INSURANCE REVIEWER– Atty.

Quimson

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

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

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

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


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


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

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INSURANCE REVIEWER– Atty. Quimson

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

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

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

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INSURANCE REVIEWER– Atty. Quimson 

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

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

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

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was entered into between him and one Robert Garcia. While the said receipt appears to have been a filled-up form of Fidelity. While the three fire insurance policies were in force. allowed such a ruse. is proven by the fact that Verendia himself filed 3D SY 2004-2005 rhys alexei . that all benefits under the policy shall be forfeited "if the claim be in any respect fraudulent. insured the same property with two other insurance companies for a total coverage of around P900. during the trial. 1981 covering Rafael (Rex) Verendia's residential in the amount of P385. Verendia. however. inflated the value of the property by the alleged monthly rental of P6. As it is also a contract of adhesion. specifically Section 13 thereof which is expressed in terms that are clear and unambiguous. The contract of lease upon which Verendia relies to support his claim for insurance benefits.000. More significantly. Despite demands. a couple of days after the effectivity of the insurance policy. according to the investigation by the police. or if any false declaration be made or used in support thereof. he forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof that Fidelity waived such provision There is also no reason to conclude that by submitting the subrogation receipt as evidence in court. It is even incomplete as the blank spaces for a witness and his address are not filled up. or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy".500) when in fact. that Verendia maliciously represented that the building at the time of the fire was leased under a contract executed on June 25. when actually it was a Marcelo Garcia who was the lessee. the foregoing discussion pointing to the fact that Verendia used a false lease contract to support his claim under Fire Insurance Policy.685. having presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract. an insurance contract should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it . Fidelity refused payment under its policy.000 Fidelity. averred that the policy was avoided by reason of over-insurance. the insured property was completely destroyed by fire. the terms of the policy should be strictly construed against the insured. the lessor. failed to explain why Marcelo had to sign his cousin's name when he in fact he was paying for the rent and why he (Verendia) himself.00. F-18876 effective between June 23. who had also been paying the rentals all the while.000. Basically a contract of indemnity. an insurance contract is the law between the parties. Its terms and conditions constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right to recovery from the. Roberto Garcia was "renting on the otherside of said compound" These pieces of evidence belie Verendia's uncorroborated testimony that Marcelo Garcia whom he considered as the real lessee. however. 1980 and June 23. Considering. the building appeared to have "no occupants" and that Mr. 1980 to a certain Roberto Garcia. it appears that Robert Garcia was still within the premises. Designated as beneficiary was the Monte de Piedad & Savings Bank. Fidelity appraised the damage amounting to 385. and created a dead-end for the adjuster by the disappearance of Robert Garcia.000. Verendia failed to live by the terms of the policy. that Verendia had not received the amount stated therein. to have sufficient bases: Verendia concocted the lease contract to deflect responsibility for the fire towards an alleged "lessee". therefore. was occupying the building when it was burned. The Country Bankers Insurance for P56. Verendia.300. namely. Verendia also insured the same building with two other companies.INSURANCE REVIEWER– Atty. However. the Provincial Assessor of Rizal had assessed the property's fair market value to be only P40. Fidelity bound itself to a "mutual agreement" to settle Verendia's claims in consideration of the amount of P142.00.000 when it was accordingly informed of the loss. Quimson page 7      Fidelity and Surety Insurance Company (Fidelity) issued Fire Insurance Policy No. Fidelity's conclusions on these proven facts appear. Verendia admitted that it was not Robert Garcia who signed the lease contract but it was Marcelo Garcia cousin of Robert. Issue: WON Verendia can claim on the insurance despite the misrepresentation as to the lessee and the overinsurance. the same receipt states that Verendia had received the aforesaid amount.00 and The Development Insurance for P400. no representative of Fidelity had signed it.000. Held: NOPE. thus prompting Verendia to file a complaint for the recovery of 385. Ironically. When the rented residential building was razed to the ground. However.77.00.

