of the rider which is pasted or attached to a policy MUST be mentioned and written on the blank spaces provided for in the policy; and 2) Unless applied for by the insured or owner, said insured or owner MUST countersign the rider. Do the preceding requirements apply only to riders? NO. they apply also to warranties, clauses and endorsements. What are warranties? Warranties are inserted or attached to a policy to eliminate specific potential increases of hazard during the policy term owing to actions of the insured, or conditions of property. What are clauses? Clauses are agreements between the insurer and the insured on certain matters relating to the laibiity of the insurer in case of loss. What are examples of clauses: 1) ¾ Clause – where the insurer is liable for only ¾ of the loss or damage to the insured 2) Loss Payable clause – where the loss if any is payable to the party or parties named, as their interests may appear. 3) Change of Ownership clause where the insurance will insure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured. What is an endorsement? An endorsement is any provision added to an insurance contract altering its scope or application. Examples would be those additions to the contract changing the amount, the rate or the term of the same. What does Sec. 226 say? Section 226. No policy, certificate or contract of insurance shall be issued or delivered within the Philippines unless in the form previously approved by the Commissioner, and no application form shall be used with, and no rider, clause, warranty or endorsement shall be attached to, printed or stamped upon such policy, certificate or contract unless the form of such application, rider, clause, warranty or endorsement has been approved by the Commissioner.

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Cases: (75) Sindayen v. Insular Life 62 PHIL 9 Facts:  Arturo Sindayen was a linotype operator in the Bureau of Printing. He and his wife Fortunat went to Camiling to spend Christmas with his aunt Felicidad Estrada.  On Dec. 26, 1932, while still in Camiling, he made a written application to Insular Life, through its agent, Cristobal Hendoza, for a policy of insurance on his life in the sum of 1,000.  He paid the agent P15 as part of the first premium. It was agreed that the policy, when and if issued, should be delivered to Felicidad with whom Sindayen left the sum P25.06 to complete the payment of the first annual premium of P40.06.  On Jan 1, 1933, Sindayen was examined by Insular’s doctor who made a favorable report to Insular.  The next day, Sindayen returned to Manila and resumed his work. On Jan. 11, 1933, Insular accepted the risk and issued a policy, and mailed the same to its agent for delivery to the insured.  On Jan. 12, 1933, Sindayen complained of a severe headache. ON Jan. 15, 1933, he called a physician who found that Sindayen was suffering from acute nephritis and uremia. His illness did not yield to treatment and on Jan. 19, 1933, he died.


  

  

The policy which the company issued and mailed in manila on Jan. 11 1933 was received by its agent in Camilin on Jan. 16, 1933. On Jan 18, 1933, the agent, in accordance with his agreement with the insured delivered the policy to Felicided upon her payment of the balance of the 1st year’s premium. The agent asked Felicidad if her nephew was in good health and she replied that she believed so because she had no information that he was sick, and thereupon , the policy was handed to her by the agent. On Jan. 20, 1933, the agent learned of the death of Sindayen, afterwhich he called upon Felicidad and asked her to return the policy. Felicidad did so. On Feb. 4, 1933, the company obtained from Sindayen’s widow Fortunata (also the beneficiary), her signature on a legal document whereby in consideration of the sum 40.06 representing the amount of premium paid, Fortunata thereby releases forever and discharges Insular from any and all claims and obligations she may have against the latter. A check for the above-mentioned amount was drawn in the name of Fortunata, but the same was never encashed. Instead, it was returned to Insular and this complaint to enforce payment under the policy was instituted. The application which Sindayen signed in Camiling contained the following provisions: “xxx (3) That the said policy shall not take effect until the first premium has been paid and the policy has been delivered to and accepted by me, while I am in good health.” The main defense of the company is the policy never took effect because of par. 3 of the application, since at the time of the delivery of the agent, the insured was not in good health.

Issue: WON the policy took effect. Held: YES. There is one line of American cases which holds that the stipulation contained par. 3 is in the nature of a condition precedent, that is to say, that there can be no valid delivery to the insured unless he is in good health at that time; that this condition precedent goes to the very essence of the contract and cannot be waived by the agent making delivery of the policy; HOWEVER, there is also a number of American decision which state the contrary. These decisions say that an agent to whom a life insurance policy (similar to the one at bar) was sent with instruction to deliver it to the insured, has authority to bind the company by making such delivery, ALTHOUGH the insured was NOT in good health at the time of delivery, on the theory that the delivery of the policy being the final act to the consummation of the contract, the condition as to the insured’s good health was WAIVED by the company. These same cases further hold that the delivery of the policy by the agent to the insured consummates the contract even though the agent knew that the insured was NOT in good health at the time, the theory being, that his knowledge is the company’s knowledge; and his delivery is the company’s delivery; that when

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as we do. he is entitled to regular smaller amounts for the rest of his life. Mendoza was duly licensed by the Insurance Commission to act for Insular Life. 20. An acceptance of an offer of insurance NOT actually or constructively communicated to the proposer does NOT make a contract of insurane. 1917. the insurer pays a big amount to his beneficiaries. 24 1917. as the locus poenitentiae is ended when an acceptance has passed beyond the control of the party. and if after a certain period of time the insured is stil living. The plaintiff as administrator of Herrer’s estate brought this action to recover the 6T paid by the deceased.  2 days later. This sense of security and of piece of mind that one’s dependents are provided for without risk of either loss or of litigation is the bedrock of life insurance. Quimson page 85 the delivery is made notwithstanding this knowledge of the defect. Examples of Life annuity are pensions. in the absence of fraud or other legal grounds for rescission. Mendoza’s decision that the condition had been met by the insured and that it was proper to make delivery of the policy to him is just as binding on the company as if the decision had been made by its Board of Directors. but as far as known was never actually mailed and never received by Herrer. A cloud will be thrown over the entire insurance business if the condition of health of the insured at the time of the delivery of the policy may be inquired into years afterwards with the view of avoiding the policy on the ground that it never took effect because of an alleged lack of good health at the time of delivery. The contract for life annuity was NOT perfected because it had NOT been proved satisfactorily that the acceptance of the application ever came to the knowledge of the applicant. Held: NO. the company is deemed to have WAIVED such defect. 1917. SunLIfe 41 PHIL 269 Facts:  On Sept. On the same date. Issue: WON the insurance contract was perfected. In life annuity. Life Insurance on the other hand. a big amount is given to the insurance company. 26. The agent. the head office gave notice of acceptance by cable to Manila. he paid the sum of 6T to the company’s anager in its Manila office and was given a receipt. Herrer died on Dec. the Manila office prepared a letter notifying Herrer that his application has been accepted and this was placed in the ordinary channels of transmission. He had the authority given by him by the company to withhold the delivery of the policy to the insured until the first premium has been paid and the policy has been delivered to and accepted by the insured while he is in good health. NOTE: Life annuity is the opposite of a life insurance.INSURANCE REVIEWER– Atty. that the delivery of the policy to the insured by an agent of the company who is authorized to make delivery or withhold delivery is the final act which binds the company and the insured. Whether that condition had been met or not plainly calls for the exercise of discretion. Admittedly. (76) Enriquez v. The fact that the agent to whom it has entrusted this duty is derelict or negligent or even dishonest in the performance of the duty which has been entrusted to him would create an obligation based upon the authorized acts of the agent toward a third party who was not in collusion with the agent. CA (90 SCRA 236) Facts: 3D SY 2004-2005 rhys alexei . Mendoza made a mistake of judgment because he acted on insufficient evidence as to the state of health of the insured. It is therefore in the public interest that we are constrained to hold. Herrer made an application to SunLife through its office in Manila for life annuity. It is in the interest of not only of the applicant but of all insurance companies as well that there should be some act which gives the applicant the definite assurance that the contract has been consummated. and this mistake cannot be said to be induced by any misconduct on the part of the insured.   On Nov. (77) Tang v. the insured during the period of the coverage makes small regular payments and upon his death.

