INSURANCE REVIEWER– Atty.

Quimson

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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. What are the present laws that govern insurance (also known as the laws we have to know for exams)?

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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 points, at least, the construction placed by California Courts on California law (and the construction placed by the NY Courts on NY law).

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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 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.

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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 concerned. Both are founded on the same from the premiums of the policy which the of said insurance. As a consequence, the contracts. no different from civil donations insofar as the beneficiary is consideration of liberality. A beneficiary is like a donee because insured pays, the beneficiary will receive the proceeds or profits proscription in Art. 739 should equally operate in life insurance

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. 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

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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.  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.

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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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Fidelity and Surety Insurance Company (Fidelity) issued Fire Insurance Policy No. F-18876 effective between June 23, 1980 and June 23, 1981 covering Rafael (Rex) Verendia's residential in the amount of P385,000.00. Designated as beneficiary was the Monte de Piedad & Savings Bank. Verendia also insured the same building with two other companies, namely, The Country Bankers Insurance for P56,000.00 and The Development Insurance for P400,000.00.

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Fidelity refused payment under its policy. that all benefits under the policy shall be forfeited "if the claim be in any respect fraudulent.000 Fidelity. the lessor. 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. 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". no representative of Fidelity had signed it. allowed such a ruse. having presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract. More significantly. the same receipt states that Verendia had received the aforesaid amount. however. Ironically.500) when in fact. a couple of days after the effectivity of the insurance policy.000 when it was accordingly informed of the loss.000. is proven by the fact that Verendia himself filed the complaint for the full amount of P385. Verendia. thus prompting Verendia to file a complaint for the recovery of 385. during the trial. Fidelity appraised the damage amounting to 385. inflated the value of the property by the alleged monthly rental of P6. 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 appears that Robert Garcia was still within the premises. 1980 to a certain Roberto Garcia. the foregoing discussion pointing to the fact that Verendia used a false lease contract to support his claim under Fire Insurance Policy. The contract of lease upon which Verendia relies to support his claim for insurance benefits. Verendia failed to live by the terms of the policy. Despite demands. and created a dead-end for the adjuster by the disappearance of Robert Garcia.00. Thus. Verendia admitted that it was not Robert Garcia who signed the lease contract but it was Marcelo Garcia cousin of Robert. according to the investigation by the police.77. While the said receipt appears to have been a filled-up form of Fidelity. Fidelity bound itself to a "mutual agreement" to settle Verendia's claims in consideration of the amount of P142. It is even incomplete as the blank spaces for a witness and his address are not filled up. that Verendia maliciously represented that the building at the time of the fire was leased under a contract executed on June 25.00 stated in the policy.000. the terms of the policy should be strictly construed against the insured. that Verendia had not received the amount stated therein. insured the same property with two other insurance companies for a total coverage of around P900. Held: NOPE. was occupying the building when it was burned.INSURANCE REVIEWER– Atty.685. Verendia. Considering. was entered into between him and one Robert Garcia. or if any false declaration be made or used in support thereof.300. an insurance contract should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it . Basically a contract of indemnity. the insured property was completely destroyed by fire. but surely. therefore. to have sufficient bases: Verendia concocted the lease contract to deflect responsibility for the fire towards an alleged "lessee". 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. averred that the policy was avoided by reason of over-insurance. who had also been paying the rentals all the while. Issue: WON Verendia can claim on the insurance despite the misrepresentation as to the lessee and the overinsurance. When the rented residential building was razed to the ground. 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. Fidelity's conclusions on these proven facts appear. Quimson page 7    While the three fire insurance policies were in force. specifically Section 13 thereof which is expressed in terms that are clear and unambiguous. an insurance contract is the law between the parties. However. however. the building appeared to have "no occupants" and that Mr. However. 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 3D rhys alexei . As it is also a contract of adhesion. the Provincial Assessor of Rizal had assessed the property's fair market value to be only P40. the subrogation receipt by itself does not prove that a settlement had been arrived at and enforced. It might be that there had been efforts to settle Verendia's claims. when actually it was a Marcelo Garcia who was the lessee.

the term “Commissioner” means the “Insurance Commissioner. object and cause or consideration.” What are the characteristics of an insurance contract? A contract of insurance has the following characteristics: 1.INSURANCE REVIEWER– Atty. upon the happening of a loss. any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety. 5. shall include: (a) Making or proposing to make. any insurance contract. 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. The object of the contract is the transferring or distributing of the risk of loss. agreements or transactions or that no separate or distinct consideration is received therefor. A better definition he thinks. damage. shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business. A contract of suretyship shall be deemed to be an insurance contract. specifically recognized as constituting the doing of an insurance business within the meaning of this Code. 4. In the application of the provisions of this Code. (d) Doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this code. within the meaning of this Code. or to do some act valuable to the insured or his nominee. (b) Making. credit and conduct of the other What are the elements of an insurance contract? Like any other contract. Whenever used in this Code. (c) Doing any kind of business including a reinsurance business. or proposing to make. 3. as surety. What is an additional element of an insurance contract? 3D rhys alexei . The cause or consideration of the contract is the premium which the insured pays the insurer. damage. the fact that no profit is derived from the making of insurance contracts.” Is the definition of a contract of insurance under Sec. (2) The term “doing an insurance business” or “transacting an insurance business” withing the meaning of this Code. an insurance contract must have consent of the parties. is doing an insurance business as hereinafter provided. is that of Vance who said that a “contract of insurance is an agreement by which one party. only if made by a surety who or which. (3) As used in this Code. promises to pay money or its equivalent. 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. liability or disability arising from an unknown or contingent event. liability or disability from the insured to the insurer. 6. The parties who give their consent in this contract are the insurer and insured. the following terms shall have the respective meanings hereinafter set forth or indicated. Consensual – perfected by the meeting of the minds of the parties 2. damage or liability arising from an unknown or contingent event. unless the context otherwise requires: (1) A “Contract of Insurance” is an agreement whereby one undertakes for a consideration to indemnify another against loss. 7. for a consideration. as insurer. 2 sufficient? De Leon believes that it is not. Quimson page 8 Section 2. as such.

Paterno sent a letter-complaint to the Insurance Commissioner alleging certain problems encountered by agents. b) Making. The complaint prays that provisions on charges and fees stated in the Contract of Agency executed between Philamlife and its agents. any insurance contract. pecuniary estimation. the person acting as a surety is habitually engaged as such for a livelihood. be declared as null and void. c) Doing any kind of business including a reinsurance business. specifically recognized as constituting the doing of an insurance business within the meaning of this Code. as well as the implementing provisions as published in the agents' handbook. page 9 This means that the insured possesses an interest of some kind susceptible of How are insurance contracts classified? Insurance contracts are classified as follows? 1) Life insurance contracts a) Individual (Sections 179-183. supervisors. as surety. (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. Cases: (8) Philamlife v. or proposing to make. 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. Ansaldo 234 SCRA 509 Facts:    Ramon M. Will any suretyship agreement amount to an insurance contract? No. As the insurance policy is prepared solely by the insurer. 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. the ambiguities shall be construed against it and in favor of the insured. Quimson Insurable Interest. Commissioner requested petitioner Rodrigo de los Reyes. agency bulletins and circulars. Furthermore. managers and public consumers of the Philamlife as a result of certain practices by said company. with interest at the prevailing rate reckoned from the date when they were deducted 3D rhys alexei . He also asked that the amounts of such charges and fees already deducted and collected by Philamlife in connection therewith be reimbursed to the agents.INSURANCE REVIEWER– Atty. to comment on respondent Paterno's letter. any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety. In order for a suretyship agreement to come under the purview of the Insurance Code. d) Doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this code. as insurer. in his capacity as Philamlife's president. 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. 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.

or any commission of irregularities. then from March 1. he was entitled to avail of hospitalization benefits. (9) Philamcare v. Insurance Commissioner set the case for hearing and sent subpoena to the officers of Philamlife. cancer. the Insurance Commissioner is hereby authorized. shall include (a) making or proposing to make. insurance companies and other insurance matters. 1989. give details)” The application was approved for a period of one year from March 1. as insurer. 1988 to March 1. whether ordinary or emergency. . The amount of coverage was increased to a maximum sum of P75. Upon the termination of the agreement. or proposing to make. which is defined as follows: "(2) The term 'doing an insurance business' or 'transacting an insurance business. removal of directors and/or officers and/or agents. 1989 to March 1. regulation or ruling of the Insurance Commissioner. or violation of any provision of this Code. to impose upon insurance companies. 2 [2]) Since the contract of agency entered into between Philamlife and its agents is not included within the meaning of an insurance business. (d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code. the following: a) fines not in excess of five hundred pesos a day. (b) making. and b) suspension. listed therein. 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. Philamlife's Senior Assistant Vice-President and Executive Assistant to the President. Section 2 of the Insurance Code cannot be invoked to give jurisdiction over the same to the Insurance Commissioner. at his discretion. The motion to quash was denied. he answered NO to the following question: “Have you or any of your family members ever consulted or been treated for high blood pressure. He was a issued Health Care Agreement. applied for a health care coverage with Philamcare. liver disease. diabetes. to wit: "The Insurance Commissioner shall have the duty to see that all laws relating to insurance. asthma or peptic ulcer? (If Yes. their directors and/or officers and/or agents. Expressio unius est exclusio alterius. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. 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. it does not have jurisdiction." A plain reading of the above-quoted provisions show that the Insurance Commissioner has the authority to regulate the business of insurance.   3D rhys alexei .000. Issue: WON the insurance commissioner had jurisdiction over the legality of the Contract of Agency between Philamlife and its agents. Sec. specifically recognized as constituting the doing of an insurance business within the meaning of this Code. or any order. preventive health care and other out-patient services. 1990.' within the meaning of this Code. Held: No. any contract of suretyship as a vocation and not as merely incidental of the surety. the same was extended for another year from March 1. and/or conducting business in an unsafe or unsound manner as may be determined by the Insurance Commissioner.00 per disability. In the standard application form. instruction. 1990. . . or after due hearing. The general regulatory authority of the Insurance Commissioner is described in Section 414 of the Insurance Code. for any willful failure or refusal to comply with. (Insurance Code. 1990 to June 1. CA 379 SCRA 356 (2002) Facts:  Ernani Trinos. mutual benefit associations and trusts for charitable uses are faithfully executed and to perform the duties imposed upon him by this Code.INSURANCE REVIEWER– Atty. including a reinsurance business. any insurance contract. heart trouble. (c) doing any kind of business." On the other hand. and under such. Quimson page 10    Manuel Ortega. Section 415 provides: "In addition to the administrative sanctions provided elsewhere in this Code. as surety. .

Philamcare denied her claim saying that the Health Care Agreement was void. SC held that in the case at bar. 48 does not apply. since in such case the insurer is not justified in relying upon such statement. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. Thus. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. Later. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. treatment or any other medical advice or examination. While her husband was in the hospital. However. since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. a representation of the expectation. 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. Julita tried to claim the benefits under the health care agreement. Julita was constrained to bring him back to the CGH where he died on the same day. especially coming from respondent's husband who was not a medical doctor.00 After her husband was discharged from the MMC. RTC decided in favor of Julita. raising the primary argument that a health care agreement is not an insurance contract.      Issues and Resolutions: Philamcare brought the instant petition for review. belief. 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. an action for damages against Philamcare. and this is likewise the rule although the statement is material to the risk. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. Under the title Claim procedures of expenses. Ernani had fever and was feeling very weak. injury or other stipulated contingent. medical or any other expense arising from sickness. Julita brought her husband home again. as a matter of expectation or belief. Due to financial difficulties. Julita had no choice but to pay the hospitalization expenses herself.000. 3D rhys alexei . (A)lthough false. Petitioner argues that respondent's husband concealed a material fact in his application. there was concealment regarding Ernani's medical history. o Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. Sec. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true. which is primarily a contract of indemnity. 1990. According to Philamcare. hence the "incontestability clause" under the Insurance Code Title 6. to be actually untrue. It appears that in the application for health coverage. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. whether intentional or unintentional. intention. Philamcare. The periods having expired. Where matters of opinion or judgment are called for. CA affirmed. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. or its acceptance at a lower rate of premium. opinion. This largely depends on opinion rather than fact. petitioners required respondent's husband to sign an express authorization for any person. amounting to about P76. contrary to his answer in the application form. Quimson  page 11 During the period of his coverage. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. or the impossibility of which is shown by the facts within his knowledge. In the morning of April 13. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. The health care agreement was in the nature of non-life insurance. 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. Julita instituted. that which he then knows.INSURANCE REVIEWER– Atty. consultation. 1990. Once the member incurs hospital. diabetic and asthmatic. but is obligated to make further inquiry. the defense of concealment or misrepresentation no longer lie. if the statement is obviously of the foregoing character. he was attended by a physical therapist at home. Philamcare cannot rely on the stipulation regarding "Invalidation of agreement" which reads: Failure to disclose or misrepresentation of any material information by the member in the application or medical examination. he was admitted at the Chinese General Hospital (CGH).

By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. may notwithstanding such minority. 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. subject to the provisions of this chapter. In any case. must be liberally construed in favor of the subscriber. Any contingent or unknown event. and exclusionary clauses of doubtful import should be strictly construed against the provider. 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. What perils or risk may be insured? The following risks may be insured: 1. 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. Any contingent or unknown event whether past or future which may cause damage to a person having an insurable interest. petitioner is liable for claims made under the contract. whether past or future. husband. In the end. provided the insurance is taken on his own life and the beneficiary appointed is the minor’s estate or the minor’s father. "a concealment entitles the injured party to rescind a contract of insurance.INSURANCE REVIEWER– Atty. 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 minor of the age of eighteen years or more. None of the above pre-conditions was fulfilled in this case. may be insured against. petitioner is bound to answer the same to the extent agreed upon. unless otherwise provided in the policy. Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. or 3D rhys alexei . the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. Having assumed a responsibility under the agreement. with any insurance company duly authorized to do business in the Philippines. the terms of an insurance contract are to be construed strictly against the party which prepared the contract — the insurer. In this case. The phraseology used in medical or hospital service contracts. CHAPTER 1 CONTRACT OF INSURANCE TITLE I – WHAT MAY BE INSURED Section 3. When the terms of insurance contract contain limitations on liability. such as the one at bar. contract for life. 4. Being a contract of adhesion. All rights. to furnish facts on which cancellation is based." The right to rescind should be exercised previous to the commencement of an action on the contract. wife. brother or sister. courts should construe them in such a way as to preclude the insurer from noncompliance with his obligation. child. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured. 3. mother. Besides. Must be in writing. or create a liability against him. Under Section 27 of the Insurance Code. Quimson page 12 The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. mailed or delivered to the insured at the address shown in the policy. This is equally applicable to Health Care Agreements. ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned. especially to avoid forfeiture. Prior notice of cancellation to insured. 2. health and accident insurance. and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted. with or without the authority to investigate. which may damnify a person having an insurable interest. no rescission was made.

intimidation. Without the knowledge of both parties. May a minor take out an insurance? Third par of Sec. Case. or when it is otherwise declared by stipulation. May a married woman take out an insurance? If so. A then sent 5 of his cargo vessels to Taiwan. These contracts are binding. CA (repeat – Case #09) 379 SCRA 356 Facts:  Ernani Trinos. An insurance against an unknown past event is peculiar only to marine insurance. whether past or future. is liable because he agreed to pay even though the ship be already lost. The contract is valid and B Insurance Co. cancer. transfer the administration of his or her exclusive property to the other by means of a public instrument. which may create liability against the person insured. 110 (FC). could not be foreseen. which shall be recorded in the registry of property of the place where the property is located. diabetes. Problem: A. 13. A insured the 5 vessels against perils of the South China Sea “Lost or Not Lost” with B Insurance Co. 3 is no longer applicable. On August 14. Quimson said in class that nowadays. or which. wanted to open a medicinal herb shop. 14. They are susceptible of ratification. 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. her paraphernal property. undue influence or fraud. The spouses retain the ownership. However. on what? Yes. 1174 (NCC). Except in cases expressly specified by the law. 1327 (NCC). Art. Art. Quimson 2. Atty. 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. The following cannot give consent to a contract: (1) Unemancipated minors. A married woman may take out an insurance on her life or that of her children even without the consent of her husband. since the age of majority is now 18 years old (RA 8809. liver disease. The ships left on August 9. asthma or peptic ulcer? (If Yes. Either spouse may during the marriage. 1989). 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. and deaf-mutes who do not know how to write. (10) Philamcare v. She may likewise take out an insurance on the life of her husband. or on property given to her by her husband. Art. the ships had already sunk on Aug. Is B Insurance Co. page 13 Any contingent or unknown event. he answered NO to the following question: “Have you or any of your family members ever consulted or been treated for high blood pressure. were inevitable. or when the nature of the obligation requires the assumption of risk.INSURANCE REVIEWER– Atty. The following contracts are voidable or annullable. applied for a health care coverage with Philamcare. 1390 (NCC). heart trouble. unless they are annulled by a proper action in court. give details)” 3D rhys alexei . (2) Those where the consent is vitiated by mistake. administration and enjoyment of their exclusive properties. liable for the ships? Yes. possession. 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. In the standard application form. (2) Insane or demented persons. What are they? Art. Dec. though foreseen. violence. Atty Quimson asked us to look at a few provisions of law with respect to this section. no person shall be responsible for those events which.

1990. While her husband was in the hospital. whether intentional or unintentional.000. or its acceptance at a lower rate of premium. The amount of coverage was increased to a maximum sum of P75. the same was extended for another year from March 1. 1990. Julita tried to claim the benefits under the health care agreement. 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. 48 does not apply. Petitioner argues that respondent's husband concealed a material fact in his application. Julita was constrained to bring him back to the CGH where he died on the same day. hence the "incontestability clause" under the Insurance Code Title 6. During the period of his coverage. preventive health care and other out-patient services. there was concealment regarding Ernani's medical history. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk.      Issues and Resolutions: Philamcare brought the instant petition for review. contrary to his answer in the application form. CA affirmed. Philamcare denied her claim saying that the Health Care Agreement was void. She asked for reimbursement of her expenses plus moral damages and attorney's fees. petitioners required respondent's husband to sign an express authorization for any person. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. 1990. Julita instituted. Later. Where matters of opinion or judgment are called for. 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. Sec.00 per disability. amounting to about P76.000. then from March 1. diabetic and asthmatic. injury or other stipulated contingent. belief. 1989 to March 1. which is primarily a contract of indemnity. Quimson page 14    The application was approved for a period of one year from March 1. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. According to Philamcare. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. opinion. intention. 1990 to June 1. he was admitted at the Chinese General Hospital (CGH). He was a issued Health Care Agreement. 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. especially coming from respondent's husband who was not a medical doctor. This largely depends on opinion rather than fact. Under the title Claim procedures of expenses. he was attended by a physical therapist at home.INSURANCE REVIEWER– Atty. Ernani had fever and was feeling very weak. and under such. o Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. an action for damages against Philamcare. Julita had no choice but to pay the hospitalization expenses herself. 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. and this is likewise the rule although the statement is 3D rhys alexei . SC held that in the case at bar. The health care agreement was in the nature of non-life insurance. The periods having expired. 1988 to March 1. Julita brought her husband home again. Thus. 1990. medical or any other expense arising from sickness. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. treatment or any other medical advice or examination.00 After her husband was discharged from the MMC. raising the primary argument that a health care agreement is not an insurance contract. RTC decided in favor of Julita. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. consultation. Upon the termination of the agreement. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. Once the member incurs hospital. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. 1989. It appears that in the application for health coverage. Due to financial difficulties. the health care provider must pay for the same to the extent agreed upon under the contract. the defense of concealment or misrepresentation no longer lie. However. whether ordinary or emergency. a representation of the expectation. In the morning of April 13. listed therein. Philamcare. (A)lthough false.

2. Quimson page 15 material to the risk. no rescission was made. but is obligated to make further inquiry. 4. the terms of an insurance contract are to be construed strictly against the party which prepared the contract — the insurer. What are the three essential elements of lottery? Consideration. In the end. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured. prizes and chance. with or without the authority to investigate. Although it is true that an insurance contract is also based on a contingency. In this case. to furnish facts on which cancellation is based. Besides. 3. raffles at fairs. it is not a contract of chance. When the terms of insurance contract contain limitations on liability. must be liberally construed in favor of the subscriber. and exclusionary clauses of doubtful import should be strictly construed against the provider. courts should construe them in such a way as to preclude the insurer from noncompliance with his obligation. gift exhibition. 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. such as the one at bar. A contract of insurance is a contract of indemnity and not a wagering or gambling contract. The preceding section does not authorize an insurance for or against the drawing of any lottery. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true. The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. especially to avoid forfeiture. What is the concept of a lottery? The term “lottery” extends to all schemes for the distribution of prizes by chance. 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. 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. Having assumed a responsibility under the agreement. Section 4. to promote the sale of certain products. ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. or the impossibility of which is shown by the facts within his knowledge. resorts to a 3D rhys alexei . since in such case the intent to deceive the insurer is obvious and amounts to actual fraud." The right to rescind should be exercised previous to the commencement of an action on the contract. Is a contract of insurance a wagering or gambling contract? NO. or for against any chance or ticket in a lottery drawing a prize. that which he then knows. there is no lottery. Prior notice of cancellation to insured. prize concerts. no consideration has been paid and consequent. Must be in writing. Ex: A company. In any case. the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. Being a contract of adhesion. 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. The phraseology used in medical or hospital service contracts. and various forms of gambling. Under Section 27 of the Insurance Code. petitioner is bound to answer the same to the extent agreed upon. and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted. such as policy playing. "a concealment entitles the injured party to rescind a contract of insurance. mailed or delivered to the insured at the address shown in the policy.INSURANCE REVIEWER– Atty. This is equally applicable to Health Care Agreements. as a matter of expectation or belief. Are all prizes equivalent to a lottery? If the prizes do not come out of the fund or contributions by the participants. to be actually untrue. etc. if the statement is obviously of the foregoing character. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. None of the above pre-conditions was fulfilled in this case. petitioner is liable for claims made under the contract.

Is this insurance or gambling? This is now a gambling contract. In purchasing insurance. 1 of the Insurance Code. it is not a contract of chance and is not used for profit. They contributed P1. Can a sweepstakes holder insure himself against the failure of his ticket to win? NO. In both. Is this insurance or gambling? This is an insurance contract. C. Life Insurance (Secs. What are the similarities between an insurance contract and a gambling contract? They are similar in only one respect. Purchase of insurance does not create a new and non-existing risk of loss to the purchaser.000 each to a fund available for the use of any member who is injured in the contest. The distinctions are the following: Insurance Contract Parties seek to distribute loss by reason of mischance Insured avoids misfortune. 25) White it is based on a contingency. B. out of which one is reimbursed for the losses that he may suffer. 167-173). A. Quimson page 16 scheme which envisions the giving away for free of certain prizes for the purchase of said products. 99-166). than he paid or agreed to pay. he creates a risk of loss to himself where no such risk existed previously. 175-178). the promise being condition upon the payment of. Problems. Casualty Insurance (Sec. All kinds of insurance are subject to the provisions of this chapter so far as the provisions can apply. or gambling contract. So. Gambling contract Parties contemplate gain through mere chance or the occurrence of a contingent event. C and D decided to join a bungee jumping competition. much more. an insurance contract under RA 1611 (Social Security Act of 1954) shall be governed primarily by the said law and subsidiarily by Chap. Matters not expressly provided for in the Insurance Code and special laws are regulated by the CC. the funds which make possible the payment of all claims. Suppose A. As soon as a party makes a wager. Tends to equalize fortune. one party may receive more. B. Gambler courts fortune Tends to increase the inequality of fortune. Essence is whatever one person wins from a wager is lost by the other wagering party. for the participants are not required to pay more than the usual price o the products. It cannot be said that he suffered a “loss” of prize when he did not win. Suretyship (Secs. the insurer faces an already existing risk of economic loss. or agreement to pay. and in the absence of the applicable provisions in both laws. What is the applicability of the provisions of Chapter 1? Provisions of Chap 1 on “The Contract of Insurance” (Secs 1-98) are also applicable to marine Insurance (Secs.INSURANCE REVIEWER– Atty. 174).(Sec. Fire insurance (Secs. What one insured gains is not at the expense of another insured. one party promises to pay a given sum to the other upon the occurrence of a given future event. 179-183). The parties are now contemplating a gain based upon uncertain events. and to any other kind of insurance (Sec. 2) so far as said provisions can apply. In either case. The entire group of insureds provides through the premiums paid. a stipulated amount by the other party to the contract. The failure to win a prize would not damnify or create a liability against him. and D agree that the whole amount of 4T would be given to the one who swings nearest to the ground. the pertinent provisions of the CC shall be applied. 3D rhys alexei . Section 5. Each member contributes to a common fund. 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.

The state itself may go into insurance business.” The beneficiary is the person designated by the terms of the policy as the one to receive the proceeds of the insurance. The insured. while “assured” refers to the person for whose benefit the insurance is granted. Every person. damage. is the person in whose favor. The wife is the assured. or is to receive a certain sum upon the happening of a specified contingency or event. Is the insured always the person to whom the proceeds are paid? No. (Sec. whose benefit the policy is issued and to whom the loss is payable. like fire insurance. 187) An individual may also be an insurer. What is the nature of the relationship between the insurer and the insured? It is that of a contingent debtor and creditor. and provided further that he is possessed of the capital assets required of an insurance corporation doing the same kind of business in the Philippines and invested in the same manner. damage. Assured is also used sometimes as a synonym of “beneficiary. (Sec. 175) 3D rhys alexei . or liability arising from any unknown or future or contingent event. 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. 185) The last part of the statement refers to suretyship. provided he holds a certificate of authority from the Insurance Commissioner. The person paid may be the beneficiary designated in the policy. or liability. or to indemnify or to compensate any person or persons or other corporations for any such loss.INSURANCE REVIEWER– Atty. How are the terms assurer. Who are the parties to the contract of insurance? The Insurer is the party who assumes or accepts the risk of loss and undertakes for a consideration to indemnify the insured or to pay him a certain sum on the happening of a specified contingency or event. The business of insurance may be carried on by individuals just as much as by corporations and associations. In property insurance. the contract is operative and who is indemnified against. Quimson page 17 TITLE II – PARTIES TO THE CONTRACT Section 6. the insure is also the assured where the proceeds are payable to him. insured and assured used in insurance? Accdg to Black’s Law. partnership. and the husband the insured. but strictly speaking. The wife is the owner of the policy but she is not the insured. or the second party to the contract. He is the person whose loss is the occasion for the payment of the insurance proceeds by the insurer. subject to the conditions of the policy and NOT that of trustee and cestui que trust. 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. the term “insured” refers to the owner of the property insured or the person whose life is the subject of the contract of insurance. association or corporation duly authorized to transact insurance business as elsewhere provided in this Code. The terms “insured” and “assured” are generally used interchangeably. He is the third party in a contract of life insurance. Insurer is synonymous with the term “assurer” or “underwriter”. For ex: A wife insures the life of her husband for her own benefit. or to guarantee the performance of or compliance with contractual obligations or the payment of debts of others. (Secs. Who may be an insurer? A foreign or domestic insurance company may transact business in the Philippines but must first obtain a certificate of authority for that purpose from the Insurance Commissioner who has the discretion to refuse to issue such certificate if it will best promote the interests of the people of this country. (Sec.

