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Perez v CA

Facts: Primitivo Perez had been insured with the BF Lifeman Insurance Corporation. Sometime in 1987, an agent of the
insurance corporation visited Perez in Quezon and convinced him to apply for additional insurance coverage. Virginia A. Perez,
Primitivos wife, paid to the agent. The receipt issued indicated the amount received was a "deposit." Unfortunately, the agent lost
the application form accomplished by Perez and he asked the latter to fill up another application form. The agent sent
the application for additional insurance of Perez to the Quezon office. Such was supposed to be forwarded to the Manila office.
Perez drowned. His application papers for the additional insurance were still with the Quezon. It was only after some time that
the papers were brought to Manila. Without knowing that Perez died, BF Lifeman Insurance Corporation approved
the application and issued the corresponding policy. Petitioner Virginia Perez went to Manila to claim the benefits under the
insurance policies of the deceased. She was paid under the first insurance policy but the insurance company refused to pay the
claim under the additional policy coverage. The insurance company maintained that the insurance had not been perfected at the
time of the death of Primitivo Perez. Consequently, the insurance company refunded the amount paid. BF Lifeman Insurance
Corporation filed a complaint against Virginia Perez seeking the rescission and declaration of nullity of the insurance contract in
question. Petitioner Virginia A. Perez, on the other hand, averred that the deceased had fulfilled all his prestations under the
contract and all the elements of a valid contract are present.
Issue: WON the widow can receive the proceeds of the 2 insurance policy

Held: No. Perezs application was subject to the acceptance of private respondent BF Lifeman Insurance Corporation. The
perfection of the contract of insurance between the deceased and respondent corporation was further conditioned with the
following requisites stated in the application form: there shall be no contract of insurance unless and until a policy is issued on
this application and that the said policy shall not take effect until the premium has been paid and the policy delivered to and
accepted by me/us in person while I/We, am/are in good health. BF Lifeman didnt give its assent when it merely received
the application form and all the requisite supporting papers of the applicant. This happens only when it gives a policy. It is not
disputed, however, that when Primitivo died, his application papers for additional insurance coverage were still with the branch
office of respondent in Quezon. Consequently, there was absolutely no way the acceptance of the application could have been
communicated to the applicant for the latter to accept inasmuch as the applicant at the time was already dead. Petitioner insists
that the condition imposed by BF that a policy must have been delivered to and accepted by the proposed insured in good health
is potestative, being dependent upon the will of the corporation and is therefore void. A potestative condition depends upon the
exclusive will of one of the parties and is considered void. The Civil Code states: When the fulfillment of the condition depends
upon the sole will of the debtor, the conditional obligation shall be void. The following conditions were imposed by the
respondent company for the perfection of the contract of insurance: a policy must have been issued, the premiums paid, and the
policy must have been delivered to and accepted by the applicant while he is in good health. The third condition isnt potestative,
because the health of the applicant at the time of the delivery of the policy is beyond the control or will of the insurance company.
Rather, the condition is a suspensive one whereby the acquisition of rights depends upon the happening of an event which
constitutes the condition. In this case, the suspensive condition was the policy must have been delivered and accepted by
the applicant while he is in good health. There was non-fulfillment of the condition, because the applicant was already dead at the
time the policy was issued. As stated above, a contract of insurance, like other contracts, must be assented to by both parties
either in person or by their agents. So long as an application for insurance has not been either accepted or rejected, it is merely an
offer or proposal to make a contract. The contract, to be binding from the date of application, must have been a completed
contract. The insurance company wasnt negligent because delay in acting on the application does not constitute acceptance even
after payment. The corporation may not be penalized for the delay in the processing of the application papers due to the fact that
process in a week wasnt the usual timeframe in fixing the application. Delay could not be deemed unreasonable so as to
constitute gross negligence.


