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2. eternal gardens VS Philam 551 SCRA 1


December 10, 1980: Philippine American Life Insurance Company (Philamlife)

entered into an agreement denominated as Creditor Group Life Policy No. P-19202
with Eternal Gardens Memorial Park Corporation (Eternal)
Under the policy (renewable annually), the clients of Eternal who
purchased burial lots from it on installment basis would be insured by Philamlife
amount of insurance coverage depended upon the existing
Eternal complied by submitting a letter dated December 29, 1982, a list of
insurable balances of its lot buyers for October 1982 which includes John Chuang
which was stamped as received by Philam Life
August 2, 1984, Chuang died with a balance of 100,000 php
April 25, 1986: Philamlife had not furnished Eternal with any reply on its
insurance claim so its demanded its claim
According to Philam Life, since the application was submitted only on
November 15, 1984, after his death, Mr. John Uy Chuang was not covered under
the Policy since his application was not approved. Moreover, the acceptance of
the premiums are only in trust for and not a sign of approval.
RTC: favored Eternal
CA: Reversed RTC
ISSUE: W/N Philam's inaction or non-approval meant the perfection of the insurance

HELD: YES. CA reversed

construed in favor of the insured and in favor of the effectivity of the
insurance contract
Upon a partys purchase of a memorial lot on installment from Eternal, an
insurance contract covering the lot purchaser is created and the same is
effective, valid, and binding until terminated by Philamlife by disapproving the
insurance application
Moreover, the mere inaction of the insurer on the insurance application must
not work to prejudice the insured
The termination of the insurance contract by the insurer must be explicit and

3. philhealth provider VS CIR 600 SCRA 413

Philippine Health Care Providers, Inc. is a domestic corporation whose primary
purpose is "[t]o establish, maintain, conduct and operate a prepaid group practice
health care delivery system or a health maintenance organization to take care of
the sick and disabled persons enrolled in the health care plan and to provide for
the administrative, legal, and financial responsibilities of the organization."
Individuals enrolled in its health care programs pay an annual membership fee
and are entitled to various preventive, diagnostic and curative medical services
provided by its duly licensed physicians, specialists and other professional
technical staff participating in the group practice health delivery system at a
hospital or clinic owned, operated or accredited by it.
January 27, 2000: Commissioner of Internal Revenue (CIR) sent petitioner a
formal demand letter and the corresponding assessment notices demanding the
payment of deficiency taxes, including surcharges and interest, for the taxable
years 1996 and 1997 in the total amount of P224,702,641.18
Petitioner protested the assessment in a letter dated February 23,
CIR did not act on the protest, petitioner filed a petition for review in
the Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and
DST assessments.
to pay VAT
CIR: health care agreement was a contract of insurance subject to DST under
Section 185 of the 1997 Tax Code
CA: health care agreement was in the nature of a non-life insurance contract
subject to DST
Court Affirmed CA
1. W/N the Philippine Health Care Providers, Inc (HMO) was engaged in the
business of insurance during the pertinent taxable years - NO
2. W/N the Philippine Health Care Providers, Inc enters into an insurance
contract - NO

HELD: motion for reconsideration is GRANTED

1. NO

P.D. 612 Insurance Code

Sec. 2 (2)
(2) The term "doing an insurance business" or "transacting an insurance business",
within the meaning of this Code, shall include:

(a) making or proposing to make, as insurer, any insurance contract;

(b) making or proposing to make, as surety, any contract of suretyship as a vocation
and not as merely incidental to any other legitimate business or activity of the

(c) doing any kind of business, including a reinsurance business, specifically

recognized as constituting the doing of an insurance business within the meaning of
this Code;

(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.

In the application of the provisions of this Code the fact that no profit is derived
from the making of insurance contracts, agreements or transactions or that no
separate or direct consideration is received therefor, shall not be deemed
conclusive to show that the making thereof does not constitute the doing or
transacting of an insurance business.
o no profit is derived from the making of insurance contracts,
agreements or transactions or that no separate or direct consideration is received
therefore, shall not be deemed conclusive to show that the making thereof does
not constitute the doing or transacting of an insurance business
2. NO
basic distinction between medical service corporations and ordinary health
and accident insurers is that the former undertake to provide prepaid medical
services through participating physicians, thus relieving subscribers of any further
financial burden, while the latter only undertake to indemnify an insured for
medical expenses up to, but not beyond, the schedule of rates contained in the
A participating provider of health care services is one who agrees in writing to
render health care services to or for persons covered by a contract issued by
health service corporation in return for which the health service corporation
agrees to make payment directly to the participating provider
any indemnification resulting from the payment for services rendered
in case of emergency by non-participating health providers would still be
incidental to petitioners purpose of providing and arranging for health care
services and does not transform it into an insurer.
As an HMO, it is its obligation to maintain the good health of its members
its undertaking under its agreements is not to indemnify its members
against any loss or damage arising from a medical condition but, on the contrary,
to provide the health and medical services needed to prevent such loss or
Overall, petitioner appears to provide insurance-type benefits to its members
(with respect to its curative medical services), but these are incidental to the
principal activity of providing them medical care. The "insurance-like" aspect of
petitioners business is miniscule compared to its noninsurance activities.
Therefore, since it substantially provides health care services rather than
insurance services, it cannot be considered as being in the insurance business.
principal purpose test
purpose of determining what "doing an insurance business" means, we
have to scrutinize the operations of the business as a whole and not its mere
letter dated September 3, 2000, the Insurance Commissioner confirmed that
petitioner is not engaged in the insurance business. This determination of the
commissioner must be accorded great weight
Section 2 (1) of the Insurance Code defines a contract of insurance as an
agreement whereby one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event. An
insurance contract exists where the following elements concur: - NOT present
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designed peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses
among a large group of persons bearing a similar risk and
5. In consideration of the insurers promise, the insured pays a premium.
no indemnity
member can take advantage of the bulk of the benefits anytime even
in the absence of any peril, loss or damage on his or her part.
assumption of the expense by petitioner is not confined to the
happening of a contingency but includes incidents even in the absence of illness
or injury
Since indemnity of the insured was not the focal point of the
agreement but the extension of medical services to the member at an affordable
cost, it did not partake of the nature of a contract of insurance
HMO, undertakes a business risk when it offers to provide health services. But
it is not the risk of the type peculiar only to insurance companies. Insurance risk,
also known as actuarial risk, is the risk that the cost of insurance claims might be
higher than the premiums paid. The amount of premium is calculated on the basis
of assumptions made relative to the insured.
In our jurisdiction, a commentator of our insurance laws has pointed out that,
even if a contract contains all the elements of an insurance contract, if its primary
purpose is the rendering of service, it is not a contract of insurance. The primary
purpose of the parties in making the contract may negate the existence of an
insurance contract.
health care agreements are clearly not within the ambit of Section 185 of the
NIRC and there was never any legislative intent to impose the same on HMOs

4. Insular v Ebrado G.R. No. L-44059 October 28, 1977

J. Martin:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00
with a rider for Accidental Death. He designated Carponia T. Ebrado as the
revocable beneficiary in his policy. He referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was
made liable to pay the coverage in the total amount of P11,745.73, representing
the face value of the policy in the amount of P5,882.00 plus the additional benefits
for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as
the designated beneficiary therein, although she admited that she and the insured
were merely living as husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured.
She asserts that she is the one entitled to the insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who should
be given the proceeds. The court declared Carponia as disqualified.

