INSURANCE
(ATTY.


QUIMSON)
 


1


Sec.
1.
This
Decree
shall
be
known
as
"The
Insurance
Code".
 
 LAWS
GOVERNING
INSURANCE
 1. PD
1460
 2. Articles
2011
and
2012,
CC
 3. Articles
2021
to
2027,
CC
 4. Article
2186
CC
 5. Article
43,
par.
4,
50,
64
FC
 6. Laws
and
related
acts
creating
and
governing
the
SSS
and
GSIS
 
 CONSTANTINO
V.
ASIA
LIFE
 87
PHIL
248
 
 FACTS:
 Two
 cases
 are
 involved
 in
 this
 case.
 
 Asia
 Life
 is
 an
 American
 insurance
 company
 which
 issued
 two
 different
 insurance
 policies.
 
 On
 the
 first
 policy,
 after
 the
 first
 payment,
no
further
payment
was
made
by
the
insured.

He
died
later
on.

On
the
 second
 policy,
 premiums
 were
 paid,
 nonetheless,
 at
 a
 certain
 period,
 he
 wasn't
 able
to
continue
payment.

Both
insurance
policy
transactions
were
affected
by
the
 Japanese
 occupation
 wherein
 the
 American
 company
 was
 forced
 to
 leave.
 
 Now,
 the
 beneficiaries
 are
 seeking
 the
 payment
 of
 proceeds
 minus
 all
 sums
 due
 for
 premiums
in
arrears.
 
 HELD:
 American
cases
may
be
divided
into
three
groups,
according
as
they
support
the
so‐ called
Connecticut
Rule,
the
New
York
Rule,
or
the
United
States
Rule.
 
 The
first
holds
the
view
that
"there
are
two
elements
in
the
consideration
for
which
 the
annual
premium
is
paid
�
First,
the
mere
protection
for
the
year,
and
second,
 the
 privilege
 of
 renewing
 the
 contract
 for
 each
 succeeding
 year
 by
 paying
 the
 premium
 for
 that
 year
 at
 the
 time
 agreed
 upon.
 According
 to
 this
 view
 of
 the
 contract,
the
payment
of
premiums
is
a
condition
precedent,
the
non‐performance
 would
be
illegal
necessarily
defeats
the
right
to
renew
the
contract."
 
 The
second
rule,
apparently
followed
by
the
greater
number
of
decisions,
hold
that
 "war
between
states
in
which
the
parties
reside
merely
suspends
the
contracts
of
 the
life
insurance,
and
that,
upon
tender
of
all
premiums
due
by
the
insured
or
his


representatives
 after
 the
 war
 has
 terminated,
 the
 contract
 revives
 and
 becomes
 fully
operative."
 
 The
 United
 States
 rule
 declares
 that
 the
 contract
 is
 not
 merely
 suspended,
 but
 is
 abrogated
by
reason
of
non‐payments
is
peculiarly
of
the
essence
of
the
contract.
It
 additionally
holds
that
it
would
be
unjust
to
allow
the
insurer
to
retain
the
reserve
 value
of
the
policy,
which
is
the
excess
of
the
premiums
paid
over
the
actual
risk
 carried
 during
 the
 years
 when
 the
 policy
 had
 been
 in
 force.
 This
 rule
 was
 announced
 in
 the
 well‐known
 Statham
 case
 which,
 in
 the
 opinion
 of
 Professor
 Vance,
is
the
correct
rule.
 
 After
perusing
the
Insurance
Act,
we
are
firmly
persuaded
that
the
non‐payment
of
 premiums
 is
 such
 a
 vital
 defense
 of
 insurance
 companies
 that
 since
 the
 very
 beginning,
 said
 Act
 no.
 2427
 expressly
 preserved
 it,
 by
 providing
 that
 after
 the
 policy
shall
have
been
in
force
for
two
years,
it
shall
become
incontestable
(i.e.
the
 insurer
 shall
 have
 no
 defense)
 except
 for
 fraud,
 non‐payment
 of
 premiums,
 and
 military
 or
 naval
 service
 in
 time
 of
 war
 (sec.
 184
 [b],
 Insurance
 Act).
 And
 when
 Congress
 recently
 amended
 this
 section
 (Rep.
 Act
 No.
 171),
 the
 defense
 of
 fraud
 was
 eliminated,
 while
 the
 defense
 of
 nonpayment
 of
 premiums
 was
 preserved.
 Thus
the
fundamental
character
of
the
undertaking
to
pay
premiums
and
the
high
 importance
of
the
defense
of
non‐payment
thereof,
was
specifically
recognized.
 In
 keeping
 with
 such
 legislative
 policy,
 we
 feel
 no
 hesitation
 to
 adopt
 the
 United
 States
 Rule,
 which
 is
 in
 effect
 a
 variation
 of
 the
 Connecticut
 rule
 for
 the
 sake
 of
 equity.
In
this
connection,
it
appears
that
the
first
policy
had
no
reserve
value,
and
 that
 the
 equitable
 values
 of
 the
 second
 had
 been
 practically
 returned
 to
 the
 insured
in
the
form
of
loan
and
advance
for
premium.
 
 INSULAR
LIFE
V.
EBRADO
 80
SCRA
181
 
 FACTS:
 Buenaventura
secured
for
himself
a
life
insurance
policy,
naming
therein
Carponia
 as
 his
 revocable
 beneficiary.
 
 Thereafter,
 he
 met
 his
 death
 through
 an
 accident.

 Carponia
 moved
 to
 receive
 the
 proceeds
 and
 admitting
 therein
 that
 she
 was
 the
 common‐law
wife
of
insured.

The
true
widow
also
filed
for
the
proceeds.
 
 HELD:



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


2


In
essence,
a
life
insurance
policy
is
no
different
from
a
civil
donation
insofar
as
the
 beneficiary
is
concerned.
Both
are
founded
upon
the
same
consideration:
liberality.
 A
beneficiary
is
like
a
donee,
because
from
the
premiums
of
the
policy
which
the
 insured
pays
out
of
liberality,
the
beneficiary
will
receive
the
proceeds
or
profits
of
 said
 insurance.
 As
 a
 consequence,
 the
 proscription
 in
 Article
 739
 of
 the
 new
 Civil
 Code
 should
 equally
 operate
 in
 life
 insurance
 contracts.
 The
 mandate
 of
 Article
 2012
 cannot
 be
 laid
 aside:
 any
 person
 who
 cannot
 receive
 a
 donation
 cannot
 be
 named
 as
 beneficiary
 in
 the
 life
 insurance
 policy
 of
 the
 person
 who
 cannot
 make
 the
donation.
 
 Policy
 considerations
 and
 dictates
 of
 morality
 rightly
 justify
 the
 institution
 of
 a
 barrier
between
common
law
spouses
in
record
to
Property
relations
since
such
hip
 ultimately
 encroaches
 upon
 the
 nuptial
 and
 filial
 rights
 of
 the
 legitimate
 family
 There
is
every
reason
to
hold
that
the
bar
in
donations
between
legitimate
spouses
 and
 those
 between
 illegitimate
 ones
 should
 be
 enforced
 in
 life
 insurance
 policies
 since
 the
 same
 are
 based
 on
 similar
 consideration
 As
 above
 pointed
 out,
 a
 beneficiary
 in
 a
 fife
 insurance
 policy
 is
 no
 different
 from
 a
 donee.
 Both
 are
 recipients
of
pure
beneficence.
So
long
as
manage
remains
the
threshold
of
family
 laws,
 reason
 and
 morality
 dictate
 that
 the
 impediments
 imposed
 upon
 married
 couple
 should
 likewise
 be
 imposed
 upon
 extra‐marital
 relationship.
 If
 legitimate
 relationship
is
circumscribed
by
these
legal
disabilities,
with
more
reason
should
an
 illicit
relationship
be
restricted
by
these
disabilities.

 
 INTERPRETATION
OF
INSURANCE
CONTRACTS
 • Ambiguities
and
obscurities
should
be
strictly
construed
against
the
party
 who
caused
them
 
 QUA
CHEE
GAN
V.
LAW
UNION
 52
OG
1982
 
 FACTS:
 Plaintiff
sought
the
proceeds
of
its
fire
insurance
with
the
company.

the
insurance
 company
 denies
 payment
 due
 to
 many
 reasons—one,
 the
 violation
 of
 certain
 provisions
of
the
policy.

It
alleged
that
the
claimant
was
guilty
of
arson
also.


 
 HELD:
 Taking
 into
 account
 the
 well
 known
 rule
 that
 ambiguities
 or
 obscurities
 must
 be
 strictly
interpreted
agaInst
the
party
that
caused
them,
1the
"memo
of
warranty"


invoked
 by
 appellant
 bars
 the
 latter
 from
 questioning
 the
 existence
 of
 the
 appliances
 called
 for
 in
 the
 insured
 premises,
 since
 its
 initial
 expression,
 "the
 undernoted
appliances
for
the
extinction
of
fire
being
kept
on
the
premises
insured
 hereby,
.
.
.
it
is
hereby
warranted
.
.
.",
admists
of
interpretation
as
an
admission
of
 the
existence
of
such
appliances
which
appellant
cannot
now
contradict,
should
the
 parol
evidence
rule
apply.
 
 This
 rigid
 application
 of
 the
 rule
 on
 ambiguities
 has
 become
 necessary
 in
 view
 of
 current
 business
 practices.
 The
 courts
 cannot
 ignore
 that
 nowadays
 monopolies,
 cartels
 and
 concentrations
 of
 capital,
 endowed
 with
 overwhelming
 economic
 power,
 manage
 to
 impose
 upon
 parties
 dealing
 with
 them
 cunningly
 prepared
 "agreements"
that
the
weaker
party
may
not
change
one
whit,
his
participation
in
 the
 "agreement"
 being
 reduced
 to
 the
 alternative
 to
 take
 it
 or
 leave
 it"
 labelled
 since
 Raymond
 Baloilles"
 contracts
 by
 adherence"
 (con
 tracts
 d'adhesion),
 in
 contrast
 to
 these
 entered
 into
 by
 parties
 bargaining
 on
 an
 equal
 footing,
 such
 contracts
(of
which
policies
of
insurance
and
international
bills
of
lading
are
prime
 examples)
obviously
call
for
greater
strictness
and
vigilance
on
the
part
of
courts
of
 justice
with
a
view
to
protecting
the
weaker
party
from
abuses
and
imposition,
and
 prevent
their
becoming
traps
for
the
unwary.
 
 TY
V.
FILIPINAS
CIA.
DE
SEGUROS
 17
SCRA
364
 
 FACTS:
 Ty
filed
a
claim
against
several
insurance
companies
for
compensation
due
to
the
 injury
he
incurred
to
his
left
hand.

He
was
a
machine
operator
in
a
company
and
 he
took
a
personal
accident
insurance
from
several
companies.

In
the
said
policies,
 for
 it
 to
 be
 considered
 disability,
 there
 must
 be
 severance
 or
 amputation
 of
 the
 affected
 member
 from
 the
 body
 of
 the
 insured.
 
 What
 happened
 in
 his
 case
 was
 that
during
a
fire,
a
heavy
object
caused
his
hand
to
be
fractured.
 
 HELD:
 Ty
cannot
claim
to
have
been
misled
by
the
terms
of
the
contract.

The
provision
is
 clear
 enough
 to
 inform
 the
 party
 entering
 into
 the
 contract
 that
 the
 loss
 to
 be
 considered
 a
 disability
 entitled
 to
 indemnity
 must
 be
 severance
 or
 amputation
 from
the
body
of
the
insured.


 
 GULF
RESORTS
V.
PHIL.
CHARTER
INSURANCE
CORP.



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


3


458
SCRA
550
 
 FACTS:
 Gulf
Resorts’
properties
was
previously
insured
with
American
Home
Assurance.

In
 the
 said
 earthquake
 insurance,
 what
 were
 covered
 only
 were
 the
 company’s
 two
 swimming
pools.

This
was
included
in
the
earthquake
endorsement
clause.

When
 the
company
decided
to
be
insured
instead
by
PCIC,
it
ordered
that
the
same
policy
 with
AHAC
be
copied.

Thereafter,
an
earthquake
broke
out,
causing
magnanimous
 damage
 to
 the
 properties.
 
 After
 assessment
 by
 PCIC,
 it
 denied
 claims
 of
 Gulf
 Resorts
 except
 to
 those
 pertaining
 to
 the
 swimming
 pools
 as
 it
 was
 allegedly
 not
 covered
by
the
earthquake
insurance
clause.


 
 HELD:
 It
 is
 basic
 that
 all
 the
 provisions
 of
 the
 insurance
 policy
 should
 be
 examined
 and
 interpreted
 in
 consonance
 with
 each
 other.
 All
 its
 parts
 are
 reflective
 of
 the
 true
 intent
 of
 the
 parties.
 
 The
 policy
 cannot
 be
 construed
 piecemeal.
 Certain
 stipulations
cannot
be
segregated
and
then
made
to
control;
neither
do
particular
 words
 or
 phrases
 necessarily
 determine
 its
 character.
 Petitioner
 cannot
 focus
 on
 the
earthquake
shock
endorsement
to
the
exclusion
of
the
other
provisions.

All
the
 provisions
 and
 riders,
 taken
 and
 interpreted
 together,
 indubitably
 show
 the
 intention
of
the
parties
to
extend
earthquake
shock
coverage
to
the
two
swimming
 pools
only.
 
 A
 careful
 examination
 of
 the
 premium
 recapitulation
 will
 show
 that
 it
 is
 the
 clear
 intent
 of
 the
 parties
 to
 extend
 earthquake
 shock
 coverage
 only
 to
 the
 two
 swimming
pools.
Section
2(1)
of
the
Insurance
Code
defines
a
contract
of
insurance
 as
an
agreement
whereby
one
undertakes
for
a
consideration
to
indemnify
another
 against
loss,
damage
or
liability
arising
from
an
unknown
or
contingent
event.
Thus,
 an
insurance
contract
exists
where
the
following
elements
concur:
 
 1.


The
insured
has
an
insurable
interest;
 
 2.


The
insured
is
subject
to
a
risk
of
loss
by
the
happening
of
the
designated
peril;
 
 3.


The
insurer
assumes
the
risk;
 
 4.


Such
assumption
of
risk
is
part
of
a
general
scheme
to
distribute
actual
losses
 among
a
large
group
of
persons
bearing
a
similar
risk;
and



 5.


In
consideration
of
the
insurer's
promise,
the
insured
pays
a
premium.
 
 An
 insurance
 premium
 is
 the
 consideration
 paid
 an
 insurer
 for
 undertaking
 to
 indemnify
 the
 insured
 against
 a
 specified
 peril.
 In
 fire,
 casualty,
 and
 marine
 insurance,
the
premium
payable
becomes
a
debt
as
soon
as
the
risk
attaches.
In
the
 subject
policy,
no
premium
payments
were
made
with
regard
to
earthquake
shock
 coverage,
except
on
the
two
swimming
pools.

There
is
no
mention
of
any
premium
 payable
 for
 the
 other
 resort
 properties
 with
 regard
 to
 earthquake
 shock.
 
 This
 is
 consistent
 with
 the
 history
 of
 petitioner’s
 previous
 insurance
 policies
 from
 AHAC‐ AIU.
 
 There
is
no
ambiguity
in
the
terms
of
the
contract
and
its
riders.

The
general
rule
 that
 insurance
 contracts
 are
 contracts
 of
 adhesion
 which
 should
 be
 liberally
 construed
in
favor
of
the
insured
and
strictly
against
the
insurer
company
cannot
 be
applied.

 
 Sec.
2.
Whenever
used
in
this
Code,
the
following
terms
shall
have
the
respective
 meanings
 hereinafter
 set
 forth
 or
 indicated,
 unless
 the
 context
 otherwise
 requires:
 
 (1)
 A
 "contract
 of
 insurance"
 is
 an
 agreement
 whereby
 one
 undertakes
 for
 a
 consideration
to
indemnify
another
against
loss,
damage
or
liability
arising
from
 an
unknown
or
contingent
event.
 
 A
contract
of
suretyship
shall
be
deemed
to
be
an
insurance
contract,
within
the
 meaning
of
this
Code,
only
if
made
by
a
surety
who
or
which,
as
such,
is
doing
an
 insurance
business
as
hereinafter
provided.
 
 (2)
 The
 term
 "doing
 an
 insurance
 business"
 or
 "transacting
 an
 insurance
 business",
within
the
meaning
of
this
Code,
shall
include:
 
 (a)
making
or
proposing
to
make,
as
insurer,
any
insurance
contract;
 
 (b)
 making
 or
 proposing
 to
 make,
 as
 surety,
 any
 contract
 of
 suretyship
 as
 a
 vocation
and
not
as
merely
incidental
to
any
other
legitimate
business
or
activity
 of
the
surety;
 



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


4


(c)
 doing
 any
 kind
 of
 business,
 including
 a
 reinsurance
 business,
 specifically
 recognized
as
constituting
the
doing
of
an
insurance
business
within
the
meaning
 of
this
Code;
 
 (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
the
fact
that
no
profit
is
derived
 from
 the
 making
 of
 insurance
 contracts,
 agreements
 or
 transactions
 or
 that
 no
 separate
 or
 direct
 consideration
 is
 received
 therefore,
 shall
 not
 be
 deemed
 conclusive
 to
 show
 that
 the
 making
 thereof
 does
 not
 constitute
 the
 doing
 or
 transacting
of
an
insurance
business.
 
 (3)
 As
 used
 in
 this
 code,
 the
 term
 "Commissioner"
 means
 the
 "Insurance
 Commissioner".
 
 INSURANCE
CONTRACT
 • Agreement
 whereby
 one
 undertakes
 for
 a
 consideration
 to
 indemnify
 another
 against
 loss,
 damage,
 or
 liability
 arising
 from
 a
 an
 unknown
 or
 contingent
event
 
 ELEMENTS
OF
AN
INSURANCE
CONTRACT
 1. The
 insurer
 possesses
 an
 interest
 of
 some
 kind
 susceptible
 of
 pecuniary
 estimation—insurable
interest
 2. The
 insurer
 is
 subject
 to
 the
 risk
 of
 loss
 through
 the
 destruction
 or
 impairment
of
that
interest
by
the
happening
of
designated
perils
 3. The
insurer
assumes
the
risk
of
loss
 4. Such
 assumption
 is
 part
 of
 a
 general
 scheme
 to
 distribute
 actual
 losses
 among
a
large
group
of
persons
bearing
somewhat
similar
risks
 5. As
 consideration
 for
 the
 insurer’s
 promise,
 the
 insured
 makes
 a
 ratable
 contribution
called
a
premium
to
an
insurance
fund
 
 NATURE
AND
CHARACTERISTICS
OF
AN
INSURANCE
CONTRACT
 1. It
is
aleatory
 2. Contract
of
indemnity
for
non‐life
insurance
and
a
contract
of
investment
 for
life
insurance
 3. It
is
a
personal
contract
 4. It
is
executory
and
conditional
on
the
part
of
the
insurer
 5. It
is
one
of
perfect
good
faith


6. It
is
a
contract
of
adhesion
 
 DOING
AN
INSURANCE
BUSINESS/TRANSACTING
AN
INSURANCE
BUSINESS
 1. Making
or
proposing
to
make,
as
insurer,
any
insurance
contract
 2. Making
or
proposing
to
make,
as
surety,
any
contract
of
suretyship
as
a
 vocation
and
not
as
incidental
to
any
legitimate
business
or
activity
of
the
 surety
 3. Doing
 any
 kind
 of
 business
 including
 a
 reinsurance
 business,
 specifically
 recognized
as
constituting
the
doing
of
an
insurance
business
 4. 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
 *The
 fact
 that
 no
 profit
 is
 derived
 from
 the
 contract
 or
 transaction
 or
 that
 no
 separate
and
distinct
consideration
is
received
for
such
contract
or
transaction
shall
 not
be
deemed
conclusive
to
show
that
no
insurance
business
was
transacted.
 
 PHILAMLIFE
V.
ANSALDO
 234
SCRA
509
 
 FACTS:
 Paterno
 together
 with
 other
 complainants,
 wrote
 a
 letter‐complaint
 to
 the
 Insurance
 Commissioner
 with
 respect
 to
 the
 problems
 they
 were
 undergoing
 as
 agents,
supervisors,
consumers
of
Philamlife.
Specifying
their
demands,
they
stated
 that
 Philamlife’s
 provisions
 on
 fees
 and
 charges
 stated
 in
 the
 contract
 of
 agency,
 etc.
be
declared
null
and
void.
 
 HELD:
 The
insurance
commissioner
has
the
authority
to
regulate
the
insurance
business.

 Nonetheless,
the
crux
of
the
controversy
is
a
contract
of
agency
and
is
not
within
 the
meaning
of
what
is
“doing
an
insurance
business”,
Section
2
of
the
Insurance
 Code
cannot
be
invoked
to
give
jurisdiction
to
the
Insurance
Commissioner.


 
 It
 also
 doesn't
 help
 to
 say
 that
 Section
 416
 is
 applicable
 to
 plaintiff’s
 case.
 
 A
 reading
 of
 the
 section
 shows
 that
 the
 quasi‐judicial
 power
 is
 limited
 by
 law
 to
 complaints
 involving
 loss,
 damage
 or
 liability
 for
 which
 an
 insurer
 may
 be
 answerable
 under
 any
 kind
 of
 policy
 or
 contract
 of
 insurance.
 
 Hence,
 this
 power
 doesn't
cover
the
relationship
affecting
the
insurance
company
and
its
agents
but
is
 limited
 to
 adjudicating
 claims
 and
 compliants
 filed
 by
 the
 insured
 against
 the
 insurance
company.



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


5



 THE
CONTRACT
OF
INSURANCE
 
 Sec.
 3.
 Any
 contingent
 or
 unknown
 event,
 whether
 past
 or
 future,
 which
 may
 damnify
 a
 person
 having
 an
 insurable
 interest,
 or
 create
 a
 liability
 against
 him,
 may
be
insured
against,
subject
to
the
provisions
of
this
chapter.
 
 The
consent
of
the
husband
is
not
necessary
for
the
validity
of
an
insurance
policy
 taken
out
by
a
married
woman
on
her
life
or
that
of
her
children.
 
 [Any
 minor
 of
 the
 age
 of
 eighteen
 years
 or
 more,
 may,
 notwithstanding
 such
 minority,
 contract
 for
 life,
 health
 and
 accident
 insurance,
 with
 any
 insurance
 company
 duly
 authorized
 to
 do
 business
 in
 the
 Philippines,
 provided
 the
 insurance
 is
 taken
 on
 his
 own
 life
 and
 the
 beneficiary
 appointed
 is
 the
 minor's
 estate
or
the
minor's
father,
mother,
husband,
wife,
child,
brother
or
sister.]
 
 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.
 
 All
 rights,
 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,
unless
otherwise
provided
for
in
the
policy.
 
 WHAT
MAY
BE
INSURED
AGAINST
 1. Any
 contingent
 or
 unknown
 event,
 past
 or
 future,
 which
 may
 cause
 damage
to
a
person
having
an
insurable
interest
 2. Any
 contingent
 or
 unknown
 event,
 past
 or
 future,
 which
 may
 cause
 a
 liability
against
a
person
insured
 
 VALIDITY
OF
INSURANCE
POLICY
TAKEN
OUT
BY
A
MARRIED
WOMAN
OR
MINOR
 1. Consent
of
husband
not
necessary
for
validity
of
life
insurance
on
wife’s
 life
or
that
of
her
children
 2. Insured
 married
 woman
 or
 minor
 may
 exercise
 rights
 and
 privileges
 of
 owner
under
a
life
policy

 3. All
 rights,
 title,
 interest
 in
 the
 insurance
 policy
 taken
 out
 by
 an
 original
 owner
 on
 the
 life
 of
 the
 minor
 automatically
 vests
 in
 the
 minor
 upon
 death
of
original
owner
unless
otherwise
provided
for
in
the
policy
 


TWO
SCENARIOS
CONTEMPLATED
IN
PAR.
2
 1. The
 married
 woman
 takes
 a
 life
 insurance
 on
 her
 own
 life.
 
 When
 she
 dies,
the
proceeds
will
go
to
her
designated
beneficiary.
 2. The
married
woman
takes
a
life
insurance
on
the
life
of
her
minor
child.

 When
 she
 dies,
 as
 the
 original
 owner,
 all
 rights
 and
 privileges
 shall
 be
 vested
on
the
minor

 
 RELATED
LAWS
 1. Article
234
FC
 2. Article
1174
CC
 3. Article
110
FC
 4. Article
1327
CC
 5. Article
1390
CC
 
 PHILAMCARE
V.
CA

 379
SCRA
356
(2002)
 
 FACTS:
 Ernani
 Trinos
 applied
 for
 a
 health
 care
 coverage
 with
 petitioner
 and
 was
 duly
 issued
one.

One
of
the
questions
asked
in
the
application
form
was
whether
or
not
 he
 had
 history
 of
 heart
 disease,
 diabetes,
 cancer,
 etc.?
 
 To
 this
 question,
 he
 answered
 no.
 
 Months
 later
 after
 the
 issuance
 of
 the
 policy,
 he
 suffered
 from
 a
 heart
 attack
 and
 was
 confined
 in
 the
 hospital.
 
 His
 wife
 tried
 to
 claim
 from
 the
 health
 care
 policy
 but
 she
 was
 denied
 relief.
 
 The
 MMC
 allegedly
 found
 out
 that
 long
 before
 he
 applied
 for
 health
 care
 policy,
 he
 had
 history
 already
 of
 hypertension,
 diabetes,
 etc.
 
 After
 the
 discharge
 from
 the
 hospital,
 he
 was
 taken
 care
of
by
a
physical
therapist.

Later
on,
he
was
confined
again
but
due
to
financial
 difficulties,
he
was
taken
home.

A
few
days
after,
he
died.

This
prompted
the
wife
 to
file
a
complaint
against
the
insurance
company.


 
 HELD:
 Section
2
(1)
of
the
Insurance
Code
defines
a
contract
of
insurance
as
an
agreement
 whereby
 one
 undertakes
 for
 a
 consideration
 to
 indemnify
 another
 against
 loss,
 damage
 or
 liability
 arising
 from
 an
 unknown
 or
 contingent
 event.
 An
 insurance
 contract
exists
where
the
following
elements
concur:
 
 1.
The
insured
has
an
insurable
interest;
 



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


6


2.
The
insured
is
subject
to
a
risk
of
loss
by
the
happening
of
the
designated
peril;
 
 3.
The
insurer
assumes
the
risk;
 
 4.
 Such
 assumption
 of
 risk
 is
 part
 of
 a
 general
 scheme
 to
 distribute
 actual
 losses
 among
a
large
group
of
persons
bearing
a
similar
risk;
and
 
 5.
In
consideration
of
the
insurer’s
promise,
the
insured
pays
a
premium.8
 
 Section
 3
 of
 the
 Insurance
 Code
 states
 that
 any
 contingent
 or
 unknown
 event,
 whether
past
or
future,
which
may
damnify
a
person
having
an
insurable
interest
 against
him,
may
be
insured
against.
Every
person
has
an
insurable
interest
in
the
 life
and
health
of
himself.
Section
10
provides:
 
 Every
person
has
an
insurable
interest
in
the
life
and
health:
 
 (1)
of
himself,
of
his
spouse
and
of
his
children;
 
 (2)
of
any
person
on
whom
he
depends
wholly
or
in
part
for
education
or
support,
 or
in
whom
he
has
a
pecuniary
interest;
 
 (3)
 of
 any
 person
 under
 a
 legal
 obligation
 to
 him
 for
 the
 payment
 of
 money,
 respecting
property
or
service,
of
which
death
or
illness
might
delay
or
prevent
the
 performance;
and
 
 (4)
of
any
person
upon
whose
life
any
estate
or
interest
vested
in
him
depends.
 
 In
the
case
at
bar,
the
insurable
interest
of
respondent’s
husband
in
obtaining
the
 health
care
agreement
was
his
own
health.
The
health
care
agreement
was
in
the
 nature
 of
 non‐life
 insurance,
 which
 is
 primarily
 a
 contract
 of
 indemnity.
 Once
 the
 member
incurs
hospital,
medical
or
any
other
expense
arising
from
sickness,
injury
 or
other
stipulated
contingent,
the
health
care
provider
must
pay
for
the
same
to
 the
extent
agreed
upon
under
the
contract.
 
 With
respect
to
the
contention
of
petitioner
that
insured
concealed
a
material
fact,
 the
answer
assailed
was
in
response
to
a
question
relating
to
the
medical
history
of
 the
 applicant.
 
 This
 relies
 largely
 on
 opinion
 rather
 than
 fact,
 especially
 that
 the
 applicant
was
not
a
doctor.

Where
matters
of
opinion
or
judgment
are
called
for,


answers
 in
 good
 faith
 and
 without
 intent
 to
 deceive
 will
 not
 avoid
 a
 policy
 even
 though
they
were
untrue.


 
 Sec.
4.
The
preceding
section
does
not
authorize
an
insurance
for
or
against
the
 drawing
of
any
lottery,
or
for
or
against
any
chance
or
ticket
in
a
lottery
drawing
 a
prize.
 
 INSURANCE
FOR
OR
AGAINST
LOTTERY
IS
VOID
 • A
 person
 who
 purchases
 an
 instant
 sweepstake
 cannot
 insure
 himself
 against
the
failure
of
his
ticket
to
win
a
prize
 • A
contract
of
insurance
is
a
contract
of
indemnity
and
not
of
suretyship
 • In
 a
 gambling
 contract,
 the
 parties
 contemplate
 gain
 through
 mere
 chance,
 while
 in
 a
 contract
 for
 insurance,
 the
 parties
 seek
 to
 distribute
 possible
law
by
reason
of
mischance
 
 Sec.
5.
All
kinds
of
insurance
are
subject
to
the
provisions
of
this
chapter
so
far
as
 the
provisions
can
apply.
 
 APPLICABILITY
OF
THIS
CHAPTER
 1. Marine
insurance
 2. Fire
 3. Casualty
 4. Suretyship

 5. Life
 6. Other
kinds
of
insurance
 
 PARTIES
TO
THE
CONTRACT
 
 Sec.
6.
Every
person,
partnership,
association,
or
corporation
duly
authorized
to
 transact
 insurance
 business
 as
 elsewhere
 provided
 in
 this
 code,
 may
 be
 an
 insurer.
 
 PARTIES
TO
AN
INSURANCE
CONTRACT
 1. The
insurer—he
is
the
party
who
agrees
to
indemnify
another
upon
the
 happening
of
a
specified
contingency
 2. The
insured—he
is
party
to
be
indemnified
in
case
of
loss
 3. The
 beneficiary—he
 is
 the
 person
 who
 receives
 the
 benefits
 of
 an
 insurance
policy
upon
its
maturity




MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


7



 WHO
MAY
BE
AN
INSURER
 • Every
person,
partnership,
association,
or
corporation
duly
authorized
to
 transact
business
as
provided
in
this
code
 • This
 shall
 include
 all
 individuals,
 partnerships,
 associations,
 or
 corporations
 including
 government‐owned
 or
 controlled
 corporations
 and
 entities
 engaged
 as
 principals
 in
 the
 insurance
 business
 excepting
 mutual
benefit
associations
 
 INSURANCE
CORPORATION
 • Those
formed
and
organized

 o To
save
any
person
or
persons
or
other
corporations
from
loss,
 damage,
 liability,
 arising
 from
 any
 unknown
 or
 future
 or
 contingent
event,
or

 o To
indemnify
or
to
compensate
any
person
or
persons
or
other
 corporations
for
any
such
loss,
damage,
or
liability,
or

 o To
 guarantee
 the
 performance
 of
 or
 compliance
 with
 contractual
obligations
or
the
payment
of
debts
of
others
 
 Sec.
7.
Anyone
except
a
public
enemy
may
be
insured.
 
 WHO
MAY
BE
INSURED
 1. Anyone
 2. Except
a
public
enemy
 
 FILIPINAS
CIA
DE
SEGUROS
V.
HUENEFIELD
AND
CO.
 89
PHIL
54
 
 FACTS:
 The
 respondent
 corporation
 was
 operated
 by
 Germans
 and
 majority
 of
 its
 stock
 was
 owned
 by
 the
 same.
 
 They
 secured
 a
 fire
 policy
 after
 paying
 the
 appropriate
 premium.
 
 During
 the
 Japanese
 military
 occupation,
 the
 warehouse
 was
 burned
 and
 destroyed.
 
 Whatever
 was
 salvaged
 from
 the
 premises
 were
 sold
 in
 public
 auction
 and
 the
 proceeds
 were
 deducted
 from
 the
 total
 loss.
 
 The
 insurance
 company
did
not
indemnify
the
corporation,
alleging
therewith
that
the
Americans
 had
declared
war
against
the
Germans
and
that
the
corporation
was
being
run
by
 the
same.


 


HELD:
 The
 Philippine
 Insurance
 Law
 (Act
 No.
 2427,
 as
 amended,)
 in
 section
 8,
 provides
 that
 "anyone
 except
 a
 public
 enemy
 may
 be
 insured."
 It
 stands
 to
 reason
 that
 an
 insurance
 policy
 ceases
 to
 be
 allowable
 as
 soon
 as
 an
 insured
 becomes
 a
 public
 enemy.
 
 In
this
case,
the
respondent
corporation
was
indeed
an
enemy
corporation.
 
 Sec.
 8.
 Unless
 the
 policy
 otherwise
 provides,
 where
 a
 mortgagor
 of
 property
 effects
insurance
in
his
own
name
providing
that
the
loss
shall
be
payable
to
the
 mortgagee,
 or
 assigns
 a
 policy
 of
 insurance
 to
 a
 mortgagee,
 the
 insurance
 is
 deemed
 to
 be
 upon
 the
 interest
 of
 the
 mortgagor,
 who
 does
 not
 cease
 to
 be
 a
 party
 to
 the
 original
 contract,
 and
 any
 act
 of
 his,
 prior
 to
 the
 loss,
 which
 would
 otherwise
avoid
the
insurance,
will
have
the
same
effect,
although
the
property
is
 in
 the
 hands
 of
 the
 mortgagee,
 but
 any
 act
 which,
 under
 the
 contract
 of
 insurance,
 is
 to
 be
 performed
 by
 the
 mortgagor,
 may
 be
 performed
 by
 the
 mortgagee
 therein
 named,
 with
 the
 same
 effect
 as
 if
 it
 had
 been
 performed
 by
 the
mortgagor.
 
 THREE
CONTRACTS
CONTEMPLATED
IN
THE
AFOREMENTIONED
PROVISION
 1. Loan:
creditor
and
debtor
 2. Mortgage:
 the
 debtor
 will
 be
 the
 one
 to
 mortgage
 the
 property
 (mortgagor),
in
favor
of
the
creditor
(mortgagee)
 3. Insurance:
mortgagor
becomes
the
insured
and
the
insurance
company
is
 the
 insurer
 (the
 bank
 shall
 be
 the
 first
 to
 receive
 the
 proceeds
 of
 the
 insurance
to
the
extent
of
the
loan)
 a. Loss
 payable
 clause
 which
 in
 effect
 says
 that
 there
 is
 a
 loss
 payable
to
the
bank
as
its
interest
may
appear
 
 WHO
MAY
INSURE
MORTGAGED
PROPERTY
 • Both
 the
 mortgagor
 and
 mortgagee
 have
 each
 a
 separate
 and
 distinct
 insurable
 interest
 in
 the
 mortgaged
 property
 and
 that
 they
 may
 take
 separate
policies
with
the
same
or
different
insurance
companies
 
 EXTENT
OF
MORTGAGOR’S
AND
MORTGAGEE’S
INSURABLE
INTEREST
 1. The
mortgagor
may
insure
the
mortgaged
property
to
its
full
value
while
 the
mortgagee
can
only
insure
it
to
the
extent
of
the
debt
secured
 2. Separate
 insurance
 covering
 different
 insurable
 interests
 may
 be
 obtained
by
the
mortgagor
and
the
mortgagee



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


8



 INSURANCE
TAKEN
BY
THE
MORTGAGOR
 • A
mortgagor
may
take
an
insurance
payable

 o To
himself
 o To
the
mortgagee
 • If
the
mortgagor
takes
insurance
payable
to
the
mortgagee,
or
where
the
 mortgagor
assigns
the
policy
taken
by
him
to
the
mortgagee,
and
unless
 the
policy
otherwise
provides,
the
legal
effects
are:
 o The
 insurance
 is
 still
 deemed
 to
 be
 upon
 the
 interest
 of
 the
 mortgagor
 o The
 mortgagor
 doesn't
 cease
 to
 be
 a
 party
 to
 the
 original
 contract
 o Any
 act
 of
 the
 mortgagor,
 prior
 to
 the
 loss,
 which
 would
 otherwise
render
the
insurance
null
and
void
still
renders
it
null
 and
 void
 although
 the
 property
 is
 in
 the
 hands
 of
 the
 mortgagee
and
the
proceeds
are
payable
to
the
mortgagee
 o Any
 act
 which,
 under
 the
 contract
 of
 insurance,
 is
 to
 be
 performed
 by
 the
 mortgagor,
 may
 be
 performed
 by
 the
 mortgagee
with
the
same
legal
effect
 o In
case
of
loss,
the
mortgagee
is
entitled
to
the
proceeds
in
the
 extent
 of
 the
 debt
 secured
 while
 the
 excess
 will
 go
 to
 the
 mortgagor
 o Upon
the
recovery
of
the
mortgagee
to
the
extent
of
his
credit,
 his
debt
is
extinguished
and
the
mortgagor
is
released
from
his
 indebtedness
 
 INSURANCE
TAKEN
BY
THE
MORTGAGEE
 • If
 the
 mortgagee
 insures
 his
 own
 interest
 in
 the
 mortgaged
 property
 without
reference
to
the
right
of
the
mortgagor,
the
legal
effects
are:
 o The
mortgagee
is
entitled
to
the
proceeds
of
the
policy
in
case
 of
loss
to
the
extent
of
his
credit
 o If
 the
 proceeds
 are
 more
 than
 the
 total
 amount
 of
 the
 credit,
 the
mortgagor
has
no
right
to
collect
the
balance
 o If
the
proceeds
are
equal
to
the
total
amount
of
the
credit,
the
 mortgagee
 can
 no
 longer
 recover
 the
 mortgagor’s
 indebtedness,
 since
 the
 insurer
 is
 subrogated
 to
 the
 mortgagee’s
rights
 o If
the
proceeds
are
less
than
the
total
amount
of
the
credit,
the
 mortgagee
may
still
recover
from
the
mortgagor
the
deficiency


o 


Upon
 payment,
 the
 insurer
 is
 subrogated
 to
 the
 rights
 of
 the
 mortgagee
against
the
mortgagor
to
the
extent
of
the
amount
 paid.




SAN
MIGUEL
V.
LAW
UNION
ROCK
INSURANCE

 40
PHIL
674
 
 FACTS:
 San
 Miguel
 sought
 to
 recover
 from
 two
 insurance
 policies.
 
 It
 is
 maintained
 however
 that
 San
 Miguel’s
 only
 interest
 in
 the
 property
 insured
 is
 that
 it
 is
 a
 mortgage
creditor.

The
property
was
really
owned
by
Harding
who
was
included
as
 a
defendant.

The
insurance
companies
don't
deny
liability
but
they
maintain
that
 San
 Miguel
 is
 only
 entitled
 to
 the
 amount
 of
 the
 mortgage
 credit.
 
 They
 also
 maintain
 that
 Harding
 is
 not
 entitled
 to
 any
 proceeds
 in
 excess
 of
 the
 mortgage
 credit
because
he
wasn't
privy
to
the
insurance
contract.
 
 HELD:
 There
 is
 no
 cause
 of
 action
 in
 Henry
 Harding
 against
 the
 insurance
 companies
 is
 show.
He
is
not
a
party
to
the
contracts
of
insurance
and
cannot
directly
maintain
 an
 action
 thereon.
 His
 claim
 is
 merely
 of
 an
 equitable
 and
 subsidiary
 nature
 and
 must
be
made
effective,
if
at
all,
through
the
San
Miguel
Brewery
in
whose
name
 the
contracts
are
written.
Now
the
Brewery,
as
mortgagee
of
the
insured
property,
 undoubtedly
 had
 an
 insurable
 interest
 therein;
 but
 it
 could
 not,
 in
 any
 event,
 recover
 upon
 these
 policies
 an
 amount
 in
 excess
 of
 its
 mortgage
 credit.
 In
 this
 connection
it
will
be
remembered
that
Antonio
Brias,
upon
making
application
for
 the
insurance,
informed
the
company
with
which
the
insurance
was
placed
that
the
 Brewery
was
interested
only
as
a
mortgagee.
It
would,
therefore,
be
impossible
for
 the
Brewery
mortgage
on
the
insured
property.
 
 This
 conclusion
 is
 not
 only
 deducible
 from
 the
 principles
 governing
 the
 operation
 and
effect
of
insurance
contracts
in
general
but
the
point
is
clearly
covered
by
the
 express
provisions
of
sections
16
and
50
of
the
Insurance
Act
(Act
No.
2427).
In
the
 first
of
the
sections
cited,
it
is
declared
that
"the
measure
of
an
insurable
interest
in
 property
 is
 the
 extent
 to
 which
 the
 insured
 might
 be
 damnified
 by
 loss
 or
 injury
 thereof"
(sec.
16);
while
in
the
other
it
is
stated
that
"the
insurance
shall
be
applied
 exclusively
 to
 the
 proper
 interest
 of
 the
 person
 in
 whose
 name
 it
 is
 made
 unless
 otherwise
specified
in
the
policy"
(sec.
50).
 



