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Insurance (Case Tickler)

1. Enriquez v. Sunlife Insurance, GR 15895, Nov. 1920

2. Insular Life v. Ebrado, GR L-44059, Oct. 1977
3. Filipinas-Compania de Seguros de Nava, GR L-20552, May 1966
4. White Gold Marine Services v. Pioneer Insurance, GR 154514, July 2005
5. Philamcare Health Services Inc. v. CA, GR 125678, March 2002
6. Philippine Heath Care Providers v. CIR, GR 167330, Sept. 2009
7. Rizal Surety and Insurance Co. v. CA, GR 112360, July 2000
8. Blue Cross Health Care v. Olivares, GR 169737, Feb. 2008
9. Fortune Insurance and Surety Co. v. CA, GR 115278, May 1995
10. Gulf Resorts v. Phil. Charter Insurance Corp, GR 155167, May 2005
11. Eternal Gardens Memorial v. Philamlife Insurance, GR 166245, April 2008
12. Manila Bankers Life Insurance v. Aban, GR 175666, July 2013
13. Verendia v. CA, GR 75605, Jan. 1993
14. Gulf Resorts v. PCIC, supra.
15. Philamlife Health Systems v. CA, supra
16. Manila Mahogany Manufacturing Corp. v. CA, GR L-52756, Oct. 1987
17. Federal Express Corp. v. American Home Assurance, GR 150094, Aug. 2004

Cases Doctrine
1. Enriquez v. Sunlife Insurance, (GR D:
15895, Nov. 1920) Laws Governing Insurance
Law on Insurance now found in the
F: Insurance Code and CC (Expressly
Sept. 24 1917:Herrer made an repealed the provisions on the Code
application to SunLifeCo.through its of Commerce on Insurance)
office in Manila for Life Annuity. o In matters which are governed
o (2 days later)Herrer paid the by special laws, any deficiency of
sum of 6k to the companys the latter shall be supplied by
manager in its Manila office and the provisions of the CC
was given a receipt. Repeal of Commercial Law
Head office gave notice of left a void (Insurance Act
acceptance by cable to only deals w/ Life Insurance,
Manila. not Life Annuity), so CC
provision on Life Annuity
(On the same date) the can be applied
Manila office prepared a
Letter notifying Herrer Acceptance made by Letter (When
that his application has Perfected)
been accepted and this Acceptance made by letter shall bind
was placed in the ordinary the person making the offer only
channels of transmission from the date it came to his
(but was never actually knowledge.(Art. 1262, CC)
mailed and never received
by Herrer)

Herrer died on Dec. 20, 1917.

o Plaintiff Enriquez (as
administrator of Herrers
estate)brought this action to
recover the 6k paid by the

I:W/N the insurance contract was

perfected(whether Herrer received
the notice of acceptance of his
application) - NO
NOT perfected because it had NOT
been proved satisfactorily that the
acceptance of the application ever
came to the knowledge of the
applicant - As provided in CC

RE: Kind of Insurance availed by

Herrer and Law that governs
Life Life Insurance
able in this
Governed by Governed by
CC (In Insurance
matters Act
which are
governed by
special laws,
deficiency of
the latter
shall be
supplied by
provisions of
this Code) -
Act only
deals w/ Life
not Life
Life Life
annuity is Insurance,
the opposite on the other
of a life hand, the
insurance. insured
during the
In life period of the
annuity, a coverage
big amount makes small
is given to regular
the payments
insurance and upon his
company, death, the
and if after a insurer pays
certain a big
period of amount to
time the his
insured is beneficiaries
still living, .
he is
entitled to
amounts for
the rest of
his life.

EX: Pensions

Applying Art. 1262, CC (On Life
Annuity), acceptance made by letter
shall not bind the person making the
offer except from the time it came to
his knowledge.