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

Held: No. Petition

Section 50 of the Insurance Act which provides that "the insurance shall
be applied exclusively to the proper interest of the person in whose name it is
The word "interest" highly suggests that the provision refers only to the "insured"
and not to the beneficiary, since a contract of insurance is personal in character.
Otherwise, the prohibitory laws against illicit relationships especially on property
and descent will be rendered nugatory, as the same could easily be circumvented
by modes of insurance.
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.
And under Article 2012 of the same Code, any person who is forbidden from
receiving any donation under Article 739 cannot be named beneficiary of a fife
insurance policy by the person who cannot make a donation to him. Common-law
spouses are barred from receiving donations from each other.
Article 739 provides that void donations are those made between persons who were
guilty of adultery or concubinage at the time of donation.
There is every reason to hold that the bar in donations between legitimate spouses
and those between illegitimate ones should be enforced in life insurance policies
since the same are based on similar consideration. So long as marriage remains the
threshold of family laws, reason and morality dictate that the impediments imposed
upon married couple should likewise be imposed upon extra-marital relationship.
A conviction for adultery or concubinage isnt required exacted before
the disabilities mentioned in Article 739 may effectuate. The article says that in the
case referred to in No. 1, the action for declaration of nullity may be brought by the
spouse of the donor or donee; and the guilty of the donee may be proved by
preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the offense is
a condition precedent. The law plainly states that the guilt of the party may be
proved in the same acting for declaration of nullity of donation. And, it would be
sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate
children. He was also living in with his common-law wife with whom he has two

5. heirs of loreto maramag VS CA 588 SCRA 744


Loreto Maramag designated as beneficiary his concubine Eva de Guzman

Vicenta Maramag and Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto
Maramag) and his concubine Eva de Guzman Maramag, also suspected in the
killing of Loreto and his illegitimate children are claiming for his insurance.
Vicenta alleges that Eva is disqualified from claiming
RTC: Granted - civil code does NOT apply
CA: dismissed the case for lack of jurisdiction for filing beyond reglementary
ISSUE: W/N Eva can claim even though prohibited under the civil code against

HELD: YES. Petition is DENIED.

Any person who is forbidden from receiving any donation under Article 739
cannot be named beneficiary of a life insurance policy of the person who cannot
make any donation to him
If a concubine is made the beneficiary, it is believed that the insurance
contract will still remain valid, but the indemnity must go to the legal heirs and
not to the concubine, for evidently, what is prohibited under Art. 2012 is the
naming of the improper beneficiary.
SECTION 53. The insurance proceeds shall be applied exclusively to the
proper interest of the person in whose name or for whose benefit it is made
unless otherwise specified in the policy.
GR: only persons entitled to claim the insurance proceeds are either
the insured, if still alive; or the beneficiary, if the insured is already deceased,
upon the maturation of the policy.
EX: situation where the insurance contract was intended to benefit
third persons who are not parties to the same in the form of favorable stipulations
or indemnity. In such a case, third parties may directly sue and claim from the
It is only in cases where the insured has not designated any beneficiary, or
when the designated beneficiary is disqualified by law to receive the proceeds,
that the insurance policy proceeds shall redound to the benefit of the estate of
the insured

6. gaisnao cdo VS insurance co. of N. america


Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans.

while Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing
trademarks owned by Levi Strauss & Co
IMC and LSPI separately obtained from Insurance Company of North
America fire insurance policies for their book debt endorsements related to their
ready-made clothing materials which have been sold or delivered to various
customers and dealers of the Insured anywhere in the Philippines which are
unpaid 45 days after the time of the loss
February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro City,
owned by Gaisano Cagayan, Inc., containing the ready-made clothing materials
sold and delivered by IMC and LSPI was consumed by fire.
February 4, 1992: Insurance Company of North America filed a complaint for
damages against Gaisano Cagayan, Inc. alleges that IMC and LSPI filed their
claims under their respective fire insurance policies which it paid thus it was
subrogated to their rights
Gaisano Cagayan, Inc: not be held liable because it was destroyed due
to fortuities event or force majeure
RTC: IMC and LSPI retained ownership of the delivered goods until fully paid,
it must bear the loss (res perit domino)
CA: Reversed - sales invoices is an exception under Article 1504 (1) of the
Civil Code to res perit domino
ISSUE: W/N Insurance Company of North America can claim against Gaisano
Cagayan for the debt that was isnured

HELD: YES. petition is partly GRANTED. order to pay P535,613 is DELETED

insurance policy is clear that the subject of the insurance is the book debts
and NOT goods sold and delivered to the customers and dealers of the insured
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until
the ownership therein is transferred to the buyer, but when the ownership therein
is transferred to the buyer the goods are at the buyer's risk whether actual
delivery has been made or not, except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the ownership in the goods has been
retained by the seller merely to secure performance by the buyer of his
obligations under the contract, the goods are at the buyer's risk from the time of
such delivery;
IMC and LSPI did not lose complete interest over the goods. They have an
insurable interest until full payment of the value of the delivered goods. Unlike
the civil law concept of res perit domino, where ownership is the basis for
consideration of who bears the risk of loss, in property insurance, one's interest is
not determined by concept of title, but whether insured has substantial economic
interest in the property
Section 13 of our Insurance Code defines insurable interest as "every interest
in property, whether real or personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril might directly damnify the
insured." Parenthetically, under Section 14 of the same Code, an insurable
interest in property may consist in: (a) an existing interest; (b) an inchoate
interest founded on existing interest; or (c) an expectancy, coupled with an
existing interest in that out of which the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction.
it is sufficient that the insured is so situated with reference to the
property that he would be liable to loss should it be injured or destroyed by the
peril against which it is insured
an insurable interest in property does not necessarily imply a property
interest in, or a lien upon, or possession of, the subject
matter of the insurance, and neither the title nor a beneficial interest is
requisite to the existence of such an interest
insurance in this case is not for loss of goods by fire but for petitioner's
accounts with IMC and LSPI that remained unpaid 45 days after the fire
- obligation is pecuniary in nature
obligor should be held exempt from liability when the loss occurs thru a
fortuitous event only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in case of
fortuitous event
Article 1263 of the Civil Code in an obligation to deliver a generic thing, the
loss or destruction of anything of the same kind does not extinguish the
obligation (Genus nunquan perit)
The subrogation receipt, by itself, is sufficient to establish not only the
relationship of respondent as insurer and IMC as the insured, but also the amount
paid to settle the insurance claim
Art. 2207. If the plaintiff's property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
has violated the contract.
As to LSPI, no subrogation receipt was offered in evidence.
Failure to substantiate the claim of subrogation is fatal to petitioner's
case for recovery of the amount of P535,613

7. RCBC VS CA 289 SCRA 292


RCBC Binondo Branch initially granted a credit facility of P30M to Goyu &
Sons, Inc. GOYUs applied again and through Binondo Branch key officer's Uys
and Laos recommendation, RCBCs executive committee increased its credit
facility to P50M to P90M and finally to P117M.
As security, GOYU executed 2 real estate mortgages and 2 chattel
mortgages in favor of RCBC.
GOYU obtained in its name 10 insurance policy on the mortgaged
properties from Malayan Insurance Company, Inc. (MICO). In February 1992, he
was issued 8 insurance policies in favor of RCBC.
April 27, 1992: One of GOYUs factory buildings was burned so he claimed
against MICO for the loss who denied contending that the insurance policies were
either attached pursuant to writs of attachments/garnishments or that creditors
are claiming to have a better right
GOYU filed a complaint for specific performance and damages at the RTC
RCBC, one of GOYUs creditors, also filed with MICO its formal claim over the
proceeds of the insurance policies, but said claims were also denied for the same
reasons that MICO denied GOYUs claims
RTC: Confirmed GOYUs other creditors (Urban Bank, Alfredo Sebastian, and
Philippine Trust Company) obtained their writs of attachment covering an
aggregate amount of P14,938,080.23 and ordered that 10 insurance policies be
deposited with the court minus the said amount so MICO
deposited P50,505,594.60.
Another Garnishment of P8,696,838.75 was handed down
RTC: favored GOYU against MICO for the claim, RCBC for damages and to pay
RCBC its loan
CA: Modified by increasing the damages in favor of GOYU
In G.R. No. 128834, RCBC seeks right to intervene in the action between
Alfredo C. Sebastian (the creditor) and GOYU (the debtor), where the subject
insurance policies were attached in favor of Sebastian
RTC and CA: endorsements do not bear the signature of any officer of GOYU
concluded that the endorsements favoring RCBC as defective.