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


9


These
 provisions
 would
 have
 been
 fatal
 to
 any
 attempt
 at
 recovery
 even
 by
 D.
 P.
 Dunn,
if
the
ownership
of
the
property
had
continued
in
him
up
to
the
time
of
the
 loss;
and
as
regards
Harding,
an
additional
insuperable
obstacle
is
found
in
the
fact
 that
the
ownership
of
the
property
had
been
charged,
prior
to
the
loss,
without
any
 corresponding
change
having
been
effected
in
the
policy
of
insurance.
In
section
19
 of
 the
 Insurance
 Act
 we
 find
 it
 stated
 that
 "a
 change
 of
 interest
 in
 any
 part
 of
 a
 thing
 insured
 unaccompanied
 by
 a
 corresponding
 change
 of
 interest
 in
 the
 insurance,
suspends
the
insurance
to
an
equivalent
extent,
until
the
interest
in
the
 thing
 and
 the
 interest
 in
 the
 insurance
 are
 vested
 in
 the
 same
 person."
 Again
 in
 section
55
it
is
declared
that
"the
mere
transfer
of
a
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."
 
 Undoubtedly
 these
 policies
 of
 insurance
 might
 have
 been
 so
 framed
 as
 to
 have
 been
"payable
to
the
Sane
Miguel
Brewery,
mortgagee,
as
its
interest
may
appear,
 remainder
 to
 whomsoever,
 during
 the
 continuance
 of
 the
 risk,
 may
 become
 the
 owner
 of
 the
 interest
 insured."
 (Sec
 54,
 Act
 No.
 2427.)
 Such
 a
 clause
 would
 have
 proved
 an
 intention
 to
 insure
 the
 entire
 interest
 in
 the
 property,
 not
 merely
 the
 insurable
 interest
 of
 the
 San
 Miguel
 Brewery,
 and
 would
 have
 shown
 exactly
 to
 whom
 the
 money,
 in
 case
 of
 loss,
 should
 be
 paid.
 But
 the
 policies
 are
 not
 so
 written.

 
 GREPALIFE
V.
CA
 316
SCRA
677
 
 FACTS:
 1.

3. 4.

5.

6.

2.

A
contract
of
group
life
insurance
was
executed
between
petitioner
Great
 Pacific
 Life
 Assurance
 Corporation
 (hereinafter
 Grepalife)
 and
 Development
Bank
of
the
Philippines
(hereinafter
DBP).
Grepalife
agreed
 to
insure
the
lives
of
eligible
housing
loan
mortgagors
of
DBP.
 Leuterio,
 a
 physician
 and
 a
 housing
 debtor
 of
 DBP
 applied
 for
 membership
in
the
group
life
insurance
plan.
In
an
application
form,
Dr.
 Leuterio
answered
questions
concerning
his
health
condition
as
follows:
 7.
Have
you
ever
had,
or
consulted,
a
physician
for
a
heart
condition,
high
 blood
pressure,
cancer,
diabetes,
lung;
kidney
or
stomach
disorder
or
any
 other
physical
impairment?
 



 HELD:
 The
 rationale
 of
 a
 group
 insurance
 policy
 of
 mortgagors,
 otherwise
 known
 as
 the
 "mortgage
 redemption
 insurance,"
 is
 a
 device
 for
 the
 protection
 of
 both
 the
 mortgagee
and
the
mortgagor.
On
the
part
of
the
mortgagee,
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,
 the
 proceeds
 from
 such
 insurance
 will
 be
 applied
 to
 the
 payment
 of
 the
 mortgage
 debt,
 thereby
 relieving
the
heirs
of
the
mortgagor
from
paying
the
obligation.

7
In
a
similar
vein,
 ample
 protection
 is
 given
 to
 the
 mortgagor
 under
 such
 a
 concept
 so
 that
 in
 the
 event
of
death;
the
mortgage
obligation
will
be
extinguished
by
the
application
of
 the
 insurance
 proceeds
 to
 the
 mortgage
 indebtedness.
 
 Consequently,
 where
 the
 mortgagor
pays
the
insurance
premium
under
the
group
insurance
policy,
making
 the
 loss
 payable
 to
 the
 mortgagee,
 the
 insurance
 is
 on
 the
 mortgagor's
 interest,


Answer:
No.
If
so
give
details
_____________.
 
 8.
Are
you
now,
to
the
best
of
your
knowledge,
in
good
health?
 
 Answer:
[x]
Yes
[
]
NO.
4
 
 Grepalife
 issued
 Certificate
 No.
 B‐18558,
 as
 insurance
 coverage
 of
 Dr.
 Leuterio,
to
the
extent
of
his
DBP
mortgage
indebtedness
amounting
to
 eighty‐six
thousand,
two
hundred
(P86,200.00)
pesos.
 Dr.
 Leuterio
 died
 due
 to
 "massive
 cerebral
 hemorrhage."
 Consequently,
 DBP
 submitted
 a
 death
 claim
 to
 Grepalife.
 Grepalife
 denied
 the
 claim
 alleging
that
Dr.
Leuterio
was
not
physically
healthy
when
he
applied
for
 an
 insurance
 coverage.
 Grepalife
 insisted
 that
 Dr.
 Leuterio
 did
 not
 disclose
 he
 had
 been
 suffering
 from
 hypertension,
 which
 caused
 his
 death.
 Allegedly,
 such
 non‐disclosure
 constituted
 concealment
 that
 justified
the
denial
of
the
claim.
 The
widow
of
the
late
Dr.
Leuterio,
respondent
Medarda
V.
Leuterio,
filed
 a
 complaint
 During
 the
 trial,
 Dr.
 Hernando
 Mejia,
 who
 issued
 the
 death
 certificate,
 was
 called
 to
 testify.
 Dr.
 Mejia's
 findings,
 based
 partly
 from
 the
information
given
by
the
respondent
widow,
stated
that
Dr.
Leuterio
 complained
 of
 headaches
 presumably
 due
 to
 high
 blood
 pressure.
 The
 inference
 was
 not
 conclusive
 because
 Dr.
 Leuterio
 was
 not
 autopsied,
 hence,
other
causes
were
not
ruled
out.
 The
 trial
 court
 rendered
 a
 decision
 in
 favor
 of
 respondent
 widow
 and
 against
Grepalife.



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


10


and
 the
 mortgagor
 continues
 to
 be
 a
 party
 to
 the
 contract.
 In
 this
 type
 of
 policy
 insurance,
the
mortgagee
is
simply
an
appointee
of
the
insurance
fund,
such
loss‐ payable
clause
does
not
make
the
mortgagee
a
party
to
the
contract.


 
 Sec.
8
of
the
Insurance
Code
provides:
 
 Unless
the
policy
provides,
where
a
mortgagor
of
property
effects
insurance
in
his
 own
name
providing
that
the
loss
shall
be
payable
to
the
mortgagee,
or
assigns
a
 policy
 of
 insurance
 to
 a
 mortgagee,
 the
 insurance
 is
 deemed
 to
 be
 upon
 the
 interest
 of
 the
 mortgagor,
 who
 does
 not
 cease
 to
 be
 a
 party
 to
 the
 original
 contract,
 and
 any
 act
 of
 his,
 prior
 to
 the
 loss,
 which
 would
 otherwise
 avoid
 the
 insurance,
will
have
the
same
effect,
although
the
property
is
in
the
hands
of
the
 mortgagee,
but
any
act
which,
under
the
contract
of
insurance,
is
to
be
performed
 by
 the
 mortgagor,
 may
 be
 performed
 by
 the
 mortgagee
 therein
 named,
 with
 the
 same
effect
as
if
it
had
been
performed
by
the
mortgagor.
 
 The
 insured
 private
 respondent
 did
 not
 cede
 to
 the
 mortgagee
 all
 his
 rights
 or
 interests
 in
 the
 insurance,
 the
 policy
 stating
 that:
 "In
 the
 event
 of
 the
 debtor's
 death
 before
 his
 indebtedness
 with
 the
 Creditor
 [DBP]
 shall
 have
 been
 fully
 paid,
 an
amount
to
pay
the
outstanding
indebtedness
shall
first
be
paid
to
the
creditor
 and
 the
 balance
 of
 sum
 assured,
 if
 there
 is
 any,
 shall
 then
 be
 paid
 to
 the
 beneficiary/ies
 designated
 by
 the
 debtor."
 When
 DBP
 submitted
 the
 insurance
 claim
 against
 petitioner,
 the
 latter
 denied
 payment
 thereof,
 interposing
 the
 defense
 of
 concealment
 committed
 by
 the
 insured.
 Thereafter,
 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,
 will
 or
 succession
 to
 any
 person,
 whether
 he
 has
 an
 insurable
 interest
 or
 not,
 and
 such
 person
 may
 recover
 it
 whatever
 the
 insured
 might
 have
 recovered,
 the
 widow
 of
 the
decedent
Dr.
Leuterio
may
file
the
suit
against
the
insurer,
Grepalife.
 
 Sec.
9.
If
an
insurer
assents
to
the
transfer
of
an
insurance
from
a
mortgagor
to
a
 mortgagee,
 and,
 at
 the
 time
 of
 his
 assent,
 imposes
 further
 obligation
 on
 the
 assignee,
making
a
new
contract
with
him,
the
act
of
the
mortgagor
cannot
affect
 the
rights
of
said
assignee.
 
 TRANSFER
OF
INSURANCE
WITH
APPROVAL
OF
INSURER


Generally,
 where
 the
 mortgagor
 effects
 insurance
 in
 his
 own
 name
 payable
 to
 the
 mortgagee,
 or
 assigns
 in
 his
 policy
 to
 a
 mortgagee,
 the
 mortgagor
doesn't
cease
to
be
a
party
to
the
insurance
contract
and
his
 acts
still
affect
the
policy
 Under
 this
 provision,
 where
 an
 insurer
 assents
 to
 the
 transfer
 of
 an
 insurance
 from
 a
 mortgagor
 to
 a
 mortgagee,
 and
 at
 the
 time
 of
 his
 assent,
 imposes
 new
 obligations
 to
 the
 assignee,
 a
 new
 and
 distinct
 consideration
 passes
 from
 the
 mortgagee
 to
 the
 insurer
 and
 a
 new
 contract
 is
 created
 between
 them.
 
 In
 this
 scenario,
 the
 mortgagor
 cannot
anymore
affect
the
rights
of
the
assignee‐mortgagee.
 
 INSURABLE
INTEREST



 Sec.
10.
Every
person
has
an
insurable
interest
in
the
life
and
health:
 
 (a)
Of
himself,
of
his
spouse
and
of
his
children;
 
 (b)
 Of
 any
 person
 on
 whom
 he
 depends
 wholly
 or
 in
 part
 for
 education
 or
 support,
or
in
whom
he
has
a
pecuniary
interest;
 
 (c)
Of
any
person
under
a
legal
obligation
to
him
for
the
payment
of
money,
or
 respecting
property
or
services,
of
which
death
or
illness
might
delay
or
prevent
 the
performance;
and
 
 (d)
Of
any
person
upon
whose
life
any
estate
or
interest
vested
in
him
depends.i
 
 INSURABLE
INTEREST
 • A
 person
 has
 insurable
 interest
 in
 the
 subject
 matter
 insured
 where
 he
 has
such
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,
 termination,
 or
 injury
 by
 the
happening
of
the
event
insured
against

 
 NECESSARY
TO
VALIDITY
OF
INSURANCE
CONTRACT
 • Insurable
 interest
 essential
 to
 the
 validity
 and
 enforceability
 of
 the
 insurance
contract
 • A
 policy
 issued
 to
 a
 person
 without
 interest
 in
 the
 subject
 matter
 is
 a
 mere
wager
policy
or
contract



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


11



 IN
LIFE
INSURANCE
 • Insurable
 interest
 exists
 when
 there
 is
 reasonable
 ground,
 founded
 on
 the
relations
of
the
parties,
either
pecuniary
or
contractual
or
by
blood
or
 affinity,
 to
 expect
 some
 kind
 of
 benefit
 or
 advantage
 from
 the
 continuance
of
the
life
of
the
insured
 
 IN
ONE’S
OWN
LIFE
 • A
 person
 has
 an
 unlimited
 interest
 in
 his
 own
 life
 which
 will
 support
 a
 policy
taken
by
him
in
favor
of
himself,
his
estate,
or
in
favor
of
another
 person,
regardless
of
whether
or
not
the
latter
has
an
insurable
interest
 provided,
in
case
the
beneficiary
is
without
insurable
interest,
that
there
 is
no
bad
faith
or
fraud
 
 IN
ONE’S
SPOUSES
AND
CHILDREN
 • The
law
presumes
that
a
person
has
an
insurable
interest
in
the
life
of
his
 spouse
and
his
children

 • The
law
makes
no
qualification
 
 BASED
ON
PECUNIARY
INTEREST
 • Mere
blood
relationship
doesn't
create
an
insurable
interest
in
the
life
of
 another
 • The
 existence
 of
 relationship
 by
 affinity
 doesn't
 constitute
 insurable
 interest
 • The
abovementioned
persons
may
have
insurable
interest
if
there
exists
 pecuniary
interest
between
them
 • A
person
can
have
an
insurable
interest
with
any
other
person
or
stranger
 as
long
as
he
has
come
pecuniary
interest
in
the
latter’s
life
 
 BASED
ON
SOME
LEGAL
OBLIGATION
 • A
 person
 has
 an
 insurable
 interest
 in
 the
 life
 of
 another
 who
 is
 under
 a
 legal
obligation
to
him
for
the
payment
of
money,
or
respecting
property
 or
 services
 an
 whose
 death
 or
 illness
 might
 delay
 or
 prevent
 the
 performance
of
the
obligation
 • A
person
who
has
a
commercial
or
contractual
relationship
with
another
 has
an
insurable
interest
in
the
latter
if
his
death
will
delay
or
prevent
the
 performance
by
the
latter
of
some
legal
obligation
in
favor
of
the
former
 
 WHERE
ESTATE
OR
INTEREST
IS
DEPENDENT
ON
THE
LIFE
OF
THE
INSURED



 WHEN
DOES
INSURABLE
INTEREST
MUST
EXIST
 • When
the
insurance
takes
effect
but
need
not
exist
after
or
when
the
loss
 occurs
 or
 at
 the
 time
 of
 the
 death
 of
 the
 insured—this
 is
 because
 life
 insurance
 is
 not
 a
 contract
 of
 indemnity
 but
 is
 meant
 to
 give
 financial
 security
either
to
the
insured
himself
or
his
beneficiaries
 
 COL.
C.
CASTRO
V.
INSURANCE
COMMISSIONER
 GR
55836,
FEBRUARY
16,
1981
 
 FACTS:
 Col.
Castro
was
the
employer
of
the
deceased.

While
the
deceased
was
still
living,
 he
 worked
 as
 the
 family
 driver
 of
 Castro.
 
 Castro
 took
 a
 life
 insurance
 policy
 on
 behalf
of
the
deceased
and
when
the
latter
died,
Castro
tried
to
claim
the
proceeds
 from
the
insurance
company.

The
company
denied
the
claim,
maintaining
that
the
 policy
taken
was
null
and
void
and
thus,
Castro
is
not
entitled
to
any
proceeds.

This
 position
was
sustained
by
the
court
and
thus,
Castro’s
complaint
was
dismissed.


 
 POINTS
RAISED
BY
PETITIONER:
 1. An
employer
has
an
insurable
interest
in
the
life
of
his
employee
 2. Insurance
company
cannot
deny
liability
under
the
policy
 3. There
 is
 no
 legal
 effect
 on
 the
 act
 of
 the
 insurance
 company
 to
 remit
 a
 refund
check
 
 POSITION
 TAKEN
 BY
 INSURANCE
 COMPANY:
 Castro
 doesn't
 have
 any
 insurable
 interest
on
the
life
of
Terrenal.
 • A
life
insurance
policy
was
taken
for
Terrenal
by
Castro
for
a
period
of
20
 years
 who
 was
 only
 his
 driver.
 
 Castro
 failed
 to
 establish
 that
 he
 had
 a
 legal
claim
over
Terrenal
for
services
during
the
period
of
20
years.


 • Mere
 existence
 of
 employer‐employee
 relationship
 is
 not
 enough
 to
 establish
 insurable
 interest.
 
 The
 employer
 should
 show
 that
 he
 would
 suffer
economic
loss
in
case
the
employee
dies.

 
 AN
 EXAMPLE
 WHEREIN
 THERE
 IS
 ECONOMIC
 LOSS
 TO
 THE
 EMPLOYER
 IF
 AN
 EMPLOYEE
IS
PLACED
IN
HARM’S
WAY
OR
DIES…


Every
person
has
an
insurable
interest
in
the
life
and
health
of
any
person
 upon
 whose
 life
 any
 estate
 or
 interest
 vested
 in
 the
 person
 taking
 the
 policy
depends



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


12


Employer
sends
his
employee
abroad
to
take
post‐graduate
studies.

Together
with
 paying
 his
 tuition,
 the
 employer
 pays
 for
 the
 transportation,
 board
 and
 lodging,
 while
still
continuing
to
pay
the
employee’s
salary.
 
 LINCOLN
NATIONAL
LIFE
V.
SAN
JUAN
 CA‐GR
NO.
34586‐88,
MAY
27,
1971
 
 FACTS:
 Plaintiffs
seek
the
rescission
of
five
insurance
policies
of
defendants
on
the
ground
 that
 there
 was
 concealment
 of
 material
 facts
 and
 false
 representations.
 
 Lack
 of
 insurable
 interest
 was
 also
 cited
 as
 a
 ground
 for
 rescission
 by
 the
 plaintiffs.
 
 The
 defendants
denied
these
allegations
however.

The
trial
court
adjudged
the
case
in
 favor
of
the
plaintiffs,
declaring
the
policies
null
and
void.


 
 HELD:
 The
five
insurance
policies
were
in
effect
wagering
or
highly
speculative
contracts
 of
insurance,
which
are
void
for
reasons
of
public
policy
and
not
being
based
on
the
 existence
of
insurable
interest
on
the
part
of
appellant
Luis
Parco
on
the
life
of
San
 Juan,
 the
 insurance
 having
 been
 brought
 about
 and
 procured
 through
 false
 affirmations
or
representations
and
concealment
of
material
points.


 
 The
spouses
didn't
have
any
insurable
interest
on
the
life
of
Mysterioso
San
Juan,
 who
 was
 just
 a
 farm
 laborer
 of
 the
 spouses.
 
 There
 is
 no
 evidence
 showing
 that
 there
was
economic
loss
to
be
incurred
by
the
spouses
in
case
of
death
of
San
Juan.

 The
beneficiaries
named
in
the
policies
were
not
even
the
children
of
San
Juan.
 
 *Note:
 
 Insurance
 companies
 rescind
 extrajudicially.
 
 They
 just
 write
 a
 letter
 and
 then
issue
a
check,
to
accompany
the
same.

They
can
only
do
this
though
before
a
 claim
is
filed.




 
 Sec.
11.
The
insured
shall
have
the
right
to
change
the
beneficiary
he
designated
 in
the
policy,
unless
he
has
expressly
waived
this
right
in
said
policy.
 
 BENEFICIARY,
DEFINED
 • Person,
whether
natural
or
juridical,
for
whose
benefit
the
policy
is
issued
 and
is
the
recipient
of
the
proceeds
of
the
insurance
 
 LIMITATIONS
AND
DISQUALIFICATIONS


A
person
may
take
a
life
insurance
on
his
life
payable
to
any
person
called
 a
 beneficiary
 even
 though
 said
 beneficiary
 is
 a
 stranger
 and
 has
 no
 insurable
interest
in
the
insured’s
life
 However,
any
person
who
is
forbidden
from
receving
any
donation
under
 Article
739
CC
cannot
be
named
as
beneficiary
of
a
life
insurance
policy
 by
the
person
who
cannot
make
any
donation
to
him



 WHEN
NO
BENEFICIARY
DESIGNATED
 • In
case
of
failure
to
designate
a
beneficiary
or
where
such
designation
is
 void,
the
proceeds
of
the
insurance
will
go
the
estate
of
the
insured
 
 INSULAR
LIFE
V.
EBRADO
 Supra

 
 
 NARIO
V.
PHILAMLIFE
 20
SCRA
434
 
 FACTS:
 Alejandra
Nario
took
a
life
insurance
policy
on
her
life,
designated
her
husband
and
 son
 as
 the
 irrevocable
 beneficiaries.
 
 She
 then
 applied
 for
 a
 loan
 on
 said
 policy
 which
she
was
entitled
to
after
the
policy
has
been
in
force
for
three
years,
for
the
 purpose
 of
 using
 the
 proceeds
 to
 defray
 the
 school
 expenses
 of
 her
 son.
 
 The
 application
bore
twice
the
signature
of
her
husband,
one
for
being
an
irrevocable
 beneficiary
and
two,
for
being
the
legal
administrator
of
the
son’s
properties.

The
 application
was
however
denied
as
it
maintained
that
it
must
also
be
authorized
by
 the
court
in
competent
guardianship
proceedings.
 
 HELD:
 The
proposed
transactions
in
question
constitute
acts
of
disposition
or
alienation
of
 property
 rights
 and
 not
 merely
 of
 management
 or
 administration
 because
 they
 involve
the
incurring
or
termination
of
the
contractual
obligations.


 
 It
 appearing
 that
 the
 minor’s
 beneficiary’s
 vested
 interest
 or
 right
 on
 the
 policy
 exceeds
P2000
and
as
there
was
no
court
petition
and
bond,
the
consent
given
by
 the
 father
 for
 and
 in
 behalf
 of
 the
 minor
 son,
 without
 court
 authorization,
 to
 the
 policy
 loan
 application
 and
 the
 surrender
 of
 such
 policy,
 was
 insufficient
 and



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ineffective,
and
Philamlife
was
justified
in
disapproving
the
proposed
transactions
 in
question.
 
 Sec.
 12.
 The
 interest
 of
 a
 beneficiary
 in
 a
 life
 insurance
 policy
 shall
 be
 forfeited
 when
the
beneficiary
is
the
principal,
accomplice,
or
accessory
in
willfully
bringing
 about
the
death
of
the
insured;
in
which
event,
the
nearest
relative
of
the
insured
 shall
receive
the
proceeds
of
said
insurance
if
not
otherwise
disqualified.
 
 WHEN
BENEFICIARY
FORFEITS
INSURANCE
PROCEEDS
 • When
the
beneficiary
is
the
principal,
accomplice
or
accessory
in
willfully
 bringing
about
the
death
of
the
insured,
such
beneficiary
forfeits
the
right
 to
receive
the
proceeds
of
the
life
insurance
policy
 
 Sec.
 13.
 Every
 interest
 in
 property,
 whether
 real
 or
 personal,
 or
 any
 relation
 thereto,
 or
 liability
 in
 respect
 thereof,
 of
 such
 nature
 that
 a
 contemplated
 peril
 might
directly
damnify
the
insured,
is
an
insurable
interest.
 
 INSURABLE
INTEREST
IN
PROPERTY
 • Exists
as
long
as
such
interest,
whether
real
or
personal,
or
any
relation
 thereto
or
liability
thereof,
is
of
such
a
nature
that
a
contemplated
peril
 might
directly
damnify
the
insured
 • Where
 the
 interest
 of
 the
 insured
 in,
 or
 his
 relation
 to,
 the
 property
 is
 such
that,
he
will
be
benefited
by
the
continued
existence
or
will
suffer
a
 direct
pecuniary
loss
by
its
destruction,
the
contract
of
insurance
will
be
 upheld
 
 HARVARDIAN
COLLEGE
V.
COUNTRY
BANKERS

 1
CARA
1;
83
OG
(NO.
31)
 
 FACTS:
 Harvardian
 College
 is
 a
 family
 corporation
 owned
 by
 spouses
 Yap
 and
 their
 children.
 
 They
 insured
 the
 school
 building,
 per
 advice
 of
 an
 insurance
 agent.

 During
 the
 effectivity
 of
 the
 policy,
 the
 school
 building
 was
 totally
 burned.
 
 They
 tried
 to
 claim
 from
 the
 insurance
 company
 but
 they
 were
 denied
 on
 the
 ground
 that
the
building
and
land
it
was
constructed
on
was
owned
by
Ildefonso
Yap
and
 not
by
Harvadian
Colleges.
 
 HELD:


Any
title
to,
or
interest
in
property,
legal
or
equitable,
will
support
a
contract
of
fire
 insurance,
and
even
when
the
insured
had
no
title
the
contract
will
be
upheld
if
his
 interest,
or
his
relation
to,
the
property
is
such
that
he
will,
or
may
be
benefited
by
 its
 continued
 existence
 or
 suffer
 a
 direct
 pecuniary
 loss
 from
 its
 destruction
 or
 injury.
 
 The
plaintiff
in
this
case
has
long
been
using
and
possessing
the
building
for
several
 years
 with
 both
 the
 consent
 and
 knowledge
 of
 Ildefonso
 Yap.
 
 As
 such,
 it
 is
 reasonable
to
assume
that
had
the
building
not
been
burned,
plaintiff
would
have
 been
 allowed
 the
 continued
 use
 of
 the
 same
 in
 its
 operations
 of
 an
 educational
 institution.


 
 FILIPINO
MERCHANTS
V.
CA
 179
SCRA
638
 
 FACTS:
 A
 consignee
 of
 goods
 aboard
 a
 vessel
 insured
 the
 goods.
 
 Due
 to
 the
 damage
 incurred
by
the
goods
during
the
voyage,
consignee
now
seeks
proceeds
from
the
 insurance
 company.
 
 This
 led
 to
 litigation
 as
 the
 company
 failed
 to
 pay
 him
 indemnity.


 
 HELD:
 Contracts
 of
 insurance
 are
 contracts
 of
 indemnity
 upon
 the
 terms
 and
 conditions
 specified
 in
 the
 policy.
 
 The
 agreement
 has
 the
 force
 of
 law
 between
 the
 parties.

 The
 terms
 of
 the
 policy
 constitute
 the
 measure
 of
 the
 insurer’s
 liability.
 
 If
 such
 terms
 are
 clear
 and
 unambiguous,
 they
 must
 be
 taken
 and
 understood
 in
 their
 plain,
ordinary
and
popular
sense.


 
 Anent
 the
 issue
 of
 insurable
 interest,
 the
 consignee
 had
 an
 insurable
 interest
 in
 insuring
the
goods.

In
principle,
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,
 lien
 upon
 or
 possession
 of
 the
 property.

 insurable
 interest
 in
 property
 may
 consist
 in
 an
 existing
 interest,
 an
 inchoate
 interest
founded
on
an
existing
interest,
or
an
expectancy,
coupled
with
an
existing
 interest
in
that
out
of
which
the
expentancy
arises.


 



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Herein,
the
consignee
has
an
existing
interest
in
the
goods
insured.

This
insurable
 interest
was
grounded
on
a
valid
contract
of
sale.

This
contract
vested
an
equitable
 interest
on
the
property
being
shipped.


 
 Sec.
14.
An
insurable
interest
in
property
may
consist
in:
 
 (a)
An
existing
interest;
 
 (b)
An
inchoate
interest
founded
on
an
existing
interest;
or
 
 (c)
 An
 expectancy,
 coupled
 with
 an
 existing
 interest
 in
 that
 out
 of
 which
 the
 expectancy
arises.
 
 LAMPANO
V.
JOSE
 30
PHIL
537
 
 FACTS:
 Barreto
 constructed
 a
 house
 for
 Jose.
 
 During
 the
 construction
 of
 the
 house
 and
 Jose’s
 disposition
 of
 the
 same,
 Barreto
 took
 an
 insurance
 policy
 on
 the
 house.
 Subsequently,
 Jose
 sold
 the
 house
 to
 Lampano
 and
 there
 was
 still
 a
 remaining
 balance
 from
 the
 latter.
 
 On
 an
 unfortunate
 date
 however,
 the
 house
 was
 destroyed
by
fire.


 
 Lampano
filed
a
complaint
against
Barreto
and
Jose.

She
asserted
that
there
was
a
 verbal
 agreement
 between
 her
 and
 Jose
 that
 upon
 sale
 of
 the
 house,
 the
 latter
 would
 deliver
 the
 insurance
 policy
 to
 her.
 
 She
 maintained
 that
 Barreto
 and
 Jose
 don't
have
any
right
to
the
insurance
policy
anymore.


 
 The
trial
court
ruled
in
favor
of
Jose
collectively.

First,
it
ruled
that
Barreto
owed
 Jose
 the
 balance
 between
 the
 proceeds
 of
 the
 insurance
 policy
 and
 the
 premium
 paid
by
him.

Second,
it
ruled
that
Lampano
pay
the
remaining
balance
for
the
sale
 of
the
house
to
Jose.
 
 HELD:
 If
Barreto
had
an
insurable
interest
in
the
house,
he
could
insure
this
interest
for
 his
sole
protection.

The
policy
was
in
his
name
alone.
It
was,
therefore,
a
personal
 contract
 between
 him
 and
 the
 company
 and
 not
 a
 contract
 which
 ran
 with
 the
 property.

According
to
this
personal
contract,
the
insurance
policy
was
payable
to


the
insured
without
regard
to
the
extent
and
nature
of
his
interest
in
the
property,
 provided
 that
 he
 had
 an
 insurable
 interest
 at
 the
 time
 of
 the
 making
 of
 the
 contract,
and
also
at
the
time
of
the
fire.

Where
different
persons
have
different
 interests
in
the
same
property,
the
insurance
taken
by
one
in
his
known
right
and
in
 his
 own
 interest
 doesn't
 in
 any
 way
 inure
 to
 the
 benefit
 of
 another.
 
 This
 is
 the
 general
rule
prevailing
in
the
US,
and
this
is
no
different
from
our
own
jurisdiction.
 
 A
contract
of
insurance
made
for
insurer’s
indemnity
only,
as
where
there
was
no
 agreement,
 express
 or
 implied,
 that
 it
 shall
 be
 for
 the
 benefit
 of
 a
 third
 person,
 doesn't
attach
to
or
run
with
the
title
to
the
insured
property
on
a
transfer
thereof
 personal
 as
 between
 the
 insurer
 and
 insured.
 
 In
 such
 case,
 strangers
 to
 the
 contract
 cannot
 acquire
 in
 their
 own
 right
 any
 interest
 in
 the
 insurance
 money,
 except
through
an
assignment
or
some
contract
with
which
they
are
connected.
 
 In
 the
 case
 at
 bar,
 Barreto
 assumed
 the
 responsibility
 for
 the
 insurance.
 
 The
 premiums
were
paid
by
him
without
any
agreement
or
right
to
recoup
the
amount
 paid
therefore
should
no
loss
result
to
the
property.

It
would
not,
therefore,
be
in
 accordance
with
law
and
his
contractual
obligations
to
compel
him
to
account
for
 the
 insurance
 money,
 or
 any
 part
 thereof,
 to
 the
 plaintiff,
 who
 assumed
 no
 risk
 whatsoever.


 
 That
 he
 had
 insurable
 interest
 in
 the
 house,
 there
 is
 no
 question.
 
 Barreto
 constructed
the
house,
furnished
all
materials
and
supplies,
and
insured
it
after
it
 had
been
completed.


 
 Sec.
 15.
 A
 carrier
 or
 depository
 of
 any
 kind
 has
 an
 insurable
 interest
 in
 a
 thing
 held
 by
 him
 as
 such,
 to
 the
 extent
 of
 his
 liability
 but
 not
 to
 exceed
 the
 value
 thereof.
 
 LOPEZ
V.
DEL
ROSARIO
 44
PHIL
98
 
 FACTS:
 Del
 Rosario
 was
 engaged
 in
 the
 business
 of
 warehouse
 keeping.
 
 She
 owned
 a
 bonded
warehouse,
wherein
she
stored
copra
and
other
merchandise.

One
of
the
 people
who
stored
copra
in
her
warehouse
was
Lopez.

Del
Rosario
procured
many
 insurance
policies,
covering
the
warehouse
and
the
merchandise
it
stored.

On
an
 unfortunate
 date
 however,
 the
 warehouse
 together
 with
 majority
 of
 the



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merchandise
 stored
 in
 it,
 was
 destroyed
 by
 fire.
 
 Del
 Rosario
 was
 able
 to
 collect
 from
the
insurance
companies
the
proceeds
of
the
insurance
policies.

She
was
able
 to
 satisfy
 obligations
 to
 her
 clients
 except
 Lopez
 who
 was
 running
 after
 also
 to
 some
more
proceeds
from
the
policies.


 
 HELD:
 Under
any
aspect,
Del
Rosario
would
be
liable.

The
law
is
that
a
policy
effected
by
 a
 bailee
 and
 covering
 by
 its
 terms
 his
 own
 property
 and
 property
 held
 in
 trust,
 insures,
in
an
event
of
a
loss,
equally
and
proportionately
to
the
benefit
of
all
the
 owners
 of
 the
 property
 insured.
 
 Even
 if
 one
 secured
 insurance
 covering
 his
 own
 goods
and
goods
stored
with
him,
and
even
if
the
owner
of
the
stored
goods
didn't
 request
or
know
of
the
insurance,
and
did
not
ratify
it
before
the
payment
of
the
 loss,
 yet
 it
 has
 been
 held
 that
 the
 warehouseman
 is
 liable
 to
 the
 owner
 of
 such
 stored
goods
for
his
share.


 
 Lopez’s
 right
 was
 not
 forfeited
 by
 his
 failure
 to
 pay
 the
 interest
 indicated
 in
 the
 warehouse
receipts.

A
preponderance
of
the
proof
doesn't
demonstrate
that
the
 plaintiff
ever
ordered
the
cancellation
of
the
insurance
with
the
defendant.

Nor
is
 it
shown
the
bills
were
presented
to
him,
and
that
notice
of
an
intention
to
cancel
 the
insurance
was
ever
given
to
the
plaintiff.
 
 The
 remaining
 contention
 that
 Lopez
 cannot
 claim
 the
 benefits
 of
 the
 agency
 without
sharing
in
the
expenses
is
well
taken.

Del
Rosario
was
acting
as
his
agent
 in
 securing
 insurance,
 while
 he
 benefits
 from
 the
 amicable
 adjustment
 of
 the
 insurance
claims.

 
 Sec.
16.
A
mere
contingent
or
expectant
interest
in
anything,
not
founded
on
an
 actual
right
to
the
thing,
nor
upon
any
valid
contract
for
it,
is
not
insurable.
 
 Sec.
17.
The
measure
of
an
insurable
interest
in
property
is
the
extent
to
which
 the
insured
might
be
damnified
by
loss
or
injury
thereof.
 
 SAN
MIGUEL
V.
LAW
UNION
ROCK
INSURANCE
 Supra
 
 HELD:
 That
the
brewery
company
had
an
insurable
interest
but
could
only
recover
on
the
 policy
only
to
the
extent
of
the
credit
secured
by
the
mortgage.





 Sec.
 18.
 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.
 
 INSURANCE
 IS
 UNENFORCEABLE
 IF
 TAKEN
 FOR
 THE
 BENEFIT
 OF
 SOME
 PERSON
 WITHOUT
INSURABLE
INTEREST
 • An
insurance
policy
on
property
for
the
benefit
of
some
person
without
 insurable
interest
in
the
property
insured
is
unenforceable
 
 GARCIA
V.
HONG
KONG
FIRE
AND
MARINE
INSURANCE
 45
PHIL
122
 
 FACTS:
 Garcia
 was
 a
 merchant
 who
 owned
 a
 bazaar.
 
 
 His
 friend
 assisted
 him
 in
 taking
 a
 fire
insurance
policy
for
his
merchandise.

However,
it
was
indicated
in
the
policy
 that
what
was
insured
was
the
building
where
it
was
stored
in—which
didn't
show
 the
 true
 intent
 of
 the
 parties.
 
 It
 was
 found
 out
 that
 the
 insurance
 policy
 was
 in
 English,
which
is
in
a
language
that
Garcia
was
ignorant
of.
 
 Later,
 he
 decided
 to
 mortgage
 the
 insured
 merchandise
 to
 the
 bank.
 
 He
 wrote
 a
 letter
to
the
insurance
company,
asking
for
an
indorsement
so
that
he
can
properly
 mortgage
 his
 merchandise.
 
 In
 his
 letter,
 he
 wrote
 therein
 that
 what
 was
 insured
 was
the
merchandise
and
not
the
building.


 
 On
a
relevant
date,
a
fire
broke
out
and
the
merchandise
was
destroyed.


 
 HELD:
 Although
 the
 policy
 was
 in
 possession
 of
 the
 bank,
 the
 insurance
 company
 had
 among
its
own
records
all
of
the
data
and
information
upon
which
the
policy
was
 issued,
 as
 a
 matter
 of
 fact,
 its
 agents
 knew
 or
 should
 have
 known
 the
 kind
 of
 property
insured.
 
 In
 the
 final
 analysis,
 Garcia
 wanted
 insurance
 upon
 a
 stock
 of
 goods,
 which
 he
 owned,
and
he
received
and
paid
for
a
policy
on
a
building,
which
he
didn't
own,
 and
 while
 the
 policy
 was
 in
 force
 and
 effect,
 both
 the
 building
 and
 the
 stock
 of
 merchandise,
were
completely
destroyed
by
fire.

Garcia’s
merchandise
was
in
the
 building
described
in
the
policy.



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


16



 Sec.
 19.
 An
 interest
 in
 property
 insured
 must
 exist
 when
 the
 insurance
 takes
 effect,
and
when
the
loss
occurs,
but
not
exist
in
the
meantime;
and
interest
in
 the
life
or
health
of
a
person
insured
must
exist
when
the
insurance
takes
effect,
 but
need
not
exist
thereafter
or
when
the
loss
occurs.
 
 TIME
WHEN
INSURABLE
INTEREST
MUST
EXIST—
 1. Property
 insurance—at
 time
 insurance
 takes
 place
 and
 at
 time
 of
 loss,
 need
not
exist
in
the
meantime
 2. Life
 insurance—only
 at
 time
 insurance
 takes
 effect,
 need
 not
 exist
 thereafter
or
when
loss
occurs
 
 INSURABLE
INTEREST
IN
LIFE

 INSURABLE
INTEREST
IN
PROPERTY
 Unlimited
 Limited
 to
 the
 actual
 value
 of
 the
 Except
one
taken
by
creditor
on
the
life
 interest
on
the
property
 of
the
debtor
 It
 is
 sufficient
 that
 insurable
 interest
 Must
 exist
 both
 at
 the
 time
 the
 exists
 at
 the
 time
 the
 insurance
 takes
 insurance
 takes
 effect
 and
 at
 the
 time
 effect
but
not
when
the
loss
occurs
 of
loss
 Expectancy
of
benefit
may
be
sufficient
 The
 expentancy
 must
 be
 coupled
 with
 even
if
there
is
no
legal
basis
 an
existing
legal
basis
to
be
a
sufficient
 insurable
interest

 
 TAI
TONG
CHUA
CHE
V.
INSURANCE
COMMISSION
 158
SCRA
366
 
 FACTS:
 Complainants
acquired
a
certain
building
and
land.

He
then
obtained
a
loan
from
 petitioner.

He
secured
this
through
a
mortgage.

The
mortgagee
then
insured
the
 land
and
building.

Thereafter,
Palomo
secured
two
fire
insurance
policies
from
two
 different
companies—Zenith
Insurance
and
Philippine
British
Assurance
Company.

 The
building
then
on
a
later
date
was
destroyed
by
fire.


 
 Based
on
a
standard
assessment
program,
the
insurance
companies
were
assessed
 for
the
loss
they
should
pay
for.

Only
1
of
them
didn't
want
to
pay.

This
prompted
 the
complainant
to
demand
payment
from
them
the
balance
of
the
claim.

Tai
Tong
 then
sought
to
intervene
but
was
denied
as
it
didn't
allegedly
have
cause
of
action
 as
a
mere
mortgagee.



 HELD:
 Respondent
company
is
bound
by
the
policy
it
issued
to
petitioner
that
was
still
in
 legal
force
and
effect
when
the
fire
transpired.


 
 When
 the
 fire
 happened,
 the
 petitioner
 still
 had
 an
 insurable
 interest
 in
 the
 land
 and
 building
 subject
 of
 the
 insurance.
 
 He
 wasn't
 paid
 yet
 for
 the
 loan
 obtained
 from
him.

He
remained
a
mortgagee.

And
furthermore,
it
is
presumed
that
he
still
 holds
 credit
 as
 he
 presented
 the
 document
 of
 credit
 evincing
 the
 loan
 obtained
 from
him.
 
 Sec.
20.
Except
in
the
cases
specified
in
the
next
four
sections,
and
in
the
cases
of
 life,
 accident,
 and
 health
 insurance,
 a
 change
 of
 interest
 in
 any
 part
 of
 a
 thing
 insured
 unaccompanied
 by
 a
 corresponding
 change
 in
 interest
 in
 the
 insurance,
 suspends
the
insurance
to
an
equivalent
extent,
until
the
interest
in
the
thing
and
 the
interest
in
the
insurance
are
vested
in
the
same
person.
 