2. Insular Life v. Ebrado, (GR L- D:

44059, Oct. 1977) Laws Governing Insurance
When not otherwise specifically
F:Ebrado was issued by The Life provided for by the Insurance Law,
Assurance Co., whole-life plan for the contract of life insurance is
P5,882 with a rider for Accidental governed by the general rules of the
Death for the same amount. civil law regulating contracts.
o Ebrado designated Carponia
Ebrado as the revocable Life Insurance Policy and Donation
beneficiary in his policy as his (Similar)
wife. (In truth, she was a Life insurance policy is no different
common-law wife and they had 2 from a civil donation insofar as the
children) beneficiary is concerned.
o Both are founded upon the same
Buenaventura died(Hit by a falling consideration: Liberality.
branch of a tree.
o The insurance company was then o As a consequence, the
liable to pay P11,745.73 proscription in Art. 739, CC
(representing the face value of should equally operate in life
the policy +addtl. benefits for insurance contracts.
accidental death and other costs) The ff. donations shall be
Carponiafiled with the insurer a 1. Those made between
claim for the proceeds of the policy persons who were guilty of
as she was the designated adultery orconcubinage at
beneficiary. the time of donation;
o She admits however, that she and
the deceased only lived as 2. Those made between
husband and wife without the persons found guilty of the
benefit of marriage. same criminaloffense, in
consideration thereof;
Pascuala Vda. De Ebrado also filed
her claim as the widow of the 3. Those made to a public
deceased. officer or his wife,
o Asserts that she is entitled to the descendants orascendants
insurance proceeds and not the by reason of his office.
common-law wife.
Insurance Policy shall not benefit
Insurer: In doubt as to whom the common law sps.
proceeds should be paid, he commenced Policy considerations and dictates of
an action for interpleader. morality rightly justify the institution
of a barrier between common law
TC: Disqualified Carponia from spouses in property relations since it
becoming the beneficiary of the insured. ultimately encroaches upon the
nuptial and filial rights of the
I:W/N a common-law wife named as legitimate family.
beneficiary in the life insurance o The impediments imposed upon
policy of a legally married man married couple should likewise be
canclaim the proceeds in case of imposed upon extra-marital
death of the latter - NO (Carponia relationship.
disqualified to be a beneficiary. Proceeds
shall go to estate of Ebrado) o If legitimate relationship is
circumscribed by these legal
H: disabilities, with more reason
Insurance Act (RA 2327, as should an illicit relationship be
amended) or even the Insurance restricted by these disabilities.
Code (PD 612, as amended) does not
contain any specific provision grossly Crim. Conviction of Adultery/
resolutory of the question at hand. Concubinage NOT necessary before
Art. 739 be applicable
Sec. 50, Insurance Act: the A conviction for adultery or
insurance shall be applied exclusively concubinage need not be exacted
to the proper interest of the person before the disabilities mentioned in
in whose name it is made Article 739 may effectuate.
o The word interest does not The guilt of the donee may be
refer to the beneficiary but only proved by preponderance of
to the insured because insurance evidence in the same action
is personal in character. (Last par. of Art. 739)

o Otherwise, the prohibitory laws

against illicit relationships will be
rendered nugatory, as they can
easily be circumvented by modes
of insurance.

Art. 2011, NCC: The contract of

insurance is governed by special
laws. Matters not expressly
provided for in such special laws
shall be regulated by this Code.
o Thus, when not otherwise
specifically provided for by the
Insurance Law, the contract of
life insurance is governed by
the general rules of the civil
law regulating contracts.

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 the person who cannot
make a donation to him.
o Common-law spouses are,
definitely, barred from
receiving donations from each

o Art. 739, NCC: Donation shall

be void if made between persons
who were guilty of adultery or
concubinage at the time of

3. Filipinas-Compania de Seguros de D:
Nava (GR L-20552, May 1966) Laws Governing Insurance
Insurance Law does not contain an
F: express provision as to what the
1. (Before the war) Nava obtained 18 court should do in cases of rescission
Insurance Policies from Filipinas of aninsurance policy[under Sec. 69];
Life Assurance Co. hence, the provision that should
IPs contain a Loan Clause (w/c apply is that embodied in [Art. 1295]
allows I/ed to borrow money from Old CC.
I/er, AFTER 3Y from approval of
policy) Insured is Debtor of the Insurer
Petitioners maintain that the Haw Pia
2. Navaapplied for a P5k loan. case did not settle the question of the
Filipinas Life refused (After war, valuation of premium payments in
Insurance Comm. required Jap. military notes during the war on
insurance companies to withhold life insurance policies bec. the
payments on premiums, made insured is by no means a debtor of
during Jap. occupation, bec. it the insurer, noris the insurer his
shall be subject to currency creditor, considering that there is
adjustments) absolutely no obligation on hispart to
pay the premiums.
3. Nava: COURT: There is no merit in this
Haw Pia v. China Banking: contention. A life insurancepolicy
Establishing and recognizing the involves a contractual oblig. wherein
relationship of D/or and C/or with the insured becomes duty boundto
respect to payments in fiat pay the premiums agreed upon, lest
currency made during the Jap. he runs the risk of having his
occupation on pre-war obligations insurancepolicy lapse if he fails to
- Fil. Life still refused (Not pay such premiums.
applicable when they relate to The fact that the insurance
life-insurance policies) policycontains an automatic
premium payment clause cannot
Filed for rescission of the 18 divest such policy of
policies and for refund of itscontractual nature, for the
premiums paid result of such failure would only
be for him to pay laterthe
CFI: Ruled in favor of Nava premium plus the corresponding
CA: Affirmed. interest depending upon the
Before SC, Filipinas Life argued condition of thepolicy.
that even if Nava is entitled, he is In effect, therefore, the payment
only entitled to recover the cash of premiums on the life
surrender value (He had fully insurance policieswere made by
enjoyed the protection of the a debtor to a creditor.
insurance on his life during the
period of the policies)
I: W/N Nava is only entitled to cash
surrender value - NO
Argument had no basis.
o Considering that our Insurance
Law does not contain an express
provision as to what the court
should do in cases of rescission of
an insurance policy, the provision
that should apply is that
embodied in Ar. 1225 of the old
Civil Code, provides that on
matters which are not governed
by special laws the provisions of
said Code shall supplement its
o Art. 1295, OCC1