however. 15. On Nov. Accordingly. it is seeking to avoid its performance. 1965 with her nephew Vicente Tang as beneficiary.00 if the premium were paid annually. no further medical exam was made but she accomplished Part 1 (which certified the truthfulness of statements made in Part. 1332: When one of the parties is unable to read or if the contract is in a language not understood by him. Art. 61 years old and illiterate who spoke only Chinese. 23. Antonio In a contract of insurance. the petitioner cannot assume inconsistent positions by attempting to enforce the contract of insurance for the purpose of collecting the proceeds of the policy and at the same time nullify the contract by claiming that it was executed through fraud or mistake. CA 323 SCRA 613 (2000) Facts:   Primitivo Perez had been insured with the BF Lifeman Insurance Corporation since 1980 for P20. the insurance company is NOT seeking to enforce the contract. and considering the findings of both the trial court and the CA as to the Concealment of Lee.” “absence of any concealment or deception however slight. when fraud or mistake is alleged. In October 1987. In sum. Quimson page 86        On Sept.00. and mistake or fraud is alleged. 1332 is NOT applicable. 1965. the failure by the insured to disclose conditions affecting the risk of which he is aware makes the contract voidable at the option of the insurer. Lee Su Guat. The application was in two parts.000. Certainly. the SC affirms their decisions. The reason for this rule is that insurance policies are traditionally contracts uberrimae fidei. it has to be noted as above stated that there has been NO imputation of mistake of fraud by the illiterate insured whose personality is represented by her beneficiary. all facts within his knowledge which are material to the contract. 25. in good faith. to avail of the ongoing promotional discount of P400. 3D SY 2004-2005 rhys alexei . 2965. 2) The policy was again approved. Lee Su Guat died of Lung cancer. NOTE: Art. “absolute and perfect candor or openness and honesty. applied for life insurance for 60T with Philamlife. on the contrary. Lee again applied for additional insurance of her life for 40T. Art. the person enforcing the contract must show that the terms thereof have been fully explained to him.000. Issue: WON Art. she could not be held guilty of concealment of her health history because the application for insurance was English. The second part dealt with her state of health. Both trial court and CA ruled that Lee was guilty of concealment. and which the other has no means of ascertaining. (78) Perez v. is that because Lee was illiterate and spoke only Chinese. Rodolfo Lalog. Her answers having shown that she was health.” Here the CA found that the insured deliberately concealed material facts about her physical condition and history and/or concealed with whoever assisted her in relaying false information to the medical examiner. Philamlife was under no obligation to prove that the terms of the insurance contract were fully explained to the other party.00. devolves on the party seeking to enforce it. Tang’s position. which means “most abundant good faith”. Here. Even if we were to say that the insurer is the one seeking the performance of the cont contracts by avoiding paying the claim. Tang claimed the amount o 100T but Philamlife refused to pay on the ground that the insured was guilty of concealment and misrepresentation. and the insurer has not proven that the terms thereof had been fully explained to her as provided by Art. 1332 is inapplicable.INSURANCE REVIEWER– Atty. even as fraud or mistake is NOT alleged. widow. each party must communicate to the other. Since it was only recent from the time she first applied. 1332 of CC. an agent of Lifeman. the obligation to show that the terms of the contract had been fully explained to the party who is unable to read or understand the language of the contract. On Apri 20 1966. both in English. Under said article. Concurring: J. visited Perez in Quezon and convinced him to apply for additional insurance coverage of P50. As a general rule. Philamlife issued her a policy effective Oct. 1332 applies. Held: NO. It is petitioner who is seeking to enforce it..

The perfection of the contract of insurance between the deceased and respondent corporation was further conditioned upon compliance with the following requisites stated in the application form: "there shall be no contract of insurance unless and until a policy is issued on this application and that the said policy shall not take effect until the premium has been paid and the policy delivered to and accepted by me/us in person while I/We. A contract.      Issue: WON there was a perfected additional insurance contract.00 under the first insurance policy for P20. Under the abovementioned provision. 1987 that said papers were received in Manila. his wife.075. for a stipulated consideration. Consequently.00.00 on December 2. 1987. paid P2.00 in view of a triple indemnity rider on the insurance policy. it is only when the applicant pays the premium and receives and accepts the policy while he is in good health that the contract of insurance is deemed to have been perfected.00 (double indemnity in case of accident) but the insurance company refused to pay the claim under the additional policy coverage of P50.00 to Lalog. At the time of his death. the proceeds of which amount to P150. when Lalog personally delivered the application papers to the head office in Manila. Quimson page 87      Primitivo B. RTC ruled in favor of Perez. Perez." The assent of private respondent BF Lifeman Insurance Corporation therefore was not given when it merely received the application form and all the requisite supporting papers of the applicant. however.075. Perez. 1987. It is not disputed.000. which he passed.075. The offer must be certain and the acceptance absolute. 1988 to Virginia A. am/are in good health. Perez was made to undergo the required medical examination. Perez died while he was riding a banca which capsized during a storm. he found them still in the Quezon office and so he personally brought the papers to the Manila office of BF Lifeman Insurance Corporation. Lalog testified that when he went to follow up the papers. Consent must be manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. his application papers for the additional insurance were still with the Quezon office. 1987. Virginia A. paid P2. She was paid P40. Lalog forwarded the application for additional insurance of Perez. 1987. that when Primitivo died on November 25. On November 1. on the other hand. his application papers for additional insurance coverage were still with the branch office of respondent corporation in Gumaca and it was only two days later.00 which Virginia Perez had paid Lifeman filed for the rescission and the declaration of nullity. 1987. his application was subject to the acceptance of private respondent BF Lifeman Insurance Corporation. together with all its supporting papers. with respect to the other to give something or to render some service. he asked the latter to fill up another application form. one party undertakes to compensate the other for loss on a specified subject by specified perils. When Primitivo filed an application for insurance. the insurance company maintained that the insurance for P50.000. Perez. BF Lifeman Insurance Corporation approved the application and issued the corresponding policy for the P50.000.00 had not been perfected at the time of the death of Primitivo Perez. Insurance is a contract whereby. to the office of BF Lifeman Insurance Corporationn in Quezon which office was supposed to forward the papers to the Manila office. Perez accomplished an application form for the additional insurance coverage. The receipt issued by Lalog indicated the amount received was a "deposit. averred that the deceased had fulfilled all his prestations under the contract and all the elements of a valid contract are present. 3D SY 2004-2005 rhys alexei . On November 25. Lalog lost the application form accomplished by Perez and so on October 28.00 and submitted the results of his medical examination. the insurance company refunded the amount of P2. 1987 Virginia went to Manila to claim the benefits under the insurance policies of the deceased. Held: The contract was not perfected.000. Its assent was given when it issues a corresponding policy to the applicant." Unfortunately. Consequently.000. Without knowing that Perez died on November 25. In its letter of January 29. 1987. there was absolutely no way the acceptance of the application could have been communicated to the applicant for the latter to accept inasmuch as the applicant at the time was already dead. is a meeting of the minds between two persons whereby one binds himself. on the other hand. It was only on November 27.000. or on November 27. CA reversed.INSURANCE REVIEWER– Atty.