For the purposes of this Code. Quimson asked us to look at Sec. such refusal will best promote the interests of the people of this country. whichever is shorter. Sec. and “Insurance corporation”. notwithstanding the provisions of section 188. or liability. In order to maintain the quality of the management of insurance companies and afford better protection of policyholders and the public in general. engaged as principals in the insurance business. 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. that the grant of such authority appears to be justified in the light of local economic requirements. partnerships. or to indemnify or to compensate any person or persons or other corporations for any such loss.INSURANCE REVIEWER– Atty. unquestioned integrity and recognized competence may be elected or appointed director or officer of insurance companies. Atty.” 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. organized or existing under the laws of the Philippines. associations. Unless the context otherwise requires. 185. Quimson page 18 What does the term “insurer” and “insurance company” include? It includes individuals. partnerships. or existing under any lws other than those of the Philippines. “Domestic Company” shall include companies formed. in his judgment. 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 shall be known as “insurance corporations. What do these sections provide? Sec. No person shall concurrently be a director and/or officer of an insurance company and an adjustment company. except mutual benefit associations. 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. The Commissioner shall prescribe the qualifications of the executive officers and other key officials of insurance companies for the purposes of this section. and Sec. The Commissioner may refuse to issue a certificate of authority to any insurance company if. the term “ insurer” or “insurance company” shall include all individuals. shall include companies formed.” when used without limitation. 187. Incumbent directors and/or officers affected by the above provisions are hereby allowed to hold on to their positions until the end of their terms or two years from the effectivity of the Decree. the financial organization and the amount of capital. associations or corporations. or corporations including government-owned or controlled corporations or entities. as well as the integrity and responsibility of the organizers and administrators. It is therefore. engaged as principals in the insurance business. 3D rhys alexei . Sec. reasonably assure the safety of the interests of the policyholders and the public. “Foreign Company. including GOCC’s or entities. “insurance company”. 280. 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. damage. 280 (Sec. organized. 184. Corporations formed or organized to save any person or persons or other corporations harmless from loss. 187 for the certificate of authority required to transact insurance business. It shall also include professional reinsurers as defined in Sec. the term shall also include professional reinsurers defined in Sec. 184) Is the Business of Insurance affected with public interest? Yes. damage. 184-185 for the meaning of “insurer”. excepting mutual benefit associations. and that the direction and administration. any person of good moral character.

3D rhys alexei . No insurance company may be authorized to transact in the Philippines the business of life and non-life insurance concurrently. (3) US Rule – declared the contract not merely suspended but is abrogated by reason of nonpayment of premiums. e) He must NOT be 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. What is the effect of war on the existing insurance contracts between the Philippines and a citizen or subject of a public enemy. provided however. 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.INSURANCE REVIEWER– Atty. 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. Section 7. 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. with respect to life insurance? Three doctrines have arisen. However. (1) Connecticut Rule – there are two elements in the consideration for which the annual premium is paid: a. or a name so similar as to be calculated to mislead the public. and b. to this view. with respect to property insurance? With respect to property insurance. Anyone except a public enemy may be insured. 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. unless specifically authorized to do so. The mere protection for the year. 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. What is the effect of war on the existing insurance contracts between the Philippines and a citizen or subject of a public enemy. instructions. d) He must possess an insurable interest in the subject of insurance. The privilege of renewing the contract for each succeeding year by paying the premium for that year at the time agreed upon. Accdg. the payments of the premiums are a condition precedent. since the time of the payment is peculiarly of the essence of the contract. We follow the US Rule. that the terms “life” and “non-life” insurance shall e deemed to include health. Quimson page 19 Before issuing such certificate of authority. (2) New York Rule – apparently followed by the number of decisions. rulings or decisions of the Commissioner. 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. accident and disability insurance. and it includes every citizen or subject of such nation. Insurance companies and adjustment companies presently affected by the above provisions shall have two years from the effectivity of the Decree within which to divest of their stockholdings. What is a public enemy? It is a nation with whom the Philippines is at war. Such certificate of authority shall expire on the last day of June of each year and shall be renewed annually if the company is continuing to comply with the provisions of this Code or the circulars. the non-performance of which (as when the performance would be illegal) necessary defeats the right to renew the contract.

Held: NO. Sec. B is sideswiped by a balut vendor. (11) Filipinas Cia de Seguros v. fire policy no. who does not cease to be a party to the original contract. will have the same effect. or assigns a policy of insurance to a mortgagee. although the property is in the hands of the mortgagee. 27. It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy. in a state of utter exclusion and are public enemies. SC ruled that said corporation became an enemy corporation upon the war between the US and Germany. All individuals who compose the belligerent powers. and during the war.1. and any act of his. which would otherwise avoid the insurance. he was declared Metro Manila’s Public Enemy No. or that it should in such manner increase the resources of the enemy or render it aid. may the insurer refuse on the grounds that B is a public enemy and therefore may not be insured under Sec. with the same effect as if it had been performed by the mortgagor. 10. Is it alright if both the mortgagor and the mortgage insure the same property? YES. Huenfeld & Co. during the Jap occupation. 1941 by Filipinas had ceased to be valid and enforceable. Christern Huenfeld & Co. Christern having become an enemy corporation on Dec. Section 8.INSURANCE REVIEWER– Atty. 8 provides that anyone except a public enemy may be insured. Cases.  On Feb. The purpose of the war is to cripple the power ad exhaust the resources of the enemy. 1941. The Phil Insurance Law in Sec.  Filipinas denied liability on the ground that Christern was an enemy corp and cannot be insured. Issue: WON Filipinas is liable to Christern. or one policy covering their respective interests. 1. obtained from Filipinas. Christern submitted to Filipinas its claim. And in case both of them take out separate insurance policies on the same property. the insurance policy issued in his favor on Oct. 80 PHIL 54 Facts:  Oct. but any act which. the insurance is deemed to be upon the interest of the mortgagor. 1941. 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. Domestic Corp Christern. Elementary rules of justice require that the premium paid by Christern for the period covered by the policy from Dec. may be performed by the mortgagee therein named. 1. Consequently. If A wants to secure insurance on the life of B. exist as to each other. Unless the policy otherwise provides. The mortgagor and the mortgagee have each an insurable interest in the property mortgaged. 10. the same is not open to the objection that there is double insurance. 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. 10. 1942. 1941 should be returned by Filipinas. 3D rhys alexei . Quimson page 20 Problem. and since the insured goods were burned after Dec. 29333 for P100T covering merchandise contained in a building located in Binondo. is to be performed by the mortgagor. and this interest is separate and distinct from the other. 7 of the IC? NO. insurance taken by one in his own name only and in his favor alone does not inure to the benefit of the other. Because he was previously indicted for many other crimes including illegal possession of balisongs. This being so. prior to the loss.  Salvaged goods were sold and the total loss of Christern was P92T. Majority of the stockholders of Christern were German subjects. where a mortgagor of the property effects insurance in his own name providing that a loss shall be payable to the mortgagee. the building and the insured merchandise were burned. Christern was NOT entitled to any indemnity under said policy from Filipinas. under the contract of insurance. after payment of the premium.

Who may recover on the policy? B. What is the effect if the mortgagee effects insurance on behalf of the mortgagor? Practically the same rules apply. But B can only recover P750T. Atty. whether the estate remains in the possession of the mortgagor. Under Sec. Suppose it was B. if at all. the mortgagee may receive the 1M but is entitled only to the extent of his credit of P750T. The house was mortgaged to B as security for a loan of P750T. with the declarations. then the mortgagee is entitled to receive the proceeds equal to the amount of the mortgage credit. and the rents or income not yet received when the obligation becomes due. 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. What does it say? Art. 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. will receive the proceeds? A will receive the proceeds. or in virtue of expropriation for public use. amplifications and limitations established by law. and the mortgagee cannot recover in excess of the credit at the time of the loss. mortgagee is P5T. (3) Any act which under the contract of insurance is to be performed by the mortgagor. the excess of P250T. who. Problems. The mortgage extends to the natural accession. It was totally destroyed by accidental fire. mortgagor is P10T. (4) In case of loss. or it passes into the hands of a third person. can he still receive the proceeds? 3D rhys alexei . and to the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged. 8. The reason is that the loss or destruction of the property insured will NOT extinguish the mortgage debt. Supposing before the fire occurred B had already been paid. such interest continues until the mortgage debt is extinguished. the amount of her credit.INSURANCE REVIEWER– Atty. and (5) Upon recovery by the mortgagee to the extent of his credit. as owner has an insurable interest to the extent of the value of the property. Quimson wants us to look at Art. may be performed by the mortgagee. mortgagee who insured the house for 1M. mortgagor. hence he does NOT cease to be a party to the contract. the debt is extinguished. 2127 CC. to the improvements. Quimson page 21 What is the extent of the insurable interest of the mortgagor? The mortgagor of the property. What is the insurable interests of each? Insurable interest of A. and he shall hold as trustee for A. 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. 2127. (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. the mortgagee is entitled to the proceeds to the extent of his credit. What if the loss occurred after B was paid. Up to what extent can each recover? The mortgagor cannot recover upon the insurance beyond the full amount of the loss. even if the mortgage debt is equal to such value. Upon the destruction of the property. A insured for 1M her house with the policy providing that the loss shall be payable to B. A is the owner of a house worth 10T which he mortgaged to B to secure a loan of 5T. Such payment operates to discharge the debt. If the loss occurred before B was paid who is entitled to receive the proceeds? B. while the insurable interest of B. growing fruits.

Held: NOPE. SMB’s general manager. In 1917. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof. and the policies had inadvertently been written in the form in which they were eventually issued. Both policies required assignments to be approved and noted on the policy. SMB filed an action in court to recover on the policies. The policies might have been worded differently so as to protect the owner. SMB as the mortgagee of the property. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. By virtue of the Insurance Act. Brias stated that SMB’s interest in the property was merely that of a mortgagee. In the application. it would have proved an intention to insure the entire interest in the property. there is no clear and satisfactory proof 3D rhys alexei . If during the negotiation for the policies. 12. issued one for P7. he became the owner of the property. If the wording had been: “Payable to SMB. page 22 Will A get the proceeds? No. NOT merely SMB’s and would have shown to whom the money. 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. mortgagee who effected the insurance. However. Harding was made a defendant because by virtue of the sale. Premiums were paid by SMB and charged to Dunn. SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit.   Brias. but this was not done. approached Law Union for insurance to the extent of 15T upon the property. mortgagee. neither Dunn nor Harding could have recovered from the two policies.  Mortgage contract stated that Dunn was to have the property insured at his own expense. 1918. but no assignment of the policies was made to the latter. in case of loss. Upon payment of the debt. remainder to whomsoever. the policies were renewed. It is important to note that it was B. recover upon the two policies an amount in excess of its mortgage credit. Property was destroyed by fire. when he acquired the property. Unfortunately.INSURANCE REVIEWER– Atty.  Dunn likewise authorized SMB to take out the insurance policy for him. Trial court ruled against Harding. during the continuance of the risk. 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. Law Union Rock Insurance Company 40 PHIL 674 Facts:  On Jan. Cases: (12) San Miguel Brewery v. 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. as its interests may appear. Hence the appeal. Harding was left to fend for himself. Because A was never a party to the contract. Law Union. Under the Insurance Act. although the policies were issued in SMB’s name. Undoubtedly. Quimson No. had an insurable interest therein.       Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies. no change or assignment of the policies had been undertaken. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty. 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. B lost his insurable interest in the property.500 and procured another policy of equal amount from Filipinas Cia de Seguros. an any event. With respect to Harding. but it could NOT. may become owner of the interest insured”. should be paid. the parties had agreed that even the owner’s interest would be covered by the policies. A year later. not wanting to issue a policy for the entire amount. Dunn sold the property to Harding. this was not what was stated in the policies.

Notice of the cancellation was sent to PNB in writing and was received by the bank on Nov. Cosio insured the building against fire with Associated Insurance & Surety Co. Saura filed a claim with PISC and mortgagee bank. payable to PNG as their interest may appear. On Oct. conditions and warranties of this policy. Cosio 97 PHIL 919 Facts:       On Dec. Palileo demanded from Cosio that she be credited with the necessary amount to pay her obligation out of the insurance proceeds.685 were burned. After execution of the document. (14) Palilieo v. Quimson page 23 that the policies failed to reflect the real agreement between the parties that would justify the reformation of these two contracts. The policy was delivered to PNB by Saura. PISC canceled the same. 1985. PISC is then ordered to pay Saura P29T. with a right to repurchase (on the part of Palileo). Actual notice of cancellation in a clear and unequivocal manner. The notice should be personal to the insurer and not to and/or through any unauthorized person by the policy. Palileo obtained from Cosio a loan of P12T. On April 11. (Associated) for 15T. The Insurance Law does not likewise provide for such notice. was erected on the parcel of land and the building had always been covered by insurance even before the execution of the mortgage contract. The memo stated: Loss if any. Both the PSIC and the PNB failed. 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. effective as of the date of issue.  A building of strong materials which was also owned by Saura. Saura mortgaged to PNB its registered parcel of land in Davao to secure the payment of a promissory note of P27T. when Saura’s folder in the bank’s file was opened and the notice of the cancellation by PISC was found. wittingly or unwittingly to notify Saura of the cancellation made.107. The insurance policy was issued in the name of Cosio. 1954. it devolves upon the Court to apply the generally accepted principles of insurance. it obtained a fire insurance for P29T from PISC for a period of 1 year starting Oct. Cosio was able to collect from the insurance company an indemnity of P13. 18. the building and its contents worth P4. (13) Saura Import Export Co. the amount involved in the policy subject matter of this case.  Pursuant to the mortgage agreement which required Saura to insure the building and its contents.INSURANCE REVIEWER– Atty. On Apr. 1951. subject to the terms. 1954. To secure payment. 2. Philippine International Surety 118 PHIL 150 Facts:  On Dec. NO. Issue: WON there was proper cancellation of the policy? Held.      The mortgage also required Saura to endorse the insurance policy to PNB. purporting to convey to Cosio. 6. a two-story building of strong materials belonging to Palileo. This being the case. v. its form or period. The policy in question does NOT provide for the notice of cancellation. 26. as far as Saura herein is concerned. barely 13 days after the issuance of the fire insurance. 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. 1955. Cosio required Palileo to sign a document known as “conditional sale of residential building”. regarding cancellation of the insurance policy by the insurer. but Cosio refused to do so. Saura learned for the first time that the policy had been previously canceled by PISC. 3D rhys alexei . 8. 15. 1954. But notice to the bank. Upon presentation of notice of loss with PNB. is not effective notice. 1952. The building was partly destroyed by fire and after proper demand.

00) pesos. To resolve the issue. we must consider the insurable interest in mortgaged properties and the parties to this type of contract. stated that Dr. and WON the trial court was correct in requiring Cosio to refund the excess of P1. to the extent of his DBP mortgage indebtedness amounting to eighty-six thousand.” 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. Dr. cancer. Dr. the difference between the indebtedness and the amount of insurance received by Cosio.107 – 12. 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. he is entitled to the insurance proceeds in case of loss. Leuterio complained of headaches presumably due to high blood pressure. Leuterio. Dr. Grepalife alleges that the complaint was instituted by the widow of Dr. Dr. The inference was not conclusive because Dr. Grepalife issued the insurance coverage of Dr. Grepalife denied the claim alleging that Dr. The rule is that “where a mortgagee. DBP submitted a death claim to Grepalife. but in such case. hence. CA 316 SCRA 677 Facts:   A contract of group life insurance was executed between Grepalife and DBP. not the real party in interest. RTC ruled in favor of widow and against Grepalife. other causes were not ruled out. high blood pressure.200. Leuterio was not autopsied.       Issue: WON the widow is the real party in interest. a physician and a housing debtor of DBP applied for membership in the group life insurance plan. which caused his death. Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. two hundred (P86. Leuterio died due to "massive cerebral hemorrhage. It argues that when the Court of Appeals affirmed the trial court’s judgment. was called to testify. kidney or stomach disorder or any other physical impairment. Leuterio. (not DBP) and has legal standing to file the suit. hence the trial court acquired no jurisdiction over the case. Allegedly.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. Leuterio answered questions concerning his health stating that he is in good health and has never consulted a physician for or a heart condition. Held. The rationale of a group insurance policy of mortgagors. Grepalife appealed contending that the wife was not the proper party in interest to file the suit. Leuterio." During the trial. Mejia’s findings.107 (13. who issued the death certificate. since it is DBP who insured the life of Dr. 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. Hernando Mejia. Leuterio. such non-disclosure constituted concealment that justified the denial of the claim. insures the mortgaged property in his own name and for his own interest. Leuterio was not physically healthy when he applied for an insurance coverage and insisted that Dr. lung. Held: YES. The widow of the late Dr. but is passed by subrogation to the insurer to the extent of the money paid. the correct solution would be that the proceeds of the Insurance be delivered to Cosio. Wilfredo Leuterio." Consequently. 3D rhys alexei . Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP. independently of the mortgagor. diabetes. based partly from the information given by the widow. (15) Grepalife v. Leuterio did not disclose that he had been suffering from hypertension. In the light of this ruling. filed a complaint against Grepalife for "Specific Performance with Damages. he is not allowed to retain his claim against the mortgagor. Dr.107 to Palileo. NO and NO.INSURANCE REVIEWER– Atty. otherwise known as the "mortgage redemption insurance. Quimson  page 24 Trial Court found that the debt had an unpaid balance of P12T. In an application form. the indispensable party who was not joined in the suit." is a device for the protection of both the mortgagee and the mortgagor.

Aside from the statement of the insured’s widow who was not even sure if the medicines taken by Dr. or respecting property or services. the policy stating that: "In the event of the debtor’s death before his indebtedness with the Creditor [DBP] shall have been fully paid. 8 that all acts of the mortgagor affects the mortgagee? Well. Consequently. whether he has an insurable interest or not. TITLE III – INSURABLE INTEREST Section 10. the acts of the mortgagor cannot affect the rights of said assignee. (c) Of any person under a legal obligation to him for the payment of money. and 3D rhys alexei . if there is any. shall then be paid to the beneficiary/ies designated by the debtor. and. where an insurer assents to the transfer of an insurance from a Mortgagor (Mor) to a Mortgage (Mee). 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. (b) Of any person on whom he depends wholly in part for education or support. In the case at bar. Leuterio may file the suit against the insurer. Quimson page 25 On the part of the mortgagee. What is the significance of this provision? Remember we said in Sec. imposes further obligations on the assignee. there was no sufficient proof that the insured had suffered from hypertension. the appellant had not proven nor produced any witness who could attest to Dr. The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. at the time of his assent. will or succession to any person.INSURANCE REVIEWER– Atty. and at the time of his assent the insurer imposes further obligation on the Mee. interposing the defense of concealment committed by the insured. The acts of the Mor cannot anymore affect the rights of the Mee. a new and distinct consideration passed from the Mee to the insurer. the insurance is on the mortgagor’s interest. ample protection is given to the mortgagor under such a concept so that in the event of death. the petitioner failed to clearly and satisfactorily establish its defense. The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance. such loss-payable clause does not make the mortgagee a party to the contract. Of which death or illness might delay or prevent the performance. In a similar vein. In this type of policy insurance. and a new contract is created between them. the latter denied payment thereof. Grepalife. thereby relieving the heirs of the mortgagor from paying the obligation. this provision provides the exception to the rule. the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. Leuterio’s medical history. making the loss payable to the mortgagee. Every person has an insurable interest in the life and health: (a) Of himself. 14 the widow of the decedent Dr. it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract. the mortgagee is simply an appointee of the insurance fund. Thereafter. CA held as affirmed by the SC that contrary to Grepalife’s allegations. Leuterio were for hypertension. where the mortgagor pays the insurance premium under the group insurance policy. and the mortgagor continues to be a party to the contract. of his spouse and of his children. the proceeds from such insurance will be applied to the payment of the mortgage debt. an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured." When DBP submitted the insurance claim against petitioner. and such person may recover it whatever the insured might have recovered. and is therefore liable to pay the proceeds of the insurance Section 9. making a new contract with him. If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee. What does this provision say? Under this section. or in whom he has a pecuniary interest. As to the question of whether there was concealment. 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.

16. termination or injury by the happening of the event insured against.95. Which of the two insurances. In general. 3D rhys alexei . 934943 effective July 18. Insular Life issued policy No. A takes an insurance policy on his life and names his friend X as beneficiary. Insurable interest exists where there is reasonable ground founded on the relations of the parties whether pecuniary. if any. on Oct. What is insurable interest? Insurable interest is one the most basic of all requirements in insurance. When is there insurable interest in life insurance? In life insurance. 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. and another insurance on the life of Y in consideration of “love and affection” with A as a beneficiary. C. On the basis of such application. (hmmm… sounds fishy…)  Castro then filed a claim for the total benefits of 50T under the policy. contractual or by blood or affinity. 1979. Castro v. 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.INSURANCE REVIEWER– Atty. A policy issued to a person without interest in the subject matter is a mere wager policy or contract. Quimson (d) Of any person upon whose life any estate or interest vested in him depends. 16. About 3 months later.  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. Feb. 55836. it goes without saying that one has an insurable interest in his own life and health. and of course. Cases: (16) Col. 1981 Facts:  Castro applied for insurance on the life of his driver. Why must there be an insurable interest? It is essential for validity and enforceability of the contract or policy. Insular instead refunded to Castro the premiums he had paid. Insurance Commissioner GR.  Castro paid the first quarterly premium of P309. ON the other hand. the insured driver was allegedly shot to death by unknown persons. Issue: WON Castro has an insurable interest in his driver. The requirement of insurable interest to support a contract of insurance is based upon consideration of public policy which renders wager policies INVALID. 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. Atty. is void? The Insurance taken on A on his life is VALID. is valid and which. Quimsons asked this in a past mid-term exam. It must be the one insuring who has an insurable interest in the life of the person he is insuring. 1959. and to expect some benefit or advantage from the continuance of the life of the insured. because the beneficiary need not have an insurable interest in the life of the insured. if any. Problem. asking the students to Quote the provision. page 26 Why is this section important? Other than it discusses the concept of keyman insurance. Held: NO.  Insular life denied the claim on the ground that the policy was VOID.

NO. should she survive him. the former agreeing to insure the life of Gercio for 2T to be paid to him on Feb. Issue: WON Gercio may change the beneficiary in the policy. 1930 or if he should die before said date. Elser.  A severed head was later found.  Sunlife refused to change the beneficiary. otherwise to the executor. 1971 Facts:  An employer insured the life of the employee with two insurance companies..000.  The policy did not include any provision reserving to Gercio the right to change the beneficiary. Many more policies were found to have been issued with the employee/tenant as insured and the employer and his wife as beneficiaries. of Toronto. 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. who had had more than thirty-five (35) years of experience in the manufacture of cigars in the Philippines. It was found that the various postal money orders issued in payment of the premiums were made by the employer. 1. 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. based on the circumstances and evidence.  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. United States currency designating itself as the beneficiary. This. It appears that. The policies were also found to have been acquired in quick succession. The insured was a tenant in a coconut land owned by the employer and his earning were barely that of a farm laborer. the insurance was really taken out by the employer. 27. Held.  The insurance companies refused to pay on the ground that the employer had no insurable interest in the life of the employee. the insured cannot make such change. employer and employee is NOT sufficient to provide an insurable interest on the life of the insured. NOPE. Issue: WON the employer can recover the proceeds of a life insurance policy of his employee. Quimson page 27 Mere relationship of uncle and nephew. San Juan CA GR 34588-88.  The wife was convicted of adultery and a decree of divorce was issued. Held. Velhagen. purportedly that of the insured employee.  The insurance totaled 200T and the only beneficiaries were the employer and his wife. A. then to his wife Andrea. (19) El Oriente v. E.INSURANCE REVIEWER– Atty. (18) Gercio v. Nov. (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. Sun Life 48 PHIL 53 Facts:  Sunlife issued a life insurance policy to Gercio. procured from the Manufacturers Life Insurance Co. administrator of Gercio. Velhagen for the sum of $50. If the policy contains no provision authorizing a change of beneficiary without the beneficiary’s consent. thru its local agent E. 3D rhys alexei . (17) Lincoln National Life v. Castro failed to prove. Canada. It was established that the insured could not have afforded the insurance policies drawn on his life. It must be shown that the destruction of the life of the insured would cause pecuniary loss to the complainant. an insurance policy on the life of the said A.

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. During the period of his coverage.88 CIR assessed El Oriente for deficiency taxes because El Oriente did not include as income the proceeds received from the insurance.00 per disability. While her husband was in the hospital. in Chapter II On Corporations. .INSURANCE REVIEWER– Atty. (20) Philamcare v. But at least. and paid annually upon the total net income received in the preceding calendar year from all sources by every corporation . the same was extended for another year from March 1. The amount of coverage was increased to a maximum sum of P75." Section 11 in the same chapter. took out the insurance on the life of its manager. listed therein. to protect itself against the loss it might suffer by reason of the death of its manager. who had had more than thirty-five years' experience in the manufacture of cigars in the Philippines." Section 10. but neither here nor in any other section is reference made to the provisions of section 4 in Chapter I. there was concealment regarding Ernani's medical history. collected. in exempting individual beneficiaries. assessed. it is sufficient for our purposes to direct attention to the anomalous and vague condition of the law.      3D rhys alexei . 1989. and under such.957. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. He was a issued Health Care Agreement. 1990 to June 1. then from March 1. According to Philamcare. whether ordinary or emergency. which deductions were allowed upon a showing that such premiums were legitimate expenses of its business. "There shall be levied. provides that. give details)” The application was approved for a period of one year from March 1. applied for a health care coverage with Philamcare. together with the interests and the dividends accruing thereon. he was entitled to avail of hospitalization benefits. preventive health care and other out-patient services. Philamcare denied her claim saying that the Health Care Agreement was void. . . . the El Oriente received all the proceeds of the said life insurance policy. 1990. provides the exemptions under the law. Under the view we take of the case. 1989 to March 1. are taxable as income under the Philippine Income Tax Law Held: NOT TAXABLE. Velhagen in 1929.957. Upon the termination of the agreement. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. cancer. asthma or peptic ulcer? (If Yes. However. It is certain that the proceeds of life insurance policies paid to individual beneficiaries upon the death of the insured are exempt. Julita tried to claim the benefits under the health care agreement. In Chapter I of the Tax Code. CA (repeat – Case # 09) 379 SCRA 356 Facts:  Ernani Trinos. In reality. "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 . aggregating P104. it thereby realized a net profit in this amount. speaks of the proceeds of life insurance policies as income. Upon the death of A. We do not believe that this fact signifies that when the plaintiff received P104. he answered NO to the following question: “Have you or any of your family members ever consulted or been treated for high blood pressure. 1988 to March 1.000. . 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.   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. diabetes. 1990. It is true that the Income Tax Law. 1990. .88 from the insurance on the life of its manager. liver disease. is to be found section 4 which provides that. 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. but this is a very slight indication of legislative intention. In the standard application form. as amended. heart trouble. Quimson page 28  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.a tax of three per centum upon such income .

medical or any other expense arising from sickness. 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. to be actually untrue. Due to financial difficulties. Once the member incurs hospital. petitioner is bound to answer the same to the extent agreed upon. as a matter of expectation or belief. Under the title Claim procedures of expenses. Petitioner argues that respondent's husband concealed a material fact in his application. which is primarily a contract of indemnity. hence the "incontestability clause" under the Insurance Code Title 6. he was attended by a physical therapist at home. Philamcare. belief. In the end. he was admitted at the Chinese General Hospital (CGH). or the impossibility of which is shown by the facts within his knowledge. but is obligated to make further inquiry. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true. an action for damages against Philamcare. Julita was constrained to bring him back to the CGH where he died on the same day. consultation. the health care provider must pay for the same to the extent agreed upon under the contract. petitioner is liable for claims made under the contract. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. especially coming from respondent's husband who was not a medical doctor. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. petitioners required respondent's husband to sign an express authorization for any person. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. amounting to about P76. (A)lthough false. Julita instituted. injury or other stipulated contingent. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. An undisclosed or misrepresented information is deemed material if its revelation would have resulted in the declination of the applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for.00 After her husband was discharged from the MMC. The health care agreement was in the nature of non-life insurance. 1990. intention. Later. a representation of the expectation.  Issues and Resolutions: Philamcare brought the instant petition for review.   Julita had no choice but to pay the hospitalization expenses herself. Quimson o page 29 Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. Having assumed a responsibility under the agreement. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. raising the primary argument that a health care agreement is not an insurance contract. opinion. with or without the authority to investigate. Julita brought her husband home again. if the statement is obviously of the foregoing character. since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. The periods having expired. 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 defense of concealment or misrepresentation no longer lie. 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.INSURANCE REVIEWER– Atty. It appears that in the application for health coverage. or its acceptance at a lower rate of premium.000. In any case. diabetic and asthmatic. In the morning of April 13. that which he then knows. 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. She asked for reimbursement of her expenses plus moral damages and attorney's fees. Ernani had fever and was feeling very weak. the liability of the health care provider attaches 3D rhys alexei . The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. CA affirmed. treatment or any other medical advice or examination. since in such case the insurer is not justified in relying upon such statement. This largely depends on opinion rather than fact. 48 does not apply. Sec. contrary to his answer in the application form. Thus. Where matters of opinion or judgment are called for. RTC decided in favor of Julita. SC held that in the case at bar.

