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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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INSURANCE REVIEWER– Atty. Quimson

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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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INSURANCE REVIEWER– Atty. Quimson   

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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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INSURANCE REVIEWER– Atty. Quimson

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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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INSURANCE REVIEWER– Atty. Quimson

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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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Basically a contract of indemnity. therefore. Ironically. having presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract.000. insured the same property with two other insurance companies for a total coverage of around P900.000 when it was accordingly informed of the loss.500) when in fact. More significantly. Fidelity appraised the damage amounting to 385. inflated the value of the property by the alleged monthly rental of P6. Verendia failed to live by the terms of the policy. It might be that there had been efforts to settle Verendia's claims. no representative of Fidelity had signed it. specifically Section 13 thereof which is expressed in terms that are clear and unambiguous.300. 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. 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. Fidelity bound itself to a "mutual agreement" to settle Verendia's claims in consideration of the amount of P142. and created a dead-end for the adjuster by the disappearance of Robert Garcia.685. the same receipt states that Verendia had received the aforesaid amount. it appears that Robert Garcia was still within the premises. that Verendia had not received the amount stated therein.000. to have sufficient bases: Verendia concocted the lease contract to deflect responsibility for the fire towards an alleged "lessee". according to the investigation by the police. Considering.INSURANCE REVIEWER– Atty. during the trial. the subrogation receipt by itself does not prove that a settlement had been arrived at and enforced. averred that the policy was avoided by reason of over-insurance. a couple of days after the effectivity of the insurance policy. allowed such a ruse. However. or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy". that all benefits under the policy shall be forfeited "if the claim be in any respect fraudulent. As it is also a contract of adhesion. however. an insurance contract should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it . the building appeared to have "no occupants" and that Mr. When the rented residential building was razed to the ground. was occupying the building when it was burned. Despite demands. however. Issue: WON Verendia can claim on the insurance despite the misrepresentation as to the lessee and the overinsurance. an insurance contract is the law between the parties. the Provincial Assessor of Rizal had assessed the property's fair market value to be only P40.00 stated in the policy. Roberto Garcia was "renting on the otherside of said compound" These pieces of evidence belie Verendia's uncorroborated testimony that Marcelo Garcia whom he considered as the real lessee. However. Verendia admitted that it was not Robert Garcia who signed the lease contract but it was Marcelo Garcia cousin of Robert. Verendia. the lessor. is proven by the fact that Verendia himself filed the complaint for the full amount of P385. 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 . but surely. or if any false declaration be made or used in support thereof. The contract of lease upon which Verendia relies to support his claim for insurance benefits. Fidelity's conclusions on these proven facts appear. Fidelity refused payment under its policy. Verendia.77. It is even incomplete as the blank spaces for a witness and his address are not filled up. thus prompting Verendia to file a complaint for the recovery of 385. who had also been paying the rentals all the while. Thus.000 Fidelity. 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. when actually it was a Marcelo Garcia who was the lessee. 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. the terms of the policy should be strictly construed against the insured.00. While the said receipt appears to have been a filled-up form of Fidelity. Held: NOPE. was entered into between him and one Robert Garcia. that Verendia maliciously represented that the building at the time of the fire was leased under a contract executed on June 25. the insured property was completely destroyed by fire. Quimson page 7    While the three fire insurance policies were in force.

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

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

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

since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. Later. to be actually untrue. The health care agreement was in the nature of non-life insurance. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. (A)lthough false. diabetic and asthmatic. Sec. 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. Where matters of opinion or judgment are called for. the defense of concealment or misrepresentation no longer lie. 3D rhys alexei . Due to financial difficulties. intention. 1990. whether intentional or unintentional. petitioners required respondent's husband to sign an express authorization for any person. However. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true. opinion. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. amounting to about P76. contrary to his answer in the application form. which is primarily a contract of indemnity. especially coming from respondent's husband who was not a medical doctor.INSURANCE REVIEWER– Atty. She asked for reimbursement of her expenses plus moral damages and attorney's fees. a representation of the expectation. In the morning of April 13. o Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. Quimson  page 11 During the period of his coverage. CA affirmed. raising the primary argument that a health care agreement is not an insurance contract. Julita brought her husband home again. The periods having expired. an action for damages against Philamcare. Julita had no choice but to pay the hospitalization expenses herself. Petitioner argues that respondent's husband concealed a material fact in his application. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. 48 does not apply. Julita was constrained to bring him back to the CGH where he died on the same day. 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. as a matter of expectation or belief. injury or other stipulated contingent. While her husband was in the hospital. he was attended by a physical therapist at home. Once the member incurs hospital. there was concealment regarding Ernani's medical history.000. that which he then knows. This largely depends on opinion rather than fact. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. the health care provider must pay for the same to the extent agreed upon under the contract. and this is likewise the rule although the statement is material to the risk. Julita tried to claim the benefits under the health care agreement. Philamcare denied her claim saying that the Health Care Agreement was void. or the impossibility of which is shown by the facts within his knowledge. Thus. Philamcare. if the statement is obviously of the foregoing character. Under the title Claim procedures of expenses. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. 1990. SC held that in the case at bar. but is obligated to make further inquiry. he was admitted at the Chinese General Hospital (CGH).      Issues and Resolutions: Philamcare brought the instant petition for review. since in such case the insurer is not justified in relying upon such statement. RTC decided in favor of Julita. According to Philamcare. Ernani had fever and was feeling very weak.00 After her husband was discharged from the MMC. Julita instituted. 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. It appears that in the application for health coverage. hence the "incontestability clause" under the Insurance Code Title 6. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. or its acceptance at a lower rate of premium. 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. medical or any other expense arising from sickness. belief. consultation.