Haw Pia case applied:

all payments made in fiat currency
during the Japanese occupation in
relation with any contractual
obligation executed before the war
were valid to all intents and
purposes. - So, all payments made
by Nava, before, during and after the
war were considered valid.

Would Impair Contractual Oblig.

Regulation issued by Insurance
Comm. suspend the effectivity of a
provision or clause embodied in a
valid insurancepolicy would infringe
contractual oblig. (Violates Const.)

4. White Gold Marine Services v. D:

Pioneer Insurance (GR 154514, Test of Insurance
July 2005) The test to determine if a contract is
aninsurance contract or not, depends
F: on:
1. White Gold procured a protection 1. the nature of the promise,
and indemnity coverage for its 2. the act required to be performed,

1 ART. 1295. Rescission makes necessary the return of the things which were the
subject-matter of the contract, with their fruits, and of the price paid, with interest
vessels from Steamship Mutual and
thru Pioneer Insurance and Surety 3. the exact nature of the agreement
Corp. in the light of the occurrence,
When WG failed to fully pay its contingency, or circumstances
accts., SMUA refused to renew its under which the performance
coverage. becomes requisite.
SMUAfiled a case for the
collection of sum of money to Itis not by what it is called.
recover the unpaid balance.
Doing Insurance Business:
2. WGfiled a complaint w/ the See Sec. 2 (b) of Insurance Code
Insurance Comm. against SMUA and
Pioneer for violating the Insurance Mutual Insurance Company;
Code2 (Re: Licensing) Elucidated:
Relatedly, a mutual insurance
IC: Ruled in favor of SMUA and Pioneer company is a cooperative enterprise
SMUA (No need for license since not where themembers are both the
engaged in insurance business) insurer and insured.
SMUA: [We are] merely In it, the members all contribute,
anassociation of vessel owners by asystem of premiums or
who have come together to assessments, to the creation of a
provide mutual protectionagainst fund from which all lossesand
liabilities incidental to liabilities are paid, and where
shipowning (A Protection and the profits are divided among
Indemnity Club) themselves, inproportion to their
Pioneer (Need not obtain another interest.
license asinsurance agent and/or a Additionally, mutual insurance
broker for Steamship Mutual because associations, or clubs,provide 3
Steamship Mutualwas not engaged in types of coverage, namely:
the insurance business) a. protection and indemnity,
-------------------------------------------------- b. war risks, and
------------- c. defense costs.
I: W/N SMUA is engaged in
insurance business - YES Regulation by the State is necessary
A Protection and Indemnity Club" is in an Insurance Contract (Certificate
a form of insurance against third of Authority):
party liability, where Since a contract of insurance
the 3rd party is anyone other than the P involves publicinterest, regulation by
& I Club and the members. the State is necessary. Thus, no
o Specifically, it is a mutual insurer or insurancecompany is
insurance company engaged in allowed to engage in the insurance
the marine insurance business. business without a license or
o It maintains a resident agent in acertificate of authority from the
the Phil. (Pioneer) to solicit Insurance Commission.
insurance and to collect payments
in its behalf.
o Hence, SMUA and Pioneer must
both obtain Cert. of Authority to
engage in insurance business.