Facts: Juan B. Dans, together with his wife, his son and daughter-in-law, applied for a loan of P500,000.00 with the Development
Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor, Dans, then 76 years of age, was advised by DBP to
obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was approved by DBP and released. From the proceeds of the loan, DBP
deducted the amount of P1,476.00 as payment for the MRI premium. Dans accomplished and submitted the MRI Application
for Insurance and the Health Statement for DBP MRI Pool. The MRI premium of Dans, less the DBP service fee of 10
percent, was credited by DBP to the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the
credit. Dans died of cardiac arrest. The DBP, upon notice, relayed this information to the DBP MRI Pool. The DBP MRI Pool
notified DBP that Dans was not eligible for MRI coverage, being over the acceptance age limit of 60 years at the time of
application. DBP apprised the wife of Dans of the disapproval of her late husbands MRI application. The DBP offered to
refund the premium of P1,476.00 which the deceased had paid, but Candida Dans refused to accept the same, demanding
payment of the face value of the MRI or an amount equivalent to the loan. She, likewise, refused to accept an ex gratia settlement
of P30,000.00, which the DBP later offered. On February 10, 1989, respondent Estate, through Candida Dans as administratrix,
filed a complaint with the Regional Trial Court, Branch I, Basilan, against DBP and the insurance pool for Collection of Sum of
Money with Damages. Respondent Estate alleged that Dans became insured by the DBP MRI Pool when DBP, with full
knowledge of Dans age at the time of application, required him to apply for MRI, and later collected the insurance premium
1) WON there is a contract made between DBP MRI Pool and the late Juan Dans;
2) Whether or not DBP should be held liable.

1) No. When Dans applied for MRI, he filled up and personally signed a Health Statement for DBP MRI Pool with the
following declaration: I hereby declare and agree that all the statements and answers contained herein are true, complete and
correct to the best of my knowledge and belief and form part of my application for insurance. It is understood and agreed that no
insurance coverage shall be effected unless and until this application is approved and the full premium is paid during my
continued good health. Under the aforementioned provisions, the MRI coverage shall take effect: when the application shall be
approved by the insurance pool and when the full premium is paid during the continued good health of the applicant. These two
conditions, being joined conjunctively, must concur. Undisputably, the power to approve MRI applications is lodged with the
DBP MRI Pool. The pool, however, did not approve the application of Dans. There is also no showing that it accepted the sum
of P1,476.00, which DBP credited to its account with full knowledge that it was payment for Dans premium. There was, as a
result, no perfected contract of insurance; hence, the DBP MRI Pool cannot be held liable on a contract that does not exist.

2) Yes. As an insurance agent, DBP made Dans go through the motion of applying for said insurance, thereby leading him and
his family to believe that they had already fulfilled all the requirements for the MRI and that the issuance of their policy was
forthcoming. Apparently, DBP had full knowledge that Dans application was never going to be approved. The maximum age for
MRI acceptance is 60 years as clearly and specifically provided in Article 1 of the Group Mortgage Redemption Insurance Policy
signed in 1984 by all the insurance companies concerned. Under Article 1987 of the Civil Code of the Philippines, the agent
who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the
limits of his authority without giving such party sufficient notice of his powers. The DBPs liability, however, cannot be for the
entire value of the insurance policy. To assume that were it not for DBPs concealment of the limits of its authority, Dans would
have secured an MRI from another insurance company, and therefore would have been fully insured by the time he died, is
highly speculative. Considering his advanced age, there is no absolute certainty that Dans could obtain an insurance coverage
from another company. It must also be noted that Dans died almost immediately, i.e., on the nineteenth day after applying for the
MRI, and on the twenty-third day from the date of release of his loan.

3. Zenith Insurance Corporation v. Fernandez

FACTS: Private respondent Lawrence Fernandez insured with the insurer his car for "own damage". The car figured in an
accident and suffered actual damages. The insurer offered to pay the claim of Fernandez pursuant to the terms and conditions of
the contract which, the private respondent rejected. After allegedly being given a run around by Zenith for two (2) months,
Fernandez filed a complaint with the Regional Trial Court for sum of money and damages resulting from the refusal of Zenith to
pay the amount claimed. Aside from actual damages and interests, Fernandez also prayed for moral damages in the amount of
P10,000.00, exemplary damages of P5,000.00, attorney's fees of P3,000.00 and litigation expenses of P3,000.00.

