Interpretation of insurance contracts

VIOLETA LALICAN vs. THE INSULAR LIFE ASSURANCE COMPANY LIMITED

G.R. No. 183526, August 25, 2009, 597 SCRA 159
FACTS:
Eulogio, the husband of herein petitioner, applied for an insurance policy the value of which is P1,500,000.00. Under the policy terms,
Eulogio is obliged to pay the premiums on a quarterly basis, until the end of the 20-year period of the policy. It was likewise stated
therein that the insured has 31-day grace period for the payment of each premium subsequent to the first and that default in any
payment of said premiums shall result in the automatic lapse of the said policy. Eulogio failed to pay a premium even after the lapse of
the 31-day grace period. Hence, the policy lapsed and became void. He filed an Application for Reinstatement of said policy and
paying the amount of the premium due. However, Insular Life notified him that they could not fully process his application because
the amount he paid is inadequate to cover the accrued interests. Hence, he again applied for the reinstatement of said policy this time,
together with the required amount. The husband of the insurance agent was the one who received his application because the agent
was away at that time. Within the same day, the insured died. This fact was unknown to the agent who then submitted Eulogios
application for reinstatement to the Insular Life Regional Office.
Violeta then filed a claim for payment of the full proceeds of the policy. However, the company said that she is not entitled to the
insurance proceeds because they claimed that the policy was not reinstated during her husbands lifetime and good health.
ISSUE:
Whether or not Eulogio was able to reinstate the lapsed insurance policy before his death
HELD:
NO. The Court agrees with the RTC that the conditions for reinstatement under the Policy Contract and Application for Reinstatement
were written in clear and simple language, which could not admit of any meaning or interpretation other than those that they so
obviously embody. Violeta did not adduce any evidence that Eulogio might have failed to fully understand the import and meaning of
the provisions of his Policy Contract and/or Application for Reinstatement both of which he voluntarily signed. 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 as
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.
WHEREFORE, premises considered, the Court DENIES the instant Petition for Review on Certiorari under Rule 45 of the Rules of
Court. The Court AFFIRMS the Orders dated 10 April 2008 and 3 July 2008 of the RTC of Gapan City, Branch 34, in Civil Case No.
2177, denying petitioner Violeta R. Lalicans Notice of Appeal, on the ground that the Decision dated 30 August 2007 subject thereof,
was already final and executor. No costs.
Philam v Pineda G.R. No. L-54216 July 19, 1989
J. Paras
Facts:
Pineda procured an ordinary life insurance policy from the petitioner company and designated his wife and children as irrevocable
beneficiaries.
He then filed a petition to amend the designation of the beneficiaries in his life policy from irrevocable to revocable.
The judge granted the request.
Petitioner promptly filed a motion but was denied. Hence, this petition.
Issues:
1. WON the designation of the irrevocable beneficiaries could be changed or amended without the consent of all the irrevocable
beneficiaries.
2. WON the irrevocable minor beneficiaries could give consent to the change in designation
Held: No to both. Petition dismissed.
Ratio:

Under the Insurance Act, the beneficiary designated in a life insurance contract cannot be changed without the consent of the
beneficiary because he has a vested interest in the policy.
There was an express stipulation to this effect: It is hereby understood and agreed that, notwithstanding the provisions of this policy
to the contrary, inasmuch as the designation of the primary/contingent beneficiary/beneficiaries in this Policy has been made without
reserving the right to change said beneficiary/ beneficiaries, such designation may not be surrendered to the Company, released or
assigned; and no right or privilege under the Policy may be exercised, or agreement made with the Company to any change in or
amendment to the Policy, without the consent of the said beneficiary/beneficiaries.
The alleged acquiescence of the six (6) children beneficiaries of the policy cannot be considered an effective ratification due to the fact
that they were minors. Neither could they act through their father insured since their interests are quite divergent from one another.
Therefore, the parent-insured cannot exercise rights and/or privileges pertaining to the insurance contract, for otherwise, the vested
rights of the irrevocable beneficiaries would be rendered inconsequential.
Of equal importance is the well-settled rule that the contract between the parties is the law binding on both of them and for so many
times, this court has consistently issued pronouncements upholding the validity and effectivity of contracts. Likewise, contracts which
are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations, for contracts are
obligatory, no matter in what form they may be, whenever the essential requisites for their validity are present
The change in the designation of was not within the contemplation of the parties. The lower court instead made a new contract for
them. It acted in excess of its authority when it did so