(c) The premium. was already definite at the time of the issuance of the policy. Section 51. hence. unless the interest of a person insured is susceptible of exact pecuniary measurement. Documentary stamp taxes due on the policy were paid to the petitioner only on the initial sum assured. corresponding to the amount of automatic increase of the sum assured on the policy issued by respondent. as well as the amount of the increase. CTA found no basis for the assessment.    Issue: WON the automatic increase of the sum assured on the policy is taxable. Lincoln issued a special kind of life insurance policy known as the "Junior Estate Builder Policy. there was no need for an execution of a separate agreement for the increase in the coverage that took effect in 1984 when the assured reached a certain age. Thus." Although the clause was to take effect only in 1984. petitioner issued deficiency documentary stamps tax assessment for the year 1984. Lincoln questioned the deficiency assessments and sought their cancellation in a petition filed in the Court of Tax Appeals. the original policy was essentially re-issued when the additional obligation was assumed upon the effectivity of this "automatic increase clause" in 1984. Here. In the instant case. It is clear from Section 173 of the NIRC that the payment of documentary stamp taxes is done at the time the act is done or transaction had and the tax base for the computation of documentary stamp taxes on life insurance policies under Section 183 of NIRC is the amount fixed in policy. The subject insurance policy at the time it was issued contained an "automatic increase clause. The "automatic increase clause" in the policy is in the nature of a conditional obligation under Article 1181. (d) The property or life insured." the distinguishing feature of which is a clause providing for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. Subsequently. it was written into the policy at the time of its issuance. the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy. The SC agreed with this contention. (b) The amount to be insured except in the cases of open or running policies. the date of its effectivity. or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract. A policy of insurance must specify: (a) The parties between whom the contract is made. CA affirmed. Logically. hence. The distinctive feature of the "junior estate builder policy" called the "automatic increase clause" already formed part and parcel of the insurance contract. we believe that the amount fixed in the policy is the figure written on its face and whatever increases will take effect in the future by reason of the "automatic increase clause" embodied in the policy without the need of another contract. Quimson page 88 (79) CIR v. 9 but still a part of the insurance sold to which private respondent was liable for the payment of the documentary stamp tax. 3D SY 2004-2005 rhys alexei . although the automatic increase in the amount of life insurance coverage was to take effect later on. 8 by which the increase of the insurance coverage shall depend upon the happening of the event which constitutes the obligation. Held: YES. a statement of the basis and rates upon which the final premium is to be determined. a deficiency assessment based on the additional insurance not covered in the main policy is in order. Lincoln Phil Life 379 SCRA 423 (2002) Facts:  In the years prior to 1984. The clause was to take effect in the year 1984. the additional insurance that took effect in 1984 was an obligation subject to a suspensive obligation.INSURANCE REVIEWER– Atty. CIR claims that the "automatic increase clause" in the subject insurance policy is separate and distinct from the main agreement and involves another transaction. and that. while no new policy was issued.

Within sixty days after the issue of the cover note. 7. it can no longer be revived. The Commissioner may promulgate rules and regulations governing such extensions for the purpose of preventing such violations and may by such rules and regulations dispense with the requirement of written approval by him in the case of extension in compliance with such rules and regulations. Interests of the insured in the property  In order to determine actual damage. if he is not the absolute owner thereof. Rate of premium  Because the premium represents the consideration of the contract. time. group and industrial life policies. these rates are developed on the basis of the nature and character of the risk assumed. Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. Remember Atty. it will result to a big loss on the part of the insurer. and you hold the insurer liable for any loss due to any cause whatsoever. a policy shall be issued in lieu thereof. Cover notes may be extended or renewed beyond such sixty days with the written approval of the Commissioner if he determines that such extension is not contrary to and is not for the purpose of violating any provisions of this Code. Quimson (e) The interest of the insured in property insured. 228. Section 52. Remember. an owner gets the full value of the loss while a mortgagee gets only the value of his credit. including within its terms the identical insurance bound under the cover note and the premium therefor. Duration of the insurance  This period signifies the life of the policy. page 89 What must a policy contain and what are the reason behind such requirements? A policy must contain: 1. Amount of insurance  to easily and exactly determine the amount of indemnity to be paid in case of loss or damage. (f) The risks insured against. 6. What are two types of preliminary contracts of insurance? The preliminary contract of present insurance and the preliminary executory contract of insurance. 3D SY 2004-2005 rhys alexei . 3. If the duration of insurance has already ended. Quimson’s famous words? As the risk increases. 4. This requirement however can be dispensed with in cases of open or running policies. What are the kinds of insurable risks? 1) Personal risks – life or health risks 2) Property risks – loss or damage to property 3) Liability risks – involve liability of the insured for an injury caused to the person or property of another What are the requirements in order that a risk be insurable? 1) The loss to be insured against must be important enough to warrant the existence of an insurance contract 2) Risk must permit a reasonable statistical estimate of the chance of loss in order to determine the amount of premium to be paid 3) The loss should be definite as to cause. Names of the parties 2. the rate of premium also increases. Property or life or thing insured  Constitutes the Subject Matter 5.INSURANCE REVIEWER– Atty. and (g) The period during which the insurance is to continue. and 230 for additional matters to be included in individual. Risks insured against  In order to know when the insurer is called to indemnify the insured. place and amount 4) The loss is not catastrophic 5) Risk is accidental in nature NOTE: Read sections 227. because if this is NOT stated.

1(1) of IC. Cases: (80) Lim v. within 60 days after the issuance of the cover not be issued in lieu thereof. In life insurance. By its nature. 1917. BUT such cover note may be canceled by either party upon at least 7 days notice to the other party. that the risks involved. provided that it is later determined that the applicant was insurable at the time it was given. a binding slip or binding receipt DOES NOT insure itself. 3) NO cover note shall be issued or renewed unless in the form previously approved by the Insurance Commission. Under such an executory contract. the values of such risks. 5) If a cover not is not so canceled. provided that such written approval may be dispensed with upon the certification of the Pres. whether or not the premium therefore has been paid or not. Can you explain a preliminary executory contract of insurance? By a preliminary executory contract of insurance. it is subject to all conditions in the policy expected even though that policy may never issue. 7) The insurance companies may impose on cover notes a deposit premium equivalent to at least 25% of the estimated premium of the intended insurance coverage but in no case less than P500. the insurer insures the subject matter usually by what is known as a “binding slip” or “binder” or “cover note” which is the contract to be effective until the formal policy is issued or the risk is rejected. in life insurance. intended to give temporary protection pending the investigation of the risk by the insurer. VP or General Mgr of the Insurance company concerned. The first premium of P433 was paid by Lim and company issued a “provisional policy” 3D SY 2004-2005 rhys alexei . Quimson page 90 What is a preliminary contract of present insurance? By a preliminary contract of insurance. where an agreement is made between an applicant and the insurers’ agent. the right acquired by the insured is merely to demand the delivery of the policy in accordance with the terms agreed upon and the obligation assumed by the insurer is to deliver the said policy. and the premiums therefore have not as yet been determined or established and that such extension or renewal is NOT contrary to and is not for the purpose of violating any provision of the IC. Such policy shall include within its terms the identical insurance bound under the cover note and the premiums therefore. Thus. the insurer makes a contract to insure the subject matter at some subsequent time which may be definite or indefinite. Sun Life 41 PHIL 263 Facts:  On July 6. What are the rules governing cover notes? 1) Insurance companies doing business in the Philippines may issue cover notes to bind insurance temporarily pending the issuance of the policy 2) A cover not shall e deemed to be a contract of insurance within the meaning of Sec. or until the issuance of a formal policy. no liability shall attach until the insurer approves the risk. Luis Lim Y Garcia of Zamboanga applied for a policy of life insurance with Sunlife in the amount of 5T. 4) A cover not shall be valid and binding for a period NOT exceeding 60 days from the date of its issuance.  He designated his wife Pilar Lim as the beneficiary.INSURANCE REVIEWER– Atty. 6) A cover note may be extended or renewed beyond the aforementioned period of 60 days with the written approval of the Insurance Commissioner. What is a cover note? The cover not is merely a written memorandum of the most important terms of the preliminary contract of insurane. a policy of insurance shall.