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

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

opinion. he was entitled to avail of hospitalization benefits. listed therein. which is primarily a contract of indemnity. Under the title Claim procedures of expenses. 1989 to March 1. During the period of his coverage. diabetic and asthmatic. there was concealment regarding Ernani's medical history.      Issues and Resolutions: Philamcare brought the instant petition for review. and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9.INSURANCE REVIEWER– Atty. answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. injury or other stipulated contingent. The amount of coverage was increased to a maximum sum of P75. whether intentional or unintentional. then from March 1.000. o Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive. especially coming from respondent's husband who was not a medical doctor. According to Philamcare. belief. Philamcare. shall automatically invalidate the Agreement from the very beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. petitioners required respondent's husband to sign an express authorization for any person. Later. organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization. hence the "incontestability clause" under the Insurance Code Title 6. and this is likewise the rule although the statement is 3D rhys alexei .00 per disability. Petitioner argues that respondent's husband concealed a material fact in his application. 1990. Sec. 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. whether ordinary or emergency. preventive health care and other out-patient services. While her husband was in the hospital. 1990. Julita was constrained to bring him back to the CGH where he died on the same day. a representation of the expectation. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. RTC decided in favor of Julita. CA affirmed. or its acceptance at a lower rate of premium. 1990. Julita tried to claim the benefits under the health care agreement. (A)lthough false. She asked for reimbursement of her expenses plus moral damages and attorney's fees. 48 does not apply. Due to financial difficulties. Julita brought her husband home again. Thus. Quimson page 14    The application was approved for a period of one year from March 1. 1990 to June 1. 1988 to March 1. treatment or any other medical advice or examination. Ernani had fever and was feeling very weak. and under such. amounting to about P76. or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. This largely depends on opinion rather than fact. Upon the termination of the agreement. However. 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. SC held that in the case at bar. the same was extended for another year from March 1. 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. an action for damages against Philamcare. Julita instituted. 1990. he was admitted at the Chinese General Hospital (CGH). the health care provider must pay for the same to the extent agreed upon under the contract. Julita had no choice but to pay the hospitalization expenses herself. raising the primary argument that a health care agreement is not an insurance contract. intention. In the morning of April 13.000. he was attended by a physical therapist at home. Philamcare denied her claim saying that the Health Care Agreement was void. Once the member incurs hospital. consultation. the defense of concealment or misrepresentation no longer lie. contrary to his answer in the application form. the insurable interest of respondent's husband in obtaining the health care agreement was his own health. The health care agreement was in the nature of non-life insurance.00 After her husband was discharged from the MMC. Where matters of opinion or judgment are called for. It appears that in the application for health coverage. The periods having expired. He was a issued Health Care Agreement. 1989. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. medical or any other expense arising from sickness.

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

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

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

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

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. Insurance companies and adjustment companies presently affected by the above provisions shall have two years from the effectivity of the Decree within which to divest of their stockholdings. the payments of the premiums are a condition precedent. What is the effect of war on the existing insurance contracts between the Philippines and a citizen or subject of a public enemy. (3) US Rule – declared the contract not merely suspended but is abrogated by reason of nonpayment of premiums. d) He must possess an insurable interest in the subject of insurance. to this view. and it includes every citizen or subject of such nation. 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. The privilege of renewing the contract for each succeeding year by paying the premium for that year at the time agreed upon. The mere protection for the year.INSURANCE REVIEWER– Atty. What is a public enemy? It is a nation with whom the Philippines is at war. Anyone except a public enemy may be insured. 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. 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. with respect to life insurance? Three doctrines have arisen. However. e) He must NOT be a public enemy. Quimson page 19 Before issuing such certificate of authority. Section 7. provided however. 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. instructions. rulings or decisions of the Commissioner. and b. with respect to property insurance? With respect to property insurance. that the terms “life” and “non-life” insurance shall e deemed to include health. Accdg. or a name so similar as to be calculated to mislead the public. unless specifically authorized to do so. What is the effect of war on the existing insurance contracts between the Philippines and a citizen or subject of a public enemy. 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. accident and disability insurance. the Commissioner must be satisfied that the name of the company is not that of any other known company transacting a similar business in the Philippines. No insurer company shall have any equity in an adjustment company and neither shall an adjustment company have an equity in an insurance company. No insurance company may be authorized to transact in the Philippines the business of life and non-life insurance concurrently. 3D rhys alexei . (2) New York Rule – apparently followed by the number of decisions. since the time of the payment is peculiarly of the essence of the contract. We follow the US Rule. (1) Connecticut Rule – there are two elements in the consideration for which the annual premium is paid: a. the non-performance of which (as when the performance would be illegal) necessary defeats the right to renew the contract.

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

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

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

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

such non-disclosure constituted concealment that justified the denial of the claim. DBP submitted a death claim to Grepalife. Leuterio died due to "massive cerebral hemorrhage. Dr. was called to testify. the indispensable party who was not joined in the suit. Leuterio answered questions concerning his health stating that he is in good health and has never consulted a physician for or a heart condition. hence the trial court acquired no jurisdiction over the case. Leuterio was not autopsied. insures the mortgaged property in his own name and for his own interest. kidney or stomach disorder or any other physical impairment. Held.       Issue: WON the widow is the real party in interest. The rule is that “where a mortgagee. but is passed by subrogation to the insurer to the extent of the money paid. Dr. Allegedly. Leuterio. but in such case." Consequently.” 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. To resolve the issue. Leuterio. high blood pressure. Grepalife appealed contending that the wife was not the proper party in interest to file the suit. he is not allowed to retain his claim against the mortgagor. CA 316 SCRA 677 Facts:   A contract of group life insurance was executed between Grepalife and DBP. the correct solution would be that the proceeds of the Insurance be delivered to Cosio. In the light of this ruling. Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP.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 was not physically healthy when he applied for an insurance coverage and insisted that Dr. Grepalife denied the claim alleging that Dr. we must consider the insurable interest in mortgaged properties and the parties to this type of contract." is a device for the protection of both the mortgagee and the mortgagor. Dr. stated that 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. to the extent of his DBP mortgage indebtedness amounting to eighty-six thousand. lung. diabetes. Wilfredo Leuterio. (15) Grepalife v. the difference between the indebtedness and the amount of insurance received by Cosio. Grepalife issued the insurance coverage of Dr. filed a complaint against Grepalife for "Specific Performance with Damages.INSURANCE REVIEWER– Atty. since it is DBP who insured the life of Dr. based partly from the information given by the widow. independently of the mortgagor. RTC ruled in favor of widow and against Grepalife.00) pesos.107 (13. which caused his death. Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP. (not DBP) and has legal standing to file the suit. who issued the death certificate. otherwise known as the "mortgage redemption insurance. other causes were not ruled out. In an application form. Quimson  page 24 Trial Court found that the debt had an unpaid balance of P12T. Leuterio did not disclose that he had been suffering from hypertension.107 – 12.200. and WON the trial court was correct in requiring Cosio to refund the excess of P1. cancer. The widow of the late Dr. two hundred (P86. Leuterio. Dr. 3D rhys alexei . not the real party in interest. 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. hence. a physician and a housing debtor of DBP applied for membership in the group life insurance plan. The rationale of a group insurance policy of mortgagors. Mejia’s findings. Leuterio. Leuterio complained of headaches presumably due to high blood pressure. he is entitled to the insurance proceeds in case of loss. Held: YES. It argues that when the Court of Appeals affirmed the trial court’s judgment. The inference was not conclusive because Dr." During the trial. Dr.107 to Palileo. Hernando Mejia. Grepalife alleges that the complaint was instituted by the widow of Dr. NO and NO.