 EFFECT
OF
CHANGE
OF
INTEREST
INSURED
ON
CONTRACT
OF
INSURANCE
 • General
rule—if
not
accompanied
BY
corresponding
change
of
interest
in
 insurance,
 insurance
 coverage
 suspended
 until
 interest
 in
 thing
 insured
 and
interest
in
the
insurance
contract
are
vested
in
the
same
person

 • Exceptions—
 o Life,
accident,
and
health
insurance
 o Change
of
interest
in
thing
insured
after
occurrence
of
loss
 o Change
of
interest
in
things
separately
insured
 o Transfer
of
interest
by
will
or
succession
upon
death
of
insured
 o Transfer
 of
 interest
 by
 one
 of
 the
 partners
 joint
 owners,
 or
 common
owners
jointly
insured,
to
the
others
 o An
 insurance
 policy
 framed
 to
 inure
 to
 the
 benefit
 of
 whomsoever
becomes
the
owner
of
the
thing
insured
 
 BACHRACH
V.
BRITISH
AMERICAN
ASSURANCE
CO.
 17
PHIL
555
 
 FACTS:
 Bachrach
 sought
 to
 recover
 the
 proceeds
 of
 an
 earlier
 taken
 fire
 insurance
 policy
 from
 defendant.
 
 As
 a
 matter
 of
 defense,
 the
 defendant
 raised
 that
 first,
 complainant
maintained
a
paint
and
varnish
shop
in
the
building.

Second,
that
he



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


17


had
transferred
his
insurable
interest
by
conveying
the
insurance
policy
to
another
 to
 secure
 certain
 debts
 due.
 
 Third,
 preceding
 immediately
 the
 fire,
 he
 willfully
 stored
the
gasoline
barrel
inside
the
building.

Plaintiff
denied
this.

He
maintained
 that
he
has
been
acquitted
of
the
charges
of
arson
earlier
on
and
that
he
was
able
 to
prove
loss
due
to
the
fire.


 
 HELD:
 With
 reference
 to
 the
 second
 assigned
 error,
 defendant
 contended
 that
 the
 execution
 of
 the
 chattel
 mortgage
 without
 the
 knowledge
 and
 consent
 of
 the
 insurance
 company
 annulled
 the
 insurance
 policy.
 
 However,
 upon
 reading
 the
 policy,
 there
 was
 no
 provision
 prohibiting
 the
 plaintiff
 from
 placing
 a
 mortgage
 over
the
property
insurance.

And
even
if
there
was
an
intended
alienation
clause,
 it
 is
 to
 be
 noted
 that
 mere
 execution
 of
 a
 chattel
 mortgage
 and
 that
 alienation
 within
 the
 meaning
 of
 the
 insurance
 law
 until
 the
 mortgagee
 acquires
 a
 right
 to
 take
possession
by
default
under
the
terms
of
the
mortgager.

No
right
is
claimed
 to
have
accrued
in
this
case.


 
 Sec.
21.
A
change
in
interest
in
a
thing
insured,
after
the
occurrence
of
an
injury
 which
results
in
a
loss,
does
not
affect
the
right
of
the
insured
to
indemnity
for
 the
loss.
 
 Sec.
 22.
 A
 change
 of
 interest
 in
 one
 or
 more
 several
 distinct
 things,
 separately
 insured
by
one
policy,
does
not
avoid
the
insurance
as
to
the
others.
 
 Sec.
23.
A
change
on
interest,
by
will
or
succession,
on
the
death
of
the
insured,
 does
 not
 avoid
 an
 insurance;
 and
 his
 interest
 in
 the
 insurance
 passes
 to
 the
 person
taking
his
interest
in
the
thing
insured.
 
 DEATH
OF
INSURED
DOESN'T
AVOID
THE
INSURANCE
ON
PROPERTY
 • An
 insurance
 policy
 on
 property
 taken
 by
 the
 insured
 who
 dies
 doesn't
 affect
 the
 property
 except
 that
 his
 interest
 passes
 to
 his
 heir
 or
 legal
 representative
 • The
heir
or
legal
representative
may
continue
the
insurance
policy
on
the
 property
 of
 the
 decedent
 by
 paying
 the
 premiums
 thereof
 and
 will
 receive
the
proceeds
of
the
insurance
in
case
loss
occurs

 
 Sec.
24.
A
transfer
of
interest
by
one
of
several
partners,
joint
owners,
or
owners
 in
common,
who
are
jointly
insured,
to
the
others,
does
not
avoid
an
insurance


even
though
it
has
been
agreed
that
the
insurance
shall
cease
upon
an
alienation
 of
the
thing
insured.
 
 Sec.
25.
Every
stipulation
in
a
policy
of
insurance
for
the
payment
of
loss
whether
 the
person
insured
has
or
has
not
any
interest
in
the
property
insured,
or
that
the
 policy
 shall
 be
 received
 as
 proof
 of
 such
 interest,
 and
 every
 policy
 executed
 by
 way
of
gaming
or
wagering,
is
void.
 
 VOID
STIPULATIONS
IN
PROPERTY
INSURANCE
 1. The
following
stipulations
in
a
contract
are
void—
 a. Stipulation
for
the
payment
of
loss
whether
the
person
insured
 has
or
has
no
interest
in
the
property
insured

 b. Stipulation
 that
 the
 policy
 shall
 be
 received
 as
 proof
 of
 such
 interest
 2. Every
policy
executed
by
way
of
gaining
or
wagering
is
likewise
void
 
 CHA
V.
CA
 277
SCRA
690
 
 FACTS:
 Petitioner‐spouses
 Nilo
 Cha
 and
 Stella
 Uy‐Cha,
 as
 lessees,
 entered
 into
 a
 lease
 contract
with
private
respondent
CKS.

One
of
the
conditions
of
the
lease
was
that
 the
 lessee
 wouldn't
 take
 any
 insurance
 policy
 on
 any
 chattels
 or
 merchandise
 placed
 in
 the
 stalls,
 etc.
 without
 first
 obtaining
 the
 consent
 of
 the
 lessor.

 Notwithstanding
 this
 agreement,
 the
 spouses
 insured
 their
 merchandise.
 
 Days
 before
the
expiration
of
the
lease,
a
fire
broke
out
and
destroyed
the
goods.

CKS
 upon
knowing
of
the
insurance
policy,
sought
the
proceeds
of
the
same.


 
 HELD:
 Sec.
18
of
the
Insurance
Code
provides:
 
 Sec.
18.
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.
 
 A
 non‐life
 insurance
 policy
 such
 as
 the
 fire
 insurance
 policy
 taken
 by
 petitioner‐ spouses
 over
 their
 merchandise
 is
 primarily
 a
 contract
 of
 indemnity.
 Insurable
 interest
 in
 the
 property
 insured
 must
 exist
 at
 the
 time
 the
 insurance
 takes
 effect
 and
 at
 the
 time
 the
 loss
 occurs.
 4
 The
 basis
 of
 such
 requirement
 of
 insurable



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


18


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.
In
 such
a
case,
the
contract
of
insurance
is
a
mere
wager
which
is
void
under
Section
 25
of
the
Insurance
Code,
which
provides:
 
 Sec.
25.
Every
stipulation
in
a
policy
of
Insurance
for
the
payment
of
loss,
whether
 the
person
insured
has
or
has
not
any
interest
in
the
property
insured,
or
that
the
 policy
shall
be
received
as
proof
of
such
interest,
and
every
policy
executed
by
way
 of
gaming
or
wagering,
is
void.
 
 In
 the
 present
 case,
 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:
 
 Sec.
17.
The
measure
of
an
insurable
interest
in
property
is
the
extent
to
which
the
 insured
might
be
damnified
by
loss
of
injury
thereof.
 
 Therefore,
 respondent
 CKS
 cannot,
 under
 the
 Insurance
 Code,
 a
 special
 law,
 be
 validly
 a
 beneficiary
 of
 the
 fire
 insurance
 policy
 taken
 by
 the
 petitioner‐spouses
 over
their
merchandise.
This
insurable
interest
over
said
merchandise
remains
with
 the
insured,
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.
 The
 proceeds
 of
 the
 fire
 insurance
 policy
 thus
 rightfully
 belong
 to
 the
 spouses
 Nilo
 Cha
 and
 Stella
 Uy‐Cha
 (herein
 co‐petitioners).
 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.
 
 CONCEALMENT
 
 Sec.
 26.
 A
 neglect
 to
 communicate
 that
 which
 a
 party
 knows
 and
 ought
 to
 communicate,
is
called
a
concealment.
 
 PROVISIONS
ON
CONCEALMENT
 • The
provisions
on
concealment,
representation,
and
warranties
are
based
 on
one
of
the
fundamental
characteristics
of
an
insurance
contract—that
 it
be
of
perfect
good
faith
on
the
part
of
both
parties
 


CONCEALMENT
 • Neglect
 to
 communicate
 that
 which
 a
 party
 knows
 or
 ought
 to
 communicate,
whether
intentional
or
unintentional
 
 WHEN
IT
EXISTS
 • Concealment
exists
where
the
assured
had
knowledge
of
a
fact
material
 to
 the
 risk,
 and
 honesty,
 good
 faith,
 and
 fair
 dealing
 requires
 that
 he
 should
communicate
it
to
the
assurer,
but
he
designedly
and
intentionally
 withholds
the
same

 
 Sec.
27.
A
concealment
whether
intentional
or
unintentional
entitles
the
injured
 party
to
rescind
a
contract
of
insurance.
(As
amended
by
Batasang
Pambansa
Blg.

 874)
 
 ARGENTE
V.
WEST
COAST
LIFE
 51
PHIL
725
 
 FACTS:
 Bernardo
Argente
signed
an
application
for
joint
insurance
with
his
wife
in
the
sum
 of
 P2,000.
 The
 wife,
 Vicenta
 de
 Ocampo,
 signed
 a
 like
 application
 for
 the
 same
 policy.
Both
applications,
with
the
exception
of
the
names
and
the
signatures
of
the
 applicants,
were
written
by
Jose
Geronimo
del
Rosario,
an
agent
for
the
West
Coast
 Life
 Insurance
 Co.
 But
 all
 the
 information
 contained
 in
 the
 applications
 was
 furnished
 the
 agent
 by
 Bernardo
 Argente.
 
 The
 spouses
 were
 then
 medically
 examined
 by
 the
 doctor.
 
 All
 information
 was
 written
 by
 the
 doctor
 with
 some
 being
furnished
by
Bernardo.


 
 The
spouses
then
asked
for
the
increase
of
the
amount
covered
by
the
policy.

They
 were
issued
a
temporary
insurance
policy
and
the
permanent
one
wasn't
delivered
 until
 the
 first
 payment
 of
 premium
 of
 the
 spouses.
 
 Days
 after,
 Vicenta
 died
 of
 cerebral
apoplexy.

Bernardo
sought
the
proceeds
but
was
denied
on
the
ground
of
 concealment.


 
 The
 court
 found
 from
 the
 evidence
 that
 the
 representations
 made
 by
 Bernardo
 Argente
and
his
wife
in
their
applications
to
the
defendant
for
life
insurance
were
 false
with
respect
to
their
estate
of
health
during
the
period
of
five
years
preceding
 the
 date
 of
 such
 applications,
 and
 that
 they
 knew
 the
 representations
 made
 by
 them
 in
 their
 applications
 were
 false.
 The
 court
 further
 found
 from
 the
 evidence



MA.
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AGUINALDO
 ATENEO
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that
the
answers
given
by
Bernardo
Argente
and
his
wife
at
the
time
of
the
medical
 examination
 by
 Doctor
 Sta.
 Ana
 were
 false
 with
 respect
 to
 the
 condition
 of
 their
 health
at
that
time
and
for
a
period
of
several
years
prior
thereto.
Based
on
these
 findings
 which
 must
 here
 be
 accepted
 since
 the
 stenographic
 transcript
 is
 incomplete,
the
question
arises
as
to
the
estate
of
the
law
in
relation
thereto.
 
 HELD:
 One
ground
for
the
rescission
of
a
contract
of
insurance
under
the
Insurance
Act
is
 "a
concealment,"
which
in
section
25
is
defined
as
"A
neglect
to
communicate
that
 which
a
party
knows
and
ought
to
communicate."

 

 In
an
action
on
a
life
insurance
policy
where
the
evidence
conclusively
shows
that
 the
 answers
 to
 questions
 concerning
 diseases
 were
 untrue,
 the
 truth
 of
 falsity
 of
 the
 answers
 become
 the
 determining
 factor.
 In
 the
 policy
 was
 procured
 by
 fraudulent
representations,
the
contract
of
insurance
apparently
set
forth
therein
 was
 never
 legally
 existent.
 It
 can
 fairly
 be
 assumed
 that
 had
 the
 true
 facts
 been
 disclosed
by
the
assured,
the
insurance
would
never
have
been
granted.
 
 Concealment
exists
where
the
assured
has
knowledge
of
a
fact
material
to
the
risk,
 and
honesty,
good
faith,
and
fair
dealing
requires
that
he
should
communicate
it
to
 the
assured,
but
he
designated
and
intentionally
with
holds
the
same.
 
 Another
 rule
 is
 that
 if
 the
 assured
 undertakes
 to
 state
 all
 the
 circumstances
 affecting
the
risk,
a
full
and
fair
statement
of
all
is
required.
 
 The
basis
of
the
rule
vitiating
the
contract
in
case
of
concealment
is
that
it
misleads
 or
 deceives
 the
 insurer
 into
 accepting
 the
 risk,
 or
 accepting
 it
 at
 the
 rate
 of
 premium
 agreed
 upon.
 The
 insurer,
 relying
 upon
 the
 belief
 that
 the
 assured
 will
 disclose
 every
 material
 within
 his
 actual
 or
 presumed
 knowledge,
 is
 misled
 into
 a
 belief
that
the
circumstance
withheld
does
not
exist,
and
he
is
thereby
induced
to
 estimate
 the
 risk
 upon
 a
 false
 basis
 that
 it
 does
 not
 exist.
 The
 principal
 question,
 therefore,
 must
 be,
 Was
 the
 assurer
 misled
 or
 deceived
 into
 entering
 a
 contract
 obligation
 or
 in
 fixing
 the
 premium
 of
 insurance
 by
 a
 withholding
 of
 material
 information
of
facts
within
the
assured's
knowledge
or
presumed
knowledge?
 
 It
 therefore
 follows
 that
 the
 assurer
 in
 assuming
 a
 risk
 is
 entitled
 to
 know
 every
 material
fact
of
which
the
assured
has
exclusive
or
peculiar
knowledge,
as
well
as
 all
material
facts
which
directly
tend
to
increase
the
hazard
or
risk
which
are
known
 by
the
assured,
or
which
ought
to
be
or
are
presumed
to
be
known
by
him.
And
a


concealment
of
such
facts
vitiates
the
policy.
"It
does
not
seem
to
be
necessary
.
.
.
 that
 the
 .
 .
 .
 suppression
 of
 the
 truth
 should
 have
 been
 willful."
 If
 it
 were
 but
 an
 inadvertent
 omission,
 yet
 if
 it
 were
 material
 to
 the
 risk
 and
 such
 as
 the
 plaintiff
 should
have
known
to
be
so,
it
would
render
the
policy
void.
But
it
is
held
that
if
 untrue
 or
 false
 answers
 are
 given
 in
 response
 to
 inquiries
 and
 they
 relate
 to
 material
 facts
 the
 policy
 is
 avoided
 without
 regard
 to
 the
 knowledge
 or
 fraud
 of
 assured,
although
under
the
statute
statements
are
representations
which
must
be
 fraudulent
to
avoid
the
policy.
So
under
certain
codes
the
important
inquiries
are
 whether
the
concealment
was
willful
and
related
to
a
matter
material
to
the
risk.

 
 SATURNINO
V.
PHILAMLIFE
 7
SCRA
316
 
 FACTS:
 It
appears
that
two
months
prior
to
the
issuance
of
the
policy
to
her,
Saturnino
was
 operated
 on
 for
 cancer,
 involving
 complete
 removal
 of
 the
 right
 breast,
 including
 the
 pectoral
 muscles
 and
 the
 glands
 found
 in
 the
 right
 armpit.
 She
 stayed
 in
 the
 hospital
 for
 a
 period
 of
 eight
 days,
 after
 which
 she
 was
 discharged,
 although
 according
 to
 the
 surgeon
 who
 operated
 on
 her
 she
 could
 not
 be
 considered
 definitely
cured,
her
ailment
being
of
the
malignant
type.
 
 Notwithstanding
 the
 fact
 of
 her
 operation
 Estefania
 A.
 Saturnino
 did
 not
 make
 a
 disclosure
 thereof
 in
 her
 application
 for
 insurance.
 On
 the
 contrary,
 she
 stated
 therein
that
she
did
not
have,
nor
had
she
ever
had,
among
other
ailments
listed
in
 the
application,
cancer
or
other
tumors;
that
she
had
not
consulted
any
physician,
 undergone
 any
 operation
 or
 suffered
 any
 injury
 within
 the
 preceding
 five
 years;
 and
 that
 she
 had
 never
 been
 treated
 for
 nor
 did
 she
 ever
 have
 any
 illness
 or
 disease
 peculiar
 to
 her
 sex,
 particularly
 of
 the
 breast,
 ovaries,
 uterus,
 and
 menstrual
 disorders.
 The
 application
 also
 recites
 that
 the
 foregoing
 declarations
 constituted
"a
further
basis
for
the
issuance
of
the
policy."
 
 The
 policy
 sued
 upon
 is
 one
 for
 20‐year
 endowment
 non‐medical
 insurance.
 This
 kind
 of
 policy
 dispenses
 with
 the
 medical
 examination
 of
 the
 applicant
 usually
 required
in
ordinary
life
policies.
However,
detailed
information
is
called
for
in
the
 application
 concerning
 the
 applicant's
 health
 and
 medical
 history.
 The
 written
 application
 in
 this
 case
 was
 submitted
 by
 Saturnino
 and
 the
 policy
 was
 issued
 on
 the
same
day,
upon
payment
of
the
first
year's
premium.
On
a
later
date,
Saturnino
 died
of
pneumonia,
secondary
to
influenza.
Appellants
here,
who
are
her
surviving



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20


husband
and
minor
child,
respectively,
demanded
payment
of
the
face
value
of
the
 policy.
The
claim
was
rejected
and
this
suit
was
subsequently
instituted.
 
 HELD:
 The
 question
 at
 issue
 is
 whether
 or
 not
 the
 insured
 made
 such
 false
 representations
 of
 material
 facts
 as
 to
 avoid
 the
 policy.
 There
 can
 be
 no
 dispute
 that
 the
 information
 given
 by
 her
 in
 her
 application
 for
 insurance
 was
 false,
 namely,
 that
 she
 had
 never
 had
 cancer
 or
 tumors,
 or
 consulted
 any
 physician
 or
 undergone
 any
 operation
 within
 the
 preceding
 period
 of
 five
 years.
 Are
 the
 facts
 then
 falsely
 represented
 material?
 The
 Insurance
 Law
 (Section
 30)
 provides
 that
 "materiality
is
to
be
determined
not
by
the
event,
but
solely
by
the
probable
and
 reasonable
 influence
 of
 the
 facts
 upon
 the
 party
 to
 whom
 the
 communication
 is
 due,
in
forming
his
estimate
of
the
proposed
contract,
or
in
making
his
inquiries."
It
 seems
 to
 be
 the
 contention
 of
 appellants
 that
 the
 facts
 subject
 of
 the
 representation
 were
 not
 material
 in
 view
 of
 the
 "non‐medical"
 nature
 of
 the
 insurance
 applied
 for,
 which
 does
 away
 with
 the
 usual
 requirement
 of
 medical
 examination
 before
 the
 policy
 is
 issued.
 The
 contention
 is
 without
 merit.
 If
 anything,
 the
 waiver
 of
 medical
 examination
 renders
 even
 more
 material
 the
 information
required
of
the
applicant
concerning
previous
condition
of
health
and
 diseases
suffered,
for
such
information
necessarily
constitutes
an
important
factor
 which
the
insurer
takes
into
consideration
in
deciding
whether
to
issue
the
policy
 or
 not.
 It
 is
 logical
 to
 assume
 that
 if
 appellee
 had
 been
 properly
 apprised
 of
 the
 insured's
 medical
 history
 she
 would
 at
 least
 have
 been
 made
 to
 undergo
 medical
 examination
in
order
to
determine
her
insurability.
 
 INSULAR
LIFE
V.
FELICIANO
 74
PHIL
468
 
 FACTS:
 Evaristo
 Feliciano,
 was
 suffering
 with
 advanced
 pulmonary
 tuberculosis
 when
 he
 signed
his
applications
for
insurance
with
the
petitioner.
On
that
same
date
Doctor
 Trepp,
 who
 had
 taken
 X‐ray
 pictures
 of
 his
 lungs,
 informed
 the
 respondent
 Dr.
 Serafin
 D.
 Feliciano,
 brother
 of
 Evaristo,
 that
 the
 latter
 "was
 already
 in
 a
 very
 serious
ad
practically
hopeless
condition."
Nevertheless
the
question
contained
in
 the
 application
 �
 "Have
 you
 ever
 suffered
 from
 any
 ailment
 or
 disease
 of
 the
 lungs,
pleurisy,
pneumonia
or
asthma?"
�
appears
to
have
been
answered
,
"No"
 And
 above
 the
 signature
 of
 the
 applicant,
 following
 the
 answers
 to
 the
 various
 questions
propounded
to
him,
is
the
following
printed
statement:1awphil.net



 I
declare
on
behalf
of
myself
and
of
any
person
who
shall
have
or
claim
any
interest
 in
 any
 policy
 issued
 hereunder,
 that
 each
 of
 the
 above
 answers
 is
 full,
 complete
 and
true,
and
that
to
the
best
of
my
knowledge
and
belief
I
am
a
proper
subject
for
 life
insurance.
(Exhibit
K.)
 
 The
 false
 answer
 above
 referred
 to,
 as
 well
 as
 the
 others,
 was
 written
 by
 the
 Company's
 soliciting
 agent
 Romulo
 M.
 David,
 in
 collusion
 with
 the
 medical
 examiner
Dr.
Gregorio
Valdez,
for
the
purpose
of
securing
the
Company's
approval
 of
the
application
so
that
the
policy
to
be
issued
thereon
might
be
credited
to
said
 agent
in
connection
with
the
inter‐provincial
contest
which
the
Company
was
then
 holding
 among
 its
 soliciting
 agents
 to
 boost
 the
 sales
 of
 its
 policies.
 Agent
 David
 bribed
Medical
Examiner
Valdez
with
money
which
the
former
borrowed
from
the
 applicant's
mother
by
way
of
advanced
payment
on
the
premium,
according
to
the
 finding
 of
 the
 Court
 of
 Appeals.
 Said
 court
 also
 found
 that
 before
 the
 insured
 signed
the
application
he,
as
well
as
the
members
of
his
family,
told
the
agent
and
 the
medical
examiner
that
he
had
been
sick
and
coughing
for
some
time
and
that
 he
 had
 gone
 three
 times
 to
 the
 Santol
 Sanatorium
 and
 had
 X‐ray
 pictures
 of
 his
 lungs
 taken;
 but
 that
 in
 spite
 of
 such
 information
 the
 agent
 and
 the
 medical
 examiner
told
them
that
the
applicant
was
a
fit
subject
for
insurance.
 
 HELD:
 When
Evaristo
Feliciano,
the
applicant
for
insurance,
signed
the
application
in
blank
 and
 authorized
 the
 soliciting
 agent
 and/or
 medical
 examiner
 of
 the
 Company
 to
 write
the
answers
for
him,
he
made
them
his
own
agents
for
that
purpose,
and
he
 was
 responsible
 for
 their
 acts
 in
 that
 connection.
 If
 they
 falsified
 the
 answers
 for
 him,
he
could
not
evade
the
responsibility
for
he
falsification.
He
was
not
supposed
 to
sign
the
application
in
blank.
He
knew
that
the
answers
to
the
questions
therein
 contained
 would
 be
 "the
 basis
 of
 the
 policy,"
 and
 for
 that
 every
 reason
 he
 was
 required
with
his
signature
to
vouch
for
truth
thereof.
 
 Moreover,
 from
 the
 facts
 of
 the
 case
 we
 cannot
 escape
 the
 conclusion
 that
 the
 insured
acted
in
connivance
with
the
soliciting
agent
and
the
medical
examiner
of
 the
 Company
 in
 accepting
 the
 policies
 in
 question.
 Above
 the
 signature
 of
 the
 applicant
is
the
printed
statement
or
representation:
"
.
.
.
I
am
a
proper
subject
for
 life
 insurance."
 In
 another
 sheet
 of
 the
 same
 application
 and
 above
 another
 signature
 of
 the
 applicant
 was
 also
 printed
 this
 statement:
 "That
 the
 said
 policy
 shall
 not
 take
 effect
 until
 he
 first
 premium
 has
 been
 paid
 and
 the
 policy
 as
 been
 delivered
to
and
accepted
by
me,
while
I
am
in
good
health."
When
the
applicant



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signed
the
application
he
was
"having
difficulty
in
breathing,
.
.
.
with
a
very
high
 fever."
 He
 had
 gone
 three
 times
 to
 the
 Santol
 Sanatorium
 and
 had
 X‐ray
 pictures
 taken
 of
 his
 lungs.
 He
 therefore
 knew
 that
 he
 was
 not
 "a
 proper
 subject
 for
 life
 insurance."
When
he
accepted
the
policy,
he
knew
that
he
was
not
in
good
health.
 Nevertheless,
he
not
only
accepted
the
first
policy
of
P20,000
but
then
and
there
 applied
for
and
later
accepted
another
policy
of
P5,000.
 
 It
 is
 unbelievable
 that
 the
 insured
 did
 not
 take
 the
 trouble
 to
 read
 the
 answers
 contained
in
the
photostatic
copy
of
the
application
attached
to
and
made
a
part
of
 the
 policy
 before
 he
 accepted
 it
 and
 paid
 the
 premium
 thereon.
 He
 must
 have
 notice
 that
 the
 answers
 to
 the
 questions
 therein
 asked
 concerning
 his
 clinical
 history
were
false,
and
yet
he
accepted
the
first
policy
and
applied
for
another.

 
 Sec.
28.
Each
party
to
a
contract
of
insurance
must
communicated
to
the
other,
in
 good
faith,
all
facts
within
his
knowledge
which
are
material
to
the
contract
and
 as
 to
 which
 he
 makes
 no
 warranty,
 and
 which
 the
 other
 has
 not
 the
 means
 of
 ascertaining.
 
 FACTS
TO
BE
COMMUNICATED:
REQUISITES
 • Each
 party
 to
 an
 insurance
 contract
 must
 communicate
 to
 the
 other
 in
 good
faith
 o Which
are
within
his
knowledge
 o Which
are
material
to
the
contract
 o Which
the
other
party
has
not
the
means
of
ascertaining
 o As
to
which
the
party
with
the
duty
to
communicate
makes
no
 warranty
 
 MUST
BE
WITHIN
PARTY’S
KNOWLEDGE
 • Concealment
 requires
 knowledge
 of
 the
 fact
 concealed
 by
 the
 party
 charged
with
concealment
 • This
must
be
proven
by
the
party
claiming
the
concealment

 
 MUST
BE
MATERIAL
TO
THE
CONTRACT
 • If
the
fact
concealed
is
of
such
nature
that
had
the
insurer
known
of
it,
it
 wouldn't
 have
 accepted
 the
 risk
 or
 would
 have
 demanded
 a
 higher
 premium,
or
could
have
laid
down
different
terms,
or
at
least
would
have
 made
further
inquiries
before
assuming
the
risk
 
 NO
MEANS
OF
ASCERTAINMENT
BY
THE
OTHER
PARTY


If
such
other
party
has
means
of
ascertaining
the
non‐disclosed
fact
like
 public
events
under
Section
32
or
when
the
insurer
had
every
means
to
 ascertain
 the
 non‐disclosed
 fact
 the
 other
 facts
 already
 communicated
 but
neglects
to
make
inquiries,
the
right
of
information
is
deemed
waived
 under
Section
33



 FIELDMAN’S
INSURANCE
V.
SONGCO
 25
SCRA
70
 
 FACTS:
 
 
 HELD:
 
 Sec.
 29.
 An
 intentional
 and
 fraudulent
 omission,
 on
 the
 part
 of
 one
 insured,
 to
 communicate
information
of
matters
proving
or
tending
to
prove
the
falsity
of
a
 warranty,
entitles
the
insurer
to
rescind.
 
 FACTS
 WHICH
 PROVE
 OR
 TEND
 TO
 PROVE
 FALSITY
 OF
 WARRANTY
 TO
 BE
 DISCLOSED
 • Although
 facts
 or
 matters
 concerning
 which
 the
 insured
 has
 made
 a
 warranty
need
not
to
be
disclosed,
the
facts
which
prove
or
tend
to
prove
 a
falsity
of
the
warrant
must
be
communicated
or
disclosed
 • An
intentional
and
fraudulent
omission
to
communicate
said
facts
which
 proves
or
tends
to
prove
the
falsity
of
the
warranty
entitles
the
insurer
to
 rescind
 
 Sec.
 30.
 Neither
 party
 to
 a
 contract
 of
 insurance
 is
 bound
 to
 communicate
 information
 of
 the
 matters
 following,
 except
 in
 answer
 to
 the
 inquiries
 of
 the
 other:
 
 (a)
Those
which
the
other
knows;
 
 (b)
Those
which,
in
the
exercise
of
ordinary
care,
the
other
ought
to
know,
and
of
 which
the
former
has
no
reason
to
suppose
him
ignorant;
 
 (c)
Those
of
which
the
other
waives
communication;
 



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(d)
 Those
 which
 prove
 or
 tend
 to
 prove
 the
 existence
 of
 a
 risk
 excluded
 by
 a
 warranty,
and
which
are
not
otherwise
material;
and
 
 (e)
 Those
 which
 relate
 to
 a
 risk
 excepted
 from
 the
 policy
 and
 which
 are
 not
 otherwise
material.
 
 Sec.
 31.
 Materiality
 is
 to
 be
 determined
 not
 by
 the
 event,
 but
 solely
 by
 the
 probable
 and
 reasonable
 influence
 of
 the
 facts
 upon
 the
 party
 to
 whom
 the
 communication
 is
 due,
 in
 forming
 his
 estimate
 of
 the
 disadvantages
 of
 the
 proposed
contract,
or
in
making
his
inquiries.
 
 TEST
OF
MATERIALITY
 • Materiality
 is
 determined
 not
 by
 the
 event
 but
 by
 the
 probable
 or
 reasonable
 influence
 of
 the
 facts
 on
 the
 judgment
 of
 the
 parties
 in
 entering
into
an
insurance
contract
 
 SUN
LIFE
V.
COURT
OF
APPEALS
 245
SCRA
268
 
 FACTS:
 Bacani
took
an
insurance
policy
on
his
life.

He
was
issued
Policy
No.
3‐903‐766‐X
 valued
 at
 P100,000.00,
 with
 double
 indemnity
 in
 case
 of
 accidental
 death.
 The
 designated
beneficiary
was
his
mother,
respondent
Bernarda
Bacani.
 
 Insured
Bacani
died
on
a
plane
crash
and
his
mother
sought
to
collect
the
proceeds
 of
the
policy
but
was
denied
on
alleged
concealment
done
by
her
son.

Petitioner
 discovered
 that
 two
 weeks
 prior
 to
 insured’s
 application
 for
 insurance,
 he
 was
 diagnosed
with
renal
failure
and
was
subject
to
dialysis,
etc.




 
 HELD:
 Section
 26
 of
 The
 Insurance
 Code
 is
 explicit
 in
 requiring
 a
 party
 to
 a
 contract
 of
 insurance
to
communicate
to
the
other,
in
good
faith,
all
facts
within
his
knowledge
 which
 are
 material
 to
 the
 contract
 and
 as
 to
 which
 he
 makes
 no
 warranty,
 and
 which
the
other
has
no
means
of
ascertaining.
Said
Section
provides:
 
 A
neglect
to
communicate
that
which
a
party
knows
and
ought
to
communicate,
is
 called
concealment.
 


Materiality
 is
 to
 be
 determined
 not
 by
 the
 event,
 but
 solely
 by
 the
 probable
 and
 reasonable
influence
of
the
facts
upon
the
party
to
whom
communication
is
due,
in
 forming
 his
 estimate
 of
 the
 disadvantages
 of
 the
 proposed
 contract
 or
 in
 making
 his
inquiries
(The
Insurance
Code,
Sec.
31).
 
 The
terms
of
the
contract
are
clear.
The
insured
is
specifically
required
to
disclose
 to
the
insurer
matters
relating
to
his
health.
 
 The
information
which
the
insured
failed
to
disclose
were
material
and
relevant
to
 the
 approval
 and
 issuance
 of
 the
 insurance
 policy.
 The
 matters
 concealed
 would
 have
definitely
affected
petitioner's
action
on
his
application,
either
by
approving
it
 with
 the
 corresponding
 adjustment
 for
 a
 higher
 premium
 or
 rejecting
 the
 same.
 Moreover,
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.
 
 Anent
the
finding
that
the
facts
concealed
had
no
bearing
to
the
cause
of
death
of
 the
 insured,
 it
 is
 well
 settled
 that
 the
 insured
 need
 not
 die
 of
 the
 disease
 he
 had
 failed
 to
 disclose
 to
 the
 insurer.
 It
 is
 sufficient
 that
 his
 non‐disclosure
 misled
 the
 insurer
in
forming
his
estimates
of
the
risks
of
the
proposed
insurance
policy
or
in
 making
inquiries.
 
 Sec.
 32.
 Each
 party
 to
 a
 contract
 of
 insurance
 is
 bound
 to
 know
 all
 the
 general
 causes
 which
 are
 open
 to
 his
 inquiry,
 equally
 with
 that
 of
 the
 other,
 and
 which
 may
affect
the
political
or
material
perils
contemplated;
and
all
general
usages
of
 trade.
 
 CONSTRUCTIVE
 NOTICE
 TO
 BOTH
 PARTIES
 OF
 ALL
 GENERAL
 CAUSES
 AND
 GENERAL
USAGES
OF
TRADE
 1. The
insured
need
not
disclose
public
events
such
as
that
of
a
nation
is
at
 war,
or
the
laws
and
political
conditions
in
other
countries
 2. He
 likewise
 need
 not
 communicate
 the
 general
 usages
 of
 trade
 like
 the
 customs
pertaining
to
maritime
matters
 
 Sec.
33.
The
right
to
information
of
material
facts
may
be
waived,
either
by
the
 terms
of
the
insurance
or
by
neglect
to
make
inquiry
as
to
such
facts,
where
they
 are
distinctly
implied
in
other
facts
of
which
information
is
communicated.
 
 WAIVER
OF
DISCLOSURE
OF
MATERIAL
FACTS



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


23


A
party
is
not
bound
to
disclose
material
facts
the
disclosure
of
which
is
 waived—
 o Expressly
by
the
terms
of
the
contract
 o Impliedly,
by
neglect
to
make
inquiries
on
such
facts
which
can
 be
distinctly
implied
in
the
other
facts
already
communicated




 NG
GAN
ZEE
V.
ASIAN
CRUSADER
 122
SCRA
461
 
 FACTS:
 Kwong
Nam
applied
for
a
20‐year
endowment
insurance
on
his
life
for
the
sum
of
 P20,000.00,
with
his
wife,
appellee
Ng
Gan
Zee
as
beneficiary.
On
the
same
date,
 appellant,
 upon
 receipt
 of
 the
 required
 premium
 from
 the
 insured,
 approved
 the
 application
 and
 issued
 the
 corresponding
 policy.
 
 After
 a
 year
 or
 so,
 Kwong
 Nam
 died
of
cancer
of
the
liver
with
metastatis.

His
wife
sought
the
proceeds
but
was
 denied
her
claim
on
alleged
concealment
of
her
husband
of
any
known
illness.


 
 HELD:
 Section
27
of
the
Insurance
Law
[Act
2427]
provides:
 
 Sec.
27.
Such
party
a
contract
of
insurance
must
communicate
to
the
other,
in
good
 faith,
all
facts
within
his
knowledge
which
are
material
to
the
contract,
and
which
 the
 other
 has
 not
 the
 means
 of
 ascertaining,
 and
 as
 to
 which
 he
 makes
 no
 warranty.

 
 Thus,
"concealment
exists
where
the
assured
had
knowledge
of
a
fact
material
to
 the
 risk,
 and
 honesty,
 good
 faith,
 and
 fair
 dealing
 requires
 that
 he
 should
 communicate
 it
 to
 the
 assurer,
 but
 he
 designedly
 and
 intentionally
 withholds
 the
 same."

 
 It
 has
 also
 been
 held
 "that
 the
 concealment
 must,
 in
 the
 absence
 of
 inquiries,
 be
 not
 only
 material,
 but
 fraudulent,
 or
 the
 fact
 must
 have
 been
 intentionally
 withheld."

 
 Assuming
that
the
aforesaid
answer
given
by
the
insured
is
false,
as
claimed
by
the
 appellant.
Sec.
27
of
the
Insurance
Law,
above‐quoted,
nevertheless
requires
that
 fraudulent
intent
on
the
part
of
the
insured
be
established
to
entitle
the
insurer
to
 rescind
 the
 contract.
 And
 as
 correctly
 observed
 by
 the
 lower
 court,


"misrepresentation
 as
 a
 defense
 of
 the
 insurer
 to
 avoid
 liability
 is
 an
 'affirmative'
 defense.
 The
 duty
 to
 establish
 such
 a
 defense
 by
 satisfactory
 and
 convincing
 evidence
rests
upon
the
defendant.
The
evidence
before
the
Court
does
not
clearly
 and
satisfactorily
establish
that
defense."
 
 It
bears
emphasis
that
Kwong
Nam
had
informed
the
appellant's
medical
examiner
 that
 the
 tumor
 for
 which
 he
 was
 operated
 on
 was
 "associated
 with
 ulcer
 of
 the
 stomach."
 In
 the
 absence
 of
 evidence
 that
 the
 insured
 had
 sufficient
 medical
 knowledge
as
to
enable
him
to
distinguish
between
"peptic
ulcer"
and
"a
tumor",
 his
statement
that
said
tumor
was
"associated
with
ulcer
of
the
stomach,"
should
 be
construed
as
an
expression
made
in
good
faith
of
his
belief
as
to
the
nature
of
 his
ailment
and
operation.
Indeed,
such
statement
must
be
presumed
to
have
been
 made
 by
 him
 without
 knowledge
 of
 its
 incorrectness
 and
 without
 any
 deliberate
 intent
on
his
part
to
mislead
the
appellant.
 
 While
 it
 may
 be
 conceded
 that,
 from
 the
 viewpoint
 of
 a
 medical
 expert,
 the
 information
communicated
was
imperfect,
the
same
was
nevertheless
sufficient
to
 have
induced
appellant
to
make
further
inquiries
about
the
ailment
and
operation
 of
the
insured.
 
 Section
32
of
Insurance
Law
[Act
No.
24271
provides
as
follows:
 
 Section
32.
The
right
to
information
of
material
facts
maybe
waived
either
by
the
 terms
of
insurance
or
by
neglect
to
make
inquiries
as
to
such
facts
where
they
are
 distinctly
implied
in
other
facts
of
which
information
is
communicated.
 
 It
has
been
held
that
where,
upon
the
face
of
the
application,
a
question
appears
to
 be
 not
 answered
 at
 all
 or
 to
 be
 imperfectly
 answered,
 and
 the
 insurers
 issue
 a
 policy
without
any
further
inquiry,
they
waive
the
imperfection
of
the
answer
and
 render
the
omission
to
answer
more
fully
immaterial.

 
 As
aptly
noted
by
the
lower
court,
"if
the
ailment
and
operation
of
Kwong
Nam
had
 such
 an
 important
 bearing
 on
 the
 question
 of
 whether
 the
 defendant
 would
 undertake
the
insurance
or
not,
the
court
cannot
understand
why
the
defendant
or
 its
medical
examiner
did
not
make
any
further
inquiries
on
such
matters
from
the
 Chinese
 General
 Hospital
 or
 require
 copies
 of
 the
 hospital
 records
 from
 the
 appellant
before
acting
on
the
application
for
insurance.
The
fact
of
the
matter
is
 that
 the
 defendant
 was
 too
 eager
 to
 accept
 the
 application
 and
 receive
 the



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


24


insured's
 premium.
 It
 would
 be
 inequitable
 now
 to
 allow
 the
 defendant
 to
 avoid
 liability
under
the
circumstances."

 
 Sec.
34.
Information
of
the
nature
or
amount
of
the
interest
of
one
insured
need
 not
 be
 communicated
 unless
 in
 answer
 to
 an
 inquiry,
 except
 as
 prescribed
 by
 section
fifty‐one.
 
 GENERAL
RULE
ON
COMMUNICATION
OF
INSURABLE
INTEREST
 • Insured
is
not
required
to
communicate
the
nature
or
the
amount
of
his
 insurable
interest
in
the
life
or
property
insured
to
the
insurer
 
 EXCEPTIONS
 1. When
 the
 insurer
 makes
 an
 inquiry
 from
 the
 insured
 of
 the
 nature
 or
 amount
of
the
latter’s
insurable
interest,
whether
in
life
or
property
 2. Under
 Section
 51,
 the
 insurance
 policy
 must
 specify,
 among
 others
 the
 interest
of
the
insured
in
property
insured,
if
he
is
not
the
absolute
owner
 thereof

 
 Sec.
35.
Neither
party
to
a
contract
of
insurance
is
bound
to
communicate,
even
 upon
inquiry,
information
of
his
own
judgment
upon
the
matters
in
question.
 
 REPRESENTATION
 
 Sec.
36.
A
representation
may
be
oral
or
written.
 