the branch manager of Grepalife-Cebu.INSURANCE REVIEWER– Atty.” Mondragon wrote on the bottom of the application form his strong recommendation for the approval of the insurance application. constituted a temporary contract of life insurance. so in life insurance a “binding slip or receipt” does not insure itself. 23. the insurance premium and had accepted the application subject for processing by the insurance company. It was nothing but an acknowledgment by the Company that it has received a sum of money agreed upon as the first year’s premium upon a policy to be issued upon the application if it is accepted by the Company. The binding receipt contained the following provision: “If the applicant shall not have been insurable xxx and the Company declines to approve the application. Should the company NOT issue such a policy. respondent Ngo Hing filed an application with Grepalife for a 20-yr endowment policy for 50T on the life of his one year old daughter Helen Go. Quimson page 91    Such policy contained the following provisions “xx the abovementioned life is to be assured in accordance with the terms and conditions contained or inserted by the Company in the policy which may be granted by it in this particular case for 4 months only from the date of the application. the amount herein shall be returned. The instant action is brought by the beneficiary to recover from Sun Life the sum of 5T. All the essential data regarding Helen was supplied by Ngo to Lapu-Lapu Mondragon. then this agreement shall be null and void ab initio and the Company shall be held not to have been on the risk at all. The binding receipt in question was merely an acknowledgement on behalf of the company. Mondragon received a letter from Grepalife Main office disapproving the insurance application of Ngo for the simple reason that the 20yr endowment plan is not available for minors below 7 yrs old. Mondragon then typed the data on the application form which was later signed by Ngo. Helen died of influenza with complication of broncho pneumonia. but the latter denied liability on the ground that there was no contract between the insurer and the insured and a binding receipt is NOT evidence of such contract. but in such case. and that the latter will either approve or reject the same on the basis of whether or not the applicant is insurable on standard rates. Ngo then paid the insurance premium and a binding deposit receipt was issued to him. 1957. When an agreement is made between the applicant and the agent whether by signing an application containing such condition or otherwise. (81) Grepalife v. such acceptance is merely conditional and is subordinated to the company’s act in approving or rejecting. 1957. The contract of insurance was not consummated by the parties. CA 89 SCRA 543 Facts:   On March 14. The above quoted agreement clearly stated that the agreement should NOT go into effect until the home office of the Company shall confirm it by issuing a policy. Ngo filed a claim with Gepalife. On Apr 30. Held: NO. adding that Grepalife was the only insurance company NOT selling endowment plans to children. 3D SY 2004-2005 rhys alexei . Issue: WON the beneficiary can collect the 5T. that no liability shall attach until the principal approves the risk and a receipt is given by the agent. the insurance applied for shall not have been in force at any time and the sum paid shall be returned to the applicant upon the surrender of this receipt.      Issue: WON the binding deposit receipt. PROVIDED that the company shall confirm this agreement by issuing a policy on said application xxx. Lim died on Aug. On may 1957. Mondragon wrote back the main office again strongly recommending the approval of the endowment plan on the life of Helen. that the latter’s branch office had received from the applicant. 1917 after the issuance of the provisional policy but before the approval of the application by the home office of the insurance company. Held: NO.

1966. The insurer’s application form contained a so-called “Binding Receipt” which was detachable.  From the time the insured received the application form its agent on Nov. After the issuance of the cover note but BEFORE the issuance of the 2 policies. 1966. (83) Gloria v. (82) Pacific Timber v. Issue: WON the cover not was without consideration.INSURANCE REVIEWER– Atty. 6.  It is not sure whether or not Narito was given the Binding Receipt upon his payment of the first premium. for its exportation of logs to Japan. CA 112 SCRA 199 Facts:     On March 13. E of the said receipt. Where an agreement is made between the applicant and the agent. 5. an agent of the insured prepared an application for the life insurance whose annual premium was P1. Thus in life insurance.  Narito paid the first annual premium on the policy applied for. The beneficiaries submitted a claim to the insurer. 1966. its purpose would be meaningless for it is in a real sense a contract. 31. Narito was examined by Dra. particulars of the shipment that would serve as basis for the computation of the premiums. the insurer’s medical examiner. Narito was shot and killed. it found out that Narito was unacceptable as an insurance risk.  On Dec. and is subordinated to the act of the company in approving or rejecting the application. NO liability shall attach until the principal approves the risk and a receipt is given by the agent. for no such premium could have been paid. but what is certain that he was handed a Cashier’s Receipt. Philamlife Insurance Co. contending that said loss may not be considered as covered under the cover note because such became null and void by virtue of the issuance of the marine policies. pursuant to par. Issue: WON the beneficiaries can claim. thus null and void. as all cover notes do not contain. On the same date. since by the nature of the cover note. not a mere application. Her opinion was confirmed by Dr. some of the logs intended to be exported were lost due to a typhoon. the binding deposit receipt had never became on force at any time.178. Workmen issued on said date Cover Note 1010 insuring said cargo. Pacific filed its claim with the company. After an underwriting analysis conducted by the insurer. SC upheld Pacific’s contention that said cover not was with consideration. As a logical consequence. The 2 marine policies bore the number 53H01032 and 53H01033.  On Oc. Quimson page 92 Since Grepalife disapproved the insurance application of Ngo. A binding receipt is manifestly merely conditional and does NOT insure outright. Vergel de dios. Roberto Narito applied for a 100T life insurance policy with Philamlife Insurance Company. The fact that no separate premium was paid on the cover note before the loss was insured against occurred does not militate against the validity of Pacific’s contention. but the latter refused. it did not take any action with regard to the controverted insurance coverage. the Associate Medical Director of the insurer. it did not contain. Orobia. up to Dec. 6. the application was signed by Narito. no separate premiums are required to be paid on a cover note. a binding slip or binding receipt does NOT insure by itself. Held: YUP 3D SY 2004-2005 rhys alexei . The acceptance is merely conditional. Pacific secured temporary insurance from the Workemen’s Insurance Co. If the note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued. The claim was denied. 1963. 1966. 73 OG 8660 Facts:  In 1966. Held: It was with consideration. 1963.  She opined that Narito was insurable. The regular marine policies were issued by the company in favor of Pacific on Apr 2.