DELFIN NARIO and ALEJANDRA SANTOS-NARIO vs.THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY
(G.R. No. L-22796, June 26, 1967)
FACTS: Mrs. Nario was issued by respondent Philamlife a life insurance policy. She designated her husband, Delfin and their
unemancipated minor son, Ernesto, as her irrevocable beneficiaries. She applied for a loan on the policy for the school expenses of her
son. The loan application bore the signature of Delfin as the father-guardian of minor son and as the legal administrator of the minor's
properties. Philamlife denied the application because the written consent for the minor son must not only be given by his father as
legal guardian but it must also be authorized by the court in a competent guardianship proceeding. After the denial, Mrs. Nario decided
to surrender her policy to Philamlife and demanded its cash value of then amounting to P520. Philamlife also denied the surrender of
the policy, on the same ground, hence, Nario brought suit. Philamlife claims that under Articles 320 and 326 of the Civil Code, mere
written consent given by the father-guardian, for and in behalf of the minor son, without any court authority, was insufficient,
inasmuch as the policy loan application and the surrender of the policy involved acts of disposition and alienation of the property
rights of the minor, and said acts are not within the powers of the legal administrator. The lower court agreed with Philamlife and
dismissed petitioners claim. It held that under the policy, the minor son, as one of the designated irrevocable beneficiaries, "acquired a
vested right to all benefits accruing to the policy, including that of obtaining a policy loan to the extent stated in the schedule of values
attached to the policy. On appeal to the SC, petitioner averred that the minor's interest amounted to only one-half of the policy's cash
surrender value of P520; that payment of the ward's debts is within the powers of the guardian, where no realty is involved (Rule 96,
Sec. 2 of the Revised Rules of Court); hence, father may validly agree to the proposed transaction on behalf of the minor without need
of court authority.

ISSUE: Can an insurer refuse to grant the loan application (on a cash surrender value and not full face value) and the surrender of the
policy claimed by a father-guardian in behalf of his minor son when it is without court authority?

HELD: Yes, the insurer can validly refuse.

The vested interest or right of the beneficiaries in the policy should be measured on its full face value and not on its cash surrender
value, for in case of death of the insured, said beneficiaries are paid on the basis of its face value and in case the insured should
discontinue paying premiums, the beneficiaries may continue paying it and are entitled to automatic extended term or paid-up

insurance options, etc. and that said vested right under the policy cannot be divisible at any given time. As above noted, the full face
value of the policy is P5,000 and the minor's vested interest therein, as one of the two irrevocable beneficiaries, consists of one-half
() of said amount or P2,500.
The transactions in question (policy loan and surrender of policy) constitute acts of disposition or alienation of property rights and not
merely of management or administration because they involve the incurring or termination of contractual obligations. Under Articles
320 and 326 of the Civil Code provide that the father, or in his absence the mother, is the legal administrator of their childs property
and when it is worth more than two thousand pesos, as in this case, he should have filed a formal application or petition for
guardianship and bond.
As there was no such
petition for guardianship and bond, the consent given by the father-guardian, was insufficient and ineffective, and defendant-appellee
was justified in disapproving the proposed transactions in question. The result would be the same even if interest is worth less than
P2,000. The parent's authority over the estate of the ward as a legal-guardian would not extend to acts of encumbrance or disposition,
as distinguished from acts of management or administration. Since the law merely constitutes the parent as legal administrator of the
child's property (which is a general power), the parent requires special authority for the acts above specified, and this authority can be
given only by a court.

G.R. No. 181132

June 5, 2009

Lessons Applicable: To whom insurance proceeds payable (Insurance)

FACTS:

Loreto Maramag designated as beneficiary his concubine Eva de Guzman Maramag

Vicenta Maramag and Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto Maramag) and his concubine Eva de Guzman
Maramag, also suspected in the killing of Loreto and his illegitimate children are claiming for his insurance.