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

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

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

1990. Julita instituted. an action for damages against Philamcare. Petitioner argues that respondent's husband concealed a material fact in his application. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. he was entitled to avail of hospitalization benefits. 1990. While her husband was in the hospital.000. and under such. According to Philamcare. Later. 1989. the same was extended for another year from March 1. Due to financial difficulties. She asked for reimbursement of her expenses plus moral damages and attorney's fees. The periods having expired. opinion. Sec. a representation of the expectation. 1988 to March 1. treatment or any other medical advice or examination. diabetic and asthmatic. especially coming from respondent's husband who was not a medical doctor. o Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. 1990. hence the "incontestability clause" under the Insurance Code Title 6. An undisclosed or misrepresented information is deemed material if its revelation would have resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for. This largely depends on opinion rather than fact. Philamcare denied her claim saying that the Health Care Agreement was void. whether intentional or unintentional.000. In the morning of April 13. intention. he was admitted at the Chinese General Hospital (CGH). 1990 to June 1. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. During the period of his coverage. 48 does not apply. He was a issued Health Care Agreement.INSURANCE REVIEWER– Atty. belief. It appears that in the application for health coverage. injury or other stipulated contingent. which is primarily a contract of indemnity. 1990. Under the title Claim procedures of expenses. whether ordinary or emergency. contrary to his answer in the application form. However. CA affirmed. Julita tried to claim the benefits under the health care agreement. Quimson page 11    The application was approved for a period of one year from March 1. Ernani had fever and was feeling very weak. the defense of concealment or misrepresentation no longer lie.      Issues and Resolutions: Philamcare brought the instant petition for review. Philamcare cannot rely on the stipulation regarding "Invalidation of agreement" which reads: Failure to disclose or misrepresentation of any material information by the member in the application or medical examination.00 After her husband was discharged from the MMC. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. (A)lthough false. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9.00 per disability. Julita brought her husband home again. Where matters of opinion or judgment are called for. amounting to about P76. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. or its acceptance at a lower rate of premium. consultation. The health care agreement was in the nature of non-life insurance. Julita had no choice but to pay the hospitalization expenses herself. raising the primary argument that a health care agreement is not an insurance contract. petitioners required respondent's husband to sign an express authorization for any person. Once the member incurs hospital. 1989 to March 1. the health care provider must pay for the same to the extent agreed upon under the contract. The amount of coverage was increased to a maximum sum of P75. then from March 1. RTC decided in favor of Julita. Julita was constrained to bring him back to the CGH where he died on the same day. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. preventive health care and other out-patient services. Upon the termination of the agreement. he was attended by a physical therapist at home. medical or any other expense arising from sickness. had 12 mos from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma. Thus. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. and this is likewise the rule although the 3D SY 2004-2005 rhys alexei . there was concealment regarding Ernani's medical history. Philamcare. SC held that in the case at bar. listed therein.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The life insurance and the retirement insurance are two separate and distinct systems of benefits paid out from 2 separate and distinct funds. And when there exists two marriages. SC held that the disqualification mentioned in Art. as in the case of a life insurance policy if NO beneficiary is named in the insurance policy.5028 years. (27) In Re: Mario Chanliongco 79 SCRA 364 Facts:  Atty. the proceeds of his life insurance were paid by the GSIS to Berdin and her children who were the beneficiaries named in the policy. each to receive an equal share of 1/16.  He failed or overlooked to state in his application for membership with the GSIS the beneficiary or beneficiaries of his retirement benefits should he die before the retirement. each family will be entitled to one-half of the estate. 1951. GSIS 37 SCRA 315 Facts:  Jose Consuegra was employed as a shop foreman of the Office of the District Engineer in Surigao Del Norte.  Since he was in the gov’t service for 22. he contracted two marriages: o First – Rosario Diaz. In case of failure to name a beneficiary in an insurance policy. 2 children = Jose Consuegra Jr. (29) Gercio v. CFI affirmed GSIS decision. (28) Vda. and Pedro but both predeceased him o 2nd – Basilia Berdin. he could NOT have intended those beneficiaries of his life insurance as also the beneficiaries of his retirement insurance because the provisions on retirement insurance under the GSIS came about only when CA 186 was amended by RA 660 on June 18. (this was contracted in GF while the first marriage subsisted)  Being a GSIS member when he died. an atty of the SC and a GSIS member. Sec. or before 1943. Sun Life (repeat. 11(b) clearly indicates that there is need for the employee to file an application for retirement insurance benefits when he becomes a GSIS member and to state his beneficiary. for which no beneficiary was designated.  Both families filed their claims with the GSIS. because she was not guilty of concubinage . during the early part of 1943. the proceeds will accrue to the estate of the insured. 739 is NOT applicable to Candelaria. Issue: Who will benefit from the proceeds? Held: The retirement benefits shall accrue to his estate and be distributed among his legal heirs in accordance with the law on intestate succession. Quimson page 36 CC. Changliongco. De Consuegra v. When Consuegra. The beneficiary named in the life insurance does NOT automatically become the beneficiary in the retirement insurance. case #18) 48 PHIL 53 Facts: 3D SY 2004-2005 rhys alexei . there bieing NO proof that she had actual knowledge of the previous marriage of her husband.INSURANCE REVIEWER– Atty.  When he was still alive. 7 children. Issue: To whom should the retirement insurance benefits be paid? Held: Both families are entitled to half of the retirement benefits. died ab intestate. designated his beneficiaries in his life insurance.  Berdin went to CFI on appeal. which ruled that the legal heirs were Diaz who is entitled to one-half or 8/16 of the retirement benefits and Berdin and her children were entitled to the remaining half. he was entitled to retirement insurance benefits.