ISSUE: W/N RCBC as mortgagee, has any right over the insurance policies taken by
GOYU, the mortgagor, in case of the occurrence of loss

mortgagor and a mortgagee have separate and distinct insurable interests in
the same mortgaged property, such that each one of them may insure the same
property for his own sole benefit
although it appears that GOYU obtained the subject insurance policies
naming itself as the sole payee, the intentions of the parties as shown by their
contemporaneous acts, must be given due consideration in order to better serve
the interest of justice and equity
8 endorsement documents were prepared by Alchester in favor of
MICO, a sister company of RCBC
GOYU continued to enjoy the benefits of the credit facilities extended
to it by RCBC.
GOYU is at the very least estopped from assailing their operative
The two courts below erred in failing to see that the promissory notes which
they ruled should be excluded for bearing dates which are after that of the fire,
are mere renewals of previous ones
RCBC has the right to claim the insurance proceeds, in substitution of the
property lost in the fire. Having assigned its rights, GOYU lost its standing as the
beneficiary of the said insurance policies
insurance company to be held liable for unreasonably delaying and
withholding payment of insurance proceeds, the delay must be wanton,
oppressive, or malevolent - not shown
Sebastians right as attaching creditor must yield to the preferential rights of
RCBC over the Malayan insurance policies as first mortgagee.

8. Geagonia v CA G.R. No. 114427 February 6, 1995

Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for
P100,000.00. The 1 year policy and covered thestock trading of dry goods.
The policy noted the requirement that
"3. The insured shall give notice to the Company of any insurance or insurances
already effected, or which may subsequently be effected, covering any of the
property or properties consisting of stocks in trade, goods in process and/or
inventories only hereby insured, and unless notice be given and the particulars of
such insurance or insurances be stated therein or endorsed in this policy pursuant
to Section 50 of the Insurance Code, by or on behalf of the Company before the
occurrence of any loss or damage, all benefits under this policy shall be deemed
forfeited, provided however, that this condition shall not apply when the total
insurance or insurances in force at the time of the loss or damage is not more than
The petitioners stocks were destroyed by fire. He then filed a claim which was
subsequently denied because the petitioners stocks were covered by two other fire
insurance policies for Php 200,000 issued by PFIC. The basis of the private
respondent's denial was the petitioner's alleged violation of Condition 3 of the
Geagonia then filed a complaint against the private respondent in the Insurance
Commission for the recovery of P100,000.00 under fire insurance policy and
damages. He claimed that he knew the existence of the other two policies. But, he
said that he had no knowledge of the provision in the private respondent's policy
requiring him to inform it of the prior policies and this requirement was not
mentioned to him by the private respondent's agent.
The Insurance Commission found that the petitioner did not violate Condition 3 as
he had no knowledge of the existence of the two fire insurance policies obtained
from the PFIC; that it was Cebu Tesing Textiles w/c procured the PFIC policies w/o
informing him or securing his consent; and that Cebu Tesing Textile, as his creditor,
had insurable interest on the stocks.
The Insurance Commission then ordered the respondent company to pay
complainant the sum of P100,000.00 with interest and attorneys fees.
CA reversed the decision of the Insurance Commission because it found that the
petitioner knew of the existence of the two other policies issued by the PFIC.

1. WON the petitioner had not disclosed the two insurance policies when he
obtained the fire insurance and thereby violated Condition 3 of the policy.
2. WON he is prohibited from recovering

Held: Yes. No. Petition Granted

1. The court agreed with the CA that the petitioner knew of the prior policies issued
by the PFIC. His letter of 18 January 1991 to the private respondent conclusively
proves this knowledge. His testimony to the contrary before the Insurance
Commissioner and which the latter relied upon cannot prevail over a
written admission made ante litem motam. It was, indeed, incredible that he did not
know about the prior policies since these policies were not new or original.
2. Stated differently, provisions, conditions or exceptions in policies which tend to
work a forfeiture of insurance policies should be construed most strictly against
those for whose benefits they are inserted, and most favorably toward those against
whom they are intended to operate.
With these principles in mind, Condition 3 of the subject policy is not totally free
from ambiguity and must be meticulously analyzed. Such analysis leads us to
conclude that (a) the prohibition applies only to double insurance, and (b) the nullity
of the policy shall only be to the extent exceeding P200,000.00 of the total policies
Furthermore, by stating within Condition 3 itself that such condition shall not apply
if the total insurance in force at the time of loss does not exceed P200,000.00, the
private respondent was amenable to assume a co-insurer's liability up to a loss not
exceeding P200,000.00. What it had in mind was to discourage over-insurance.
Indeed, the rationale behind the incorporation of "other insurance" clause in fire
policies is to prevent over-insurance and thus avert the perpetration of fraud. When
a property owner obtains insurance policies from two or more insurers in a total
amount that exceeds the property's value, the insured may have an inducement to
destroy the property for the purpose of collecting the insurance. The public as well
as the insurer is interested in preventing a situation in which a fire would be
profitable to the insured.

9. South Sea v CA G.R. No. 102253 June 2, 1995

J. Vitug

Valenzuela Hardwood entered into an agreement with the defendant Seven Brothers
whereby the latter undertook to load the former's 940 lauan logs for shipment to
South Sea insured the logs for P2,000,000.00 in its marine policy. Valenzuela then
gave the check in payment of the premium on the insurance policy to Mr. Victorio
Seven Brothers ship sank resulting in the loss of the logs.
A check for P5,625.00 to cover payment of the premium tendered to the insurer but
was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled
the insurance policy it issued as of the date of inception for non-payment of the
premium due in accordance with Section 77 of the Insurance Code.
Valenzuela demanded from South Sea the payment of the proceeds of the policy but
the latter denied liability under the policy. Plaintiff likewise filed a formal claim
with defendant Seven Brothers Shipping Corporation for the value of the lost logs
but the latter denied the claim.
Valenzuela filed a complaint a complaint for the recovery of the value of lost logs
and freight charges from Seven Brothers Shipping Corporation or from South Sea
Surety and Insurance Company, the insurer.
The trial court rendered judgment in favor of plaintiff Valenzuela. The Court of
Appeals affirmed the judgment only against the insurance corporation and absolved
the shipping entity from liability. The court held that there was a stipulation in the
charter party exempted the ship owner from liability in case of loss.
In the SC petition, petitioner argues that it should have been freed from any liability
to Hardwood. It faults the appellatecourt (a) for having disregarded Section 77 of
the insurance Code and (b) for holding Victorio Chua to have been an authorized
representative of the insurer.

WON Mr. Chua acted as an agent of the surety company or of the insured when he
received the check for insurance premiums.

Held: Agent of the surety. Petition denied.

To determine if there was a valid contract of insurance, it must be determine if the
premium was validly paid to the company or its agents at the time of the loss.
The appellate and trial courts have found that Chua acted as an agent.
South Sea insisted that Chua has been an agent for less than ten years of the
Columbia Insurance Brokers, a different company. Appellant argued that Mr. Chua,
having received the premiums, acted as an agent under Section 301 of the
Insurance Code which provides:
Sec. 301. Any person who for any compensation, commission or other thing of
value, acts, or aids in soliciting, negotiating or procuring the making of any
insurance contract or in placing risk or taking out insurance, on behalf of an insured
other than himself, shall be an insurance broker within the intent of this Code, and
shall thereby become liable to all the duties requirements, liabilities and penalties to
which an insurance broker is subject.
Valenzuela claimed that the second paragraph of Section 306 of the Insurance Code
Sec. 306 Any insurance company which delivers to an insurance agent or insurance
broker a policy or contract of insurance shall be deemed to have authorized such
agent or broker to receive on its behalf payment of any premium which is due on
such policy of contract of insurance at the time of its issuance or delivery or which
becomes due thereon.
Mr. Chua testified that the marine cargo insurance policy logs was by South Sea to
be given to the wood company.
When South Sea delivered to Mr. Chua the marine cargo insurance policy for
Valenzuelas logs, he is deemed to have been authorized by former to receive the
premium which is due on its behalf.
When the logs were lost, the insured had already paid the premium to an agent of
the South Sea Surety and Insurance Co., Inc., which is consequently liable to pay
the insurance proceeds under the policy it issued to the insured.
The court followed the factual evidence of the lower courts and held that they didnt
try questions of fact.