Vicenta alleges that Eva is disqualified from claiming

RTC: Granted - civil code does NOT apply

CA: dismissed the case for lack of jurisdiction for filing beyond reglementary period

ISSUE: W/N Eva can claim even though prohibited under the civil code against donation

HELD: YES. Petition is DENIED.

Any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life insurance
policy of the person who cannot make any donation to him

If a concubine is made the beneficiary, it is believed that the insurance contract will still remain valid, but the
indemnity must go to the legal heirs and not to the concubine, for evidently, what is prohibited under Art. 2012 is the
naming of the improper beneficiary.

SECTION 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.

GR: only persons entitled to claim the insurance proceeds are either the insured, if still alive; or the beneficiary, if
the insured is already deceased, upon the maturation of the policy.

EX: situation where the insurance contract was intended to benefit third persons who are not parties to the same in
the form of favorable stipulations or indemnity. In such a case, third parties may directly sue and claim from the
insurer

It is only in cases where the insured has not designated any beneficiary, or when the designated beneficiary is disqualified by
law to receive the proceeds, that the insurance policy proceeds shall redound to the benefit of the estate of the insured

The Insular Life Assurance Company vs Ebrado, 80 SCRA 181

Fact:
On September 1, 1968, Buenaventura Ebrado issued by the Insular Life Assurance Policy No 009929 a whole-life plan with a rider for
Accidental Death. Buenaventura designated Carponia Ebrado as the revocable beneficiary in his policy. He referred her as his wife.

On October 21, 1969, Buenaventura Ebrad died as a result of an accident when he was hit by a falling tree. Carponia filed with the
insurer a claim for the proceeds of the policy as the designated beneficiary therein. Although she admits that she and the insured
Buenaventura were merely living as husband and wife without the benefits of marriage. Pascuala de Ebrado, valid wife, also filed her
claim as the widow of the deceased insured.

Issue: Can a common-law wife named as beneficiary in the life insurance policy of legally married man claim the proceeds thereof in
case of death of the latter?

Ruling:
In essence, a life insurance 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 Article739 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 a beneficiary in the life insurance policy of the persons who cannot make the donation.

Note following Articles from the Civil Code:

Article 2011 - "The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be
regulated by this Code."

Article 2012 - "Any person who in forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life
insurance policy by the person who cannot be make a donation to him."

Article 739- "The donations shall be void:

1.

Those made between persons who were guilty of adultery or concubinage at the title of donation.xx

In the case provided to in No.1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt
of the donee may be provided by preponderance of evidence in same action."

Cha vs CA
Post under case digests, Commercial Law at Saturday, March 31, 2012 Posted by Schizophrenic Mind
Facts: Petitioner spouses Nilo Cha and Stella Uy-Cha, as lesseesentered into a lease contract with private respondent CKS
Development Corporation as lessor. A stipulation of the lease contract provides that the Lessee is not allowed to insure against fire
the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased premises without first obtaining
the written consent and approval of the Lessor. If the Lessee violates this the policy is deemed assigned and transferred to the Lessor
for his own benefit.

Petitioner took out a policy of fire insurance over the merchandise inside the leased premises with United Insurance without consent of
CKS.

On the day the lease contract was to expire a fire broke out inside the leased premises. CKS, wrote a letter to United asking that the
proceeds of the fire insurance be paid directly to CKS. United refused. Hence, the latter filed a complaint against the Cha spouses and
United.

RTC ruled in favor of CKS. CA affirmed, hence the petition.

Issue: Whether or not CKS can recover from the insurance policy.

Held: No. Section 18 of the Insurance Code provides that: 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.

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: The measure of an insurable interest in property is the extent to which the
insured might be damnified by loss or injury thereof. Therefore, CKS cannot be validly a beneficiary of the fire insurance policy
taken by petitioner-spouses. The insurable interest remains with the Cha spouses.