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

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

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

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

Thailand to Manila against all risks under warehouse to warehouse terms. mere possession of an equitable title. it cannot now allege that complainant has no insurable interest on the property insured.653. Issues and Resolutions: (1) WON the loss through theft or robbery claimed is within the coverage of the policy.940 metric tons not 600 tons at $395. Furthermore. Zenith is now precluded by the equitable principle of estoppel from impugning and dishonoring the very insurance policy contract it issued and the endorsement and increase in the coverage made through its duly authorized agent. because at the time it became operative. 15 of the IC allows the insurance of a mere contingent or expectant interest in anything if the same is founded on an actual right to the thing. Filipino brought a third party complaint against Compagnie Maritime Des Chargeurs Reunis and/or E. limit compensability to that stated in the enumeration.568. gives rise to insurable interest in the property in which such title inheres. “the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. CA 179 SCRA 638 Facts:     The Chao Tiek Seng a consignee of the shipment of fishmeal loaded on board the vessel SS Bougainville and unloaded at the Port of Manila on or about December 11. the property still hot having been delivered to him. what was imported was 59. atty’s fees. as reiterated by the SC. considering that Zenith’s agent had been fully apprised of the circumstances prior to the actual issuance of the policy and the endorsement. 3D SY 2004-2005 rhys alexei . The foregoing policy is supported by the long time honored doctrine of “contra proferentem: which provides that: “any ambiguity in the policy shall be resolved in favor of the insured and against the insurer”.INSURANCE REVIEWER– Atty. while theft or robbery is NOT insured against in the policy. found for the complainant in this wise: While the policy enumerated the risks covered. and litigation expenses. The enumerated risks excluded did not include theft or robbery committed or perpetrated by an unidentified culprit. The complainant has insurable interest in the insured property at the time of the procurement of the insurance policy. the complainant was NOT yet the owner of the property insured. like that pertaining to the buyer. however. Actually. 1976 and seeks to recover from Filipino the amount of P51.62 representing damages to said shipment which has been insured by Filipino. etc. Quimson page 41   Complainant seeks not only the payment of said insurance claim of 70T plus legal interest. and BA finance had no insurable interest yet.42 a ton. Inc. As the CC provides. As this is the case. The Insurance Commissioner. in its express terms. and for failure to give timely notice of loss o Complainant and/or BA Finance is guilty of concealment and misrepresentation at the time they secured the policy. or upon any valid contract.” and Sec. hence the complainant’s claim for damages is compensable. the BA Finance Corp o The policy insures against loss or damage caused by fire and lightning. unattended and deserted while entrusted to him. Zenith on the other hand contends that: o Complainant is not the real party in interest since the policy carries with it a designated loss payee. henceforth. (2) WON the complainant was with insurable interest therein when the said policy contract was procured. it does NOT.59 for the goods described as 600 metric tons of fishmeal in gunny bags of 90 kilos each from Bangkok. seeking judgment against the third party defendants in case judgment is rendered against it. it not having been expressly mentioned o Loss nevertheless is excluded under the exception of “infidelity exclusion” by the operator who left it unguarded. It appears from the evidence presented that Chao insured said shipment with Filipino for the sum of P267. (34) Filipino Merchants v. This is true because insurance contracts are essentially contracts of adhesion and applicants for insurance have no choice but to accept the terms and conditions in the policy even if they are not in full accord therewith. Razon. but also the revocation or cancellation of the license of Zenith to do insurance business. the contract of insurance was VOID AB INITIO for lack of insurable interest at the time the insurance took effect.

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

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

notwithstanding the fact that he has received from Z 1M as advance payment. What is the extent of the insurable interest of A? It is still 4M.000. the policies were renewed. Dunn sold the property to Harding. reduces and diminished the amount which the insurer is bound to pay. Both policies required assignments to be approved and noted on the policy. Anything that reduces or diminishes the loss. 3D SY 2004-2005 rhys alexei . 12.  Brias. Hence the insurer is liabile for 20T. How much is he entitled to recover? A is entitled to recover only the value of his loss which is 100T and not 120T because it is against public policy to profit from a loss. not wanting to issue a policy for the entire amount.000 for P120. In other words. and the rights to succession are transmitted only from the moment of the death of the decedent. A mere contingent or expectant interest in anything.  Premiums were paid by SMB and charged to Dunn. SMB’s general manager. not founded on an actual right to the thing. Examples: A son cannot insure the property of his father which he expects to inherit from the latter. 13.000? What is the liability of the Insurance Company? The insurance claim is reduced in the same amount of 80T. 4M was the extent to which A was damnified by the loss of the house.  Law Union. Law Union Rock Insurance Company (repeat – case #12) 40 PHIL 674 Facts:  On Jan. A year later. Brias stated that SMB’s interest in the property was merely that of a mortgagee. In the application. A finished the house on July 13. the reason being. What if the one who caused the damage.  In 1917.500 and procured another policy of equal amount from Filipinas Cia de Seguros.  Dunn likewise authorized SMB to take out the insurance policy for him. Problems. 1918. the house burned down. Cases: (36) San Miguel Brewery v. The reason why he is entitled to the whole 4M is. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty. he has to replace the house destroyed with another house worth 4M as per the contract. approached Law Union for insurance to the extent of 15T upon the property. A insured his property valued at P100. A constructed a house in Ayala Alabang for 4M for Z who made an advance payment of 1M. nor upon any valid contract for it. is not insurable.  Mortgage contract stated that Dunn was to have the property insured at his own expense. but no assignment of the policies was made to the latter. B paid A P80. The measure of an insurable interest in the property is the extent to which the insured might be damnified by loss or injury thereof.INSURANCE REVIEWER– Atty. the balance to be paid upon deliver of the house on Aug. not one valued at only 3M. What does this section mean? Mere hope or expectation of benefit which may be frustrated by the happening of some event uncoupled with any present legal right will not support a contract of insurance. their interest is merely an expectancy of inheriting. authorizing SMB to choose the insurers and to receive the proceeds thereof and retain so much of the proceeds as would cover the mortgage debt. or a husband insuring the paraphernal property of his wife. issued one for P7. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. 1993. Quimson page 44 Section 16. A suffered a total loss. Under a building contract. Before delivery of the house in August. 1993 so he insured the house against fire for 4M. Section 17.