2. unless he has expressly waived his right in the said policy. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned. When the terms of insurance contract contain limitations on liability. extinguished at his death and CANNOT be exercised by his personal representatives or assignees. such designation is irrevocable and he cannot change his beneficiary without the consent of the latter. they may be made beneficiaries. This is equally applicable to Health Care Agreements. such as the one at bar. concubinage does the disqualification extend to the illegitimate children? NO. whether or not such power is reserved in the policy. Besides. They cannot be named beneficiaries of a life insurance policy by the person who cannot make any donation to him. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured. Must be in writing. Quimson page 30 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. Prior notice of cancellation to insured. to furnish facts on which cancellation is based." The right to rescind should be exercised previous to the commencement of an action on the contract. no rescission was made. The only persons disqualified from being a beneficiary are those not qualified to receive donations under Art. In case of adultery. the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. The phraseology used in medical or hospital service contracts.INSURANCE REVIEWER– Atty. 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. Section 11. Under the current rule. The disqualification does not extend to the children. Being a contract of adhesion. especially to avoid forfeiture. when does the insured lose the right to change the beneficiary? When the right to change the beneficiary is expressly waived in the policy. and as such. 3D rhys alexei . ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. courts should construe them in such a way as to preclude the insurer from noncompliance with his obligation. 739. 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. mailed or delivered to the insured at the address shown in the policy. the terms of an insurance contract are to be construed strictly against the party which prepared the contract — the insurer. and exclusionary clauses of doubtful import should be strictly construed against the provider. must be liberally construed in favor of the subscriber. Are there any exceptions? Yes. What is the old rule regarding revocability of designation of beneficiary as enunciated in the case of Gercio v. Such right must be exercised specifically in the manner set forth in the policy or contract. 3. 4. Under Section 27 of the Insurance Code. It is of course. and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. Who can be a beneficiary? Any person in general can be a beneficiary. The insured shall have the right to change the beneficiary he designated in the policy. "a concealment entitles the injured party to rescind a contract of insurance. Sunlife? The OLD rule is: When the insured did NOT expressly reserve his right to revoke the designation of his beneficiary. In this case. None of the above pre-conditions was fulfilled in this case. the insured has no power to make such change without the consent of the beneficiary.

(3) Those made to a public officer. 50. Jef and Jojo are also husband and wife. 739 is therefore not applicable in the situation at bar. Jane can still be a beneficiary of Jef since the law provides that Jane cannot be a beneficiary of a life insurance policy if the person who names her as beneficiary is forbidden to give her a donation under Art. 2012. the innocent spouse may revoke the designation of the offending spouse as beneficiary in any insurance policy. 739. Jef and Jojo are also husband and wife (yihee…). Pao and Jane are husband and wife. who gets the proceeds? There is a divergence of opinion. Notwithstanding that Jef is guilty of concubinage. Jef secured a life insurance policy and named Jane as beneficiary. descendants and ascendants by reason of his office. in consideration thereof. Jef has a concubine named Maui Taylor. Quimson page 31 What if the beneficiary dies before the insured and the insured did not change the designation. 43 xxx shall also apply in the proper cases to marriages which are declared void ab initio or annulled by final judgment under Art. according to said article. 739 will not apply and Jef is not forbidden from giving a donation to Jane. Jef and Jojo are also husband and wife. but the general trend is to give it to the estate of the beneficiary. When Jef dies. 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. according to said article. Any person who is forbidden from receiving any donation under Art. Pao and Jane are husband and wife. CC. Problems. 3D rhys alexei . Quimson required us to read? Art. Art. Jef thereafter secured a life insurance policy and named Jane as beneficiary. who will get the insurance proceeds? Jane. Art. or his wife.INSURANCE REVIEWER– Atty. FC. Art. Jane engaged in adulterous relaions with Van. Since Jane is not the concubine. What are the other provisions of law that Atty. Pao and Jane are husband and wife. as long as the designation was not made in consideration of an act done by the public officer by reason of his office in favor of the insured. who will get the insurance proceeds? Jojo. Art. 64. The law only prohibits the situation wherein a person who is forbidden from receiving a donation under Art. Art. FC. FC. Art. 739 cannot be named a beneficiary of a life insurance policy by the person who cannot make any donation to him. The revocation of or change in the designation of the insurance beneficiary shall take effect upon written notification to the insured. Jef and Jane engaged in adulterous relations. Jef secured a life insurance and named Jane as beneficiary. The effects provided for by paragraph (4) of Art. When Jef dies. 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. 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. In other words. 739. 40 & 45. When Jef dies. according to said article. (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. (2) Those made between persons found guilty of the same criminal offense. 43. 739 is named a beneficiary of a life insurance policy by the person who cannot make any donation to him. After the finality of the decree of legal separation. who will get the insurance proceeds? Jane. The following donations shall be void: (1) Those made between persons who were guilty of adultery or concubinage at the time of the donation. Jane can still be a beneficiary. 739 is named a beneficiary of a life insurance policy by the person who cannot make any donation to him. The termination of subsequent marriage produces the following effects: xxx.* *Atty.

they are not forbidden because Jef is not the one engaged in an adulterous relationship with Jane. Both are founded on the same from the premiums of the policy which the of said insurance. 739 should equally operate in life insurance Therefore. referring to her as his wife. WhenJef dies. Ebrado (repeated case – case #2) 80 SCRA 181 Facts:  Buenaventura Ebrado was issued by Insular Life Assurance Co. who will get the insurance proceeds? Jane. and she is not the concubine of Jef. Jef and Jojo are also husband and wife. a life insurance policy is concerned.  Insurer by virtue of the contract was liable for 11. a whole life plan for P5. Jef and Jojo are also husband and wife. Under Art. 739 does not apply. Hahahaha. no different from civil donations insofar as the beneficiary is consideration of liberality. according to said article. Jane engages in adulterous relations with Van. they are likewise barred from receiving proceeds of a life insurance contract. according to said article. Cases. 3D rhys alexei . Pao and Jane are husband and wife. Jef thereafter secures a life insurance policy and names Pao as his beneficiary. As a consequence. 739. Quimson page 32 Pao and Jane are husband and wife. and Carponia filed her claim. A beneficiary is like a donee because insured pays. Rather. NCC: Any person who is forbidden from receiving any donation under Art. the beneficiary will receive the proceeds or profits proscription in Art. When not otherwise specifically provided for in the insurance law. The law only prohibits the situation wherein a person who is forbidden from receiving a donation under Art.  Pascuala Ebrado also filed her claim as the widow of the deceased insured. Disclaimer: Any resemblance to real and living persons are purely coincidental.745.  Ebrado died when he was accidentally hit by a falling branch of tree.882. 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.00 with a rider for Accidental Death Benefits for the same amount. In essence. Notwithstanding that both parties are guilty of adultery and concubinage respectively. the contracts. When Jef dies who will get the insurance proceeds? Pao. because both of them are neither guilty of adultery nor concubinage. 739 is named a beneficiary of a life insurance policy by the person who cannot make any donation to him.  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. the general rules of civil law should be applied to resolve this void in the insurance law. 2011 of the NCC states: The contract of insurance is governed by special laws. Jef and Pao become lovers. Issue: Between Carponia and Pascuala. Art. donations between persons who were guilty of adultery or concubinage at the time of the donation shall be void. 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 cannot be named beneficiary of a life insurance policy by a person who cannot make any donation to him. since common-law spouses are barred from receiving donations. Since there is no law prohibiting Jef from donating to Pao.  Ebrado designated Carponia Ebrado as the revocable beneficiary in his policy.73. Art. Matters not expressly provided for in such special laws shall be regulated by this Code. Under Art. right. 2012. Jef thereafter secures a life insurance policy and names Jane as a beneficiary. (21) Insular Life v.INSURANCE REVIEWER– Atty. who is entitled to the proceeds? Held: Pascuala. although she admitted that she and the insured were merely living as husband and wife without the benefit of marriage. Jef has a concubine named Maui Taylor..

3D rhys alexei . Philamlife Insurance Company 20 SCRA 434 Facts:  Mrs. the NCC recognizes certain successional rights of illegitimate children. Golpeo 96 PHIL 83 page 33 Facts:  SLEA is composed of laborers and employees of the LTBC and BTC (now BLTB Co. After his death. 503617) by PHILAMLIFE under a 20-yr endowment plant. Nario then applied for a loan on the above policy with PHILAMLIFE w/c she is entitled to as policy holder. the common law wife. She argues that: o The insurance code does not apply since the association is not an insurance company but a mutual benefit association. Her husband Delfin and their unemancipated son Ernesto were her revocable beneficiaries. Nario then signified her decision to surrender her policy and demand its cash value which then amounted to P 520. but merely ruled that the death benefit in question is analogous to insurance. Quimson (22) Souther Luzon Employee’s Association v. o The stipulation between SLEA and Roman was void for being contrary to law. SLEA was able to collect voluntary contribution from its members amounting to P2. and her children o Aquilina Maloles. and her child. Golpeo’s argument would certainly NOT apply to the children of Maloles likewise named beneficiaries by the deceased. Only Golpeo appealed. 739 of the CC ( donations between persons guilty of concubinage at the time of donation are void)    Issue: WON Golpeo. by her silence and actions had acquiesced in the illicit relations between her husband and Maloles. Secondly.205. Besides. As a matter of fact.  Mrs. if he chooses. and such person so named by the member will be the sole persons to be recognized by SLEA regarding claims for condolence contributions.INSURANCE REVIEWER– Atty. the lower court did not consider the association as a regular insurance company. Nario applied for and was issued a life Insurance policy (no. The purpose of such loan was for the school expenses of Ernesto. Roman listed as his beneficiaries Aquilina Maloles and their 4 children. public morals and public policy.  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. with a face value of 5T.    In 1949. SLEA then filed an action for interpleader against the 3 conflicting claimants. 320 of the CC. (23) Nario v. Del Val. Held: NO. 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.  Mrs. Trial court rendered a decision declaring Maloles and her children the sole beneficiaries of the amount citing Del Val v. the legal wife is entitled to the amount. put down his common law wife and/or children he had with her as his beneficiaries. legal wife.).  Roman Concepcion was a member until his death in 1950. Three sets of claimants to the amount presented themselves to the association namely: o Juanita Golpeo. First of all. without considering the intimation in the brief for Maloles that Golpeo. SLEA adopted a resolution providing that: A member may. pursuant 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. and her children o Elsie Hicban. another common law wife of Roman. and one of its purposes is mutual aid of its members and their dependents in case of death. after the policy has been in force for 3 years.

Held: NO. 1943. 320 in relation to art. (24) Villanueva v. the effect would be the same. Quimson    page 34 PHILAMLIFE also denied the surrender of the policy on the same ground as that given in disapproving the loan application. and vice versa. the minor’s propty was worth 2. for in case of death of the insured. West agreed to pay 2T either to Esperanza if still living on Apr 1. the proceeds are payable exclusively to her or to her estate unless she had before her death otherwise assigned the matured policies. hence court authority is required. Esperanza died in 1944 without having collected the insurance proceeds. Bartolome died. 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. Mrs.500 his ½ share as beneficiary). In the case at bar.INSURANCE REVIEWER– Atty. In other words. said acts are not within the power of administrator granted under Art. as the insured Esperanza was living on April 1 and March 31. maturing April 1. but their acts as legal administrators are only limited to acts of management or administration and not to acts of encumbrance or disposition. 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. 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. 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. The first contingency excludes the second. one for 2T. and when the propty of the child is worth more than P2T (as in the case at bar. 31. said beneficiaries are paid on the basis of its face value and in case the insured should discontinue paying premiums. Adverse claims for the proceeds were presented by the estate of Esperanza on one hand and by Mariano on the other. the insurer obligated itself to pay the insurance proceeds to: (1) the insured if the latter lived on the dates of maturity. Under the policies. 326 CC. In 1940. and other for 3T maturing Mar. 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. since the parents would only be exempted from filing a bond and judicial authorization. or the father of the insured immediately upon receipt of the proof of death of Esperanza. CFI held that the estate of Esperanza was entitled to the proceeds to the exclusion of the beneficiary. or (2) the beneficiary if the insured died during the continuance of the policies. 1943.    In both policies. Issue: WON PHILAMLIFE was justified in refusing to grant the loan application and the surrender of the policy. Under the laws (CC and rules of Court) The father is constituted as the minor’s legal administrator of the propty. 3D rhys alexei . 1943. 1943. Oro 81 PHIL 464 Facts:  West Coast Life Insurance Company issued two policies of insurance on the life of Esperanza Villanueva. and he was substituted as beneficiary under the policies by Mariano. Held: YES. the father a must file a petition for guardianship and post a guardianship bond.   Issue: WON the beneficiary is entitled to the proceeds. the father did not file any petition for guardianship nor post a guardianship bond. 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. Assuming that the propty of the ward was less than 2T. and as such cannot possibly exercise the powers vested on him as legal administrator of the minor’s property. Esparanza’s brother. The policy also gave her the right to change the beneficiary. or to beneficiary Bartolome Villanueva.

the beneficiary as recorded by the employee’s employer is the one entitled to the death benefits.) (26) SSS v. Quimson page 35 The beneficiary could be entitled to said proceeds only in default of the first contingency. Dimayuga filed a petition in court to amend the designation of the beneficiaries in his policy from irrevocable to revocable.  When he died. because she was not guilty of concubinage . and designated Candelaria Davac. Lourdes and his second wife. (This case rule is no longer controlling under the Insurance Code. 3D rhys alexei . as against the personal representatives the endowment period. his alleged wife. 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. The policy contract states that the designation of the beneficiaries is irrevocable. Davao 17 SCRA 863 Facts:  Davac was an SSS member. Under the SSS Act. (27) In Re: Mario Chanliongco 79 SCRA 364 Facts:  Atty. both his first wife. an atty of the SC and a GSIS member. 739 is NOT applicable to Candelaria. Changliongco. notwithstanding a beneficiary is designated in the policy.  The death benefits were awarded to Candelaria Davac.  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. there bieing NO proof that she had actual knowledge of the previous marriage of her husband. within the period. the SSS filed a petition praying that both of them be required to interplead and litigate the conflicting claims. based on the said provision of the contract.INSURANCE REVIEWER– Atty. Therefore. it is only with the consent of all the beneficiaries that any change or amendment in the poicy may be legally and validly effected. SC held that the disqualification mentioned in Art. 22. Issue: WON the court erred in granting Dimayuga’s petition. Under the Insurance Act. (AmJur and Couch Cyclopedia of Insurance Law) (25) Philamlife v. Dimayuga processed an ordinary life insurance policy from Philamlife and designated his wife and children as irrevocable beneficiaries. 739 of the CC. not to mention the law then applicable. the beneficiary will take. as his beneficiary.  On Feb. Held: YES. hence they should go to Candelaria. 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. Pineda 175 SCRA 416 Facts:  On Jan. Issue: Who is entitled to the SSS benefits? Held: Candelaria. 1980.” 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. died ab intestate. Candelaria filed claims for the death benefits. 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. The contract between the parties is the law binding on them.  Due to the conflicting claims. Upon the insured’s death. 15 1963. the benefits are payable to him or to his assignee.  Lower Court granted the petition.

7 children. Quimson page 36 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. for which no beneficiary was designated. and Pedro but both predeceased him o 2nd – Basilia Berdin. the proceeds will accrue to the estate of the insured.  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. 1930 or if he should die before said date. (28) Vda. GSIS 37 SCRA 315 Facts:  Jose Consuegra was employed as a shop foreman of the Office of the District Engineer in Surigao Del Norte. Held. De Consuegra v. each family will be entitled to one-half of the estate. And when there exists two marriages. the proceeds of his life insurance were paid by the GSIS to Berdin and her children who were the beneficiaries named in the policy. 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. CFI affirmed GSIS decision.  Since he was in the gov’t service for 22. then to his wife Andrea. 2 children = Jose Consuegra Jr. Sun Life (repeat.  Both families filed their claims with the GSIS. each to receive an equal share of 1/16. 1951. (29) Gercio v.  The policy did not include any provision reserving to Gercio the right to change the beneficiary. Sec. he contracted two marriages: o First – Rosario Diaz. 1. In case of failure to name a beneficiary in an insurance policy. NO.  When he was still alive.5028 years.  Sunlife refused to change the beneficiary.  Berdin went to CFI on appeal. When Consuegra. Issue: WON Gercio may change the beneficiary in the policy. he was entitled to retirement insurance benefits. otherwise to the executor. The life insurance and the retirement insurance are two separate and distinct systems of benefits paid out from 2 separate and distinct funds. or before 1943. (this was contracted in GF while the first marriage subsisted)  Being a GSIS member when he died. 3D rhys alexei . Issue: To whom should the retirement insurance benefits be paid? Held: Both families are entitled to half of the retirement benefits. should she survive him. administrator of Gercio. during the early part of 1943. case #18) 48 PHIL 53 Facts:  Sunlife issued a life insurance policy to Gercio.INSURANCE REVIEWER– Atty. designated his beneficiaries in his life insurance. as in the case of a life insurance policy if NO beneficiary is named in the insurance policy.  The wife was convicted of adultery and a decree of divorce was issued. 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. the former agreeing to insure the life of Gercio for 2T to be paid to him on Feb. 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. The beneficiary named in the life insurance does NOT automatically become the beneficiary in the retirement insurance.

brother of full blood b) Alf. b. His nearest relatives are: 1) Anakin. The grandfather and grandmother. 3. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal. The illegitimate children. the STATE shall be entitled to receive the insurance proceeds. Anakin and Lois were convicted of murder. However. In case all three are convicted who gets the proceeds? Since Anakin. The father and mother. and 6. Quimson page 37 If the policy contains no provision authorizing a change of beneficiary without the beneficiary’s consent. if living. or ascendants nearest in degree. 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. grandfather and grandmother (or ascendants in the nearest degree) 4) Bastardo. if living. it is only the interest of the beneficiary which is forfeited. because according to Section 12. the surviving spouse are no longer entitled to the proceeds. then following the rules on intestate succession. 2. and c. Same facts above. the illegitimate child 5) Lois Lane. Section 12. in which event. (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. Brothers and sisters of the half-blood. The collateral relatives. accomplice or accessory in willfully bringing about the death of the insured. In default of the above. but it was only Lois Lane who was instituted as beneficiary. 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. 4. they are also instituted as beneficiaries in the insurance policy of Clark. to wit: a. the legitimate child 2) Jor-el and Kyla. The legitimate children. and since Anakin was not instituted as beneficiaries. the legitimate father and mother 3) Lolo and Lola. The surviving spouse. Is Anakin still entitled to the insurance proceeds? At first glance the answer might be YES. 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.INSURANCE REVIEWER– Atty. Brothers and sisters of the full blood. the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise qualified. nephew What if all of the above are nowhere to be found? Then the State of Krypton is entitled to the proceeds. the insured cannot make such change. then his interest is still 3D rhys alexei . and the proceeds are the only properties available for distribution to the heirs. the legitimate child and Lois. Problem: Clark is insured. the surviving spouse 6) Collateral relatives to wit: a) Kuya. 5. Suppose that Lois Lane masterminded a plan to kill Clark and Anakin carried it out. Nephews and nieces 7. brother of half blood c) Nep.

INSURANCE REVIEWER– Atty. Elle fails to qualify since she is Bill’s concubine. any person who has been convicted of an attempt against the life of the testator is incapable of succeeding by reason of unworthiness. an agent of Country Bankers proposed to Harvardian to insure its school building. O-Ren now claims the proceeds of the insurance. Although at first reluctant. the correct answer to this problem is NO. used the “5 point exploding heart technique” she learned from Pai Mei. 1 CARA 2 Facts:  Harvardian is a family corporation. Cases: (30) Harvardian Colleges v. can they still collect the proceeds? There is no law or jurisprudence that treats of this situation. Suppose Anakin and Lois are not convicted and they are not instituted as beneficiaries of Clark. his qualifications at the time of the death of the decedent shall be the criterion. which states: ” the nearest relative of the insured shall received the proceeds of said insurance if not otherwise qualified” . 12 is no longer the relevant provision. All three are instituted as beneficiaries of Bill. or liability in respect thereof.e. Meaning. to bar Anakin and Lois from collecting on the ground of unworthiness. eager to claim the insurance proceeds. Beatrix Kiddo & O-Ren Ishi are all creditors of Bill. 1032. 9. However. Beatrix on the other hand. 12. However.  Prior to Aug. Hence. 3D rhys alexei . 1032 (2). the stockholders of which are Ildefonso Yap. her claim is opposed by BB. Elle Driver. but both are instituted as beneficiaries of Clark. According to Art. Country Bankers Insurance Corp. Sec. Quimson said in class that there must be a conviction before Sec. Anakin is not entitled to the proceeds and subsequently the insurance proceeds will be divided as provided for in the first answer. and according to Art. Furthermore. Bill’s legitimate daughter who contends that according to Sec. 12 ONLY applies if there is NO stipulation in the contract of insurance as to who are the other beneficiaries of the proceeds. can they now collect the proceeds? In this case.(Cue Kill Bill soundtrack…) Section 13. Every interest in property.000 for which Harvardian paid an annual premium of P2. 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) . 2. the provisions relating to incapacity by will are equally applicable to intestate succession. Remember that the insurance contract is the law between the parties and hence it must be followed by the insurance company. meaning her. reference must be made to laws of succession. Art.. Between BB and O-Ren. of such nature that a contemplated peril might directly damnify the insured. Sec. Atty. but Art.  Country Banks sent an inspector to inspect the school building and agreed to insure the same for P500. or any relation thereto. 1032 (2) of the CC. is an insurable interest. Harvardian agreed. 12 can operate to disqualify or forfeit the interests of Anakin and Lois. What is the importance of this provision? It defines insurable interest in PROPERTY. 12 speaks of “principals. it is submitted (by JohnBee Sioson) that there must be a final conviction in order for Art. Virginia King Yap and their children. 1034 says: In order to judge the capacity of the heir. there is a proviso in Sec. it is the nearest relative who should get the proceeds. i. Sec. 12. Quimson page 38 intact. 1979. and there must therefore be a conviction of the beneficiaries as either of the three to the crime against the insured. 1024 of the CC. accomplice or accessory”. 3 & 5 of Art. In cases falling under Nos. However. In case Anakin and Lois are not convicted. in order to find out if Anakin is qualified.500. 1032 to apply. killing Bill. HOWEVER. whether real or personal. it shall be necessary to wait until final judgment is rendered. devisee or legatee.

and certainly suffered a pecuniary loss by its being burned. the two juke boxes were destroyed by fire. 1980. Issues and Resolutions: (1) Whether or not the juke boxes were overvalued. Cases: (31) Suter v. 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. 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. Country Bankers issued to Harvardian a fire insurance policy. Regardless of the nature of the title of the insured or even if he did not have title to the property insured. 1979. What is an inchoate interest? It is an interest which has not yet ripened. or (c) An expectancy. Quimson page 39    On Aug.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. (b) An inchoate interest founded on an existing interest. or will suffer pecuniary loss or damage from its destruction. siya din yung sa Tax 2 diba? Yung pinakasalan yung partner niyang si Spirig?) Subsequently. the latter denying the claims on the grounds that: o The properties were allegedly overvalued. Harvardian therefore would have been directly benefited by the preservation of the property. 3D rhys alexei .INSURANCE REVIEWER– Atty. An insurable ineters in property may consist in: (a) An existing interest. such as the interest of a stockholder in the property of the corporation which he owns stocks. or a workman insuring the building which he was contracted to repair. What is existing interest? Existing interest in property is the legal or equitable title on the property. In what kind of expectancy may insurable interest consist? The expectancy MUST be coupled with an existing interest in that. (39 days before I was born… hehehehe )during the effectivity of said 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. Harvardian would have been allowed the continued use of the same as the site of its operation as an educational institution. Held: Harvardian has a right to the proceeds. Examples would be: a farmer insuring future crops that he will grow on his land. coupled with an existing interest in that out of which the expectancy arises. Section 14. On March 12. out of which such expectancy arises. (btw. It was contended that both the lot and the building were owned by Ildefonso Yap and NOT by the Harvardian Colleges. the insured property was totally burned rendering it a total loss.000.. The test in determining insurable interest in property is whether one will derive pecuniary benefit or advantage from its preservation. Suter now claims from Union Surety. the managing partner of Morcoin Co. 9. Union Surety 51 OG 1905 Facts:    Suter. insured two juke boxes with Union Surety for P4. It is reasonably fair to assume that had the building not been burned. termination or injury by the happening of the event insured against. Issue: WON Harvardian colleges has a right to the proceeds.