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

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

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

In the standard application form. CA (repeat – Case # 09) 379 SCRA 356 Facts:  Ernani Trinos. and paid annually upon the total net income received in the preceding calendar year from all sources by every corporation . Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month beginning March 9. is to be found section 4 which provides that. 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. 1990. Velhagen in 1929. asthma or peptic ulcer? (If Yes. We do not believe that this fact signifies that when the plaintiff received P104. He was also entitled to avail of "out-patient benefits" such as annual physical examinations. Julita tried to claim the benefits under the health care agreement. and under such. 1989 to March 1. Philamcare denied her claim saying that the Health Care Agreement was void. (20) Philamcare v.957. heart trouble. Upon the death of A. 1990.      3D rhys alexei . the same was extended for another year from March 1. During the period of his coverage. then from March 1. he was entitled to avail of hospitalization benefits. 1990. in exempting individual beneficiaries. While her husband was in the hospital. . give details)” The application was approved for a period of one year from March 1. together with the interests and the dividends accruing thereon.88 CIR assessed El Oriente for deficiency taxes because El Oriente did not include as income the proceeds received from the insurance. assessed. cancer. whether ordinary or emergency. to protect itself against the loss it might suffer by reason of the death of its manager. "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 . liver disease. provides the exemptions under the law. 1988 to March 1. According to Philamcare.88 from the insurance on the life of its manager. The amount of coverage was increased to a maximum sum of P75. aggregating P104. listed therein. but neither here nor in any other section is reference made to the provisions of section 4 in Chapter I. diabetes. In reality. But at least. preventive health care and other out-patient services. "There shall be levied. 1989.   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. . speaks of the proceeds of life insurance policies as income. . 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. 1990 to June 1. took out the insurance on the life of its manager. but this is a very slight indication of legislative intention. 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. It is true that the Income Tax Law. it thereby realized a net profit in this amount. which deductions were allowed upon a showing that such premiums were legitimate expenses of its business. collected. who had had more than thirty-five years' experience in the manufacture of cigars in the Philippines.00 per disability. Under the view we take of the case. provides that. Upon the termination of the agreement. 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.INSURANCE REVIEWER– Atty. . applied for a health care coverage with Philamcare. are taxable as income under the Philippine Income Tax Law Held: NOT TAXABLE." Section 10.000.957. it is sufficient for our purposes to direct attention to the anomalous and vague condition of the law. In Chapter I of the Tax Code.a tax of three per centum upon such income . the El Oriente received all the proceeds of the said life insurance policy. there was concealment regarding Ernani's medical history." Section 11 in the same chapter. in Chapter II On Corporations. . 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. However. It is certain that the proceeds of life insurance policies paid to individual beneficiaries upon the death of the insured are exempt. . as amended.

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

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

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

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

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

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

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

(28) Vda. should she survive him. 3D rhys alexei . 1.5028 years. each to receive an equal share of 1/16. for which no beneficiary was designated. 11(b) clearly indicates that there is need for the employee to file an application for retirement insurance benefits when he becomes a GSIS member and to state his beneficiary. (29) Gercio v. as in the case of a life insurance policy if NO beneficiary is named in the insurance policy. 2 children = Jose Consuegra Jr. designated his beneficiaries in his life insurance. NO. case #18) 48 PHIL 53 Facts:  Sunlife issued a life insurance policy to Gercio. then to his wife Andrea. CFI affirmed GSIS decision. Sun Life (repeat. 1951. The life insurance and the retirement insurance are two separate and distinct systems of benefits paid out from 2 separate and distinct funds. 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. In case of failure to name a beneficiary in an insurance policy.  Gercio notified Sunlife that he had revoked his donation in favor of Andrea and that he had designated his present wife Adela as his beneficiary. the proceeds of his life insurance were paid by the GSIS to Berdin and her children who were the beneficiaries named in the policy.  The policy did not include any provision reserving to Gercio the right to change the beneficiary. The beneficiary named in the life insurance does NOT automatically become the beneficiary in the retirement insurance. When Consuegra. (this was contracted in GF while the first marriage subsisted)  Being a GSIS member when he died. or before 1943. he contracted two marriages: o First – Rosario Diaz. De Consuegra v. And when there exists two marriages. he was entitled to retirement insurance benefits. and Pedro but both predeceased him o 2nd – Basilia Berdin. the former agreeing to insure the life of Gercio for 2T to be paid to him on Feb.  Both families filed their claims with the GSIS. Issue: WON Gercio may change the beneficiary in the policy. 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. during the early part of 1943.  Since he was in the gov’t service for 22. Sec.  The wife was convicted of adultery and a decree of divorce was issued.INSURANCE REVIEWER– Atty. the proceeds will accrue to the estate of the insured. 1930 or if he should die before said date.  Sunlife refused to change the beneficiary.  Berdin went to CFI on appeal. Issue: To whom should the retirement insurance benefits be paid? Held: Both families are entitled to half of the retirement benefits. each family will be entitled to one-half of the estate. otherwise to the executor. GSIS 37 SCRA 315 Facts:  Jose Consuegra was employed as a shop foreman of the Office of the District Engineer in Surigao Del Norte. 7 children. 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. administrator of Gercio. Held.  When he was still alive.