10. Makati Tuscany v CA G.R. No. 95546 November 6, 1992

J. Bellosillo

American International Underwriters issued a policy in favor of Makati Tuscany
Condominium Corporation with a total premium of P466,103.05. The company
issued a replacement policy. Premium was again paid. In 1984, the policy was again
renewed and private respondent issued to petitioner another policy. The petitioner
paid 152,000 pesos then refused to furnish the balance.
The company filed an action to recover the unpaid balance of P314,103.05.
The condominium administration explained that it discontinued the payment of
premiums because the policy did not contain a credit clause in its favor and that the
acceptance of premiums didnt waive any of the company rights to deny liability on
any claim under the policy arising before such payments or after the expiration of
the credit clause of the policy and prior to premium payment, loss wasnt covered.
Petitioner sought for a refund. The trial court dismissed the complaint and
counterclaim owing to the argument that payment of the premiums of the policies
were made during the lifetime or term of said policies, so risk attached under the
The Court of Appeals ordered petitioner to pay the balance of the premiums owing
to the reason that it was part of an indivisible obligation.
Petitioner now asserts that its payment by installment of the premiums for
the insurance policies invalidated them because of the provisions of Sec. 77 of
the Insurance Code disclaiming liability for loss for occurring before payment of

Issue: Whether payment by installment of the premiums due on an insurance policy

invalidates the contract of insurance, in view of Sec. 77 of P.D. 612

Held: Judgment affirmed.

Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing is
exposed to the peril insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been paid, except in the case
of a life or an industrial life policy whenever the grace period provision applies.
Petitioner concluded that there cannot be a perfected contract of insurance upon
mere partial payment of the premiums because under Sec. 77 of
the Insurance Code, no contract of insurance is valid and binding unless the
premium thereof has been paid, notwithstanding any agreement to the contrary. As
a consequence, petitioner seeks a refund of all premium payments made on the
alleged invalid insurance policies.
We hold that the subject policies are valid even if the premiums were paid
on installments. The records clearly show that petitioner and private respondent
intended subject insurance policies to be binding and effective notwithstanding the
staggered payment of the premiums. The initial insurance contract entered into in
1982 was renewed in 1983, then in 1984. In those three (3) years, the insurer
accepted all the installment payments. Such acceptance of payments speaks loudly
of the insurer's intention to honor the policies it issued to petitioner.
Quoting the CA decision:
While the import of Section 77 is that prepayment of premiums is strictly required
as a condition to the validity of the contract, we are not prepared to rule that the
request to make installment payments duly approved by the insurer, would prevent
the entire contract of insurance from going into effect despite payment and
acceptance of the initial premium or first installment. Section 78 of
the Insurance Code in effect allows waiver by the insurer of the condition of
prepayment by making an acknowledgment in the insurance policy of
receipt of premium as conclusive evidence of payment so far as to make
the policy binding despite the fact that premium is actually unpaid. Section
77 merely precludes the parties from stipulating that the policy is valid even if
premiums are not paid, but does not expressly prohibit an agreement granting
credit extension. So is an understanding to allow insured to pay premiums
in installments not so proscribed.
The reliance by petitioner on Arce vs. Capital Surety and Insurance Co. is unavailing
because the facts therein are substantially different from those in the case at bar. In
Arce, no payment was made by the insured at all despite the grace period given.
Here, petitioner paid the initial installment and thereafter made staggered
payments resulting in full payment of the 1982 and 1983 insurance policies. For the
1984 policy, petitioner paid two (2) installments although it refused to pay the
It appearing from the peculiar circumstances that the parties actually intended to
make three (3) insurance contracts valid, effective and binding, petitioner may not
be allowed to renege on its obligation to pay the balance of the premium after the
expiration of the whole term. Moreover, as correctly observed by
the appellate court, where the risk is entire and the contract is indivisible, the
insured is not entitled to a refund of the premiums paid if the insurer was exposed
to the risk insured for any period, however brief or momentary.

11. American Home v Chua G.R. No. 130421. June 28, 1999
C.J. Davide

Chua obtained from American Home a fire insurance covering the stock-in-trade of
his business. The insurance was due to expire on March 25, 1990.
On April 5, 1990, Chua issued a check for P2,983.50 to American Homes agent,
James Uy, as payment for the renewal of the policy. The official receipt was issued
on April 10. In turn, the latter a renewal certificate. A new insurance policy was
issued where petitioner undertook to indemnify respondent for any damage or loss
arising from fire up to P200,000 March 20, 1990 to March 25, 1991.
On April 6, 1990, the business was completely razed by fire. Total loss was
estimated between P4,000,000 and P5,000,000. Respondent filed an insurance
claim with petitioner and four other co-insurers, namely, Pioneer Insurance,
Prudential Guarantee, Filipino Merchants and Domestic Insurance. Petitioner
refused to honor the claim hence, the respondent filed an action in the trial court.
American Home claimed there was no existing contract because respondent did not
pay the premium. Even with a contract, they contended that he was ineligible
bacue of his fraudulent tax returns, his failure to establish the actual loss and his
failure to notify to petitioner of any insurance already effected. The trial court ruled
in favor of respondent because the respondent paid by way of check a day before
the fire occurred and that the other insurance companies promptly paid the claims.
American homes was made to pay 750,000 in damages.
The Court of Appeals found that respondents claim was substantially proved and
petitioners unjustified refusal to pay the claim entitled respondent to the award of
American Home filed the petition reiterating its stand that there was no existing
insurance contract between the parties. It invoked Section 77 of the Insurance
Code, which provides that no policy or contract of insurance issued by an insurance
company is valid and binding unless and until the premium thereof has been paid
and the case of Arce v. Capital Insurance that until the premium is paid there is no

1. Whether there was a valid payment of premium, considering that
respondents check was cashed after the occurrence of the fire
2. Whether respondent violated the policy by his submission of fraudulent
documents and non-disclosure of the other existing insurance contracts
3. Whether respondent is entitled to the award of damages.
Held: Yes. No. Yes, but not all damages valid. Petition granted. Damages modified.

1. The trial court found, as affirmed by the Court of Appeals, that there was a
valid check payment by respondent to petitioner. The court respected this.
The renewal certificate issued to respondent contained the acknowledgment that
premium had been paid.
In the instant case, the best evidence of such authority is the fact that petitioner
accepted the check and issued the official receipt for the payment. It is, as well,
bound by its agents acknowledgment of receipt of payment.
Section 78 of the Insurance Code explicitly provides:
An acknowledgment in a policy or contract of insurance of the receipt of premium is
conclusive evidence of its payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be binding until the
premium is actually paid.
2. Submission of the alleged fraudulent documents pertained to respondents
income tax returns for 1987 to 1989. Respondent, however, presented a BIR
certification that he had paid the proper taxes for the said years. Since this is a
question of fact, the finding is conclusive.
Ordinarily, where the insurance policy specifies as a condition the disclosure of
existing co-insurers, non-disclosure is a violation that entitles the insurer to avoid
the policy. The purpose for the inclusion of this clause is to prevent an increase in
the moral hazard. The relevant provision is Section 75, which provides that:
A policy may declare that a violation of specified provisions thereof shall avoid it,
otherwise the breach of an immaterial provision does not avoid the policy.
Respondent acquired several co-insurers and he failed to disclose this information to
petitioner. Nonetheless, petitioner is estopped from invoking this argument due to
the loss adjusters admission of previous knowledge of the co-insurers.
It cannot be said that petitioner was deceived by respondent by the latters non-
disclosure of the other insurance contracts when petitioner actually had prior
knowledge thereof. The loss adjuster, being an employee of petitioner, is deemed a
representative of the latter whose awareness of the other insurance
contracts binds petitioner.
3. Petitioner is liable to pay the loss. But there is merit in petitioners grievance
against the damages and attorneys fees awarded. There was no basis for an award
for loss of profit. This cannot be shouldered by petitioner whose obligation is limited
to the object of insurance.
There was no fraud to justify moral damages. Exemplary damages cant be awarded
because the defendant never acted in a reckless manner to claim insurance.
Attorneys fees cant be recovered as part of damages because no premium should
be placed on the right to litigate.