ISSUE: WON the insurer is liable to the insured for moral and exemplary damages

In case of unreasonable delay in the payment of the proceeds of an insurance policy, the damages that may be awarded are: 1)
attorney's fees; 2) other expenses incurred by the insured person by reason of such unreasonable denial or withholding of
payment; 3) interest at twice the ceiling prescribed by the Monetary Board of the amount of the claim due the injured; and 4) the
amount of the claim. In awarding moral damages in case of breach of contract, there must be a showing that the breach was
wanton and deliberately injurious or the one responsible acted fraudently or in bad faith. The act of petitioner of delaying
payment for two months cannot be considered as so wanton or malevolent to justify an award for moral damages, taking into
consideration the actual damage. The reason for petitioner's failure to indemnify private respondent within the two-month period
was that the parties could not come to an agreement as regards the amount of the actual damage on the car. On the other hand,
exemplary or corrective damages are imposed by way of example or correction for the public good. Jurisprudence has also
declared that exemplary damages cannot be awarded as the insurance company had not acted in wanton, oppressive or
malevolent manner.

4. Insular v Ebrado

Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy with a rider for Accidental Death. He designated Carponia
Ebrado and referred her as his wife as the revocable beneficiary in his policy. 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.

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. 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 made. 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. 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. It would be sufficient if evidence

5. Gulf Resorts Inc. V. Philippine Charter Insurance Corp.

Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance Company which includes loss or damage to
shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake. An earthquake
struck Central Luzon and Northern Luzon so the properties and 2 swimming pools in its Agoo Playa Resort were damaged.
Gulf's claim was denied on the ground that its insurance policy only afforded earthquake shock coverage to the two swimming
pools of the resort. Petitioner contends that pursuant to this rider, no qualifications were placed on the scope of the earthquake
shock coverage. Thus, the policy extended earthquake shock coverage to all of the insured properties.

ISSUE: WON Gulf can claim for its properties aside from the 2 swimming pools

HELD: YES. It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with
each other. All its parts are reflective of the true intent of the parties. Under Section 2, Paragraph 1 of the Insurance code,
provides that contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown contingent event. Thus, an insurance premium is the consideration paid an
insurer for undertaking to indemnify the insured against a specified peril. In the subject policy, no premium payments were made
with regard to earthquake shock coverage, except on the two swimming pools.

6. Pan Malayan Insurance Corporation v CA

Petition filed a complaint for damages with the RTC of Makati against private respondents Erlinda Fabie and her driver and
averred on the following: that it insured a Mitsubishi Colt Lancer car with plate No. DDZ-431 and registered in the name of
Canlubang Automotive Resources Corporation and that due to the carelessness, recklessness, and imprudence of the unknown
driver of a pick-up with plate no. PCR-220, the insured car was hit and suffered damages. Petitioner defrayed the cost of repair of
the insured car and, therefore, was subrogated to the rights of Canlubang against the driver of the pick-up and his employer,
Erlinda Fabie. Despite repeated demands, defendants, failed and refused to pay the claim of the Petitioner. Private respondents
filed a Motion to Dismiss alleging that Petitioner had no cause of action against them. They argued that payment under the "own
damage" clause of the insurance policy precluded subrogation under Article 2207 of the Civil Code, since indemnification
thereunder was made on the assumption that there was no wrongdoer or no third party at fault.

ISSUE: WON petitioner may institute an action to recover the amount it had paid its assured in settlement of an insurance claim
against private respondents as the parties allegedly responsible for the damage caused to the insured vehicle.

HELD: Yes. Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property is
destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer, upon payment to the
assured, will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been
obligated to pay. Payment by the insurer to the assured operates as an equitable that the insurer has been obligated to pay.
Payment by the insurer to the assured operates as an equitable or negligence of a third party. The right of subrogation is not
dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon
payment of the insurance claim by the insurer. The exceptions are: (1) if the assured by his own act releases the wrongdoer or
third party liable for the loss or damage, from liability, the insurer's right of subrogation is defeated. (2) where the insurer pays the
assured the value of the lost goods without notifying the carrier who has in good faith settled the assured's claim for loss, the
settlement is binding on both the assured and the insurer, and the latter cannot bring an action against the carrier on his right of
subrogation. (3) where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby effecting "voluntary
payment", the former has no right of subrogation against the third party liable for the loss
None of the exceptions are availing in the present case.