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

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

9. 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. the latter denying the claims on the grounds that: o The properties were allegedly overvalued. out of which such expectancy arises. 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. coupled with an existing interest in that out of which the expectancy arises.. the two juke boxes were destroyed by fire. (39 days before I was born… hehehehe )during the effectivity of said insurance policy. or will suffer pecuniary loss or damage from its destruction. (b) An inchoate interest founded on an existing interest. insured two juke boxes with Union Surety for P4. What is existing interest? Existing interest in property is the legal or equitable title on the property. or a workman insuring the building which he was contracted to repair. Section 14. 1979. It was contended that both the lot and the building were owned by Ildefonso Yap and NOT by the Harvardian Colleges. It is reasonably fair to assume that had the building not been burned.00 o Suter had no insurable interest since the properties insured belong to Morcoin Co. the insured property was totally burned rendering it a total loss. Issue: WON Harvardian colleges has a right to the proceeds.000. In what kind of expectancy may insurable interest consist? The expectancy MUST be coupled with an existing interest in that. (btw. What is an inchoate interest? It is an interest which has not yet ripened. Country Bankers issued to Harvardian a fire insurance policy. 1980. Held: Harvardian has a right to the proceeds. Quimson page 39    On Aug. Harvardian therefore would have been directly benefited by the preservation of the property. siya din yung sa Tax 2 diba? Yung pinakasalan yung partner niyang si Spirig?) Subsequently. The test in determining insurable interest in property is whether one will derive pecuniary benefit or advantage from its preservation. Cases: (31) Suter v. Suter now claims from Union Surety. termination or injury by the happening of the event insured against. Union Surety 51 OG 1905 Facts:    Suter. Issues and Resolutions: (1) Whether or not the juke boxes were overvalued. 3D rhys alexei . and certainly suffered a pecuniary loss by its being burned. the managing partner of Morcoin Co. such as the interest of a stockholder in the property of the corporation which he owns stocks. Examples would be: a farmer insuring future crops that he will grow on his land. Harvardian would have been allowed the continued use of the same as the site of its operation as an educational institution. or (c) An expectancy. An insurable ineters in property may consist in: (a) An existing interest. it having been proven that the juke boxes cost only P774.INSURANCE REVIEWER– Atty. Regardless of the nature of the title of the insured or even if he did not have title to the property insured. 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. On March 12.

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

62. mere possession of an equitable title. 3D rhys alexei . It appears from the evidence presented that Chao insured said shipment with Filipino for the sum of P267. upon whom lay the burden. it cannot now allege that complainant has no insurable interest on the property insured. (2) WON the complainant was with insurable interest therein when the said policy contract was procured. The fishmeal in 666 gunny bags were unloaded from the ship on December 11.940 metric tons not 600 tons at $395. considering that Zenith’s agent had been fully apprised of the circumstances prior to the actual issuance of the policy and the endorsement. Inc. Issues and Resolutions: (1) WON the loss through theft or robbery claimed is within the coverage of the policy. like that pertaining to the buyer. in its express terms. Based on said computation the Chao made a formal claim against the Filipino for P51.568.59 for the goods described as 600 metric tons of fishmeal in gunny bags of 90 kilos each from Bangkok. Actually. “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. limit compensability to that stated in the enumeration. it does NOT. Razon. but the Filipino refused to pay the claim.   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. Quimson page 41 had no insurable interest yet. to adduce evidence showing that the alleged loss to the cargo in question was due to a fortuitous event precludes his right to recover from the insurance policy. The enumerated risks excluded did not include theft or robbery committed or perpetrated by an unidentified culprit. 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. found for the complainant in this wise: While the policy enumerated the risks covered. 1976 at Manila unto the arrastre contractor E. As this is the case. Inc. The Insurance Commissioner. As the CC provides. hence the complainant’s claim for damages is compensable. henceforth. (34) Filipino Merchants v. what was imported was 59.62 representing damages to said shipment which has been insured by Filipino. The complainant has insurable interest in the insured property at the time of the procurement of the insurance policy. Razon. Filipino brought a third party complaint against Compagnie Maritime Des Chargeurs Reunis and/or E. 1976 and seeks to recover from Filipino the amount of P51. gives rise to insurable interest in the property in which such title inheres. The foregoing policy is supported by the long time honored doctrine of “contra proferentem: which provides that: “any ambiguity in the policy shall be resolved in favor of the insured and against the insurer”.INSURANCE REVIEWER– Atty. A formal claim statement was also presented by the plaintiff against the vessel. seeking judgment against the third party defendants in case judgment is rendered against it. 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.568.” and Sec." "casualty" or "accidental cause" to which the alleged loss is attributable and the failure of herein private respondent. 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 11.42 a ton. 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 contract of insurance was VOID AB INITIO for lack of insurable interest at the time the insurance took effect. Furthermore. 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. Thailand to Manila against all risks under warehouse to warehouse terms. as reiterated by the SC.653. or upon any valid contract. however.

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

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

4M was the extent to which A was damnified by the loss of the house. the policies were renewed.  In 1917. he became the owner of the property. Harding was made a defendant because by virtue of the sale. Before delivery of the house in August. How much is he entitled to recover? A is entitled to recover only the value of his loss which is 100T and not 120T because it is against public policy to profit from a loss. 1993. Hence the appeal.  SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding. although the policies were issued in SMB’s name. 1918. Dunn sold the property to Harding. Anything that reduces or diminishes the loss. Trial court ruled against Harding.500 and procured another policy of equal amount from Filipinas Cia de Seguros. not one valued at only 3M. A suffered a total loss. Both policies were issued in the name of SMB only and contained no reference to any other interests in the propty.  Property was destroyed by fire. Hence the insurer is liabile for 20T. the balance to be paid upon deliver of the house on Aug. The reason why he is entitled to the whole 4M is.  Premiums were paid by SMB and charged to Dunn. Issue: WON the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies. What if the one who caused the damage. Harding was left to fend for himself.  SMB eventually reached a settlement with the insurance companies and was paid the balance of it’s mortgage credit. but no assignment of the policies was made to the latter. A insured his property valued at P100. Quimson page 44 Problems. In other words. 12. Held: NOPE.  Law Union.INSURANCE REVIEWER– Atty. A finished the house on July 13. approached Law Union for insurance to the extent of 15T upon 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. Law Union Rock Insurance Company (repeat – case #12) 40 PHIL 674 Facts:  On Jan. Under a building contract.000. In the application.000? What is the liability of the Insurance Company? The insurance claim is reduced in the same amount of 80T. SMB’s general manager. notwithstanding the fact that he has received from Z 1M as advance payment. he has to replace the house destroyed with another house worth 4M as per the contract. 1993 so he insured the house against fire for 4M. What is the extent of the insurable interest of A? It is still 4M. Cases: (36) San Miguel Brewery v. Dunn mortgaged a parcel of land to SMB to secure a debt of 10T. SMB filed an action in court to recover on the policies. A constructed a house in Ayala Alabang for 4M for Z who made an advance payment of 1M. reduces and diminished the amount which the insurer is bound to pay. B paid A P80. 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. the house burned down. Both policies required assignments to be approved and noted on the policy. 3D rhys alexei . A year later.  Brias. issued one for P7.000 for P120.  Dunn likewise authorized SMB to take out the insurance policy for him.  Mortgage contract stated that Dunn was to have the property insured at his own expense. Brias stated that SMB’s interest in the property was merely that of a mortgagee. not wanting to issue a policy for the entire amount. 13.