The stipulation in the lease contract is void for being contrary to law and public policy. This is in keeping with the provision under
Sec. 25 of the Insurance Code that: 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

Insurance Case Digest: Gaisano Cagayan, Inc. V. Insurance Company Of North America (2006)

G.R. No. 147839

June 8, 2006

Lessons Applicable: Existing Interest (Insurance)

Laws Applicable: Article 1504,Article 1263, Article 2207 of the Civil Code, Section 13 of Insurance Code

FACTS:

Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. while Levi Strauss (Phils.) Inc. (LSPI) is the
local distributor of products bearing trademarks owned by Levi Strauss & Co

IMC and LSPI separately obtained from Insurance Company of North America fire insurance policies for their book debt
endorsements related to their ready-made clothing materials which have been sold or delivered to various customers and
dealers of the Insured anywhere in the Philippines which are unpaid 45 days after the time of the loss

February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro City, owned by Gaisano Cagayan, Inc., containing the
ready-made clothing materials sold and delivered by IMC and LSPI was consumed by fire.

February 4, 1992: Insurance Company of North America filed a complaint for damages against Gaisano Cagayan, Inc. alleges
that IMC and LSPI filed their claims under their respective fire insurance policies which it paid thus it was subrogated to
their rights

Gaisano Cagayan, Inc: not be held liable because it was destroyed due to fortuities event or force majeure

RTC: IMC and LSPI retained ownership of the delivered goods until fully paid, it must bear the loss (res perit domino)

CA: Reversed - sales invoices is an exception under Article 1504 (1) of the Civil Code to res perit domino

ISSUE: W/N Insurance Company of North America can claim against Gaisano Cagayan for the debt that was isnured
HELD: YES. petition is partly GRANTED. order to pay P535,613 is DELETED

insurance policy is clear that the subject of the insurance is the book debts and NOT goods sold and delivered to the
customers and dealers of the insured

ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the
buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has
been made or not, except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership
in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods
are at the buyer's risk from the time of such delivery;

IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until full payment of the value
of the delivered goods. Unlike the civil law concept of res perit domino, where ownership is the basis for consideration of
who bears the risk of loss, in property insurance, one's interest is not determined by concept of title, but whether insured has
substantial economic interest in the property

Section 13 of our Insurance Code defines insurable interest as "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."
Parenthetically, under Section 14 of the same Code, an insurable interest in property may consist in: (a) an existing interest;
(b) an inchoate interest founded on existing interest; or (c) an expectancy, coupled with an existing interest in that out of
which the expectancy arises.

Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its
destruction.

it is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be
injured or destroyed by the peril against which it is insured

an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or possession of,
the subject

matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of such an interest

insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45
days after the fire- obligation is pecuniary in nature

obligor should be held exempt from liability when the loss occurs thru a fortuitous event only holds true when the
obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case
of fortuitous event

Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or destruction of anything of the same kind
does not extinguish the obligation (Genus nunquan perit)

The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as insurer and IMC as the
insured, but also the amount paid to settle the insurance claim

Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the
injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the
rights of the insured against the wrongdoer or the person who has violated the contract.

As to LSPI, no subrogation receipt was offered in evidence.

Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the amount of P535,613

SaturninovsPhilamLife
Facts:
>2monthspriortotheinsuranceofthepolicy,Saturninowasoperatedonforcancer,
involvingcompleteremovaloftherightbreast,includingthepectoralmusclesandtheglands,
foundintherightarmpit.
>Notwithstandingthefactofheroperation,Saturninodidnotmakeadisclosurethereofinher
applicationforinsurance.
>Shestatedthereinthatshedidnothave,norhadsheeverhad,amongotherslistedinthe
application,cancerorothertumors;thatshehadnotconsultedanyphysician,undergoneany
operationorsufferedanyinjurywithinthepreceding5years.
>Shealsostatedthatshehadneverbeentreatedfor,nordidsheeverhaveanyillnessor
diseasepeculiartohersex,particularlyofthebreast,ovaries,uterusandmenstrualdisorders.
>TheapplicationalsorecitedthatthedeclarationsofSaturninoconstitutedafurtherbasisfor
theissuanceofthepolicy.

Issue:
Whetherornottheinsuredmadesuchfalserepresentationofmaterialfactsastoavoidthe
policy.