There is no question that the first premium was paid.  Law Union.  Insurance Companies contended that they were not liable to Harding because their liability under the policies was limited to the insurable interests of SMB only. the company should be liable to the beneficiaries. (84) San Miguel Brewery v. IN this connection. A year later. Law Union Rock Insurance Company (repeat – case #12) 40 PHIL 674 Facts:  On Jan. Brias stated that SMB’s interest in the property was merely that of a mortgagee.  SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. and no justification for the delay had been proven. The application for insurance contained the following clause: “There shall be no contract of insurance unless a policy is issued on this application and the full first premium thereon actually paid.  Brias. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty. Trial court ruled against Harding. Also it is provided in the IA that the insurance shall 3D SY 2004-2005 rhys alexei . Held: NOPE. in contrast to the requirement of actual payment of the premium.  Mortgage contract stated that Dunn was to have the property insured at his own expense. what may be noted is that. Hence the appeal. approached Law Union for insurance to the extent of 15T upon the property. one way or the other.  Property was destroyed by fire. the policies were renewed. for which reason. the first annual premium of P1. Harding was made a defendant because by virtue of the sale. but no assignment of the policies was made to the latter. 12. with the actual issuance of the policy being a mere technicality. It should therefore be liable for loss before the application is subsequently rejected. not wanting to issue a policy for the entire amount.  SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. 5. In the case at bar. Quimson page 93 The application for insurance signed by the deceased contained the following stipulation: “The binding receipt must NOT be issued unless a binding deposit is paid which must be at least equal to the first full premium. Harding was left to fend for himself. Under the Insurance Act.500 and procured another policy of equal amount from Filipinas Cia de Seguros. The problem is to resolve whether or not it can be said that the policy has been issued.INSURANCE REVIEWER– Atty. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof. Hence the rights of the beneficiaries and the obligation of the company have to be determined solely in the application for insurance an in the Cashier’s receipt. SMB’s general manager. Hence. When an insurer accepts and retains the first premium for an unreasonable length of time. it should still be held that the application for insurance was approved by the company.” The preponderance of evidence is to the effect that the binding receipt was not issued to the deceased when he paid the company’s agent. although the policies were issued in SMB’s name. the company did NOT act on the application for insurance. although the policy had not actually been issued. ” It should be conceded that there shall be a contract of insurance once the first premium is paid and a policy is issued. it should be held that the application for insurance of the deceased had been approved prior to his death. it should be presumed that the insurer had assumed the risk.  Dunn likewise authorized SMB to take out the insurance policy for him. it was NOT required that the policy be actually issued. Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies.  Premiums were paid by SMB and charged to Dunn. 2 to Dec. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. issued one for P7. SMB filed an action in court to recover on the policies. 1966. Dunn sold the property to Harding. he became the owner of the property. An assuming that no policy had indeed been issued. 1918. Both policies required assignments to be approved and noted on the policy. from Nov.178.  In 1917. In the application. authorizing SMB to choose the insurers and to receive the proceeds thereof and retain so much of the proceeds as would cover the mortgage debt.

but it could NOT. there is no clear and satisfactory proof that the policies failed to reflect the real agreement between the parties that would justify the reformation of these two contracts. temporary or preliminary contract of insurance effective from that time until the issuance of the formal policy or until rejection of the risk. it would establish liability upon the insurer if death occurred prior to the issuance of the policy. but this was not done. If during the negotiation for the policies. Quimson ask us to read the case of Gloria v. an any event. slip or memorandum given to the insured. Under a life policy. mortgagee. and the policies had inadvertently been written in the form in which they were eventually issued. recover upon the two policies an amount in excess of its mortgage credit. The purpose of a binder is to provide temporary insurance pending an inquiry by the insurer as to the character of the risk and to take the place of the policy until the latter can be issued. the parties had agreed that even the owner’s interest would be covered by the policies. or neutralize the binding result of the receipt. Section 12 provides: The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal. to the improvements. The mortgage extends to the natural accession. By virtue of the Insurance Act. Philamlife? The case defined a binding receipt. Recall Section 12. in which event. What does Art. the lower court would have been able to order that the contract be reformed to give effect to them in the sense that the parties intended to be bound. neither Dunn nor Harding could have recovered from the two policies. NOT merely SMB’s and would have shown to whom the money. in case of loss. So? It is an exception to Section 53. no change or assignment of the policies had been undertaken. when he acquired the property. or in virtue of expropriation 3D SY 2004-2005 rhys alexei .INSURANCE REVIEWER– Atty. for what other reason did Atty. the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise qualified. a complete. then the insurer would have actually practiced fraud on the applicant for insurance. What is a binding receipt according to Glora v. accomplice or accessory in willfully bringing about the death of the insured. However. should be paid. A binder receipt would be misnamed if it does NOT bind the insurer. 2127 of the CC say? Art. Aside from the ruling. it would have proved an intention to insure the entire interest in the property. may become owner of the interest insured” . Philamlife? A binding receipt or slip is ordinarily a document. growing fruits and the rents or income not yet received when the obligation becomes due. The issuance of a binder evidences. as its interests may appear. The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy. If the insurer issues a binder receipt with terms which will negate. With respect to Harding. Undoubtedly. during the continuance of the risk. Quimson page 94 be applied exclusively to the proper interest of the person in whose name it is made. The policies might have been worded differently so as to protect the owner. If the wording had been: “Payable to SMB. and the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged. 2127. had an insurable interest therein. remainder to whomsoever. Section 53. which binds the insurance company to pay insurance should a loss occur pending action upon the application and actual issuance of a policy. SMB as the mortgagee of the property. Unfortunately. this was not what was stated in the policies.