" Notwithstanding the above stipulation. Unfortunately. When CKS learned of the insurance earlier procured by the Cha spouses (without its consent). He insured it with Phoenix. SMB as the mortgagee of the property. no change or assignment of the policies had been undertaken. If the wording had been: “Payable to SMB. The LESSEE shall not insure against fire the chattels. If during the negotiation for the policies. . (37) Ang Ka Yu v. entered into a lease contract with CKS Development Corporation (CKS). 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. NOT merely SMB’s and would have shown to whom the money. . during the continuance of the risk. remainder to whomsoever. should be paid. as lessor.000. On the day that the lease contract was to expire.  The property was lost. fire broke out inside the leased premises. had no insurable interest over the property. Undoubtedly. merchandise.00) with the United Insurance without the written consent CKS. (38) Cha v. in case of loss. recover upon the two policies an amount in excess of its mortgage credit. Quimson page 45 Under the Insurance Act. even when he is not responsible for its safekeeping. A person having a mere right or possession of property may insure it to its full value and in his own name. the parties had agreed that even the owner’s interest would be covered by the policies. had an insurable interest therein. as its interests may appear. neither Dunn nor Harding could have recovered from the two policies. 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. However.  Phoenix denied liability on the ground that Ang was not the owner but a mere possessor and as such. may become owner of the interest insured”. . One of the stipulations of the one (1) year lease contract states: "18.   3D rhys alexei . an any event. Phoenix Assurance 1 CARA 704 Facts:  Ang Ka Yu had a piece of property in his possession. With respect to Harding. . Held: Yes. the Cha spouses insured against loss by fire their merchandise inside the leased premises for Five Hundred Thousand (P500. but it could NOT. there is no clear and satisfactory proof that the policies failed to reflect the real agreement between the parties that would justify the reformation of these two contracts. but this was not done. 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. 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. because he stands either to benefit from their continued existence or to be prejudiced by their destruction. based on its lease contract with the Cha spouses.INSURANCE REVIEWER– Atty. and the policies had inadvertently been written in the form in which they were eventually issued. so Ang Ka Yu sought to claim the proceeds. this was not what was stated in the policies. . Cha 277 SCRA 690 (1997) Facts:   Spouses Nilo Cha and Stella Uy-Cha. as lessees. . textiles. By virtue of the Insurance Act. the lower court would have been able to order that the contract be reformed to give effect to them in the sense that the parties intended to be bound. The policies might have been worded differently so as to protect the owner. the measure of insurable interest in the property is the extent to which the insured might be daminified by the loss or injury thereof. said person still has insurable interest. Issue: WON a mere possessor has insurable interest over the property. it would have proved an intention to insure the entire interest in the property. mortgagee. when he acquired the property. 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 provision states that? NO insurable interest = NO contract of Insurance. Hence. 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. and not Sharuff and Eskenazi. 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. 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. In the present case. 18. Later on.INSURANCE REVIEWER– Atty. 45 PHIL 122 3D rhys alexei . v. it cannot be denied that CKS has no insurable interest in the goods and merchandise inside the leased premises under the provisions of Section 17 of the Insurance Code which provide: "Section 17. Held: YUP. Baloise Fire Insurance Co. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof. HongKong Fire and Marine Insurance Co. under the Insurance Code — a special law — be validly a beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise. 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. alleging that the latter had no insurable interest." Therefore. Quimson page 46  United refused to pay CKS. 18 of the Insurance Code provides: "Sec. Held: NO. the Cha spouses. Cases: (39) Sharuff and Co.  The merchandise insured was subsequently destroyed by fire. CKS cannot. Issue: WON the partnership can claim the proceeds of the policy. Sec. The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella UyCha (herein co-petitioners). Section 18. Simplified.  They insured their merchandise with Baloise. such change of firm name was not made to defraud the insurance company or some other person." A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity. Issue: WON CKS can claim the proceeds of the fire insurance. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs. CKS has no insurable interest. 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. (40) Garcia v. Furthermore. This insurable interest over said merchandise remains with the insured. Sharuff and Eskenazi filed their claim against the insurance company.  Baloise refused to pay on the ground that the policy was issued in the name of Sharuff and Co. 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. Sharuff and Eskenazi entered into a contract of partnership and thereby changed the firm name to Sharuff and Eskenazi. The people involved are actually the same. The subsequent partnership did not alter the composition of the firm.