. Philamcare Health Services Inc. v. D:

CA (GR 125678, March 2002) Contract of Insurance, Defined

2 a. SMUA: Secs. 186 & 187; Pioneer: Secs. 299, 300 and 301
See Sec. 2 (1), Insurance Code
1. Ernani Trinosapplied for a health Elements of a Contract of Insurance
care coverage with Philam. 1. The insured has an insurable
He answered no to a question interest;
asking if he or his family 2. The insuredis subject to a risk of
members were treated to heart loss by the happening of the
trouble, asthma, diabetes, etc. designated peril;
3. The insurerassumes the risk;
The application was approved for 4. Such assumption of risk is part of a
1 year. general scheme to distribute actual
He was also given hospitalization losses among a large group of persons
benefits and out-patient benefits. bearing a similar risk; and
After the period expired, he was 5. In consideration of the insurer's
promise, the insured pays a premium.
given an expanded coverage for
Insurable Interest
See Sec. 10, Insurance Code
2. (During the period) he suffered
from heart attack andconfined at
MMC. Exception to the Rule that
Concealment Avoid Policy
Wife tried to claim the benefits -
Where matters of opinion or
Philam DENIED(Trinos concealed
his medical history by answering judgment arecalled for, answers
made in good faith and without intent
no to the aforementioned
question). to deceive will not avoid a policy
even though they are untrue.
She had to pay for the hospital
Although false, a representation of
bills (P76k)
the expectation, intention, belief,
opinion, or judgment of the
insured will not avoid the policy if
3. Wifefiled a case for the collection of
there is no actual fraud in
the amount + damages.
inducing the acceptance of the
risk, or its acceptance at a lower
RTC: Ruled in favor of Wife (Awarded
rate of premium, and this is
P76k for the bills and P40 for damages)
likewise the rule although the
CA: Affirmed w/ mod (Deleted damages) statement is material to the risk, if
the statement is obviously of the
Philam argues foregoing character, since in such
It is not an insurance company case the insurer is not justified in
(under by Insurance Comm) relying upon such statement, but
BUT a Health Maintenance Org is obligated to make further
(under DOH) inquiry.
Claimed that its Health Care
Agreementgrants benefit only Rescission of Contract of Insurance
when the insured is alive during When (See Sec. 27, Insurance Code)
the 1-year duration. It
contended that there was no Cancellation of health care
indemnification unlike in agreements as in insurance
insurance contracts. policies require the concurrence
-------------------------------------------------- of the ff. conditions:
------------- 1. Prior notice of cancellation to
I: W/N Philams Health Care insured;
Agreement is an insurance contract - 2. Notice must be based onthe
YES occurrence after effective date of
Philamcare is liable. the policy of one or more of the
Health Care Agreement is an groundsmentioned;
Insurance Contract because all 3. Must be in writing, mailed or
elements are present: delivered to the insured at the
a. Insurable interest (Trinos health) addressshown in the policy; 4. Must
b. Subject (Expenses) state the grounds relied upon
c. Premiums paid provided in Sec. 64, Insurance
d. Rsik-distribution scheme Code and upon request of insured,
e. Insurer assumes risk (Health care to furnish facts on
must pay for expenses) whichcancellation is based.

The health care agreement was in

the nature ofnon-life insurance,
which is primarily a contract of
o Once the memberincurs hospital,
medical or any other expense
arising from sickness, injury or
otherstipulated contingent, the
health care provider must pay for
the same to the extentagreed
upon under the contract.

RE: Concealment
No concealment since the
representation was based on his
opisnion and Philamcare did not
make any further inquiry but just
relied on the opinsion.
o Assuming there was concealment,
Insurer is entitled to rescind, but
no rescission was made.

. Philippine Health Care Providers D:

v. CIR (GR 167330, Sept. 2009) Doing Insurance Business:
See Sec. 2 (b) of Insurance Code
1. CIR wrote a demand letter to Exception to the element of risk(In
PhilHealth(for the payment of doing insurance business):
deficiency taxes). Principal object and purpose test:
Doc. Stamp Tax was imposed on provides that if the assumption of
PhilHealths mems (pursuant to risk and indemnification of loss are
Sec. 185, 1997 Tax Code) the principal object and purpose
Sec. 185: On all policies of of the org. (not merely incidental to
insurance or obligations made by it), then it is in the business of
corps. transacting in the business insurance.
of insurance must pay a DST of o If merely incidental=>Not
50c on each P4 of the premium insurance business

It is not an insurance company but
merely a Health Maintenance Org.
(So, not subject to DST)
Due to CIRs inaction, it brought the
case to CTA.