7. Federal Express vs. American Home Assurance

FACTS: Shipper SMITHKLINE USA delivered to carrier Burlington Air Express, an agent of Petitioner, a shipment of 109
cartons of veterinary biologicals for delivery to consignee SMITHKLINE and French Overseas Company in Makati City. The
shipment was covered by Burlington Airway Bill No. 11263825 with the words, refrigerate when not in transit and perishable
stamp marked on its face. That same day, Burlington insured the cargoes with American Home Assurance Company
(AHAC). The following day, Burlington turned over the custody of said cargoes to FEDEX which transported the same to
Manila. The shipments arrived in Manila and was immediately stored at Cargohaus Inc.s warehouse. Prior to the arrival of the
cargoes, FEDEX informed the customs broker hired by the consignee to facilitate the release of its cargoes from the Bureau of
Customs, of the impending arrival of its clients cargoes. 12 days after the cargoes arrived in Manila, a non-licensed customs
broker who was assigned by customs broker, found out, while he was about to cause the release of the said cargoes, that the same
were stored only in a room with 2 air conditioners running, to cool the place instead of a refrigerator. The non-licensed broker,
upon instructions from customs broker, did not proceed with the withdrawal of the vaccines and instead, samples of the same
were taken and brought to the Bureau of Animal Industry of the Department of Agriculture in the Philippines by SMITHKLINE
for examination wherein it was discovered that the reading of vaccinates sera are below the positive reference serum. As a
consequence of the foregoing result of the veterinary biologics test, SMITHKLINE abandoned the shipment and, declaring total
loss for the unusable shipment, filed a claim with AHAC through its representative in the Philippines, the Philam Insurance Co.,
Inc. (PHILAM) which recompensed SMITHKLINE for the whole insured amount. Thereafter, PHILAM filed an action for
damages against the FEDEX imputing negligence on either or both of them in the handling of the cargo.

ISSUE: WON FEDEX is liable for damage to or loss of the insured goods

HELD: Yes. From the initial proceedings in the trial court up to the present, petitioner has tirelessly pointed out that
respondents claim and right of action are already barred. Indeed, this fact has never been denied by respondents and is plainly
evident from the records. In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually
constitutes a condition precedent to the accrual of a right of action against a carrier for loss of or damage to the goods. The
shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the
carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not
constitute a limitation of action. The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The
fundamental reasons for such a stipulation are (1) to inform the carrier that the cargo has been damaged, and that it is being
charged with liability therefor; and (2) to give it an opportunity to examine the nature and extent of the injury. This protects the
carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to
safeguard itself from false and fraudulent claims.

8. Cebu Shipyard v William

Facts: Petitioner is engaged in the repair of marine vessels while the Prudential is in the non-life insurance business. William
Lines, Inc. is the owner of M/V Manila City, a luxury passenger-cargo vessel, which caught fire and sank. At the time of the
incident, subject vessel was insured with Prudential for P45M for hull and machinery. CSEW was insured for only Php 10 million
for the ship repairers liability policy. They entered into a contract where negligence was the only factor that could make CSEW
liable for damages. Moreover, liability of CSEW was limited to only Php 1million for damages. The Hull Policy included an
Additional Perils Clause covering loss of or damage to the vessel through the negligence of, among others, ship repairmen.
William brought the ship to the dry dock of CSEW for repairs. The officers and cabin crew stayed at the ship while it was being
repaired. After the vessel was transferred to the docking quay, it caught fire and sank, resulting to its total loss. William filed suit
against CSEW alleging that it was through the latters negligence that the ship caught fire and sank. Prudential was impleaded as
co-plaintiff after it had paid the value of insured items. It was subrogated to 45 million, or the value it claimed to indemnify.

1. WON the doctrine of res ipsa loquitur applies against the crew
2. WON Prudential has the right of subrogation against its own insured
3. WON the provisions limiting CSEWs liability for negligence to a maximum of Php 1 million is valid

1. For the doctrine of res ipsa loquitur to apply to a given situation, the following conditions must concur: (1) the accident was of a
kind which does not ordinarily occur unless someone is negligent; and (2) that the instrumentality or agency which caused the
injury was under the exclusive control of the person charged with negligence. The facts and evidence reveal the presence of these
conditions. First, the fire would not have happened in the ordinary course of things if reasonable care and diligence had been
exercised. Second, the agency charged with negligence, as found by the trial court and the CA and as shown by the records, is
CSEW, which had control over subject vessel when it was docked for annual repairs. What is more, in the present case the trial
court found direct evidence to prove that the workers didnt exercise due diligence in the care of subject vessel. The direct
evidence substantiates the conclusion that CSEW was really negligent even without applying such doctrine.