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

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

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

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

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

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

Saturnino was operated on for cancer. Philamlife 7 SCRA 316 Facts:      2 months prior to the insurance of the policy. among others listed in the application. Thereafter. If the policy was procured by fraudulent misrepresentations. He answered “ No”. In the application for the policy. not disputed that in 1924. She stated therein that she did not have. 3D rhys alexei . spirits and other intoxicants?” she answered “beer only in small quantities”. the contract of insurance apparently set forth therein was never legally existent. found in the right armpit. nor did she ever have any illness or disease peculiar to her sex. Issue: WON the insured made such false representation of material facts as to avoid the policy. nor had she ever had. Issue: WON on the bais of the misrepresentations of Vicenta. Vicenta died of cerebral apoplexy. Notwithstanding the fact of her operation. It can be fairly assumed that had the true facts been disclosed by the insured. advanced and lesser curvature. 18. wine. cancer or other tumors. the truth or falsity of the answer becomes the determining factor. her replies were as follows: o “How frequently do you use beer. Grade 4. She also stated that she had never been treated for. uterus and menstrual disorders. Saturnino did not make a disclosure thereof in her application for insurance. 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. Quimson   page 53  On Nov. In an action on a life insurance policy where the evidence conclusively shows that the answers to questions concerning diseases were untrue. (46) Saturnino v. Held: YES. Issue: WON the policy is void. 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. Bernardo claimed payment but was refused. the insurance would never have been granted.  Eng subsequently died of medullary carcinoma.  Insurance co. during the effectivity of the policy.  Cheng claims the proceeds of the policy. o “What physician have you consulted or been treated by within the last 5 years and for what illness or ailment?” she answered “none” It is however. refused payment on the ground that the policy was void due to the concealment.INSURANCE REVIEWER– Atty. Held: YES. CA 105 PHIL 1930 Facts:  Yu Pang Eng obtained a life insurance policy naming his brother Yu Pang Cheng as beneficiary. including the pectoral muscles and the glands. 1925. Vicenta. ovaries. Eng was asked whether he had been ill or had consulted a doctor due to symptoms or illnesses enumerated in the questionnaire. that she had not consulted any physician. The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy. Held: YES. involving complete removal of the right breast. particularly of the breast. Bernardo is barred from recovery. (45) Yu Pang Cheng v. It is admitted that in the Medical Examiner’s report. when in fact he was hospitalized seven months prior to his application for the said policy. in response to the question asked by the medical examiner. undergone any operation or suffered any injury within the preceding 5 years.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2000. a merchant. 3D rhys alexei . 1. the contract can still be rescinded. Tan died of hepatoma.  West Coast now denies liability based on these misrepresentations. CA? The period to consider in a life insurance poiicy is “two years” from the date of issue or of the last reinstatement. 2003. two years had not yet elapsed. Patricio filed a claim for the proceeds of the insurance. Hence. they submitted the certificates and paid the premiums. 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. when in fact he was married. When US life sought to rescind the contract on the ground of concealment/misrepresentation. Held: Yes. In Jan. Francisco Sanchez and Dr. 1975 denying their claim and rescinding the contract on the ground of misrepresentation. par. West Coast Life (repeat – case #68) 51 PHIL 80 Facts:  In 1926.  West Coast said that it was made to appear that Tan Caeng was single. Issue: WON Philamlife can rescind the contract. In Apr 1949. a laborer. 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. His beneficiaries then filed a claim with Philamlife for the proceeds of the insurance. Tan Caeng who died in 1925. Issue: WON West Coast’s action for rescission is therefore barred by the collection suit filed by Tan Chay. and thereafter. What is a simpler illustration of the ruling in Tan v. 1975. Locsin of West Coast. Held: YES. 48. 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. 1. suffering form tuberculosis and addicted to drugs.  Philamlife wrote the beneficiaries in Sep. Rosario died of acute dilation of the heart. health and not a drug user. Issue: WON the contract can still be rescinded. 1949. REGARDLESS of whether the insured died before or after Jan. 2.  On Aprl 26. 1973. 2003 or two years from the date of issue/reinstatement. and they were furnished at the same time long-form health certificates for the reinstatement of the policies. (73) Tan v. 1950. Tan Chay Heng sued West Coast on the policy allegedly issued to his “uncle”.  West Coast refused on the ground that the policy was obtained by Tan Caeng with the help of agents Go Chuilian. the insurer can still exercise his right to rescind up to Jan. He was the sole beneficiary thereof. Quimson  page 81    In Mar. the spouses were informed that the premium for Jan 1949 was still unpaid notwithstanding that the 31-day grace period has already expired. (74) Tan Chay Heng v.INSURANCE REVIEWER– Atty. 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”. CA 174 SCRA 403 Facts:  Tan Lee Siong was issued a policy by Philamlife on Nov.  Tan Chay contends that West Coast may not rescind the contract because an action for performance has already been filed.  Trial court found for Tan Chay holding that an insurer cannot avoid a policy which has been procured by fraud unless he brings an action to rescind it before he is sued thereon. The phrase “during the lifetime” found in Sec. So if for example the policy was issued/reinstated on Jan 1. 6.

INSURANCE REVIEWER– Atty. Quimson

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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  

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  

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

Perez. the insurance company is NOT seeking to enforce the contract. Antonio In a contract of insurance. and considering the findings of both the trial court and the CA as to the Concealment of Lee.00 if the premium were paid annually. he asked the latter to fill up another application form. Lalog forwarded the application for additional insurance of Perez. 1332 of CC. she could not be held guilty of concealment of her health history because the application for insurance was English. 1987. Issue: WON Art. 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.00. 1332 applies. Rodolfo Lalog. when fraud or mistake is alleged. Here. to the office of BF Lifeman Insurance Corporationn in Quezon which office was supposed to forward the papers to the Manila office. 1332: When one of the parties is unable to read or if the contract is in a language not understood by him. 1987. in good faith. to avail of the ongoing promotional discount of P400. Under said article. devolves on the party seeking to enforce it. visited Perez in Quezon and convinced him to apply for additional insurance coverage of P50. Certainly.075. Held: NO. On November 1. Perez accomplished an application form for the additional insurance coverage. Virginia A. Primitivo B. 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. even as fraud or mistake is NOT alleged. CA 323 SCRA 613 (2000) Facts:      Primitivo Perez had been insured with the BF Lifeman Insurance Corporation since 1980 for P20. all facts within his knowledge which are material to the contract.” 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. it is seeking to avoid its performance. Concurring: J. 1332 is NOT applicable.00 to Lalog. each party must communicate to the other. his wife. The receipt issued by Lalog indicated the amount received was a "deposit. an agent of Lifeman. Both trial court and CA ruled that Lee was guilty of concealment. the person enforcing the contract must show that the terms thereof have been fully explained to him. 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. and which the other has no means of ascertaining. is that because Lee was illiterate and spoke only Chinese. paid P2. (78) Perez v. 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. Tang’s position. on the contrary. however. As a general rule. Accordingly. In October 1987. It is petitioner who is seeking to enforce it. the SC affirms their decisions. Even if we were to say that the insurer is the one seeking the performance of the cont contracts by avoiding paying the claim.. NOTE: Art. 3D rhys alexei . 1332 is inapplicable.” “absence of any concealment or deception however slight. 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. which he passed." Unfortunately. and the insurer has not proven that the terms thereof had been fully explained to her as provided by Art.INSURANCE REVIEWER– Atty.00. “absolute and perfect candor or openness and honesty.000.000. Perez was made to undergo the required medical examination. and mistake or fraud is alleged. together with all its supporting papers. which means “most abundant good faith”. Art. Art. 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. In sum.