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

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

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

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

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

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

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

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

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

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

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

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

On June 26. required a higher premium for the same coverage. would obviously erase Section 27 from the Insurance Code of 1978. if accepted. ultra-sonography and hematology tests. A check representing the total premiums paid in the amount of P10." that is to say. thus rendering the contract of insurance voidable. Bernarda. except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. that "probable and reasonable influence of the facts" concealed must. Bernarda and her husband.172. where he was diagnosed for renal failure. the information concealed must be information which the concealing party knew and "ought to [have] communicate[d]. Moreover. Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the communication should have been made. 1986. Such failure precisely constituted concealment on the part of Canilang. Sun Life conducted an investigation and its findings prompted it to reject the claim. in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance. He was issued a life insurance policy with double indemnity in case of accidental death. 1987. CA 245 SCRA 268 (1995) Facts:    On April 15. it held that the health history of the insured was immaterial since the insurance policy was "non-medical. the diagnosis made and the medicines prescribed by such doctor. by the judge ultimately. Wilfredo B. the insured died in a plane crash. 3D SY 2004-2005 rhys alexei . be determined objectively. at the very least.   Issue: WON the beneficiary can claim despite the concealment. Sun Life discovered that 2 weeks prior to his application. The materiality of the information withheld by Canilang from Grepalife did not depend upon the state of mind of Jaime Canilang. Bacani was examined and confined at the Lung Center of the Philippines. Had Canilang disclosed his visits to his doctor. in the insurance application. of course. The information which Canilang failed to disclose was material to the ability of Grepalife to estimate the probable risk he presented as a subject of life insurance." CA affirmed. Held: NOPE. He did not reveal such fact in his application. that the insured did not disclosed material facts relevant to the issuance of the policy. Claudio who had found him to be suffering from "sinus tachycardia" and "acute bronchitis. The designated beneficiary was his mother.INSURANCE REVIEWER– Atty. it may be reasonably assumed that Grepalife would have made further inquiries and would have probably refused to issue a non-medical insurance policy or. Bacani procured a life insurance contract for himself from Sun Life. SC found it difficult to take seriously the argument that Grepalife had waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilang's failure to set out answers to some of the questions in the insurance application. RTC ruled for Bernarda holding that the facts concealed by the insured were made in good faith and under the belief that they need not be disclosed. Held: SC took note of the fact that Canilang failed to disclose that hat he had twice consulted Dr. Neither does materiality depend upon the actual or physical events which ensue. information which was "material to the contract. During his confinement. Bernarda Bacani filed a claim with Sun Life. A man's state of mind or subjective belief is not capable of proof in our judicial process. (53) Sun Life v. In its letter. Quimson page 57 Issue: WON Grepalife is liable. filed an action for specific performance against Sun Life. Sun Life informed Berarda. seeking the benefits of the insurance.00 was attached to said letter. Under the relevant provisions of the Insurance Code. the deceased was subjected to urinalysis. Petitioner's argument.

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

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

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

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

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

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

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

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

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

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

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

provided he gives the explanation that he represents so on the information of others.. whose duty it is in the ordinary course of business to communicate such information to his principal. On Sept. and which he believes to be true. the insured will be liable for the truth. What is the effect where information is obtained from the agent of the insured? If the information proceeds from an agent of the insured. 2004. 2004. Problem. Harding. the insured cannot recover on the policy. He then gave the car to his wife Mrs. Harding was having the car repaired at the Luneta Garage (Luneta was an agent of Smith Bell and Co. The truth of the statement made by the insured at the date of the application of her age is surely to be tested as of the date of the application. or he may submit the information. James is the shipowner. unless it proceeds from an agent of the insured. with the explanation that he does so on the information of others. James apples for an insurance upon Titanic “Lost or Not Lost” with Jack and Rose Insurance Co. Quimson page 69 The insurer is stupid. and in neither case is he responsible for its truth. If the representation turns out to be false. and it is possible for the agent under such circumstances in the exercise of due diligence to have made such communication before the making of the contract.INSURANCE REVIEWER– Atty. and if the latter effects an insurance on the ship “lost or not lost” in ignorance of the antecedent loss due to the fraud or negligence of the captain. 16. he may nevertheless repeat information which he has upon the subject. whose duty it is to give the information. Section 43.8T and not 3T. Mrs. a captain of the ship is bound to communicates its loss to the owner. the latter induced Mrs. the car was damaged by fire. Harding agreed. 43. in its whole extent. and Smith Bell sent an agent to Luneta Garage. Commercial Union Assurance Company 38 PHIL 464 Facts:  Henry Harding bought a car for 2T in 1915. which in turn is Commercial Union’s agent). who together with the manager of LUneta. Harding to insure the care with Commercial. appraised the car and declared that its present value was P3T. What is the effect where information is obtained from third persons? Under Sec. Can James still recover on the policy? NO. Held: Commercial is liable. A already knew that the ship was lost at sea but did not tell James. In which case. Commercial refused to pay because the car’s present value was only 2. to the insurer. Issue: WON Commercial is liable. he may report information obtained from friends and relatives if he likes.    While Mrs. 19. Subsequently. Case: (62) Harding v. It would e absurd to say that this representation was fatally false because at the time of the acceptance of the application and the completion of the contract it was no longer true. When a person insured has no personal knowledge of a fact. he is not responsible for the truth of the information. However as of Sept. the insured is given discretion to communicate to the insurer what he knows of a matter of which he has no personal knowledge. This amt was written in the proposal form which Mrs. he is NOT responsible therefor. Example? If the insured has no personal knowledge of the causes of the death of his parents because they died when the injured was still an infant. A is the captain of Titanic. Harding signed. 3D SY 2004-2005 rhys alexei .