Both at the time of the issuance of the policy and at the time of the fire. The test for insurable interest in property is whether or not the insured will benefit in the property’s reservation or continued existence. because at the time it became operative. by fire. it refused and failed to settle and pay complainant’s insurance claim. stolen and/or illegally detached by unknown thieves or malefactors Despite repeated assurances by Zenith’s soliciting agent. Before the policy was issued. 6306 granting Golangco the right to collect rentals from a building in Sta. Cruz. Manila. Within the period of effectivity of the policy. the complainant was NOT yet the owner of the property insured. collecting rentals from its occupant. Complainant seeks not only the payment of said insurance claim of 70T plus legal interest. while theft or robbery is NOT insured against in the policy. (33) Zenith Insurance Corporation v. this does not include taxes. plaintiff Golangco was in legal possession of the premises. the property still hot having been delivered to him. (2) WON Suter had insurable interest. and hence he had an insurable interest therein. and litigation expenses. v. freight insurance. which are considered appurtenances and/or parts attached to and/or installed in the Kato BAchoe were lost. YES. i.00. he could not collect the insurance proceeds. denominated as Equipment Floater Policy covering a Kato Bachoe including its accessories and appurtenances thereof. Golangco made a full and clear exposal of his interests in the premises. Quimson page 40 No. Golangco would be. the two pieces of hydraulic wheel gear pumps. but also the revocation or cancellation of the license of Zenith to do insurance business.   Golangco then sought fire insurance from Traders. The Insurance Commission 87 OG 6249 Facts:   Zenith entered into an insurance contract. The value of the property is determine at the time it was insured and not the time it was acquired. and other improvements made thereon. unattended and deserted while entrusted to him. the BA Finance Corp o The policy insures against loss or damage caused by fire and lightning. atty’s fees. or suffer a direct pecuniary loss in its destruction. Suter had insurable interest. The building burned down in a fire and Golangco sought to collect from Traders. etc. and BA finance    3D rhys alexei . YES. that he was not the owner. 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. from loss of damage. The fire policy that defendant issued covered only all of Golangco’s interest in the premises and his right to collect the rentals. Suter. It seems plain that if the premises were destroyed as they were. shipping cost. Complainant paid the stipulated premiums therefore. 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. directly damnified thereby.  Issue: WON plaintiff can claim the insurance proceeds. Golangco 95 PHIL 826 Facts:  A decision was rendred in Civil Case No. being the managing partner will clearly benefit in the juke boxes’ preservation and would also be affected by its destruction. (32) Traders Insurance and Surety Co. as he was.INSURANCE REVIEWER– Atty. Zenith on the other hand contends that: o Complainant is not the real party in interest since the policy carries with it a designated loss payee. it not having been expressly mentioned o Loss nevertheless is excluded under the exception of “infidelity exclusion” by the operator who left it unguarded.e. Held. While acquisition cost is only P774.

what was imported was 59. it cannot now allege that complainant has no insurable interest on the property insured. 3D rhys alexei . The fishmeal in 666 gunny bags were unloaded from the ship on December 11. 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.62. however. 1976 at Manila unto the arrastre contractor E. 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 upon any valid contract. Quimson page 41 had no insurable interest yet. Issues and Resolutions: (1) WON the loss through theft or robbery claimed is within the coverage of the policy. Razon. Inc. Thailand to Manila against all risks under warehouse to warehouse terms. in its express terms. considering that Zenith’s agent had been fully apprised of the circumstances prior to the actual issuance of the policy and the endorsement. limit compensability to that stated in the enumeration. As the CC provides. “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. seeking judgment against the third party defendants in case judgment is rendered against it. A formal claim statement was also presented by the plaintiff against the vessel. found for the complainant in this wise: While the policy enumerated the risks covered." "casualty" or "accidental cause" to which the alleged loss is attributable and the failure of herein private respondent. (34) Filipino Merchants v. it does NOT. Based on said computation the Chao made a formal claim against the Filipino for P51. 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. the contract of insurance was VOID AB INITIO for lack of insurable interest at the time the insurance took effect.568. It appears from the evidence presented that Chao insured said shipment with Filipino for the sum of P267.   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. gives rise to insurable interest in the property in which such title inheres. 1976 and seeks to recover from Filipino the amount of P51. (2) WON the complainant was with insurable interest therein when the said policy contract was procured. but the Filipino refused to pay the claim. as reiterated by the SC. As this is the case. The complainant has insurable interest in the insured property at the time of the procurement of the insurance policy.59 for the goods described as 600 metric tons of fishmeal in gunny bags of 90 kilos each from Bangkok.INSURANCE REVIEWER– Atty. upon whom lay the burden. mere possession of an equitable title.940 metric tons not 600 tons at $395. hence the complainant’s claim for damages is compensable. 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.568. Furthermore. 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 enumerated risks excluded did not include theft or robbery committed or perpetrated by an unidentified culprit.62 representing damages to said shipment which has been insured by Filipino. Actually.” and Sec. Razon. henceforth.42 a ton.653. like that pertaining to the buyer. 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. The Insurance Commissioner. 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”. Inc. Filipino brought a third party complaint against Compagnie Maritime Des Chargeurs Reunis and/or E.

therefore.MAY Insurance Company for 2M. caught fire. have not acquired any technical meaning. A carrier or depository of any kind has an insurable interest in a thing held by him as such. and which is unexpected. not expected. of such nature that a contemplated peril might directly damnify the insured.MAY denies liability on the ground 3D rhys alexei .INSURANCE REVIEWER– Atty. destroyed or deteriorated. M/V Mary Jane. as vendee/consignee of the goods in transit has such existing interest therein as may be the subject of a valid contract of insurance.. or lien upon or possession of the property. insured Peter Parker’s goods. without intention and design. Insurable interest in property may consist in (a) an existing interest. an existing interest over the goods sufficient to be the subject of insurance Section 15. or (c) an expectancy. and sank. Quimson page 42 SC did not uphold this contention.B. as consignee of the goods in transit under an invoice containing the terms under "C & F Manila. or is an unusual effect of a known cause and. therefore. In the present case. In principle.O. The burden of the insured. Anent the issue of insurable interest. the insurer is liable under the policy Filipino contends that Chao does not have insurable interest. an event that proceeds from an unknown cause. 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. Chao. a common carrier. there being no showing that the loss was caused by any of the excepted perils. Section 13 of the Insurance Code defines insurable interest in property as every interest in property. unusual and unforeseen. the burden is shifted to the insurer to prove that the loss was due to excepted perils. to the extent of the value of the goods. (b) an inchoate interest founded on an existing interest." has insurable interest in said goods. whether under F. 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. The vessel was hit by lightning. & F. is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit. 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. is to prove merely that the goods he transported have been lost. Mary Jane is now claiming 2M from A.. the insurer can avoid coverage upon demonstrating that a specific provision expressly excludes the loss from coverage. C. whether real or personal. The terms "accident" and "accidental". Thus. as in this case. His interest over the goods is based on the perfected contract of sale. or liability in respect thereof. being only a consignee of the goods. The contract of shipment. They are construed by the courts in their ordinary and common acceptance. to the extent of his liability but not to exceed the value thereof. coupled with an existing interest in that out of which the expectancy arises. 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. An accident is an event that takes place without one's foresight or expectation. or any relation thereto.F.MAY because the policy stated that the loss due to lightning is compensable.I. 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 terms have been taken to mean that which happens by chance or fortuitously. SC upheld the ruling of the CA that Chao. The perfected contract of sale even without delivery vests in the vendee an equitable title. 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. valued at 1M with A. and the law therefore allows such a carrier or depositary to insure his possible liability therefor. A. or C. Thereafter. Problem. 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. and covers all losses except such as arise from the fraud of the insured. as used in insurance contracts.

Even if one secured insurance covering his own goods and goods stored with him. a carrier has insurable interest in a thing held by him as such. except for one (with Nat’l Insurance Co. inures.  A case was filed in CFI by Lopez.INSURANCE REVIEWER– Atty. equally and proportionately to the benefit of all owners of the property insured.21 with legal interest. is not insurable. Held: She acted as the agent of Lopez.) for 40T.  An agreement was reached to submit the matter to arbitration. the reason being. and the rights to succession are transmitted only from the moment of the death of the decedent. Quimson page 43 that: (1) Mary Jane is not the owner of the goods and therefore has no insurable interest. Case: (35) Lopez v. failed to effect a settlement between the Insurance companies and Del Rosario. Del Rosario is liable. Fisher to negotiate with the Companies. and even if the owner of the stored goods did not request or know the insurance. a fire loss adjuster.  Among those who had copra deposited in the warehouse was Froilan Lopez. 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. in the event of loss. the owner of 14 warehouse receipts with a declared value of P107. Examples: A son cannot insure the property of his father which he expects to inherit from the latter. When Bayne. Mary Jane has insurable interest over the goods of Peter Parker. and (2) Mary Jane cannot claim more than the value of the goods lost. 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. Decide.  Del Rosario secured insurance on the warehouse and its contents with 5 different insurance companies in the amount of P404. or a husband insuring the paraphernal property of his wife. 15.492. 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. it has been held by a reputable court that the warehouseman is liable to the owner of such stored goods for his share. Section 17. Since the value of the goods is only 1M. or as obligatory. According to Sec. Section 16.  All policies were in the name of Del Rosario. then Mary Jane can only collect 1M. A mere contingent or expectant interest in anything.  The warehouse and its contents were destroyed by fire.990. The claims by different people who had stored copra in the warehouse were settled with the exception of Friolan Lopez. not founded on an actual right to the thing. However. their interest is merely an expectancy of inheriting. 3D rhys alexei . 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. the insurance policies and the circumstances surrounding the transaction. Under any aspect. Issue: WON Del Rosario acted as the agent of Lopez in taking out the insurance on the contents of the warehouse or whether she acted as the reinsurer of the copra. in favor of Compania Copra de Tayabas. Hence. The law is that a policy effected by a bailee and covering by its terms in his own property and property held in trust. nor upon any valid contract for it. In a case of contributing policies. The court awarded him the sum of P88.40 in his name.800. but for the purpose of assisting the court in calculating the amount of liability. The agency can be deduced from the warehouse receipts. The measure of an insurable interest in the property is the extent to which the insured might be damnified by loss or injury thereof. the latter authorized Atty. and did not ratify it before the payment of the loss.

 Premiums were paid by SMB and charged to Dunn.  Mortgage contract stated that Dunn was to have the property insured at his own expense.000? What is the liability of the Insurance Company? The insurance claim is reduced in the same amount of 80T. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty. 3D rhys alexei . SMB’s general manager.  In 1917. Anything that reduces or diminishes the loss. In the application. the balance to be paid upon deliver of the house on Aug. Quimson page 44 Problems. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. reduces and diminished the amount which the insurer is bound to pay. 1918. Hence the insurer is liabile for 20T. 12. although the policies were issued in SMB’s name.500 and procured another policy of equal amount from Filipinas Cia de Seguros. 13. Trial court ruled against Harding.INSURANCE REVIEWER– Atty. the policies were renewed. Cases: (36) San Miguel Brewery v. A finished the house on July 13. 1993 so he insured the house against fire for 4M.  SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding.  Property was destroyed by fire. Before delivery of the house in August. Under a building contract. Hence the appeal. Harding was left to fend for himself. 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. Both policies required assignments to be approved and noted on the policy. 4M was the extent to which A was damnified by the loss of the house. he became the owner of the property. In other words. 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.  Law Union. he has to replace the house destroyed with another house worth 4M as per the contract. A constructed a house in Ayala Alabang for 4M for Z who made an advance payment of 1M. A insured his property valued at P100. Dunn sold the property to Harding. 1993. Held: NOPE.  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. issued one for P7.000. The reason why he is entitled to the whole 4M is. Brias stated that SMB’s interest in the property was merely that of a mortgagee. What if the one who caused the damage. A suffered a total loss.  SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. not one valued at only 3M. B paid A P80. the house burned down. Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies. but no assignment of the policies was made to the latter.  Brias. approached Law Union for insurance to the extent of 15T upon the property. Law Union Rock Insurance Company (repeat – case #12) 40 PHIL 674 Facts:  On Jan. notwithstanding the fact that he has received from Z 1M as advance payment.  Dunn likewise authorized SMB to take out the insurance policy for him. Harding was made a defendant because by virtue of the sale. not wanting to issue a policy for the entire amount. SMB filed an action in court to recover on the policies. What is the extent of the insurable interest of A? It is still 4M. A year later.000 for P120.

. 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. said person still has insurable interest. had an insurable interest therein. By virtue of the Insurance Act.  Phoenix denied liability on the ground that Ang was not the owner but a mere possessor and as such. 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. . . no change or assignment of the policies had been undertaken. 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. . and the policies had inadvertently been written in the form in which they were eventually issued. in case of loss. the Cha spouses insured against loss by fire their merchandise inside the leased premises for Five Hundred Thousand (P500. recover upon the two policies an amount in excess of its mortgage credit. as lessor. Cha 277 SCRA 690 (1997) Facts:   Spouses Nilo Cha and Stella Uy-Cha. 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. . but this was not done. but it could NOT. (38) Cha v. remainder to whomsoever. On the day that the lease contract was to expire. The policies might have been worded differently so as to protect the owner. If the wording had been: “Payable to SMB. 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. With respect to Harding.000. it would have proved an intention to insure the entire interest in the property. He insured it with Phoenix. Phoenix Assurance 1 CARA 704 Facts:  Ang Ka Yu had a piece of property in his possession. A person having a mere right or possession of property may insure it to its full value and in his own name. When CKS learned of the insurance earlier procured by the Cha spouses (without its consent). NOT merely SMB’s and would have shown to whom the money. 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. SMB as the mortgagee of the property. when he acquired the property. textiles. However. fire broke out inside the leased premises. Held: Yes. this was not what was stated in the policies. The LESSEE shall not insure against fire the chattels. as lessees. should be paid. . as its interests may appear. Unfortunately. even when he is not responsible for its safekeeping. the parties had agreed that even the owner’s interest would be covered by the policies.00) with the United Insurance without the written consent CKS. entered into a lease contract with CKS Development Corporation (CKS). mortgagee. based on its lease contract with the Cha spouses. Issue: WON a mere possessor has insurable interest over the property. (37) Ang Ka Yu v. because he stands either to benefit from their continued existence or to be prejudiced by their destruction. One of the stipulations of the one (1) year lease contract states: "18. had no insurable interest over the property. Undoubtedly. so Ang Ka Yu sought to claim the proceeds.INSURANCE REVIEWER– Atty. merchandise. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof.   3D rhys alexei . during the continuance of the risk. If during the negotiation for the policies.  The property was lost. an any event. neither Dunn nor Harding could have recovered from the two policies. 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. may become owner of the interest insured”. Quimson page 45 Under the Insurance Act." Notwithstanding the above stipulation.

Simplified.INSURANCE REVIEWER– Atty. The people involved are actually the same. Cases: (39) Sharuff and Co. (40) Garcia v. 18 of the Insurance Code provides: "Sec. Issue: WON CKS can claim the proceeds of the fire insurance. 18. Later on. HongKong Fire and Marine Insurance Co. 45 PHIL 122 3D rhys alexei ." A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity. Held: YUP. and not Sharuff and Eskenazi. 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. The subsequent partnership did not alter the composition of the firm.  The merchandise insured was subsequently destroyed by fire. Furthermore. 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. Section 18. Sharuff and Eskenazi filed their claim against the insurance company. 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." Therefore. 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. 64 SCRA 258 Facts:  Sharuff and Eskenazi were doing business under the firm name Sharuff and Co. the latter filed a complaint against the Cha spouses and United. Held: NO.  They insured their merchandise with Baloise. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs. Baloise Fire Insurance Co. The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella UyCha (herein co-petitioners). Hence. the provision states that? NO insurable interest = NO contract of Insurance. Sharuff and Eskenazi entered into a contract of partnership and thereby changed the firm name to Sharuff and Eskenazi. In the present case. Quimson page 46  United refused to pay CKS. 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. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof. such change of firm name was not made to defraud the insurance company or some other person. Sec. the Cha spouses. v. 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.  Baloise refused to pay on the ground that the policy was issued in the name of Sharuff and Co. alleging that the latter had no insurable interest. CKS cannot. This insurable interest over said merchandise remains with the insured. Issue: WON the partnership can claim the proceeds of the policy. CKS has no insurable interest. under the Insurance Code — a special law — be validly a beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise.

INSURANCE REVIEWER– Atty. Taitong claimed the proceeds from the insurance company. or during the intervening period between the time of effectivity of the insurance. the insurance was suspended. Garcia could not have noticed the mistake due to his ignorance of the English language. then the insurer is liable. In case of property insurance. at the time the insurance takes effect AND at the time of the loss. Insurance Commission 158 SCRA 366 Facts:  Palomo obtained a loan from Taitong for 100T. claiming that Taitong had no more insurable interest in the property since Palomo had allegedly paid the mortgaged debt already. but need not exist thereafter or when the loss occurs. The defense of the insurer is purely technical. Problem. Issue: WON Garcia can collect. Taitong insured the mortgaged property with Travelers Multi-Indemnity Corp for 100T. notwithstanding the ownership of Bill during the intervening period.  The insured property was razed by fire. 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. but did not transfer the policy. Therefore. and interest in the life or health of a person insured must exist when the insurance takes effect. It cannot deny such allegation due to the fact that it even confirmed with PNB the nature of said policy when it was endorsed. so he could not have noticed the error of the insurance company. The law says Beatrix need not have insurable interest in the meantime. referring to it as a policy covering the merchandise. To secure this. 3D rhys alexei . During the effectivity of the policy.  The building which housed the merchandise was later razed by fire.  The insurance company however made a mistake and issued a policy covering the building where the merchandise was stored. Because of the effects of Sec. Issue: WON Taitong can collect the proceeds. Cases: (41) Tai Tong Chua Che & Co. she sold the house to Bill for 2T. Beatrix realized how much she missed the house and bought it from Bill for 3T. she was the owner of the house. and the time of the loss. At that time.  Said policy was later on assigned by Garcia to PNB to secure a loan. She also had insurable interest on the house at the time of the loss since she had already reacquired it from Bill. Is the Insurer liable notwithstanding the transfer of interest from Beatrix to Bill during the effectivity of the policy? Yes. The next day. Held: YES. A week later. The mistake was obviously on the part of the insurer when it issued a wrong policy. An interest in property insured must exist when the insurance takes effect. Section 19. of which Garcia was ignorant. PNB acknowledged receipt of said policy. v. When must insurable interest exist? In case of life insurance at the time the insurance takes effect. Beatrix insured her house for 1T. 20. The insurance company refused to pay due to the fact that the policy indicates insurance on the building and not on the merchandise. he mortgaged a parcel of land with a building. but it need not exist in the meantime.  Travelers refused to pay. and when the loss occurs. as Beatrix had insurable interest at the two points in time required by law.  The insurance company made the necessary endorsements to PNB. Quimson page 47 Facts:  Garcia had his merchandise insured by Hongkong Fire and Marine Insurance Co. (The building was not owned by Garcia)  The policy was written in English. the house burned down.

a change of interest in any part of a thing insured. or might lessen the interest of the insurer in protecting and guarding it. Issue: WON Bachrach can claim the proceeds of the policy. 20) 2. until the interests in the thing and the interest in the insurance are vested in the same person. The claim was denied on the ff grounds: o The policy was allegedly forfeited because the insured stored varnishes and paints within the premises. 22) 4. unaccompanied by a corresponding change of interest in the insurance. 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. Change of interest in the thing insured occurs after the injury which results in a loss (Sec.  Bachrach claims from the insurance company. The allegation of the insurance company that the debt had already been paid was NOT proved.INSURANCE REVIEWER– Atty. Life. 17 PHIL 555 Facts:  Bachrach insured properties of its general furniture shop with British. What are the exceptions to the general rule? The exceptions. 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. 23) 5. to the other (Sec. Held: Yes. and in the cases of life. where a change of interest does NOT suspend the insurance are: 1. health and accident insurance (Sec. and o Bachrach executed a chattel mortgage on the properties insured without the consent of the insured. namely the contract of mortgage which does not appear to have been canceled or released. joint owners or owners in common who are jointly insured. accident and health insurance. 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. There is no express prohibition against the execution of a chattel mortgage on the property insured. Law Union Rock Insurance Company (repeat – case #12) 40 PHIL 674 Facts: 3D rhys alexei . Change of interest in one or more of several things separately insured by one policy (Sec. Case: (42) Bachrach v. Change of interest by will or succession on the death of the insured (Sec. The properties were subsequently destroyed by fire. (43) San Miguel Brewery v. Except in the cases specified in the next four sections. British American Insurance Co. Section 20. 21) 3. The policy was NOT forfeited due to the strong paints and varnishes. Quimson page 48 Held: Yes. The gasoline stored within the premises was in the reservoir of the car and thus does not violate any provision in the policy. suspends the insurance to an equivalent extent. Taitong on the other hand presented evidence. Transfer of interest by one of several partners. o Insured stored gasoline in the building. 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.

SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. SMB filed an action in court to recover on the policies. issued one for P7. but no assignment of the policies was made to the latter. Under the Insurance Act. he became the owner of the property. Dunn likewise authorized SMB to take out the insurance policy for him. A year later. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty. The policies might have been worded differently so as to protect the owner.INSURANCE REVIEWER– Atty. In 1917. after the occurrence of an injury which results in a loss. 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. Property was destroyed by fire. may become owner of the interest insured”. By virtue of the Insurance Act. If the wording had been: “Payable to SMB. With respect to Harding. the parties had agreed that even the owner’s interest would be covered by the policies. an any event. Problem: A insured his house for 10T. On Aug. 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. it would have proved an intention to insure the entire interest in the property. In the application. NOT merely SMB’s and would have shown to whom the money. 2004. the policies were renewed. approached Law Union for insurance to the extent of 15T upon the property. in case of loss. recover upon the two policies an amount in excess of its mortgage credit. Can A collect on the insurance after selling the house? 3D rhys alexei . 15. when he acquired the property. as its interests may appear. 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. he sold the same house so partially damaged to C. Harding was left to fend for himself. mortgagee. does not affect the right of the insured to indemnity for the loss. However. Trial court ruled against Harding. SMB as the mortgagee of the property. Quimson   page 49          On Jan. 12.500 and procured another policy of equal amount from Filipinas Cia de Seguros. On Aug. neither Dunn nor Harding could have recovered from the two policies. Dunn sold the property to Harding. Brias stated that SMB’s interest in the property was merely that of a mortgagee. Undoubtedly. should be paid. If during the negotiation for the policies. during the continuance of the risk. and the policies had inadvertently been written in the form in which they were eventually issued. 1918. Premiums were paid by SMB and charged to Dunn. remainder to whomsoever. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. had an insurable interest therein. Unfortunately. Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies. Brias. Held: NOPE. not wanting to issue a policy for the entire amount. 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. although the policies were issued in SMB’s name. SMB’s general manager. Harding was made a defendant because by virtue of the sale. but it could NOT. A change of interest in a thing insured. SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. Both policies required assignments to be approved and noted on the policy. Hence the appeal. no change or assignment of the policies had been undertaken. Mortgage contract stated that Dunn was to have the property insured at his own expense. this was not what was stated in the policies. 2004. 10. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof. 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. Section 21. but this was not done. Law Union. the house was partially damaged by fire.

and his interest in the insurance passes to the person taking his interest in the thing insured. the sale of one distinct thing does NOT avoid the insurance as to the others. 22. joint owners or owners in common. Thereafter. In this case. joint owner. What does this section provide? It provides that a transfer of interest in the insured property by a partner. to the others. A insures his nipa hut. joint owners. Section 23. even though it has been agreed that the insurance shall cease upon the alienation of the thing insured. the liability of the insurer became fixed and from that day onward. Problem. will NOT avoid the insurance. or owner in common to the others who are jointly insured. Upon the occurrence of the risk insured against. What is the reason for the rule? The underlying principle is that each partner. such insurance will be void and cease. A change in interest in one or more of several distinct things. Since the vehicles are separately insured. A change of interest. or of any undivided interest therein. The rule is the same even if there is a stipulation that the insurance will cease upon the alienation of th thing insured. by will or succession on the death of the insured. Since the two cars are not separately valued in the policy and the premium was meant to cover both vehicles.” What is the effect if the sale was made to a stranger? All the more. or owners in common. He institutes B as his universal heir. He has no compulsory heirs. Is there an exception to the rule? Yes. A is the owner of a Feroza and a Civic. 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. who are jointly insured. does not avoid the insurance as to the others. Under Sec. However. If the hut burns down can B collect? Yes. The change of interest was made after the occurrence of the injury which resulted in a partial loss. In other words. Section 24. A is the owner of a Feroza and a Civic.INSURANCE REVIEWER– Atty. Quimson page 50 Yes. 3D rhys alexei . is the insurer liable in case the Civic is lost? Yes. his only property. is the insurer liable in case the Civic is lost? NO. 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. separately insured by one policy. Section 22. He insures the Feroza for 200T and the Civic for 150T under a single policy for which he paid a total premium of 20T. the contract will be avoided because the risk is already affected since a new party is brought into the contract of insurance. does not avoid the insurance. If he sells the Feroza without the insurer’s consent. the sale of one thing affects the insurance of the others. Problem. He insured the Feroza and the Civic for 350T under a single policy for which he paid a premium of 20T. A transfer of interest by one of several partners. does not avoid the insurance. Sec. 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. In case he sells the Feroza without the insurer’s consent. the transfer does not affect the risk because NO NEW PARTY is brought into the contractual relationship with the insurer. he became duty bound to indemnify A for his loss. 23 says so. A dies and B inherits the hut.

(Sec. As to the 2nd stipulation. Stipulation for the payment of loss WON the person insured has any interest in the subject matter of the insurance (exception: life insurance) 2. must stipulate in the policy that “any sale of the property or any interest therein avoids the policy. 3. This section avoids two types of stipulations in an insurance policy. the amount of such loss. 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. 83) TITLE IV – CONCEALMENT Section 26. the Section 25.” This is the only way the insurer cannot be held liable. the law permits the insurer to show lack of insurable interest on the part of the insured. and if so.(Furthermore arch-enemy siya ni spiderman…hehehe) insurer is liable to Peter and MJ whose insurance was not affected by the sale of Harry. and if so. to Peter. MJ. the parties have four primary concerns to wit: 1. 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. A neglect to communicate that which a party knows and ought to communicate is called a concealment. What are they? 1. In case of fire is the insurer liable to Doc Ock? NO. Determining whether a loss occurred. 2. since Doc Ock is a stranger. 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. The correct estimation of the risk which enables the insurer to decide whether he is willing to assume it. even after the issuance of a policy of insurance to avoid liability. If using the same facts.INSURANCE REVIEWER– Atty. Harry sells to Peter. at what rate or premium. What are the four primary concerns of parties to an insurance contract? In making a contract so highly aleatory such as that of insurance. What is concealment? Concealment is a neglect to communicate that which a party knows and ought to communicate. who are partners. 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. A fire insurance policy was issued by Spiderman Insurance Co. However. Is the insurer liable to Peter? Yes. and every policy executed by way of gaming or wagering. is void. Peter is a partner. we must remember that insurable interest is a requisite of a valid contract of insurance. The precise delimitation of the risk which determines the extent of the contingent duty to pay undertaken by the insurer. and Harry. or that the policy shall be received as proof of such interest. Harry sold his interest to Doc Ock. What must the insurer do to avoid the policy? Spiderman Insurance Co. 2) Such party concealing duty bound to disclose such fact to the other 3D rhys alexei . and 4. Lack of this requisite avoids the contract. Quimson page 51 Problems.