12. Malayan Insurance Co., Inc vs Philippines First Insurance Co., Inc
G.R. No. 184300 July 11, 2012
Facts: Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable
Forwarder Services, Inc. (Reputable) had been annually executing a contract of
carriage, whereby the latter undertook to transport and deliver the formers
products to its customers, dealers or salesmen. On November 18, 1993, Wyeth
procured Marine Policy No. MAR 13797 (Marine Policy) from respondent Philippines
First Insurance Co., Inc. (Philippines First) to secure its interest over its own
products. Philippines First thereby insured Wyeths nutritional, pharmaceutical and
other products usual or incidental to the insureds business while the same were
being transported or shipped in the Philippines. The policy covers all risks of direct
physical loss or damage from any external cause, if by land, and provides a limit of
P6,000,000.00 per any one land vehicle. On December 1, 1993, Wyeth executed its
annual contract of carriage with Reputable. It turned out, however, that the contract
was not signed by Wyeths representative/s. Nevertheless, it was admittedly signed
by Reputables representatives, the terms thereof faithfully observed by the parties
and, as previously stated, the same contract of carriage had been annually
executed by the parties every year since 1989. Under the contract, Reputable
undertook to answer for all risks with respect to the goods and shall be liable to the
COMPANY (Wyeth), for the loss, destruction, or damage of the goods/products due
to any and all causes whatsoever, including theft, robbery, flood, storm,
earthquakes, lightning, and other force majeure while the goods/products are in
transit and until actual delivery to the customers, salesmen, and dealers of the
COMPANY. The contract also required Reputable to secure an insurance policy on
Wyeths goods. Thus, on February 11, 1994, Reputable signed a Special Risk
Insurance Policy (SR Policy) with petitioner Malayan for the amount of
P1,000,000.00. On October 6, 1994, during the effectivity of the Marine Policy and
SR Policy, Reputable received from Wyeth 1,000 boxes of Promil infant formula
worth P2,357,582.70 to be delivered by Reputable to Mercury Drug Corporation in
Libis, Quezon City. Unfortunately, on the same date, the truck carrying Wyeths
products was hijacked by about 10 armed men. They threatened to kill the truck
driver and two of his helpers should they refuse to turn over the truck and its
contents to the said highway robbers. The hijacked truck was recovered two weeks
later without its cargo. Malayan questions its liability based on sections 5 and 12 of
the SR Policy.
Issue: Whether or not there is double insurance in this case such that either
Section 5 or Section 12 of the SR Policy may be applied.
Held: No. By the express provision of Section 93 of the Insurance Code, double
insurance exists where the same person is insured by several insurers separately in
respect to the same subject and interest. The requisites in order for double
insurance to arise are as follows:
1. The person insured is the same;
2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.

In the present case, while it is true that the Marine Policy and the SR Policy were
both issued over the same subject matter, i.e. goods belonging to Wyeth, and both
covered the same peril insured against, it is, however, beyond cavil that the said
policies were issued to two different persons or entities. It is undisputed that Wyeth
is the recognized insured of Philippines First under its Marine Policy, while Reputable
is the recognized insured of Malayan under the SR Policy. The fact that Reputable
procured Malayans SR Policy over the goods of Wyeth pursuant merely to the
stipulated requirement under its contract of carriage with the latter does not make
Reputable a mere agent of Wyeth in obtaining the said SR Policy.

The interest of Wyeth over the property subject matter of both insurance contracts
is also different and distinct from that of Reputables. The policy issued by
Philippines First was in consideration of the legal and/or equitable interest of Wyeth
over its own goods. On the other hand, what was issued by Malayan to Reputable
was over the latters insurable interest over the safety of the goods, which may
become the basis of the latters liability in case of loss or damage to the property
and falls within the contemplation of Section 15 of the Insurance Code.
Therefore, even though the two concerned insurance policies were issued over the
same goods and cover the same risk, there arises no double insurance since they
were issued to two different persons/entities having distinct insurable interests.
Necessarily, over insurance by double insurance cannot likewise exist. Hence, as
correctly ruled by the RTC and CA, neither Section 5 nor Section 12 of the SR Policy
can be applied.

13. Pacific Timber v CA G.R. No. L-38613 February 25, 1982

J. De Castro

The plaintiff secured temporary insurance from the defendant for its exportation of
1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from
Quezon Province to Okinawa and Tokyo, Japan.
Workmens Insurance issued a cover note insuring the cargo of the plaintiff subject
to its terms and conditions.
The two marine policies bore the numbers 53 HO 1032 and 53 HO 1033. Policy No.
53 H0 1033 was for 542 pieces of logs equivalent to 499,950 board feet. Policy No.
53 H0 1033 was for 853 pieces of logs equivalent to 695,548 board feet. The total
cargo insured under the two marine policies consisted of 1,395 logs, or
the equivalent of 1,195.498 bd. ft.
After the issuance of the cover note, but before the issuance of the two marine
policies Nos. 53 HO 1032 and 53 HO 1033, some of the logs intended to be exported
were lost during loading operations in the Diapitan Bay.
While the logs were alongside the vessel, bad weather developed resulting in 75
pieces of logs which were rafted together co break loose from each other. 45 pieces
of logs were salvaged, but 30 pieces were verified to have been lost or washed
away as a result of the accident.
Pacific Timber informed Workmens about the loss of 32 pieces of logs during
loading of SS woodlock.
Although dated April 4, 1963, the letter was received in the office of
the defendant only on April 15, 1963. The plaintiff claimed for insurance to the
value of P19,286.79.
Woodmens requested an adjustment company to assess the damage. It submitted
its report, where it found that the loss of 30 pieces of logs is not covered by Policies
Nos. 53 HO 1032 and 1033 but within the 1,250,000 bd. ft. covered by Cover Note
1010 insured for $70,000.00.
The adjustment company submitted a computation of the defendant's probable
liability on the loss sustained by the shipment, in the total amount of P11,042.04.
Woodmens wrote the plaintiff denying the latter's claim on the ground they
defendant's investigation revealed that the entire shipment of logs covered by the
two marine policies were received in good order at their point of destination. It was
further stated that the said loss may be considered as covered under Cover Note
No. 1010 because the said Note had become null and void by virtue of the issuance
of Marine Policy Nos. 53 HO 1032 and 1033.
The denial of the claim by the defendant was brought by the plaintiff to the
attention of the Insurance Commissioner. The Insurance Commissioner ruled in
favor of indemnifying Pacific Timber. The company added that the cover note is null
and void for lack of valuable consideration. The trial court ruled in petitioners favor
while the CA dismissed the case. Hence this appeal.

WON the cover note was null and void for lack of valuable consideration
WON the Insurance company was absolved from responsibility due to unreasonable
delay in giving notice of loss.

Held: No. No. Judgment reversed.