 REPRESENTATION
 • Oral
or
written
statement
of
a
fact
or
a
condition
affecting
the
risk
made
 by
 the
 insured
 to
 the
 insurance
 company,
 tending
 to
 induce
 the
 insurer
 to
assume
the
risk
 • Positive
manifestation
 
 MISREPRESENTATION
 • In
 insurance,
 is
 a
 statement
 of
 a
 material
 point
 or
 matter
 which
 is
 false
 and
 made
 by
 the
 insured
 to
 deceive
 the
 insurer
 into
 entering
 into
 an
 insurance
contract
 
 Sec.
37.
A
representation
may
be
made
at
the
time
of,
or
before,
issuance
of
the
 policy.



 Sec.
38.
The
language
of
a
representation
is
to
be
interpreted
by
the
same
rules
 as
the
language
of
contracts
in
general.
 
 CONSTRUCTION
OF
REPRESENTATION
 • Representation
 need
 not
 be
 literally
 true
 and
 accurate
 in
 every
 respect,
 rather
it
is
sufficient
if
it
is
substantially
or
materially
true
and
in
case
of
 promissory
 representation,
 it
 is
 sufficient
 if
 it
 is
 substantially
 complied
 with
 
 Sec.
 39.
 A
 representation
 as
 to
 the
 future
 is
 to
 be
 deemed
 a
 promise,
 unless
 it
 appears
that
it
was
merely
a
statement
of
belief
or
expectation.
 
 KIND
OF
REPRESENTATION
 1. Affirmative
 which
 is
 an
 affirmation
 of
 a
 fact
 existing
 when
 the
 contract
 begins
 2. Promissory
 which
 is
 a
 statement
 by
 the
 insured
 concerning
 what
 is
 to
 happen
during
the
term
of
the
insurance

 
 Sec.
 40.
 A
 representation
 cannot
 qualify
 an
 express
 provision
 in
 a
 contract
 of
 insurance,
but
it
may
qualify
an
implied
warranty.
 
 REPRESENTATION
 QUALIFIES
 IMPLIED
 WARRANTY
 BUT
 NOT
 EXPRESS
 PROVISIONS
IN
THE
CONTRACT
 • Representation
is
a
mere
collateral
inducement
to
a
contract
and
doesn't
 form
part
of
a
contract
 • Thus,
a
representation
cannot
qualify
an
express
provision
in
a
contract,
 but
may
qualify
an
implied
warranty
 
 Sec.
 41.
 A
 representation
 may
 be
 altered
 or
 withdrawn
 before
 the
 insurance
 is
 effected,
but
not
afterwards.
 
 RULE
ON
ALTERATION
OR
WITHDRAWAL
OF
REPRESENTATION
 • A
 representation
 is
 allowed
 to
 be
 altered
 and
 withdrawn
 so
 long
 as
 the
 insurance
 has
 not
 been
 effected
 because
 the
 insurer
 has
 not
 been
 yet
 induced
to
issue
the
policy
 • If
the
representation
has
been
altered
or
withdrawn
before
the
issuance
 of
the
policy
and
the
insurer
still
issues
the
same,
then
the
policy
shall
not
 be
rescissible
anymore



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


25



 Sec.
 42.
 A
 representation
 must
 be
 presumed
 to
 refer
 to
 the
 date
 on
 which
 the
 contract
goes
into
effect.
 
 DATE
THE
REPRESENTATION
REFERS
 • Representation
 must
 be
 presumed
 to
 refer
 to
 the
 date
 on
 which
 the
 contract
goes
into
effect
 • Even
 though
 a
 representation
 that
 no
 other
 insurance
 exists
 on
 the
 property
insured
is
true
at
the
time
it
is
made,
yet
it
is
untrue
at
the
time
 the
 application
 is
 accepted
 and
 the
 policy
 issued
 the
 insured
 is
 guilty
 of
 misrepresentation
that
vitiates
the
policy
 
 Sec.
 43.
 When
 a
 person
 insured
 has
 no
 personal
 knowledge
 of
 a
 fact,
 he
 may
 nevertheless
 repeat
 information
 which
 he
 has
 upon
 the
 subject,
 and
 which
 he
 believes
 to
 be
 true,
 with
 the
 explanation
 that
 he
 does
 so
 on
 the
 information
 of
 others;
or
he
may
submit
the
information,
in
its
whole
extent,
to
the
insurer;
and
 in
neither
case
is
he
responsible
for
its
truth,
unless
it
proceeds
from
an
agent
of
 the
insured,
whose
duty
it
is
to
give
the
information.
 
 WHEN
 IS
 THE
 INSURED
 BOUND
 TO
 DISCLOSE
 INFORMATION
 RECEIVED
 FROM
 ANOTHER
PERSON
 1. When
 the
 information
 material
 to
 the
 transaction
 was
 acquired
 by
 an
 agent
 of
 the
 insured
 since
 knowledge
 of
 the
 agent
 is
 also
 knowledge
 of
 the
principal
 2. In
 marine
 insurance,
 the
 information
 of
 the
 belief
 or
 expectation
 of
 a
 third
 person,
 in
 reference
 to
 material
 fact,
 is
 material
 and
 must
 be
 communicated
by
the
insured

 
 HARDING
V.
COMMERCIAL
UNION
 38
PHIL
469
 
 FACTS:
 Harding
insured
her
Studebaker
car
and
on
a
later
date,
the
car
was
destroyed
by
 fire.
 
 She
 sought
 the
 proceeds
 of
 the
 car
 insurance
 but
 was
 denied
 on
 alleged
 grounds
misrepresentation
on
the
value
of
the
car.




It
 is
 a
 different
 story
 when
 the
 representation
 has
 been
 altered
 or
 withdrawn
 after
 the
 policy
 has
 been
 issued.
 
 It
 cannot
 anymore
 be
 withdrawn
or
altered.

The
contract
will
remain
rescissible.



 HELD:
 Defendant
contends
that
the
statement
regarding
the
cost
of
the
automobile
was
a
 warranty,
 that
 the
 statement
 was
 false,
 and
 that,
 therefore,
 the
 policy
 never
 attached
 to
 the
 risk.
 We
 are
 of
 the
 opinion
 that
 it
 has
 not
 been
 shown
 by
 the
 evidence
that
the
statement
was
false
�
on
the
contrary
we
believe
that
it
shows
 that
the
automobile
had
in
fact
cost
more
than
the
amount
mentioned.
The
court
 below
 found,
 and
 the
 evidence
 shows,
 that
 the
 automobile
 was
 bought
 by
 plaintiff's
husband
a
few
weeks
before
the
issuance
of
the
policy
in
question
for
the
 sum
 of
 P2,800,
 and
 that
 between
 that
 time
 and
 the
 issuance
 of
 the
 policy
 some
 P900
 was
 spent
 upon
 it
 in
 repairs
 and
 repainting.
 The
 witness
 Server,
 an
 expert
 automobile
mechanic,
testified
that
the
automobile
was
practically
as
good
as
new
 at
the
time
the
insurance
was
effected.
The
form
of
proposal
upon
which
the
policy
 was
issued
does
not
call
for
a
statement
regarding
the
value
of
the
automobile
at
 the
 time
 of
 its
 acquisition
 by
 the
 applicant
 for
 the
 insurance,
 but
 merely
 a
 statement
of
its
cost.
The
amount
stated
was
less
than
the
actual
outlay
which
the
 automobile
 represented
 to
 Mr.
 Harding,
 including
 repairs,
 when
 the
 insurance
 policy
was
issued.
It
is
true
that
the
printed
form
calls
for
a
statement
of
the
"price
 paid
by
the
proposer,"
but
we
are
of
the
opinion
that
it
would
be
unfair
to
hold
the
 policy
void
simply
because
the
outlay
represented
by
the
automobile
was
made
by
 the
plaintiff's
husband
and
not
by
his
wife,
to
whom
he
had
given
the
automobile.
 It
 cannot
 be
 assumed
 that
 defendant
 should
 not
 have
 issued
 the
 policy
 unless
 it
 were
strictly
true
that
the
price
representing
the
cost
of
the
machine
had
been
paid
 by
 the
 insured
 and
 by
 no
 other
 person
 �
 that
 it
 would
 no
 event
 insure
 an
 automobile
acquired
by
gift,
inheritance,
exchange,
or
any
other
title
not
requiring
 the
owner
to
make
a
specific
cash
outlay
for
its
acquisition.
 
 Furthermore,
the
court
below
found
and
the
evidence
shows,
without
dispute,
that
 the
 proposal
 upon
 which
 the
 policy
 in
 question
 was
 issued
 was
 made
 out
 by
 defendant's
agent
by
whom
the
insurance
was
solicited,
and
that
appellee
simply
 signed
 the
 same.
 It
 also
 appears
 that
 an
 examiner
 employed
 by
 the
 defendant
 made
an
inspection
of
the
automobile
before
the
acceptance
of
the
risk,
and
that
 the
sum
after
this
examination.
The
trial
court
found
that
Mrs.
Harding,
in
fixing
the
 value
 of
 the
 automobile
 at
 P3,000,
 acted
 upon
 information
 given
 her
 by
 her
 husband
and
by
Mr.
Server,
the
manager
of
the
Luneta
Garage.
The
Luneta
Garage,
 it
 will
 be
 remembered,
 was
 the
 agent
 of
 the
 defendant
 corporation
 in
 the
 solicitation
of
the
insurance.
Mrs.
Harding
did
not
state
of
her
own
knowledge
that
 the
automobile
originally
cost
P3,000,
or
that
its
value
at
the
time
of
the
insurance
 was
P3,000.
She
merely
repeated
the
information
which
had
been
given
her
by
her



MA.
ANGELA
AGUINALDO
 ATENEO
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2010


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(ATTY.
QUIMSON)
 


26


husband,
 and
 at
 the
 same
 time
 disclosed
 to
 defendant's
 agent
 the
 source
 of
 her
 information.
 There
 is
 no
 evidence
 to
 sustain
 the
 contention
 that
 this
 communication
 was
 made
 in
 bad
 faith.
 It
 appears
 that
 the
 statements
 in
 the
 proposal
as
to
the
price
paid
for
the
automobile
and
as
to
its
value
were
written
by
 Mr.
Quimby
who
solicited
the
insurance
on
behalf
of
defendant,
in
his
capacity
as
 an
employee
of
the
Luneta
Garage,
and
wrote
out
the
proposal
for
Mrs.
Harding
to
 sign.
 Under
 these
 circumstances,
 we
 do
 not
 think
 that
 the
 facts
 stated
 in
 the
 proposal
 can
 be
 held
 as
 a
 warranty
 of
 the
 insured,
 even
 if
 it
 should
 have
 been
 shown
that
they
were
incorrect
in
the
absence
of
proof
of
willful
misstatement.
 
 Sec.
44.
A
representation
is
to
be
deemed
false
when
the
facts
fail
to
correspond
 with
its
assertions
or
stipulations.
 
 Sec.
 45.
 If
 a
 representation
 is
 false
 in
 a
 material
 point,
 whether
 affirmative
 or
 promissory,
 the
 injured
 party
 is
 entitled
 to
 rescind
 the
 contract
 from
 the
 time
 when
the
representation
becomes
false.
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.
(As
amended
by
Batasang
Pambansa
Blg.
 874).
 
 EFFECT
OF
MISREPRESENTATION
ON
A
MATERIAL
POINT

 • If
a
representation
is
false
as
to
a
material
point,
whether
affirmative
or
 promissory,
the
injured
party
is
entitled
to
rescind
the
contract
from
the
 time
the
repesentation
becomes
false
 • The
 right
 to
 rescind
 however
 granted
 to
 the
 insurer
 is
 waived
 by
 the
 acceptance
 of
 premium
 payments
 despite
 knowledge
 of
 the
 ground
 of
 rescission
 
 EDILLON
V.
MANILA
BANKERS
LIFE
 117
SCRA
766
 
 FACTS:
 Lapuz
 applied
 with
 respondent
 insurance
 corporation
 for
 insurance
 coverage
 against
accident
and
injuries.
She
filled
up
the
blank
application
form
given
to
her
 and
 filed
 the
 same
 with
 the
 respondent
 insurance
 corporation.
 In
 the
 said
 application
form
which
was
dated
April
15,
1969,
she
gave
the
date
of
her
birth
as
 July
 11,
 1904.
 On
 the
 same
 date,
 she
 paid
 the
 sum
 of
 P20.00
 representing
 the
 premium
 for
 which
 she
 was
 issued
 the
 corresponding
 receipt
 signed
 by
 an


authorized
 agent
 of
 the
 respondent
 insurance
 corporation.
 
 During
 the
 effectivity
 of
her
insurance
policy,
she
died
from
a
vehicular
accident.
 
 Her
 sister,
 Edillon
 sought
 the
 proceeds
 of
 the
 policy
 but
 she
 was
 denied
 by
 the
 insurance
company
on
grounds
of
misrepresentation
by
her
sister
as
to
the
date
of
 birth.


 
 HELD:
 The
 age
 of
 the
 insured
 Carmen
 0.
 Lapuz
 was
 not
 concealed
 to
 the
 insurance
 company.
 Her
 application
 for
 insurance
 coverage
 which
 was
 on
 a
 printed
 form
 furnished
 by
 private
 respondent
 and
 which
 contained
 very
 few
 items
 of
 information
clearly
indicated
her
age
of
the
time
of
filing
the
same
to
be
almost
65
 years
 of
 age.
 Despite
 such
 information
 which
 could
 hardly
 be
 overlooked
 in
 the
 application
 form,
 considering
 its
 prominence
 thereon
 and
 its
 materiality
 to
 the
 coverage
applied
for,
the
respondent
insurance
corporation
received
her
payment
 of
 premium
 and
 issued
 the
 corresponding
 certificate
 of
 insurance
 without
 question.
The
accident
which
resulted
in
the
death
of
the
insured,
a
risk
covered
by
 the
policy,
occurred
on
May
31,
1969
or
FORTY‐FIVE
(45)
DAYS
after
the
insurance
 coverage
was
applied
for.
There
was
sufficient
time
for
the
private
respondent
to
 process
the
application
and
to
notice
that
the
applicant
was
over
60
years
of
age
 and
 thereby
 cancel
 the
 policy
 on
 that
 ground
 if
 it
 was
 minded
 to
 do
 so.
 If
 the
 private
 respondent
 failed
 to
 act,
 it
 is
 either
 because
 it
 was
 willing
 to
 waive
 such
 disqualification;
 or,
 through
 the
 negligence
 or
 incompetence
 of
 its
 employees
 for
 which
 it
 has
 only
 itself
 to
 blame,
 it
 simply
 overlooked
 such
 fact.
 Under
 the
 circumstances,
the
insurance
corporation
is
already
deemed
in
estoppel.
 
 QUA
CHEE
GAN
V.
LAW
UNION
ROCK
INSURANCE
 98
PHIL
85
 
 FACTS:
 This
 is
 a
 claim
 on
 an
 insurance
 policy
 which
 contained
 a
 provision
 as
 to
 the
 installation
 of
 fire
 hydrants
 the
 number
 of
 which
 depended
 on
 the
 height
 of
 the
 external
wan
perimeter
of
the
bodega
that
was
insured.
When
it
was
determined
 that
the
bodega
should
have
eleven
(11)
fire
hydrants
in
the
compound
as
required
 by
the
terms
of
the
policy,
instead
of
only
two
(2)
that
it
had,
the
claim
under
the
 policy
was
resisted
on
that
ground.
 
 HELD:



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


27


The
 insurance
 company
 was
 aware,
 even
 before
 the
 policies
 were
 issued,
 that
 in
 the
premises
insured
there
were
only
two
fire
hydrants
installed
by
Que
Chee
Gan
 and
 two
 others
 nearby,
 owned
 by
 the
 municipality
 of
 Tabaco,
 contrary
 to
 the
 requirements
 of
 the
 warranty
 in
 question.
 Such
 fact
 appears
 from
 positive
 testimony
for
the
insured
that
appellant's
agents
inspected
the
premises;
and
the
 simple
 denials
 of
 appellant's
 representative
 (Jamiczon)
 can
 not
 overcome
 that
 proof.
That
such
inspection
was
made
it
moreover
rendered
probable
by
its
being
a
 prerequisite
for
the
fixing
of
the
discount
on
the
premium
to
which
the
insured
was
 entitled,
 since
 the
 discount
 depended
 on
 the
 number
 of
 hydrants,
 and
 the
 fire
 fighting
equipment
available.
 
 It
is
usually
held
that
where
the
insurer,
at
the
time
of
the
issuance
of
a
policy
of
 insurance,
 has
 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
 the
 known
 facts,
 and
 the
 insurer
 is
 stopped
 thereafter
 from
 asserting
 the
 breach
 of
 such
 conditions.
 The
 law
 is
 charitable
enough
to
assume,
in
the
absence
of
any
showing
to
the
contrary,
that
 an
 insurance
 company
 intends
 to
 execute
 a
 valid
 contract
 in
 return
 for
 the
 premium
 received;
 and
 when
 the
 policy
 contains
 a
 condition
 which
 renders
 it
 voidable
at
its
inception,
and
this
result
is
known
to
the
insurer,
it
will
be
presumed
 to
have
intended
to
waive
the
conditions
and
to
execute
a
binding
contract,
rather
 than
to
have
deceived
the
insured
into
thinking
he
is
insured
when
in
fact
he
is
not,
 and
to
have
taken
is
money
without
consideration.'
 
 The
plain,
human
justice
of
this
doctrine
is
perfectly
apparent.
To
allow
a
company
 to
accept
one's
money
for
a
policy
of
insurance
which
it
then
knows
to
be
void
and
 of
no
effect,
though
it
knows
as
it
must,
that
the
assured
believes
it
to
be
valid
and
 binding,
 is
 so
 contrary
 to
 the
 dictates
 of
 honesty
 and
 fair
 dealing,
 and
 so
 closely
 related
to
positive
fraud,
as
to
be
abhorent
to
fairminded
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.
 This
 cannot
 be
 deemed
 to
 be
 the
 real
 intention
 of
 the
 parties.
 To
 hold
 that
 a
 literal
 construction
 of
 the
 policy
 expressed
 the
 true
 intention
 of
 the
 company
 would
 be
 to
 indict
 it,
 for
 fraudulent
 purposes
and
designs
which
we
cannot
believe
it
to
be
guilty
of.
 
 Sec.
 46.
 The
 materiality
 of
 a
 representation
 is
 determined
 by
 the
 same
 rules
 as
 the
materiality
of
a
concealment.
 
 DETERMINATION
OF
MATERIALITY


Determined
by
the
same
rules
as
to
the
materiality
of
concealment


Concealment
 Representation
 Neglect
of
one
party
to
communicate
to
 The
information
he
gives
in
compliance
 the
other
material
facts
 with
his
duty
to
reveal
information
 
 
 Passive
 form
 of
 the
 same
 act
 of
 bad
 Active
form
of
bad
faith

 faith
 
 CONCEALMENT
OR
REPRESENTATION
MADE
AFTER
EFFECTIVITY
OF
CONTRACT
 • The
general
rule
is
that
concealment
or
representation
may
be
made
only
 before
the
effectivity
of
the
contract
 • However
 where
 the
 parties
 are
 modifying
 or
 amending
 their
 contract,
 then
concealment
or
presentation
may
be
made
even
after
its
effectivity
 
 Sec.
 47.
 The
 provisions
 of
 this
 chapter
 apply
 as
 well
 to
 a
 modification
 of
 a
 contract
of
insurance
as
to
its
original
formation.
 
 Sec.
48.
Whenever
a
right
to
rescind
a
contract
of
insurance
is
given
to
the
insurer
 by
 any
 provision
 of
 this
 chapter,
 such
 right
 must
 be
 exercised
 previous
 to
 the
 commencement
of
an
action
on
the
contract.
 
 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
 insurer
 cannot
 prove
 that
 the
 policy
 is
 void
 ab
 initio
 or
 is
 rescindible
 by
 reason
 of
 the
 fraudulent
 concealment
or
misrepresentation
of
the
insured
or
his
agent.
 
 TIME
OF
RESCISSION
OF
CONTRACT
 • Whenever
a
right
to
rescind
a
contract
of
insurance
is
given
to
the
insurer
 by
any
provision
of
this
chapter,
such
right
must
be
exercised
previous
to
 the
commencement
of
an
action
on
the
contract
 
 POLICY
BECOMES
INCONTESTABLE

 • 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
 insurer
 cannot
 prove
 that
 the
 policy
 is
 void
 ab
 initio
 or
 is
 rescindible
 by



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


28


reason
 of
 the
 fraudulent
 concealment
 or
 misrepresentations
 of
 the
 insured
or
his
agent

 
 REQUISITES
OF
INCONTESTABILITY
 1. Life
insurance
policy
 2. Payable
on
the
death
of
the
insured
 3. It
must
have
been
in
force
during
the
lifetime
of
 the
insured
for
a
period
of
two
years
from
date
of
 issue
or
of
its
last
reinstatement
 
 EFFECTS
OF
INCONTESTABILITY
 • Whenever
 all
 the
 requisites
 of
 incontestability
 are
 present,
 the
 insurer
 can
 no
 longer
 escape
 liability
 under
 the
 policy
 nor
 be
 allowed
 to
 prove
 that
the
policy
is
void
ab
initio
or
rescindible
by
reason
of
concealment
or
 misrepresentation
off
the
insured
or
his
agent
 • The
insurer
is
precluded
from
contesting
the
policy
on
any
ground
 
 SOLIMAN
V.
US
LIFE
 104
PHIL
1046


subsequent
 lapse
 of
 the
 policy.
 
 The
 spouses
 updated
 payment
 which
 caused
 the
 reinstatement
 of
 the
 policy.
 
 They
 also
 submitted
 accordingly
 health
 certificate
 forms.

On
a
relevant
date,
Rosario
died
of
a
heart
attack.

The
husband
sought
to
 claim
the
proceeds
from
the
insurance
company
but
was
denied
on
the
ground
that
 the
 wife
 falsely
 completed
 the
 application
 form
 by
 concealing
 that
 she
 had
 been
 suffering
from
bronchial
asthma.


 
 HELD:
 First,
 it
 is
 true
 that
 after
 the
 approval
 of
 the
 application
 for
 reinstatement
 the
 company
 accepted
 without
 any
 reservation
 the
 sum
 due
 from
 the
 spouses.

 However,
 this
 acceptance
 cannot
 be
 considered
 as
 a
 waiver
 on
 the
 partr
 of
 the
 company
of
its
rights
to
invalidate
the
reinstated
policy,.
For
evidence
shows
that
 the
fraud
was
discovered
only
thereafter.

In
fact,
when
after
proper
investigation,
 the
company
immediately
refunded
the
premiums
paid
by
the
spouses.


 
 TAN
V.
CA
 174
SCRA
403
 
 FACTS:
 Tan
 the
 father
 applied
 for
 life
 insurance
 with
 American
 Life
 Insurance.
 
 The
 beneficiaries
 were
 his
 children.
 
 He
 was
 duly
 issued
 a
 policy.
 
 On
 a
 later
 date,
 he
 died
 of
 hepatoma.
 
 Petitioners
 sought
 the
 proceeds
 but
 was
 denied
 by
 the
 insurance
 company
 on
 the
 ground
 of
 alleged
 concealment
 and
 misrepresentation
 made
by
the
father
in
his
insurance
application.

The
premiums
earlier
on
paid
by
 the
 deceased
 father
 was
 returned
 and
 the
 policy
 was
 rescinded.
 
 This
 of
 course
 prompted
 the
 petitioners
 to
 file
 a
 case
 against
 the
 insurance
 company
 on
 the
 ground
that
it
couldn't
longer
rescind
the
contract.
 
 HELD:
 The
 so‐called
 "incontestability
 clause"
 precludes
 the
 insurer
 from
 raising
 the
 defenses
of
false
representations
or
concealment
of
material
facts
insofar
as
health
 and
previous
diseases
are
concerned
if
the
insurance
has
been
in
force
for
at
least
 two
 years
 during
 the
 insured's
 lifetime.
 The
 phrase
 "during
 the
 lifetime"
 found
 in
 Section
48
simply
means
that
the
policy
is
no
longer
considered
in
force
after
the
 insured
 has
 died.
 The
 key
 phrase
 in
 the
 second
 paragraph
 of
 Section
 48
 is
 "for
 a
 period
of
two
years."
 


Took
a
 policy


?
Operated
 on
?


Date
of
 issue
of
 policy
 (2000)


Forgot
to
 pay
 premium:
 will
cause
 lapse
of
 insurance
 policy


Reinstatem ent:
new
 questions
 (avenue
for
 concealme nt
and
 misreprese ntation)


FACTS:
 US
 LIFE
 sought
 the
 rescission
 of
 the
 life
 insurance
 policy
 of
 Soliman.
 
 Soliman
 maintained
on
the
other
hand
that
US
Life
is
estopped
from
rescinding
the
policy,
it
 being
in
force
for
more
than
2
years
and
thus,
it
is
already
incontestable.

The
lower
 court
 reinstated
 the
 policy.
 
 The
 facts
 showed
 that
 when
 Soliman
 and
 his
 wife
 secured
 the
 insurance
 policy,
 there
 were
 unpaid
 premiums
 which
 caused
 the



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


29


The
policy
was
issued
on
November
6,1973
and
the
insured
died
on
April
26,1975.
 The
 policy
 was
 thus
 in
 force
 for
 a
 period
 of
 only
 one
 year
 and
 five
 months.
 Considering
 that
 the
 insured
 died
 before
 the
 two‐year
 period
 had
 lapsed,
 respondent
company
is
not,
therefore,
barred
from
proving
that
the
policy
is
void
 ab
initio
by
reason
of
the
insured's
fraudulent
concealment
or
misrepresentation.
 Moreover,
respondent
company
rescinded
the
contract
of
insurance
and
refunded
 the
premiums
paid
on
September
11,
1975,
previous
to
the
commencement
of
this
 action
on
November
27,1975.
 
 The
insurer
has
two
years
from
the
date
of
issuance
of
the
insurance
contract
or
of
 its
 last
 reinstatement
 within
 which
 to
 contest
 the
 policy,
 whether
 or
 not,
 the
 insured
still
lives
within
such
period.
After
two
years,
the
defenses
of
concealment
 or
 misrepresentation,
 no
 matter
 how
 patent
 or
 well
 founded,
 no
 longer
 lie.
 Congress
 felt
 this
 was
 a
 sufficient
 answer
 to
 the
 various
 tactics
 employed
 by
 insurance
 companies
 to
 avoid
 liability.
 The
 petitioners'
 interpretation
 would
 give
 rise
 to
 the
 incongruous
 situation
 where
 the
 beneficiaries
 of
 an
 insured
 who
 dies
 right
 after
 taking
 out
 and
 paying
 for
 a
 life
 insurance
 policy,
 would
 be
 allowed
 to
 collect
on
the
policy
even
if
the
insured
fraudulently
concealed
material
facts.
 
 THE
POLICY
 
 Sec.
 49.
 The
 written
 instrument
 in
 which
 a
 contract
 of
 insurance
 is
 set
 forth,
 is
 called
a
policy
of
insurance.
 
 INSURANCE
POLICY,
DEFINED
 • A
policy
of
insurance
is
defined
under
this
section
as
a
written
instrument
 in
which
a
contract
of
insurance
is
set
forth
 • It
is
to
be
construed
in
favor
of
the
insured
and
against
the
insurer,
who
 caused
it
 
 FORM
OF
INSURANCE
CONTRACT
 • An
insurance
contract
may
be
verbal
or
in
writing,
or
partly
in
writing
or
 verbal
 • It
must
be
in
a
form
previously
approved
by
the
Insurance
Commissioner
 but
 failure
 to
 obtain
 prior
 approval
 doesn't
 affect
 the
 validityu
 of
 the
 terms
of
the
contract
 
 ENRIQUEZ
V.
SUN
LIFE


62
PHIL
9
 
 FACTS:
 Herrer
 applied
 for
 life
 insurance
 with
 the
 Sun
 Life
 Assurance
 Company.
 
 He
 submitted
the
application
form
together
with
his
payment.


 
 On
December
4,
1917,
the
policy
was
issued
at
Montreal.
On
December
18,
1917,
 attorney
Aurelio
A.
Torres
wrote
to
the
Manila
office
of
the
company
stating
that
 Herrer
 desired
 to
 withdraw
 his
 application.
 The
 following
 day
 the
 local
 office
 replied
to
Mr.
Torres,
stating
that
the
policy
had
been
issued,
and
called
attention
 to
the
notification
of
November
26,
1917.
This
letter
was
received
by
Mr.
Torres
on
 the
morning
of
December
21,
1917.
Mr.
Herrer
died
on
December
20,
1917.
 
 HELD:
 The
deduction
from
the
evidence
on
this
issue
must
be
that
the
letter
of
November
 26,
 1917,
 notifying
 Mr.
 Herrer
 that
 his
 application
 had
 been
 accepted,
 was
 prepared
and
signed
in
the
local
office
of
the
insurance
company,
was
placed
in
the
 ordinary
 channels
 for
 transmission,
 but
 as
 far
 as
 we
 know,
 was
 never
 actually
 mailed
and
thus
was
never
received
by
the
applicant.
 
 With
 respect
 to
 the
 law
 applicable
 to
 the
 case,
 the
 second
 paragraph
 of
 article
 1262
of
the
Civil
Code
applies
by
providing
that
an
acceptance
made
by
letter
shall
 not
 bind
 the
 person
 making
 the
 offer
 except
 from
 the
 time
 it
 came
 to
 his
 knowledge.
 The
 pertinent
 fact
 is,
 that
 according
 to
 the
 provisional
 receipt,
 three
 things
 had
 to
 be
 accomplished
 by
 the
 insurance
 company
 before
 there
 was
 a
 contract:
(1)
There
had
to
be
a
medical
examination
of
the
applicant;
(2)
there
had
 to
 be
 approval
 of
 the
 application
 by
 the
 head
 office
 of
 the
 company;
 and
 (3)
 this
 approval
had
in
some
way
to
be
communicated
by
the
company
to
the
applicant.
 The
 further
 admitted
 facts
 are
 that
 the
 head
 office
 in
 Montreal
 did
 accept
 the
 application,
did
cable
the
Manila
office
to
that
effect,
did
actually
issue
the
policy
 and
 did,
 through
 its
 agent
 in
 Manila,
 actually
 write
 the
 letter
 of
 notification
 and
 place
it
in
the
usual
channels
for
transmission
to
the
addressee.
The
fact
as
to
the
 letter
of
notification
thus
fails
to
concur
with
the
essential
elements
of
the
general
 rule
 pertaining
 to
 the
 mailing
 and
 delivery
 of
 mail
 matter
 as
 announced
 by
 the
 American
 courts,
 namely,
 when
 a
 letter
 or
 other
 mail
 matter
 is
 addressed
 and
 mailed
with
postage
prepaid
there
is
a
rebuttable
presumption
of
fact
that
it
was
 received
by
the
addressee
as
soon
as
it
could
have
been
transmitted
to
him
in
the
 ordinary
course
of
the
mails.
But
if
any
one
of
these
elemental
facts
fails
to
appear,



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it
 is
 fatal
 to
 the
 presumption.
 For
 instance,
 a
 letter
 will
 not
 be
 presumed
 to
 have
 been
received
by
the
addressee
unless
it
is
shown
that
it
was
deposited
in
the
post‐ office,
properly
addressed
and
stamped.
 
 The
contract
for
a
life
annuity
in
the
case
at
bar
was
not
perfected
because
it
has
 not
been
proved
satisfactorily
that
the
acceptance
of
the
application
ever
came
to
 the
knowledge
of
the
applicant.lawph!l.net
 
 PEREZ
V.
CA
 323
SCRA
613
 
 FACTS:
 Primitivo
 B.
 Perez
 had
 been
 insured
 with
 the
 BF
 Lifeman
 Insurance
 Corporation
 since
 1980
 for
 P20,000.00.
 Sometime
 later,
 he
 was
 convinced
 to
 apply
 for
 additional
 insurance
 coverage
 of
 P50,000.00,
 to
 avail
 of
 the
 ongoing
 promotional
 discount
 of
 P400.00
 if
 the
 premium
 were
 paid
 annually.
 
 He
 was
 convinced
 and
 accomplished
the
needed
application
form.

His
wife
paid
accordingly
the
premium
 to
the
agent.

Unfortunately,
the
application
form
was
lost
and
the
applicant
was
 made
 to
 accomplish
 a
 new
 one.
 
 He
 took
 subsequently
 a
 medical
 examination
 to
 which
he
passed.



The
application
was
forwarded
to
the
company.

supervening
 approval
 however,
 the
 applicant
 died
 in
 an
 accident.
 
 Not
 knowing
 he
 died,
 the
 insurance
company
issued
its
approval.


 
 HELD:
 Insurance
 is
 a
 contract
 whereby,
 for
 a
 stipulated
 consideration,
 one
 party
 undertakes
 to
 compensate
 the
 other
 for
 loss
 on
 a
 specified
 subject
 by
 specified
 perils
 A
 contract,
 on
 the
 other
 hand,
 is
 a
 meeting
 of
 the
 minds
 between
 two
 persons
whereby
one
binds
himself,
with
respect
to
the
other
to
give
something
or
 to
 render
 some
 service
 Under
 Article
 1318
 of
 the
 Civil
 Code,
 there
 is
 no
 contract
 unless
the
following
requisites
concur:
 (1)
Consent
of
the
contracting
parties;
 (2)
Object
certain
which
is
the
subject
matter
of
the
contract;
 (3)
Cause
of
the
obligation
which
is
established.


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.
 The
 offer
 must
 be
 certain
and
the
acceptance
absolute.
 When
 Primitivo
 filed
 an
 application
 for
 insurance,
 paid
 P2,075.00
 and
 submitted
 the
 results
 of
 his
 medical
 examination,
 his
 application
 was
 subject
 to
 the
 acceptance
 of
 private
 respondent
 BF
 Lifeman
 Insurance
 Corporation.
 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,
am/are
in
good
health.
 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.
 Its
 assent
 was
 given
 when
 it
 issues
 a
 corresponding
 policy
 to
 the
 applicant.
 Under
 the
 abovementioned
 provision,
 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.
 
 Sec.
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



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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.
 
 FORMAL
REQUIREMENTS
FOR
A
POLICY
 1. Policy
shall
be
in
printed
form
which
may
contain
blank
spaces
on
which
 the
necessary
data
may
be
written
 2. However,
 group
 insurance
 and
 group
 annuity
 policies
 may
 be
 merely
 typewritten
 3. No
policy,
certificate,
or
contract
of
insurance
shall
be
issued
or
delivered
 within
 the
 Philippines
 unless
 in
 the
 form
 approved
 by
 the
 Insurance
 Commissioner
 4. A
 policy
 issued
 without
 its
 form
 being
 approved
 doesn't
 invalidate
 an
 otherwise
 valid
 insurance
 contract.
 
 However,
 the
 insurer
 may
 be
 prosecuted
for
using
an
invalid
form
 
 MUST
A
RIDER
IN
A
POLICY
BE
SIGNED
BY
THE
INSURED?
 • In
 case
 the
 rider,
 clause
 warranty,
 or
 endorsement
 was
 issued
 after
 the
 original
 policy,
 said
 rider
 must
 be
 countersigned
 by
 the
 insured
 unless
 applied
for
by
the
latter
 • Where
the
rider
was
pasted
or
attached
to
the
original
policy
at
the
time
 the
policy
was
issued,
the
signature
is
not
necessary
but
the
descriptive
 title
or
name
of
the
rider
must
be
written
on
the
black
spaces
provided
 for
in
the
policy
 
 RULES
ON
RIDERS,
CLAUSES,
WARRANTIES
AND
ENDORSEMENTS
 1. A
rider,
clause,
warranty
or
endorsement
to
be
binding—
 a. Must
be
pasted
or
attached
to
the
policy
 b. Its
descriptive
title

 2. If
the
rider,
etc.
is
pasted
or
attached
to
the
original
policy
at
the
time
it
 was
 issued,
 the
 signature
 of
 the
 insured
 is
 not
 necessary
 to
 make
 it
 binding
 3. If
 the
 rider,
 etc.
 is
 executed
 after
 the
 issuance
 of
 the
 policy,
 it
 must
 be
 countersigned
by
the
insured
to
be
binding
unless
said
rider,
was
applied
 for
by
the
insured
himself


4. 5.

No
 application
 form,
 rider,
 clause,
 warranty,
 or
 endorsement
 shall
 be
 attached
 to,
 printed
 or
 stamped
 upon
 such
 policy
 unless
 the
 form
 has
 been
approved
by
the
Insurance
Commissioner
 It
 is
 a
 well
 settled
 rule
 that
 in
 case
 repugnance
 exists
 between
 written
 and
 printed
 portions
 of
 a
 policy,
 the
 written
 portion
 prevails,
 and
 there
 can
be
no
question
that
as
far
as
any
inconsistency
exists,
the
type
rider
 prevails
over
the
printed
clause
it
covers.


COMMISIONER
OF
INTERNAL
REVENUE
V.
LINCOLN
LIFE
 379
SCRA
423
 
 FACTS:
 Private
 respondent
 issued
 a
 special
 kind
 of
 life
 insurance
 policy
 known
 as
 the
 "Junior
 Estate
 Builder
 Policy,"
 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.
 The
clause
was
to
take
effect
in
the
year
1984.
Documentary
stamp
taxes
due
on
 the
policy
were
paid
by
petitioner
only
on
the
initial
sum
assured.
 Consequently,
private
respondent
also
issued
50,000
shares
of
stock
dividends
with
 a
par
value
of
P100.00
per
share
or
a
total
par
value
of
P5,000,000.00.
The
actual
 value
 of
 said
 shares,
 represented
 by
 its
 book
 value,
 was
 P19,307,500.00.
 Documentary
stamp
taxes
were
paid
based
only
on
the
par
value
of
P5,000,000.00
 and
not
on
the
book
value.
 Subsequently,
petitioner
issued
deficiency
documentary
stamps
tax
assessment
for
 the
year
1984
in
the
amounts
of
(a)
P464,898.75,
corresponding
to
the
amount
of
 automatic
increase
of
the
sum
assured
on
the
policy
issued
by
respondent,
and
(b)
 P78,991.25
corresponding
to
the
book
value
in
excess
of
the
par
value
of
the
stock
 dividends.
 
 Petitioner
 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,
 the
 original
 policy
 was
 essentially
 re‐issued
 when
 the
 additional
 obligation
 was
 assumed
 upon
 the
 effectivity
 of
 this
 "automatic
 increase
 clause"
 in
 1984;
 hence,
 a
 deficiency
 assessment
based
on
the
additional
insurance
not
covered
in
the
main
policy
is
in
 order.



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The
 Court
 of
 Appeals
 sustained
 the
 CTA’s
 ruling
 that
 there
 was
 only
 one
 transaction
involved
in
the
issuance
of
the
insurance
policy
and
that
the
"automatic
 increase
clause"
is
an
integral
part
of
that
policy.
 
 HELD:
 Section
49,
Title
VI
of
the
Insurance
Code
defines
an
insurance
policy
as
the
written
 5 instrument
 in
 which
 a
 contract
 of
 insurance
 is
 set
 forth. 
 Section
 50
 of
 the
 same
 Code
provides
that
the
policy,
which
is
required
to
be
in
printed
form,
may
contain
 any
word,
phrase,
clause,
mark,
sign,
symbol,
signature,
number,
or
word
necessary
 6 to
 complete
 the
 contract
 of
 insurance. 
 It
 is
 thus
 clear
 that
 any
 rider,
 clause,
 warranty
 or
 endorsement
 pasted
 or
 attached
 to
 the
 policy
 is
 considered
 part
 of
 such
policy
or
contract
of
insurance.
 
 The
 subject
 insurance
 policy
 at
 the
 time
 it
 was
 issued
 contained
 an
 "automatic
 increase
clause."
Although
the
clause
was
to
take
effect
only
in
1984,
it
was
written
 into
 the
 policy
 at
 the
 time
 of
 its
 issuance.
 The
 distinctive
 feature
 of
 the
 "junior
 estate
 builder
 policy"
 called
 the
 "automatic
 increase
 clause"
 already
 formed
 part
 and
parcel
of
the
insurance
contract,
hence,
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.
 
 It
is
clear
from
Section
173
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
 is
 the
 amount
 fixed
 in
 policy,
 unless
 the
 interest
 of
 a
 person
 insured
 is
 susceptible
 of
 7 exact
 pecuniary
 measurement. 
 What
 then
 is
 the
 amount
 fixed
 in
 the
 policy?
 Logically,
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.
 
 Here,
 although
 the
 automatic
 increase
 in
 the
 amount
 of
 life
 insurance
 coverage
 was
to
take
effect
later
on,
the
date
of
its
effectivity,
as
well
as
the
amount
of
the
 increase,
 was
 already
 definite
 at
 the
 time
 of
 the
 issuance
 of
 the
 policy.
 Thus,
 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
 "automatic
 increase
 clause"
 in
 the
 policy
 is
 in
 the
 nature
 of
 a
 conditional
 8 obligation
 under
 Article
 1181, 
 by
 which
 the
 increase
 of
 the
 insurance
 coverage
 shall
depend
upon
the
happening
of
the
event
which
constitutes
the
obligation.
In
 the
instant
case,
the
additional
insurance
that
took
effect
in
1984
was
an
obligation
 9 subject
 to
 a
 suspensive
 obligation, 
 but
 still
 a
 part
 of
 the
 insurance
 sold
 to
 which
 private
respondent
was
liable
for
the
payment
of
the
documentary
stamp
tax.
 