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

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

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

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

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

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

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

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

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

asthma or peptic ulcer? (If Yes. 2001. heart trouble. he answered NO to the following question: “Have you or any of your family members ever consulted or been treated for high blood pressure. diabetes. Is the answer still the same? This time. Later. CA affirmed. The concealment that B made when he applied for the reinstatement is not incontestable. The insurer is once again given two years from the date of reinstatement to investigate the veracity of the facts represented by the insured in the application for reinstatement. he was admitted at the Chinese General Hospital (CGH). there was concealment regarding Ernani's medical history. liver disease. SC held that in the case at bar. 1990. whether ordinary or emergency. The health care agreement was in the nature of non-life insurance. He was a issued Health Care Agreement. Once the member incurs hospital. Ernani had fever and was feeling very weak. Since the reinstatement was made in Apr. 48 provides that the two years are counted from the time the date of its issue or of its last reinstatement. amounting to about P76. cancer. Julita was constrained to bring him back to the CGH where he died on the same day. RTC decided in favor of Julita. During the period of his coverage. 1990. Quimson page 79 No. the counting of the two-year period should start from there. he was attended by a physical therapist at home. the same was extended for another year from March 1.000. Julita instituted. 3D SY 2004-2005 rhys alexei . he was entitled to avail of hospitalization benefits. preventive health care and other out-patient services. Same facts. an action for damages against Philamcare. Sec. diabetic and asthmatic. then from March 1. which is primarily a contract of indemnity. The amount of coverage was increased to a maximum sum of P75. 1988 to March 1. While her husband was in the hospital.00 per disability. (Soliman v. Due to financial difficulties. She asked for reimbursement of her expenses plus moral damages and attorney's fees. the health care provider must pay for the same to the extent agreed upon under the contract. listed therein. In the standard application form. and under such. Julita brought her husband home again. 1989 to March 1. 1989. it is approximately 1 year and 10 mos up until the death of B. and the insurer can raise the defense of concealment. However. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. Julita had no choice but to pay the hospitalization expenses herself. hence the "incontestability clause" under the Insurance Code Title 6. raising the primary argument that a health care agreement is not an insurance contract. According to Philamcare. US Life) Counting from Apr. give details)” The application was approved for a period of one year from March 1. CA (repeat – case #9) 379 SCRA 356 (2002) Facts:  Ernani Trinos. o Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. 2001. the two year period has lapsed and the policy has become incontestable. Philamcare denied her claim saying that the Health Care Agreement was void. and B died in December 2003. 48 does not apply. 1990.00 After her husband was discharged from the MMC.INSURANCE REVIEWER– Atty. 1990. medical or any other expense arising from sickness. Julita tried to claim the benefits under the health care agreement. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. applied for a health care coverage with Philamcare. Cases: (71) Philamcare v. But instead.         Issues and Resolutions: Philamcare brought the instant petition for review. injury or other stipulated contingent. Since the date of reinstatement was April 2001. Upon the termination of the agreement. B died on December 2003.000. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. Sec. In the morning of April 13. contrary to his answer in the application form. C can now collect from the insurance company. 1990 to June 1.

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

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

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

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

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

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

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


  

  

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

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

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

each party must communicate to the other. 25. Art. the person enforcing the contract must show that the terms thereof have been fully explained to him. and considering the findings of both the trial court and the CA as to the Concealment of Lee. and mistake or fraud is alleged. Held: NO. Here.” Here the CA found that the insured deliberately concealed material facts about her physical condition and history and/or concealed with whoever assisted her in relaying false information to the medical examiner. The application was in two parts. both in English. Tang’s position. 2965. 1332 is inapplicable. when fraud or mistake is alleged. all facts within his knowledge which are material to the contract. Lee Su Guat died of Lung cancer. applied for life insurance for 60T with Philamlife. Under said article. Quimson page 86        On Sept. she could not be held guilty of concealment of her health history because the application for insurance was English. In October 1987. In sum.. Accordingly.000. 1332: When one of the parties is unable to read or if the contract is in a language not understood by him. even as fraud or mistake is NOT alleged. 1332 of CC. and the insurer has not proven that the terms thereof had been fully explained to her as provided by Art.000. which means “most abundant good faith”. and which the other has no means of ascertaining. on the contrary. Lee again applied for additional insurance of her life for 40T. the SC affirms their decisions. 1332 is NOT applicable. the obligation to show that the terms of the contract had been fully explained to the party who is unable to read or understand the language of the contract.” “absence of any concealment or deception however slight. in good faith. no further medical exam was made but she accomplished Part 1 (which certified the truthfulness of statements made in Part. NOTE: Art. Issue: WON Art.00. the insurance company is NOT seeking to enforce the contract. Lee Su Guat. Philamlife issued her a policy effective Oct. however. 2) The policy was again approved. As a general rule. 1965.00. 1332 applies. CA 323 SCRA 613 (2000) Facts:   Primitivo Perez had been insured with the BF Lifeman Insurance Corporation since 1980 for P20. “absolute and perfect candor or openness and honesty. Even if we were to say that the insurer is the one seeking the performance of the cont contracts by avoiding paying the claim. Certainly. 61 years old and illiterate who spoke only Chinese. Antonio In a contract of insurance. 15.00 if the premium were paid annually. Both trial court and CA ruled that Lee was guilty of concealment. 1965 with her nephew Vicente Tang as beneficiary. Concurring: J. is that because Lee was illiterate and spoke only Chinese. Philamlife was under no obligation to prove that the terms of the insurance contract were fully explained to the other party. it is seeking to avoid its performance. Art. Tang claimed the amount o 100T but Philamlife refused to pay on the ground that the insured was guilty of concealment and misrepresentation. visited Perez in Quezon and convinced him to apply for additional insurance coverage of P50. 23. it has to be noted as above stated that there has been NO imputation of mistake of fraud by the illiterate insured whose personality is represented by her beneficiary. On Apri 20 1966. It is petitioner who is seeking to enforce it. widow. the petitioner cannot assume inconsistent positions by attempting to enforce the contract of insurance for the purpose of collecting the proceeds of the policy and at the same time nullify the contract by claiming that it was executed through fraud or mistake. devolves on the party seeking to enforce it. The reason for this rule is that insurance policies are traditionally contracts uberrimae fidei. On Nov. Her answers having shown that she was health. Rodolfo Lalog.INSURANCE REVIEWER– Atty. to avail of the ongoing promotional discount of P400. (78) Perez v. Since it was only recent from the time she first applied. 3D SY 2004-2005 rhys alexei . The second part dealt with her state of health. the failure by the insured to disclose conditions affecting the risk of which he is aware makes the contract voidable at the option of the insurer. an agent of Lifeman.