1. The fact that no separate premium was paid on the Cover Note before the loss
occurred does not militate against the validity of the contention even if no such
premium was paid. All Cover Notes do not contain particulars of the shipment that
would serve as basis for the computation of the premiums. Also, no separate
premiums are required to be paid on a Cover Note.
The petitioner paid in full all the premiums, hence there was no account unpaid on
the insurance coverage and the cover note. If the note is to be treated as a
separate policy instead of integrating it to the regular policies, the purpose of the
note would be meaningless. It is a contract, not a mere application for insurance.
It may be true that the marine insurance policies issued were for logs no longer
including those which had been lost during loading operations. This had to be so
because the risk insured against is for loss during transit, because the logs were
safely placed aboard.
The non-payment of premium on the Cover Note is, therefore, no cause for the
petitioner to lose what is due it as if there had been payment of premium, for non-
payment by it was not chargeable against its fault. Had all the logs been lost during
the loading operations, but after the issuance of the Cover Note, liability on the note
would have already arisen even before payment of premium. Otherwise, the note
would serve no practical purpose in the realm of commerce, and is supported by the
doctrine that where a policy is delivered without requiring payment of the premium,
the presumption is that a credit was intended and policy is valid.
2. The defense of delay cant be sustained. The facts show that instead of invoking
the ground of delay in objecting to petitioner's claim of recovery on the cover note,
the insurer never had this in its mind. It has a duty to inquire when the loss took
place, so that it could determine whether delay would be a valid ground of
There was enough time for insurer to determine if petitioner was guilty of delay in
communicating the loss to respondent company. It never did in the Insurance
Commission. Waiver can be raised against it under Section 84 of the Insurance Act.
14. CIR VS lincoln phil 379 SCRA 423

Prior to 1984, Lincoln Philippine Life Insurance Company, Inc. (now called Jardine-
CMA Life Insurance Company, Inc.) used to issue policies called Junior Estate
Builder Policy. A clause therein provides for an automatic increase in the amount of
life insurance coverage upon attainment of a certain age by the insured without the
need of issuing a new policy. The clause was to take effect in the year 1984.
Documentary stamp taxes due on the policy were paid by Lincoln Philippine only on
the initial sum assured.

When the clause became effective in 1984, the Commissioner of Internal Revenue
assessed an additional tax on the increased amount of the coverage of the said
policies. Said tax was to cover the deficiency documentary stamps tax for said year.
The Court of Appeals ruled that there is only one policy and the automatic increase
is not a separate policy; that said increase of coverage is not covered by another
documentary stamp tax.

ISSUE: Whether or not there is only one policy.

HELD: Yes. Section 49, Title VI of the Insurance Code defines an insurance policy as
the written instrument in which a contract of insurance is set forth. Section 50 of the
same Code provides that the policy, which is required to be in printed form, may
contain any word, phrase, clause, mark, sign, symbol, signature, number, or word
necessary to complete the contract of insurance. It is thus clear that any rider,
clause, warranty or endorsement pasted or attached to the policy is considered part
of such policy or contract of insurance.

The subject insurance policy at the time it was issued contained an automatic
increase clause. Although the clause was to take effect only in 1984, it was written
into the policy at the time of its issuance. The distinctive feature of the junior
estate builder policy called the automatic increase clause already formed part
and parcel of the insurance contract, hence, there was no need for an execution of a
separate agreement for the increase in the coverage that took effect in 1984 when
the assured reached a certain age.

The said increase however is imposable with documentary stamp taxes. The original
documentary stamps tax paid by Lincoln Philippine covers the original amount of
the policies without the projected increase. The said increase was already definite at
the time of the issuance of the policy. Thus, 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.
While tax avoidance schemes and arrangements are not prohibited, tax laws cannot
be circumvented in order to evade the payment of just taxes. In the case at bar, to
claim that the increase in the amount insured (by virtue of the automatic increase
clause incorporated into the policy at the time of issuance) should not be included
in the computation of the documentary stamp taxes due on the policy would be a
clear evasion of the law requiring that the tax be computed on the basis of the
amount insured by the policy.

15. Ng v Asian Crusader G.R. No. L-30685 May 30, 1983

J. Escolin:

Kwong Nam applied for a 20-year endowment insurance on his life for the sum of
P20,000.00, with his wife, appellee Ng Gan Zee as beneficiary. On the same date,
Asian Crusader, upon receipt of the required premium from the insured, approved
the application and issued the corresponding policy. Kwong Nam died of cancer of
the liver with metastasis. All premiums had been paid at the time of his death.
Ng Gan Zee presented a claim for payment of the face value of the policy. On the
same date, she submitted the required proof of death of the
insured. Appellant denied the claim on the ground that the answers given by the
insured to the questions in his application for life insurance were untrue.
Appellee brought the matter to the attention of the Insurance Commissioner. The
latter, after conducting an investigation, wrote the appellant that he had found no
material concealment on the part of the insured and that, therefore, appellee should
be paid the full face value of the policy. The company refused to settle its obligation.
Appellant alleged that the insured was guilty of misrepresentation when he
answered "No" to the following question appearing in the application for life
Has any life insurance company ever refused your application for insurance or for
reinstatement of a lapsed policy or offered you a policy different from
that applied for? If, so, name company and date.
The lower court ruled against the company on lack of evidence.
Appellant further maintains that when the insured was examined in connection with
his application for life insurance, he gave the appellant's medical examiner false
and misleading information as to his ailment and previous operation. The company
contended that he was operated on for peptic ulcer 2 years before the policy
was applied for and that he never disclosed such an operation.

Issue: WON Asian Crusader was deceived into entering the contract or in accepting
the risk at the rate of premium agreed upon because of insured's representation?

Held: No. Petition dismissed.

Section 27 of the Insurance Law:
Sec. 27. Such party a contract of insurance must communicate to the other, in good
faith, all facts within his knowledge which are material to the contract, and which
the other has not the means of ascertaining, and as to which he makes no warranty.
"Concealment exists where the assured had knowledge of a fact material to the
risk, and honesty, good faith, and fair dealing requires that he should communicate
it to the assurer, but he designedly and intentionally withholds the same."
It has also been held "that the concealment must, in the absence of inquiries, be
not only material, but fraudulent, or the fact must have been intentionally
Fraudulent intent on the part of the insured must be established to entitle the
insurer to rescind the contract. And as correctly observed by the lower court,
"misrepresentation as a defense of the insurer to avoid liability is an 'affirmative'
defense. The duty to establish such a defense by satisfactory and convincing
evidence rests upon the defendant. The evidence before the Court does not clearly
and satisfactorily establish that defense."
It bears emphasis that Kwong Nam had informed the appellant's medical examiner
of the tumor. His statement that said tumor was "associated with ulcer of the
stomach" should be construed as an expression made in good faith of his belief as
to the nature of his ailment and operation.
While the information communicated was imperfect, the same was sufficient to
have induced appellant to make further inquiries about the ailment and operation of
the insured.
Section 32 of Insurance Law:
Section 32. The right to information of material facts maybe waived either by the
terms of insurance or by neglect to make inquiries as to such facts where they are
distinctly implied in other facts of which information is communicated.
Where a question appears to be not answered at all or to be imperfectly answered,
and the insurers issue a policy without any further inquiry, they waive the
imperfection of the answer and render the omission to answer more fully
The company or its medical examiner did not make any further inquiries on such
matters from the hospital before acting on the application for insurance. The fact of
the matter is that the defendant was too eager to accept the application and
receive the insured's premium. It would be inequitable now to allow
the defendant to avoid liability under the circumstances."

16. Vda Canilang v CA G.R. No. 92492 June 17, 1993

J. Feliciano

Canilang was found to have suffered from sinus tachycardia then bronchitis after
a check-up from his doctor. The next day, he applied for a "non-medical" insurance
policy with respondent Grepalife naming his wife, Thelma Canilang, as his
beneficiary. This was to the value of P19,700.
He died of "congestive heart failure," "anemia," and "chronic anemia." The widow
filed a claim with Great Pacific which the insurer denied on the ground that the
insured had concealed material information from it.
Petitioner then filed a complaint against Great Pacific for recovery of the insurance
proceeds. Petitioner testified that she was not aware of any serious illness suffered
by her late husband and her husband had died because of a kidney disorder. The
doctor who gave the check up stated that he treated the deceased for sinus
tachycardia and "acute bronchitis."
Great Pacific presented a physician who testified that the deceased's
insurance application had been approved on the basis of his medical declaration.
She explained that as a rule, medical examinations are required only in cases where
the applicant has indicated in his application for insurance coverage that he has
previously undergone medical consultation and hospitalization.
The Insurance Commissioner ordered Great Pacific to pay P19,700 plus legal
interest and P2,000.00 as attorney's fees. On appeal by Great Pacific, the Court of
Appeals reversed. It found that the failure of Jaime Canilang to disclose previous
medical consultation and treatment constituted material information which should
have been communicated to Great Pacific to enable the latter to make proper
Hence this petition by the widow.