 The
 deficiency
 of
 documentary
 stamp
 tax
 imposed
 on
 private
 respondent
 is
 definitely
 not
 on
 the
 amount
 of
 the
 original
 insurance
 coverage,
 but
 on
 the
 increase
 of
 the
 amount
 insured
 upon
 the
 effectivity
 of
 the
 "Junior
 Estate
 Builder
 Policy."
 
 Sec.
51.
A
policy
of
insurance
must
specify:
 
 (a)
The
parties
between
whom
the
contract
is
made;
 
 (b)
The
amount
to
be
insured
except
in
the
cases
of
open
or
running
policies;
 
 (c)
The
premium,
or
if
the
insurance
is
of
a
character
where
the
exact
premium
is
 only
determinable
upon
the
termination
of
the
contract,
a
statement
of
the
basis
 and
rates
upon
which
the
final
premium
is
to
be
determined;
 
 (d)
The
property
or
life
insured;
 
 (e)
The
interest
of
the
insured
in
property
insured,
if
he
is
not
the
absolute
owner
 thereof;
 
 (f)
The
risks
insured
against;
and
 
 (g)
The
period
during
which
the
insurance
is
to
continue.
 
 MATTERS
TO
BE
CONTAINED
IN
AN
INSURANCE
POLICY
 1. Incorrect
spelling
of
the
names
of
the
parties
don't
affect
the
policy.

An
 error
 in
 the
 desgination
 of
 the
 name
 of
 the
 insured
 in
 the
 absence
 of
 fraud
doesn't
invalidate
the
policy
 2. The
 amount
 of
 insurance
 must
 be
 specified
 except
 in
 cases
 of
 open
 or
 running
policies
 3. The
rate
of
premium
which
is
the
consideration
of
the
contract
must
be
 specified.
 
 Where
 the
 premium
 is
 only
 determinable
 upon
 the



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4. 5. 6.

7.

termination
 of
 the
 contract,
 a
 statement
 of
 the
 basis
 and
 rates
 upon
 which
the
final
premium
is
determined
must
be
specified
 The
policy
must
state
the
property
or
life
insured
 In
 property
 insurance,
 if
 the
 insured
 is
 not
 the
 absolute
 owner
 thereof,
 his
insurable
interest
in
the
property
must
be
specified
 The
policy
must
set
forth
the
risks
insured
against.

Risk
is
the
chance
of
 loss.
 
 Peril
 is
 the
 contingency
 which
 may
 cause
 the
 loss.
 
 Hazard
 is
 the
 condition
which
may
create,
decrease
or
increase
the
chance
of
loss
from
 a
given
peril.
 The
 period
 of
 effectivity
 must
 be
 specified
 wherein
 the
 insurer
 shall
 be
 liable
in
case
of
loss
occurring
during
said
period.


GREPALIFE
V.
CA
 89
SCRA
543
 
 FACTS:
 Ngo
Hing
filed
an
application
for
life
insurance
of
her
one‐year
old
daughter
Helen.

 The
application
was
denied
as
the
insurance
isn’t
the
appropriate
policy
for
minors
 below
 the
 age
 of
 7.
 
 This
 denial
 wasn't
 allegedly
 communicated
 to
 the
 private
 respondent
outright.

Her
daughter
died
of
influenza
with
bronchopneumonia
and
 she
sought
the
proceeds
of
the
policy.


 
 HELD:
 At
 the
 back
 of
 Exhibit
 E
 are
 condition
 precedents
 required
 before
 a
 deposit
 is
 considered
a
BINDING
RECEIPT.
These
conditions
state
that:
 
 A.
If
the
Company
or
its
agent,
shan
have
received
the
premium
deposit
...
and
the
 insurance
 application,
 ON
 or
 PRIOR
 to
 the
 date
 of
 medical
 examination
 ...
 said
 insurance
shan
be
in
force
and
in
effect
from
the
date
of
such
medical
examination,
 for
 such
 period
 as
 is
 covered
 by
 the
 deposit
 ...,
 PROVIDED
 the
 company
 shall
 be
 satisfied
that
on
said
date
the
applicant
was
insurable
on
standard
rates
under
its
 rule
 for
 the
 amount
 of
 insurance
 and
 the
 kind
 of
 policy
 requested
 in
 the
 application.
 
 D.
If
the
Company
does
not
accept
the
application
on
standard
rate
for
the
amount
 of
 insurance
 and/or
 the
 kind
 of
 policy
 requested
 in
 the
 application
 but
 issue,
 or
 offers
 to
 issue
 a
 policy
 for
 a
 different
 plan
 and/or
 amount
 ...,
 the
 insurance
 shall
 not
 be
 in
 force
 and
 in
 effect
 until
 the
 applicant
 shall
 have
 accepted
 the
 policy
 as
 issued
or
offered
by
the
Company
and
shall
have
paid
the
full
premium
thereof.
If
 the
applicant
does
not
accept
the
policy,
the
deposit
shall
be
refunded.
 
 E.
If
the
applicant
shall
not
have
been
insurable
under
Condition
A
above,
and
the
 Company
 declines
 to
 approve
 the
 application
 the
 insurance
 applied
 for
 shall
 not
 have
been
in
force
at
any
time
and
the
sum
paid
be
returned
to
the
applicant
upon
 the
surrender
of
this
receipt.
(Emphasis
Ours).
 
 The
 aforequoted
 provisions
 printed
 on
 Exhibit
 E
 show
 that
 the
 binding
 deposit
 receipt
is
intended
to
be
merely
a
provisional
or
temporary
insurance
contract
and
 only
 upon
 compliance
 of
 the
 following
 conditions:
 (1)
 that
 the
 company
 shall
 be
 satisfied
that
the
applicant
was
insurable
on
standard
rates;
(2)
that
if
the
company



 Sec.
 52.
 Cover
 notes
 may
 be
 issued
 to
 bind
 insurance
 temporarily
 pending
 the
 issuance
of
the
policy.

Within
sixty
days
after
the
issue
of
the
cover
note,
a
policy
 shall
 be
 issued
 in
 lieu
 thereof,
 including
 within
 its
 terms
 the
 identical
 insurance
 bound
under
the
cover
note
and
the
premium
therefore.
 
 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.

 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.
 
 COVER
NOTE
OR
BINDING
SLIP
 • Merely
a
written
memorandum
of
the
important
terms
of
a
preliminary
 contract
of
insurance
intended
to
give
temporary
protection
pending
the
 investigation
 of
 the
 risk
 by
 the
 insurer
 or
 until
 the
 issuance
 of
 a
 formal
 policy

 • Within
 60
 days
 after
 issue
 of
 the
 cover
 note,
 a
 policy
 shall
 be
 issued
 in
 lieu
thereof.

Such
period
may
be
extended
or
renewed
upon
approval
of
 the
Insurance
Commissioner.
 
 ILLUSTRATION:
 
 X
 buys
 a
 car
 and
 applied
 for
 motor
 insurance
 policy.
 
 The
 policy
 wasn't
 issued
 outright
 and
 he
 really
 wanted
 to
 take
 out
 his
 car
 for
 a
 ride.
 
 He
 couldn't
 wait
 any
 longer
 and
 used
 his
 car
 but
 unfortunately,
 it
 got
 bumped
 by
 a
 truck.

He
should
have
gotten
a
cover
note.
 



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


34


does
not
accept
the
application
and
offers
to
issue
a
policy
for
a
different
plan,
the
 insurance
 contract
 shall
 not
 be
 binding
 until
 the
 applicant
 accepts
 the
 policy
 offered;
 otherwise,
 the
 deposit
 shall
 be
 reftmded;
 and
 (3)
 that
 if
 the
 applicant
 is
 not
 ble
 according
 to
 the
 standard
 rates,
 and
 the
 company
 disapproves
 the
 application,
 the
 insurance
 applied
 for
 shall
 not
 be
 in
 force
 at
 any
 time,
 and
 the
 premium
paid
shall
be
returned
to
the
applicant.
 
 Clearly
implied
from
the
aforesaid
conditions
is
that
the
binding
deposit
receipt
in
 question
is
merely
an
acknowledgment,
on
behalf
of
the
company,
that
the
latter's
 branch
 office
 had
 received
 from
 the
 applicant
 the
 insurance
 premium
 and
 had
 accepted
the
application
subject
for
processing
by
the
insurance
company;
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."
Since
petitioner
Pacific
Life
disapproved
 the
 insurance
 application
 of
 respondent
 Ngo
 Hing,
 the
 binding
 deposit
 receipt
 in
 question
had
never
become
in
force
at
any
time.
 
 Upon
 this
 premise,
 the
 binding
 deposit
 receipt
 (Exhibit
 E)
 is,
 manifestly,
 merely
 conditional
 and
 does
 not
 insure
 outright.
 As
 held
 by
 this
 Court,
 where
 an
 agreement
 is
 made
 between
 the
 applicant
 and
 the
 agent,
 no
 liability
 shall
 attach
 until
 the
 principal
 approves
 the
 risk
 and
 a
 receipt
 is
 given
 by
 the
 agent.
 The
 acceptance
is
merely
conditional
and
is
subordinated
to
the
act
of
the
company
in
 approving
 or
 rejecting
 the
 application.
 Thus,
 in
 life
 insurance,
 a
 "binding
 slip"
 or
 "binding
receipt"
does
not
insure
by
itself.
 
 There
was
no
contract
perfected
between
the
parties
who
had
no
meeting
of
their
 minds.
 Private
 respondet,
 being
 an
 authorized
 insurance
 agent
 of
 Pacific
 Life
 at
 Cebu
branch
office,
is
indubitably
aware
that
said
company
does
not
offer
the
life
 insurance
 applied
 for.
 When
 he
 filed
 the
 insurance
 application
 in
 dispute,
 private
 respondent
was,
therefore,
only
taking
the
chance
that
Pacific
Life
will
approve
the
 recommendation
of
Mondragon
for
the
acceptance
and
approval
of
the
application
 in
question
along
with
his
proposal
that
the
insurance
company
starts
to
offer
the
 20‐year
endowment
insurance
plan
for
children
less
than
seven
years.
Nonetheless,
 the
 record
 discloses
 that
 Pacific
 Life
 had
 rejected
 the
 proposal
 and
 recommendation.
Secondly,
having
an
insurable
interest
on
the
life
of
his
one‐year
 old
 daughter,
 aside
 from
 being
 an
 insurance
 agent
 and
 an
 offense
 associate
 of
 petitioner
 Mondragon,
 private
 respondent
 Ngo
 Hing
 must
 have
 known
 and
 followed
the
progress
on
the
processing
of
such
application
and
could
not
pretend
 ignorance
 of
 the
 Company's
 rejection
 of
 the
 20‐year
 endowment
 life
 insurance
 application.



 PACIFIC
TIMBER
V.
CA
 112
SCRA
199
 
 FACTS:
 The
plaintiff
secured
temporary
insurance
from
the
defendant
for
its
exportation
of
 1,250,000
board
feet
of
Philippine
Lauan
and
Apitong
logs
to
be
shipped
from
the
 Diapitan.
 Bay,
 Quezon
 Province
 to
 Okinawa
 and
 Tokyo,
 Japan.
 The
 defendant
 issued
 on
 said
 date
 Cover
 Note
 No.
 1010,
 insuring
 the
 said
 cargo
 of
 the
 plaintiff
 "Subject
to
the
Terms
and
Conditions
of
the
WORKMEN'S
INSURANCE
COMPANY,
 INC.
 printed
 Marine
 Policy
 form
 as
 filed
 with
 and
 approved
 by
 the
 Office
 of
 the
 Insurance
Commissioner
(Exhibit
A).
 
 The
 regular
 marine
 cargo
 policies
 were
 issued
 by
 the
 defendant
 in
 favor
 of
 the
 plaintiff
 on
 April
 2,
 1963.
 The
 two
 marine
 policies
 bore
 the
 numbers
 53
 HO
 1032
 and
53
HO
1033
(Exhibits
B
and
C,
respectively).
Policy
No.
53
H0
1033
(Exhibit
B)
 was
for
542
pieces
of
logs
equivalent
to
499,950
board
feet.
Policy
No.
53
H0
1033
 was
 for
 853
 pieces
 of
 logs
 equivalent
 to
 695,548
 board
 feet
 (Exhibit
 C).
 The
 total
 cargo
insured
under
the
two
marine
policies
accordingly
consisted
of
1,395
logs,
or
 the
equivalent
of
1,195.498
bd.
ft.
 
 After
 the
 issuance
 of
 Cover
 Note
 No.
 1010
 (Exhibit
 A),
 but
 before
 the
 issuance
 of
 the
 two
 marine
 policies
 Nos.
 53
 HO
 1032
 and
 53
 HO
 1033,
 some
 of
 the
 logs
 intended
 to
 be
 exported
 were
 lost
 during
 loading
 operations
 in
 the
 Diapitan
 Bay.
 The
logs
were
to
be
loaded
on
the
'SS
Woodlock'
which
docked
about
500
meters
 from
the
shoreline
of
the
Diapitan
Bay.
The
logs
were
taken
from
the
log
pond
of
 the
plaintiff
and
from
which
they
were
towed
in
rafts
to
the
vessel.
At
about
10:00
 o'clock
 a.
 m.
 on
 March
 29,
 1963,
 while
 the
 logs
 were
 alongside
 the
 vessel,
 bad
 weather
 developed
 resulting
 in
 75
 pieces
 of
 logs
 which
 were
 rafted
 together
 co
 break
loose
from
each
other.
45
pieces
of
logs
were
salvaged,
but
30
pieces
were
 verified
to
have
been
lost
or
washed
away
as
a
result
of
the
accident.

 
 HELD:
 The
Cover
Note
was
not
without
consideration
for
which
the
respondent
court
held
 the
Cover
Note
as
null
and
void,
and
denied
recovery
therefrom.
The
fact
that
no
 separate
 premium
 was
 paid
 on
 the
 Cover
 Note
 before
 the
 loss
 insured
 against
 occurred,
 does
 not
 militate
 against
 the
 validity
 of
 petitioner's
 contention,
 for
 no
 such
premium
could
have
been
paid,
since
by
the
nature
of
the
Cover
Note,
it
did



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


35


not
 contain,
 as
 all
 Cover
 Notes
 do
 not
 contain
 particulars
 of
 the
 shipment
 that
 would
 serve
 as
 basis
 for
 the
 computation
 of
 the
 premiums.
 As
 a
 logical
 consequence,
 no
 separate
 premiums
 are
 intended
 or
 required
 to
 be
 paid
 on
 a
 Cover
Note.
This
is
a
fact
admitted
by
an
official
of
respondent
company,
Juan
Jose
 Camacho,
in
charge
of
issuing
cover
notes
of
the
respondent
company
(p.
33,
tsn,
 September
24,
1965).
 
 At
any
rate,
it
is
not
disputed
that
petitioner
paid
in
full
all
the
premiums
as
called
 for
 by
 the
 statement
 issued
 by
 private
 respondent
 after
 the
 issuance
 of
 the
 two
 regular
marine
insurance
policies,
thereby
leaving
no
account
unpaid
by
petitioner
 due
on
the
insurance
coverage,
which
must
be
deemed
to
include
the
Cover
Note.
 If
 the
 Note
 is
 to
 be
 treated
 as
 a
 separate
 policy
 instead
 of
 integrating
 it
 to
 the
 regular
 policies
 subsequently
 issued,
 the
 purpose
 and
 function
 of
 the
 Cover
 Note
 would
be
set
at
naught
or
rendered
meaningless,
for
it
is
in
a
real
sense
a
contract,
 not
a
mere
application
for
insurance
which
is
a
mere
offer.

 
 It
 may
 be
 true
 that
 the
 marine
 insurance
 policies
 issued
 were
 for
 logs
 no
 longer
 including
 those
 which
 had
 been
 lost
 during
 loading
 operations.
 This
 had
 to
 be
 so
 because
the
risk
insured
against
is
not
for
loss
during
operations
anymore,
but
for
 loss
 during
 transit,
 the
 logs
 having
 already
 been
 safely
 placed
 aboard.
 This
 would
 make
 no
 difference,
 however,
 insofar
 as
 the
 liability
 on
 the
 cover
 note
 is
 concerned,
for
the
number
or
volume
of
logs
lost
can
be
determined
independently
 as
 in
 fact
 it
 had
 been
 so
 ascertained
 at
 the
 instance
 of
 private
 respondent
 itself
 when
it
sent
its
own
adjuster
to
investigate
and
assess
the
loss,
after
the
issuance
 of
the
marine
insurance
policies.

 
 Sec.
53.
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.
 
 PROCEEDS,
TO
WHOM
APPLIED
 • When
 the
 policy
 matures,
 its
 proceeds
 shall
 be
 given
 exclusively
 to
 the
 proper
 interest
 of
 the
 person
 in
 whose
 name
 or
 for
 whose
 benefit
 it
 is
 made,
unless
otherwise
specified
in
the
policy
 
 BONIFACIO
BROS.
V.
MORA
 20
SCRA
262
 


FACTS:
 Mora
 mortgaged
 his
 car
 to
 H.G
 Reyes
 with
 the
 condition
 that
 the
 latter
 would
 insure
 the
 car
 with
 Mora
 being
 designated
 as
 the
 beneficiary.
 
 Consequently,
 the
 latter
issued
the
car
and
the
policy
was
issued
to
Mora.

Thereafter
the
car
met
an
 accident
and
without
the
knowledge
of
H.G
Reyes,
Mora
had
it
repaired.


 
 HELD:
 From
 the
 undisputed
 facts
 and
 from
 the
 pleadings
 it
 will
 be
 seen
 that
 the
 appellants'
 alleged
 cause
 of
 action
 rests
 exclusively
 upon
 the
 terms
 of
 the
 insurance
contract.
The
appellants
seek
to
recover
the
insurance
proceeds,
and
for
 this
 purpose,
 they
 rely
 upon
 paragraph
 4
 of
 the
 insurance
 contract
 document
 executed
 by
 and
 between
 the
 State
 Bonding
 &
 Insurance
 Company,
 Inc.
 and
 Enrique
Mora.
The
appellants
are
not
mentioned
in
the
contract
as
parties
thereto
 nor
is
there
any
clause
or
provision
thereof
from
which
we
can
infer
that
there
is
an
 obligation
on
the
part
of
the
insurance
company
to
pay
the
cost
of
repairs
directly
 to
 them.
 It
 is
 fundamental
 that
 contracts
 take
 effect
 only
 between
 the
 parties
 thereto,
 except
 in
 some
 specific
 instances
 provided
 by
 law
 where
 the
 contract
 contains
some
stipulation
in
favor
of
a
third
person.
 
 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
materialmen
in
case
of
 repair
 of
 the
 car
 in
 question.
 The
 parties
 to
 the
 insurance
 contract
 omitted
 such
 stipulation,
which
is
a
circumstance
that
supports
the
said
conclusion.
On
the
other
 hand,
the
"loss
payable"
clause
of
the
insurance
policy
stipulates
that
"Loss,
if
any,
 is
payable
to
H.S.
Reyes,
Inc."
indicating
that
it
was
only
the
H.S.
Reyes,
Inc.
which
 they
intended
to
benefit.
 
 As
 regards
 paragraph
 4
 of
 the
 insurance
 contract,
 a
 perusal
 thereof
 would
 show
 that
 instead
 of
 establishing
 privity
 between
 the
 appellants
 and
 the
 insurance
 company,
such
stipulation
merely
establishes
the
procedure
that
the
insured
has
to
 follow
 in
 order
 to
 be
 entitled
 to
 indemnity
 for
 repair.
 This
 paragraph
 therefore
 should
not
be
construed
as
bringing
into
existence
in
favor
of
the
appellants
a
right
 of
 action
 against
 the
 insurance
 company
 as
 such
 intention
 can
 never
 be
 inferred
 therefrom.
 
 COQUIA
V.
FIELDMEN’S
INSURANCE
 26
SCRA
172
 



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


36


FACTS:
 The
insurance
company
issued
a
carrier
insurance
policy
in
favor
of
Manila
Taxicab
 Company.
 
 While
 the
 policy
 was
 in
 force,
 one
 of
 their
 taxicabs
 met
 a
 vehicular
 accident
which
caused
the
death
of
its
driver
Coquia.

The
taxicab
company
sought
 the
proceeds
but
the
company
didn't
want
to
pay
in
full
the
claim.

This
prompted
 the
company
together
with
the
victim’s
parents
to
file
against
the
company
a
case.


 
 HELD:
 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,
 which
 were
 deducted
 from
 his
 weekly
 commissions.
Under
these
conditions,
it
is
clear
that
the
Coquias
who,
admittedly,
 are
 the
 sole
 heirs
 of
 the
 deceased
 �
 have
 a
 direct
 cause
 of
 action
 against
 the
 Company,3
 and,
 since
 they
 could
 have
 maintained
 this
 action
 by
 themselves,
 without
 the
 assistance
 of
 the
 Insured,
 it
 goes
 without
 saying
 that
 they
 could
 and
 did
properly
join
the
latter
in
filing
the
complaint
herein.
 
 DEL
VAL
V.
DEL
VAL
 29
PHIL
535
 
 FACTS:
 Gregorio
del
Val
took
an
insurance
policy
on
his
life
and
designated
his
son
as
the
 beneficiary.
 
 When
 he
 died,
 the
 plaintiff
 wanted
 the
 proceeds
 of
 the
 policy
 to
 belong
to
the
estate.
 
 HELD:
 The
proceeds
belonged
exclusively
to
the
designated
son
and
not
to
the
estate
of
 the
deceased.

The
other
children
have
no
share
in
the
proceeds.
 
 Furthermore,
 insurance
 is
 a
 special
 contract
 and
 the
 designation
 of
 the
 proceeds
 thereof
 is
 determined
 by
 special
 law
 and
 not
 by
 the
 law
 on
 donations
 and/or
 succession.
 
 RCBC
V.
CA
 289
SCRA
292
 
 FACTS:


Goyu
 Corporation
 applied
 for
 credit
 facilities
 and
 accommodation
 with
 RCBC.
 
 It
 was
 granted
 and
 to
 guarantee
 the
 credit
 given
 to
 them,
 they
 mortgaged
 some
 of
 their
properties
in
favor
of
RCBC.

After,
they
obtained
10
insurance
policies
from
 MICO.

A
fire
broke
out
and
destroyed
one
of
the
factory
buildings
of
Goyu.

It
then
 sought
the
proceeds
from
the
insurance
company
but
the
latter
denied
its
claims
 on
the
ground
that
many
were
seeking
the
proceeds.


 
 HELD:
 Accordant
with
the
credit
facilities
extended
by
RCBC
to
GOYU,
the
latter
executed
 several
 mortgage
 contracts
 in
 favor
 of
 RCBC.
 It
 was
 expressly
 stipulated
 in
 these
 mortgage
contracts
that
GOYU
shall
insure
the
mortgaged
property
with
any
of
the
 insurance
 companies
 acceptable
 to
 RCBC.
 GOYU
 indeed
 insured
 the
 mortgaged
 property
 with
 MICO,
 an
 insurance
 company
 acceptable
 to
 RCBC.
 Bases
 on
 their
 stipulations
 in
 the
 mortgage
 contracts,
 GOYU
 was
 supposed
 to
 endorse
 these
 insurance
 policies
 in
 favor
 of,
 and
 deliver
 them,
 to
 RCBC.
 Alchester
 Insurance
 Agency,
Inc.,
MICO's
underwriter
from
whom
GOYU
obtained
the
subject
insurance
 policies,
 prepared
 the
 nine
 endorsements
 (see
 Exh.
 "1‐Malayan"
 to
 "9‐Malayan";
 also
Exh.
"51‐RCBC"
to
"59‐RCBC"),
copies
of
which
were
delivered
to
GOYU,
RCBC,
 and
MICO.
However,
because
these
endorsements
do
not
bear
the
signature
of
any
 officer
of
GOYU,
the
trial
court,
as
well
as
the
Court
of
Appeals,
concluded
that
the
 endorsements
are
defective.
 
 The
lower
courts
were
wrong.
 
 It
 is
 settled
 that
 a
 mortgagor
 and
 a
 mortgagee
 have
 separated
 and
 distinct
 insurable
 interests
 in
 the
 same
 mortgaged
 property,
 such
 that
 each
 one
 of
 them
 may
insure
the
same
property
for
his
own
sole
benefit.
There
is
no
question
that
 GOYU
 could
 insure
 the
 mortgaged
 property
 for
 its
 own
 exclusive
 benefit.
 In
 the
 present
 case,
 although
 it
 appears
 that
 GOYU
 obtained
 the
 subject
 insurance
 policies
naming
itself
as
the
sole
payee,
the
intentions
of
the
parties
as
shown
by
 their
 contemporaneous
 acts,
 must
 be
 given
 due
 consideration
 in
 order
 to
 better
 serve
the
interest
of
justice
and
equity.
 
 It
is
to
be
noted
that
nine
endorsement
documents
were
prepared
by
Alchester
in
 favor
of
RCBC.
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.
It
is
also
significant
that
GOYU
voluntarily
 and
 purposely
 took
 the
 insurance
 policies
 from
 MICO,
 a
 sister
 company
 of
 RCBC,



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and
 not
 just
 from
 any
 other
 insurance
 company.
 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.
 Had
 it
 not
 been
 for
 GOYU,
 Alchester
 would
 not
 have
 known
 of
 GOYU's
 intention
 of
 obtaining
 insurance
 coverage
in
compliance
with
its
undertaking
in
the
mortgage
contracts
with
RCBC,
 and
verily,
Alchester
would
not
have
endorsed
the
policies
to
RCBC
had
it
not
been
 so
directed
by
GOYU.
 
 On
 equitable
 principles,
 particularly
 on
 the
 ground
 of
 estoppel,
 the
 Court
 is
 constrained
to
rule
in
favor
of
mortgagor
RCBC.

 
 RCBC,
in
good
faith,
relied
upon
the
endorsement
documents
sent
to
it
as
this
was
 only
 pursuant
 to
 the
 stipulation
 in
 the
 mortgage
 contracts.
 GOYU
 failed
 to
 seasonably
 repudiate
 the
 authority
 of
 the
 person
 or
 persons
 who
 prepared
 such
 endorsements.
 Over
 and
 above
 this,
 GOYU
 continued,
 in
 the
 meantime,
 to
 enjoy
 the
benefits
of
the
credit
facilities
extended
to
it
by
RCBC.
After
the
occurrence
of
 the
 loss
 insure
 against,
 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.
 If
 there
 had
 not
 been
 actually
 an
 implied
 ratification
 of
 said
 endorsements
by
virtue
of
GOYU's
inaction
in
this
case,
GOYU
is
at
the
very
least
 estopped
from
assailing
their
operative
effects.
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,
 is
 to
 countenance
 grave
 contravention
of
public
policy,
fair
dealing,
good
faith,
and
justice.
Such
an
unjust
 situation,
the
Court
cannot
sanction.
Under
the
peculiar
circumstances
obtaining
in
 this
 case,
 the
 Court
 is
 bound
 to
 recognize
 RCBC's
 right
 to
 the
 proceeds
 of
 the
 insurance
polices
if
not
for
the
actual
endorsement
of
the
policies,
at
least
on
the
 basis
of
the
equitable
principle
of
estoppel.
 
 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.
 The
 peculiarity
 of
 the
 circumstances
 obtaining
 in
 the
 instant
 case
 presents
 a
 justification
 to
 take
 exception
 to
 the
 strict
 application
 of
 said
 provision,
 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.
 
 SSS
V.
DAVAC


17
SCRA
863
 
 FACTS:
 Petronillo
became
a
member
of
the
SSS
and
assigned
Candelaria
as
his
beneficiary.

 He
later
on
died.

It
was
found
out
that
two
women
were
alleging
to
be
the
wife
of
 Petronillo.

One
was
Lourdes
and
another
was
Candelaria
who
was
the
designated
 beneficiary.

As
there
was
contesting
claims,
SSS
filed
an
interpleader.
 
 HELD:
 The
benefits
accruing
from
membership
in
the
Social
Security
System
do
not
form
 part
of
the
properties
of
the
conjugal
partnership
of
the
covered
member.
They
are
 disbursed
 from
 a
 public
 special
 fund
 created
 by
 Congress
 in
 pursuance
 to
 the
 declared
policy
of
the
Republic
"to
develop,
establish
gradually
and
perfect
a
social
 security
system
which
...
shall
provide
protection
against
the
hazards
of
disability,
 sickness,
old
age
and
death."
 
 The
sources
of
this
special
fund
are
the
covered
employee's
contribution
(equal
to
 2‐per
cent
of
the
employee's
monthly
compensation);
the
employer's
contribution
 (equivalent
to
3‐per
cent
of
the
monthly
compensation
of
the
covered
employee);
 and
the
Government
contribution
which
consists
in
yearly
appropriation
of
public
 funds
to
assure
the
maintenance
of
an
adequate
working
balance
of
the
funds
of
 the
 System.
 Additionally,
 Section
 21
 of
 the
 Social
 Security
 Act,
 as
 amended
 by
 Republic
Act
1792,
provides:
 
 SEC.
 21.
 Government
 Guarantee.
 The
 benefits
 prescribed
 in
 this
 Act
 shall
 not
 be
 diminished
and
to
guarantee
said
benefits
the
Government
of
the
Republic
of
the
 Philippines
accepts
general
responsibility
for
the
solvency
of
the
System.
 
 From
the
foregoing
provisions,
it
appears
that
the
benefit
receivable
under
the
Act
 is
 in
 the
 nature
 of
 a
 special
 privilege
 or
 an
 arrangement
 secured
 by
 the
 law,
 pursuant
 to
 the
 policy
 of
 the
 State
 to
 provide
 social
 security
 to
 the
 workingmen.
 The
amounts
that
may
thus
be
received
cannot
be
considered
as
property
earned
 by
the
member
during
his
lifetime.
His
contribution
to
the
fund,
it
may
be
noted,
 constitutes
only
an
insignificant
portion
thereof.
Then,
the
benefits
are
specifically
 declared
 not
 transferable,
 and
 exempted
 from
 tax
 legal
 processes,
 and
 lien.
 Furthermore,
in
the
settlement
of
claims
thereunder
the
procedure
to
be
observed
 is
 governed
 not
 by
 the
 general
 provisions
 of
 law,
 but
 by
 rules
 and
 regulations
 promulgated
by
the
Commission.
Thus,
if
the
money
is
payable
to
the
estate
of
a



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deceased
 member,
 it
 is
 the
 Commission,
 not
 the
 probate
 or
 regular
 court
 that
 determines
the
person
or
persons
to
whom
it
is
payable.8
that
the
benefits
under
 the
Social
Security
Act
are
not
intended
by
the
lawmaking
body
to
form
part
of
the
 estate
of
the
covered
members
may
be
gathered
from
the
subsequent
amendment
 made
to
Section
15
thereof,
as
follows:
 
 SEC.
15.
Non‐transferability
of
benefit.
The
system
shall
pay
the
benefits
provided
 for
 in
 this
 Act
 to
 such
 persons
 as
 may
 be
 entitled
 thereto
 in
 accordance
 with
 the
 provisions
of
this
Act.
Such
benefits
are
not
transferable,
and
no
power
of
attorney
 or
 other
 document
 executed
 by
 those
 entitled
 thereto
 in
 favor
 of
 any
 agent,
 attorney,
or
any
other
individual
for
the
collection
thereof
in
their
behalf
shall
be
 recognized
except
when
they
are
physically
and
legally
unable
to
collect
personally
 such
 benefits:
 Provided,
 however,
 That
 in
 the
 case
 of
 death
 benefits,
 if
 no
 beneficiary
 has
 been
 designated
 or
 the
 designation
 there
 of
 is
 void,
 said
 benefits
 shall
be
paid
to
the
legal
heirs
in
accordance
with
the
laws
of
succession.
(Rep.
Act
 2658,
amending
Rep.
Act
1161.)
 
 In
short,
if
there
is
a
named
beneficiary
and
the
designation
is
not
invalid
(as
it
is
 not
so
in
this
case),
it
is
not
the
heirs
of
the
employee
who
are
entitled
to
receive
 the
 benefits
 (unless
 they
 are
 the
 designated
 beneficiaries
 themselves).
 It
 is
 only
 when
there
is
no
designated
beneficiaries
or
when
the
designation
is
void,
that
the
 laws
of
succession
are
applicable.
And
we
have
already
held
that
the
Social
Security
 Act
is
not
a
law
of
succession.
 
 IN
RE:
MARIO
CHALIONGCO
 79
SCRA
364
 
 FACTS:
 This
matter
refers
to
the
claims
for
retirement
benefits
filed
by
the
heirs
of
the
late
 ATTY.
MARIO
V.
CHANLIONGCO
an
attorney
in
this
Court,
under
the
provisions
of
 R.A.
No.
1616,
as
amended
by
R.A.
No.
4986,
which
was
approved
by
this
Court
in
 its
resolution
of
August
19,
1976,
effective
on
July
12,
1976
it
a
g
from
the
records
 that
at
the
time
of
his
death
on
July
12,
1976,
Atty.
Chanliongco
was
more
than
63
 years
 of
 age,
 with
 more
 than
 38
 years
 of
 service
 in
 the
 government.
 He
 did
 not
 have
 any
 pending
 criminal
 administrative
 or
 not
 case
 against
 him,
 neither
 did
 he
 have
 any
 money
 or
 property
 accountability.
 The
 highest
 salary
 he
 received
 was
 P18,700.00
per
annum.
 


The
above
named
flied
the
appellants
for
benefits
with
the
accruing
and
with
the
 Government
Service
System.
 
 Aside
 from
 his
 widow,
 Dra.
 Fidel
 B.
 Chanliongco
 and
 an
 only
 Intimate
 Mario
 it
 appears
that
there
are
other
deceased
to
namely,
Mrs.
Angelina
C.
,
Jr.,
both
born
 out
of
wedlock
to
Angelina
R
Crespo,
and
duly
recognized
by
the
deceased.
Except
 Mario,
Jr.,
who
is
only
17
years
of
age,
all
the
claimants
are
of
legal
age.
 
 According
to
law,
the
benefits
accruing
to
the
deceased
consist
of:
(1)
retirement
 benefits;
 (2)
 money
 value
 of
 terminal
 leave;
 (3)
 life
 insurance
 and
 (4)
 refund
 of
 retirement
premium.
 
 HELD:
 The
record
also
shows
that
the
late
Atty.
Chanliongco
died
ab
intestato
and
that
he
 filed
 or
 over
 to
 state
 in
 his
 application
 for
 membership
 with
 the
 GSIS
 the
 beneficiary
or
benefits
of
his
retirement
benefits,
should
he
die
before
retirement.
 Hence,
 the
 retirement
 benefits
 shall
 accrue
 to
 his
 estate
 and
 will
 be
 distributed
 among
his
Legal
heirs
in
with
the
benefits
on
intestate
s
,
as
in
the
caw
of
a
fife
if
no
 benefit
is
named
in
the
policy.
 
 VDA.
DE
CONSUEGRA
V.
GSIS
 37
SCRA
315
 
 FACTS:
 The
late
Jose
Consuegra,
at
the
time
of
his
death,
was
employed
as
a
shop
foreman
 of
 the
 office
 of
 the
 District
 Engineer
 in
 the
 province
 of
 Surigao
 del
 Norte.
 In
 his
 lifetime,
 Consuegra
 contracted
 two
 marriages,
 the
 first
 with
 herein
 respondent
 Rosario
 Diaz,
 out
 of
 which
 marriage
 were
 born
 two
 children,
 namely,
 Jose
 Consuegra,
 Jr.
 and
 Pedro
 Consuegra,
 but
 both
 predeceased
 their
 father;
 and
 the
 second,
which
was
contracted
in
good
faith
while
the
first
marriage
was
subsisting,
 with
 herein
 petitioner
 Basilia
 Berdin,
 out
 of
 which
 marriage
 were
 born
 seven
 children,
namely,
Juliana,
Pacita,
Maria
Lourdes,
Jose,
Rodrigo,
Lenida
and
Luz,
all
 surnamed
 Consuegra.
 
 Being
 a
 member
 of
 the
 Government
 Service
 Insurance
 System
 (GSIS,
 for
 short)
 when
 Consuegra
 died
 on
 September
 26,
 1965,
 the
 proceeds
 of
 his
 life
 insurance
 under
policy
No.
601801
were
paid
by
the
GSIS
to
petitioner
Basilia
Berdin
and
her
 children
who
were
the
beneficiaries
named
in
the
policy.
Having
been
in
the
service



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of
 the
 government
 for
 22.5028
 years,
 Consuegra
 was
 entitled
 to
 retirement
 insurance
 benefits
 in
 the
 sum
 of
 P6,304.47
 pursuant
 to
 Section
 12(c)
 of
 Commonwealth
 Act
 186
 as
 amended
 by
 Republic
 Acts
 1616
 and
 3836.
 Consuegra
 did
 not
 designate
 any
 beneficiary
 who
 would
 receive
 the
 retirement
 insurance
 benefits
due
to
him.
 
 HELD:
 If
 Consuegra
 had
 22.5028
 years
 of
 service
 in
 the
 government
 when
 he
 died
 on
 September
26,
1965,
it
follows
that
he
started
in
the
government
service
sometime
 during
 the
 early
 part
 of
 1943,
 or
 before
 1943.
 In
 1943
 Com.
 Act
 186
 was
 not
 yet
 amended,
and
the
only
benefits
then
provided
for
in
said
Com.
Act
186
were
those
 that
 proceed
 from
 a
 life
 insurance.
 Upon
 entering
 the
 government
 service
 Consuegra
became
a
compulsory
member
of
the
GSIS,
being
automatically
insured
 on
 his
 life,
 pursuant
 to
 the
 provisions
 of
 Com.
 Act
 186
 which
 was
 in
 force
 at
 the
 time.
During
1943
the
operation
of
the
Government
Service
Insurance
System
was
 suspended
because
of
the
war,
and
the
operation
was
resumed
sometime
in
1946.
 When
Consuegra
designated
his
beneficiaries
in
his
life
insurance
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
Com.
Act
186
was
amended
by
Rep.
Act
660
on
June
 16,
1951.
Hence,
it
cannot
be
said
that
because
herein
appellants
were
designated
 beneficiaries
 in
 Consuegra's
 life
 insurance
 they
 automatically
 became
 the
 beneficiaries
also
of
his
retirement
insurance.
 
 In
 the
 case
 of
 the
 proceeds
 of
 a
 life
 insurance,
 the
 same
 are
 paid
 to
 whoever
 is
 named
the
beneficiary
in
the
life
insurance
policy.
As
in
the
case
of
a
life
insurance
 provided
for
in
the
Insurance
Act
(Act
2427,
as
amended),
the
beneficiary
in
a
life
 insurance
under
the
GSIS
may
not
necessarily
be
a
heir
of
the
insured.
The
insured
 in
a
life
insurance
may
designate
any
person
as
beneficiary
unless
disqualified
to
be
 so
 under
 the
 provisions
 of
 the
 Civil
 Code.
 And
 in
 the
 absence
 of
 any
 beneficiary
 named
 in
 the
 life
 insurance
 policy,
 the
 proceeds
 of
 the
 insurance
 will
 go
 to
 the
 estate
of
the
insured.
 
 Retirement
 insurance
 is
 primarily
 intended
 for
 the
 benefit
 of
 the
 employee
 to
 provide
for
his
old
age,
or
incapacity,
after
rendering
service
in
the
government
for
 a
required
number
of
years.
If
the
employee
reaches
the
age
of
retirement,
he
gets
 the
 retirement
 benefits
 even
 to
 the
 exclusion
 of
 the
 beneficiary
 or
 beneficiaries
 named
 in
 his
 application
 for
 retirement
 insurance.
 The
 beneficiary
 of
 the
 retirement
insurance
can
only
claim
the
proceeds
of
the
retirement
insurance
if
the


employee
dies
before
retirement.
If
the
employee
failed
or
overlooked
to
state
the
 beneficiary
 of
 his
 retirement
 insurance,
 the
 retirement
 benefits
 will
 accrue
 to
 his
 estate
and
will
be
given
to
his
legal
heirs
in
accordance
with
law,
as
in
the
case
of
a
 life
insurance
if
no
beneficiary
is
named
in
the
insurance
policy.
 
 GSIS
 had
 correctly
 acted
 when
 it
 ruled
 that
 the
 proceeds
 of
 the
 retirement
 insurance
 of
 the
 late
 Jose
 Consuegra
 should
 be
 divided
 equally
 between
 his
 first
 living
wife
Rosario
Diaz,
on
the
one
hand,
and
his
second
wife
Basilia
Berdin
and
his
 children
 by
 her,
 on
 the
 other;
 and
 the
 lower
 court
 did
 not
 commit
 error
 when
 it
 confirmed
 the
 action
 of
 the
 GSIS,
 it
 being
 accepted
 as
 a
 fact
 that
 the
 second
 marriage
of
Jose
Consuegra
to
Basilia
Berdin
was
contracted
in
good
faith.
 
 Sec.
54.
When
an
insurance
contract
is
executed
with
an
agent
or
trustee
as
the
 insured,
the
fact
that
his
principal
or
beneficiary
is
the
real
party
in
interest
may
 be
 indicated
 by
 describing
 the
 insured
 as
 agent
 or
 trustee,
 or
 by
 other
 general
 words
in
the
policy.
 