Cases: (85) Bonifacio Bros.102. amplifications and limitations established by law. with the condition that Mora would insure the car with HS Reyes as beneficiary. Quimson page 95 for public use. The bill was sent to the insurer’s appraiser. and in case Z was the one who contracted for the repairs. Under this doctrine. authorized Bonifacio Bros to fix the car. with declarations. a third person NOT a party to the contract has NO action against the aprties thereto. is to rely upon the intention of the parties as disclosed by their contract.73. Is X entitled to collect the cost of repair? NO. The car got lost and X. The company then assigned the accident to an insurance appraiser for investigation and appraisal of the damage. IN this connection. v. the car figured in an accident. The car was delivered to Mora without the consent of HS Reyes. Z must pay X. and without payment to Bonifacio Bros and Ayala.INSURANCE REVIEWER– Atty.  The car was then insured with State Insurance Company and the policy delivered to Mora. Problems.  During the effectivity of the insurance contract.73. Mora was billed P2. Held: NONE. the proceeds must be paid to Z. provided that the contracting parties have clearly and deliberately conferred a favor upon such person. using materials supplied by the Ayala Auto Parts Company. As far as the insurance company is concerned. The insurance company filed its answer with a counterclaim for interpleader. In the instant case the insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any repairmen or material men in case of repair of the car in question. whether the estate remains in the possession of the mortgagor or it passes into the hands of a third person. and cannot generally demand the enforcement of the same. the mortgagee of the car”. Issue: WON there is privity of contract between Bonficacio and Ayala on one hand and State Insurance on the other. The question of whether a third person has an enforceable interest in a contract must be settled by determining whether the contracting parties intended to tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of conferring favor upon such third person. Bonifacio and Ayala filed a complaint against Mora and the insurer with the municipal court for the collection of P2. The parties to the 3D SY 2004-2005 rhys alexei . Consequently. X is not privy to the insurance contract. Such stipulation is known as a stipulation pour autrui. or a provision in favor of a third person not a party to the contract.  Mora without the knowledge and consent of HS Reyes.     For the cost of Labor and materials. In this case. except in some specific instance provided by law where the contract contains some stipulation in favor of a third person. It is fundamental that contracts take effect only between the parties thereto. requiring Bonifacio and HS Reyes to interplead in order to determine who has a better right to the proceeds. this court has laid down the rule that the fairest test to determine whether the interest of a 3 rd person in a contract is a stipulation pour autrui or merely an incidental interest. A had taken out a policy on his car with the stipulation: “loss if any payable to Z. the owner of the auto repair shop where the car was fixed filed a claim with the insurance company. a third person is allowed to avail himself of a benefit granted to him by the terms of the contract. Even if there was a provision in the contract authorizing either A or Z to contract for repairs. The insurance company drew a check in the amount of the insurance proceeds and entrusted the check to its appraiser for delivery to the proper party. Mora 20 SCRA 262 Facts:  Enrique Mora mortgaged his Odlsmobile sedan car to HS Reyes Inc. this does not mean that X became entitled to claim the proceeds. Upon the theory that the insurance proceeds should be directly paid to them.102.

Inc. is payable to H. since they could have maintained this action by themselves. is payable to H. expressed or implied exists." indicating that it was only the H. This conclusion is deducible not only from the principle governing the operation and effect of insurance contracts in general. are the sole heirs of the deceased — have a direct cause of action against the Company. Under these conditions. Fieldmen’s Insurance co. one of which is found in the second paragraph of Article 1311 of the Civil Code of the Philippines." which unmistakably shows the intention of the parties. his parents. although not a party to the contract. 53).INSURANCE REVIEWER– Atty. if any. We. Reyes.    Issue: WON plaintiffs have the right to collect on the policy. In this case. he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. only parties to a contract may bring an action based thereon. 1.S. reading: "If a contract should contain some stipulation in favor of a third person. express or implied. Del Monte 80 SCRA 181 Facts:   The insured owned a fleet of jeepneys. Reyes.S. Reyes. and third persons have no right either in a court of equity. bumped and killed Guingon. if any. in general. is merely equitable in nature and must be made effective through Enrique Mora who entered into a contract with the Bonifacio Bros Inc. (87) Guingon v. the enforcement of which may be demanded by a third party for whose benefit it was made. Athough. Held: YES. He insured the operation of his jeepneys against “accidents with third part liability” with Capital Insurance and Surety Co. S. which were deducted from his weekly commissions. The policy also stated that in “the event of the death of the driver. On the other hand. or in a court of law. The appellant's claim. The policy in question has been so framed that "Loss. therefore. the policy under consideration is typical of contracts pour autrui this character being made more manifest by the fact that the deceased driver paid fifty percent (50%) of the corresponding premiums. no contract of trust. this rule is subject to exceptions. Inc. it is clear that the Coquias — who.” During the policy’s lifetime. they institued this complaint. Fieldmen’s Insurance 26 SCRA 172 Facts:  On Dec. which is a circumstance that supports the said conclusion. In this case." This is but the restatement of a well-known principle concerning contracts pour autrui. to the proceeds of it. A policy of insurance is a distinct and independent contract between the insured and insurer. A mere incidental benefit or interest of a person is not sufficient. by the insured and third person. When the company refused to pay the only heirs of Coquia. admittedly. without the assistance of the insured it goes without saying that they could and did properly join the latter in filing the complaint herein. if at all. 3D SY 2004-2005 rhys alexei . The contracting parties must have clearly and deliberately conferred a favor upon a third person. the "loss payable" clause of the insurance policy stipulates that "Loss. which they intended to benefit. a taxicab of the insured driven by Coquia met an accident and Coquia died. but is clearly covered by the express provisions of section 50 of the Insurance Act (now Sec. 1961. before the stipulation in his favor has been revoked by the contracting parties In the case at bar. and. (86) Coquia v. no contract of trust. One day. expressed or implied. one of his jeepney dirivers. agree with the trial court that no cause of action exists in favor of the appellants in so far as the proceeds of insurance are concerned. The company contends that plaintiffs have no cause of action since the Coquias have no contractual relationship with the company. unless there be some contract of trust. Quimson page 96 insurance contract omitted such stipulation. the Company shall indemnify his personal representatives and at the Company’s option may make indemnity payable directly to the claimants or heirs of the claimants. Inc. Issued in favor of the Manila Yellow Taxicab a common carrier insurance policy with a stipulation that the company shall indemnify the insured of the sums which the latter wmy be held liable for with respect to “death or bodily injury to any faire-paying passenger including the driver and conductor”.

said third persons' recourse being thus limited to the insured alone The policy in the present case. the contract being solely to reimburse the insured for liability actually discharged by him through payment to third persons. Held: YES. The company sough to dismiss the charges against it on the ground of lack of cause of action against it. (Accdg to Andres. Petitioners to account for the use and occupation of the premises. It was found out that the deceased took out insurance on his life for the sum of 40T and made it payable to private respondents as sole beneficiary. redeemed with the use of the insurance proceeds and its remainder.INSURANCE REVIEWER– Atty. Quimson   page 97 An action for damages was then filed against the owner-insured. then third persons cannot proceed against the insurer. then third persons to whom the insured is liable. then the insurance company must deliver the proceeds to the claimants. Del Val 29 Phil 535 Facts:   Petitioners and private respondents are brothers and Sisters and are the only heirs and next of kin of Gregorio del Val who died intestate. Thus. Andres paid 18T to redeem some real property which Gregorio had sold to third persons during his lifetime. . . Of the said policy. The test applied here is: Where the contract provides for indemnity against liability to third persons. petitioners have been in possession of the property) Petitioners now contend that the amount of the insurance policy belonged to the estate of the deceased and not to Andres personally. said redemption in the name of Petitioners and himself was without his knowledge and that since the redemption. Said redemption of the property was made by Andres’ laywer in the name of Andres and the petitioners. Andres collected the proceeds of the policy. can sue the insurer. The right of a person injured to sue the insurer of the party at fault depends on whether the contract of insurance was intended to benefit third persons. therefore. Since the policy in questioned contained a stipulation pour autrui. is one whereby the insurer agreed to indemnify the insured "against all sums . death of or bodily injury to any person . it is one for indemnity against liability from the fact then that the insured is liable to the third person. which the Insured shall become legally liable to pay in respect of: a. The SC held that if it is established by evidence that that was his intention and that the real estate was delivered to 3D SY 2004-2005 rhys alexei ." Clearly. Our civil code has no provisions which relate directly and specifically to life-insurance contracts of to the destination of life-insurance proceeds that subject is regulated exclusively by the Code of Commerce. After Gregorio’s death. On the other hand. the driver and the company. contention of petitioners that proceeds should be considered as a dontation or gift and should be included in the estate of the deceased is UNTENABLE. Pet filed a complaint for partition of property including the insurance proceeds Andress claims that he is the sole owner of the proceeds and prayed that he be declared: Sole owner of the real property. Since the repurchase has been made n the names of all the heirs instead of the defendant alone. petitioners claim that the property belongs to the heirs in common and not to the defendant alone. (88) Del Val v. Issue: WON there is a cause of action against the company. The contract of life insurance is a special contract and the destination of the proceeds thereof is determined by special laws which deal exclusively with the subject. such third person is entitled to sue the insurer.         Issue: WON the petitioners have a right to the insurance proceeds? Held: NOPE. where the contract is for indemnity against actual loss or payment.