A did not reveal the fact that he was suffering from a certain ailment. was aware of the ailment. the insurer need not prove fraud in order to rescind a contract on the ground of concealment. 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. What is the effect of concealment? As a rule. Why does the law make no distinction between international and unintentional concealment? Because you have to prove fraud. failure on the part of the insured to disclose conditions affecting the risk of which he is aware. And it is so hard to prove intention to deceive because we are not mind-readers. makes the contract voidable at the insured’s option. Quimson 3) Such party concealing makes no warranty of the fact concealed. Is there concealment? YES. However. In order to rescind a contract on the ground of concealment. the insurer is misled or deceived into accepting the risk .INSURANCE REVIEWER– Atty. but honestly believed that it was not material. is misled into a belief that the circumstance withheld does NOT exist. 27 provides that the effect of concealment is the same regardless of whether the concealment is intentional or unintentional. must the insurer prove fraud? NO. What is the criterion then if we were to apply Sec. by West Coast. Cases: (44) Argente v. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. is that in cases of concealment. The duty of communication is independent of the intention and is violated by the fact of concealment. The reason is that insurance policies are traditionally contracts uberrime fidae. the effect is the same. What is the reason behind Sec. we can distinguish. Same facts as above but the ailment is material to the contract. Nevertheless. even when there is no intention to deceive. Sec. But if A was aware of the materiality of the ailment. you have to prove intention to deceive. contracts of the outmost good faith. and he is thereby induced to estimate the risk upon a false basis. It entitles the insurer to rescind the contract. 27? The reason behind the Sec. as a rule. In his application for life insurance. 51 PHIL 725 Facts:  A joint life insurance policy was issued to Bernardo Argente and his wife Vicenta upon payment of premium. And if you have to prove fraud. there is fraudulent concealment. necessarily depends on the answer to this question. and 4) The other party has no means of ascertaining the fact concealed page 52 Section 27. the concealment is not fraudulent or intentional. must rely primarily upon the information supplied to him by the appellant. 27. relying upon the belief that the insured will disclose every material fact within his actual or presumed knowledge. There is concealment. West Coast Life Insurance Co. 3D rhys alexei . Problems. The insurer. known to the insured only. that is. or accepting it at the rate of premium agreed upon. Is there concealment if the ailment was not material to the contract? Whether or not A was aware of the ailment. If A. This doctrine is essential on account of the fact that the full circumstances of the subject-matter of insurance are. there is no concealment if the ailment is not material to the contract. in deciding whether or not to accept a risk. and the insurer. Under Sec.

Notwithstanding the fact of her operation. If the policy was procured by fraudulent misrepresentations. (45) Yu Pang Cheng v. 1925. particularly of the breast. the insurance would never have been granted. The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy. Eng was asked whether he had been ill or had consulted a doctor due to symptoms or illnesses enumerated in the questionnaire. including the pectoral muscles and the glands. spirits and other intoxicants?” she answered “beer only in small quantities”. when in fact he was hospitalized seven months prior to his application for the said policy.  Cheng claims the proceeds of the policy. Philamlife 7 SCRA 316 Facts:      2 months prior to the insurance of the policy. 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. involving complete removal of the right breast. Vicenta. She stated therein that she did not have. Saturnino did not make a disclosure thereof in her application for insurance.  Insurance co.INSURANCE REVIEWER– Atty. 3D rhys alexei . her replies were as follows: o “How frequently do you use beer. Held: YES. uterus and menstrual disorders. nor did she ever have any illness or disease peculiar to her sex. Bernardo claimed payment but was refused. Held: YES. advanced and lesser curvature. undergone any operation or suffered any injury within the preceding 5 years. Issue: WON the insured made such false representation of material facts as to avoid the policy. the truth or falsity of the answer becomes the determining factor. found in the right armpit. 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. In an action on a life insurance policy where the evidence conclusively shows that the answers to questions concerning diseases were untrue.  Eng subsequently died of medullary carcinoma. wine. CA 105 PHIL 1930 Facts:  Yu Pang Eng obtained a life insurance policy naming his brother Yu Pang Cheng as beneficiary. (46) Saturnino v. It can be fairly assumed that had the true facts been disclosed by the insured. Issue: WON the policy is void. refused payment on the ground that the policy was void due to the concealment. It is admitted that in the Medical Examiner’s report. Vicenta died of cerebral apoplexy. In the application for the policy. in response to the question asked by the medical examiner. Thereafter. not disputed that in 1924. Issue: WON on the bais of the misrepresentations of Vicenta. 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. She also stated that she had never been treated for. the contract of insurance apparently set forth therein was never legally existent. 18. Bernardo is barred from recovery. He answered “ No”. that she had not consulted any physician. nor had she ever had. among others listed in the application. during the effectivity of the policy. cancer or other tumors. ovaries. Quimson   page 53  On Nov. Grade 4. Saturnino was operated on for cancer. Held: YES.

concealment of the fact of the operation itself was fraudulent. concealment being defined as “negligence to communicate that which a party knows and ought to communicate. namely. but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due.” The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk. In the first place. it is not necessary to show actual fraud on the part of the insured. or making his inquiries. (48) Henson v.  In 1955. 3D rhys alexei . Concealment entitles the insurer to resolve the contract of insurance. Quimson page 54 There can be no dispute that the information given by her in the application for insurance was false. withheld such fact which is material to the risk to be assumed by the insurance company. 1957. The contention is without merit. and he is thereby induced to estimate the risk upon a false basis that it does not exist. When he supplied the required essential data for the insurance form. in apparent gad faith. Held: NO. 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. since her doctor never told her. Secondly.INSURANCE REVIEWER– Atty. in forming his estimate of the proposed contract. Had he divulged said significant fact in the insurance form. In this jurisdiction. CA (repeat – case #15) Facts:  On Mar 4. Such a congenital defect could not be ensconced or disguised. a binding deposit receipt was issued to HIng by the branch manager of the insurer in Cebu. Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself did not know. whether intentional or unintentional entitled the insurer to rescind the contract of insurance. in order to avoid a policy. If anything. the policy lapsed due to non-payment of the premiums. Ngo Hing. for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. which does away with the usual requirement of medical examination before the policy is issued. 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. or accepting it at a rate of premium agreed upon. The insurer. Grepalife would have verified the same and would have had no obvious choice but to disapprove the application outright. Issue: WON Grepalife is liable to HIng.  On May 28. Nonetheless. The question to determine is: Are the facts then falsely represented material? The Insurance Law provides that “materiality is to be determined not by the event. that the disease for which she had been operated on was cancer. 1957. Philamlife 56 OG 7328 Facts:  Celestino Henson was insured by Philamlife in 1954 upon his application or a 20-yr endowment life policy. (47) Grepalife v. that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5 years. the waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered.  Upon payment of the insurance premium. as there could not have been any mistake about it.  Hing filed a claim with Grepalife. but the latter denied liability on the ground of concealment. is misled into a belief that the circumstances withheld does not exist. concealment. The SC was of the firm belief that Ngo Hing had deliberately concealed the state of health and physical condition of his daughter Helen. Helen died of influenza with complication of broncho pneumonia. he was fully aware that Helen was a mongoloid. There was concealment. relying upon the belief that the insured will disclose every material fact within his actual or presumed knowledge. no matter what the ailment.

30 of the Insurance Code: Materiality is to be determined not by the event. subleased the ground floor to ONg. Manuel Leyson.  In Aprl 1949. And aside from this.  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. He also did not disclose that he had been examined by a physician. the spouses were informed that the premium for Jan 1949 was still unpaid notwithstanding that the 31-day grace period had already expired. Quimson  page 55   Upon payment of the premiums due. 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. 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. and that the policy was in English (which she did not understand) and was never read to her. soles and canvass were stored therein. 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. 3D rhys alexei . Bautista’s lessee. rubber heels. Rosario died of acute dilatation of the heart. and they were furnished at the same time long-form health certificates for the reinstatement of the policies. (49) Soliman v. and thereafter Patricio filed a claim for the proceeds of the insurance. enlarged liver and hernia. in forming his estimate of the disadvantages of the proposed contract. In 1956. Before the policy was issued however. intent. or in making his inquiries.  In March 1949. Subsequently.INSURANCE REVIEWER– Atty. Henson died. being a state of the mind is hard to prove. Held: NO. Henson did not disclose the fact that he had been previously diagnosed for pyelonephritis. the house was destroyed by fire. The company then filed for rescission. Held: YES. the insured need not have died of the very diseases he had failed to reveal to the insurance company. Issue: WON the policy can be rescinded. they submitted the health certificates and paid the premium due up to said month. Bautista filed her claims with Capital Insurance. but of the insurance agent. who used it as a factory for the manufacture of shoes. Capital Insurance 1 CA Rep. in order to entitle the latter to rescind the contract. Beneficiaries’ contend that the intent to conceal must be proven to warrant rescission. the policy was reinstated. Issue: WON there is need to prove intent to conceal to warrant rescission. 228 Facts:  In 1952. each of them being the beneficiary of the other. In essence therefore. (50) Bautista v. According to Sec. Bautista said that the statement “occupied as dwelling only” was not hers. but the latter denied her claim on the ground of breach of warranty. and his beneficiaries’ claim was rejected by Philamlife on the ground of concealment. 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. 26 provides that “a concealment whether intentional or unintentional entitles the injured party to rescind the contract of insurance”.  In Jan. A month later.  Patricio claims that the answers to the questions in the health certificates were made by US Life’s agent. Sec. upon PIlar Bautista’s house. 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. 1950. a contract of insurance was entered by the parties.      The policy described the building as “occupied as dwelling only”.

as his beneficiary. Violation of the statement which is to be considered a warranty entitles the insurer to rescind the contract of insurance. Wilfredo B. Such misrepresentation is fatal. and the insured is regarded as having assumed the risk of the falsity or misstatements of its contents. On 5 August 1983.  Ng Hua declared that there was non. Canilang applied for a "non-medical" insurance policy with Grepalife naming his wife. the 3D rhys alexei . Canilang was issued ordinary life insurance with the face value of P19. Insurance & Surety Corp v. 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. Claudio who had found him to be suffering from "sinus tachycardia" and "acute bronchitis. 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. Canilang consulted the same doctor again on 3 August 1982 and this time was found to have "acute bronchitis." and "chronic anemia. General issued a fire policy to Ng Hua to cover the contents of the Central Pomade Factory owned by him. the information concealed must be information which the concealing party knew and "ought to [have] communicate[d]. (51) Gen.INSURANCE REVIEWER– Atty."    On the next day." "anemia. filed a claim with Grepalife which the insurer denied on the ground that the insured had concealed material information from it. Under the relevant provisions of the Insurance Code. 4 August 1982. Quimson page 56 Issue: WON Capital may rescind the contract. Failure to read the policy is negligence. In the absence of fraud. CA reversed.  Issue: WON Grepalife is liable. information which was "material to the contract. Held: SC took note of the fact that Canilang failed to disclose that hat he had twice consulted Dr. 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. Held: It can. Had Canilang disclosed his visits to his doctor. Held: Yes. she is presumed to know the contents of the contract and to have assented to them. Claudio and was diagnosed as suffering from "sinus tachycardia. The very next day." Mr." The wife as beneficiary. the building and the goods stored therein burned.  There was a provision in the policy that should there be any insurance already effected or to be subsequently procured. Issue: WON General Insurance can refuse to pay the proceeds. the insured shall give notice to the insurer.700. De Canilang v. Canilang died of "congestive heart failure. NG Hua 106 PHIL 1117 Facts:  In 1952.  Subsequently. CA 223 SCRA 443 (1993) Facts:  Canilang consulted Dr. (52) Vda." that is to say. Bautista was bound to know the contents of the policy in accepting it.

" CA affirmed. by the judge ultimately. 1986. required a higher premium for the same coverage. but solely by the probable and reasonable influence of the facts upon the party to whom communication is due. (53) Sun Life v. in the insurance application. Neither does materiality depend upon the actual or physical events which ensue.INSURANCE REVIEWER– Atty. He was issued a life insurance policy with double indemnity in case of accidental death. A check representing the total premiums paid in the amount of P10. The matters concealed would have definitely affected petitioner's action on his application. Bacani procured a life insurance contract for himself from Sun Life. it held that the health history of the insured was immaterial since the insurance policy was "non-medical. of course. 1987. Bernarda. Petitioner's argument. filed an action for specific performance against Sun Life. CA 245 SCRA 268 (1995) Facts:    On April 15. Sun Life informed Berarda. Held: NOPE. In its letter. Bacani was examined and confined at the Lung Center of the Philippines. in forming his estimate of the disadvantages of the proposed contract or in making his inquiries (The Insurance Code. Sun Life conducted an investigation and its findings prompted it to reject the claim. The information which the insured failed to disclose were material and relevant to the approval and the issuance of the insurance policy. if accepted. Sec 31) The terms of the contract are clear. seeking the benefits of the insurance. 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. Quimson page 57 diagnosis made and the medicines prescribed by such doctor. the insured died in a plane crash. thus rendering the contract of insurance voidable. He did not reveal such fact in his application. Such failure precisely constituted concealment on the part of Canilang. Materiality is to be determined not by the event. except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. and which the other has no means of ascertaining. Moreover. A man's state of mind or subjective belief is not capable of proof in our judicial process. During his confinement. at the very least. be determined objectively. Bernarda Bacani filed a claim with Sun Life.172. in good faith. that "probable and reasonable influence of the facts" concealed must. ultra-sonography and hematology tests. Sun Life discovered that 2 weeks prior to his application. that the insured did not disclosed material facts relevant to the issuance of the policy. either by approving it with the corresponding adjustment for a higher 3D rhys alexei . The designated beneficiary was his mother. 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. The materiality of the information withheld by Canilang from Grepalife did not depend upon the state of mind of Jaime Canilang. Bernarda and her husband. Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the communication should have been made. the deceased was subjected to urinalysis. in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance. The insured is specifically required to disclose to the insurer matters relating to his health. all facts within his knowledge which are material to the contract and as to which he makes no warranty. Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other.   Issue: WON the beneficiary can claim despite the concealment. 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.00 was attached to said letter. On June 26. would obviously erase Section 27 from the Insurance Code of 1978. where he was diagnosed for renal failure.

Atty Quimson asked us to look at Sec. the party with the duty to communicate makes no warranty. What if the insurer with reasonable diligence could have known or discovered such facts for himself. What does this provision say? Sec. 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. raises grave doubts about his bonafides. 107 provides that “in marine insurance each party is bound to communicate. In the above example. 28. in good faith. "good faith" is no defense in concealment. Songco 3D rhys alexei .INSURANCE REVIEWER– Atty. In the problem above. though unasked. Cases: (54) Fieldman’s Insuranc v. Moreover. such fact is material in cases of life or health insurance and may even be material up to a certain extent for accident insurance. 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 is deemed material? See sec. If A consulted Dr. 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. Quimson page 58 premium or rejecting the same. how will A know if the fact is material or not? The fact must be related to the insurance applied for. Each party to a contract of insurance must communicate to the other. all the information which he possesses. 107. 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. material to the risk. and 2. if such fact is material to the risk assumed by the insurer. The insurer has the right to rely upon the statements of the insured for he knows the facts and the insurer does not. The insured's failure to disclose the fact that he was hospitalized for two weeks prior to filing his application for insurance. Section 28. Problem. except such as is mentioned in Section thirty. or upon inquiry discloses or assumes to disclose. It is far-fetched to require disclosing such information if he is applying for fire or marine insurance. According to Sec. GOOD FAITH requires him to disclose that circumstance. 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. can the Insured be excused for his concealment and deny the remedy of rescission to the insurer? NO. and which the other has not the means of ascertaining. B for treatment of syphilis and gonorrhea when must A disclose the fact? He must disclose such fact even if not inquired into. 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. in addition to what is required by section twenty-eight. 31. 30. Thus. the other party has no means of ascertaining the facts Any exceptions to the duty to communicate? Those falling under Sec. and to state the exact and whole truth in relation to all matters that he represents.

entitles the insurer to rescind. 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. Issue: WON the Songcos’ can claim the insurance proceeds despite the fact that the vehicle concerned was an owner and not a common carrier. After it had led Federico Songco to believe that he could qualify under the common carrier liability insurance policy. a man of scant education to enter into a common carrier insurance contract with Fieldman. 1961. (b) Those which. to communicate information of matters proving or tending to prove the falsity of a warranty. 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. (c) Those of which the other waives communication. and the company did not object to this. Quimson 25 SCRA 70 page 59 Facts:  In 1960. Section 29. Held: Yes. the other ought to know. induced Songco. Its agent Sambat twice exerted the utmost pressure on the insured. the non-disclosure under this section must be intentional and fraudulent in order that the contract may be rescinded. 27. in the exercise of ordinary care. Sambat. and (e) Those which relate to a risk excepted from the policy and which are not otherwise material.  The insurance was executed and approved for a year from Sept. 3D rhys alexei . on the part of one insured. the jeepney collided with a car in Bulacan and as a result. Unlike the ordinary concealment provided for in Sec. a man of scant education. Neither party to a contract of insurance is bound to communicate information of the matters following. 1960-1961.  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). What type of concealment is referred to here? The type of concealment referred to here relates to the “falsity of a warranty”. except in answer to the inquiries of the other: (a) Those which the other knows. An intentional and fraudulent omission. It knew all along that Frederico owned a private vehicle. and of which the former has no reason to suppose him ignorant.INSURANCE REVIEWER– Atty. and to enter into a contract of insurance paying the premiums due. It was renewed in 1961 for another year. (d) Those which prove or tend to prove the existence of a risk excluded by a warranty. What is an example of this kind of concealment? In every contract of marine insurance.  During the inducement. 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. The company is estopped from asserting that the vehicle was not covered. an agent of Fieldman’s Insurance. there is an implied warranty of seaworthiness of the vessel. What is the exception? Those provided for under Section 30. Section 30.  In Oct. and which are not otherwise material. Sonco died. it could not thereafter be permitted to change its stand to the detriment of the heirs of the insured. What is the general rule? Communicate the necessary material facts.

Such fact appeared during the medical exam.. 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. He was not supposed to sign the application in blank. They act as general representatives of insurance companies.  After that. Jose Aranilla applied for life insurance with Insular. Nowadays. (bakit kaya nagreverse?. Issue: WON Insular Life was bound by their agent’s acts. The situation is one in which of two innocent parties must bear a loss for his reliance upon a third person. If they falsified the answers for him. Agents who solicit contracts are paid large commissions on the policies secured by them. to which he answered NO. Held: Yes. o WON he has been confined in a hospital for consultation and treatment. these 2 questions appeared: o WON he has suffered from any disease of the kidney and urinary tract. In his application. Insular is liable to the beneficiaries. and Insular Life is absolved from liability. the insured becomes duty bound to communicate such information. 30 (exception to the exception)? If the insurer asks about them. Hence. it is the one who drafted and accepted the policy and consummated the contract. he made them his own agents for that purpose and he was responsible for their acts in that connection. The insurance business has grown so vast and lucrative within the past century. and was required with his signature to vouch for their truth. In this case.  It appears that during that time. Quimson page 60 When will the insured be required to communicate information covered by Sec. The judgment rendered therefore in the preceding case is thus reversed. The insurer’s medical examiner approved the application knowing fully well that the applicant was sick. the one who employed and gave character to the third person as its agent should be the one to bear the loss. (Evaristo could not read and understand English)  When Evaristo died. the plot thickens… Hmm…. (56) Insular life v. he could not evade liability for the falsification. Issue: WON Insular Life was bound by their agent’s acts. Insular life refused to pay the proceeds because of concealment. 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. When Evaristo authorized them to write the answers for him. he was confined due to influenza. 4 637 Facts:  In 1959. Feliciano 74 PHIL 4681 Facts:  Insular life filed a motion for reconsideration of the decision in the preceding case. IN the case at bar. Insular LIfe 69 OG No. Evaristo was already suffering from tuberculosis. Cases: (55) Insular Life v.INSURANCE REVIEWER– Atty. It seems reasonable that as between the two of them. to which he answered that in 1947. 3D rhys alexei .) (57) Aranilla v.. but the examiner and the company’s agent ignored it. the true state of health of the insured was concealed by the agents of the insurer. even people of modest means enter into insurance contracts. Feliciano 73 PHIL 201 Facts:  Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of its agents. He knew that his answers would be the basis for the policy.

a disease of the kidney and urinary tract. among others listed in the application. Held: YES. Issue: WON the contract can be rescinded. 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. ovaries.INSURANCE REVIEWER– Atty. particularly of the breast. Saturnino did not make a disclosure thereof in her application for insurance. cancer or other tumors. that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5 years. 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.  Notwithstanding the fact of her operation. uterus and menstrual disorders. then the contract is avoided. even if the cause of the loss which subsequently occurred be unconnected with the fact concealed. involving complete removal of the right breast. or in any wise affect the risk. What is the test of materiality? The test is simply: IF the knowledge of a fact would cause the insurer to reject the risk .  She stated therein that she did not have. he was confined and treated for nephritis. namely. 3D rhys alexei . in forming his estimate of the disadvantages of the proposed contract. but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due. There can be no dispute that the information given by her in the application for insurance was false. undergone any operation or suffered any injury within the preceding 5 years. Issue: WON the insured made such false representation of material facts as to avoid the policy. Materiality is to be determined not by the event. Saturnino was operated on for cancer. or in making his inquiries. it is a concealment of a material fact which entitles the insurer to rescind. When Aranilla died of cirrhosis of the liver. in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. Quimson   page 61 The truth however. nor did she ever have any illness or disease peculiar to her sex. 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. that she had not consulted any physician. found in the right armpit. 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. Held: Yes. nor had she ever had. even if the insured died of an ailment which has NO connection with the specific questions falsely answered by him. or making his inquiries. that fact is material. Cases: (58) Saturnino v. Insular refused to pay the proceeds due to concealment. and he was accordingly informed of the cause. in forming his estimate of the proposed contract. 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. Section 31.  The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy. 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. or to accept it only at a higher premium rate. Philamlife (repeat – case #46) 7 SCRA 316 Facts:  2 months prior to the insurance of the policy. was that a few months prior to his application. though it may not even remotely contribute to the contingency upon which the insurer would become liable. including the pectoral muscles and the glands.

and he is thereby induced to estimate the risk upon a false basis that it does not exist. Henson did not disclose the fact that he had been previously diagnosed for pyelonephritis.INSURANCE REVIEWER– Atty.  Upon payment of the premiums due. 30 of the Insurance Code: Materiality is to be determined not by the event. no matter what the ailment. The insurer. 1986. Sec. intent. but in the application for reinstatement. In essence therefore. being a state of the mind is hard to prove. that the disease for which she had been operated on was cancer. Held: NO. He also did not disclose that he had been examined by a physician. If anything. is misled into a belief that the circumstances withheld does not exist. or accepting it at a rate of premium agreed upon. Secondly. it is not necessary to show actual fraud on the part of the insured. (59) Henson v. the insured need not have died of the very diseases he had failed to reveal to the insurance company. CA (repeat – Case # 53) 245 SCRA 268 (1995) Facts:  On April 15. Quimson page 62 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. for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. The contention is without merit. In this jurisdiction. 26 provides that “a concealment whether intentional or unintentional entitles the injured party to rescind the contract of insurance”. which does away with the usual requirement of medical examination before the policy is issued. 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. 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. as there could not have been any mistake about it.” The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk. Issue: WON there is need to prove intent to conceal to warrant rescission. concealment being defined as “negligence to communicate that which a party knows and ought to communicate.  In 1956. (60) Sun Life v. concealment of the fact of the operation itself was fraudulent. The designated beneficiary was his mother. whether intentional or unintentional entitled the insurer to rescind the contract of insurance. in order to avoid a policy. and his beneficiaries’ claim was rejected by Philamlife on the ground of concealment. relying upon the belief that the insured will disclose every material fact within his actual or presumed knowledge. in forming his estimate of the disadvantages of the proposed contract. the policy was reinstated. enlarged liver and hernia. Henson died. but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due. And aside from this. concealment. Bacani procured a life insurance contract for himself from Sun Life. He was issued a life insurance policy with double indemnity in case of accidental death. or in making his inquiries. In the first place. Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself did not know.  The company then filed for rescission. According to Sec. the waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered. the policy lapsed due to non-payment of the premiums. since her doctor never told her. 3D rhys alexei . in order to entitle the latter to rescind the contract. Bernarda. Beneficiaries’ contend that the intent to conceal must be proven to warrant rescission.  In 1955.

all facts within his knowledge which are material to the contract and as to which he makes no warranty. it held that the health history of the insured was immaterial since the insurance policy was "non-medical." CA affirmed. He did not reveal such fact in his application. Bernarda and her husband. Held: NOPE. filed an action for specific performance against Sun Life. Bacani was examined and confined at the Lung Center of the Philippines. The insured is specifically required to disclose to the insurer matters relating to his health. in good faith. and all general usages of trade. General usages of trade. and which the other has no means of ascertaining. A party however. namely: 1.172. Likewise. Moreover. is not bound to know all the classes of general clauses but only such general causes: a) Which are open to his inquiry. General clauses 2. the insurer is charged with the knowledge or general trade usages and rules of navigation. Under this section. The matters concealed would have definitely affected petitioner's action on his application. In its letter. equally with that of the other. the deceased was subjected to urinalysis. Thus. Materiality is to be determined not by the event. and which may affect the political or material perils contemplated. Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other. Sun Life informed Berarda.00 was attached to said letter. "good faith" is no defense in concealment. Sec 31) The terms of the contract are clear. equally with that of the other. raises grave doubts about his bonafides.INSURANCE REVIEWER– Atty. either by approving it with the corresponding adjustment for a higher premium or rejecting the same. ultra-sonography and hematology tests. 3D rhys alexei . What is the import of the aforementioned rules? The insured need not communicate public events such as that the nation is at war.   Issue: WON the beneficiary can claim despite the concealment. Sun Life discovered that 2 weeks prior to his application. 1987. Sun Life conducted an investigation and its findings prompted it to reject the claim. in forming his estimate of the disadvantages of the proposed contract or in making his inquiries (The Insurance Code. seeking the benefits of the insurance. or political conditions in other countries. Each party to a contract of insurance is bound to know all the general causes which are open to his inquiry. or what the law is. b) Which may affect either the political or material perils contemplated. The insured's failure to disclose the fact that he was hospitalized for two weeks prior to filing his application for insurance. During his confinement. thus rendering the contract of insurance voidable. 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. Moreover. the insured died in a plane crash. 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. 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. Section 32. that the insured did not disclosed material facts relevant to the issuance of the policy. the sources of this information being equally open to the insurer who is also presumed to know such events. The information which the insured failed to disclose were material and relevant to the approval and the issuance of the insurance policy. where he was diagnosed for renal failure. Quimson page 63   On June 26. It appears that such concealment was deliberate on his part. A check representing the total premiums paid in the amount of P10. Bernarda Bacani filed a claim with Sun Life. kinds of seasons and all the risks connected with navigation. but solely by the probable and reasonable influence of the facts upon the party to whom communication is due.

except as prescribed by section fifty-one. Quimson page 64 Section 33. The right to information of material facts may be waived. If the insurer does not inquire for the cause of the long confinement. Asian Crusader LIfe 122 SCRA 61 Facts:  In 1962. Held: NO. where they are distinctly implied in other facts of which information is communicated. Asian’s failure to inquire constituted a waiver of the imperfection in the answer. 3D rhys alexei . 51(e). Section 34. by neglect to make inquiry as to the facts already communicated. Kwong did not have sufficient knowledge as to distinguish between a tumor and a peptic ulcer.INSURANCE REVIEWER– Atty. The right to information of material facts may be waived either: 1) Expressly. 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. His statement therefore was made in good faith. he is justified in assuming that no further information is desired. Asian refused to pay on the ground of alse information.  In 1963. then he is deemed to have waived the information. it is required that a policy of an insurance must specify the interest of the insured in the property insured. Imelda represented herself as owner. or 2) Impliedly. She is guilty of misrepresentation. Cases: (61) Ng Gan Zee v. Information of the nature or amount of the interest of one insured need not be communicated unless in answer to an inquiry. Problem: A fire insurance policy was issued in which Imeda (insured) was described as the owner of the insured residential property. So a mortgagee must disclose his particular interest even if no inquiry is made by the insurer in relation thereto. This section therefore says. either by the terms of the insurance or by neglect to make inquiry as to such facts. Kwong died of cancer of the liver with metastasis. If the applicant has answered the questioned asked in the application. Imelda was only given the privilege of occupying the house rent-free for life. Kwon Nam applied for a 20yr endowment insurance on his life with his wife.  It was found that prior to his application. Ng Gan Zee as the beneficiary. What does this provision provide? Under Sec. that there is NO NEED to disclose the interest in the property insured if the interest is absolute. Is the policy valid? NO. 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”. if he is not the absolute owner thereof. She should have disclosed the nature of her interest in the property in as much as she was not the absolute owner thereof. The exception of course is the insurer asks. But actually. Such requirement is made so that the insurer may determine the extent of the insured’s insurable interest. and that during the operation what was removed from Kwong’s body was actually a portion of the stomach and not tumor. May the right to information be waived? Yes. Issue: WON the contract may be rescinded on the ground of the imperfection in the application form.  He stated in his application that he was operated on for tumor of the stomach associated with ulcer. by the terms of the insurance. Kwong was diagnosed to have peptic ulcers.