CTA: Cancelled DST payment

CA: Ruled in favor of PhilHealth
(Agreement was in the nature of a non-
life insurance - subj. to DST)
Ruling: Affirmed CA
I: W/N PhilHealth Providers is an
insurance company - NO
PhilHealth is NOT an insurance
company (So, not subj. to DST).
o It provides preventive, diagnostic,
and curative medical services for
its enrolled mems. (who pay
annual membership fees)

o Medical services will be

dispensed to mems by accredited
practitioners or hospitals, w/c are
then paid by PhilHealth.

o Principal object and purpose

test: provides that if the
assumption of risk and
indemnification of loss are the
principal object and purpose of
the org. (not merely incidental to
it), then it is in the business of

PhilHealth is merely a health care
provider whose primary purpose is
to provide medical services to its
subscribers by providing them w/
physicians and hospital services at a
lower price.

The incidental presence of risk is

not sufficient to make it an insurance

. Rizal Surety and Insurance Co. v. D:

CA(GR 112360, July 2000) Contract of Adhesion
Art. 1377, CC: The interpretation of
F: obscure words or stipulations in a
1. Rizal Surety issued a fire insurance contractshall not favor the party who
policy on bldgs. owned by Transworld caused the obscurity
Knitting Mills.
It covered property stored in the Landicho v. GSIS: The 'terms in
premises occupied by them an insurance policy, which are
forming part of the bldg.. situated ambiguous,equivocal, or
w/in own compd. uncertain x x x are to be
It includes a 4-span bldg. construed strictly and most
(containing fun and amusement strongly against the insurer, and
machines and spare parts) liberally in favor of the insured so
as to effect thedominant purpose
2. A fire broke out partly damaging the of indemnity or payment to the
4-span bldg. (the 2-storey bldg., insured, especially where
allegedly called its annex, was also forfeiture is involved.
damaged) o Reason:
Transworld claimed for a. Insured usually has no
insurance (annex an integral part voice in the selection or
of the 4-span bldg) arrangement of the
wordsemployed; and
Rizal Suretyargues that the fire
insurance covers only the 4-span b. Language of the
bldg.. (NOT the 2-storey annex) contract is selected by
experts and legal
TC: Ruled in favor of Transworld advisersof the insurance
CA: Affirmed w/ Mod. (To include company.
another insurance co.)
Insurance Co. v. Vda De
I:W/N the 2-storey annex is included Songco: This rigid application of
in the fire insurance policy - the rule on ambiguities has
YES(Coverage includes the 2-storey become necessary inview of
annex) current business practices.
o Nowadays monopolies,
H: cartels and concentration
Policy includes the 2-storey bldg. of capital (endowed
The policy did not limit its coverage withoverwhelming economic
to the 4-span bldg power) manage to impose
Stipulation under the policy upon parties dealingwith them
includes: cunningly prepared
o Areas occupied by 'agreements' that the weaker
Transworld; and party may notchange one,
o Areas forming part of the
o [Weaker partys] participation
bldg. (including the 2-storey
bldg.) in the 'agreement' being
reduced to thealternative to
2-storey bldg. was NOT merely an 'take it or leave it'
'contractsby adherence', in
contrast tothose entered
Adjusters and Surveyors Co.
intoby parties bargaining on
even attested (in a letter) that it
an equal footing.
was adjoined and interconnected
w/ the 1st span of the area and so
o [Contracts of adhesion],of
it forms an integral part of the
which policiesof insurance
and international bills of
lading are prime example,call
2-storey bldg. also already existing
for greater strictness and
when the insurance was constituted.
vigilance on the part of courts
If it was not included, it should of justice with aview to
have been specifically stated in protecting the weaker party
the policy. from abuses and imposition,
andprevent their becoming
RE: Interpretation of Contracts traps for the unwary.
Bec. of the doubt in what portions of
the bldg. is insured, Court brought
up Art. 1377, CC.

o The Fire Insurance Policy
Contract shall be resolved against
Rizal Surety (whose lawyer/ mngr.
drafted the contract)

o Reason: See cases in doctrine

. Blue Cross Health Care v. D:
Olivares (GR 169737, Feb. 2008) Contract of Adhesion
F: Citing Philamcare 2002 doctrine:
1. Olivaresapplied for a health care Health care agreement is in the
program w/ Blue Cross (covering Oct. nature of a non-life insurance.
2002-2003) Rule in insurance
All amts. were paid in full contracts:When the terms
Agreement stipulated that contain limitations on liability =
ailments due to pre-existing they should be construed strictly
conditions were excluded against the insurer.
from the coverage
These are contracts of adhesion
2. (Less than 2 mos. after) She suffered a the terms of which must be
strokeand was admitted to Medical City interpreted and enforced strictly
(one of the hospitals accredited by Blue against the insurer which
Cross) prepared the contract. (This
Blue Cross refused to pay the doctrine is equally applicable to
bills. health care agreements)
Sps. Olivares were prompted to
pay so they filed a case against Limitations of liability(on the part of
Blue Cross the insurer or health care provider)
must be construed in such a way
I: W/N Olivares is excluded from the as to preclude it from evading its
coverage of the health care obligations.
agreement - NO Accordingly, they should be
Blue Cross was NOT able to prove scrutinized by the courts with
that the stroke was caused by a pre- extreme jealousy and care and
existing condition. with a jaundiced eye