 INSURANCE
EXECUTED
BY
AGENT
OR
TRUSTEE
 • In
 case
 of
 an
 insurance
 contract
 secured
 in
 the
 name
 of
 an
 agent
 or
 trustee
 for
 the
 principal’s
 account,
 that
 fact
 must
 be
 indicated
 in
 the
 policy
by
describing
the
insured
as
agent
or
trustee
or
by
general
words
 • If
 an
 agent
 or
 trustee
 secures
 an
 insurance
 in
 his
 name,
 without
 indicating
his
principal,
the
agent
or
trustee
is
deemed
to
have
taken
the
 insurance
for
his
own
benefit
and
interest
alone
and
the
principal
has
no
 right
of
action
against
the
insurer
 
 Sec.
55.
To
render
an
insurance
effected
by
one
partner
or
part‐owner,
applicable
 to
 the
 interest
 of
 his
 co‐partners
 or
 other
 part‐owners,
 it
 is
 necessary
 that
 the
 terms
 of
 the
 policy
 should
 be
 such
 as
 are
 applicable
 to
 the
 joint
 or
 common
 interest.
 
 INSURANCE
EXECUTED
BY
CO‐PARTNER
OR
CO‐OWNER
 • In
case
of
an
insurance
secured
in
the
name
of
a
partner
or
co‐owner
but
 to
cover
the
interests
of
his
other
co‐partners
or
co‐owners,
the
terms
of
 the
 policy
 should
 state
 that
 the
 insurance
 is
 applicable
 to
 their
 joint
 or
 common
interest
 • If
 the
 co‐partner
 or
 co‐owner
 takes
 insurance
 in
 his
 own
 name
 without
 indicating
that
said
insurance
applies
also
to
the
interest
of
the
other
co‐


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partners
or
co‐owners,
the
insurance
is
deemed
to
be
limited
only
to
the
 individual
share
of
the
co‐partner
or
co‐owner
only
 
 Sec.
56.
When
the
description
of
the
insured
in
a
policy
is
so
general
that
it
may
 comprehend
 any
 person
 or
 any
 class
 of
 persons,
 only
 he
 who
 can
 show
 that
 it
 was
intended
to
include
him
can
claim
the
benefit
of
the
policy.
 
 WHEN
DESCRIPTION
OF
INSURED
IS
IN
GENERAL
TERMS
 • When
 the
 description
 of
 the
 insured
 is
 so
 general,
 the
 person
 claiming
 the
 proceeds
 must
 prove
 that
 such
 description
 was
 intended
 to
 include
 him
 
 Sec.
 57.
 A
 policy
 may
 be
 so
 framed
 that
 it
 will
 inure
 to
 the
 benefit
 of
 whomsoever,
during
the
continuance
of
the
risk,
may
become
the
owner
of
the
 interest
insured.
 
 POLICY
FRAMED
TO
BENEFIT
FUTURE
OWNER
 • When
 the
 policy
 is
 so
 framed
 that
 it
 will
 inure
 to
 the
 benefit
 of
 whomsoever,
during
the
continuance
of
the
risk,
may
become
the
owner
 of
the
interest
insured,
the
transfer
of
the
property
will
not
suspend
the
 insurance
 and
 instead,
 the
 insurance
 is
 deemed
 transferred
 with
 the
 property
 • Exception
to
Section
20—Except

in
the
cases
specified
in
the
next
four
 sections,
and
in
the
cases
of
life,
accident,
and
health
insurance,
a
change
 of
interest
in
any
part
of
a
thing
insured
unaccompanied
by
a
 corresponding
change
in
interest
in
the
insurance,
suspends
the
 insurance
to
an
equivalent
extent,
until
the
interest
in
the
thing
and
the
 interest
in
the
insurance
are
vested
in
the
same
person.
 SAN
MIGUEL
V.
LAW
UNION
 Supra

 
 HELD:
 If
 during
 the
 negotiations
 leading
 up
 to
 the
 writing
 of
 a
 policy
 of
 insurance
 the
 contracting
 parties
 agree
 that
 the
 insurance
 shall
 be
 so
 written
 as
 to
 protect
 not
 only
the
interest
of
the
applicant
for
the
policy,
as
mortgagee
but
also
the
residuary
 interest
 of
 the
 owner,
 and
 the
 policy
 is,
 by
 inadvertence,
 ignorance,
 mistake,
 so
 written
as
to
protect
only
the
interest
of
the
applicant,
the
court
has
the
power
to


reform
the
contract
and
give
effect
to
it
in
the
sense
in
which
the
parties
intended
 to
be
bound.
 
 Sec.
 58.
 The
 mere
 transfer
 of
 a
 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.
 
 SAN
MIGUEL
V.
LAW
UNION
 Supra
 
 HELD:
 A
 purchaser
 of
 insured
 property
 who
 doesn't
 take
 the
 precaution
 to
 obtain
 a
 transfer
 of
 the
 policy
 of
 insurance
 cannot,
 in
 case
 of
 loss,
 recover
 upon
 such
 contract,
as
the
transfer
of
the
property
has
the
effect
of
suspending
the
insurance
 until
the
purchaser
becomes
owner
of
the
policy
as
well
as
of
the
property
insured.


 
 Sec.
59.
A
policy
is
either
open,
valued
or
running.
 
 Sec.
 60.
 An
 open
 policy
 is
 one
 in
 which
 the
 value
 of
 the
 thing
 insured
 is
 not
 agreed
upon,
but
is
left
to
be
ascertained
in
case
of
loss.
 
 OPEN
POLICY
 • The
amount
stated
in
the
policy
is
not
the
value
of
the
property
insured
 but
 merely
 the
 maximum
 limit
 of
 the
 insurer’s
 liability,
 in
 case
 of
 total
 loss
 • The
insurer
only
pays
the
actual
cash
value
of
the
property
ascertained
at
 the
time
of
loss
 
 DEV.
INS.
CORPORATION
V.
IAC
 143
SCRA
62
 
 FACTS:
 A
fire
occurred
in
the
building
of
the
private
respondent
and
it
sued
for
recovery
of
 damages
from
the
petitioner
on
the
basis
of
an
insurance
contract
between
them.
 
 HELD:
 The
 petitioner
 argues
 that
 since
 at
 the
 time
 of
 the
 fire
 the
 building
 insured
 was
 worth
P5,800,000.00,
the
private
respondent
should
be
considered
its
own
insurer



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for
the
difference
between
that
amount
and
the
face
value
of
the
policy
and
should
 share
pro
rata
in
the
loss
sustained.
Accordingly,
the
private
respondent
is
entitled
 to
 an
 indemnity
 of
 only
 P67,629.31,
 the
 rest
 of
 the
 loss
 to
 be
 shouldered
 by
 it
 alone.
 
 However,
 there
 is
 no
 evidence
 on
 record
 that
 the
 building
 was
 worth
 P5,800,000.00
 at
 the
 time
 of
 the
 loss;
 only
 the
 petitioner
 says
 so
 and
 it
 does
 not
 back
 up
 its
 self‐serving
 estimate
 with
 any
 independent
 corroboration.
 On
 the
 contrary,
the
building
was
insured
at
P2,500,000.00,
and
this
must
be
considered,
 by
 agreement
 of
 the
 insurer
 and
 the
 insured,
 the
 actual
 value
 of
 the
 property
 insured
on
the
day
the
fire
occurred.
This
valuation
becomes
even
more
believable
 if
 it
 is
 remembered
 that
 at
 the
 time
 the
 building
 was
 burned
 it
 was
 still
 under
 construction
and
not
yet
completed.
 
 As
defined
in
the
aforestated
provision,
which
is
now
Section
60
of
the
Insurance
 Code,
"an
open
policy
is
one
in
which
the
value
of
the
thing
insured
is
not
agreed
 upon
but
is
left
to
be
ascertained
in
case
of
loss.
"
This
means
that
the
actual
loss,
 as
determined,
will
represent
the
total
indemnity
due
the
insured
from
the
insurer
 except
only
that
the
total
indemnity
shall
not
exceed
the
face
value
of
the
policy.
 
 The
 actual
 loss
 has
 been
 ascertained
 in
 this
 case
 and,
 to
 repeat,
 this
 Court
 will
 respect
 such
 factual
 determination
 in
 the
 absence
 of
 proof
 that
 it
 was
 arrived
 at
 arbitrarily.
 There
 is
 no
 such
 showing.
 Hence,
 applying
 the
 open
 policy
 clause
 as
 expressly
 agreed
 upon
 by
 the
 parties
 in
 their
 contract,
 we
 hold
 that
 the
 private
 respondent
is
entitled
to
the
payment
of
indemnity
under
the
said
contract
in
the
 total
amount
of
P508,867.00.
 
 Sec.
61.
A
valued
policy
is
one
which
expresses
on
its
face
an
agreement
that
the
 thing
insured
shall
be
valued
at
a
specific
sum.
 
 VALUED
POLICY
 • The
 valuation
 of
 the
 property
 insured
 is
 conclusive
 between
 the
 parties
 and
in
the
absence
of
fraud
or
mistake,
such
value
will
be
paid
in
case
of
 total
loss
 • Parties
have
conclusively
stipulated
that
the
property
insured
is
valued
at
 a
specified
sum
 
 Sec.
 62.
 A
 running
 policy
 is
 one
 which
 contemplates
 successive
 insurances,
 and
 which
 provides
 that
 the
 object
 of
 the
 policy
 may
 be
 from
 time
 to
 time
 defined,
 especially
 as
 to
 the
 subjects
 of
 insurance,
 by
 additional
 statements
 or
 indorsements.



 RUNNING
POLICY
 • Intended
to
provide
indemnity
for
property
which
cannot
be
covered
by
 specific
insurance
because
of
its
frequent
change
in
location
and
quantity
 • May
be
issued
for
property
which
has
a
frequent
change
of
location
 
 Sec.
63.
A
condition,
stipulation,
or
agreement
in
any
policy
of
insurance,
limiting
 the
time
for
commencing
an
action
thereunder
to
a
period
of
less
than
one
year
 from
the
time
when
the
cause
of
action
accrues,
is
void.
 
 AGREEMENT
TO
LIMIT
THE
TIME
TO
COMMENCE
ACTION;
LIMITATION
 • The
 insurer
 and
 insured
 may
 validly
 agree
 that
 an
 action
 on
 the
 policy
 should
be
brought
with
a
specified
period
of
time,
provided
such
period
 isn’t
less
than
one
year
from
the
time
the
cause
of
action
accrues
 
 CAUSE
OF
ACTION,
EXPLAINED
 • Accrues
from
the
time
the
insured’s
claim
is
rejected
by
the
insurer
and
 not
from
the
time
of
loss
 
 NEW
LIFE
ENTERPRISES
V.
CA
 207
SCRA
669
 
 FACTS:
 Julian
 Sy
 and
 Jose
 Sy
 Bang
 have
 formed
 a
 business
 partnership
 named
 New
 Life
 Enterprises
 and
 was
 engaged
 in
 the
 sale
 of
 construction
 materials.
 
 One
 of
 the
 partners
 insured
 their
 stocks
 and
 was
 duly
 issued
 a
 fire
 insurance
 policy.
 
 A
 fire
 broke
 out
 in
 the
 building,
 destroying
 therein
 the
 stocks
 insured.
 
 The
 plaintiffs
 sought
the
proceeds
of
the
insurance
policy
but
was
denied
on
the
alleged
breach
 of
the
following
condition—
 
 3.
 The
 insured
 shall
 give
 notice
 to
 the
 Company
 of
 any
 insurance
 or
 insurances
 already
 effected,
 or
 which
 may
 subsequently
 be
 effected,
 covering
 any
 of
 the
 property
 or
 properties
 consisting
 of
 stocks
 in
 trade,
 goods
 in
 process
 and/or
 inventories
 only
 hereby
 insured,
 and
 unless
 such
 notice
 be
 given
 and
 the
 particulars
 of
 such
 insurance
 or
 insurances
 be
 stated
 therein
 or
 endorsed
 on
 this
 policy
 pursuant
 to
 Section
 50
 of
 the
 Insurance
 Code,
 by
 or
 on
 behalf
 of
 the
 Company
 before
 the
 occurrence
 of
 any
 loss
 or
 damage,
 all
 benefits
 under
 this
 policy
 shall
 be
 deemed
 forfeited,
 provided
 however,
 that
 this
 condition
 shall
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apply
when
the
total
insurance
or
insurances
in
force
at
the
time
of
loss
or
damage
 not
more
than
P200,000.00.
 
 The
trial
court
decided
in
favor
of
New
Life
but
was
reversed
by
the
CA.
 
 HELD:
 The
 terms
 of
 the
 contract
 are
 clear
 and
 unambiguous.
 The
 insured
 is
 specifically
 required
to
disclose
to
the
insurer
any
other
insurance
and
its
particulars
which
he
 may
have
effected
on
the
same
subject
matter.
The
knowledge
of
such
insurance
 by
the
insurer's
agents,
even
assuming
the
acquisition
thereof
by
the
former,
is
not
 the
"notice"
that
would
estop
the
insurers
from
denying
the
claim.
Besides,
the
so‐ called
theory
of
imputed
knowledge,
that
is,
knowledge
of
the
agent
is
knowledge
 of
 the
 principal,
 aside
 from
 being
 of
 dubious
 applicability
 here
 has
 likewise
 been
 roundly
refuted
by
respondent
court
whose
factual
findings
we
find
acceptable.
 
 Thus,
 it
 points
 out
 that
 while
 petitioner
 Julian
 Sy
 claimed
 that
 he
 had
 informed
 insurance
 agent
 Alvarez
 regarding
 the
 co‐insurance
 on
 the
 property,
 he
 contradicted
himself
by
inexplicably
claiming
that
he
had
not
read
the
terms
of
the
 policies;
that
Yap
Dam
Chuan
could
not
likewise
have
obtained
such
knowledge
for
 the
same
reason,
aside
from
the
fact
that
the
insurance
with
Western
was
obtained
 before
 those
 of
 Reliance
 and
 Equitable;
 and
 that
 the
 conclusion
 of
 the
 trial
 court
 that
 Reliance
 and
 Equitable
 are
 "sister
 companies"
 is
 an
 unfounded
 conjecture
 drawn
from
the
mere
fact
that
Yap
Kam
Chuan
was
an
agent
for
both
companies
 which
also
had
the
same
insurance
claims
adjuster.
Availment
of
the
services
of
the
 same
 agents
 and
 adjusters
 by
 different
 companies
 is
 a
 common
 practice
 in
 the
 insurance
business
and
such
facts
do
not
warrant
the
speculative
conclusion
of
the
 trial
court.
 
 Furthermore,
 when
 the
 words
 and
 language
 of
 documents
 are
 clear
 and
 plain
 or
 readily
understandable
by
an
ordinary
reader
thereof,
there
is
absolutely
no
room
 for
 interpretation
 or
 construction
 anymore.
 Courts
 are
 not
 allowed
 to
 make
 contracts
 for
 the
 parties;
 rather,
 they
 will
 intervene
 only
 when
 the
 terms
 of
 the
 policy
are
ambiguous,
equivocal,
or
uncertain.
The
parties
must
abide
by
the
terms
 of
the
contract
because
such
terms
constitute
the
measure
of
the
insurer's
liability
 and
 compliance
 therewith
 is
 a
 condition
 precedent
 to
 the
 insured's
 right
 of
 recovery
from
the
insurer.

 
 While
it
is
a
cardinal
principle
of
insurance
law
that
a
policy
or
contract
of
insurance
 is
 to
 be
 construed
 liberally
 in
 favor
 of
 the
 insured
 and
 strictly
 against
 the
 insurer


company,
 yet
 contracts
 of
 insurance,
 like
 other
 contracts,
 are
 to
 be
 construed
 according
 to
 the
 sense
 and
 meaning
 of
 the
 terms
 which
 the
 parties
 themselves
 have
 used.
 If
 such
 terms
 are
 clear
 and
 unambiguous,
 they
 must
 be
 taken
 and
 understood
 in
 their
 plain,
 ordinary
 and
 popular
 sense.
 Moreover,
 obligations
 arising
 from
 contracts
 have
 the
 force
 of
 law
 between
 the
 contracting
 parties
 and
 should
be
complied
with
in
good
faith.

 
 Petitioners
should
be
aware
of
the
fact
that
a
party
is
not
relieved
of
the
duty
to
 exercise
the
ordinary
care
and
prudence
that
would
be
exacted
in
relation
to
other
 contracts.
The
conformity
of
the
insured
to
the
terms
of
the
policy
is
implied
from
 his
 failure
 to
 express
 any
 disagreement
 with
 what
 is
 provided
 for.
 It
 may
 be
 true
 that
 the
 majority
 rule,
 as
 cited
 by
 petitioners,
 is
 that
 injured
 persons
 may
 accept
 policies
without
reading
them,
and
that
this
is
not
negligence
per
se.
But,
this
is
not
 without
 any
 exception.
 It
 is
 and
 was
 incumbent
 upon
 petitioner
 Sy
 to
 read
 the
 insurance
 contracts,
 and
 this
 can
 be
 reasonably
 expected
 of
 him
 considering
 that
 he
has
been
a
businessman
since
1965
and
the
contract
concerns
indemnity
in
case
 of
 loss
 in
 his
 money‐making
 trade
 of
 which
 important
 consideration
 he
 could
 not
 have
been
unaware
as
it
was
pre‐in
case
of
loss
in
his
money‐making
trade
of
which
 important
 consideration
 he
 could
 not
 have
 been
 unaware
 as
 it
 was
 precisely
 the
 reason
for
his
procuring
the
same.
 
 Sec.
 64.
 No
 policy
 of
 insurance
 other
 than
 life
 shall
 be
 cancelled
 by
 the
 insurer
 except
 upon
 prior
 notice
 thereof
 to
 the
 insured,
 and
 no
 notice
 of
 cancellation
 shall
be
effective
unless
it
is
based
on
the
occurrence,
after
the
effective
date
of
 the
policy,
of
one
or
more
of
the
following:
 
 (a)
non‐payment
of
premium;
 
 (b)
conviction
of
a
crime
arising
out
of
acts
increasing
the
hazard
insured
against;
 
 (c)
discovery
of
fraud
or
material
misrepresentation;
 
 (d)
discovery
of
willful
or
reckless
acts
or
omissions
increasing
the
hazard
insured
 against;
 
 (e)
 physical
 changes
 in
 the
 property
 insured
 which
 result
 in
 the
 property
 becoming
uninsurable;
or
 



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(f)
 a
 determination
 by
 the
 Commissioner
 that
 the
 continuation
 of
 the
 policy
 would
violate
or
would
place
the
insurer
in
violation
of
this
Code.
 
 Sec.
65.
All
notices
of
cancellation
mentioned
in
the
preceding
section
shall
be
in
 writing,
 mailed
 or
 delivered
 to
 the
 named
 insured
 at
 the
 address
 shown
 in
 the
 policy,
 and
 shall
 state
 (a)
 which
 of
 the
 grounds
 set
 forth
 in
 section
 sixty‐four
 is
 relied
upon
and
(b)
that,
upon
written
request
of
the
named
insured,
the
insurer
 will
furnish
the
facts
on
which
the
cancellation
is
based.
 
 REQUISITES
FOR
CANCELLATION
OF
POLICY
 1. There
must
have
been
prior
notice
thereof
to
the
insured
 2. Said
notice
must
be
based
on
the
grounds
as
provided
for
by
Section
64
 and
shall
so
state
said
grounds
 3. Said
notice
must
be
in
writing,
mailed
or
delivered
to
the
named
insured
 at
the
address
shown
in
the
policy
 4. If
requested
in
writing
by
the
insured,
the
insurer
must
furnish
the
facts
 on
which
the
cancellation
is
based
 
 SAURA
V.
PHIL.
INTERNATIONAL
CO.
 8
SCRA
143
 
 FACTS:
 Saura
 Import
 &
 Export
 Co
 Inc.,
 mortgaged
 to
 the
 Phil.
 National
 Bank,
 a
 parcel
 of
 land
 covered
 by
 T.C.T.
 No.
 40445
 of
 the
 Registry
 of
 Deeds
 of
 Davao,
 issued
 in
 its
 name,
to
secure
the
payment
of
promissory
note
of
P27,000.00.


 
 Erected
 on
 the
 land
 mortgaged,
 was
 a
 building
 of
 strong
 materials
 owned
 by
 the
 mortgagor
 Saura
 Import
 &
 Export
 Co.,
 Inc.,
 which
 had
 always
 been
 covered
 by
 insurance,
 many
 years
 prior
 to
 the
 mortgage
 contract.
 Pursuant
 to
 the
 requirement,
 Saura
 insured
 the
 building
 and
 its
 contents
 with
 the
 Philippine
 International
 Surety,
 an
 insurance
 firm
 acceptable
 to
 mortgagee
 Bank,
 for
 P29,000.00
 against
 fire
 for
 the
 period
 of
 one
 year
 from
 October
 2,
 1954.
 As
 required
therefor,
the
insurance
policy
was
endorsed
to
the
mortgagee
PNB.
 
 The
policy
was
delivered
to
the
mortgagee
Bank
by
Saura.
Barely
thirteen
(13)
days
 after
 the
 issuance
 of
 the
 fire
 insurance
 policy,
 the
 insurer
 cancelled
 the
 same,
 effective
 as
 of
 the
 date
 of
 issue.
 Notice
 of
 the
 cancellation
 was
 given
 to
 appellee
 bank
 in
 writing,
 sent
 by
 Registered
 Mail
 and
 personally
 addressed
 to
 the
 Branch


Manager
of
the
appellee
Bank's
Davao
Branch.
On
a
later
date,
the
building
and
its
 contents,
 were
 burned.
 Saura
 filed
 a
 claim
 with
 the
 Insurer
 and
 mortgagee
 Bank.
 Upon
 the
 presentation
 of
 notice
 of
 loss
 with
 the
 PNB,
 Saura
 learned
 for
 the
 first
 time
 that
 the
 policy
 had
 previously
 been
 cancelled,
 by
 the
 insurer,
 when
 Saura's
 folder
 in
 the
 Bank's
 filed
 was
 opened
 and
 the
 notice
 of
 cancellation
 (original
 and
 duplicate)
sent
by
the
Insurer
to
the
Bank,
was
found.
Upon
refusal
of
the
Insurer
 Philippine
International
Surety
to
pay
the
amount
of
the
insurance,
a
case
was
filed
 against
the
Insurer,
and
the
PNB
was
later
included
as
party
defendant,
after
it
had
 refused
to
prosecute
the
case
jointly
with
Saura
Import
&
Export
Co.,
Inc.
 
 HELD:
 Fire
insurance
policies
and
other
contracts
of
insurance
upon
property,
in
addition
 to
the
common
provision
for
cancellation
of
the
policy
upon
request
of
the
insured,
 generally
 provide
 for
 cancellation
 by
 the
 insurer
 by
 notice
 to
 the
 insured
 for
 a
 prescribed
period,
which
is
usually
5
days,
and
the
return
of
the
unearned
portion
 of
 the
 premium
 paid
 by
 the
 insured,
 such
 provision
 for
 cancellation
 upon
 notice
 being
 authorized
 by
 statutes
 in
 some
 jurisdiction,
 either
 specifically
 or
 as
 a
 provision
 of
 an
 adopted
 standard
 form
 of
 policy.
 The
 purpose
 of
 provisions
 or
 stipulations
 for
 notice
 to
 the
 insured,
 is
 to
 prevent
 the
 cancellation
 of
 the
 policy,
 without
allowing
the
insured
ample
opportunity
to
negotiate
for
other
insurance
in
 its
 stead.
 The
 form
 and
 sufficiency
 of
 a
 notice
 of
 cancellation
 is
 determined
 by
 policy
provisions.
In
order
to
form
the
basis
for
the
cancellation
of
a
policy,
notice
 to
the
insured
n
not
be
in
any
particular
form,
in
the
absence
of
a
statute
or
policy
 provision
 prescribing
 such
 form,
 and
 it
 is
 sufficient,
 so
 long
 as
 it
 positively
 and
 unequivocally
indicates
to
the
insured,
that
it
is
the
intention
of
the
company
that
 the
policy
shall
cease
to
be
binding.
Where
the
policy
contains
no
provisions
that
a
 certain
number
of
days
notice
shall
be
given,
a
reasonable
notice
and
opportunity
 to
 obtain
 other
 insurance
 must
 be
 given.
 Actual
 personal
 notice
 to
 the
 insured
 is
 essential
to
a
cancellation
under
a
provision
for
cancellation
by
notice.
The
actual
 receipt
 by
 the
 insured
 of
 a
 notice
 of
 cancellation
 is
 universally
 recognized
 as
 a
 condition
precedent
to
a
cancellation
of
the
policy
by
the
insurer,
and
consequently
 a
 letter
 containing
 notice
 of
 cancellation
 which
 is
 mailed
 by
 the
 insurer
 but
 not
 received
by
the
insured,
is
ineffective
as
cancellation.
 
 The
 policy
 in
 question
 does
 not
 provide
 for
 the
 notice,
 its
 form
 or
 period.
 The
 Insurance
Law,
Act
No.
2427,
does
not
likewise
provide
for
such
notice.
This
being
 the
case,
it
devolves
upon
the
Court
to
apply
the
generally
accepted
principles
of
 insurance,
regarding
cancellation
of
the
insurance
policy
by
the
insurer.
From
what
 has
been
heretofore
stated,
actual
notice
of
cancellation
in
a
clear
and
unequivocal



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manner,
preferably
in
writing,
in
view
of
the
importance
of
an
insurance
contract,
 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
notice
should
be
 personal
to
the
insured
and
not
to
and/or
through
any
unauthorized
person
by
the
 policy.
In
the
case
at
bar,
the
defendant
insurance
company,
must
have
realized
the
 paramount
importance
of
sending
a
notice
of
cancellation,
when
it
sent
the
notice
 of
cancellation
of
the
policy
to
the
defendant
bank
(as
mortgagee),
but
not
to
the
 insured
 with
 which
 it
 (insurance
 company)
 had
 direct
 dealing.
 It
 was
 the
 primary
 duty
of
the
defendant‐appellee
insurance
company
to
notify
the
insured,
but
it
did
 not.
 It
 should
 be
 stated
 that
 the
 house
 and
 its
 contents
 were
 burned
 at
 the
 time
 when
the
policy
was
enforced
and
that
under
the
facts,
as
found
by
the
trial
court,
 it
 is
 evident
 that
 both
 the
 insurance
 company
 and
 the
 appellee
 bank
 failed,
 wittingly
 or
 unwittingly,
 to
 notify
 the
 insured
 appellant
 Saura
 of
 the
 cancellation
 made.
 
 MALAYAN
INSURANCE
V.
ARNALDO
 154
SCRA
672
 
 FACTS:
 MICO
issued
a
fire
insurance
policy
to
Pinca
on
her
house.

On
a
relevant
date,
the
 fire
insurance
policy
was
allegedly
cancelled
by
MICO
due
to
Pinca’s
non‐payment
 of
 premiums.
 
 Pinca
 then
 paid
 her
 deficiency
 premiums
 and
 the
 company
 duly
 received
 the
 same.
 
 Days
 after
 the
 receipt
 of
 the
 payment,
 the
 house
 was
 destroyed
 by
 fire.
 
 Pinca
 sought
 the
 proceeds
 of
 the
 insurance
 policy
 but
 was
 denied
on
the
ground
that
allegedly,
the
policy
was
already
earlier
cancelled.


 
 HELD:
 MICO
 is
 taking
 an
 inconsistent
 stand.
 While
 contending
 that
 acceptance
 of
 the
 premium
payment
was
prohibited
by
the
policy,
it
at
the
same
time
insists
that
the
 policy
never
came
into
force
because
the
premium
had
not
been
paid.
One
surely,
 cannot
have
his
cake
and
eat
it
too.
 
 MICO's
 view
 is
 unacceptable,
 that
 there
 was
 no
 existing
 insurance
 at
 the
 time
 of
 the
 loss
 sustained
 by
 Pinca
 because
 her
 policy
 never
 became
 effective
 for
 non‐ payment
of
premium.
Payment
was
in
fact
made,
rendering
the
policy
operative
as
 of
June
22,
1981,
and
removing
it
from
the
provisions
of
Article
77,
Thereafter,
the
 policy
could
be
cancelled
on
any
of
the
supervening
grounds
enumerated
in
Article


64
 (except
 "nonpayment
 of
 premium")
 provided
 the
 cancellation
 was
 made
 in
 accordance
therewith
and
with
Article
65.
 
 Section
64
reads
as
follows:
 
 SEC.
 64.
 No
 policy
 of
 insurance
 other
 than
 life
 shall
 be
 cancelled
 by
 the
 insurer
 except
upon
prior
notice
thereof
to
the
insured,
and
no
notice
of
cancellation
shall
 be
 effective
 unless
 it
 is
 based
 on
 the
 occurrence,
 after
 the
 effective
 date
 of
 the
 policy,
of
one
or
more
of
the
following:
 
 (a)
non‐payment
of
premium;
 
 (b)
conviction
of
a
crime
arising
out
of
acts
increasing
the
hazard
insured
against;
 
 (c)
discovery
of
fraud
or
material
misrepresentation;
 
 (d)
 discovery
 of
 willful,
 or
 reckless
 acts
 or
 commissions
 increasing
 the
 hazard
 insured
against;
 
 (e)
physical
changes
in
the
property
insured
which
result
in
the
property
becoming
 uninsurable;or
 
 (f)
a
determination
by
the
Commissioner
that
the
continuation
of
the
policy
would
 violate
or
would
place
the
insurer
in
violation
of
this
Code.
 
 As
for
the
method
of
cancellation,
Section
65
provides
as
follows:
 
 SEC.
65.
All
notices
of
cancellation
mentioned
in
the
preceding
section
shall
be
in
 writing,
 mailed
 or
 delivered
 to
 the
 named
 insured
 at
 the
 address
 shown
 in
 the
 policy,
 and
 shall
 state
 (a)
 which
 of
 the
 grounds
 set
 forth
 in
 section
 sixty‐four
 is
 relied
 upon
 and
 (b)
 that,
 upon
 written
 request
 of
 the
 named
 insured,
 the
 insurer
 will
furnish
the
facts
on
which
the
cancellation
is
based.
 
 A
 valid
 cancellation
 must,
 therefore,
 require
 concurrence
 of
 the
 following
 conditions:
 
 (1)
There
must
be
prior
notice
of
cancellation
to
the
insured;

 



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(2)
 The
 notice
 must
 be
 based
 on
 the
 occurrence,
 after
 the
 effective
 date
 of
 the
 policy,
of
one
or
more
of
the
grounds
mentioned;
 
 (3)
The
notice
must
be
(a)
in
writing,
(b)
mailed,
or
delivered
to
the
named
insured,
 (c)
at
the
address
shown
in
the
policy;

 
 (4)
 It
 must
 state
 (a)
 which
 of
 the
 grounds
 mentioned
 in
 Section
 64
 is
 relied
 upon
 and
(b)
that
upon
written
request
of
the
insured,
the
insurer
will
furnish
the
facts
 on
which
the
cancellation
is
based.

 
 If
Pinca
had
really
received
the
said
notice,
she
would
not
have
made
payment
on
 the
original
policy
on
December
24,
1981.
Instead,
she
would
have
asked
for
a
new
 insurance,
effective
on
that
date
and
until
one
year
later,
and
so
taken
advantage
 of
 the
 extended
 period.
 The
 Court
 finds
 that
 if
 she
 did
 pay
 on
 that
 date,
 it
 was
 because
 she
 honestly
 believed
 that
 the
 policy
 issued
 on
 June
 7,
 1981,
 was
 still
 in
 effect
 and
 she
 was
 willing
 to
 make
 her
 payment
 retroact
 to
 July
 22,
 1981,
 its
 stipulated
commencement
date.
After
all,
agent
Adora
was
very
accomodating
and
 had
earlier
told
her
"to
call
him
up
any
time"
she
was
ready
with
her
payment
on
 the
 policy
 earlier
 issued.
 She
 was
 obviously
 only
 reciprocating
 in
 kind
 when
 she
 paid
 her
 premium
 for
 the
 period
 beginning
 July
 22,
 1981,
 and
 not
 December
 24,
 1981.
 
 MICO's
 suggests
 that
 Pinca
 knew
 the
 policy
 had
 already
 been
 cancelled
 and
 that
 when
she
paid
the
premium
on
December
24,
1981,
her
purpose
was
"to
renew
it."
 As
this
could
not
be
done
by
the
agent
alone
under
the
terms
of
the
original
policy,
 the
renewal
thereof
did
not
legally
bind
MICO.
 Pinca
meant
to
renew
the
policy
if
it
had
really
been
already
cancelled
but
not
if
it
 was
stffl
effective.
It
was
all
conditional.
As
it
has
not
been
shown
that
there
was
a
 valid
cancellation
of
the
policy,
there
was
consequently
no
need
to
renew
it
but
to
 pay
 the
 premium
 thereon.
 Payment
 was
 thus
 legally
 made
 on
 the
 original
 transaction
and
it
could
be,
and
was,
validly
received
on
behalf
of
the
insurer
by
its
 agent
Adora.
Adora.
incidentally,
had
not
been
informed
of
the
cancellation
either
 and
saw
no
reason
not
to
accept
the
said
payment.
 
 Sec.
66.
In
case
of
insurance
other
than
life,
unless
the
insurer
at
least
forty‐five
 days
 in
 advance
 of
 the
 end
 of
 the
 policy
 period
 mails
 or
 delivers
 to
 the
 named
 insured
at
the
address
shown
in
the
policy
notice
of
its
intention
not
to
renew
the
 policy
 or
 to
 condition
 its
 renewal
 upon
 reduction
 of
 limits
 or
 elimination
 of
 coverages,
the
named
insured
shall
be
entitled
to
renew
the
policy
upon
payment


of
the
premium
due
on
the
effective
date
of
the
renewal.

Any
policy
written
for
a
 term
of
less
than
one
year
shall
be
considered
as
if
written
for
a
term
of
one
year.

 Any
 policy
 written
 for
 a
 term
 longer
 than
 one
 year
 or
 any
 policy
 with
 no
 fixed
 expiration
date
shall
be
considered
as
if
written
for
successive
policy
periods
or
 terms
of
one
year.
 
 REQUISITES
FOR
RENEWAL
OF
POLICY
 1. An
insurance
policy
other
than
life
is
renewed
provided—
 a. The
 insurer
 doesn't
 mail
 or
 deliver
 to
 the
 insured
 at
 least
 45
 days
before
its
expiry
date
a
notice
of
intention
either—
 i. Not
to
renew
the
policy
 ii. Or
to
condition
its
renewal
upon
reduction
of
limits
or
 elimination
of
coverage’s
 b. Payment
of
the
premium
due
on
the
effective
date
of
renewal
 
 WARRANTIES
 
 Sec.
67.
A
warranty
is
either
expressed
or
implied.
 
 Sec.
68.
A
warranty
may
relate
to
the
past,
the
present,
the
future,
or
to
any
or
all
 of
these.
 
 WARRANTY,
DEFINED.
 • Statement
 or
 promise
 stated
 in
 the
 policy
 itself
 or
 incorporated
 therein
 by
reference,
whereby
the
insured
expressly
contracts
as
to
the
present
 or
 future
 existence
 of
 certain
 facts,
 circumstances,
 or
 conditions,
 the
 literal
 truth
 of
 which
 is
 essential
 to
 the
 validity
 of
 the
 contract
 of
 insurance
 
 KINDS
OF
WARRANTY
 1. Affirmative
 warranty—where
 the
 insured
 asserts
 the
 existence
 of
 a
 matter
at
or
before
the
issuance
of
the
policy
 2. Promissory
 warranty—where
 the
 insured
 promises
 or
 undertakes
 that
 certain
matters
shall
exist
or
will
be
done
or
omitted
after
the
policy
has
 taken
effect
 3. Express
warranty—where
the
assertion
or
promise
is
clearly
set
forth
in
 the
policy
or
incorporated
therein
by
reference



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4.

Implied
 warranty—where
 the
 assertion
 or
 promise
 isn’t
 expressly
 set
 forth
 in
 the
 policy
 but
 because
 of
 the
 general
 tenor
 of
 the
 terms
 of
 the
 policy
 or
 from
 the
 very
 nature
 of
 the
 insurance
 contract,
 a
 warranty
 necessarily
inferred
or
understood.





 Sec.
69.
No
particular
form
of
words
is
necessary
to
create
a
warranty.
 
 Sec.
70.
Without
prejudice
to
section
fifty‐one,
every
express
warranty,
made
at
 or
 before
 the
 execution
 of
 a
 policy,
 must
 be
 contained
 in
 the
 policy
 itself,
 or
 in
 another
instrument
signed
by
the
insured
and
referred
to
in
the
policy
as
making
 a
part
of
it.
 
 EXPRESS
WARRANTY,
WHEN
MADE.
 • It
must
be
made
at
or
before
the
execution
of
the
policy
 
 WHERE
TO
BE
CONTAINED
 • Express
warranty
may
be
contained
either—
 o In
the
policy
itself
 o In
 another
 instrument
 signed
 by
 the
 insured
 or
 referred
 to
 in
 the
policy
as
making
part
of
it
 • It
may
also
be
contained
in
a
rider.

It
not
be
signed
unless
the
rider
was
 issued
after
the
original
policy
took
effect
 
 ANG
GIOK
CHIP
V.
SPRINGFIELD
FIRE
AND
MARINE
INSURANCE
 56
PHIL
375
 
 FACTS:
 Ang
 Giok
 Chip
 doing
 business
 under
 the
 name
 and
 style
 of
 Hua
 Bee
 Kong
 Si
 was
 formerly
the
owner
of
a
warehouse.

The
contents
of
the
warehouse
were
insured
 with
 the
 three
 insurance
 companies
 for
 the
 total
 sum
 of
 P60,000.
 One
 insurance
 policy,
in
the
amount
of
P10,000,
was
taken
out
with
the
Springfield
Fire
&
Marine
 Insurance
 Company.
 The
 warehouse
 was
 destroyed
 by
 fire
 on
 January
 11,
 1928,
 while
the
policy
issued
by
the
latter
company
was
in
force.

By
virtue
of
the
policy,
 plaintiff
sought
the
proceeds
from
defendant
insurance
company.


 
 HELD:
 Section
65
of
the
Insurance
Act
and
its
counterpart,
section
265
of
the
Civil
Code
of
 California,
 will
 bear
 analysis
 as
 tested
 by
 reason
 and
 authority.
 The
 law
 says
 that


every
 express
 warranty
 must
 be
 "contained
 in
 the
 policy
 itself."
 The
 word
 "contained,"
 according
 to
 the
 dictionaries,
 means
 "included,"
 inclosed,"
 "embraced,"
 "comprehended,"
 etc.
 When,
 therefore,
 the
 courts
 speak
 of
 a
 rider
 attached
 to
 the
 policy,
 and
 thus
 "embodied"
 therein,
 or
 of
 a
 warranty
 "incorporated"
in
the
policy,
it
is
believed
that
the
phrase
"contained
in
the
policy
 itself"
 must
 necessarily
 include
 such
 rider
 and
 warranty.
 As
 to
 the
 alternative
 relating
 to
 "another
 instrument,"
 "instrument"
 as
 here
 used
 could
 not
 mean
 a
 mere
 slip
 of
 paper
 like
 a
 rider,
 but
 something
 akin
 to
 the
 policy
 itself,
 which
 in
 section
 48
 of
 the
 Insurance
 Act
 is
 defined
 as
 "The
 written
 instrument,
 in
 which
 a
 contract
 of
 insurance
 is
 set
 forth."
 In
 California,
 every
 paper
 writing
 is
 not
 necessarily
 an
 "instrument"
 within
 the
 statutory
 meaning
 of
 the
 term.
 The
 word
 "instrument
 has
 a
 well
 defined
 definition
 in
 California,
 and
 as
 used
 in
 the
 Codes
 invariably
 means
 some
 written
 paper
 or
 instrument
 signed
 and
 delivered
 by
 one
 person
to
another,
transferring
the
title
to,
or
giving
a
lien,
on
property,
or
giving
a
 right
to
debt
or
duty.
 
 In
 other
 words,
 the
 rider,
 warranty
 F,
 is
 contained
 in
 the
 policy
 itself,
 because
 by
 the
contract
of
insurance
agreed
to
by
the
parties
it
is
made
to
form
a
part
of
the
 same,
 but
 is
 not
 another
 instrument
 signed
 by
 the
 insured
 and
 referred
 to
 in
 the
 policy
as
forming
a
part
of
it.
 
 It
is
admitted
that
the
policy
before
us
was
accepted
by
the
plaintiff.
The
receipt
of
 this
 policy
 by
 the
 insured
 without
 objection
 binds
 both
 the
 acceptor
 and
 the
 insured
to
the
terms
thereof.
The
insured
may
not
thereafter
be
heard
to
say
that
 he
did
not
read
the
policy
or
know
its
terms,
since
it
is
his
duty
to
read
his
policy
 and
it
will
be
assumed
that
he
did
so.
 
 Sec.
71.
A
statement
in
a
policy
of
matter
relating
to
the
person
or
thing
insured,
 or
to
the
risk,
as
a
fact,
is
an
express
warranty
thereof.
 
 EXPRESS
 WARRANTY
 RELATING
 TO
 PERSON
 OR
 THING
 INSURED
 TO
 OR
 TO
 THE
 RISK
 • A
 statement
 in
 the
 policy
 of
 a
 matter
 relating
 to
 the
 person
 or
 thing
 insured,
or
to
the
risk,
as
a
fact,
is
an
express
warranty
 • Statements
in
the
application
or
medical
examination
are
representations
 only
and
not
warranties,
if
the
application
or
medical
examinations
isn’t
 incorporated
in
the
policy
or
made
part
of
it
as
reference.
 