Held:
YES.
Therecanbenodisputethattheinformationgivenbyherintheapplicationforinsurancewas
false,namely,thatsheneverhadcancerortumorsorconsultedanyphysicianorundergoneany
operationwithintheprecedingperiodof5years.
Thequestiontodetermineis:Arethefactsthenfalselyrepresentedmaterial?TheInsurance
Lawprovidesthatmaterialityistobedeterminednotbytheevent,butsolelybytheprobable
andreasonableinfluenceofthefactsuponthepartytowhomthecommunicationisdue,in
forminghisestimateoftheproposedcontract,ormakinghisinquiries.
Thecontentionofappellantsisthatthefactssubjectoftherepresentationwerenotmaterialin
viewofthenonmedicalnatureoftheinsuranceappliedfor,whichdoesawaywiththeusual
requirementofmedicalexaminationbeforethepolicyisissued.Thecontentioniswithout
merit.Ifanything,thewaiverofmedicalexaminationrendersevenmorematerialthe
informationrequiredoftheapplicantconcerningpreviousconditionofhealthanddiseases
suffered,forsuchinformationnecessarilyconstitutesanimportantfactorwhichtheinsurer
takesintoconsiderationindecidingwhethertoissuethepolicyornot.

Appellantsalsocontendthattherewasnofraudulentconcealmentofthetruthinasmuchasthe
insuredherselfdidnotknow,sinceherdoctornevertoldher,thatthediseaseforwhichshehad
beenoperatedonwascancer.Inthefirstplace,concealmentofthefactoftheoperationitself
wasfraudulent,astherecouldnothavebeenanymistakeaboutit,nomatterwhattheailment.
Secondly,inordertoavoidapolicy,itisnotnecessarytoshowactualfraudonthepartofthe
insured.Inthisjurisdiction,concealment,whetherintentionalorunintentionalentitledthe
insurertorescindthecontractofinsurance,concealmentbeingdefinedasnegligenceto
communicatethatwhichapartyknowsandoughttocommunicate.Thebasisoftherule
vitiatingthecontractincasesofconcealmentisthatitmisleadsordeceivestheinsurerinto
acceptingtherisk,oracceptingitatarateofpremiumagreedupon.Theinsurer,relyingupon
thebeliefthattheinsuredwilldiscloseeverymaterialfactwithinhisactualorpresumed
knowledge,ismisledintoabeliefthatthecircumstanceswithhelddoesnotexist,andheis
therebyinducedtoestimatetheriskuponafalsebasisthatitdoesnotexist.
SunlifevsBacani
Facts:
>OnApril15,1986,BacaniprocuredalifeinsurancecontractforhimselffromSunLife.He
wasissuedalifeinsurancepolicywithdoubleindemnityincaseofaccidentaldeath.The
designatedbeneficiarywashismother,Bernarda.
>OnJune26,1987,theinsureddiedinaplanecrash.BernardaBacanifiledaclaimwithSun
Life,seekingthebenefitsoftheinsurance.SunLifeconductedaninvestigationanditsfindings
promptedittorejecttheclaim.
>SunLifediscoveredthat2weekspriortohisapplication,Bacaniwasexaminedandconfined
attheLungCenterofthePhilippines,wherehewasdiagnosedforrenalfailure.Duringhis
confinement,thedeceasedwassubjectedtourinalysis,ultrasonographyandhematologytests.
Hedidnotrevealsuchfactinhisapplication.
>Initsletter,SunLifeinformedBerarda,thattheinsureddidnotdisclosedmaterialfacts
relevanttotheissuanceofthepolicy,thusrenderingthecontractofinsurancevoidable.Acheck
representingthetotalpremiumspaidintheamountofP10,172.00wasattachedtosaidletter.
>Bernardaandherhusband,filedanactionforspecificperformanceagainstSunLife.RTC
ruledforBernardaholdingthatthefactsconcealedbytheinsuredweremadeingoodfaithand
underthebeliefthattheyneednotbedisclosed.Moreover,itheldthatthehealthhistoryofthe
insuredwasimmaterialsincetheinsurancepolicywas"nonmedical."CAaffirmed.

Issue:

Whetherornotthebeneficiarycanclaimdespitetheconcealment.

Held:
NOPE.