Issue: Won Canilang was guilty of misrepresentation

Held: Yes. Petition denied.

There was a right of the insurance company to rescind the contract if it was proven
that the insured committed fraud in not affirming that he was treated for heart
condition and other ailments stipulated.
Apart from certifying that he didnt suffer from such a condition, Canilang also failed
to disclose in the that he had twice consulted a doctor who had found him to be
suffering from "sinus tachycardia" and "acute bronchitis."
Under the Insurance Code:
Sec. 26. A neglect to communicate that which a party knows and ought to
communicate, is called a concealment.
Sec. 28. Each party to a contract of insurance must communicate to the other, in
good faith, all factors within his knowledge which are material to the contract and
as to which he makes no warranty, and which the other has not the means of
The information concealed must be information which the concealing party knew
and should have communicated. The test of materiality of such information is
contained in Section 31:
Sec. 31. Materiality is to be determined not by the event, but solely by the probable
and reasonable influence of the facts upon the party to whom the communication is
due, in forming his estimate of the disadvantages of the proposed contract, or in
making his inquiries.
The information which Jaime Canilang failed to disclose was material to the ability of
Great Pacific to estimate the probable risk he presented as a subject of life
insurance. Had he disclosed his visits to his doctor, the diagnosis made and
medicines prescribed by such doctor, in the insurance application, it may be
reasonably assumed that Great Pacific would have made further inquiries and would
have probably refused to issue a non-medical insurance policy.
Materiality relates rather to the "probable and reasonable influence of the facts"
upon the party to whom the communication should have been made, in assessing
the risk involved in making or omitting to make further inquiries and in accepting
the application for insurance; that "probable and reasonable influence of the facts"
concealed must, of course, be determined objectively, by the judge ultimately.
The Insurance Commissioner had also ruled that the failure of Great Pacific to
convey certain information to the insurer was not "intentional" in nature, for the
reason that Canilang believed that he was suffering from minor ailment like
a common cold. Section 27 stated that:
Sec. 27. A concealment whether intentional or unintentional entitles the injured
party to rescind a contract of insurance.
The failure to communicate must have been intentional rather than inadvertent.
Canilang could not have been unaware that his heart beat would at times rise to
high and alarming levels and that he had consulted a doctor twice in the two (2)
months before applying for non-medical insurance. Indeed, the last medical
consultation took place just the day before the insurance application was filed. In all
probability, Jaime Canilang went to visit his doctor precisely because of the ailment.
Canilang's failure to set out answers to some of the questions in the
insurance application constituted concealment.

17. Tan v CA G.R. No. 48049 June 29, 1989

J. Gutierrez Jr.

Tan Lee Siong, father of the petitioners, applied for life insurance in the amount of P
80,000.00 with Philamlife. It was approved. Tan Lee Siong died of hepatoma.
Petitioners then filed a claim for the proceeds. The company denied petitioners'
claim and rescinded the policy by reason of the alleged misrepresentation and
concealment of material facts. The premiums paid on the policy were refunded. The
petitioners filed a complaint in the Insurance Commission. The
latter dismissed the complaint.
The Court of Appeals dismissed ' the petitioners' appeal from the Insurance
Commissioner's decision for lack of merit. Hence, this petition.

WON Philam didnt have the right to rescind the contract of insurance as rescission
must allegedly be done during the lifetime of the insured within two years and prior
to the commencement of action.

Held: No. Petition dismissed.

The Insurance Code states in Section 48:
Whenever a right to rescind a contract of insurance is given to the insurer by any
provision of this chapter, such right must be exercised previous to the
commencement of an action on the contract.
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, 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.
The so-called "incontestability clause" in the second paragraph prevents the insurer
from raising the defenses of false representations insofar as health and previous
diseases are concerned if the insurance has been in force for at least two years
during the insured's lifetime.
The policy was in force for a period of only one year and five months. Considering
that the insured died before the two-year period had lapsed, respondent company is
not, therefore, barred from proving that the policy is void ab initio by reason of the
insured's fraudulent concealment or misrepresentation.
The "incontestability clause" added by the second paragraph of Section 48 is in
force for two years. After this, the defenses of concealment or misrepresentation no
longer lie.
The petitioners argue that no evidence was presented to show that the medical
terms were explained in a layman's language to the insured. They also argue that
no evidence was presented by respondent company to show that the questions
appearing in Part II of the application for insurance were asked, explained to and
understood by the deceased so as to prove concealment on his part. This couldnt
be accepted because the insured signed the form. He affirmed the correctness of all
the entries.
The company records show that the deceased was examined by Dr. Victoriano Lim
and was found to be diabetic and hypertensive. He was also found to have suffered
from hepatoma. Because of the concealment made by the deceased, the company
was thus misled into accepting the risk and approving his application as medically

18. MA. LOURDES S. FLORENDO, Petitioner,



Manuel Florendo filed an application for comprehensive pension plan with respondent
Philam Plans, Inc. (Philam Plans) Manuel signed the application and left to Perla the
task of supplying the information needed in the application. Respondent Ma. Celeste
Abcede, Perlas daughter, signed the application as sales counselor. Philam Plans
issued Pension Plan Agreement to Manuel, with petitioner Ma. Lourdes S. Florendo, his
wife, as beneficiary. In time, Manuel paid his quarterly premiums. Eleven months later,
Manuel died of blood poisoning. Subsequently, Lourdes filed a claim with Philam Plans
for the payment of the benefits under her husbands plan but Philam Plans declined her
claim prompting her to file the present action against the pension plan company before
the Regional Trial Court (RTC) of Quezon City and ruled in favor of Ma. Lourdes.
However, the Court of Appeals then reversed the RTC decision. Hence this appeal.

Whether or not Ma. Lourdes could claim benefits as the beneficiary of her husband
under the insurance plan despite consideration that her husband Manuel concealed the
true condition of his health.


The Supreme Court answers this to the negative and the AFFIRMED in its entirety the
decision of the Court of Appeals.

The comprehensive pension plan that Philam Plans issued contains a one-year
incontestability period. It states:


After this Agreement has remained in force for one (1) year, we can no longer contest
for health reasons any claim for insurance under this Agreement, except for the reason
that installment has not been paid (lapsed), or that you are not insurable at the time you
bought this pension program by reason of age. If this Agreement lapses but is reinstated
afterwards, the one (1) year contestability period shall start again on the date of
approval of your request for reinstatement.

The above incontestability clause precludes the insurer from disowning liability under
the policy it issued on the ground of concealment or misrepresentation regarding the
health of the insured after a year of its issuance.