A representation may be oral or written. information of the belief or expectation of a third person. Why is such information important? The information forms the basis of the contract as made. Neither party to a contract of insurance is bound to communicate. As a fact of something which is untrue 2. even upon inquiry. 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. and 3. although the policy is not thereby rendered void ab initio. This information may be given orally or written in papers not connected with the contract such as in the application or examiner’s report. De Leon book says misrepresentation is an active form of concealment. This is true even if the insured is asked. (not the point of the article) HOWEVER. her error in answering that question which called for an expression of an opinion does not constitute fraud in law. 3D rhys alexei . Hence the untruthfulness of any representation will necessarily avoid the contract.” TITLE V – REPRESENTATION Section 36. 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.INSURANCE REVIEWER– Atty. while a representation may be made at the time of the issuance of the contract. Quimson page 65 Section 35. the issuance of the policy to give. meaning it is the failure to do something which is required while representation is positive act as the insured volunteers such facts. “As long as the moon rises over the grave of Pai Mei” and she dies the next day. information to the insurer and otherwise induce him to enter into the insurance contract. To what is the duty to disclose confined? The duty to disclose is confined to facts. information of his own judgment upon the matters in question. is material. Where such fact in either case is material to the risk. There is no duty to disclose mere opinion. It describes. 108. Concealment usually occurs prior to making of the insurance contract. Sometimes. speculation. What is the effect of a misrepresentation? A misrepresentation by the insured renders the insurance contract voidable at the option of the insurer. in reference to a material fact. Is misrepresentation synonymous with concealment? NO. or prior to. marks out and defines the risk assumed. intention or expectation. What is a misrepresentation? A Misrepresentation is a statement: 1. What is a representation? A representation is a factual statement made by the insured at the time of. Atty. What is the difference between a representation and concealment? A concealment is a negative act. What does it say? Section 108 provides that “In marine insurance. she will be convicted of murder…. it may appear on the policy itself. 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. if she said. Quimsons asked us to look at Sec.

is called a promissory representation. Section 39. 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. How are misrepresentations construed? They are construed liberally in favor of the insured. Quimson wants us to look at Sec. What is the nature of a promissory representation? First.” Section 38. but NOT incorporated in the policy. inserted in the policy. it is an undertaking by the insured. Oral or written. 2. the question will be construed as referring to habitual use. How can a representation be substantially true and not literally true? De Leon cites two examples: If one is asked if he drinks. 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. the house was made of nipa. or when the insurer insured a man of thirty and it turns out that the man who dies was a 130.INSURANCE REVIEWER– Atty. and not properly a representation. 41. they you can say NO. Quimson page 66 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. So if you drink only when there is an occasion. A promissory representation. The non-performance of such a promise CANNOT be shown by the insurer in defense to an action on the policy. Section 37. The language of a representation is to be interpreted by the same rules as the language of contracts in general. What are the different kinds of representations? They may either be: 1. It is however in such a case merely an executory term of the contract. or before. Atty. Must the representations be literally true? No. but proof that the promise was made with fraudulent intent and will serve to defeat the insurance. Second. but not afterwards. A representation may be made at the time of. Made at the time of the issuance of the policy or before. local disease or injury in any organ. An example would be when the insured states that the house subject of the insurance is used only for residential purposes. issuance of the policy. unless it appears that it was merely a statement of belief or expectation. What does it say? Section 41 provides that “A representation may be altered or withdrawn before the insurance is effected. you can still say NO even if three weeks before you were suffering from LBM because you ate one kaing of avocados. 3. but NOT specifically made a warranty. it used to indicate a parol or oral promise made in connection with the insurance. If you are asked if you had any illnesses. It is sufficient that they be substantially true. A representation as to the future is to be deemed a promise. 3D rhys alexei . is therefore. substantially a condition or a warranty.

promise. or condition over which the insured has no control. The intent to deceive is already presumed. although false. 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. Can you give two examples? 1) If the policy expressly provides that the house insured is used as a warehouse. An applicant for fire insurance on a building orally promised that the building will be occupied. When asked if she was HIV-positive. Allan is guilty of fraudulent misrepresentation of a material fact. all the insurer needs to prove is its falsity and materiality.” It turned out. any representation made by the insured prior to the issuance of the policy to the effect that the house was used only as a residence is NOT a defense in the action for the recovery of the amount of the insurance. no one can be certain about anything. saranghameda po…” Does a false representation based on an opinion or expectation avoid the policy? IT DEPENDS.. A representation of an expectation. 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. Is the insurer liable despite John’s misrepresentation? NO. Quimson page 67 Can you give examples of promissory representations? 1. If the representation is one of fact. 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. 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. 3. Problems. When is a representation deemed a mere expression of opinion? An oral representation as to a future event. belief opinion or judgment of the insured. but it may qualify an implied warranty. intention. which will avoid a contract ONLY when made in bad faith. the insurer is not justified in relying upon such statement but is obligated to make further inquiry. John applied for a motor vehicle insurance.INSURANCE REVIEWER– Atty. 2. A TV hostess saying “Will be back.. The insurer knows that the insured’s opinion may be mistaken after all. A representation cannot qualify an express provision in a contract of insurance. is the insurer free from liability because of the misrepresentation? No. 3D rhys alexei . 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. In such a case. he said “I’m a very good driver. with reference to property or life insured will be deemed a mere expression of opinion. When asked if he knew how to drive. An applicant for fire insurance on a building orally promised to install two fire extinguishers within the bldg. The insurer should have subjected Mary to a battery of tests before entering into a contract. Mary applied for insurance. she said that her body was wholly free from the HIV virus. If it turns out that Mary is wrong. Section 40.

the representation although true when made. and which he believes to be true. A represented that his yacht was in Taiwan and in fact it was in Taiwan. Problems: A represented that his yacht was in Taiwan when in fact it was in HK. because at the time the policy took effect. Is the insurer correct? The insurer is stupid. he completely recovered. But at the taking effect of the contract. Was there false representation? NO. When the policy was delivered and the first premium paid on Aug. A became afflicted with an enumerated disease in the policy. but not afterwards. A had never suffered from any of the diseases enumerated in the policy by the insurer. 17. When is there false representation? There is NO false representation if the representation was true at the time the contract takes effect. Section 42. we refer ONLY to conditions represented as ALREADY EXISTING. At the time he applied for a life insurance policy on Aug 10. the insurer denied liability on the ground of false representation. There is false representation if although the representation was true at the time it was made. it was already true at the time when the contract took effect. with the 3D rhys alexei . 2004. when the policy was delivered to her on Dec. When time to collect the proceeds of the insurance. 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. 2004. 2004. B was no longer 24 yrs old as she alleged. To what time does representation refer? Representations refer only to the time of making the contract. A representation may be altered or withdrawn before the insurance is effected. These conditions must exist during the making of the contract. A did not disclose his having been sick. She said that she was 24. Is there false representation? YES. Here there is false representation.INSURANCE REVIEWER– Atty. Although the representation was false at the time it was made. ON Aug. although it became false at the time it was made. Is Insurer liable? NO. 5. subsequently became false at the time the contract took effect. he may nevertheless repeat information which he has upon the subject. Quimson page 68 Section 41. 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. 2004. she had already turned 25. 5. However. it subsequently became false at the time the contract took effect. This time. 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. A representation must be presumed to refer to the date on which the contract goes into effect. But now. When B applied for a life insurance policy on Nov. 39). 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. she was asked to state her age. Section 43. Fortunately. the yacht had already reached the port in Taiwan. it is but logical that representations may not be altered or withdrawn after the insurance is affected. When a person insured has no personal knowledge of a fact. 30. But at the taking effect of the contract the yacht had already sailed to HK and then it was shipwrecked.

A already knew that the ship was lost at sea but did not tell James. in the absence of willful misstatement. 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. A representation is to be deemed false when the facts fail to correspond with its assertions or stipulations. Issue: WON Commercial is liable. Subsequently. which in turn is Commercial Union’s agent). Harding signed. Harding to insure the care with Commercial. Can James still recover on the policy? NO. to the insurer. Held: Commercial is liable. However as of Sept. If the representation turns out to be false. and in neither case is he responsible for its truth. in its whole extent. He then gave the car to his wife Mrs. he is not responsible for the truth of the information. Commercial refused to pay because the car’s present value was only 2. or he may submit the information. Harding was having the car repaired at the Luneta Garage (Luneta was an agent of Smith Bell and Co. Commercial Union Assurance Company 38 PHIL 464 Facts:  Henry Harding bought a car for 2T in 1915. he may report information obtained from friends and relatives if he likes.8T and not 3T. whose duty it is to give the information. Harding. James is the shipowner. 2004.INSURANCE REVIEWER– Atty. the insured will be liable for the truth. the insured is given discretion to communicate to the insurer what he knows of a matter of which he has no personal knowledge. and Smith Bell sent an agent to Luneta Garage. he is NOT responsible therefor. What is the effect where information is obtained from third persons? Under Sec. A is the captain of Titanic. On Sept. unless it proceeds from an agent of the insured. Problem. Harding agreed. Case: (62) Harding v. 19. Mrs. 16. who together with the manager of LUneta. whose duty it is in the ordinary course of business to communicate such information to his principal. This amt was written in the proposal form which Mrs. 3D rhys alexei . appraised the car and declared that its present value was P3T. Where it appears that the proposal form.. the latter induced Mrs. 2004. 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. James apples for an insurance upon Titanic “Lost or Not Lost” with Jack and Rose Insurance Co. the proposal is to be regarded as the act of the insurer. the insured cannot recover on the policy. 43. provided he gives the explanation that he represents so on the information of others. will not be regarded as warranted by the insured. Under such circumstances. 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. a captain of the ship is bound to communicates its loss to the owner. Section 44. In which case. What is the effect where information is obtained from the agent of the insured? If the information proceeds from an agent of the insured.    While Mrs. Quimson page 69 explanation that he does so on the information of others. even if incorrect. 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. the car was damaged by fire.

the injured party is entitled to rescind the contract from the time when the representation becomes false. (63) Saturnino v. ovaries. among others listed in the application. In other words. Saturnino did not make a disclosure thereof in her application for insurance. undergone any operation or suffered any injury within the preceding 5 years. namely. the injured party can rescind the contract of insurance where there is a misrepresentation even without fraud. nor had she ever had. Must representation be literally true? No. it must be relied upon and be falise in a substantial and material respect. Quimson page 70 What is the importance of Sec. in forming his estimate of the proposed contract. the insured is required to state the exact and whole truth in relation to all matters that he represents. (As amended by Batasang Pambansa Blg. See Section 38.  She stated therein that she did not have. including the pectoral muscles and the glands. 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. or making his inquiries. that she had not consulted any physician. nor did she ever have any illness or disease peculiar to her sex. There can be no dispute that the information given by her in the application for insurance was false. under this section. Section 45. involving complete removal of the right breast.  She also stated that she had never been treated for.  Notwithstanding the fact of her operation. or upon inquiry. 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. If a representation is false in a material point. 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. 44? This defines misrepresentation. And not that the false representation MUST be material. Is the same true in cases of marine insurance? NO. which does away with the usual requirement of medical 3D rhys alexei . fraudulent intent is IMMATERIAL. but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due. that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5 years. It is sufficient that representations are substantially true. cancer or other tumors. the substantial truth of a representation is NOT sufficient. When will a representation relied upon avoid a policy? In order that a representation shall avoid a policy. Saturnino was operated on for cancer. whether affirmative or promissory. uterus and menstrual disorders. particularly of the breast.INSURANCE REVIEWER– Atty. Accdg. to Sec. 107. found in the right armpit. Issue: WON the insured made such false representation of material facts as to avoid the policy. Representations are not required to be literally true unlike warranties which must be literally true. In marine insurance. Philamlife (repeat – case # 46) 7 SCRA 316 Facts:  2 months prior to the insurance of the policy. And ordinarily.  The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy. 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. Held: YES. discloses or assumes to disclose.

Insular life refused to pay the proceeds because of concealment. since her doctor never told her. 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. In this jurisdiction. Evaristo was already suffering from tuberculosis. in order to avoid a policy. no matter what the ailment. If anything. It turned out that from 1929 to 1939. concealment being defined as “negligence to communicate that which a party knows and ought to communicate. even people of modest means enter into insurance contracts. he was asked to answer the question: “what physician or practitioners have you consulted or been treated by. The insurance business has grown so vast and lucrative within the past century. So when he died in 1942. he went to see several physicians for a number of ailments. he answered in the negative. The 3D rhys alexei . Held: Yes. Issue: WON the answer given by Arsenio in the policies justifies the company’s refusal to pay? Held: YES. for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. yet. Such fact appeared during the medical exam. because the insurance company by reasons of such statement accepted the risk which it would otherwise have rejected.  After that. the waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered. as there could not have been any mistake about it. IN the case at bar. relying upon the belief that the insured will disclose every material fact within his actual or presumed knowledge. Such concealment and his false statements constituted fraud. but the examiner and the company’s agent ignored it. The contention is without merit. and for what illness or ailment? In both policies. or accepting it at a rate of premium agreed upon. The insurer’s medical examiner approved the application knowing fully well that the applicant was sick. he concealed this. Secondly. it is not necessary to show actual fraud on the part of the insured. Aresenio knoew that he was suffering from a number of ailments.” The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk. concealment. Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself did not know. the true state of health of the insured was concealed by the agents of the insurer. (65) Insular Life v. The insurer.  It appears that during that time. (64) Musngi v. They act as general representatives of insurance companies. In the first place. (Evaristo could not read and understand English)  When Evaristo died. Agents who solicit contracts are paid large commissions on the policies secured by them. that the disease for which she had been operated on was cancer. the company refused to pay the proceeds of the insurance. whether intentional or unintentional entitled the insurer to rescind the contract of insurance. West Coast Life Assurance Co. is misled into a belief that the circumstances withheld does not exist. concealment of the fact of the operation itself was fraudulent. Nowadays. 61 PHIL 864 Facts:   Arsenio Garcia was insured by West Coast twice in 1931. Quimson page 71 examination before the policy is issued. In both policies.INSURANCE REVIEWER– Atty. and he is thereby induced to estimate the risk upon a false basis that it does not exist. Feliciano (repeat – case # 56) 73 PHIL 201 Facts:  Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of its agents. Issue: WON Insular Life was bound by their agent’s acts.

INSURANCE REVIEWER– Atty. When he sought to claim from Yek after the fire. 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. Held: NO. 117 SCRA 187 Facts:  In Apr. Manila Bankers Life Insurance Corp. Carmen died of a car accident. (67) Gonzalez Lao v. He knew that his answers would be the basis for the policy. burned down. Hence. It is therefore estopped from disclaiming any liability. it was because Manila Bankers was willing to waive such disqualifications or it simply overlooked such fact. When Evaristo authorized them to write the answers for him. If it failed to act. Gonzales entered into other insurance contracts. If they falsified the answers for him. in May 1969. as beneficiary claimed the proceeds of the insurance.” Notwithstanding said provision.   Art. 1969. Quimson page 72 situation is one in which of two innocent parties must bear a loss for his reliance upon a third person. the one who employed and gave character to the third person as its agent should be the one to bear the loss. Despite such information. Without such requisite. (65) Insular life v. Issue: WON Insular Life was bound by their agent’s acts. he made them his own agents for that purpose and he was responsible for their acts in that connection. which on Jan. and was required with his signature to vouch for their truth. He was not supposed to sign the application in blank. it is the one who drafted and accepted the policy and consummated the contract. such policy will be regarded as null and void and the insured will be deprived of all rights of indemnity in case of loss. (bakit kaya nagreverse?.  They were stored in Gonzales’ building on Soler St. The age of Carmen was not concealed to the insurance company. Issue: WON the policy is void considering that the insured was over 60 when she applied. Insular is liable to the beneficiaries. the plot thickens… Hmm…. 3 of the said policies.. the latter denied any liability on the ground of violation of Art. Her sister. 1904 (around 64 yrs old).) (66) Edillon v. It seems reasonable that as between the two of them. Feliciano (repeat – case # 57) 74 PHIL 4681 Facts:  Insular life filed a motion for reconsideration of the decision in the preceding case. 3D rhys alexei . Her application form indicated her true age. It had all the time to process the application and notice the applicant’s age. Manila Bankers accepted the premium and issued the policy. 11.  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.  Subsequently. In this case. he could not evade liability for the falsification.. In the application she stated the date of her birth as July 11. 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. The judgment rendered therefore in the preceding case is thus reversed. 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.. 1928. Carmen Lapuz applied for insurance with Manila Bankers. and Insular Life is absolved from liability. The policy was thereafter issued.

Quimson  page 73 Gonzales however proved that the insurer knew of the other insurance policies obtained by him long efore the fire. Upon the question as to whether or not they are or are not true. Issue: WON West Coast’s action for rescission is therefore barred by the collection suit filed by Tan Chay. no valid contract was ever made. Locsin of West Coast. (69) Qua Chee Gan v. the policy is void ab initio. West Coast said that it was made to appear that Tan Caeng was single. and. section 47 upon which the lower court based its decision in sustaining the demurrer does not apply. when in fact he was married. West Coast now denies liability based on these misrepresentations. the defense of West Cast was that through fraud in its execution. 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. In the very nature of things.INSURANCE REVIEWER– Atty. Precisely. a merchant. we do not at this time have or express any opinion. and that the trial court erred in sustaining the demurrer. Hence. hence. 3D rhys alexei . and the insurer did NOT rescind the insurance polices in question but demanded and collected from the insured the premiums. in which he dealt extensively. Held: NO. or that any such a contract ever existed. and therefore. It denies that it ever made any contract of insurance on the life of Tan Caeng. Albay. Held: NOPE. West Coast Life 51 Phil 80 Facts:       In 1926. they would constitute a valid defense to plaintiff's cause of action. used for the storage of stocks of copra and of hemp. Tan Chay Heng sued West Coast on the policy allegedly issued to his “uncle”. but we are clear that section 47 does not apply to the allegations made in the answer. Tan Caeng who died in 1925. If all of the material matters set forth and alleged in the defendant's special plea are true. Tan Chay contends that West Coast may not rescind the contract because an action for performance has already been filed. a laborer. West Coast refused on the ground that the policy was obtained by Tan Caeng with the help of agents Go Chuilian. if such matters are known to exist by a preponderance of the evidence. (68) Tan Chay Heng v. West Coast’s defense is not barred by Sec. 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. Its action then cannot be fore rescission because an action to rescind is founded upon and presupposes the existence of the contract. it will be noted that even in its prayer. 47. an action to rescind a contract is founded upon and presupposes the existence of the contract which is sought to be rescinded. 1 to 4) in Tabaco. the defendant does not seek to have the alleged insurance contract rescinded. Francisco Sanchez and Dr. 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. Law Union & Rock Insurance 98 PHIL 85 Facts:  Before the last war. suffering form tuberculosis and addicted to drugs. In the instant case. health and not a drug user. We are clearly of the opinion that. there is no contract to rescind. Qua Chee Gan owned 4 warehouses or bodegas (designated as Bodegas nos. if the defendant never made or entered into the contract in question. As stated. Issue: WON Yek is still entitled to annul the contract. He was the sole beneficiary thereof. and that is the question which it seeks to have litigated by its special defense. baled and loose.

from time to give. and the simple denials of appellant's representative (Jamiczon) can not overcome that proof. 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. specially since the burden of its proof lay on appellant. however. Qua Chee thereafter instituted this civil case for the collection of the proceeds of insurance. and drilled. As defense. and only gave the "5-gallon per 3-second" rate because the insistence of appellant's counsel forced the witness to hazard a guess. 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. and received the corresponding premiums. for the reason that knowing fully all that the number of hydrants demanded therein never existed from the very beginning.     Issue: WON the company can rescind the contract on the basis of such alleged violation. and the loss made payable to the Philippine National Bank as mortgagee of the hemp and copra. Law Union refused to pay contending that Qua purposely set fire to his bodegas and violation of warranties and conditions as agreed. Anyway. which requirement appellant is estopped from enforcing. owned by the municipality of Tabaco. that in the premises insured there were only two fire hydrants installed by Qua Chee Gan and two others nearby. while its direction was entrusted to a minor employee.called fire hydrants warranty. the insurer sent fire adjusters to estimate the loss. to the extent of its interest. 1. since there are only 2 and another 2 in a further area owned by the municipality. altho not maintained as a permanently separate unit. even before the policies were issued. The supposed breach of the water pressure condition is made to rest on the testimony of witness Serra. 3D rhys alexei . The loss was estimated at 370T. which the warranty did not require. 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. Obviously. As to maintenance of a trained fire brigade of 20 men. contrary to the requirements of the warranty in question. Qua informed the insurer by telegram on the same date. the qualities required being different for both activities. 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. since the discount depended on the number of hydrants. with their contents. gutted and completely destroyed Bodegas Nos. 3 and 4. Quimson page 74   They had been. of which it was informed. that Serra repeatedly refused and professed inability to estimate the rate of discharge of the water.INSURANCE REVIEWER– Atty. 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). and lasted almost one week. with the merchandise stored therein. appellant thereupon inferring that the maximum quantity obtainable from the hydrants was 100 gallons a minute. the record is preponderant that the same was organized. the Law Union nevertheless issued the policies in question subject to such warranty. renders the testimony improbable. the testimony is worthless and insufficient to establish the violation claimed. and the fire fighting equipment available The alleged violation of the warranty of 100 feet of fire hose for every two hydrants. Fire broke out in. insured with Law Union since 1937. Law Union then filed a criminal case for arson. 1940. must be equally rejected. when the warranty called for 200 gallons a minute. and after it had misled the defendant into believing that the policies were effective. but the same was dismissed by the trial court. Such fact appears from positive testimony for the insured that appellant's agents inspected the premises. The transcript shows. Law Union is barred by waiver (or rather estoppel) to claim violation of the so. The insurance company was aware. There is no merit in appellant's claim that subordinate membership of the business manager (Co Cuan) in the fire brigade. Held: NO. that the water supply could fill a 5-gallon can in 3 seconds. 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. A business manager is not necessarily adept at fire fighting. and on the next day.

The evidence at hand shows that insofar as the payment of the last quarterly premium for 1951 was concerned. Vivencio concealed the material fact that he had consulted a doctor and was then found to be afflicted with the malady. he defaulted and the insurance was cancelled. it may well be wondered. when Vivencio applied for the reinstatement. and that he had no injuries. again. The reinstatement was approved. 1951. mas malala pa sa reviewer na Xerox) 3D rhys alexei . for the. Insular. (I’m sorry kung magulo yung digest. in submitting together with his application for reinstatement. specially to avoid a forfeiture (70) Colado v. Insular Life 51 OG (No 12) 6269 Facts:   Vivencio Collado applied for an insurance contract with Insular life in 1948. a health statement to the effect that he was in good health. His application was approved and he began started making premium payments. And how many insured. The beneificiaries instituted the present action to recover from Insular life the death benefits of a life insurance policy valued at 2T. he was already sick of a fatal disease known as carcinoma of the liver and that 4 days prior to his application for insurance. 1951 of good health. of 1951 and tendered the amount of premium for the years 1950-1951. However.. However. and is decidedly ambiguous and uncertain. CFI rendered judgment in favor of Insular and dismissed Collado’s complaint. He stated that he was as of Nov. the ambiguity must be held strictly against the insurer and liberally in favor of the insured. 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. are in a position to understand or determine "flash point below 003° Fahrenheit.. He then applied for the reinstatement of his insurance policy in Nov." The cause relied upon by the insurer speaks of "oils (animal and/or vegetable and/or mineral and/or their liquid products having a flash point below 300° Fahrenheit". by its acceptance of its overdue premiums is deemed to have waived its right to rescind the policy. Municipal court of Manila found for Collado and Insular filed an appeal with CFI of Manila. Quimson page 75 It is well to note that gasoline is not specifically mentioned among the prohibited articles listed in the socalled "hemp warranty. by reason of the exclusive control of the insurance company over the terms and phraseology of the contract. Furthermore. Here. Insular life sent him a notice canceling the policy. 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. for in ordinary parlance. It is enormously clear that when the deceased applied for a reinstatement of his policy in Nov.       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. 1951 and as such. sobrang pangit yung copya nung case. Vivencio then died. 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.. Vivencio again failed to pay the premiums for the last quarter of Nov. Held: NO.INSURANCE REVIEWER– Atty. Insular had availed of the right to rescind the policy by notifying the Insured that the policy had lapsed. 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. he consulted a doctor regarding his condition. he had already been afflicted with the fatal ailment for a period of about four months. nde ko mabasa. "Oils" mean "lubricants" and not gasoline or kerosene. Insular refused to pay claiming concealment on the part of Vivencio.