00. Under the abovementioned provision. paid P2. Quimson page 87      Primitivo B. when Lalog personally delivered the application papers to the head office in Manila. or on November 27.00 to Lalog. 1987. to the office of BF Lifeman Insurance Corporationn in Quezon which office was supposed to forward the papers to the Manila office.000. Perez. 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. Perez.075. 3D SY 2004-2005 rhys alexei . 1987. It was only on November 27. together with all its supporting papers. 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. 1987.00 (double indemnity in case of accident) but the insurance company refused to pay the claim under the additional policy coverage of P50. am/are in good health. Consequently. that when Primitivo died on November 25. Perez died while he was riding a banca which capsized during a storm. Held: The contract was not perfected. The receipt issued by Lalog indicated the amount received was a "deposit. paid P2. with respect to the other to give something or to render some service.000. Its assent was given when it issues a corresponding policy to the applicant. which he passed. one party undertakes to compensate the other for loss on a specified subject by specified perils. On November 25." 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. RTC ruled in favor of Perez.00 under the first insurance policy for P20. the insurance company refunded the amount of P2. Perez. Perez accomplished an application form for the additional insurance coverage.000. When Primitivo filed an application for insurance. 1987. Perez was made to undergo the required medical examination. CA reversed.075. on the other hand. for a stipulated consideration.000. 1987 Virginia went to Manila to claim the benefits under the insurance policies of the deceased.      Issue: WON there was a perfected additional insurance contract. Lalog forwarded the application for additional insurance of Perez.00 which Virginia Perez had paid Lifeman filed for the rescission and the declaration of nullity. his application was subject to the acceptance of private respondent BF Lifeman Insurance Corporation. In its letter of January 29. he asked the latter to fill up another application form. Lalog testified that when he went to follow up the papers. BF Lifeman Insurance Corporation approved the application and issued the corresponding policy for the P50. 1987. he found them still in the Quezon office and so he personally brought the papers to the Manila office of BF Lifeman Insurance Corporation.INSURANCE REVIEWER– Atty. his wife. averred that the deceased had fulfilled all his prestations under the contract and all the elements of a valid contract are present." Unfortunately. his application papers for the additional insurance were still with the Quezon office. the insurance company maintained that the insurance for P50. On November 1. Consent must be manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. his application papers for additional insurance coverage were still with the branch office of respondent corporation in Gumaca and it was only two days later. Insurance is a contract whereby. 1987 that said papers were received in Manila.00 and submitted the results of his medical examination. is a meeting of the minds between two persons whereby one binds himself. however. It is not disputed.000.000. A contract.00 on December 2.00 in view of a triple indemnity rider on the insurance policy. The offer must be certain and the acceptance absolute. Lalog lost the application form accomplished by Perez and so on October 28. Without knowing that Perez died on November 25. the proceeds of which amount to P150. At the time of his death. Virginia A. She was paid P40. 1988 to Virginia A. on the other hand. 1987. there was absolutely no way the acceptance of the application could have been communicated to the applicant for the latter to accept inasmuch as the applicant at the time was already dead.00 had not been perfected at the time of the death of Primitivo Perez. Consequently.075.