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47


Sec.
72.
A
statement
in
a
policy
which
imparts
that
it
is
intended
to
do
or
not
to
 do
 a
 thing
 which
 materially
 affects
 the
 risk,
 is
 a
 warranty
 that
 such
 act
 or
 omission
shall
take
place.
 
 PROMISSORY
WARRANTY
 • A
promissory
warranty
is
a
statement
in
the
policy
that
a
thing
which
is
 material
 to
 the
 risk
 is
 intended
 to
 be
 done
 or
 not
 done
 after
 the
 policy
 takes
effect
 
 Sec.
73.
When,
before
the
time
arrives
for
the
performance
of
a
warranty
relating
 to
the
future,
a
loss
insured
against
happens,
or
performance
becomes
unlawful
 at
 the
 place
 of
 the
 contract,
 or
 impossible,
 the
 omission
 to
 fulfill
 the
 warranty
 does
not
avoid
the
policy.
 
 EXCEPTIONS
 TO
 THE
 GENERAL
 RULE:
 NON‐PERFORMANCE
 OF
 PROMISSORY
 WARRANTY
ENTITLES
THE
OTHER
PARTY
TO
RESCIND
THE
INSURANCE
CONTRACT
 • Loss
 occurs
 before
 the
 time
 arrives
 for
 the
 performance
 of
 the
 promissory
warranty
 • Performance
 becomes
 unlawful
 before
 the
 time
 arrives
 for
 the
 performance
of
the
promissory
warranty
 • Performance
 becomes
 impossible
 before
 the
 time
 arrives
 for
 the
 performance
of
the
promissory
warranty
 
 Sec.
 74.
 The
 violation
 of
 a
 material
 warranty,
 or
 other
 material
 provision
 of
 a
 policy,
on
the
part
of
either
party
thereto,
entitles
the
other
to
rescind.
 
 YOUNG
V.
MIDLAND
TEXTILE
INSURANCE
 30
PHIL
617
 
 FACTS:
 Young
operated
a
candy
and
fruit
store,
for
which
he
secured
an
insurance
policy
to
 cover
 such
 goods
 against
 fire.
 
 One
 of
 the
 conditions
 in
 the
 policy
 was
 the
 prohibition
to
store
hazardous
goods
in
the
bodega
and
store.

A
fire
broke
out
in
 the
store
and
bodega
of
Young,
and
partially
destroyed
his
goods.

This
was
caused
 by
 the
 fioreworks
 he
 earlier
 placed
 therein.
 
 The
 fireworks
 were
 given
 to
 him
 by
 another
 store
 owner
 who
 intended
 to
 use
 the
 same
 for
 the
 celebration
 of
 the
 Chinese
 new
 year
 but
 since
 tan
 ordinance
 of
 Manila
 prohibited
 the
 use
 of
 such,
 Young
was
compelled
ton
store
it
in
his
bodega.





 HELD:
 Contracts
 of
 insurance
 are
 contracts
 of
 indemnity
 upon
 the
 terms
 and
 conditions
 specified
 in
 the
 policy.
 The
 parties
 have
 a
 right
 to
 impose
 such
 reasonable
 conditions
 at
 the
 time
 of
 the
 making
 of
 the
 contract
 as
 they
 may
 deem
 wise
 and
 necessary.
The
rate
of
premium
is
measured
by
the
character
of
the
risk
assumed.
 The
 insurance
 company,
 for
 a
 comparatively
 small
 consideration,
 undertakes
 to
 guarantee
 the
 insured
 against
 loss
 or
 damage,
 upon
 the
 terms
 and
 conditions
 agreed
upon,
and
upon
no
other,
and
when
called
upon
to
pay,
in
case
of
loss,
the
 insurer,
therefore,
may
justly
insist
upon
a
fulfillment
of
these
terms.
If
the
insured
 cannot
 bring
 himself
 within
 the
 conditions
 of
 the
 policy,
 he
 is
 not
 entitled
 to
 recover
for
the
loss.
The
terms
of
the
policy
constitute
the
measure
of
the
insurer's
 liability,
and
in
order
to
recover
the
insured
must
show
himself
within
those
terms;
 and
if
it
appears
that
the
contract
has
been
terminated
by
a
violation,
on
the
part
 of
 the
 insured,
 of
 its
 conditions,
 then
 there
 can
 be
 no
 right
 of
 recovery.
 The
 compliance
of
the
insured
with
the
terms
of
the
contract
is
a
condition
precedent
 to
 the
 right
 of
 recovery.
 If
 the
 insured
 has
 violated
 or
 failed
 to
 perform
 the
 conditions
 of
 the
 contract,
 and
 such
 a
 violation
 or
 want
 of
 performance
 has
 not
 been
 waived
 by
 the
 insurer,
 then
 the
 insured
 cannot
 recover.
 Courts
 are
 not
 permitted
 to
 make
 contracts
 for
 the
 parties.
 The
 function
 and
 duty
 of
 the
 courts
 consist
simply
in
enforcing
and
carrying
out
he
contracts
actually
made.
While
it
is
 true,
as
a
general
rule,
that
contracts
of
insurance
are
construed
most
favorably
to
 the
 insured,
 yet
 contracts
 of
 insurance,
 like
 other
 contracts,
 are
 to
 be
 construed
 according
 to
 the
 sense
 and
 meaning
 of
 the
 terms
 which
 the
 parties
 themselves
 have
 used.
 If
 such
 terms
 are
 clear
 and
 unambiguous
 they
 must
 be
 taken
 and
 understood
 in
 their
 plain,
 ordinary
 and
 popular
 sense.
 (Imperial
 Fire
 Ins.
 Co.
 vs.
 County
 of
 Coos,
 151
 U.
 S.,
 542;
 Kyte
 vs.
 Commercial
 Union
 Assurance
 Co.,
 149
 Mass.,
116,
122.)
The
conditions
of
contracts
of
insurance,
when
plainly
expressed
 in
 a
 policy,
 are
 binding
 upon
 the
 parties
 and
 should
 be
 enforced
 by
 the
 courts,
 if
 the
 evidence
 brings
 the
 case
 clearly
 within
 their
 meaning
 and
 intent.
 It
 tends
 to
 bring
the
law
itself
into
disrepute
when,
by
astute
and
subtle
distinctions,
a
plain
 case
 is
 attempted
 to
 be
 taken
 without
 the
 operation
 of
 a
 clear,
 reasonable,
 and
 material
obligation
of
the
contract.
 
 The
 appellant
 argues,
 however,
 that
 in
 view
 of
 the
 fact
 that
 the
 "storing"
 of
 the
 fireworks
 on
 the
 premises
 of
 the
 insured
 did
 not
 contribute
 in
 any
 way
 to
 the
 damage
 occasioned
 by
 the
 fire,
 he
 should
 be
 permitted
 to
 recover
 that
 the
 "storing"
 of
 the
 "hazardous
 goods"
 in
 no
 way
 caused
 injury
 to
 the
 defendant
 company.
 That
 argument,
 however,
 is
 beside
 the
 question,
 if
 the
 "storing"
 was
 a



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violation
of
the
terms
of
the
contract.
The
violation
of
the
terms
of
the
contract,
by
 virtue
 of
 the
 provisions
 of
 the
 policy
 itself,
 terminated,
 at
 the
 election
 of
 either
 party,
 he
 contractual
 relations.
 (Kyte
 vs.
 Commercial
 Union
 Assurance
 Co.,
 149
 Mass.,
116,
122.)
The
plaintiff
paid
a
premium
based
upon
the
risk
at
the
time
the
 policy
was
issued.
Certainly
it
cannot
be
denied
that
the
placing
of
the
firecrackers
 in
 the
 building
 insured
 increased
 the
 risk.
 The
 plaintiff
 had
 not
 paid
 a
 premium
 based
upon
the
increased
risk,
neither
had
the
defendant
issued
a
policy
upon
the
 theory
 of
 a
 different
 risk.
 The
 plaintiff
 was
 enjoying,
 if
 his
 contention
 may
 be
 allowed
 may
 be
 allowed,
 the
 benefits
 of
 an
 insurance
 policy
 upon
 one
 risk,
 whereas,
 as
 a
 matter
 of
 fact,
 it
 was
 issued
 upon
 an
 entirely
 different
 risk.
 The
 defendant
had
neither
been
paid
nor
had
issues
a
policy
to
cover
the
increased
risk.
 An
 increase
 of
 risk
 which
 is
 substantial
 and
 which
 is
 continued
 for
 a
 considerable
 period
of
time,
is
a
direct
and
certain
injury
to
the
insurer,
and
changes
the
basis
 upon
which
the
contract
of
insurance
rests.
 
 Sec.
75.
A
policy
may
declare
that
a
violation
of
specified
provisions
thereof
shall
 avoid
 it,
 otherwise
 the
 breach
 of
 an
 immaterial
 provision
 does
 not
 avoid
 the
 policy.
 
 GENERAL
INSURANCE
V.
NG
HUA
 106
PHIL
1117
 
 FACTS:
 General
 Insurance
 and
 Surety
 Corporation
 issued
 its
 insurance
 Policy
 No.
 471,
 insuring
against
fire,
for
one
year,
the
stock
in
trade
of
the
Central
Pomade
Factory
 owned
by
Ng
Hua.

The
day
after,
the
goods
were
destroyed
by
fire.

It
is
undenied
 that
Ng
Hua
had
obtained
fire
insurance
on
the
same
goods,
for
the
same
period
of
 time,
 in
 the
 amount
 of
 P20,000.00
 from
 General
 Indemnity
 Co.
 
 By
 virtue
 of
 this,
 General
Insurance
denied
the
claim
of
Ng
Hua.
 
 HELD:
 Co‐insurance
exists
under
the
condition
described
by
the
appellate
court.
But
that
 is
 one
 kind
 of
 co‐insurance.
 It
 is
 not
 the
 only
 situation
 where
 co‐insurance
 exists.
 Other
 insurers
 of
 the
 same
 property
 against
 the
 same
 hazard
 are
 sometimes
 referred
 as
 co‐insurers
 and
 the
 ensuing
 combination
 as
 co‐insurance.1
 And
 considering
 the
 terms
 of
 the
 policy
 which
 required
 the
 insured
 to
 declare
 other
 insurances,
 the
 statement
 in
 question
 must
 be
 deemed
 to
 be
 a
 statement
 (warranty)
binding
on
both
insurer
and
insured,
that
there
were
no
other
insurance


on
the
property.
Remember
it
runs
"Co‐Insurance
declared";
emphasis
on
the
last
 word.
 If
 "Co‐Insurance"
 means
 that
 the
 Court
 of
 Appeals
 says,
 the
 annotation
 served
no
purpose.
It
would
even
be
contrary
to
the
policy
itself,
which
in
its
clause
 No.
 17
 made
 the
 insured
 a
 co‐insurer
 for
 the
 excess
 of
 the
 value
 of
 the
 property
 over
the
amount
of
the
policy.
 
 The
annotation
then,
must
be
deemed
to
be
a
warranty
that
the
property
was
not
 insured
by
any
other
policy.
Violation
thereof
entitles
the
insurer
to
rescind.
 
 Furthermore,
 even
 if
 the
 annotations
 were
 overlooked,
 the
 defendant
 insurer
 would
still
be
free
from
liability
because
there
is
no
question
that
the
policy
issued
 by
 General
 Indemnity
 had
 not
 been
 stated
 in
 nor
 endorsed
 on
 Policy
 No.
 471
 of
 defendant.
 And
 as
 stipulated
 in
 the
 above‐quoted
 provisions
 of
 such
 policy
 "all
 benefit
under
this
policy
shall
be
forfeited.
 
 To
 avoid
 the
 dissastrous
 effect
 of
 the
 misrepresentation
 or
 concealment
 of
 the
 other
insurance
policy,
Ng
Hua
alleges
"actual
knowledge"
on
the
part
of
General
 insurance
 of
 the
 fact
 that
 he
 had
 taken
 out
 additional
 insurance
 with
 General
 Indemnity.
 He
 does
 not
 say
 when
 such
 knowledge
 was
 acquired
 or
 imparted.
 If
 General
Insurance
know
before
issuing
its
policy
or
before
the
fire,
such
knowledge
 might
 overcome
 the
 insurer's
 defense.3
 However,
 the
 Court
 of
 Appeals
 found
 no
 evidence
of
such
knowledge.
 
 Indeed,
this
concealment
and
violation
was
expressly
set
up
as
a
special
defense
in
 the
 answer.
 Yet
 plaintiff
 did
 not,
 in
 avoidance,
 reply
 nor
 assert
 such
 knowledge.
 And
 it
 is
 doubtful
 whether
 the
 evidence
 on
 the
 point
 would
 be
 admissible
 under
 the
pleadings.
 
 Sec.
 76.
 A
 breach
 of
 warranty
 without
 fraud
 merely
 exonerates
 an
 insurer
 from
 the
time
that
it
occurs,
or
where
it
is
broken
in
its
inception,
prevents
the
policy
 from
attaching
to
the
risk.
 
 PREMIUM
 
 Sec.
 77.
 An
 insurer
 is
 entitled
 to
 payment
 of
 the
 premium
 as
 soon
 as
 the
 thing
 insured
is
exposed
to
the
peril
insured
against.

Notwithstanding
any
agreement
 to
 the
 contrary,
 no
 policy
 or
 contract
 of
 insurance
 issued
 by
 an
 insurance
 company
 is
 valid
 and
 binding
 unless
 and
 until
 the
 premium
 thereof
 has
 been



MA.
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2010


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49


paid,
 except
 in
 the
 case
 of
 a
 life
 or
 an
 industrial
 life
 policy
 whenever
 the
 grace
 period
provision
applies.
 
 PREMIUM,
DEFINED
 • Insurance
 premium
 is
 the
 agreed
 price
 or
 consideration
 paid
 by
 the
 insured
to
the
insurer
for
undertaking
to
indemnify
the
former
against
a
 specified
peril
 
 ENTITLEMENT
OF
INSURER
TO
IT
 1. Insurer
is
entitled
to
payment
as
soon
as
the
thing
insured
is
exposed
to
 the
 peril
 insured
 against.
 
 However,
 this
 is
 qualified.
 
 If
 the
 premium
 hasn't
been
paid,
the
contract
isn’t
valid
and
binding
even
if
the
thing
is
 exposed
to
the
peril
insured
against.
 2. By
 express
 provision
 of
 law,
 an
 insurance
 policy
 requires
 as
 one
 of
 its
 requisites
 the
 payment
 of
 premium
 for
 the
 contract
 to
 be
 valid
 and
 binding

 
 NO
EXCUSE
FOR
NON‐PAYMENT;
EXCEPTIONS
 1. Non‐payment
 of
 premiums
 cannot
 be
 excused
 by
 an
 act
 of
 God,
 by
 sickness
 or
 incapacity
 of
 the
 insured,
 or
 by
 war,
 since
 the
 time
 of
 payment
is
peculiarly
the
essence
of
the
contract
 2. However
 the
 failure
 to
 pay
 was
 due
 to
 the
 wrongful
 conduct
 of
 the
 insurer
 as
 the
 act
 of
 the
 insurer
 or
 his
 agent
 in
 refusing
 the
 tender
 of
 premium
 properly
 made,
 it
 will
 necessarily
 estop
 the
 insurer
 from
 claiming
a
forfeiture
of
policy
for
non‐payment
of
premium.
 
 PHIL.
PHOENIX
V.
WOODWORKS
 20
SCRA
1270
 
 FACTS:
 1.

3. 4.

adopted
 plan
 is
 hereto
 attached
 as
 Annex
 "B"
 and
 made
 a
 part
 hereof,
 the
documentary
stamps
attached
to
the
policy
was
P96.42;
 That
the
defendant
paid
P3,000.00
on
September
22,
1960
under
official
 receipt
No.
30245
of
plaintiff;
 That
plaintiff
made
several
demands
on
defendant
to
pay
the
amount
of
 P3,522.09.



 HELD:
 There
 is,
 consequently,
 no
 doubt
 at
 all
 that,
 as
 between
 the
 insurer
 and
 the
 insured,
 there
 was
 not
 only
 a
 perfected
 contract
 of
 insurance
 but
 a
 partially
 performed
 one
 as
 far
 as
 the
 payment
 of
 the
 agreed
 premium
 was
 concerned.
 Thereafter
 the
 obligation
 of
 the
 insurer
 to
 pay
 the
 insured
 the
 amount
 for
 which
 the
policy
was
issued
in
case
the
conditions
therefor
had
been
complied
with,
arose
 and
 became
 binding
 upon
 it,
 while
 the
 obligation
 of
 the
 insured
 to
 pay
 the
 remainder
of
the
total
amount
of
the
premium
due
became
demandable.
 
 We
 cannot
 agree
 with
 appellant's
 theory
 that
 non‐payment
 by
 it
 of
 the
 premium
 due,
 produced
 the
 cancellation
 of
 the
 contract
 of
 insurance.
 Such
 theory
 would
 place
exclusively
in
the
hands
of
one
of
the
contracting
parties
the
right
to
decide
 whether
the
contract
should
stand
or
not.
Rather
the
correct
view
would
seem
to
 be
this:
as
the
contract
had
become
perfected,
the
parties
could
demand
from
each
 other
 the
 performance
 of
 whatever
 obligations
 they
 had
 assumed.
 In
 the
 case
 of
 the
 insurer,
 it
 is
 obvious
 that
 it
 had
 the
 right
 to
 demand
 from
 the
 insured
 the
 completion
 of
 the
 payment
 of
 the
 premium
 due
 or
 sue
 for
 the
 rescission
 of
 the
 contract.
As
it
chose
to
demand
specific
performance
of
the
insured's
obligation
to
 pay
the
balance
of
the
premium,
the
latter's
duty
to
pay
is
indeed
indubitable.
 
 PHIL.
PHOENIX
V.
WOODWORKS
 92
SCRA
419
 
 FACTS:
 1. 2. 3.

2.

Plaintiff
 issued
 to
 defendant
 Fire
 Policy
 No.
 9652
 for
 the
 amount
 of
 P300,000.00,
 under
 the
 terms
 and
 conditions
 therein
 set
 forth
 in
 said
 policy
 a
 copy
 of
 which
 is
 hereto
 attached
 and
 made
 a
 part
 hereof
 as
 Annex
"A";
 That
 the
 premiums
 of
 said
 policy
 as
 stated
 in
 Annex
 "A"
 amounted
 to
 P6,051.95;
 the
 margin
 fee
 pursuant
 to
 the
 adopted
 plan
 as
 an
 implementation
of
Republic
Act
2609
amounted
to
P363.72,
copy
of
said


On
 or
 before
 the
 expiration
 of
 the
 one‐year
 term,
 plaintiff
 notified
 defendant,
through
its
Indorsement
No.
F‐6963/61,
of
the
cancellation
of
 the
Policy
allegedly
upon
request
of
defendant.


 The
latter
has
denied
having
made
such
a
request.

 In
 said
 Indorsement,
 plaintiff
 credited
 defendant
 with
 the
 amount
 of
 P3,110.25
for
the
unexpired
period
of
94
days,
and
claimed
the
balance
 of
P7,483.11
representing
,learned
premium



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INSURANCE
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50


4.

5.

6.

Plaintiff
 demanded
 in
 writing
 for
 the
 payment
 of
 said
 amount.

 Defendant,
 through
 counsel,
 disclaimed
 any
 liability
 in
 its
 reply‐
 letter
 contending,
 in
 essence,
 that
 it
 need
 not
 pay
 premium
 "because
 the
 Insurer
 did
 not
 stand
 liable
 for
 any
 indemnity
 during
 the
 period
 the
 premiums
were
not
paid."


 Plaintiff
 commenced
 action
 in
 the
 Court
 of
 First
 Instance
 of
 Manila,
 Branch
IV
(Civil
Case
No.
49468),
to
recover
the
amount
of
P7,483.11
as
 "earned
premium."
Defendant
controverted
basically
on
the
theory
that
 its
failure
"to
pay
the
premium
after
the
issuance
of
the
policy
put
an
end
 to
the
insurance
contract
and
rendered
the
policy
unenforceable."

 Judgment
 was
 rendered
 in
 plaintiff's
 favor
 "ordering
 defendant
 to
 pay
 plaintiff
 the
 sum
 of
 P7,483.11,
 with
 interest
 thereon
 at
 the
 rate
 of
 6%,
 per
annum
from
January
30,
1962,
until
the
principal
shall
have
been
fully
 paid,
plus
the
sum
of
P700.00
as
attorney's
fees
of
the
plaintiff,
and
the
 costs
of
the
suit."
From
this
adverse
Decision,
defendant
appealed
to
the
 Court
of
Appeals
which,
as
heretofore
stated,
certified
the
case
to
us
on
a
 question
of
law.



In
 fact,
 if
 the
 peril
 insured
 against
 had
 occurred,
 plaintiff,
 as
 insurer,
 would
 have
 had
a
valid
defense
against
recovery
under
the
Policy
it
had
issued.
Explicit
in
the
 Policy
 itself
 is
 plaintiff's
 agreement
 to
 indemnify
 defendant
 for
 loss
 by
 fire
 only
 "after
payment
of
premium,"
supra.
Compliance
by
the
insured
with
the
terms
of
 the
contract
is
a
condition
precedent
to
the
right
of
recovery.
 
 CAPITAL
INSURANCE
V.
PLASTIC
ERA
CO.
 65
SCRA
134
 
 FACTS:
 Capital
Insurance
delivered
an
open
fire
policy
to
Plastic
Era.

In
the
said
policy,
the
 former
 undertook
 to
 insure
 the
 latter's
 building,
 equipments,
 raw
 materials,
 products
 and
 accessories
 located
 at
 Sheridan
 Street,
 Mandaluyong,
 Rizal.
 The
 policy
 expressly
 provides
 that
 if
 the
 property
 insured
 would
 be
 destroyed
 or
 damaged
by
fire
after
the
payment
of
the
premiums,
at
anytime
between
the
15th
 day
 of
 December
 1960
 and
 one
 o'clock
 in
 the
 afternoon
 of
 the
 15th
 day
 of
 December
1961,
the
insurance
company
shall
make
good
all
such
loss
or
damage
in
 an
amount
not
exceeding
P100,000.00.
When
the
policy
was
delivered,
Plastic
Era
 failed
 to
 pay
 the
 corresponding
 insurance
 premium.
 However,
 through
 its
 duly
 authorized
representative,
it
executed
the
following
acknowledgment
receipt:
 
 This
acknowledged
receipt
of
Fire
Policy)
NO.
22760
Premium
 x
x
x
x
x)
(I
promise
to
pay)
 (P2,220.00)
(has
been
paid)
 THIRTY
DAYS
AFTER
on
effective
date
‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
 (Date)
 
 As
 partial
 payment
 of
 the
 premiums
 due,
 Plastic
 Era
 delivered
 a
 posted
 check,
 dated
 on
 the
 due
 date
 of
 the
 premium.
 
 This
 was
 belatedly
 deposited
 by
 Capital
 Insurance,
 wherein
 on
 the
 date
 of
 deposit,
 the
 check
 was
 dishonored
 for
 insufficient
funds.
 
 In
 the
 meantime,
 2
 days
 after
 the
 due
 date,
 a
 fire
 broke
 out
 and
 destroyed
 the
 materials
and
products
of
Plastic
Era.

Plastic
Era
duly
filed
a
claim
but
was
denied
 by
Capital
Insurance
for
failure
to
pay
the
premium
due.

This
prompted
Plastic
Era
 to
file
an
action
and
it
was
duly
sustained
and
affirmed
by
the
appellate
court.

 
 HELD:



 HELD:
 Clearly,
 the
 Policy
 provides
 for
 pre‐payment
 of
 premium.
 Accordingly;
 "when
 the
 policy
is
tendered
the
insured
must
pay
the
premium
unless
credit
is
given
or
there
 is
a
waiver,
or
some
agreement
obviating
the
necessity
for
prepayment."
 
 There
 is
 failure
 to
 find
 any
 clear
 agreement
 that
 a
 credit
 extension
 was
 accorded
 defendant.
 And
 even
 if
 it
 were
 to
 be
 presumed
 that
 plaintiff
 had
 extended
 credit
 from
 the
 circumstances
 of
 the
 unconditional
 delivery
 of
 the
 Policy
 without
 prepayment
of
the
premium,
yet
it
is
obvious
that
defendant
had
not
accepted
the
 insurer's
 offer
 to
 extend
 credit,
 which
 is
 essential
 for
 the
 validity
 of
 such
 agreement.
 
 In
this
respect,
the
instant
case
differs
from
that
involving
the
same
parties
where
 recovery
 of
 the
 balance
 of
 the
 unpaid
 premium
 was
 allowed
 inasmuch
 as
 in
 that
 case
 "there
 was
 not
 only
 a
 perfected
 contract
 of
 insurance
 but
 a
 partially
 performed
one
as
far
as
the
payment
of
the
agreed
premium
was
concerned."
This
 is
not
the
situation
obtaining
here
where
no
partial
payment
of
premiums
has
been
 made
whatsoever.
 
 Since
the
premium
had
not
been
paid,
the
policy
must
be
deemed
to
have
lapsed.
 



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51


The
mere
delivery
of
a
bill
of
exchange
in
payment
of
a
debt
does
not
immediately
 effect
payment.
It
simply
suspends
the
action
arising
from
the
original
obligation
in
 satisfaction
of
which
it
was
delivered,
until
payment
is
accomplished
either
actually
 or
presumptively.
5
Tender
of
draft
or
check
in
order
to
effect
payment
that
would
 extinguish
 the
 debtor's
 liability
 should
 be
 actually
 cashed.
 If
 the
 delivery
 of
 the
 check
 of
 Plastic
 Era
 to
 Capital
 Insurance
 were
 to
 be
 viewed
 in
 the
 light
 of
 the
 foregoing,
no
payment
of
the
premium
had
been
effected,
for
it
is
only
when
the
 check
is
cashed
that
it
is
said
to
effect
payment.
 
 Significantly,
 Capital
 Insurance
 accepted
 the
 promise
 of
 Plastic
 Era
 to
 pay
 the
 insurance
premium
within
thirty
(30)
days
from
the
effective
date
of
policy.
By
so
 doing,
 it
 has
 implicitly
 agreed
 to
 modify
 the
 tenor
 of
 the
 insurance
 policy
 and
 in
 effect,
waived
the
provision
therein
that
it
would
only
pay
for
the
loss
or
damage
in
 case
 the
 same
 occurs
 after
 the
 payment
 of
 the
 premium.
 Considering
 that
 the
 insurance
policy
is
silent
as
to
the
mode
of
payment,
Capital
Insurance
is
deemed
 to
have
accepted
the
promissory
note
in
payment
of
the
premium.
This
rendered
 the
policy
immediately
operative
on
the
date
it
was
delivered.
 
 By
accepting
its
promise
to
pay
the
insurance
premium
within
thirty
(30)
days
from
 the
effectivity
date
of
the
policy
December
17,
1960
Capital
Insurance
had
in
effect
 extended
credit
to
Plastic
Era.
The
payment
of
the
premium
on
the
insurance
policy
 therefore
 became
 an
 independent
 obligation
 the
 non‐fulfillment
 of
 which
 would
 entitle
 Capital
 Insurance
 to
 recover.
 It
 could
 just
 deduct
 the
 premium
 due
 and
 unpaid
upon
the
satisfaction
of
the
loss
under
the
policy.

It
did
not
have
the
right
 to
cancel
the
policy
for
nonpayment
of
the
premium
except
by
putting
Plastic
Era
in
 default
and
giving
it
personal
notice
to
that
effect.
This
Capital
Insurance
failed
to
 do.
 
 VALENZUELA
V.
CA
 191
SCRA
1
 
 FACTS:
 Valenzuela
was
an
authorized
agent
of
PHILAMGEN.

Part
of
the
agency
agreement
 is
 that
 at
 every
 solicitation
 of
 insurance
 policy,
 Valenzuela
 would
 be
 entitled
 to
 a
 commission.
 
 Later,
 he
 was
 able
 to
 solicit
 marine
 insurance
 policy
 from
 Delta
 Motors.
 
 He
 wasn't
 paid
 accordingly
 his
 commissions.
 
 Then,
 the
 insurance
 company
 became
 interested
 in
 his
 commissions
 that
 they
 proposed
 a
 50‐50
 split.

 As
after
numerous
efforts
Valenzuela
was
still
reluctant,
the
concerned
officers
of


PHILAMGEN
 deployed
 harassment
 tactics
 against
 him.
 
 This
 turned
 to
 the
 detriment
of
the
business
of
Valenzuela.

 
 HELD:
 The
 principal
 cause
 of
 the
 termination
 of
 Valenzuela
 as
 General
 Agent
 of
 PHILAMGEN
 arose
 from
 his
 refusal
 to
 share
 his
 Delta
 commission.
 The
 records
 sustain
the
conclusions
of
the
trial
court
on
the
apparent
bad
faith
of
the
private
 respondents
in
terminating
the
General
Agency
Agreement
of
petitioners.
 
 As
 to
 the
 issue
 of
 whether
 or
 not
 the
 petitioners
 are
 liable
 to
 Philamgen
 for
 the
 unpaid
and
uncollected
premiums
which
the
respondent
court
ordered
Valenzuela
 to
 pay
 Philamgen
 the
 amount
 of
 One
 Million
 Nine
 Hundred
 Thirty‐Two
 Thousand
 Five
 Hundred
 Thirty‐Two
 and
 17/100
 Pesos
 (P1,932,532,17)
 with
 legal
 interest
 thereon
until
fully
paid,
there
is
no
legal
and
factual
basis
for
the
same.
 
 Under
 Section
 77
 of
 the
 Insurance
 Code,
 the
 remedy
 for
 the
 non‐payment
 of
 premiums
is
to
put
an
end
to
and
render
the
insurance
policy
not
binding.
 
 Perforce,
 since
 admittedly
 the
 premiums
 have
 not
 been
 paid,
 the
 policies
 issued
 have
lapsed.
The
insurance
coverage
did
not
go
into
effect
or
did
not
continue
and
 the
obligation
of
Philamgen
as
insurer
ceased.
Hence,
for
Philamgen
which
had
no
 more
 liability
 under
 the
 lapsed
 and
 inexistent
 policies
 to
 demand,
 much
 less
 sue
 Valenzuela
 for
 the
 unpaid
 premiums
 would
 be
 the
 height
 of
 injustice
 and
 unfair
 dealing.
In
this
instance,
with
the
lapsing
of
the
policies
through
the
nonpayment
of
 premiums
by
the
insured
there
were
no
more
insurance
contracts
to
speak
of.
As
 this
 Court
 held
 in
 the
 Philippine
 Phoenix
 Surety
 case,
 supra
 "the
 non‐payment
 of
 premiums
does
not
merely
suspend
but
puts
an
end
to
an
insurance
contract
since
 the
time
of
the
payment
is
peculiarly
of
the
essence
of
the
contract."
 
 AREOLA
V.
CA
 236
SCRA
643
 
 FACTS:
 Seven
months
after
the
issuance
of
petitioner
Areola's
Personal
Accident
Insurance
 Policy,
 respondent
 insurance
 company
 unilaterally
 cancelled
 the
 same
 since
 company
 records
 revealed
 that
 petitioner‐insured
 failed
 to
 pay
 his
 premiums.

 Months
after,
it
offered
to
reinstate
the
policy
as
well
as
extend
the
period
covered
 after
knowing
that
Areola
duly
paid
his
premiums
but
the
same
wasn't
remitted
by



MA.
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INSURANCE
(ATTY.
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52


the
 insurance
 agent.
 
 This
 notwithstanding,
 Areola
 filed
 an
 action
 for
 damages
 against
the
insurance
company.


 
 HELD:
 Malapit's
failure
to
remit
the
premiums
he
received
cannot
constitute
a
defense
for
 private
 respondent
 insurance
 company;
 no
 exoneration
 from
 liability
 could
 result
 therefrom.
 The
 fact
 that
 private
 respondent
 insurance
 company
 was
 itself
 defrauded
due
to
the
anomalies
that
took
place
in
its
Baguio
branch
office,
such
as
 the
 non‐accrual
 of
 said
 premiums
 to
 its
 account,
 does
 not
 free
 the
 same
 from
 its
 obligation
to
petitioner
Areola.
 
 Consequently,
respondent
insurance
company
is
liable
by
way
of
damages
for
the
 fraudulent
 acts
 committed
 by
 Malapit
 that
 gave
 occasion
 to
 the
 erroneous
 cancellation
of
subject
insurance
policy.
Its
earlier
act
of
reinstating
the
insurance
 policy
 can
 not
 obliterate
 the
 injury
 inflicted
 on
 petitioner‐insured.
 Respondent
 company
 should
 be
 reminded
 that
 a
 contract
 of
 insurance
 creates
 reciprocal
 obligations
 for
 both
 insurer
 and
 insured.
 Reciprocal
 obligations
 are
 those
 which
 arise
from
the
same
cause
and
in
which
each
party
is
both
a
debtor
and
a
creditor
 of
 the
 other,
 such
 that
 the
 obligation
 of
 one
 is
 dependent
 upon
 the
 obligation
 of
 the
other.
 
 Under
 the
 circumstances
 of
 instant
 case,
 the
 relationship
 as
 creditor
 and
 debtor
 between
 the
 parties
 arose
 from
 a
 common
 cause:
 i.e.,
 by
 reason
 of
 their
 agreement
 to
 enter
 into
 a
 contract
 of
 insurance
 under
 whose
 terms,
 respondent
 insurance
 company
 promised
 to
 extend
 protection
 to
 petitioner‐insured
 against
 the
 risk
 insured
 for
 a
 consideration
 in
 the
 form
 of
 premiums
 to
 be
 paid
 by
 the
 latter.
 Under
 the
 law
 governing
 reciprocal
 obligations,
 particularly
 the
 second
 paragraph
of
Article
1191,
the
injured
party,
petitioner‐insured
in
this
case,
is
given
 a
 choice
 between
 fulfillment
 or
 rescission
 of
 the
 obligation
 in
 case
 one
 of
 the
 obligors,
 such
 as
 respondent
 insurance
 company,
 fails
 to
 comply
 with
 what
 is
 incumbent
upon
him.
However,
said
article
entitles
the
injured
party
to
payment
of
 damages,
 regardless
 of
 whether
 he
 demands
 fulfillment
 or
 rescission
 of
 the
 obligation.
 Untenable
 then
 is
 reinstatement
 insurance
 company's
 argument,
 namely,
that
reinstatement
being
equivalent
to
fulfillment
of
its
obligation,
divests
 petitioner‐insured
of
a
rightful
claim
for
payment
of
damages.
Such
a
claim
finds
no
 support
in
our
laws
on
obligations
and
contracts.
 
 TIBAY
V.
CA


257
SCRA
126
 
 FACTS:
 Fortune
 issued
 a
 fire
 insurance
 policy
 in
 favor
 of
 Tibay
 for
 her
 two‐storey
 residential
building.

Out
of
the
whole
premiums
due,
she
was
only
able
to
pay
a
 minimal
 partial
 payment.
 
 Thereafter,
 on
 a
 relevant
 date,
 a
 fire
 broke
 out
 and
 destroyed
 the
 building.
 
 This
 prompted
 Tibay
 to
 file
 a
 claim
 against
 Fortune,
 on
 which
the
latter
denied
payment.


 
 HELD:
 Insurance
 is
 a
 contract
 whereby
 one
 undertakes
 for
 a
 consideration
 to
 indemnify
 another
 against
 loss,
 damage
 or
 liability
 arising
 from
 an
 unknown
 or
 contingent
 event.
The
consideration
is
the
premium,
which
must
be
paid
at
the
time
and
in
the
 way
and
manner
specified
in
the
policy,
and
if
not
so
paid,
the
policy
will
lapse
and
 be
forfeited
by
its
own
terms.

 
 Clearly
the
policy
in
this
case
provides
for
payment
of
premium
in
full.
Accordingly,
 where
the
premium
has
only
been
partially
paid
and
the
balance
paid
only
after
the
 peril
 insured
 against
 has
 occurred,
 the
 insurance
 contract
 did
 not
 take
 effect
 and
 the
insured
cannot
collect
at
all
on
the
policy.
This
is
fully
supported
by
Sec.
77
of
 the
Insurance
Code.
 
 Conformably
 with
 the
 aforesaid
 stipulations
 explicitly
 worded
 and
 taken
 in
 conjunction
with
Sec.
77
of
the
Insurance
Code
the
payment
of
partial
premium
by
 the
 assured
 in
 this
 particular
 instance
 should
 not
 be
 considered
 the
 payment
 required
by
the
law
and
the
stipulation
of
the
parties.
Rather,
it
must
be
taken
in
 the
concept
of
a
deposit
to
be
held
in
trust
by
the
insurer
until
such
time
that
the
 full
amount
has
been
tendered
and
duly
receipted
for.
In
other
words,
as
expressly
 agreed
upon
in
the
contract,
full
payment
must
be
made
before
the
risk
occurs
for
 the
policy
to
be
considered
effective
and
in
force.
 
 Thus,
no
vinculum
juris
whereby
the
insurer
bound
itself
to
indemnify
the
assured
 according
 to
 law
 ever
 resulted
 from
 the
 fractional
 payment
 of
 premium.
 The
 insurance
contract
itself
expressly
provided
that
the
policy
would
be
effective
only
 when
the
premium
was
paid
in
full.
It
would
have
been
altogether
different
were
it
 not
so
stipulated.
Ergo,
petitioners
had
absolute
freedom
of
choice
whether
or
not
 to
 be
 insured
 by
 FORTUNE
 under
 the
 terms
 of
 its
 policy
 and
 they
 freely
 opted
 to
 adhere
thereto.



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


53



 UCPB
V.
MASAGANA
TELEMART
 356
SCRA
307
 
 FACTS:
 Masagana
was
issued
5
fire
insurance
policies
by
UCPB‐GEN
and
the
former
issued
 manager’s
checks
to
pay
the
same.

The
latter
accepted
the
tender
of
payment
and
 duly
issued
receipts.

The
day
after
tender
of
checks
was
made,
Masagana
filed
a
 claim
 for
 loss
 due
 to
 a
 fire
 that
 transpired.
 
 The
 insurer
 denied
 the
 claim
 on
 the
 grounds
 that
 the
 insurance
 policies
 have
 already
 expired,
 that
 it
 had
 previously
 informed
Masagana
of
the
same,
and
that
the
loss
being
claimed
transpired
before
 the
tender
of
payment
by
Masagana.


 
 HELD:
 Section
77
of
the
Insurance
Code
of
1978
provides:
 
 SECTION
77.
An
insurer
is
entitled
to
payment
of
the
premium
as
soon
as
the
thing
 insured
is
exposed
to
the
peril
insured
against.
Notwithstanding
any
agreement
to
 the
contrary,
no
policy
or
contract
of
insurance
issued
by
an
insurance
company
is
 valid
and
binding
unless
and
until
the
premium
thereof
has
been
paid,
except
in
the
 case
 of
 a
 life
 or
 an
 industrial
 life
 policy
 whenever
 the
 grace
 period
 provision
 applies.
 
 This
 Section
 is
 a
 reproduction
 of
 Section
 77
 of
 P.D.
 No.
 612
 (The
 Insurance
 Code)
 promulgated
on
18
December
1974.
In
turn,
this
Section
has
its
source
in
Section
 72
of
Act
No.
2427
otherwise
known
as
the
Insurance
Act
as
amended
by
R.A.
No.
 3540,
approved
on
21
June
1963,
which
read:
 
 SECTION
 72.
 An
 insurer
 is
 entitled
 to
 payment
 of
 premium
 as
 soon
 as
 the
 thing
 insured
is
exposed
to
the
peril
insured
against,
unless
there
is
clear
agreement
to
 grant
 the
 insured
 credit
 extension
 of
 the
 premium
 due.
 No
 policy
 issued
 by
 an
 insurance
company
is
valid
and
binding
unless
and
until
the
premium
thereof
has
 been
paid.
(Italic
supplied)
 
 It
 can
 be
 seen
 at
 once
 that
 Section
 77
does
not
restate
the
portion
 of
 Section
72
 expressly
permitting
an
agreement
to
extend
the
period
to
pay
the
premium.
But
 are
there
exceptions
to
Section
77?
 


The
answer
is
in
the
affirmative.
 
 The
first
exception
is
provided
by
Section
77
itself,
and
that
is,
in
case
of
a
life
or
 industrial
life
policy
whenever
the
grace
period
provision
applies.
 
 The
second
is
that
covered
by
Section
78
of
the
Insurance
Code,
which
provides:
 
 SECTION
 78.
 Any
 acknowledgment
 in
 a
 policy
 or
 contract
 of
 insurance
 of
 the
 receipt
 of
 premium
 is
 conclusive
 evidence
 of
 its
 payment,
 so
 far
 as
 to
 make
 the
 policy
binding,
notwithstanding
any
stipulation
therein
that
it
shall
not
be
binding
 until
premium
is
actually
paid.
 
 A
third
exception
was
laid
down
in
Makati
Tuscany
Condominium
Corporation
vs.
 Court
 of
 Appeals,
 wherein
 we
 ruled
 that
 Section
 77
 may
 not
 apply
 if
 the
 parties
 have
 agreed
 to
 the
 payment
 in
 installments
 of
 the
 premium
 and
 partial
 payment
 has
been
made
at
the
time
of
loss.
 