Lincoln issued a special kind of life insurance policy known as the "Junior Estate Builder Policy. Its assent was given when it issues a corresponding policy to the applicant. BF Lifeman Insurance Corporation approved the application and issued the corresponding policy for the P50.000. 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. am/are in good health. his application papers for the additional insurance were still with the Quezon office.00 on December 2.  3D rhys alexei . the insurance company refunded the amount of P2. 1987." 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. Perez. paid P2. or on November 27.075.000. It is not disputed. 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. Without knowing that Perez died on November 25. A contract. the proceeds of which amount to P150. When Primitivo filed an application for insurance. In its letter of January 29.075. 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. averred that the deceased had fulfilled all his prestations under the contract and all the elements of a valid contract are present. 1987 that said papers were received in Manila. Documentary stamp taxes due on the policy were paid to the petitioner only on the initial sum assured. Lalog testified that when he went to follow up the papers.00 under the first insurance policy for P20.000. one party undertakes to compensate the other for loss on a specified subject by specified perils. At the time of his death. on the other hand. 1987 Virginia went to Manila to claim the benefits under the insurance policies of the deceased.INSURANCE REVIEWER– Atty.000. It was only on November 27.00 which Virginia Perez had paid Lifeman filed for the rescission and the declaration of nullity. the insurance company maintained that the insurance for P50. for a stipulated consideration. 1988 to Virginia A. 1987. 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. he found them still in the Quezon office and so he personally brought the papers to the Manila office of BF Lifeman Insurance Corporation.00." 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. 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. his application was subject to the acceptance of private respondent BF Lifeman Insurance Corporation. however. CA reversed. on the other hand. 1987. Held: The contract was not perfected.000.00 (double indemnity in case of accident) but the insurance company refused to pay the claim under the additional policy coverage of P50. Insurance is a contract whereby. Consequently. Quimson page 87   On November 25. is a meeting of the minds between two persons whereby one binds himself. 1987. She was paid P40. with respect to the other to give something or to render some service.      Issue: WON there was a perfected additional insurance contract. that when Primitivo died on November 25. when Lalog personally delivered the application papers to the head office in Manila.00 and submitted the results of his medical examination. Consequently. The offer must be certain and the acceptance absolute.00 in view of a triple indemnity rider on the insurance policy. RTC ruled in favor of Perez. The clause was to take effect in the year 1984.000. (79) CIR v. Perez died while he was riding a banca which capsized during a storm. Perez. Under the abovementioned provision. Lincoln Phil Life 379 SCRA 423 (2002) Facts:  In the years prior to 1984.00 had not been perfected at the time of the death of Primitivo Perez.

INSURANCE REVIEWER– Atty. although the automatic increase in the amount of life insurance coverage was to take effect later on. Rate of premium 3D rhys alexei . if he is not the absolute owner thereof. The "automatic increase clause" in the policy is in the nature of a conditional obligation under Article 1181. corresponding to the amount of automatic increase of the sum assured on the policy issued by respondent. the additional insurance that took effect in 1984 was an obligation subject to a suspensive obligation. a deficiency assessment based on the additional insurance not covered in the main policy is in order. unless the interest of a person insured is susceptible of exact pecuniary measurement. CIR claims that the "automatic increase clause" in the subject insurance policy is separate and distinct from the main agreement and involves another transaction. the date of its effectivity. (b) The amount to be insured except in the cases of open or running policies. Section 51. the original policy was essentially re-issued when the additional obligation was assumed upon the effectivity of this "automatic increase clause" in 1984. Here. 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. This requirement however can be dispensed with in cases of open or running policies. What must a policy contain and what are the reason behind such requirements? A policy must contain: 1. (f) The risks insured against. a statement of the basis and rates upon which the final premium is to be determined. Quimson page 88   Subsequently. petitioner issued deficiency documentary stamps tax assessment for the year 1984. The SC agreed with this contention. it was written into the policy at the time of its issuance. CA affirmed. while no new policy was issued. as well as the amount of the increase. Lincoln questioned the deficiency assessments and sought their cancellation in a petition filed in the Court of Tax Appeals. (d) The property or life insured. The subject insurance policy at the time it was issued contained an "automatic increase clause. and (g) The period during which the insurance is to continue. was already definite at the time of the issuance of the policy. A policy of insurance must specify: (a) The parties between whom the contract is made. Issue: WON the automatic increase of the sum assured on the policy is taxable. 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. 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. and that." Although the clause was to take effect only in 1984. Logically. 8 by which the increase of the insurance coverage shall depend upon the happening of the event which constitutes the obligation. Names of the parties 2. CTA found no basis for the assessment. 9 but still a part of the insurance sold to which private respondent was liable for the payment of the documentary stamp tax. Thus. 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. Amount of insurance  to easily and exactly determine the amount of indemnity to be paid in case of loss or damage. (c) The premium. The distinctive feature of the "junior estate builder policy" called the "automatic increase clause" already formed part and parcel of the insurance contract. Held: YES. or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract. hence. 3. hence. In the instant case.