Section26oftheInsuranceCodeisexplicitinrequiringapartytoacontractofinsuranceto
communicatetotheother,ingoodfaith,allfactswithinhisknowledgewhicharematerialtothe
contractandastowhichhemakesnowarranty,andwhichtheotherhasnomeansof
ascertaining.
Materialityistobedeterminednotbytheevent,butsolelybytheprobableandreasonable
influenceofthefactsuponthepartytowhomcommunicationisdue,informinghisestimateof
thedisadvantagesoftheproposedcontractorinmakinghisinquiries(TheInsuranceCode,Sec
31)
Thetermsofthecontractareclear.Theinsuredisspecificallyrequiredtodisclosetotheinsurer
mattersrelatingtohishealth.Theinformationwhichtheinsuredfailedtodisclosewerematerial
andrelevanttotheapprovalandtheissuanceoftheinsurancepolicy.Themattersconcealed
wouldhavedefinitelyaffectedpetitioner'sactiononhisapplication,eitherbyapprovingitwith
thecorrespondingadjustmentforahigherpremiumorrejectingthesame.Moreover,a
disclosuremayhavewarrantedamedicalexaminationoftheinsuredbypetitionerinorderforit
toreasonablyassesstheriskinvolvedinacceptingtheapplication.
Thus,"goodfaith"isnodefenseinconcealment.Theinsured'sfailuretodisclosethefactthathe
washospitalizedfortwoweekspriortofilinghisapplicationforinsurance,raisesgravedoubts
abouthisbonafides.Itappearsthatsuchconcealmentwasdeliberateonhispart.

Canilang vs Great Pacific Life Insurance

Facts:

On June 1982, Jaime Canilang was diagnosed as suffering from sinus tachycardia. Two
months later, he was found to have acute bronchitis. The next day, he applied for a nonmedical insurance policy with Great Pacific and named his wife Thelma as his beneficiary. A
year later, he died of congestive heart failure, anemia, and chronic anemia. When Thelma
filed a claim with Great Pacific, it was denied on the ground that Jaime concealed material
information.
Thelma filed a complaint against Great Pacific with the Insurance Commission for
recovery of the insurance proceeds. She testified that she was not aware of any serious
illness suffered by Jaime, and that what she knew was that he died because of a kidney
disorder. Great Pacific presented a physician who explained that Jaimes application had
been approved based on his medical declaration, and that medical examinations are required
only in cases where applicant indicated that he has undergone medical consultation and
hospitalization.
The Insurance Commission held that there was no intentional concealment on Jaimes
part. It also held that Great Pacific waived its right to inquire into Jaimes health
condition by issuing the policy despite the lack of answers to some of the pertinent questions
in the application. It said BP 874, which voids an insurance contract WON concealment was

made intentionally, was not applicable since the law became effective only on 1985.
CA reversed IC. CA said that the issue is WON there was material concealment, and not
WON Canilang intentionally made material concealment. It held that Jaimes failure to
disclose previous medical consultation and treatment constituted material information.
CANILANG FAILED TO DISCLOSE MATERIAL INFORMATION
The applicable law at that time was PD 1460 (Insurance Code of 1978). Under said law,
the information concealed must be such which the concealing party knew and ought to have
communicatedthose which are material to the contract. The test of materiality is
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.
Canilang failed to disclose material information when he did not indicate under the
caption Exceptions that he twice consulted a doctor who found him to be suffering from sinus
tachycardia and acute bronchitis. This failure to communicate must have been
intentional, since Jaime could have been aware that his heartbeat would rise to high levels
and that he consulted a doctor twice before applying for insurance.
The preceding statute, Act 2427, provided that a concealment, whether intentional or
unintentional, entitles the injured party to rescind a contract of insurance. However, in PD
1460, this phrase was not present. [The current law, BP 874, has the phrase.] SC rejected
the ICs unspoken theory that the deletion of the phrase intended to limit the kinds of
concealment to intentional concealments. The provision is properly read as referring to
ANY concealment [intentional and unintentional cancel each other out].
CA AFFIRMED; PETITION DENIED

Pacific Banking vs CA

Facts: An open Fire Policy issued to Paramount Shirt

Manufacturing for Php61,000 on the following: stocks, materils,
supplies, furniture, fixture, machinery, equipment contained on the
1st to 3rd floors. Insurance is for a year starting 21 OCTOBER
1964.
Paramount Shirt is debtor of Pacific Banking amounting to
Php800,000. Goods in policy were held in trust by Paramount for
Pacific under thrust receipts. Fire broke out on 4 January 1964.
Pacific sent letter of demand to Oriental. Insurance Adjuster of
Oriental notified Pacific to submit proof of loss pursuant to Policy