Merely speculated that the

doctors report would be adverse
to that of Olivares (Since Olivares
refused to allow her Dr. to
present her reportinvoking
physician-patient privilege) - A
disputable presumption under
Rule 131, RoC

RE: Interpretation of Contracts

Insurance policy must be construed
strictly against the Insurer (See
. Fortune Insurance and Surety Co. D:
v. CA (GR 115278, May 1995) Contract of Adhesion (Rule NOT
F: applied when there is no ambiguity
1. Producers Bankobtained a Money, in interpretation)
Security, and Payroll Robbery policy A contract of insurance is a
from Fortune Insurance contract of adhesion, thus any
ambiguity should be resolved strictly
2. An armored car of Producers Bank against the insurer or construed
was robbed (while in the process of liberally in favor of the insured.
transferring cash of P725k under Limitations of liability should
custody of its teller) - while in Taft Ave. be regarded with extremejealousy
Driver and the guard (along w/ some and must be construedin such a
others) were charged w/ violation way, as to prevent the insurer
ofAnti-Highway Robbery Law - an from non-compliancewith its
inside job obligation.

2. PB made demands for Fortune to pay

the amt. of loss
BUT Fortune refused since the loss is
EXCLUDED from the coverage of the
insurance policy w/c states:
(b) any loss caused by any
dishonest, fraudulent or criminal
act of the insured or any officer,
employee, partner, director, trustee
or authorized representative of the
Insured whether acting alone or in
conjunction with others

Driver and guardnot its officer,
employee, trustee or authorized
representative at the time of the
o Driver (assigned by PRC
Management Systems with
Producers by virtue of an
o Guard (assigned by Unicorn
Security Services, Inc. to
Producers by virtue of a contract
of Security Service)
TC: In favor of PB
CA: Affirmed

I: W/N Fortune is liable - NO

RE: Interpretation of Contracts

Theft / Robbery Insurance (entered
by parties) is a Casualty Insurance3
IC contains no other provisions

3 Sec. 174. Casualty insurance is insurance covering loss or liability arising from
accident or mishap, excluding certain types of loss which by law or custom are
considered as falling exclusively within the scope of insurance such as fire or
applicable to casualty insurance
or to theft/ robbery insurance in
particular - So, rights and obligs.
determined by the contract of

In theft, robbery insurance, the

opportunity to defraud the
insurer (the moral hazard) is so
greatthat insurers have found it
necessary to fill up their policies
w/ countless restrictions - to
reduce the hazard.

A contract of insurance is a
contract of adhesion (See

However, if the terms of the

contract are clear and
unambiguous, there is no room
for construction and such terms
cannot be enlarged or diminished
by judicial construction.

The term employee and
authorized rep should be given the
meaning as understood in common
Driver and Sec. guard are
considered authorized rep. of
PB(bec. they were entrusted w/
the duty to safely transfer the
money) - So, w/in the
contemplation of the general
exception clause.

It is the intention of Fortuneto

exclude from protection coverage
losses arising from dishonest,
fraudulent, or criminal acts of
persons granted or having
unrestricted access to Producers'
money or payroll

0. Gulf Resorts v. Phil. Charter D:

Insurance Corp (GR 155167, May Contract of Adhesion (Rule NOT
It includes, but is not limited to, employer's liability insurance, public liability
insurance, motor vehicle liability insurance, plate glass insurance, burglary and
theft insurance, personal accident and health insurance as written by non-life
insurance companies, and other substantially similar kinds of insurance.
F: applied when insured knows the
1. Gulf Resorts is the owner of the terms of the contract)
Plaza Resort(La Union) A contract of adhesion is one
It had its properties in the resort wherein a party, usually a
insured originally w/American corporation, prepares the
Home Assurance Company stipulations in the contract, while the
(AHAC). other party merely affixes his
o (In the first 4 policies issued) the signature or his "adhesion" thereto.
risks of loss from earthquake Courts have held that in these
shock was extendedonly to GRs contracts, parties do not bargain
2 swimming pools. on equal footing (weaker party's
participation reduced to the
GR agreed to insure with Phil alternative to take it or leave it.
Charter Insurancethe properties Thus, these contracts are viewed
covered by the AHACpolicy(Provided as traps for the weaker party
that the policy wording and rates in whom the courts of justice must
said policy be copied in the policy to protect)- SO, resolved against
be issued by Phil Charter). insurer