Quimson page 76 Section 46.INSURANCE REVIEWER– Atty. When must the insurer exercise his right to rescind? In a non-life insurance policy. etc. Materiality is determined by the same rules applied in cases of misrepresentation. The matter misrepresented must be of that character which the court can say would reasonably affect the insurer’s judgment. 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. (without this. but solely by the probable and reasonable influence of the facts upon the party to whom the representation is made.) 2) The rescission must be coupled with a check for the amount of premiums already paid. 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 are the differences and similarities between a concealment and misrepresentation? (already discussed in prior sections. Section 47. but for the convenience of all… presented in a logical format. misrepresentation. What is the test of materiality? The materiality of the representation is to be determined NOT by the event. 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. The provisions of this chapter apply as well to a modification of a contract of insurance as to its original formation. Section 48. the rescission is not effective) 3D rhys alexei . 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. Concealment on the part of the insured has the same effect as a misrepresentation and gives the insurer the right to rescind the contract. the insurer may rescind a contract of insurance prior to the commencement of an action on the contract. Whether intentional or not intentional.) 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. 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. the injured party is entitled to rescind the contract of insurance on ground of concealment or false representation. such right must be exercised previous to the commencement of an action on the contract. Who determines materiality? It is a judicial question. in forming his estimates of the disadvantages of the proposed contract or in making his inquiries. What does this section mean? This section means that the provisions of Sec. In a life insurance policy. 26 to 35 governing concealment and Sec. 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. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter. The materiality of a representation is determined by the same rules as the materiality of a concealment. 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. concealment.

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 by defense to a suit brought on the life policy by the beneficiary. 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. the policy shall contain in substance the following conditions: xxx 3) 3D rhys alexei . 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. either by affirmative action. as where the policy was taken out in furtherance of a scheme to murder the insured. 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. 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. As to the insured. or where the insured substitutes another person for the medical examination. the insurer should not be permitted to question the validity of the policy. 4) That the conditions of the policy relating to military or naval service have been violated [Sec. 2) Cause of death of the insured is an expected risk. 228 (b) and Sec. 227(b). or 3) It is rescissible by reason of the fraudulent misrepresentations of the insured agent. 228(b). or where the beneficiary feloniously kills the insured. 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. 77. 277(b). Sec. 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. 242) 7) That the action was not brought within the time specified. 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. 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. 5) That the fraud is of a particularly vicious type. 48 par. Sec. What are the requisites for INCONTESTABILITY? 1) The policy is a life insurance policy 2) It is payable on the death of the insured. 227(b). no matter how patent or well-founded. In the case of individual life or endowment insurance. 228(b)]. 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. What does Sec. 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. 3) That the premiums have not been paid [Secs. 230(b)]. 230 (b) provide? Section 227. Quimson page 77 The rescission must be exercised within the two years that the insurance is in force during the lifetime of the insured. or 2) It is rescissible by reason of the fraudulent misrepresentations of the insured or his agent. (I just tried to put together all of what Atty.INSURANCE REVIEWER– Atty.

or to additional insurance against loss of. The insurance was reinstated on April 2001. The concealment that B made when he applied for the reinstatement is not incontestable. except for non-payment of premiums after it has been in force for two years from its date of issue. or provisions which in the opinion of the Commissioner are more favorable to the persons insured. Same facts. the counting of the two-year period should start from there. 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. and those granting additional insurance specifically against death by accident or by accidental means. 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. B applied for the reinstatement of his life insurance policy tendering the overdue amounts. Sec. Section 230. Quimson page 78 (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. US Life) Counting from Apr. 2003 and C. or date of approval of last reinstatement. specific members of the body. 2001. and the insurer can raise the defense of concealment. B was diagnosed with cancer and only had 2 years to live. Section 228. In Mar 2001. Problems. The truth however was that in Feb. or loss of use of. B defaulted in the payment of the premium and thereafter the insurance company cancelled his policy. B submitted that a certificate stating that he is still in good health. Is C correct? No. 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. Before 2000 ended. A procured insurance on his life through fraudulent concealment or misrepresentation. But instead. B died on December 2003. The death of the insured makes the policy no longer “in force” and the insurer can still rescind the contract. 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. B procured a life insurance in Jan 2000. or services auxiliary thereto. In the case of industrial life insurance. Whether A is dead or alive is immaterial. Is the answer still the same? 3D rhys alexei . 2001. No policy of group life insurance shall be issued and delivered in the Philippines unless it contains in substance the following provisions. 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. except for non-payment of premiums and except for violation of the conditions of the policy relating to naval or military service. The latter refused claiming that B concealed the fact that he was afflicted with cancer. He attested that he was in good health which was true.INSURANCE REVIEWER– Atty. 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. (Soliman v. 48 provides that the two years are counted from the time the date of its issue or of its last reinstatement. 2001. Since the reinstatement was made in Apr. not more than two years from its date of issue. What if the two years had already lapsed? Then the insurer cannot exercise his right of rescission anymore. What is the effect if A dies within two year from the issuance of the policy. it is approximately 1 year and 10 mos up until the death of B. his beneficiary filed a claim against the insurance company. 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. and except as to provisions relating to benefits in the event of disability as defined in the policy. what is important is the fact that two years have already lapsed and has cured the fraud committed by A. B died on Feb. As required.

CA (repeat – case #9) 379 SCRA 356 (2002) Facts:  Ernani Trinos. he was entitled to avail of hospitalization benefits. asthma or peptic ulcer? (If Yes. preventive health care and other out-patient services. During the period of his coverage. Since the date of reinstatement was April 2001. Julita tried to claim the benefits under the health care agreement. Ernani had fever and was feeling very weak. Sec. medical or any other expense arising from sickness. 1990. petitioners required respondent's husband to sign an express authorization for any person. Julita was constrained to bring him back to the CGH where he died on the same day. he answered NO to the following question: “Have you or any of your family members ever consulted or been treated for high blood pressure. which is primarily a contract of indemnity. diabetes. SC held that in the case at bar. Later. Due to financial difficulties. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. 1988 to March 1. heart trouble. 1990.00 per disability. there was concealment regarding Ernani's medical history. C can now collect from the insurance company. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. he was attended by a physical therapist at home. The periods having expired. Upon the termination of the agreement. Under the title Claim procedures of expenses. o Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. He was a issued Health Care Agreement.000. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. Once the member incurs hospital. 1989 to March 1. injury or other stipulated contingent. The health care agreement was in the nature of non-life insurance. listed therein. diabetic and asthmatic. Julita brought her husband home again. consultation. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. She asked for reimbursement of her expenses plus moral damages and attorney's fees. According to Philamcare. It appears that in the application for health coverage. 3D rhys alexei . whether ordinary or emergency. 1990 to June 1. treatment or any other medical advice or examination. raising the primary argument that a health care agreement is not an insurance contract. applied for a health care coverage with Philamcare. the health care provider must pay for the same to the extent agreed upon under the contract. Petitioner argues that respondent's husband concealed a material fact in his application. the same was extended for another year from March 1. the two year period has lapsed and the policy has become incontestable. had 12 mos from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma. CA affirmed. Julita had no choice but to pay the hospitalization expenses herself. 1990. amounting to about P76. Philamcare denied her claim saying that the Health Care Agreement was void. The amount of coverage was increased to a maximum sum of P75. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. and B died in December 2003. In the morning of April 13. 1989. 48 does not apply. RTC decided in favor of Julita.INSURANCE REVIEWER– Atty. contrary to his answer in the application form. cancer. he was admitted at the Chinese General Hospital (CGH). While her husband was in the hospital.000. then from March 1. an action for damages against Philamcare.         Issues and Resolutions: Philamcare brought the instant petition for review. Quimson page 79 This time. However. Philamcare. 1990. hence the "incontestability clause" under the Insurance Code Title 6. Julita instituted. liver disease.00 After her husband was discharged from the MMC. give details)” The application was approved for a period of one year from March 1. the defense of concealment or misrepresentation no longer lie. Cases: (71) Philamcare v. In the standard application form. and under such.

There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true." The right to rescind should be exercised previous to the commencement of an action on the contract. 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. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned. Where matters of opinion or judgment are called for. Under Section 27 of the Insurance Code.INSURANCE REVIEWER– Atty. 2. as a matter of expectation or belief. 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. especially coming from respondent's husband who was not a medical doctor. courts should construe them in such a way as to preclude the insurer from noncompliance with his obligation. a representation of the expectation. 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. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured. no rescission was made. In the end. since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. especially to avoid forfeiture. if the statement is obviously of the foregoing character. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. In any case. When the terms of insurance contract contain limitations on liability. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. This is equally applicable to Health Care Agreements. mailed or delivered to the insured at the address shown in the policy. the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: 1. Having assumed a responsibility under the agreement. (72) Soliman v. (A)lthough false. Prior notice of cancellation to insured. and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted. ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured. must be liberally construed in favor of the subscriber. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. to furnish facts on which cancellation is based. since in such case the insurer is not justified in relying upon such statement. each of them being the beneficiary of the other. opinion. Quimson page 80 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. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract. None of the above pre-conditions was fulfilled in this case. the terms of an insurance contract are to be construed strictly against the party which prepared the contract — the insurer. or the impossibility of which is shown by the facts within his knowledge. 4. Being a contract of adhesion. 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. with or without the authority to investigate. such as the one at bar. intention. petitioner is liable for claims made under the contract. 3. to be actually untrue. and exclusionary clauses of doubtful import should be strictly construed against the provider. that which he then knows. In this case. Thus. The phraseology used in medical or hospital service contracts. "a concealment entitles the injured party to rescind a contract of insurance. This largely depends on opinion rather than fact. petitioner is bound to answer the same to the extent agreed upon. belief. whether intentional or unintentional. The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. but is obligated to make further inquiry. or its acceptance at a lower rate of premium. and this is likewise the rule although the statement is material to the risk. Must be in writing. 3D rhys alexei . Besides.

CA 174 SCRA 403 Facts:  Tan Lee Siong was issued a policy by Philamlife on Nov. REGARDLESS of whether the insured died before or after Jan. 2003 or two years from the date of issue/reinstatement. the insurer can still exercise his right to rescind up to Jan. the spouses were informed that the premium for Jan 1949 was still unpaid notwithstanding that the 31-day grace period has already expired. He was the sole beneficiary thereof. 2000. 1950. par. Issue: WON the contract can still be rescinded. In Apr 1949. The beneficiaries contend that Philamlife can no longer rescind the contract on the ground of misrepresentation as rescission must allegedly be done “during the lifetime of the insured” within two years and prior to the commencement of the action following the wording of Sec. The phrase “during the lifetime” found in Sec. What is a simpler illustration of the ruling in Tan v. and thereafter. suffering form tuberculosis and addicted to drugs. Hence. Tan died of hepatoma. 1975.  On Aprl 26. 48 simply means that the policy is no longer in force after the insured has died. The key phrase in the second paragraph is “for a period of two years”.  West Coast now denies liability based on these misrepresentations. health and not a drug user. Held: YES. 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.INSURANCE REVIEWER– Atty. Locsin of West Coast. 1. When US life sought to rescind the contract on the ground of concealment/misrepresentation. a laborer. Rosario died of acute dilation of the heart. Tan Caeng who died in 1925. a merchant. 1973. In Jan. 2. (74) Tan Chay Heng v. 1975 denying their claim and rescinding the contract on the ground of misrepresentation. Patricio filed a claim for the proceeds of the insurance. Issue: WON West Coast’s action for rescission is therefore barred by the collection suit filed by Tan Chay. when in fact he was married. 1949. His beneficiaries then filed a claim with Philamlife for the proceeds of the insurance.  West Coast said that it was made to appear that Tan Caeng was single. Tan Chay Heng sued West Coast on the policy allegedly issued to his “uncle”. So if for example the policy was issued/reinstated on Jan 1. Issue: WON Philamlife can rescind the contract. 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.  West Coast refused on the ground that the policy was obtained by Tan Caeng with the help of agents Go Chuilian.  Tan Chay contends that West Coast may not rescind the contract because an action for performance has already been filed. the contract can still be rescinded. Francisco Sanchez and Dr. 2003. they submitted the certificates and paid the premiums.  Philamlife wrote the beneficiaries in Sep. and they were furnished at the same time long-form health certificates for the reinstatement of the policies. Quimson  page 81    In Mar. 48.  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. 3D rhys alexei . CA? The period to consider in a life insurance poiicy is “two years” from the date of issue or of the last reinstatement. 6. 1. (73) Tan v. two years had not yet elapsed. West Coast Life (repeat – case #68) 51 PHIL 80 Facts:  In 1926. Held: Yes.

INSURANCE REVIEWER– Atty. Quimson

page 82

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: 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?

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INSURANCE REVIEWER– Atty. Quimson

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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. 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.

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INSURANCE REVIEWER– Atty. Quimson  

page 84

  

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 the delivery is made notwithstanding this knowledge of the defect, the company is deemed to have WAIVED such defect. The agent, Mendoza was duly licensed by the Insurance Commission to act for Insular Life. 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. Whether that condition had been met or not plainly calls for the exercise of discretion. Mendoza’s decision that the condition had been met by the insured and that it was proper to make delivery of the policy

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(76) Enriquez v.  2 days later. 3D rhys alexei . Lee Su Guat died of Lung cancer. in the absence of fraud or other legal grounds for rescission. Mendoza made a mistake of judgment because he acted on insufficient evidence as to the state of health of the insured. The plaintiff as administrator of Herrer’s estate brought this action to recover the 6T paid by the deceased. he paid the sum of 6T to the company’s anager in its Manila office and was given a receipt. 2965. applied for life insurance for 60T with Philamlife. In life annuity. 61 years old and illiterate who spoke only Chinese. and this mistake cannot be said to be induced by any misconduct on the part of the insured. 20. 24 1917. both in English. SunLIfe 41 PHIL 269 Facts:  On Sept. the insured during the period of the coverage makes small regular payments and upon his death. Herrer died on Dec. Issue: WON the insurance contract was perfected. Life Insurance on the other hand. A cloud will be thrown over the entire insurance business if the condition of health of the insured at the time of the delivery of the policy may be inquired into years afterwards with the view of avoiding the policy on the ground that it never took effect because of an alleged lack of good health at the time of delivery. the Manila office prepared a letter notifying Herrer that his application has been accepted and this was placed in the ordinary channels of transmission. On Apri 20 1966. as the locus poenitentiae is ended when an acceptance has passed beyond the control of the party. widow. 1917. but as far as known was never actually mailed and never received by Herrer. 1917. On the same date. NOTE: Life annuity is the opposite of a life insurance. Philamlife issued her a policy effective Oct. On Nov. CA (90 SCRA 236) Facts:     On Sept. 15. Admittedly. 25. 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. 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. The application was in two parts. 23. 26. 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.INSURANCE REVIEWER– Atty. Herrer made an application to SunLife through its office in Manila for life annuity. and if after a certain period of time the insured is stil living. no further medical exam was made but she accomplished Part 1 (which certified the truthfulness of statements made in Part. It is therefore in the public interest that we are constrained to hold. Lee Su Guat. Examples of Life annuity are pensions. 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. 1965 with her nephew Vicente Tang as beneficiary. Quimson page 85 to him is just as binding on the company as if the decision had been made by its Board of Directors.   On Nov. 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. 2) The policy was again approved. Since it was only recent from the time she first applied. The second part dealt with her state of health. An acceptance of an offer of insurance NOT actually or constructively communicated to the proposer does NOT make a contract of insurane. Held: NO. as we do. he is entitled to regular smaller amounts for the rest of his life. the head office gave notice of acceptance by cable to Manila. Her answers having shown that she was health. (77) Tang v. a big amount is given to the insurance company. the insurer pays a big amount to his beneficiaries. 1965. Lee again applied for additional insurance of her life for 40T.

1332 is NOT applicable.00 to Lalog. it is seeking to avoid its performance. In October 1987. the person enforcing the contract must show that the terms thereof have been fully explained to him. NOTE: Art. on the contrary. he asked the latter to fill up another application form. his wife. Both trial court and CA ruled that Lee was guilty of concealment. 1332: When one of the parties is unable to read or if the contract is in a language not understood by him.075.. Under said article. together with all its supporting papers. in good faith. which means “most abundant good faith”.00 if the premium were paid annually. Antonio In a contract of insurance. Art. and considering the findings of both the trial court and the CA as to the Concealment of Lee. and mistake or fraud is alleged. Here. In sum. 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. paid P2. As a general rule. Even if we were to say that the insurer is the one seeking the performance of the cont contracts by avoiding paying the claim. 1987. Philamlife was under no obligation to prove that the terms of the insurance contract were fully explained to the other party. The reason for this rule is that insurance policies are traditionally contracts uberrimae fidei. (78) Perez v. Rodolfo Lalog.000. Virginia A. even as fraud or mistake is NOT alleged. Perez. 1332 of CC. all facts within his knowledge which are material to the contract. Perez was made to undergo the required medical examination. 1332 applies. the SC affirms their decisions. and which the other has no means of ascertaining. Quimson    page 86 Tang claimed the amount o 100T but Philamlife refused to pay on the ground that the insured was guilty of concealment and misrepresentation. an agent of Lifeman. visited Perez in Quezon and convinced him to apply for additional insurance coverage of P50. Concurring: J. 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. the insurance company is NOT seeking to enforce the contract. Held: NO.00. to the office of BF Lifeman Insurance Corporationn in Quezon which office was supposed to forward the papers to the Manila office. On November 1. however.” 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.000. Art. she could not be held guilty of concealment of her health history because the application for insurance was English. Accordingly. each party must communicate to the other. when fraud or mistake is alleged. 1987. Perez accomplished an application form for the additional insurance coverage. devolves on the party seeking to enforce it." Unfortunately.INSURANCE REVIEWER– Atty. “absolute and perfect candor or openness and honesty. Primitivo B. The receipt issued by Lalog indicated the amount received was a "deposit. 1332 is inapplicable. to avail of the ongoing promotional discount of P400. Certainly. which he passed. and the insurer has not proven that the terms thereof had been fully explained to her as provided by Art. Lalog lost the application form accomplished by Perez and so on October 28. 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. CA 323 SCRA 613 (2000) Facts:      Primitivo Perez had been insured with the BF Lifeman Insurance Corporation since 1980 for P20. It is petitioner who is seeking to enforce it. 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.” “absence of any concealment or deception however slight. Lalog forwarded the application for additional insurance of Perez. Issue: WON Art.00. Tang’s position. 3D rhys alexei . is that because Lee was illiterate and spoke only Chinese.

00 which Virginia Perez had paid Lifeman filed for the rescission and the declaration of nullity. It is not disputed.INSURANCE REVIEWER– Atty. 1987. averred that the deceased had fulfilled all his prestations under the contract and all the elements of a valid contract are present. At the time of his death. am/are in good health.00 under the first insurance policy for P20. The clause was to take effect in the year 1984. when Lalog personally delivered the application papers to the head office in Manila. RTC ruled in favor of Perez.00 had not been perfected at the time of the death of Primitivo Perez. paid P2. 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. 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. The offer must be certain and the acceptance absolute. 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. on the other hand. however.00 (double indemnity in case of accident) but the insurance company refused to pay the claim under the additional policy coverage of P50. 1987 Virginia went to Manila to claim the benefits under the insurance policies of the deceased. Lincoln issued a special kind of life insurance policy known as the "Junior Estate Builder Policy. Held: The contract was not perfected. 1987 that said papers were received in Manila. When Primitivo filed an application for insurance. Under the abovementioned provision. (79) CIR v. She was paid P40.075.000. Documentary stamp taxes due on the policy were paid to the petitioner only on the initial sum assured. that when Primitivo died on November 25.000.00 in view of a triple indemnity rider on the insurance policy.00 and submitted the results of his medical examination. 1987.000. Lalog testified that when he went to follow up the papers. Lincoln Phil Life 379 SCRA 423 (2002) Facts:  In the years prior to 1984. he found them still in the Quezon office and so he personally brought the papers to the Manila office of BF Lifeman Insurance Corporation. Perez died while he was riding a banca which capsized during a storm.000. the insurance company refunded the amount of P2. Quimson page 87   On November 25.      Issue: WON there was a perfected additional insurance contract." 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. In its letter of January 29. Consequently. is a meeting of the minds between two persons whereby one binds himself. or on November 27. one party undertakes to compensate the other for loss on a specified subject by specified perils. Without knowing that Perez died on November 25. Consequently. 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. Its assent was given when it issues a corresponding policy to the applicant.00 on December 2.000." 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. Consent must be manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. the proceeds of which amount to P150.  3D rhys alexei . A contract.075. for a stipulated consideration. the insurance company maintained that the insurance for P50. Perez. Insurance is a contract whereby. 1987.000. on the other hand. his application papers for the additional insurance were still with the Quezon office. CA reversed. Perez. his application was subject to the acceptance of private respondent BF Lifeman Insurance Corporation. 1987. It was only on November 27.00. with respect to the other to give something or to render some service. 1988 to Virginia A. BF Lifeman Insurance Corporation approved the application and issued the corresponding policy for the P50.

What must a policy contain and what are the reason behind such requirements? A policy must contain: 1. Amount of insurance  to easily and exactly determine the amount of indemnity to be paid in case of loss or damage. A policy of insurance must specify: (a) The parties between whom the contract is made. a statement of the basis and rates upon which the final premium is to be determined. or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract. (f) The risks insured against. unless the interest of a person insured is susceptible of exact pecuniary measurement. petitioner issued deficiency documentary stamps tax assessment for the year 1984. the additional insurance that took effect in 1984 was an obligation subject to a suspensive obligation. CA affirmed. corresponding to the amount of automatic increase of the sum assured on the policy issued by respondent. Lincoln questioned the deficiency assessments and sought their cancellation in a petition filed in the Court of Tax Appeals. 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. (b) The amount to be insured except in the cases of open or running policies. and (g) The period during which the insurance is to continue. it was written into the policy at the time of its issuance. hence. CTA found no basis for the assessment. 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. (e) The interest of the insured in property insured. 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. Rate of premium 3D rhys alexei . Thus. hence. The SC agreed with this contention. although the automatic increase in the amount of life insurance coverage was to take effect later on. a deficiency assessment based on the additional insurance not covered in the main policy is in order. Section 51. Logically. Issue: WON the automatic increase of the sum assured on the policy is taxable. The distinctive feature of the "junior estate builder policy" called the "automatic increase clause" already formed part and parcel of the insurance contract. was already definite at the time of the issuance of the policy. 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.INSURANCE REVIEWER– Atty. Here. This requirement however can be dispensed with in cases of open or running policies. The subject insurance policy at the time it was issued contained an "automatic increase clause. (d) The property or life insured. Quimson page 88   Subsequently. Names of the parties 2. In the instant case. Held: YES. if he is not the absolute owner thereof. (c) The premium. The "automatic increase clause" in the policy is in the nature of a conditional obligation under Article 1181. 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. and that. 8 by which the increase of the insurance coverage shall depend upon the happening of the event which constitutes the obligation. CIR claims that the "automatic increase clause" in the subject insurance policy is separate and distinct from the main agreement and involves another transaction. 3. the date of its effectivity." Although the clause was to take effect only in 1984. while no new policy was issued.

228. are the kinds of insurable risks? Personal risks – life or health risks Property risks – loss or damage to property Liability risks – involve liability of the insured for an injury caused to the person or property of another What 1) 2) 3) 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. it can no longer be revived. Remember. page 89 7. Remember Atty. an owner gets the full value of the loss while a mortgagee gets only the value of his credit. 5. Because the premium represents the consideration of the contract. Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. provided that it is later determined that the applicant was insurable at the time it was given. group and industrial life policies. What is a preliminary contract of present insurance? By a preliminary contract of insurance. Property or life or thing insured  Constitutes the Subject Matter Interests of the insured in the property  In order to determine actual damage. What is a cover note? The cover not is merely a written memorandum of the most important terms of the preliminary contract of insurane. Risks insured against  In order to know when the insurer is called to indemnify the insured. Quimson’s famous words? As the risk increases. 3D rhys alexei . place and amount 4) The loss is not catastrophic 5) Risk is accidental in nature NOTE: Read sections 227. 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. because if this is NOT stated. including within its terms the identical insurance bound under the cover note and the premium therefor. Duration of the insurance  This period signifies the life of the policy. and you hold the insurer liable for any loss due to any cause whatsoever. Quimson  4. time. the rate of premium also increases. 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. intended to give temporary protection pending the investigation of the risk by the insurer. and 230 for additional matters to be included in individual. 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. or until the issuance of a formal policy. 6. a policy shall be issued in lieu thereof. What are two types of preliminary contracts of insurance? The preliminary contract of present insurance and the preliminary executory contract of insurance. Within sixty days after the issue of the cover note. If the duration of insurance has already ended. Section 52. these rates are developed on the basis of the nature and character of the risk assumed.INSURANCE REVIEWER– Atty. it will result to a big loss on the part of the insurer.

no liability shall attach until the insurer approves the risk. BUT such cover note may be canceled by either party upon at least 7 days notice to the other party. Cases: (80) Lim v. 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 amount herein shall be returned. VP or General Mgr of the Insurance company concerned.INSURANCE REVIEWER– Atty. it is subject to all conditions in the policy expected even though that policy may never issue. Thus. provided that such written approval may be dispensed with upon the certification of the Pres. 1917. Can you explain a preliminary executory contract of insurance? By a preliminary executory contract of insurance. 3D rhys alexei . 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. 4) A cover not shall be valid and binding for a period NOT exceeding 60 days from the date of its issuance. 23. 1917 after the issuance of the provisional policy but before the approval of the application by the home office of the insurance company. 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. Lim died on Aug. a binding slip or binding receipt DOES NOT insure itself. Under such an executory contract. Such policy shall include within its terms the identical insurance bound under the cover note and the premiums therefore. 6) A cover note may be extended or renewed beyond the aforementioned period of 60 days with the written approval of the Insurance Commissioner. Should the company NOT issue such a policy. that the risks involved. Quimson page 90 By its nature. the values of such risks. PROVIDED that the company shall confirm this agreement by issuing a policy on said application xxx. 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.  He designated his wife Pilar Lim as the beneficiary. but in such case. where an agreement is made between an applicant and the insurers’ agent. a policy of insurance shall. 5) If a cover not is not so canceled. Sun Life 41 PHIL 263 Facts:  On July 6. Luis Lim Y Garcia of Zamboanga applied for a policy of life insurance with Sunlife in the amount of 5T. The first premium of P433 was paid by Lim and company issued a “provisional policy”    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. whether or not the premium therefore has been paid or not. Issue: WON the beneficiary can collect the 5T. within 60 days after the issuance of the cover not be issued in lieu thereof. 3) NO cover note shall be issued or renewed unless in the form previously approved by the Insurance Commission. the insurer makes a contract to insure the subject matter at some subsequent time which may be definite or indefinite. 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. 1(1) of IC. The instant action is brought by the beneficiary to recover from Sun Life the sum of 5T. In life insurance.

and is subordinated to the act of the company in approving or rejecting the application. a binding slip or binding receipt does NOT insure by itself. Where an agreement is made between the applicant and the agent. the branch manager of Grepalife-Cebu. (81) Grepalife v. 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. such acceptance is merely conditional and is subordinated to the company’s act in approving or rejecting. the insurance premium and had accepted the application subject for processing by the insurance company. Held: NO. Mondragon then typed the data on the application form which was later signed by Ngo. 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. The contract of insurance was not consummated by the parties. constituted a temporary contract of life insurance. NO liability shall attach until the principal approves the risk and a receipt is given by the agent. the binding deposit receipt had never became on force at any time. The binding receipt in question was merely an acknowledgement on behalf of the company. The acceptance is merely conditional. that no liability shall attach until the principal approves the risk and a receipt is given by the agent. Thus in life insurance. On may 1957. 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. so in life insurance a “binding slip or receipt” does not insure itself. (82) Pacific Timber v. E of the said receipt. Mondragon wrote back the main office again strongly recommending the approval of the endowment plan on the life of Helen. Ngo then paid the insurance premium and a binding deposit receipt was issued to him. CA 112 SCRA 199 3D rhys alexei . 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. Since Grepalife disapproved the insurance application of Ngo.” Mondragon wrote on the bottom of the application form his strong recommendation for the approval of the insurance application. 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. adding that Grepalife was the only insurance company NOT selling endowment plans to children. that the latter’s branch office had received from the applicant. A binding receipt is manifestly merely conditional and does NOT insure outright. 1957. 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. On Apr 30. CA 89 SCRA 543 Facts:   On March 14. When an agreement is made between the applicant and the agent whether by signing an application containing such condition or otherwise. Ngo filed a claim with Gepalife. All the essential data regarding Helen was supplied by Ngo to Lapu-Lapu Mondragon. Helen died of influenza with complication of broncho pneumonia. Quimson page 91 Held: NO. 1957. pursuant to par.      Issue: WON the binding deposit receipt.INSURANCE REVIEWER– Atty. 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 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.