 Tuscany
 also
 has
 provided
 a
 fourth
 exception
 to
 Section
 77,
 namely,
 that
 the
 insurer
 may
 grant
 credit
 extension
 for
 the
 payment
 of
 the
 premium.
 This
 simply
 means
that
if
the
insurer
has
granted
the
insured
a
credit
term
for
the
payment
of
 the
 premium
 and
 loss
 occurs
 before
 the
 expiration
 of
 the
 term,
 recovery
 on
 the
 policy
should
be
allowed
even
though
the
premium
is
paid
after
the
loss
but
within
 the
credit
term.
 
 Moreover,
there
is
nothing
in
Section
77
which
prohibits
the
parties
in
an
insurance
 contract
to
provide
a
credit
term
within
which
to
pay
the
premiums.

 
 Sec.
78.
An
acknowledgment
in
a
policy
or
contract
of
insurance
or
the
receipt
of
 premium
 is
 conclusive
 evidence
 of
 its
 payment,
 so
 far
 as
 to
 make
 the
 policy
 binding,
notwithstanding
any
stipulation
therein
that
it
shall
not
be
binding
until
 the
premium
is
actually
paid.
 
 ACKNOWLEDGMENT
OF
RECEIPT
OF
PREMIUM
CONCLUSIVE
 • When
 a
 policy
 is
 used
 with
 an
 acknowledgement
 of
 premium,,
 such
 acknowledgement
is
conclusive
to
make
the
policy
binding
although
the
 same
 policy
 contains
 a
 stipulation
 that
 it
 shall
 not
 be
 binding
 until
 the
 premium
is
actually
paid
 • The
law
creates
a
legal
fiction
of
payment
 



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


54


AMERICAN
HOME
INSURANCE
V.
CHUA
 G.R.
No.
130421










June
28,
1999
 
 FACTS:
 1. 2. 3.

4. 5. 6.

7. 
 HELD:
 The
general
rule
in
insurance
laws
is
that
unless
the
premium
is
paid
the
insurance
 policy
 is
 not
 valid
 and
 binding.
 The
 only
 exceptions
 are
 life
 and
 industrial
 life
 insurance.
Whether
payment
was
indeed
made
is
a
question
of
fact
which
is
best
 determined
 by
 the
 trial
 court.
 The
 trial
 court
 found,
 as
 affirmed
 by
 the
 Court
 of
 Appeals,
that
there
was
a
valid
check
payment
by
respondent
to
petitioner.
 
 According
to
the
trial
court
the
renewal
certificate
issued
to
respondent
contained
 the
acknowledgment
that
premium
had
been
paid.
It
is
not
disputed
that
the
check
 drawn
by
respondent
in
favor
of
petitioner
and
delivered
to
its
agent
was
honored
 when
 presented
 and
 petitioner
 forthwith
 issued
 its
 official
 receipt
 to
 respondent
 on
 10
 April
 1990.
 Section
 306
 of
 the
 Insurance
 Code
 provides
 that
 any
 insurance
 company
which
delivers
a
policy
or
contract
of
insurance
to
an
insurance
agent
or
 insurance
 broker
 shall
 be
 deemed
 to
 have
 authorized
 such
 agent
 or
 broker
 to
 receive
 on
 its
 behalf
 payment
 of
 any
 premium
 which
 is
 due
 on
 such
 policy
 or
 contract
of
insurance
at
the
time
of
its
issuance
or
delivery
or
which
becomes
due
 thereon.
 In
 the
 instant
 case,
 the
 best
 evidence
 of
 such
 authority
 is
 the
 fact
 that


American
Home
Insurance
issued
a
fire
insurance
policy
to
Chua
for
the
 stock‐in
goods
of
the
latter
 After
the
period
of
effectivity
of
the
policy,
Chua
renewed
the
same.
 He
 paid
 the
 premium,
 through
 giving
 of
 a
 check,
 to
 American
 Home’s
 insurance
 agent
 and
 consequently,
 the
 agent
 issued
 to
 him
 a
 renewal
 certificate,
 part
 of
 which
 was
 written
 acknowledging
 acceptance
 of
 payment.


 However,
 the
 insurance
 company
 only
 received
 the
 check
 8
 days
 after
 and
thereafter
issued
the
official
receipt.
 Unfortunately,
 the
 day
 after
 the
 agent
 was
 paid
 for
 the
 renewal
 of
 the
 policy,
fire
destroyed
the
goods
insured.
 The
 company
 didn't
 want
 to
 pay
 Chua
 for
 the
 insurance
 and
 averred
 among
other
reasons
that
there
was
no
insurance
policy
as
the
premium
 wasn't
paid
yet
at
the
time
the
fire
broke
out.
 Both
the
trial
court
and
CA
adjudged
in
favor
of
Chua.


petitioner
accepted
the
check
and
issued
the
official
receipt
for
the
payment.
It
is,
 as
well,
bound
by
its
agent's
acknowledgment
of
receipt
of
payment.
 
 Sec.
78
of
the
Insurance
Code
explicitly
provides:
 
 An
acknowledgment
in
a
policy
or
contract
of
insurance
of
the
receipt
of
premium
 is
 conclusive
 evidence
 of
 its
 payment,
 so
 far
 as
 to
 make
 the
 policy
 binding,
 notwithstanding
 any
 stipulation
 therein
 that
 it
 shall
 not
 be
 binding
 until
 the
 premium
is
actually
paid.
 
 This
Section
establishes
a
legal
fiction
of
payment
and
should
be
interpreted
as
an
 exception
to
Section
77.
 
 Sec.
79.
A
person
insured
is
entitled
to
a
return
of
premium,
as
follows:
 
 (a)
 To
 the
 whole
 premium
 if
 no
 part
 of
 his
 interest
 in
 the
 thing
 insured
 be
 exposed
to
any
of
the
perils
insured
against;
 
 (b)
 Where
 the
 insurance
 is
 made
 for
 a
 definite
 period
 of
 time
 and
 the
 insured
 surrenders
 his
 policy,
 to
 such
 portion
 of
 the
 premium
 as
 corresponds
 with
 the
 unexpired
 time,
 at
 a
 pro
 rata
 rate,
 unless
 a
 short
 period
 rate
 has
 been
 agreed
 upon
 and
 appears
 on
 the
 face
 of
 the
 policy,
 after
 deducting
 from
 the
 whole
 premium
 any
 claim
 for
 loss
 or
 damage
 under
 the
 policy
 which
 has
 previously
 accrued;
Provided,
That
no
holder
of
a
life
insurance
policy
may
avail
himself
of
 the
privileges
of
this
paragraph
without
sufficient
cause
as
otherwise
provided
by
 law.
 
 GREPALIFE
V.
CA
 184
SCRA
501
 
 FACTS:
 Cortez
applied
for
a
life
insurance
policy.

He
underwent
medical
examinations
and
 other
requirements.

He
was
duly
issued
the
policy
by
the
underwriter.

He
was
also
 advised
 that
 he
 could
 pay
 the
 first
 premium,
 within
 the
 30‐day
 grace
 period
 of
 issuance
of
policy.

He
paid
his
premiums
by
three
installments.

Thereafter,
he
was
 informed
that
his
policy
wasn't
enforceable
and
if
he
wanted
to
revive
it,
he
would
 need
 to
 pay
 the
 balance
 of
 his
 unpaid
 premiums.
 
 This
 repulsed
 Cortez
 and



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


55


informed
 the
 company
 that
 it
 was
 him
 who
 was
 cancelling
 the
 policy
 and
 demanded
the
return
of
the
premiums
he
paid.


 
 HELD:
 Petitioner
 should
 have
 informed
 Cortez
 of
 the
 deadline
 for
 paying
 the
 first
 premium
 before
 or
 at
 least
 upon
 delivery
 of
 the
 policy
 to
 him,
 so
 he
 could
 have
 complied
 with
 what
 was
 needful
 and
 would
 not
 have
 been
 misled
 into
 believing
 that
his
life
and
his
family
were
protected
by
the
policy,
when
actually
they
were
 not.
And,
if
the
premium
paid
by
Cortez
was
unacceptable
for
being
late,
it
was
the
 company's
 duty
 to
 return
 it.
 By
 accepting
 his
 premiums
 without
 giving
 him
 the
 corresponding
protection,
the
company
acted
in
bad
faith.
 
 Sections
79,
81
and
82
of
P.D.
612
of
the
Insurance
Code
of
1978
provide
when
the
 insured
is
entitled
to
the
return
of
premium
paid.
 
 SECTION
79.
A
person
insured
is
entitled
to
a
return
of
premium,
as
follows:
 
 (a)
To
the
whole
premium,
if
no
part
of
his
interest
in
the
thing
insured
be
exposed
 to
any
of
the
perils
insured
against.
 
 (b)
 Where
 the
 insure
 is
 made
 for
 a
 definite
 period
 of
 time
 and
 the
 insured
 surrenders
 his
 policy,
 to
 such
 portion
 of
 the
 premium
 as
 corresponds
 with
 the
 unexpired
time,
at
a
pro
rata
rate,
unless
a
short
period
rate
has
been
agreed
upon
 and
appears
on
the
face
of
the
policy,
after
deducting
from
the
whole
premium
any
 claim
for
loss
or
damage
under
the
policy
which
has
previously
accrued:
Provided,
 That
no
holder
of
a
life
insurance
policy
may
avail
himself
of
the
privileges
of
this
 paragraph
without
sufficient
causes
as
otherwise
provided
by
law.
 
 SECTION
 81.
 A
 person
 insured
 is
 entitled
 to
 a
 return
 of
 the
 premium
 when
 the
 contract
is
voidable
on
account
of
the
fraud
or
misrepresentation
of
the
insurer
or
 of
his
agent
or
on
account
of
facts
the
existence
of
which
the
insured
was
ignorant
 without
 his
 fault;
 or
 when,
 by
 any
 default
 of
 the
 insured
 other
 than
 actual
 fraud,
 the
insurer
never
incurred
any
liability
under
the
policy.
 
 SECTION
82.
In
case
of
an
over‐insurance
by
several
insurers,
the
insured
is
entitled
 to
 a
 ratable
 return
 of
 the
 premium,
 proportioned
 to
 the
 amount
 by
 which
 the
 aggregate
sum
insured
in
all
the
policies
exceeds
the
insurable
value
of
the
thing
at
 risk.
 


Since
 his
 policy
 was
 in
 fact
 inoperative
 or
 ineffectual
 from
 the
 beginning,
 the
 company
was
never
at
risk,
hence,
it
is
not
entitled
to
keep
the
premium.
 
 The
 award
 of
 moral
 damages
 to
 Cortez
 was
 proper
 for
 there
 can
 hardly
 be
 any
 doubt
 that
 he
 must
 have
 suffered
 moral
 shock,
 serious
 anxiety
 and
 wounded
 feelings
 upon
 being
 informed
 by
 the
 petitioner
 six
 (6)
 months
 after
 it
 issued
 the
 policy
to
him
and
four
(4)
months
after
receiving
the
full
premium,
that
his
policy
 was
 in
 fact
 worthless
 for
 it
 never
 took
 effect,
 hence,
 he
 and
 his
 family
 never
 received
the
protection
that
he
paid
for.
 
 Sec.
80.
If
a
peril
insured
against
has
existed,
and
the
insurer
has
been
liable
for
 any
period,
however
short,
the
insured
is
not
entitled
to
return
of
premiums,
so
 far
as
that
particular
risk
is
concerned.
 
 MAKATI
TUSCANY
V.
CA
 215
SCRA
462
 
 FACTS:
 American
 Home
 Assurance
 issued
 in
 favor
 of
 Tuscany
 Condo
 Corporation
 a
 fire
 insurance
 policy
 covering
 its
 building
 and
 premises.
 
 The
 insured
 was
 able
 to
 pay
 the
premiums
by
installments
which
was
duly
accepted
by
the
insurer.

This
policy
 was
subsequently
renewed.

On
the
first
renewal,
the
premiums
were
then
again
 paid
 in
 installments.
 
 On
 the
 second
 renewal,
 the
 insured
 was
 able
 to
 pay
 two
 installments
but
on
the
third
installment,
it
failed
to
pay.

The
insurance
company
 sought
 the
 payment
 of
 the
 third
 installment
 and
 one
 of
 the
 defenses
 posed
 by
 Tuscany
was
that
the
policy
wasn't
valid
and
binding.


 
 HELD:
 The
subject
policies
are
valid
even
if
the
premiums
were
paid
on
installments.
The
 records
 clearly
 show
 that
 petitioner
 and
 private
 respondent
 intended
 subject
 insurance
 policies
 to
 be
 binding
 and
 effective
 notwithstanding
 the
 staggered
 payment
of
the
premiums.
The
initial
insurance
contract
entered
into
in
1982
was
 renewed
in
1983,
then
in
1984.
In
those
three
(3)
years,
the
insurer
accepted
all
the
 installment
payments.
Such
acceptance
of
payments
speaks
loudly
of
the
insurer's
 intention
to
honor
the
policies
it
issued
to
petitioner.
Certainly,
basic
principles
of
 equity
 and
 fairness
 would
 not
 allow
 the
 insurer
 to
 continue
 collecting
 and
 accepting
the
premiums,
although
paid
on
installments,
and
later
deny
liability
on
 the
lame
excuse
that
the
premiums
were
not
prepared
in
full.



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


56



 While
the
import
of
Section
77
is
that
prepayment
of
premiums
is
strictly
required
 as
a
condition
to
the
validity
of
the
contract,
We
are
not
prepared
to
rule
that
the
 request
 to
 make
 installment
 payments
 duly
 approved
 by
 the
 insurer,
 would
 prevent
 the
 entire
 contract
 of
 insurance
 from
 going
 into
 effect
 despite
 payment
 and
 acceptance
 of
 the
 initial
 premium
 or
 first
 installment.
 Section
 78
 of
 the
 Insurance
 Code
 in
 effect
 allows
 waiver
 by
 the
 insurer
 of
 the
 condition
 of
 prepayment
 by
 making
 an
 acknowledgment
 in
 the
 insurance
 policy
 of
 receipt
 of
 premium
 as
 conclusive
 evidence
 of
 payment
 so
 far
 as
 to
 make
 the
 policy
 binding
 despite
the
fact
that
premium
is
actually
unpaid.
Section
77
merely
precludes
the
 parties
from
stipulating
that
the
policy
is
valid
even
if
premiums
are
not
paid,
but
 does
 not
 expressly
 prohibit
 an
 agreement
 granting
 credit
 extension,
 and
 such
 an
 agreement
is
not
contrary
to
morals,
good
customs,
public
order
or
public
policy.

 So
 is
 an
 understanding
 to
 allow
 insured
 to
 pay
 premiums
 in
 installments
 not
 so
 proscribed.
 At
 the
 very
 least,
 both
 parties
 should
 be
 deemed
 in
 estoppel
 to
 question
the
arrangement
they
have
voluntarily
accepted.
 
 Sec.
81.
A
person
insured
is
entitled
to
return
of
the
premium
when
the
contract
 is
 voidable,
 on
 account
 of
 fraud
 or
 misrepresentation
 of
 the
 insurer,
 or
 of
 his
 agent,
 or
 on
 account
 of
 facts,
 the
 existence
 of
 which
 the
 insured
 was
 ignorant
 without
his
fault;
or
when
by
any
default
of
the
insured
other
than
actual
fraud,
 the
insurer
never
incurred
any
liability
under
the
policy.
 
 GREPALIFE
V.
CA
 Supra

 
 Sec.
82.
In
case
of
an
over‐insurance
by
several
insurers,
the
insured
is
entitled
to
 a
 ratable
 return
 of
 the
 premium,
 proportioned
 to
 the
 amount
 by
 which
 the
 aggregate
sum
insured
in
all
the
policies
exceeds
the
insurable
value
of
the
thing
 at
risk.
 
 WHEN
THE
INSURED
IS
ENTITLED
TO
A
RETURN
OF
PREMIUM
 1. When
 no
 part
 of
 the
 interest
 in
 the
 thing
 insured
 has
 been
 exposed
 to
 any
of
the
perils
insured
against
 a. The
 assumption
 of
 risk
 is
 one
 of
 the
 essential
 elements
 of
 an
 insurance
contract


2.

3. 4. 5. 
 6.

If
 there
 is
 no
 assumption
 of
 risk
 because
 the
 thing
 insured
 wasn't
exposed
to
the
peril
insured
against,
no
valid
insurance
 contract
was
effected
and
the
premium
may
be
recovered
 c. Where
 the
 risk
 is
 entire
 and
 the
 contract
 is
 indivisible,
 the
 insured
isn’t
entitled
to
a
return
of
the
premium
if
the
insurer
 was
exposed
to
the
peril
for
any
period,
however
short
 Where
 the
 insurance
 is
 made
 for
 a
 definite
 period
 of
 time
 and
 the
 insured
surrenders
his
policy
before
the
expiration
of
the
period
 a. Where
 the
 insurance
 is
 for
 a
 definite
 period
 and
 the
 insured
 surrenders
the
policy,
he
can
recover
a
portion
of
the
premium
 as
corresponds
with
the
unexpired
term
 b. This
doesn't
apply
when—
 i. The
insurance
is
not
for
a
definite
period
 ii. A
short
period
rate
has
been
agreed
upon—rates
that
 are
 usually
 found
 in
 a
 table
 of
 figures
 in
 the
 policy
 stipulating
 the
 amount
 of
 premiums
 for
 specified
 short
 times
 or
 premiums
 at
 short
 time
 basis.
 
 When
 said
 short
 period
 rate
 is
 agreed
 upon,
 the
 amount
 recoverable
 upon
 surrender
 will
 not
 be
 the
 amount
 corresponding
 to
 the
 unexpired
 period
 but
 only
 the
 balance
 after
 deducting
 the
 percentage
 to
 be
 retained
 by
 the
 insurer
 as
 stated
 in
 the
 short
 rate
 table
 iii. The
 policy
 is
 a
 life
 insurance
 policy—a
 life
 insurance
 policy
 is
 an
 indivisible
 insurance
 contract
 and
 hence
 the
 insured
 cannot
 recover
 the
 premiums
 already
 paid.
 Where
 the
 contract
 is
 voidable
 on
 account
 of
 the
 fraud
 or
 misrepresentation
of
the
insurer
or
of
his
agent
 When
the
contract
is
voidable
on
account
of
facts,
the
existence
of
which
 the
insured
was
ignorant
or
without
his
fault
 When
by
any
default
of
the
insured
other
than
actual
fraud,
the
insurer
 never
incurred
any
liability
under
the
policy
 In
case
of
an
over‐insurance
by
several
insurers
 LOSS


b.


MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


57


Sec.
83.
An
agreement
not
to
transfer
the
claim
of
the
insured
against
the
insurer
 after
the
loss
has
happened,
is
void
if
made
before
the
loss
except
as
otherwise
 provided
in
the
case
of
life
insurance.
 
 TRANSFER
OF
INSURANCE
CLAIM
 • A
 prohibition
 against
 the
 transfer
 of
 the
 claim
 after
 the
 loss
 is
 against
 public
 policy
 and
 therefore
 void
 because
 the
 rights
 of
 the
 parties
 are
 fixed
after
the
loss,
and
the
assignment
is
merely
a
transfer
of
a
chose
of
 action
against
the
insurer
 • An
exception
to
this
is
found
in
Section
173
which
prohibits
the
transfer
 of
a
fire
insurance
policy
to
any
person
or
company
who
acts
as
an
agent
 or
otherwise
represents
the
issuing
company
and
declares
such
transfer
 void
insofar
as
it
may
affect
other
creditors
of
the
insured
 • Another
exception
is
what
is
provided
for
in
life
insurance
 
 Sec.
84.
Unless
otherwise
provided
by
the
policy,
an
insurer
is
liable
for
a
loss
of
 which
 a
 peril
 insured
 against
 was
 the
 proximate
 cause,
 although
 a
 peril
 not
 contemplated
by
the
contract
may
have
been
a
remote
cause
of
the
loss;
but
he
 is
not
liable
for
a
loss
which
the
peril
insured
against
was
only
a
remote
cause.
 


Peril
 insured
 against


Proximate
 cause
of
 the
loss


Insurer
is
 liable




 CAUSE
OF
LOSS
OF
INSURANCE
 • Take
note
that
insurer
is
not
liable
if
the
peril
insured
against
is
just
the
 remote
cause
 
 PROXIMATE
CAUSE
 • In
 a
 natural
 and
 continuous
 sequence,
 unbroken
 by
 any
 efficient
 intervening
cause,
produces
an
injury
and
without
which
the
injury
would
 not
have
occurred



 Sec.
 85.
 An
 insurer
 is
 liable
 where
 the
 thing
 insured
 is
 rescued
 from
 a
 peril
 insured
against
that
would
otherwise
have
caused
a
loss,
if,
in
the
course
of
such
 rescue,
 the
 thing
 is
 exposed
 to
 a
 peril
 not
 insured
 against,
 which
 permanently
 deprives
 the
 insured
 of
 its
 possession,
 in
 whole
 or
 in
 part;
 or
 where
 a
 loss
 is
 caused
by
efforts
to
rescue
the
thing
insured
from
a
peril
insured
against.
 
 PRINCIPLE
OF
PROXIMATE
CAUSE
EXTENDED
TO
LOSS
INCURRED
WHILE
SAVING
 THE
THING
INSURED
 • An
insurer
is
liable
where
while
saving
the
property
from
the
peril
insured
 against
 that
 would
 otherwise
 cause
 the
 loss,
 the
 thing
 insured
 is
 damaged
 • However
where
the
loss
took
place
not
in
the
course
of
such
rescue
from
 the
peril
insured
against,
the
insurer
is
not
liable

 
 Sec.
 86.
 Where
 a
 peril
 is
 especially
 excepted
 in
 a
 contract
 of
 insurance,
 a
 loss,
 which
would
not
have
occurred
but
for
such
peril,
is
thereby
excepted
although
 the
immediate
cause
of
the
loss
was
a
peril
which
was
not
excepted.
 
 WHEN
EXCEPTED
PERIL
IS
THE
PROXIMATE
CAUSE
 • The
 insurer
 isn’t
 liable
 if
 the
 proximate
 cause
 is
 an
 excepted
 peril
 although
the
immediate
peril
is
a
peril
not
excepted

 • An
 immediate
 cause
 is
 the
 cause
 or
 condition
 nearest
 to
 the
 time
 and
 place
of
injury
 • Proximate
cause
is
not
equivalent
to
immediate
cause
 • The
insurer
has
the
burden
of
proof
is
proving
that
cause
is
excepted
 
 PARIS‐MANILA
PERFUME
V.
PHOENIX
ASSURANCE
 45
PHIL
753
 
 FACTS:
 Phoenix
 issued
 a
 fire
 insurance
 policy
 covering
 the
 properties
 of
 insured.
 
 On
 a
 relevant
 date,
 a
 fire
 broke
 out
 and
 destroyed
 the
 properties
 of
 the
 insured.
 
 The
 insured
 duly
 made
 a
 claim
 against
 Phoenix
 and
 was
 denied.
 
 One
 of
 the
 grounds
 asserted
by
Phoenix
is
that
the
policy
was
not
in
the
name
of
the
company
but
in


It
is
the
efficient
cause
that
others
into
motion,
to
which
the
loss
is
to
be
 attributed
although
other
and
incidental
causes
may
be
nearer
in
time
to
 the
result
and
operate
more
immediately
in
producing
the
loss



MA.
ANGELA
AGUINALDO
 ATENEO
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2010


INSURANCE
(ATTY.
QUIMSON)
 


58


the
name
of
one
Peter
Johnson.

Another
ground
raised
is
that
the
policy
doesn't
 cover
explosions.

The
trial
court
however
overruled
its
defenses
and
ruled
in
favor
 of
the
insured.
 
 HELD:
 The
factory
where
the
fire
occurred
was
filed
with
numerous
kinds
of
essences
and
 oils
 used
 in
 the
 manufacture
 of
 perfumery
 and
 with
 a
 quantity
 of
 alcohol
 and
 manufactured
perfumes,
all
of
which
were
of
a
highly
inflammable
nature,
and
the
 fire
 may
 have
 started
 from
 any
 one
 of
 a
 number
 of
 reasons.
 But
 in
 the
 final
 analysis,
the
fact
remains
that
there
was
a
fire,
and
that
the
plaintiffs
property
was
 destroyed.
It
is
true
that
it
may
be
that
the
explosion
was
the
primary
cause
of
the
 fire,
 but
 that
 is
 only
 a
 matter
 of
 conjecture,
 and
 upon
 that
 point,
 the
 burden
 of
 proof
was
upon
the
defendant.
 
 It
will
be
noted
that
section
5
of
the
subject
policy
excludes
not
only
the
damages
 which
 may
 immediately
 result
 from
 an
 earthquake,
 but
 also
 any
 damage
 which
 may
 follow
 the
 earthquake,
 and
 that
 section
 6
 excludes
 only
 the
 damages
 which
 are
 the
 direct
 result
 of
 the
 explosion
 itself,
 and
 that
 it
 does
 not
 except
 damages
 which
 occurred
 from
 the
 fire
 occuring
 after
 the
 explosion,
 even
 though
 the
 explosion
 may
 have
 been
 the
 primary
 cause
 of
 the
 fire.
 But
 assuming,
 without
 deciding,
 that
 if
 it
 be
 a
 fact
 that
 the
 fire
 resulted
 from
 an
 explosion
 that
 fact,
 if
 proven,
would
be
a
complete
defense,
the
burden
of
the
proof
of
that
fact
is
upon
 the
 defendant,
 and
 upon
 that
 point,
 there
 is
 a
 failure
 of
 proof.
 There
 is
 no
 competent
evidence
as
to
whether
the
explosion
caused
the
fire
or
the
fire
caused
 the
explosion.
 
 Sec.
87.
An
insurer
is
not
liable
for
a
loss
caused
by
the
willful
act
or
through
the
 connivance
 of
 the
 insured;
 but
 he
 is
 not
 exonerated
 by
 the
 negligence
 of
 the
 insured,
or
of
the
insurance
agents
or
others.
 
 PRATS
V.
PHOENIX
ASSURANCE
 52
PHIL
807
 
 FACTS:
 Prats
and
Company
purchased
a
building
on
which
it
stored
its
merchandise.

The
 building
 and
 merchandise
 were
 covered
 by
 several
 insurance
 policies
 and
 one
 of
 them
 was
 issued
 by
 Phoenix.
 
 A
 fire
 broke
 out
 and
 destroyed
 the
 building.
 
 Prats


duly
 filed
 its
 claim
 but
 was
 denied
 on
 the
 ground
 that
 the
 fire
 was
 caused
 by
 connivance
of
the
insured
with
others
as
well
as
the
claim
wasn't
in
good
faith.


 
 HELD:
 The
insurance
policy
which
was
the
subject
of
action
in
this
case
was
held
to
have
 been
avoided
by
the
connivance
of
the
insured
in
setting
fire
to
the
insured
goods
 and
the
submission
of
the
insured
of
fraudulent
proof
of
loss.


 
 The
 finding
 of
 the
 trial
 court
 in
 the
 effect
 that
 the
 plaintiff
 had
 submitted
 false
 proof
in
the
support
of
his
claim
is
also
well
founded.
That
conclusion
appears
to
 have
 been
 based
 upon
 three
 items
 of
 proof.
 These
 two
 facts
 are,
 first,
 that
 the
 plaintiff
had
submitted
a
claim
for
jewelry
lost
in
the
fire
as
of
a
value
of
P12,800
 when
 the
 true
 value
 of
 said
 jewelry
 was
 about
 P600;
 and,
 secondly,
 that
 the
 plaintiff
 had
 sought
 to
 recover
 from
 the
 insurance
 company
 the
 value
 of
 goods
 which
had
been
surreptitiously
withdrawn
by
it
from
the
bodega
prior
to
the
fire.
 Neither
of
these
two
facts
are
consistent
with
good
faith
on
the
part
of
the
plaintiff,
 and
 each
 constituted
 a
 breach
 of
 the
 stipulations
 of
 the
 policy
 against
 the
 use
 of
 fraudulent
devices
and
false
proof
with
respect
to
the
loss.
 
 The
other
point
relied
upon
to
support
conclusion
that
the
plaintiff
had
attempted
 to
 deceive
 the
 defendant
 with
 respect
 to
 the
 extent
 of
 the
 loss
 was
 at
 least
 competent
 in
 its
 general
 bearing
 on
 the
 good
 faith
 of
 the
 plaintiff,
 even
 if,
 as
 is
 probably
true,
not
alone
sufficient
to
constitute
a
breach
of
the
same
stipulations.
 The
point
is
this:
After
the
fire
the
plaintiff
presented
to
the
adjuster
certain
cost
 sheets
 and
 copies
 of
 supposed
 invoices
 in
 which
 the
 prices
 and
 expenses
 of
 importation
 of
 a
 quantity
 of
 goods
 were
 stated
 at
 double
 the
 true
 amount.
 The
 adjuster
 soon
 discovered
 the
 artificial
 nature
 of
 these
 documents,
 and,
 with
 his
 consent,
they
were
withdrawn
by
Prats
and
subsequently
destroyed.
At
the
hearing
 Prats
stated
that
these
documents
had
been
fabricated
in
order
that
they
might
be
 exhibited
to
intending
purchasers
of
the
goods,
thereby
making
it
appear
to
them
 that
the
cost
of
the
merchandise
had
been
much
greater
than
it
in
fact
was
a
ruse
 which
 is
 supposed
 to
 have
 been
 entirely
 innocent
 or
 at
 least
 not
 directed
 against
 the
 insurer.
 But
 a
 question
 naturally
 arises
 as
 to
 the
 purpose
 which
 these
 documents
might
have
been
made
to
serve
if
the
fire,
as
doubtless
intended
by
its
 designers,
 had
 been
 so
 destructive
 as
 to
 remove
 all
 vestiges
 of
 the
 stock
 actually
 involved.
Upon
the
whole
we
are
forced
to
state
the
conclusion,
not
only
that
the
 plaintiff
 caused
 the
 fire
 to
 be
 set,
 or
 connived
 therein,
 but
 also
 that
 it
 submitted
 fraudulent
proof
as
the
trial
judge
found.

 



MA.
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AGUINALDO
 ATENEO
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2010


INSURANCE
(ATTY.
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59


NOTICE
OF
LOSS
 
 Sec.
88.
In
case
of
loss
upon
an
insurance
against
fire,
an
insurer
is
exonerated,
if
 notice
thereof
be
not
given
to
him
by
an
insured,
or
some
person
entitled
to
the
 benefit
of
the
insurance,
without
unnecessary
delay.
 
 NOTICE
OF
LOSS
MUST
BE
GIVEN
WITHOUT
UNNECESSARY
DELAY
 • A
notice
of
loss
apprises
the
insurer
of
the
occurence
of
the
loss
 • Purpose
 is
 to
 enable
 the
 insurer
 to
 make
 proper
 investigation
 and
 take
 such
action
as
may
be
necessary
to
protect
its
interest
 • No
particular
form
is
prescribed
by
law
 • There
 is
 no
 unnecessary
 delay
 if
 the
 notice
 is
 given
 as
 soon
 as
 the
 circumstances
 permitted
 the
 insured,
 in
 the
 exercise
 of
 reasonable
 diligence
to
communicate
 
 BACHRACH
V.
BRITISH
AMERICAN
ASSURANCE
 Supra

 
 HELD:
 Where
 the
 terms
 of
 an
 insurance
 policy
 require
 that
 notice
 of
 loss
 be
 given,
 a
 denial
of
liability
by
the
insurers
under
the
policy
operates
as
a
waiver
of
notice
of
 loss
 because
 if
 the
 policy
 is
 null
 and
 void
 the
 furnishing
 of
 such
 notice
 would
 be
 vain
and
useless.

Immediate
notice
means
reasonable
time.
 
 Sec.
 89.
 When
 a
 preliminary
 proof
 of
 loss
 is
 required
 by
 a
 policy,
 the
 insured
 is
 not
bound
to
give
such
proof
as
would
be
necessary
in
a
court
of
justice;
but
it
is
 sufficient
for
him
to
give
the
best
evidence
which
he
has
in
his
power
at
the
time.
 
 Sec.
90.
All
defects
in
a
notice
of
loss,
or
in
preliminary
proof
thereof,
which
the
 insured
 might
 remedy,
 and
 which
 the
 insurer
 omits
 to
 specify
 to
 him,
 without
 unnecessary
delay,
as
grounds
of
objection,
are
waived.
 
 MALAYAN
INSURANCE
V.
ARNALDO
 Supra

 
 HELD:


The
 last
 point
 raised
 by
 the
 petitioner
 should
 not
 pose
 much
 difficulty.
 The
 valuation
 fixed
 in
 fire
 insurance
 policy
 is
 conclusive
 in
 case
 of
 total
 loss
 in
 the
 absence
 of
 fraud,
 
 which
 is
 not
 shown
 here.
 Loss
 and
 its
 amount
 may
 be
 determined
 on
 the
 basis
 of
 such
 proof
 as
 may
 be
 offered
 by
 the
 insured,
 which
 need
not
be
of
such
persuasiveness
as
is
required
in
judicial
proceedings.

If,
as
in
 this
case,
the
insured
files
notice
and
preliminary
proof
of
loss
and
the
insurer
fails
 to
specify
to
the
former
all
the
defects
thereof
and
without
unnecessary
delay,
all
 objections
to
notice
and
proof
of
loss
are
deemed
waived
under
Section
90
of
the
 Insurance
Code.
 
 The
certification
issued
by
the
Integrated
National
Police,
Lao‐ang,
Samar,
as
to
the
 extent
of
Pinca's
loss
should
be
considered
sufficient.
Notably,
MICO
submitted
no
 evidence
 to
 the
 contrary
 nor
 did
 it
 even
 question
 the
 extent
 of
 the
 loss
 in
 its
 answer
 before
 the
 Insurance
 Commission.
 It
 is
 also
 worth
 observing
 that
 Pinca's
 property
 was
 not
 the
 only
 building
 bumed
 in
 the
 fire
 that
 razed
 the
 commercial
 district
of
Lao‐ang,
Samar,
on
January
18,
1982.

 
 There
is
nothing
in
the
Insurance
Code
that
makes
the
participation
of
an
adjuster
 in
the
assessment
of
the
loss
imperative
or
indespensable,
as
MICO
suggests.

 
 PACIFIC
BANK
V.
CA
 168
SCRA
1
 
 FACTS:
 1. 2.

3. 4. 5. 6.

Paramount
 Shirts
 insured
 its
 properties
 against
 fire
 with
 Oriental
 Assurance.
 Paramount
 was
 indebted
 to
 petitioner
 for
 a
 long
 time
 already.
 
 It
 was
 holding
 the
 same
 properties
 in
 trust
 in
 favor
 of
 petitioner
 under
 a
 trust
 agreement.
 Oriental
was
duly
furnished
notice
of
this
fact.

It
knew
that
the
insurance
 proceeds
were
payable
to
petitioner.
 On
 a
 relevant
 date,
 a
 fire
 broke
 out
 and
 destroyed
 Paramount’s
 properties.


 Petitioner
 filed
 with
 Oriental
 Assurance
 its
 claim
 but
 it
 was
 informed
 to
 wait
as
the
latter
was
waiting
for
the
assessor’s
report
on
the
matter.
 The
 assessor
 reported
 that
 no
 claim
 was
 filed
 by
 Paramount
 which
 was
 allegedly
a
clear
violation
of
the
policy.
 



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


INSURANCE
(ATTY.
QUIMSON)
 


60


HELD:
 In
 the
 case
 at
 bar,
 policy
 condition
 No.
 11
 specifically
 provides
 that
 the
 insured
 shall
on
the
happening
of
any
loss
or
damage
give
notice
to
the
company
and
shall
 within
fifteen
(15)
days
after
such
loss
or
damage
deliver
to
the
private
respondent
 (a)
a
claim
in
writing
giving
particular
account
as
to
the
articles
or
goods
destroyed
 and
the
amount
of
the
loss
or
damage
and
(b)
particulars
of
all
other
insurances,
if
 any.
Likewise,
insured
was
required
"at
his
own
expense
to
produce,
procure
and
 give
 to
 the
 company
 all
 such
 further
 particulars,
 plans,
 specifications,
 books,
 vouchers,
 invoices,
 duplicates
 or
 copies
 thereof,
 documents,
 proofs
 and
 information
with
respect
to
the
claim".

 
 The
 evidence
 adduced
 shows
 that
 twenty‐four
 (24)
 days
 after
 the
 fire,
 petitioner
 merely
wrote
letters
to
private
respondent
to
serve
as
a
notice
of
loss,
thereafter,
 the
 former
 did
 not
 furnish
 the
 latter
 whatever
 pertinent
 documents
 were
 necessary
 to
 prove
 and
 estimate
 its
 loss.
 Instead,
 petitioner
 shifted
 upon
 private
 respondent
 the
 burden
 of
 fishing
 out
 the
 necessary
 information
 to
 ascertain
 the
 particular
account
of
the
articles
destroyed
by
fire
as
well
as
the
amount
of
loss.
It
 is
 noteworthy
 that
 private
 respondent
 and
 its
 adjuster
 notified
 petitioner
 that
 insured
had
not
yet
filed
a
written
claim
nor
submitted
the
supporting
documents
 in
compliance
with
the
requirements
set
forth
in
the
policy.
Despite
the
notice,
the
 latter
remained
unheedful.
Since
the
required
claim
by
insured,
together
with
the
 preliminary
 submittal
 of
 relevant
 documents
 had
 not
 been
 complied
 with,
 it
 follows
 that
 private
 respondent
 could
 not
 be
 deemed
 to
 have
 finally
 rejected
 petitioner's
 claim
 and
 therefore
 the
 latter's
 cause
 of
 action
 had
 not
 yet
 arisen.
 Compliance
 with
 condition
 No.
 11
 is
 a
 requirement
 sine
 qua
 non
 to
 the
 right
 to
 maintain
 an
 action
 as
 prior
 thereto
 no
 violation
 of
 petitioner's
 right
 can
 be
 attributable
to
private
respondent.
This
is
so,
as
before
such
final
rejection,
there
 was
 no
 real
 necessity
 for
 bringing
 suit.
 Petitioner
 should
 have
 endeavored
 to
 file
 the
 formal
 claim
 and
 procure
 all
 the
 documents,
 papers,
 inventory
 needed
 by
 private
 respondent
 or
 its
 adjuster
 to
 ascertain
 the
 amount
 of
 loss
 and
 after
 compliance
 await
 the
 final
 rejection
 of
 its
 claim.
 Indeed,
 the
 law
 does
 not
 encourage
unnecessary
litigation.
 
 It
appearing
that
insured
has
violated
or
failed
to
perform
the
conditions
under
No.
 3
and
11
of
the
contract,
and
such
violation
or
want
of
performance
has
not
been
 waived
by
the
insurer,
the
insured
cannot
recover,
much
less
the
herein
petitioner.

 


Sec.
91.
Delay
in
the
presentation
to
an
insurer
of
notice
or
proof
of
loss
is
waived
 if
 caused
 by
 any
 act
 of
 him,
 or
 if
 he
 omits
 to
 take
 objection
 promptly
 and
 specifically
upon
that
ground.
 
 PACIFIC
TIMBER
V.
CA
 Supra

 
 HELD:
 The
defense
of
delay
as
raised
by
private
respondent
in
resisting
the
claim
cannot
 be
sustained.
The
law
requires
this
ground
of
delay
to
be
promptly
and
specifically
 asserted
when
a
claim
on
the
insurance
agreement
is
made.
The
undisputed
facts
 show
that
instead
of
invoking
the
ground
of
delay
in
objecting
to
petitioner's
claim
 of
 recovery
 on
 the
 cover
 note,
 it
 took
 steps
 clearly
 indicative
 that
 this
 particular
 ground
for
objection
to
the
claim
was
never
in
its
mind.
The
nature
of
this
specific
 ground
for
resisting
a
claim
places
the
insurer
on
duty
to
inquire
when
the
loss
took
 place,
 so
 that
 it
 could
 determine
 whether
 delay
 would
 be
 a
 valid
 ground
 upon
 which
to
object
to
a
claim
against
it.
 
 In
 the
 proceedings
 that
 took
 place
 later
 in
 the
 Office
 of
 the
 Insurance
 Commissioner,
private
respondent
should
then
have
raised
this
ground
of
delay
to
 avoid
liability.
It
did
not
do
so.
It
must
be
because
it
did
not
find
any
delay,
as
this
 Court
fails
to
find
a
real
and
substantial
sign
thereof.
But
even
on
the
assumption
 that
 there
 was
 delay,
 this
 Court
 is
 satisfied
 and
 convinced
 that
 as
 expressly
 provided
by
law,
waiver
can
successfully
be
raised
against
private
respondent.
Thus
 Section
84
of
the
Insurance
Act
provides:
 
 Section
 84. Delay
 in
 the
 presentation
 to
 an
 insurer
 of
 notice
 or
 proof
 of
 loss
 is
 waived
 if
 caused
 by
 any
 act
 of
 his
 or
 if
 he
 omits
 to
 take
 objection
 promptly
 and
 specifically
upon
that
ground.
 
 Sec.
92.
If
the
policy
requires,
by
way
of
preliminary
proof
of
loss,
the
certificate
 or
testimony
of
a
person
other
than
the
insured,
it
is
sufficient
for
the
insured
to
 use
reasonable
diligence
to
procure
it,
and
in
case
of
the
refusal
of
such
person
to
 give
it,
then
to
furnish
reasonable
evidence
to
the
insurer
that
such
refusal
was
 not
induced
by
any
just
grounds
of
disbelief
in
the
facts
necessary
to
be
certified
 or
testified.
 



MA.
ANGELA
AGUINALDO
 ATENEO
LAW
2010


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