The civil code prohibitions on donations made between persons guilty of adulterous concubinage applies to insurance contracts. also filed a claim asserting her right as the legal wife. If the SC used only Sec. one of GOYU's factory buildings in Valenzuela was gutted by fire. Issue: WON the common law wife named as beneficiary can collect the proceeds.  Pascuala. GOYU submitted its claim for indemnity. Held: NOPE. GOYU filed a complaint for specific performance and damages. HOWEVER. 3D SY 2004-2005 rhys alexei . also filed with MICO its formal claim over the proceeds of the insurance policies. CA 289 SCRA 292 (1998) Facts:   GOYU applied for credit facilities and accommodations with RCBC. GOYU obtained in its name a total of 10 insurance policies from MICO. 53. the general rules on Civil law shall apply. issued nine endorsements in favor of RCBC seemingly upon instructions of GOYU On April 27. He designated Capriona as his beneficiary. as well as the Court of Appeals. because the endorsements do not bear the signature of any officer of GOYU. but said claims were also denied for the same reasons that AGCO denied GOYU's claims. since both are founded on liberality. then to P90 million. In February 1992.  She admitted to being only the common law wife of the insured. Consequently. the insurance agent where GOYU obtained the Malayan insurance policies. or that it was not his intention to make a gift to them of real estate. However. The company then filed an action for interpleader. then it is probable that their contention is correct and that they are entitled to share equally with the defendant. A life insurance policy is no different from a civil donation as far as the beneficiary is concerned. concluded that the endorsements are defective and held that RCBC has no right over the insurance proceeds. one of GOYU's creditors. 1992. the trial court.. GOYU committed itself to insure the mortgaged property with an insurance company approved by RCBC. it appears from the evidence that the conveyances were taken in the name of the plaintiffs without the knowledge and consent of Andres. referring to her as his wife. a credit facility in the amount of P30 million was initially granted.INSURANCE REVIEWER– Atty. RCBC.      Issue: WON RCBC has a right over the insurance proceeds. Art. 739 and 2012. to endorse and deliver the insurance policies to RCBC. 53? It is true that SC went against Sec. MICO denied the claim on the ground that the insurance policies were either attached pursuant to writs of attachments/garnishments issued by various courts or that the insurance proceeds were also claimed by other creditors of GOYU alleging better rights to the proceeds than the insured. (89) Insular Life. On matters not specifically provided for by the Insurance Law. the legal wife. 53. Alchester Insurance Agency. 739 and 2012 of CC prohibit persons who are guilty of adultery or concubinage from being beneficiaries of the life insurance policies of the persons with whom they committed adultery or concubinage. Sec. However. and subsequently. it would have gone against Art. Why was the common law wife not allowed to collect the proceeds despite the fact that she was the beneficiary? Isn’t this against Sec.  The insured then died and Carponia tried to claim the proceeds of the said plan. when it belongs to him. Ebrado 80 SCRA 181 Facts:  Buenaventura Ebrado was issued al life plan by Insular Company. which were registered with the Registry of Deeds at. Upon GOYU's application increased GOYU's credit facility to P50 million. and finally to P117 million As security for its credit facilities with RCBC. GOYU executed two REM and two CM in favor of RCBC. (90) RCBC v. 53 is NOT the only provision that the SC had to consider. Quimson page 98 the plaintiffs with that understanding. After due evaluation. Inc. Under each of these four mortgage contracts.

undertook to have the mortgaged property properly covered against any loss by an insurance company acceptable to RCBC. the Court cannot sanction. as mortgagor. There is no question that GOYU could insure the mortgaged property for its own exclusive benefit. although it appears that GOYU obtained the subject insurance policies naming itself as the sole payee. it having been sufficiently established that it was the intention of the parties to designate RCBC as the party for whose benefit the insurance policies were taken out. Alchester would not have endorsed the policies to RCBC had it not been so directed by GOYU. It is undisputed that the insured pieces of property were the subject of mortgage contracts entered into between RCBC and GOYU in consideration of and for securing GOYU's credit facilities from RCBC. obviously considered said endorsement to be sufficient compliance with its obligation under the mortgage contracts since RCBC 3D SY 2004-2005 rhys alexei . The peculiarity of the circumstances obtaining in the instant case presents a justification to take exception to the strict application of said provision. and not just from any other insurance company. is to countenance grave contravention of public policy. If there had not been actually an implied ratification of said endorsements by virtue of GOYU's inaction in this case. Alchester Insurance Agency. MICO and RCBC. relied upon the endorsement documents sent to it as this was only pursuant to the stipulation in the mortgage contracts. Inc. the Court is bound to recognize RCBC's right to the proceeds of the insurance policies if not for the actual endorsement of the policies. fair dealing. Alchester would not have known of GOYU's intention of obtaining insurance coverage in compliance with its undertaking in the mortgage contracts with RCBC. 4. It is to be noted that 9 endorsement documents were prepared by Alchester in favor of RCBC. 3. Quimson page 99 Held: RCBC has a right over the insurance proceeds. On equitable principles. GOYU did not assail. It is also significant that GOYU voluntarily and purposely took the insurance policies from MICO. at least on the basis of the equitable principle of estoppel. it was too late for GOYU to disown the endorsements for any imagined or contrived lack of authority of Alchester to prepare and issue said endorsements. This Court can not over stress the fact that upon receiving its copies of the endorsement documents prepared by Alchester. the intentions of the parties as shown by their contemporaneous acts.INSURANCE REVIEWER– Atty.. to enjoy the benefits of the credit facilities extended to it by RCBC. good faith. RCBC. After the occurrence of the loss insured against. particularly on the ground of estoppel. GOYU continued until the occurrence of the fire. Endorsement documents were prepared by MICO's underwriter. and copies thereof were sent to GOYU. the validity of said endorsements. GOYU continued. The mortgage contracts contained common provisions whereby GOYU. It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property. in the meantime. the Court is constrained to rule in favor of mortgagor RCBC. Had it not been for GOYU. The Court is in a quandary how Alchester could arrive at the idea of endorsing any specific insurance policy in favor of any particular beneficiary or payee other than the insured had not such named payee or beneficiary been specifically disclosed by the insured itself. and justice. until of late. Over and above this. GOYU cannot seek relief under Section 53 of the Insurance Code which provides that the proceeds of insurance shall exclusively apply to the interest of the person in whose name or for whose benefit it is made. and verify. GOYU voluntarily procured insurance policies to cover the mortgaged property from MICO. to enjoy the benefits of the credit facilities extended by RCBC which was conditioned upon the endorsement of the insurance policies to be taken by GOYU to cover the mortgaged properties. Such an unjust situation. such that each one of them may insure the same property for his own sole benefit. GOYU is at the very least estopped from assailing their operative effects. GOYU. In the present case. We find such reliance to be justified under the circumstances of the case. 2. must be given due consideration in order to better serve the interest of justice and equity. despite the absence written conformity thereto. Under the peculiar circumstances obtaining in this case. in good faith. To permit GOYU to capitalize on its non-confirmation of these endorsements while it continued to enjoy the benefits of the credit facilities of RCBC which believed in good faith that there was due endorsement pursuant to their mortgage contracts. Alchester would not have found out that the subject pieces of property were mortgaged to RCBC had not such information been voluntarily disclosed by GOYU itself. GOYU failed to seasonably repudiate the authority of the person or persons who prepared such endorsements. no less than a sister company of RCBC and definitely an acceptable insurance company to RCBC. Consider thus the following: 1. a sister company of RCBC.