2. Phil Charter issued a policy to When to apply the rule on adhesion:

GR(for P10.7M) Only when the contract is one-sided
Total premium:P45k. and weaker party was left at the
GRpaid only P393 as premium mercy of thedrafter of the contract.
against earthquake shock (ES).
When NOT to apply the rule on
3. Earthquake struck Luzon and affected adhesion
GRs properties. When the parties are completely
GR claimed for insurance. aware of the provisions of the
contract and had a share in drafting
PCI denied claim(Policy only
the same.
covers the2 swimming pools of
the resort).

TC: Ruled in favor of PCI

Insurance Contracts are contracts
of adhesion.
If the language used is
ambiguous, it shall be resolved
against the party responsible ie.
the insurance co. w/c prepared
the contract.
In this case,

I: W/N the policy covers only the 2

swimming pools - YES
Insurance contracts are contracts
of adhesion (See doctrine)
HOWEVER, the Court did NOT
apply the rule on contracts of
adhesion (to interpret strictly
against the insurer) bec.
GRcannot claim that it did not
know the provisions of the policy
- GR was the one who asked PCI
to copy verbatim the provisions of
its insurance policy w/ AHAC.

AHACpolicy only extends to

the 2 swimming pools.
. Eternal Gardens Memorial v. D:
Philamlife Insurance (GR 166245, Contract of Adhesion
April 2008) A contract of insurance is a
F: contract of adhesion, thus any
1. PhilamlifeInsuranceentered into a ambiguity should be resolved strictly
Creditor Group Life Policy with against the insurer or construed
EternalGardens Memorial Park liberally in favor of the insured
Clients of Eternal(who purchased Insurance contracts arewholly
burial lots oninstallment prepared by the insurer with vast
basis)would be insured amounts of experience in theindustry
byPhilamlife. purposefully used to its advantage.
More often than not,
Eternal was required underthe insurancecontracts are contracts
policy to submit: of adhesion containing technical
o A list of all new lot terms andconditions of the
purchasers, industry, confusing if at all
o A copy of the application of understandable to laypersons,that
eachpurchaser and are imposed on those who wish to
o Amts of unpaid balances of all avail of insurance.
those insured.
As such,insurance contracts are
2. Eternal filed a claim imbued with public interest
w/Philamlife[when John Chuang, one of that must be consideredwhenever
the purchasers in the list, died butthe the rights and obligations of the
company denied the claim - alleging insurer and the insured are to
that no application for group bedelineated.
insurance wassubmitted prior to o Hence, in order to protect the
Chuangs death] interest of insurance
3. Problem arise in the ambiguity of the companies must be obligated
2 sentences in a provision in the policy to act with haste upon
(Effective date of benefit clause): insuranceapplications, to
- The insurance of any eligible Lot either deny or approve the
Purchaser shall be effective on the same, or otherwise be bound
date he contracts a loan with the tohonor the application as a
Assured. However, there shall be no valid, binding, and effective
insurance if the application of the Lot insurance contract
Purchaser is not approved by the
1st clause: Insurance coverage
of Eternal mems. effective
upon contracting of loan.

2nd clause: Requires Philamlife

to approve the insurance
contract before it becomes

I: To whom shall the contract be

interpreted in favor of - Eternal
(against Philamlife)
Insurance contract is a contract of
adhesion (See doctrine)

The rule applies and the vague
provision shall be interpreted in
favor of the Eternal (insured) - That
upon purchase of memorial lots, an
insurance is already created.
2nd sentence is a resolutory
condition w/c would lead to the
cessation of the insurance
. Manila Bankers Life Insurance v. D:
Aban (GR 175666, July 2013) Contract of Adhesion
F: A contract of insurance is a
1. Delia Sotero availed a life insurance contract of adhesion, thus any
policy w/ Manila Bankers (designating ambiguity should be resolved strictly
her niece as beneficiary) against the insurer or construed
When the insurance policy had been liberally in favor of the insured (to
in force for 2Y and 7M, Sotero died. safeguard the latters interest)
Niecefiled a claim for the insurance
proceeds Insurers may not be allowed to
delay the payment of claims by
2. Manila Bankers conducted an filingfrivolous cases in court,
investigation and discovered the ff: hoping that the inevitable may be
a. Sotero did not personally apply put off for years (or even
she was illiterate decades) by the pendency of
b. Sotero was sickly since 1990 these unnecessary court cases.
c. Sotero did not have the financial
capability to pay the premiums Inthe meantime, they benefit
d. Sotero did not sign the July 1993 from collecting the interest
application and/or returns onboth the
e. Niecewas the one who filed the premiums previously paid by the
application and designated insured and the
herself as beneficiary. insuranceproceeds which should
otherwise go to their
3. Manila Bankersdenied the claimand beneficiaries.
premiums refunded.
One year later MBaction was filed The business ofinsurance is a
for rescission/annulment of the highly regulated commercial
policy(There was fraud, concealment, activity in the country, and is
and/or misrepresentation, rendering imbued with public interest.
the insurance contract voidable)
o MB claims that their insurance
agent connived w/ the Niece
(cousin of her husband) in
committing the fraud.