3D SY 2004-2005 rhys alexei . A policy of insurance must specify: (a) The parties between whom the contract is made. Thus. the date of its effectivity.INSURANCE REVIEWER– Atty. petitioner issued deficiency documentary stamps tax assessment for the year 1984. CIR claims that the "automatic increase clause" in the subject insurance policy is separate and distinct from the main agreement and involves another transaction. Logically. It is clear from Section 173 of the NIRC that the payment of documentary stamp taxes is done at the time the act is done or transaction had and the tax base for the computation of documentary stamp taxes on life insurance policies under Section 183 of NIRC is the amount fixed in policy. the 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. and that. Quimson page 88 (79) CIR v. the additional insurance that took effect in 1984 was an obligation subject to a suspensive obligation. In the instant case. The clause was to take effect in the year 1984. hence." 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 "automatic increase clause" in the policy is in the nature of a conditional obligation under Article 1181. The subject insurance policy at the time it was issued contained an "automatic increase clause. (c) The premium. (d) The property or life insured." Although the clause was to take effect only in 1984. CA affirmed. 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. the original policy was essentially re-issued when the additional obligation was assumed upon the effectivity of this "automatic increase clause" in 1984. The distinctive feature of the "junior estate builder policy" called the "automatic increase clause" already formed part and parcel of the insurance contract. unless the interest of a person insured is susceptible of exact pecuniary measurement. The SC agreed with this contention. or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract. Documentary stamp taxes due on the policy were paid to the petitioner only on the initial sum assured. Here. Lincoln questioned the deficiency assessments and sought their cancellation in a petition filed in the Court of Tax Appeals. a statement of the basis and rates upon which the final premium is to be determined. Held: YES. Section 51. 9 but still a part of the insurance sold to which private respondent was liable for the payment of the documentary stamp tax. as well as the amount of the increase. 8 by which the increase of the insurance coverage shall depend upon the happening of the event which constitutes the obligation. it was written into the policy at the time of its issuance. a deficiency assessment based on the additional insurance not covered in the main policy is in order. (b) The amount to be insured except in the cases of open or running policies. corresponding to the amount of automatic increase of the sum assured on the policy issued by respondent. while no new policy was issued. although the automatic increase in the amount of life insurance coverage was to take effect later on. was already definite at the time of the issuance of the policy. 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. Subsequently. Lincoln Phil Life 379 SCRA 423 (2002) Facts:  In the years prior to 1984. Lincoln issued a special kind of life insurance policy known as the "Junior Estate Builder Policy. hence.    Issue: WON the automatic increase of the sum assured on the policy is taxable. CTA found no basis for the assessment.

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

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

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

some of the logs intended to be exported were lost due to a typhoon. Roberto Narito applied for a 100T life insurance policy with Philamlife Insurance Company. it found out that Narito was unacceptable as an insurance risk. and is subordinated to the act of the company in approving or rejecting the application. Thus in life insurance. Issue: WON the cover not was without consideration. it did not take any action with regard to the controverted insurance coverage. no separate premiums are required to be paid on a cover note. Philamlife Insurance Co. the Associate Medical Director of the insurer. an agent of the insured prepared an application for the life insurance whose annual premium was P1. Vergel de dios. it did not contain. 5. On the same date. The claim was denied. for no such premium could have been paid. the application was signed by Narito. a binding slip or binding receipt does NOT insure by itself. particulars of the shipment that would serve as basis for the computation of the premiums. As a logical consequence. Pacific secured temporary insurance from the Workemen’s Insurance Co.  From the time the insured received the application form its agent on Nov. Orobia. Her opinion was confirmed by Dr. The 2 marine policies bore the number 53H01032 and 53H01033. The regular marine policies were issued by the company in favor of Pacific on Apr 2. (83) Gloria v. (82) Pacific Timber v. contending that said loss may not be considered as covered under the cover note because such became null and void by virtue of the issuance of the marine policies. since by the nature of the cover note. Where an agreement is made between the applicant and the agent. Held: It was with consideration.  On Dec. If the note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued. The acceptance is merely conditional. for its exportation of logs to Japan. pursuant to par. The fact that no separate premium was paid on the cover note before the loss was insured against occurred does not militate against the validity of Pacific’s contention. 1963. 1966.178. Issue: WON the beneficiaries can claim.  It is not sure whether or not Narito was given the Binding Receipt upon his payment of the first premium. 1966. up to Dec. 1963. SC upheld Pacific’s contention that said cover not was with consideration. its purpose would be meaningless for it is in a real sense a contract.INSURANCE REVIEWER– Atty. The insurer’s application form contained a so-called “Binding Receipt” which was detachable. 31. Quimson page 92 Since Grepalife disapproved the insurance application of Ngo. The beneficiaries submitted a claim to the insurer. but what is certain that he was handed a Cashier’s Receipt.  Narito paid the first annual premium on the policy applied for. as all cover notes do not contain. the binding deposit receipt had never became on force at any time. After the issuance of the cover note but BEFORE the issuance of the 2 policies. NO liability shall attach until the principal approves the risk and a receipt is given by the agent. the insurer’s medical examiner. but the latter refused. not a mere application. Workmen issued on said date Cover Note 1010 insuring said cargo. 1966. Pacific filed its claim with the company. thus null and void. 6.  On Oc.  She opined that Narito was insurable. Held: YUP 3D SY 2004-2005 rhys alexei . 6. Narito was examined by Dra. After an underwriting analysis conducted by the insurer. 1966. 73 OG 8660 Facts:  In 1966. E of the said receipt. CA 112 SCRA 199 Facts:     On March 13. Narito was shot and killed. A binding receipt is manifestly merely conditional and does NOT insure outright.