” It should be conceded that there shall be a contract of insurance once the first premium is paid and a policy is issued. Vergel de dios. Issue: WON the beneficiaries can claim. Orobia. Philamlife Insurance Co. SC upheld Pacific’s contention that said cover not was with consideration. the insurer’s medical examiner. 5. Pacific filed its claim with the company. 1966. 31. 1966. it did not contain. as all cover notes do not contain. As a logical consequence.  Narito paid the first annual premium on the policy applied for. no separate premiums are required to be paid on a cover note. for no such premium could have been paid. for its exportation of logs to Japan. 73 OG 8660 Facts:  In 1966. Workmen issued on said date Cover Note 1010 insuring said cargo.178. 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. Held: YUP 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. thus null and void. an agent of the insured prepared an application for the life insurance whose annual premium was P1. it found out that Narito was unacceptable as an insurance risk. the Associate Medical Director of the insurer. 1963. it did not take any action with regard to the controverted insurance coverage. (83) Gloria v. the first annual premium of P1. particulars of the shipment that would serve as basis for the computation of the premiums. Roberto Narito applied for a 100T life insurance policy with Philamlife Insurance Company. 1966. There is no question that the first premium was paid. since by the nature of the cover note.  From the time the insured received the application form its agent on Nov. but what is certain that he was handed a Cashier’s Receipt.  It is not sure whether or not Narito was given the Binding Receipt upon his payment of the first premium. The beneficiaries submitted a claim to the insurer. On the same date. If the note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued. The insurer’s application form contained a so-called “Binding Receipt” which was detachable. its purpose would be meaningless for it is in a real sense a contract. Issue: WON the cover not was without consideration.INSURANCE REVIEWER– Atty. up to Dec. 1966. The regular marine policies were issued by the company in favor of Pacific on Apr 2. After an underwriting analysis conducted by the insurer. The claim was denied. 3D rhys alexei . Pacific secured temporary insurance from the Workemen’s Insurance Co.178.  On Dec. Narito was examined by Dra. the application was signed by Narito. 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. Narito was shot and killed. After the issuance of the cover note but BEFORE the issuance of the 2 policies. 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.” 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. but the latter refused. Her opinion was confirmed by Dr. some of the logs intended to be exported were lost due to a typhoon. Held: It was with consideration. The 2 marine policies bore the number 53H01032 and 53H01033. 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. 6.  On Oc. Quimson page 92 Facts:     On March 13. not a mere application. 6. 1963.  She opined that Narito was insurable.

Hence. mortgagee. It should therefore be liable for loss before the application is subsequently rejected. the policies were renewed. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof.  Dunn likewise authorized SMB to take out the insurance policy for him. it should be held that the application for insurance of the deceased had been approved prior to his death.  Premiums were paid by SMB and charged to Dunn. during the continuance of the risk.  In 1917. With respect to Harding. SMB as the mortgagee of the property. The policies might have been worded differently so as to protect the owner. not wanting to issue a policy for the entire amount. Brias stated that SMB’s interest in the property was merely that of a mortgagee. had an insurable interest therein. Trial court ruled against Harding. when he acquired the property.  Brias. 2 to Dec. 1918. an any event. neither Dunn nor Harding could have recovered from the two policies.500 and procured another policy of equal amount from Filipinas Cia de Seguros. 1966. SMB’s general manager. SMB filed an action in court to recover on the policies. it would have 3D rhys alexei . Both policies required assignments to be approved and noted on the policy. In the case at bar. 5.  Mortgage contract stated that Dunn was to have the property insured at his own expense. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. A year later. remainder to whomsoever. Law Union Rock Insurance Company (repeat – case #12) 40 PHIL 674 Facts:  On Jan. in contrast to the requirement of actual payment of the premium.INSURANCE REVIEWER– Atty. recover upon the two policies an amount in excess of its mortgage credit. but this was not done. Quimson page 93 The problem is to resolve whether or not it can be said that the policy has been issued. 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. although the policy had not actually been issued. 12. (84) San Miguel Brewery v. the company should be liable to the beneficiaries. it should still be held that the application for insurance was approved by the company. no change or assignment of the policies had been undertaken. but no assignment of the policies was made to the latter. it should be presumed that the insurer had assumed the risk. although the policies were issued in SMB’s name. issued one for P7. with the actual issuance of the policy being a mere technicality. what may be noted is that. the company did NOT act on the application for insurance. 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. Under the Insurance Act. as its interests may appear. it was NOT required that the policy be actually issued. for which reason. from Nov. An assuming that no policy had indeed been issued. Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies. Held: NOPE.  SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. IN this connection. In the application. Hence the appeal. and no justification for the delay had been proven. approached Law Union for insurance to the extent of 15T upon the property. Undoubtedly. he became the owner of the property. one way or the other. Dunn sold the property to Harding. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty.  SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. When an insurer accepts and retains the first premium for an unreasonable length of time.  Law Union.  Insurance Companies contended that they were not liable to Harding because their liability under the policies was limited to the insurable interests of SMB only. Harding was made a defendant because by virtue of the sale. By virtue of the Insurance Act. If the wording had been: “Payable to SMB. Harding was left to fend for himself.  Property was destroyed by fire. may become owner of the interest insured”. but it could NOT.

What does Art. to the improvements. this was not what was stated in the policies. X is not privy to the insurance contract. and the policies had inadvertently been written in the form in which they were eventually issued. Under a life policy. If during the negotiation for the policies. What is a binding receipt according to Glora v. Recall Section 12. Section 53. in case of loss. A had taken out a policy on his car with the stipulation: “loss if any payable to Z. and the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged . Section 12 provides: The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal. the parties had agreed that even the owner’s interest would be covered by the policies. or in virtue of expropriation for public use. 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. However. accomplice or accessory in willfully bringing about the death of the insured.INSURANCE REVIEWER– Atty. 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. NOT merely SMB’s and would have shown to whom the money. 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. Aside from the ruling. then the insurer would have actually practiced fraud on the applicant for insurance. amplifications and limitations established by law. temporary or preliminary contract of insurance effective from that time until the issuance of the formal policy or until rejection of the risk. Quimson page 94 proved an intention to insure the entire interest in the property. the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise qualified. Is X entitled to collect the cost of repair? NO. Philamlife? The case defined a binding receipt. a complete. Unfortunately. in which event. which binds the insurance company to pay insurance should a loss occur pending action upon the application and actual issuance of a policy. or neutralize the binding result of the receipt. Philamlife? A binding receipt or slip is ordinarily a document. If the insurer issues a binder receipt with terms which will negate. A binder receipt would be misnamed if it does NOT bind the insurer. it would establish liability upon the insurer if death occurred prior to the issuance of the policy. the owner of the auto repair shop where the car was fixed filed a claim with the insurance company. 2127 of the CC say? Art. As far as the insurance company is concerned. this does not mean that X 3D rhys alexei . the mortgagee of the car”. should be paid. The car got lost and X. whether the estate remains in the possession of the mortgagor or it passes into the hands of a third person. Problems. slip or memorandum given to the insured. for what other reason did Atty. The mortgage extends to the natural accession. 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. 2127. growing fruits and the rents or income not yet received when the obligation becomes due. Quimson ask us to read the case of Gloria v. The issuance of a binder evidences. Even if there was a provision in the contract authorizing either A or Z to contract for repairs. with declarations. So? It is an exception to Section 53.

this court has laid down the rule that the fairest test to determine whether the interest of a 3rd person in a contract is a stipulation pour autrui or merely an incidental interest. no contract of trust. v.  The car was then insured with State Insurance Company and the policy delivered to Mora.  During the effectivity of the insurance contract. Under this doctrine. by the insured and third person. Z must pay X. if at all. The parties to the insurance contract omitted such stipulation. Inc. is merely equitable in nature and must be made effective through Enrique Mora who entered into a contract with the Bonifacio Bros Inc. Reyes. The car was delivered to Mora without the consent of HS Reyes. express or implied.S. the car figured in an accident. 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. and in case Z was the one who contracted for the repairs. no contract of trust. It is fundamental that contracts take effect only between the parties thereto. Reyes. the "loss payable" clause of the insurance policy stipulates that "Loss. Cases: (85) Bonifacio Bros. Inc. In this case.INSURANCE REVIEWER– Atty. with the condition that Mora would insure the car with HS Reyes as beneficiary. Upon the theory that the insurance proceeds should be directly paid to them. In this case. Bonifacio and Ayala filed a complaint against Mora and the insurer with the municipal court for the collection of P2. Such stipulation is known as a stipulation pour autrui. In this case. or in a court of law. unless there be some contract of trust. authorized Bonifacio Bros to fix the car. 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.     For the cost of Labor and materials. is payable to H. a third person is allowed to avail himself of a benefit granted to him by the terms of the contract. the proceeds must be paid to Z. expressed or implied exists. a third person NOT a party to the contract has NO action against the aprties thereto. Consequently. provided that the contracting parties have clearly and deliberately conferred a favor upon such person. This conclusion is 3D rhys alexei . expressed or implied. On the other hand. and third persons have no right either in a court of equity. or a provision in favor of a third person not a party to the contract. The company then assigned the accident to an insurance appraiser for investigation and appraisal of the damage. and cannot generally demand the enforcement of the same. Mora 20 SCRA 262 Facts:  Enrique Mora mortgaged his Odlsmobile sedan car to HS Reyes Inc. requiring Bonifacio and HS Reyes to interplead in order to determine who has a better right to the proceeds. which they intended to benefit. The appellant's claim." indicating that it was only the H. Issue: WON there is privity of contract between Bonficacio and Ayala on one hand and State Insurance on the other.102.  Mora without the knowledge and consent of HS Reyes. which is a circumstance that supports the said conclusion. to the proceeds of it. using materials supplied by the Ayala Auto Parts Company. We.73. The bill was sent to the insurer’s appraiser.73. therefore.S. Mora was billed P2. 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. IN this connection. The insurance company filed its answer with a counterclaim for interpleader. is to rely upon the intention of the parties as disclosed by their contract. Held: NONE. A policy of insurance is a distinct and independent contract between the insured and insurer.102. 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. if any. except in some specific instance provided by law where the contract contains some stipulation in favor of a third person. Quimson page 95 became entitled to claim the proceeds. and without payment to Bonifacio Bros and Ayala.

the contract being solely to reimburse the insured for liability 3D rhys alexei . The policy in question has been so framed that "Loss." which unmistakably shows the intention of the parties. 1. are the sole heirs of the deceased — have a direct cause of action against the Company. where the contract is for indemnity against actual loss or payment. 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 enforcement of which may be demanded by a third party for whose benefit it was made. Del Monte 80 SCRA 181 Facts:     The insured owned a fleet of jeepneys. The policy also stated that in “the event of the death of the driver. then third persons to whom the insured is liable. in general. Inc. One day. they institued this complaint. then third persons cannot proceed against the insurer. which were deducted from his weekly commissions. it is clear that the Coquias — who. a taxicab of the insured driven by Coquia met an accident and Coquia died. 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. 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”. (86) Coquia v. Under these conditions. if any. 1961. is payable to H. Athough.    Issue: WON plaintiffs have the right to collect on the policy. and. Reyes. admittedly. 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. only parties to a contract may bring an action based thereon. " This is but the restatement of a well-known principle concerning contracts pour autrui. he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. When the company refused to pay the only heirs of Coquia. Held: YES. A mere incidental benefit or interest of a person is not sufficient. can sue the insurer. since they could have maintained this action by themselves. Held: YES. reading: "If a contract should contain some stipulation in favor of a third person. one of his jeepney dirivers. the driver and the company. (87) Guingon v.INSURANCE REVIEWER– Atty.” During the policy’s lifetime. his parents. The company sough to dismiss the charges against it on the ground of lack of cause of action against it. He insured the operation of his jeepneys against “accidents with third part liability” with Capital Insurance and Surety Co. but is clearly covered by the express provisions of section 50 of the Insurance Act (now Sec. before the stipulation in his favor has been revoked by the contracting parties In the case at bar. this rule is subject to exceptions. although not a party to the contract. Fieldmen’s Insurance co. Fieldmen’s Insurance 26 SCRA 172 Facts:  On Dec. The company contends that plaintiffs have no cause of action since the Coquias have no contractual relationship with the company. On the other hand. bumped and killed Guingon. The test applied here is: Where the contract provides for indemnity against liability to third persons. The contracting parties must have clearly and deliberately conferred a favor upon a third person. one of which is found in the second paragraph of Article 1311 of the Civil Code of the Philippines. 53). An action for damages was then filed against the owner-insured. Issue: WON there is a cause of action against the company. Quimson page 96 deducible not only from the principle governing the operation and effect of insurance contracts in general. without the assistance of the insured it goes without saying that they could and did properly join the latter in filing the complaint herein. S.

said redemption in the name of Petitioners and himself was without his knowledge and that since the redemption. Said redemption of the property was made by Andres’ laywer in the name of Andres and the petitioners. (Accdg to Andres. it is one for indemnity against liability from the fact then that the insured is liable to the third person. Andres paid 18T to redeem some real property which Gregorio had sold to third persons during his lifetime. redeemed with the use of the insurance proceeds and its remainder. when it belongs to him. petitioners claim that the property belongs to the heirs in common and not to the defendant alone.INSURANCE REVIEWER– Atty. then it is probable that their contention is correct and that they are entitled to share equally with the defendant. 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. Ebrado 80 SCRA 181 Facts:  Buenaventura Ebrado was issued al life plan by Insular Company. or that it was not his intention to make a gift to them of real estate. death of or bodily injury to any person . 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. (89) Insular Life. 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. Since the repurchase has been made n the names of all the heirs instead of the defendant alone. 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. . referring to her as his wife. (88) Del Val v. Thus. Quimson page 97 actually discharged by him through payment to third persons. then the insurance company must deliver the proceeds to the claimants. said third persons' recourse being thus limited to the insured alone The policy in the present case. such third person is entitled to sue the insurer. it appears from the evidence that the conveyances were taken in the name of the plaintiffs without the knowledge and consent of Andres. Petitioners to account for the use and occupation of the premises. After Gregorio’s death. beneficiary. Of the said policy. 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. is one whereby the insurer agreed to indemnify the insured "against all sums . which the Insured shall become legally liable to pay in respect of: a. 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.         Issue: WON the petitioners have a right to the insurance proceeds? Held: NOPE. Andres collected the proceeds of the policy. The SC held that if it is established by evidence that that was his intention and that the real estate was delivered to the plaintiffs with that understanding. HOWEVER." Clearly. therefore. . He designated Capriona as his 3D rhys alexei . Since the policy in questioned contained a stipulation pour autrui. 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.

Quimson    page 98 The insured then died and Carponia tried to claim the proceeds of the said plan. the general rules on Civil law shall apply. Issue: WON the common law wife named as beneficiary can collect the proceeds. It is to be noted that 9 endorsement documents were prepared by Alchester in favor of RCBC. In February 1992.      Issue: WON RCBC has a right over the insurance proceeds. Sec. it would have gone against Art. In the present case. one of GOYU's creditors. one of GOYU's factory buildings in Valenzuela was gutted by fire. The civil code prohibitions on donations made between persons guilty of adulterous concubinage applies to insurance contracts. concluded that the endorsements are defective and held that RCBC has no right over the insurance proceeds. If the SC used only Sec. However. 1992. because the endorsements do not bear the signature of any officer of GOYU. Alchester Insurance Agency. 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. Inc. She admitted to being only the common law wife of the insured. although it appears that GOYU obtained the subject insurance policies naming itself as the sole payee. issued nine endorsements in favor of RCBC seemingly upon instructions of GOYU On April 27. and subsequently. CA 289 SCRA 292 (1998) Facts:   GOYU applied for credit facilities and accommodations with RCBC. to endorse and deliver the insurance policies to RCBC. Pascuala. On matters not specifically provided for by the Insurance Law. Held: RCBC has a right over the insurance proceeds. then to P90 million. the trial court. Under each of these four mortgage contracts. also filed with MICO its formal claim over the proceeds of the insurance policies. 739 and 2012.INSURANCE REVIEWER– Atty. a credit facility in the amount of P30 million was initially granted. 53. Consequently. the intentions of the parties as shown by their contemporaneous acts. GOYU committed itself to insure the mortgaged property with an insurance company approved by RCBC. After due evaluation. the insurance agent where GOYU obtained the Malayan insurance policies. GOYU submitted its claim for indemnity. RCBC. Art. The Court is in a quandary how Alchester could arrive at the idea of endorsing any specific insurance policy in favor of 3D rhys alexei . the legal wife. such that each one of them may insure the same property for his own sole benefit. Upon GOYU's application increased GOYU's credit facility to P50 million. must be given due consideration in order to better serve the interest of justice and equity. as well as the Court of Appeals. GOYU obtained in its name a total of 10 insurance policies from MICO. which were registered with the Registry of Deeds at. A life insurance policy is no different from a civil donation as far as the beneficiary is concerned. 53 is NOT the only provision that the SC had to consider. The company then filed an action for interpleader. GOYU filed a complaint for specific performance and damages. and finally to P117 million As security for its credit facilities with RCBC. 53? It is true that SC went against Sec. GOYU executed two REM and two CM in favor of RCBC. also filed a claim asserting her right as the legal wife. but said claims were also denied for the same reasons that AGCO denied GOYU's claims. 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. It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property. There is no question that GOYU could insure the mortgaged property for its own exclusive benefit.. (90) RCBC v. 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. However. since both are founded on liberality. Held: NOPE. 53.

as mortgagor. When an insurance contract is executed with an agent or trustee as the insured. RCBC. Section 54. Over and above this. Under the peculiar circumstances obtaining in this case. 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. it was too late for GOYU to disown the endorsements for any imagined or contrived lack of authority of Alchester to prepare and issue said endorsements. This Court can not over stress the fact that upon receiving its copies of the endorsement documents prepared by Alchester. 2. a sister company of RCBC. GOYU continued until the occurrence of the fire. The insurance proceeds may. and not just from any other insurance company. undertook to have the mortgaged property properly covered against any loss by an insurance company acceptable to RCBC. Just as plain too is the intention of the parties to constitute RCBC as the beneficiary of the various insurance policies obtained by GOYU. It is also significant that GOYU voluntarily and purposely took the insurance policies from MICO. 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. Quimson page 99 any particular beneficiary or payee other than the insured had not such named payee or beneficiary been specifically disclosed by the insured itself. relied upon the endorsement documents sent to it as this was only pursuant to the stipulation in the mortgage contracts. in the meantime. Alchester would not have known of GOYU's intention of obtaining insurance coverage in compliance with its undertaking in the mortgage contracts with RCBC. good faith. Endorsement documents were prepared by MICO's underwriter. obviously considered said endorsement to be sufficient compliance with its obligation under the mortgage contracts since RCBC accordingly continued to extend the benefits of its credit facilities and GOYU continued to benefit therefrom. Had it not been for GOYU. GOYU failed to seasonably repudiate the authority of the person or persons who prepared such endorsements. fair dealing. at least on the basis of the equitable principle of estoppel. despite the absence written conformity thereto. to enjoy the benefits of the credit facilities extended to it by RCBC. GOYU is at the very least estopped from assailing their operative effects. Inc. GOYU voluntarily procured insurance policies to cover the mortgaged property from MICO. in good faith. Consider thus the following: 1. and justice. 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. the Court is constrained to rule in favor of mortgagor RCBC. If there had not been actually an implied ratification of said endorsements by virtue of GOYU's inaction in this case. 3D rhys alexei . therefore. We find such reliance to be justified under the circumstances of the case. and verify. Alchester would not have endorsed the policies to RCBC had it not been so directed by GOYU. and copies thereof were sent to GOYU. It is undisputed that the insured pieces of property were the subject of mortgage contracts entered into between RCBC and GOYU in consideration of and for securing GOYU's credit facilities from RCBC. or by other general words in the policy. On equitable principles. be exclusively applied to RCBC. the Court cannot sanction. GOYU continued. the validity of said endorsements. GOYU did not assail. particularly on the ground of estoppel. 3. Alchester Insurance Agency. is to countenance grave contravention of public policy. 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. GOYU.INSURANCE REVIEWER– Atty. 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. until of late. The mortgage contracts contained common provisions whereby GOYU.. Such an unjust situation. the fact that his principal or beneficiary is the real party in interest may be indicated by describing the insured as agent or trustee. MICO and RCBC. 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. The peculiarity of the circumstances obtaining in the instant case presents a justification to take exception to the strict application of said provision. 4. The intention of the parties will have to be given full force and effect in this particular case. no less than a sister company of RCBC and definitely an acceptable insurance company to RCBC. After the occurrence of the loss insured against. which under the factual circumstances of the case. is truly the person or entity for whose benefit the policies were clearly intended.

or by other general terms in the policy. but suspends it until the same person becomes the owner of both the policy and the thing insured. personally or through his agent or trustee. Section 20. Quimson page 100 Who may take insurance? An insurance may be taken by a person. and in the absence of an assignment of the policy with the insurer’s consent. during the continuance of the risk. only he who can show that it was intended to include him can claim the benefit of the policy. unaccompanied by a corresponding change of interest in the insurance. 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. To render an insurance effected by one partner or part-owner. 3D rhys alexei . In reading sec. Problem. Not a grand-child. Section 56. and interest in the life or health of a person insured must exist when the insurance takes effect. indicate that he is merely acting in a representative capacity by signing as such agent or trustee. until the interests in the thing and the interest in the insurance are vested in the same person. Example? If the policy is payable “to the children”. What is the reason behind Sec.INSURANCE REVIEWER– Atty. applicable to the interest of his co-partners or other part-owners. and when the loss occurs. 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. but need not exist in the meantime. a change of interest in any part of a thing insured. Section 19. accident and health insurance. but need not exist thereafter or when the loss occurs. 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. nor a great-grand-child. he must show that he is the person named or described or that he belongs to the class of persons comprehended in the policy. The mere transfer of a thing insured does not transfer the policy. suspends the insurance to an equivalent extent. the purchaser of the interest of the property requires no privity with the insurer. may become the owner of the interest insured. the agent or trustee when making an insurance contract for or on behalf of his principal should. When the description of the insured in a policy is so general that it may comprehend any person or any class of persons. it is necessary that the terms of the policy should be such as are applicable to the joint or common interest. An interest in property insured must exist when the insurance takes effect. take not of Sec. Section 55. If the insurance is taken by an agent or trustee. Except in the cases specified in the next four sections. Section 58. Section 57. you must show that you are a child of the deceased. 58? Sec. A policy may be so framed that it will inure to the benefit of whomsoever. and in the cases of life. 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. 19 and 20. 58.

Hence the appeal. Law Union Rock (repeat – Case # 12) 40 PHIL 674 Facts:  On Jan. issued one for P7. an any event. Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies. A year later. but this was not done. Undoubtedly. IF the house burns down. mortgagee. had an insurable interest therein. when he acquired the property.  Law Union. A purchaser of insured property who does Not take the precaution to obtain a transfer of the policy on the insurance. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty. Quimson page 101 A borrowed 5. since B did not assign his right over the insurance policy to X.500 and procured another policy of equal amount from Filipinas Cia de Seguros. neither Dunn nor Harding could have recovered from the two policies. he mortgaged his house to B. as its interests may appear.  SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. SMB’s general manager. Subsequently. Harding was made a defendant because by virtue of the sale. By virtue of the Insurance Act. 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. but it could NOT.  Mortgage contract stated that Dunn was to have the property insured at his own expense. remainder to whomsoever. B then insured the house for 5T.  Dunn likewise authorized SMB to take out the insurance policy for him. Brias stated that SMB’s interest in the property was merely that of a mortgagee. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. not wanting to issue a policy for the entire amount. may become owner of the interest insured”. recover upon the contract. 12. but no assignment of the policies was made to the latter.000 from B.  SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. cannot in case of loss. Case: (91) San Miguel v. 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.  Property was destroyed by fire. Harding was left to fend for himself. although the policies were issued in SMB’s name. and to secure payment of his obligation. it would have 3D rhys alexei . recover upon the two policies an amount in excess of its mortgage credit. Held: NOPE.  Premiums were paid by SMB and charged to Dunn. Both policies required assignments to be approved and noted on the policy. is Paul entitled to collect the insurance money as assignee-mortgagee? NO. SMB as the mortgagee of the property. In the application. With respect to Harding. The policies might have been worded differently so as to protect the owner. Under the Insurance Act. Trial court ruled against Harding. If the wording had been: “Payable to SMB.INSURANCE REVIEWER– Atty.  Brias.  In 1917. the policies were renewed. approached Law Union for insurance to the extent of 15T upon the property. but did not make the corresponding transfer of his right over the insurance policy. Dunn sold the property to Harding. 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. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof. during the continuance of the risk. no change or assignment of the policies had been undertaken. SMB filed an action in court to recover on the policies. 1918. B assigned his mortgage credit to X. 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.

3D rhys alexei . and the policies had inadvertently been written in the form in which they were eventually issued. However. NOT merely SMB’s and would have shown to whom the money. in case of loss. 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. this was not what was stated in the policies. If during the negotiation for the policies.INSURANCE REVIEWER– Atty. Quimson page 102 proved an intention to insure the entire interest in the property. the parties had agreed that even the owner’s interest would be covered by the policies. should be paid. Unfortunately. 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.

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