Condition 11. Pacific did not accede but asked Insurance Adjuster
to verify records form Bureau of Customs.
Pacific filed for sum of money against Oriental. Oriental alleged that
Pacific prematurely filed a suit, for neither filing a formal claim over
loss pursuant to policy nor submitting any proof of loss.
Trial court decided in favor of Pacific. Decision based on
technicality. The defense of lack of proof of loss and defects were
raised for the 1st time. (On presentation of evidences by Pacific, it
was revealed there was violation of Condition No.3, there were
undeclared co-insurances under same property Wellington,
Empire, Asian. The only declared co-insurances were Malayan,
South Sea, and Victory)
CA reversed decision. Concealment of other co-insurances is a
misrepresentation and can easily be fraud.
Issues:
(1) Whether or not unrevealed con-insurances is a violation of
Policy Condition No.3
(2) Whether or not there was premature filing of action
Held:
(1) Yes. Policy Condition 3 provides that the insured must give
notice of any insurance already in effect or subsequently be in
effect covering same property being insured. Failure to do so, the
policy shall be forfeited.
Failure to reveal before the loss of the 3 other insurances is a clear
misrepresentation or a false declaration. The material fact was
asked for but was not revealed. Representations of facts are the
foundations of the contract. Pacific itself provided for the evidences

in trial court that proved existence of misrepresentation.

(2) Yes. Policy Condition 11 is a sine qua non requirement for
maintaining action. It requires that documents necessary to prove
and estimate the loss should be included with notice of loss. Pacific
failed to submit formal claim of loss with supporting documents but
shifted the burden to the insurance company. Failing to submit
claim is failure for insurance company to reject claim. Thus, a lack
of cause of action to file suit.
Furthermore, the mortgage clause in the policy specifically provides
that the policy is invalidated by reasons of FRAUD,
MISREPRESENTATION and FRAUD. Concealment can easily be
fraud or misrepresentation.
The insured PARAMOUNT is not entitled to proceeds. Moreso,
Pacific as indorsee of policy is not entitled.
Great Pacific Life vs Leuterio:
Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group
life insurance with Development Bank of the Philippines (DBP) wherein Grepalife
agreed to insure the lives of eligible housing loan mortgagors of DBP.
One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr.
Leuterio answered questions concerning his test, attesting among others that he
does not have any heart conditions and that he is in good health to the best of his
knowledge.
However, after about a year, Dr. Leuterio died due to massive cerebral
hemorrhage. When DBP submitted a death claim to Grepalife, the latter denied
the claim, alleging 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.
Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for
Specific Performance with Damages. Both the trial court and the Court of
Appeals found in favor of the widow and ordered Grepalife to pay DBP.
ISSUE:

Whether the CA erred in holding Grepalife liable to DBP as beneficiary in a group

life insurance contract from a complaint filed by the widow of the
decedent/mortgagor
HELD:
The rationale of a group of 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. 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. In this type of policy
insurance, the mortgagee is simply an appointee of the insurance fund. Such losspayable clause does not make the mortgagee a party to the contract.
The insured, being the person with whom the contract was made, is primarily the
proper person to bring suit thereon. Subject to some exceptions, insured may thus
sue, although the policy is taken wholly or in part for the benefit of another
person, such as a mortgagee.
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.
Ng gan Zee vs Asian Crusader

In1962,KwonNamappliedfora20yrendowmentinsuranceonhislifewithhiswife,NgGan
Zeeasthebeneficiary.
>Hestatedinhisapplicationthathewasoperatedonfortumorofthestomachassociatedwith
ulcer.
>In1963,Kwongdiedofcanceroftheliverwithmetastasis.Asianrefusedtopayonthe
groundofalseinformation.
>Itwasfoundthatpriortohisapplication,Kwongwasdiagnosedtohavepepticulcers,and
thatduringtheoperationwhatwasremovedfromKwongsbodywasactuallyaportionofthe
stomachandnottumor.