Who may take insurance? An insurance may be taken by a person. To render an insurance effected by one partner or part-owner. What happens when the description of the insured is general? In order that the insurance may be applied to the interest of the person claiming the benefit of the policy. Not a grand-child. 3D SY 2004-2005 rhys alexei . Section 54. Section 56. applicable to the interest of his co-partners or other part-owners. therefore. 19 and 20. Section 57. may become the owner of the interest insured. The insurance proceeds may.INSURANCE REVIEWER– Atty. What happens when the insurance is effected by a partner or a part-owner? A partner or part-owner who insures partnership property in his own name limits the contract to his individual share UNLESS the terms of the policy clearly show that the insurance was meant to cover also the shares of the other partners. Quimson page 100 accordingly continued to extend the benefits of its credit facilities and GOYU continued to benefit therefrom. only he who can show that it was intended to include him can claim the benefit of the policy. personally or through his agent or trustee. which under the factual circumstances of the case. Section 55. the agent or trustee when making an insurance contract for or on behalf of his principal should. The intention of the parties will have to be given full force and effect in this particular case. Section 58. it is necessary that the terms of the policy should be such as are applicable to the joint or common interest. When an insurance contract is executed with an agent or trustee as the insured. take not of Sec. What is the reason behind Sec. If the insurance is taken by an agent or trustee. the purchaser of the interest of the property requires no privity with the insurer. Example? If the policy is payable “to the children”. In reading sec. nor a great-grand-child. but suspends it until the same person becomes the owner of both the policy and the thing insured. and in the absence of an assignment of the policy with the insurer’s consent. The mere transfer of a thing insured does not transfer the policy. be exclusively applied to RCBC. A policy may be so framed that it will inure to the benefit of whomsoever. indicate that he is merely acting in a representative capacity by signing as such agent or trustee. during the continuance of the risk. or by other general terms in the policy. you must show that you are a child of the deceased. what must the agent or trustee do? Since the insurance is to be applied exclusively to the interest of the person in whose name and for whose benefit it is made. or by other general words in the policy. he must show that he is the person named or described or that he belongs to the class of persons comprehended in the policy. 58. the fact that his principal or beneficiary is the real party in interest may be indicated by describing the insured as agent or trustee. When the description of the insured in a policy is so general that it may comprehend any person or any class of persons. Just as plain too is the intention of the parties to constitute RCBC as the beneficiary of the various insurance policies obtained by GOYU. 58 follows from the well established principle that a policy is a personal contract with the insured and does NOT run with the insured property unless so expressly stipulated. 58? Sec. is truly the person or entity for whose benefit the policies were clearly intended.

SMB filed an action in court to recover on the policies. Dunn sold the property to Harding. approached Law Union for insurance to the extent of 15T upon the property. Subsequently. is Paul entitled to collect the insurance money as assignee-mortgagee? NO. Problem. A purchaser of insured property who does Not take the precaution to obtain a transfer of the policy on the insurance. the policies were renewed.  Insurance Companies contended that they were not liable to Harding because their liability under the policies was limited to the insurable interests of SMB only. since B did not assign his right over the insurance policy to X.  Premiums were paid by SMB and charged to Dunn. In the application.  SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof. Also it is provided in the IA that the insurance shall be applied exclusively to the proper interest of the person in whose name it is made.INSURANCE REVIEWER– Atty. Quimson page 101 Section 19.000 from B. Section 20. A borrowed 5. Held: NOPE. Law Union Rock (repeat – Case # 12) 40 PHIL 674 Facts:  On Jan. B assigned his mortgage credit to X. although the policies were issued in SMB’s name. issued one for P7.  SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. unaccompanied by a corresponding change of interest in the insurance. he became the owner of the property. suspends the insurance to an equivalent extent. Hence the appeal. A year later. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty. Harding was left to fend for himself. recover upon the contract. he mortgaged his house to B.  Dunn likewise authorized SMB to take out the insurance policy for him.  Brias. as the transfer of the property has the effect of suspending the insurance until the purchaser becomes the owner of the policy as well as the property insured. cannot in case of loss. accident and health insurance. 1918. B then insured the house for 5T.  In 1917. Both policies required assignments to be approved and noted on the policy. Harding was made a defendant because by virtue of the sale.  Mortgage contract stated that Dunn was to have the property insured at his own expense.500 and procured another policy of equal amount from Filipinas Cia de Seguros. Brias stated that SMB’s interest in the property was merely that of a mortgagee. authorizing SMB to choose the insurers and to receive the proceeds thereof and retain so much of the proceeds as would cover the mortgage debt. and interest in the life or health of a person insured must exist when the insurance takes effect.  Law Union. 12. Undoubtedly. and to secure payment of his obligation. SMB as 3D SY 2004-2005 rhys alexei . and in the cases of life. not wanting to issue a policy for the entire amount. and when the loss occurs. An interest in property insured must exist when the insurance takes effect. until the interests in the thing and the interest in the insurance are vested in the same person. but no assignment of the policies was made to the latter.  Property was destroyed by fire. but need not exist thereafter or when the loss occurs. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. IF the house burns down. Trial court ruled against Harding. Case: (91) San Miguel v. Under the Insurance Act. Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies. a change of interest in any part of a thing insured. but need not exist in the meantime. but did not make the corresponding transfer of his right over the insurance policy. Except in the cases specified in the next four sections. SMB’s general manager.

as its interests may appear. Unfortunately. Quimson page 102 the mortgagee of the property. If the wording had been: “Payable to SMB. recover upon the two policies an amount in excess of its mortgage credit. the lower court would have been able to order that the contract be reformed to give effect to them in the sense that the parties intended to be bound. The policies might have been worded differently so as to protect the owner. no change or assignment of the policies had been undertaken. neither Dunn nor Harding could have recovered from the two policies. NOT merely SMB’s and would have shown to whom the money. mortgagee. it would have proved an intention to insure the entire interest in the property. 3D SY 2004-2005 rhys alexei . had an insurable interest therein. during the continuance of the risk. If during the negotiation for the policies. but it could NOT. With respect to Harding. should be paid. However. this was not what was stated in the policies. By virtue of the Insurance Act.INSURANCE REVIEWER– Atty. may become owner of the interest insured” . when he acquired the property. an any event. in case of loss. and the policies had inadvertently been written in the form in which they were eventually issued. there is no clear and satisfactory proof that the policies failed to reflect the real agreement between the parties that would justify the reformation of these two contracts. but this was not done. remainder to whomsoever. the parties had agreed that even the owner’s interest would be covered by the policies.

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