Problem of interpretation arose in

applying Sec. 484
o MB claims that Sec. 48 does not
apply bec.
o Contract was entered thru
o Relied on results of
investigation after after the
claim for insurance proceeds
were filed.

I: W/N the insurance contract shall

be rescinded - NO
Court dismissed the Results and
conclusions(Unilaterally by MB)
after the claim was filed= Self-
serving and may not form the basis of
a cause of action given Sec. 48

Life insurance policies that pass

the statutory two-year period are
essentially treated as legitimate and
beyond question
Insurance contracts are
contracts of adhesion- See

13.Verendia v. CA (GR 75605, Jan. D:
1993) Contract of Indemnity
F: An insurance contract is the law
1. Rafael Verendia's residential between the parties.
building obtained a fire insurance Its terms and conditions
policy w/ Fidelity and Surety Insurance constitute the measure of the
Company, Country Bankers Insurance insurer's liability and compliance
and Development Insurance (Monte de w/ such terms and conditions is a
Piedad & Savings Bank as beneficiary) condition precedent to the
insured's right to recovery from

4 Sec. 48:Whenever a right to rescind a contract of insurance is given to the

insurerby any provision of this chapter, such right must be exercisedprevious to
the commencement of an action on the contract.

After a policy of life insurance made payable on the death of the insuredshall
have been in force during the lifetime of the insured for a period of two
years from the date of its issue or of its last reinstatement, the insurer
cannot prove that the policy is void ab initio or is rescindible by reason of the
fraudulent concealment or misrepresentation of the insured or his agent.

5Incontestability Clause: a provision in law that after a policy of lifeinsurance

made payable on the death of the insured shall have been inforce during the lifetime
of the insured for a period of two (2) years from thedate of its issue or of its last
reinstatement, the insurer cannot prove thatthe policy is void ab initio or is
rescindible by reason of fraudulentconcealment or misrepresentation of the insured
or his agent.
2. Sometime thereafter: The building the insurer
was completely destroyed by fire
Fidelity refused the claim (There As it is also a contract of
was a misrepresentation in the adhesion, an insurance contract
contract since the Lessee was not should be liberally construed in
Roberto Garcia but Marcelo Garcia) favor of the insured and strictly
against the insurer company
TC: Ruled in favor of Fidelity which usually prepares it
CA: Reversed

I: W/N Verendia can claim under the

insurance policy NO
Verendia failed to live by the terms
of the policy (Specifically Sec. 13:
that all benefits under the policy
shall be forfeited "If the claim be in
any respect fraudulent, or if any false
declaration be made or used in
support thereof, 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".

Verendia used a false lease contract
to support his claim under Fire
Insurance Policy.

Worse, by presenting a false lease

contract, Verendia, reprehensibly
disregarded the principle that
insurance contracts are uberrimae
fidae and demand the most abundant
good faith
14. Gulf Resorts v. PCIC, supra D:
H: An insurance premium is the
In the subject policy, no premium consideration paid an insurer for
payments were made with regard to undertaking to indemnify the insured
earthquake shock coverage, except against a specified peril.
on the two swimming pools. In fire, casualty, and marine
There is no mention of any insurance, the premium payable
premium payable for the other becomes a debt as soon as the
resort properties with regard to risk attaches
earthquake shock.
15. Philamlife Health Systems v. CA, D:
supra Premium
Athough false, a representation of
the expectation, intention, belief,
opinion, or judgment of the insured
will not avoid the policy 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, if the statement
is obviously of the foregoing
character, since in such case the
insurer is not justified in relying upon
such statement, but is obligated to
make further inquiry.

16. Manila Mahogany Manufacturing D:

Exceptions to the Subrogation Rule
Corp. v. CA (GR L-52756, Oct. 1987)

18. Federal Express Corp. v. American D:
Exceptions to the Subrogation Rule
Home Assurance (GR 150094, Aug.