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

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

102. Upon the theory that the insurance proceeds should be directly paid to them. The question of whether a third person has an enforceable interest in a contract must be settled by determining whether the contracting parties intended to tender him such an interest by deliberately inserting terms in their agreement with the avowed purpose of conferring favor upon such third person. Is X entitled to collect the cost of repair? NO. In the instant case the insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any repairmen or material men in case of repair of the car in question. The bill was sent to the insurer’s appraiser. The parties to the 3D SY 2004-2005 rhys alexei .  During the effectivity of the insurance contract. the car figured in an accident. and in case Z was the one who contracted for the repairs. In this case. A had taken out a policy on his car with the stipulation: “loss if any payable to Z. Even if there was a provision in the contract authorizing either A or Z to contract for repairs. Held: NONE. amplifications and limitations established by law. authorized Bonifacio Bros to fix the car. or a provision in favor of a third person not a party to the contract. IN this connection. The car got lost and X. and cannot generally demand the enforcement of the same. with the condition that Mora would insure the car with HS Reyes as beneficiary. As far as the insurance company is concerned. The car was delivered to Mora without the consent of HS Reyes. a third person NOT a party to the contract has NO action against the aprties thereto.     For the cost of Labor and materials. The insurance company filed its answer with a counterclaim for interpleader. with declarations. provided that the contracting parties have clearly and deliberately conferred a favor upon such person. whether the estate remains in the possession of the mortgagor or it passes into the hands of a third person. Mora 20 SCRA 262 Facts:  Enrique Mora mortgaged his Odlsmobile sedan car to HS Reyes Inc. the proceeds must be paid to Z. except in some specific instance provided by law where the contract contains some stipulation in favor of a third person. and without payment to Bonifacio Bros and Ayala. Under this doctrine. v.  The car was then insured with State Insurance Company and the policy delivered to Mora. the mortgagee of the car”. is to rely upon the intention of the parties as disclosed by their contract. this does not mean that X became entitled to claim the proceeds. Bonifacio and Ayala filed a complaint against Mora and the insurer with the municipal court for the collection of P2. Issue: WON there is privity of contract between Bonficacio and Ayala on one hand and State Insurance on the other.  Mora without the knowledge and consent of HS Reyes.INSURANCE REVIEWER– Atty. requiring Bonifacio and HS Reyes to interplead in order to determine who has a better right to the proceeds.102.73. a third person is allowed to avail himself of a benefit granted to him by the terms of the contract. Cases: (85) Bonifacio Bros. Mora was billed P2. Z must pay X. It is fundamental that contracts take effect only between the parties thereto. Problems. Such stipulation is known as a stipulation pour autrui. The insurance company drew a check in the amount of the insurance proceeds and entrusted the check to its appraiser for delivery to the proper party. using materials supplied by the Ayala Auto Parts Company. Consequently. this court has laid down the rule that the fairest test to determine whether the interest of a 3 rd person in a contract is a stipulation pour autrui or merely an incidental interest. X is not privy to the insurance contract. The company then assigned the accident to an insurance appraiser for investigation and appraisal of the damage. Quimson page 95 for public use.73. the owner of the auto repair shop where the car was fixed filed a claim with the insurance company.

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

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

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

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

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

as the transfer of the property has the effect of suspending the insurance until the purchaser becomes the owner of the policy as well as the property insured. Case: (91) San Miguel v.  Insurance Companies contended that they were not liable to Harding because their liability under the policies was limited to the insurable interests of SMB only. and interest in the life or health of a person insured must exist when the insurance takes effect. Trial court ruled against Harding. Law Union Rock (repeat – Case # 12) 40 PHIL 674 Facts:  On Jan. Dunn sold the property to Harding. and when the loss occurs.  Mortgage contract stated that Dunn was to have the property insured at his own expense. but need not exist thereafter or when the loss occurs. Subsequently. Both policies required assignments to be approved and noted on the policy. 1918. not wanting to issue a policy for the entire amount. Harding was left to fend for himself. accident and health insurance. is Paul entitled to collect the insurance money as assignee-mortgagee? NO. An interest in property insured must exist when the insurance takes effect. but no assignment of the policies was made to the latter. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. 12. Also it is provided in the IA that the insurance shall be applied exclusively to the proper interest of the person in whose name it is made. approached Law Union for insurance to the extent of 15T upon the property.  SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. Brias stated that SMB’s interest in the property was merely that of a mortgagee. Undoubtedly.  In 1917. Under the Insurance Act. a change of interest in any part of a thing insured. A purchaser of insured property who does Not take the precaution to obtain a transfer of the policy on the insurance. the policies were renewed. cannot in case of loss.  Brias. B then insured the house for 5T. Section 20. A borrowed 5. unaccompanied by a corresponding change of interest in the insurance. Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies.  SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. SMB’s general manager. recover upon the contract.000 from B.500 and procured another policy of equal amount from Filipinas Cia de Seguros. IF the house burns down. he mortgaged his house to B. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty. Held: NOPE. but need not exist in the meantime.  Law Union. issued one for P7. and to secure payment of his obligation. In the application. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof. but did not make the corresponding transfer of his right over the insurance policy. SMB as 3D SY 2004-2005 rhys alexei . suspends the insurance to an equivalent extent. Except in the cases specified in the next four sections. Harding was made a defendant because by virtue of the sale. Problem.  Property was destroyed by fire. since B did not assign his right over the insurance policy to X. although the policies were issued in SMB’s name.  Dunn likewise authorized SMB to take out the insurance policy for him. he became the owner of the property. until the interests in the thing and the interest in the insurance are vested in the same person.  Premiums were paid by SMB and charged to Dunn. B assigned his mortgage credit to X. and in the cases of life. Quimson page 101 Section 19. SMB filed an action in court to recover on the policies.INSURANCE REVIEWER– Atty. authorizing SMB to choose the insurers and to receive the proceeds thereof and retain so much of the proceeds as would cover the mortgage debt. A year later. Hence the appeal.

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

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