Issue:

Whetherornotthecontractmayberescindedonthegroundoftheimperfectioninthe
applicationform.

Held:

NO.
Kwongdidnothavesufficientknowledgeastodistinguishbetweenatumorandapepticulcer.
Hisstatementthereforewasmadeingoodfaith.Asianshouldhavemadeaninquiryastothe
illnessandoperationofKwongwhenitappearedonthefaceoftheapplicationthataquestion
appearedtobeimperfectlyanswered.Asiansfailuretoinquireconstitutedawaiverofthe
imperfectionintheanswer.

PhilamCare vs CA
Facts:
Ernani Trinos applied for a health care coverage with Philam. He answered no to a
question asking if he or his family members were treated to heart trouble, asthma,
diabetes, etc.
The application was approved for 1 year. He was also given hospitalization benefits
and out-patient benefits. After the period expired, he was given an expanded coverage
for Php 75,000. During the period, he suffered from heart attack and was confined at
MMC. The wife tried to claim the benefits but the petitioner denied it saying that he
concealed his medical history by answering no to the aforementioned question. She
had to pay for the hospital bills amounting to 76,000. Her husband subsequently
passed away. She filed a case in the trial court for the collection of the amount plus
damages. She was awarded 76,000 for the bills and 40,000 for damages. The CA
affirmed but deleted awards for damages. Hence, this appeal.
Issue: WON a health care agreement is not an insurance contract; hence the
incontestability clause under the Insurance Code does not apply.
Held: No. Petition dismissed.
Ratio:
Petitioner claimed that it granted benefits only when the insured is alive during the
one-year duration. It contended that there was no indemnification unlike in insurance
contracts. It supported this claim by saying that it is a health maintenance organization
covered by the DOH and not the Insurance Commission. Lastly, it claimed that the
Incontestability clause didnt apply because two-year and not one-year effectivity
periods were required.
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.
Section 3 states: every person has an insurable interest in the life and health:

(1) of himself, of his spouse and of his children.

In this case, the husbands health was the insurable interest. The health care
agreement was in the nature of non-life insurance, which is primarily a contract of
indemnity. The provider must pay for the medical expenses resulting from sickness or
injury.
While petitioner contended that the husband concealed materialfact of his sickness,
the contract stated that:
that any physician is, by these presents, expressly authorized to disclose or give
testimony at anytime relative to any information acquired by him in his professional
capacity upon any question affecting the eligibility for health care coverage of the
Proposed Members.
This meant that the petitioners required him to sign authorization to furnish reports
about his medical condition. The contract also authorized Philam to inquire directly to
his medical history.
Hence, the contention of concealment isnt valid.
They cant also invoke the Invalidation of agreement clause where failure of the
insured to disclose information was a grounds for revocation simply because the
answer assailed by the company was the heart condition question based on the
insureds opinion. He wasnt a medical doctor, so he cant accurately gauge his
condition.
Henrick v Fire- in such case the insurer is not justified in relying upon such statement,
but is obligated to make further inquiry.
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the
provider.
Having assumed a responsibility under the agreement, petitioner is bound to answer
the same to the extent agreed upon. In the end, the liability of the health care provider
attaches once the member is hospitalized for the disease or injury covered by the
agreement or whenever he avails of the covered benefits which he has prepaid.
Section 27 of the Insurance Code- a concealment entitles the injured party to rescind
a contract of insurance.
As to cancellation procedure- Cancellation requires certain conditions:
1.
Prior notice of cancellation to insured;
2.
Notice must be based on the occurrence after effective date of the policy of one
or more of the grounds mentioned;
3.
Must be in writing, mailed or delivered to the insured at the address shown in the
policy;
4.
Must state the grounds relied upon provided in Section 64 of the Insurance Code
and upon request of insured, to furnish facts on which cancellation is based
None were fulfilled by the provider.
As to incontestability- The trial court said that under the title Claim procedures of
expenses, the defendant Philamcare Health Systems Inc. had twelve months from the
date of issuance of the Agreement within which to contest the membership of the
patient if he had previous ailment of asthma, and six months from the issuance of the

agreement if the patient was sick of diabetes or hypertension. The periods having
expired, the defense of concealment or misrepresentation no longer lie.