Since Manuel died on the eleventh month following the issuance of his plan, the one
year incontestability period has not yet set in. Consequently, Philam Plans was not
barred from questioning Lourdes entitlement to the benefits of her husbands pension

19. Loadmasters Customs Services Inc. vs. Glodel Brokerage Corporation Digested


and R&B INSURANCE CORPORATION, / G.R. No. 179446 / January 10, 2011


The case is a petition for review on certiorari under Rule 45 of the Revised Rules of
Court assailing the August 24, 2007 Decision of the Court of Appeals (CA) in CA-G.R. CV No.
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor
of Columbia to insure the shipment of 132 bundles of electric copper cathodes against All Risks.
On August 28, 2001, the cargoes were shipped on board the vessel "Richard Rey" from Isabela,
Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the cargoes
from the pier and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the
services of Loadmasters for the use of its delivery trucks to transport the cargoes to Columbias
warehouses/plants in Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by
its employed drivers and accompanied by its employed truck helpers. Of the six (6) trucks route
to Balagtas, Bulacan, only five (5) reached the destination. One (1) truck, loaded with 11
bundles or 232 pieces of copper cathodes, failed to deliver its cargo.
Later on, the said truck, was recovered but without the copper cathodes. Because of this
incident, Columbia filed with R&B Insurance a claim for insurance indemnity in the amount
ofP1,903,335.39. After the investigation, R&B Insurance paid Columbia the amount
ofP1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and
Glodel before the Regional Trial Court, Branch 14, Manila (RTC), It sought reimbursement of the
amount it had paid to Columbia for the loss of the subject cargo. It claimed that it had been
subrogated "to the right of the consignee to recover from the party/parties who may be held
legally liable for the loss."
On November 19, 2003, the RTC rendered a decision holding Glodel liable for damages
for the loss of the subject cargo and dismissing Loadmasters counterclaim for damages and
attorneys fees against R&B Insurance.
Both R&B Insurance and Glodel appealed the RTC decision to the CA.
On August 24, 2007, the CA rendered that the appellee is an agent of appellant Glodel,
whatever liability the latter owes to appellant R&B Insurance Corporation as insurance
indemnity must likewise be the amount it shall be paid by appellee Loadmasters. Hence,
Loadmasters filed the present petition for review on certiorari.

Whether or not Loadmasters and Glodel are common carriers to determine their liability for the
loss of the subject cargo.

The petition is PARTIALLY GRANTED. Judgment is rendered declaring petitioner Loadmasters

Customs Services, Inc. and respondent Glodel Brokerage Corporation jointly and severally
liable to respondent
Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or
associations engaged in the business of carrying or transporting passenger or goods, or both by
land, water or air for compensation, offering their services to the public. Loadmasters is a
common carrier because it is engaged in the business of transporting goods by land, through its
trucking service. It is a common carrier as distinguished from a private carrier wherein the
carriage is generally undertaken by special agreement and it does not hold itself out to carry
goods for the general public. Glodel is also considered a common carrier within the context of
Article 1732. For as stated and well provided in the case of Schmitz Transport & Brokerage
Corporation v. Transport Venture, Inc., a customs broker is also regarded as a common carrier,
the transportation of goods being an integral part of its business.
Loadmasters and Glodel, being both common carriers, are mandated from the nature of their
business and for reasons of public policy, to observe the extraordinary diligence in the vigilance
over the goods transported by them according to all the circumstances of such case, as
required by Article 1733 of the Civil Code. When the Court speaks of extraordinary diligence, it
is that extreme measure of care and caution which persons of unusual prudence and
circumspection observe for securing and preserving their own property or rights. With respect to
the time frame of this extraordinary responsibility, the Civil Code provides that the exercise of
extraordinary diligence lasts from the time the goods are unconditionally placed in the
possession of, and received by, the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person who has a right to
receive them.
The Court is of the view that both Loadmasters and Glodel are jointly and severally liable to R &
B Insurance for the loss of the subject cargo. Loadmasters claim that it was never privy to the
contract entered into by Glodel with the consignee Columbia or R&B Insurance as subrogee, is
not a valid defense.
For under ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones
own acts or omissions, but also for those of persons for whom one is responsible.
Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.
It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose
employees (truck driver and helper) were instrumental in the hijacking or robbery of the
shipment. As employer, Loadmasters should be made answerable for the damages caused by
its employees who acted within the scope of their assigned task of delivering the goods safely to
the warehouse.
Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to ensure
that Loadmasters would fully comply with the undertaking to safely transport the subject cargo
to the designated destination. Glodel should, therefore, be held liable with Loadmasters. Its
defense of force majeure is unavailing.
For the consequence, Glodel has no one to blame but itself. The Court cannot come to its aid
on equitable grounds. "Equity, which has been aptly described as a justice outside legality, is
applied only in the absence of, and never against, statutory law or judicial rules of
procedure." The Court cannot be a lawyer and take the cudgels for a party who has been at
fault or negligent.

20. FACTS:

June 20, 1993: MSAS Cargo International Limited and/or Associated and/or
Subsidiary Companies (MSAS) procured an "all-risk" marine insurance policy from
ICNA UK Limited of London for wooden work tools and workbenches purchased by
consignee Science Teaching Improvement Project (STIP), Ecotech Center, Sudlon
Lahug, Cebu City.
July 26, 1993: the cargo was received by Aboitiz Shipping Corporation
(Aboitiz) through its duly authorized booking representative, Aboitiz Transport
August 1, 1993: container van was loaded on board MV Super Concarrier I
The vessel left Manila en route to Cebu City
August 3, 1993: shipment arrived in Cebu City
August 5, 1993: Stripping Report, checker noted that the crates were slightly
broken or cracked at the bottom
August 11, 1993: cargo was withdrawn by the representative of the
consignee, Science Teaching Improvement Project (STIP) and delivered to Don
Bosco Technical High School, Punta Princesa, Cebu City
August 13, 1993: Mayo B. Perez, Head of Aboiti received a call from the
receiver Mr. Bernhard Willig that the cargo sustained water damage so he
checked the other cargo but they were dry
In a letter dated August 15, 1993, Willig informed Aboitiz that the damage
was caused by water entering through the broken bottom parts of the crate
Consignee filed a claim against ICNA
CAC reported to ICNA that the shipment was placed outside the
warehouse when it was delivered on July 26, 1993 and it was only on July 31,
1993 when the shipment was stuffed inside another container van for shipment to
Cebu. Weather report shows that the heavy rains on July 28 and 29, 1993 caused
the damages.
Aboitiz refused to settle the claim
ICNA paid the amount of P280,176.92 to consignee and a subrogation receipt
was duly signed by Willig.
ICNA then advised Aboitiz of the receipt signed in its favor but received no
reply so it filed for collection at the RTC.
RTC: against ICNA - subrogation Form is self-serving and has no probative
value since Wellig was not presented to the witness stand
CA: reversed RTC ruling - right of subrogation accrues simply upon payment
by the insurance company of the insurance claim even assuming that it is an
unlicensed foreign corporation
ISSUE: W/N ICNA can claim under the right of subrogation

HELD: YES. CA affirmed.

Only when that foreign corporation is "transacting" or "doing business" in the
country will a license be necessary before it can institute suits. It may, however,
bring suits on isolated business transactions, which is not prohibited under
Philippine law
The policy benefits any subsequent assignee, or holder, including the
consignee, who may file claims on behalf of the assured.
Insurance Code
Sec. 57
Sec. 57. A policy may be so framed that it will inure to the benefit of whomsoever,
during the continuance of the risk, may become the owner of the interest insured.

Civil Code
Art. 2207
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person who has violated the contract. If
the amount paid by the insurance company does not fully cover the injury or loss,
the aggrieved party shall be entitled to recover the deficiency from the person
causing the loss or injury.

This right of subrogation, however, has its limitations.

First, both the insurer and the consignee are bound by the contractual
stipulations under the bill of lading
Second, the insurer can be subrogated only to the rights as the insured
may have against the wrongdoer. If by its own acts after receiving payment from
the insurer, the insured releases the wrongdoer who caused the loss from liability,
the insurer loses its claim against the latter.
Civil Code
Art. 366
Article 366. Within twenty four hours following the receipt of the merchandise, the
claim against the carrier for damages or average which may be found therein upon
opening the packages, may be made, provided that the indications of the damage
or average which give rise to the claim cannot be ascertained from the outside part
of such packages, in which case the claim shall be admitted only at the time of
After the periods mentioned have elapsed, or the transportation charges have been
paid, no claim shall be admitted against the carrier with regard to the condition in
which the goods transported were delivered.
The call was made 2 from delivery, a reasonable period considering that the
goods could not have corroded instantly overnight such that it could only have
sustained the damage during transit.
Civil Code
Art. 1735
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as required in Article 1733.
the shipment delivered to the consignee sustained water damage. We agree
with the findings of the CA that petitioner failed to overturn this presumption