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

the insurer makes a contract to insure the subject matter at some subsequent time which may be definite or indefinite. provided that such written approval may be dispensed with upon the certification of the Pres. Cases: (80) Lim v. Such policy shall include within its terms the identical insurance bound under the cover note and the premiums therefore. Sun Life 41 PHIL 263 Facts:  On July 6. VP or General Mgr of the Insurance company concerned. 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. 23. Quimson page 90 By its nature. a policy of insurance shall. BUT such cover note may be canceled by either party upon at least 7 days notice to the other party. PROVIDED that the company shall confirm this agreement by issuing a policy on said application xxx. it is subject to all conditions in the policy expected even though that policy may never issue. in life insurance. no liability shall attach until the insurer approves the risk. 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 values of such risks. within 60 days after the issuance of the cover not be issued in lieu thereof. Under such an executory contract. 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. Can you explain a preliminary executory contract of insurance? By a preliminary executory contract of insurance. but in such case. 7) The insurance companies may impose on cover notes a deposit premium equivalent to at least 25% of the estimated premium of the intended insurance coverage but in no case less than P500. the amount herein shall be returned. 5) If a cover not is not so canceled. Luis Lim Y Garcia of Zamboanga applied for a policy of life insurance with Sunlife in the amount of 5T.INSURANCE REVIEWER– Atty. The instant action is brought by the beneficiary to recover from Sun Life the sum of 5T. Lim died on Aug. 6) A cover note may be extended or renewed beyond the aforementioned period of 60 days with the written approval of the Insurance Commissioner. 1(1) of IC. Thus. where an agreement is made between an applicant and the insurers’ agent.  He designated his wife Pilar Lim as the beneficiary. 3) NO cover note shall be issued or renewed unless in the form previously approved by the Insurance Commission. Should the company NOT issue such a policy. a binding slip or binding receipt DOES NOT insure itself. 1917 after the issuance of the provisional policy but before the approval of the application by the home office of the insurance company. 3D rhys alexei . 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. 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. 4) A cover not shall be valid and binding for a period NOT exceeding 60 days from the date of its issuance. 1917. Issue: WON the beneficiary can collect the 5T. whether or not the premium therefore has been paid or not. In life insurance. that the risks involved.

All the essential data regarding Helen was supplied by Ngo to Lapu-Lapu Mondragon. Where an agreement is made between the applicant and the agent. Ngo then paid the insurance premium and a binding deposit receipt was issued to him. pursuant to par. (81) Grepalife v. 1957. The binding receipt in question was merely an acknowledgement on behalf of the company. adding that Grepalife was the only insurance company NOT selling endowment plans to children. Helen died of influenza with complication of broncho pneumonia.INSURANCE REVIEWER– Atty. that the latter’s branch office had received from the applicant. (82) Pacific Timber v. and is subordinated to the act of the company in approving or rejecting the application. On may 1957. Since Grepalife disapproved the insurance application of Ngo. constituted a temporary contract of life insurance. 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. When an agreement is made between the applicant and the agent whether by signing an application containing such condition or otherwise. CA 89 SCRA 543 Facts:   On March 14. 1957. that no liability shall attach until the principal approves the risk and a receipt is given by the agent. CA 112 SCRA 199 3D rhys alexei . 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. respondent Ngo Hing filed an application with Grepalife for a 20-yr endowment policy for 50T on the life of his one year old daughter Helen Go.” Mondragon wrote on the bottom of the application form his strong recommendation for the approval of the insurance application. such acceptance is merely conditional and is subordinated to the company’s act in approving or rejecting. Ngo filed a claim with Gepalife. The acceptance is merely conditional. NO liability shall attach until the principal approves the risk and a receipt is given by the agent. The contract of insurance was not consummated by the parties. A binding receipt is manifestly merely conditional and does NOT insure outright. Mondragon then typed the data on the application form which was later signed by Ngo. a binding slip or binding receipt does NOT insure by itself. 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. E of the said receipt. the insurance premium and had accepted the application subject for processing by the insurance company. 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.      Issue: WON the binding deposit receipt. Held: NO. The binding receipt contained the following provision: “If the applicant shall not have been insurable xxx and the Company declines to approve the application. On Apr 30. the binding deposit receipt had never became on force at any time. the branch manager of Grepalife-Cebu. 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. 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. Thus in life insurance. Quimson page 91 Held: NO. Mondragon wrote back the main office again strongly recommending the approval of the endowment plan on the life of Helen.

 On Dec.  From the time the insured received the application form its agent on Nov. not a mere application. Quimson page 92 Facts:     On March 13. 1963.178. Philamlife Insurance Co. it did not contain. the application was signed by Narito. 1966. Workmen issued on said date Cover Note 1010 insuring said cargo. 6. its purpose would be meaningless for it is in a real sense a contract. Held: It was with consideration. The claim was denied. 31. 73 OG 8660 Facts:  In 1966. 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. it found out that Narito was unacceptable as an insurance risk. 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. The insurer’s application form contained a so-called “Binding Receipt” which was detachable. particulars of the shipment that would serve as basis for the computation of the premiums. the Associate Medical Director of the insurer. Orobia. 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 insurer’s medical examiner.  Narito paid the first annual premium on the policy applied for. Pacific secured temporary insurance from the Workemen’s Insurance Co. After the issuance of the cover note but BEFORE the issuance of the 2 policies. There is no question that the first premium was paid. As a logical consequence. thus null and void. it did not take any action with regard to the controverted insurance coverage. for no such premium could have been paid. since by the nature of the cover note. 3D rhys alexei .  It is not sure whether or not Narito was given the Binding Receipt upon his payment of the first premium. but what is certain that he was handed a Cashier’s Receipt. ” It should be conceded that there shall be a contract of insurance once the first premium is paid and a policy is issued. Narito was shot and killed. Roberto Narito applied for a 100T life insurance policy with Philamlife Insurance Company. SC upheld Pacific’s contention that said cover not was with consideration. After an underwriting analysis conducted by the insurer. Vergel de dios. 5. 1966. Issue: WON the cover not was without consideration. 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. 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. but the latter refused.INSURANCE REVIEWER– Atty. as all cover notes do not contain. The 2 marine policies bore the number 53H01032 and 53H01033. Her opinion was confirmed by Dr.  On Oc.  She opined that Narito was insurable. Narito was examined by Dra. the first annual premium of P1. (83) Gloria v. On the same date. Pacific filed its claim with the company. 1966. an agent of the insured prepared an application for the life insurance whose annual premium was P1. 1966. no separate premiums are required to be paid on a cover note. Issue: WON the beneficiaries can claim. for its exportation of logs to Japan. The regular marine policies were issued by the company in favor of Pacific on Apr 2. 6. 1963.178. some of the logs intended to be exported were lost due to a typhoon.” 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. If the note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued. up to Dec. The beneficiaries submitted a claim to the insurer.

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

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

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

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

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

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

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

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

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

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