2. Upon proof of payment by Prudential to William Lines, Inc., the former was subrogated to the right of the latter to
indemnification from CSEW. If the plaintiffs 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. When Prudential paid the latter the total amount covered by its insurance policy, it was
subrogated to the right of the latter to recover the insured loss from the liable party, CSEW. Petitioner theorizes further that there
can be no right of subrogation as it is deemed a co-assured under the subject insurance policy with reliance on Clause 20 of the
Work Order which states that the insurance on the vessel should be maintained by the customer and/or owner of the vessel
during the period the contract is in effect. Such clause in question is clear in the sense that it requires William Lines to maintain
insurance on the vessel during the period of dry-docking or repair. However, the fact that CSEW benefits from the said
stipulation does not automatically make it as a co-assured of William Lines. The intention of the parties to make each other a co-
assured under an insurance policy is to be read from the insurance contract or policy itself and not from any other contract or
agreement because the insurance policy denominates the beneficiaries of the insurance. The hull and machinery insurance
procured by William Lines, Inc. from Prudential named only William Lines, Inc. as the assured. There was no manifestation
of any intention of William Lines, Inc. to constitute CSEW as a co-assured under subject policy. The claim of CSEW that it is a
co-assured is unfounded.

3. Although in this jurisdiction, contracts of adhesion have been consistently upheld as valid per se; as binding as an ordinary
contract, the Court recognizes instances when reliance on such contracts cannot be favored especially where the facts and
circumstances warrant that subject stipulations be disregarded. Thus, in ruling on the validity and applicability of the stipulation
limiting the liability of CSEW for negligence to P1M only, the facts and circumstances vis-a-vis the nature of the provision sought
to be enforced should be considered, bearing in mind the principles of equity and fair play. The evaluation of the average adjuster
also reported a constructive total loss. The said claim of William Lines, Inc., was then found to be valid and compensable such
that Prudential paid the latter the total value of its insurance claim. Furthermore, it was ascertained that the replacement cost of
the vessel, amounts to P55M. Considering the circumstances, it would unfair to limit the liability of petitioner to One Million
Pesos only. To allow CSEW to limit its liability to P1M notwithstanding the fact that the total loss suffered by the assured and
paid for by Prudential amounted to P45M would sanction the exercise of a degree of diligence short of what is ordinarily required
because, then, it would not be difficult for petitioner to escape liability by the simple expedient of paying an amount very much
lower than the actual damage suffered by William.

9. White Gold v Pioneer

White Gold procured a protection and indemnity coverage for its vessels from The Steamship Mutual through Pioneer Insurance
and Surety Corporation. White Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued receipts. When
White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage. Steamship Mutual thereafter filed a
case against White Gold for collection of sum of money to recover the unpaid balance. White Gold on the other hand, filed a
complaint before the Insurance Commission claiming that Steamship Mutual and Pioneer violated provisions of the Insurance
Code. The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a
license because it was not engaged in the insurance business and that it was a P & I club. Pioneer was not required to obtain
another license as insurance agent because Steamship Mutual was not engaged in the insurance business.

1. WON P & I Club is engaged in the insurance business in the Philippines?
2. WON Pioneer need a license as an insurance agent/broker for Steamship Mutual?

Held: Yes. P & I Club is a form of insurance against third party liability, where the third party is anyone other than the P & I Club
and the members. By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine
insurance business. The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of
authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance
and to collect payments in its behalf. Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-
payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a
license from the Insurance Commission. Since a contract of insurance involves public interest, regulation by the State is
necessary. Thus, no insurer or insurance company is allowed to engage in the insurance business without a license or a certificate
of authority from the Insurance Commission.

2. Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration issued by the Insurance
Commission. It has been licensed to do or transact insurance business by virtue of the certificate of authority issued by the same
agency. However, a Certification from the Commission states that Pioneer does not have a separate license to be an agent/broker
of Steamship Mutual. Although Pioneer is already licensed as an insurance company, it needs a separate license to act as
insurance agent for Steamship Mutual. Section 299 of the Insurance Code clearly states that no person shall act as an insurance
agent or as an insurance broker in the solicitation or procurement of applications for insurance, or receive for services in
obtaining insurance, any commission or other compensation from any insurance company doing business in the Philippines or
any agent thereof, without first procuring a license so to act from the Commissioner.


FACTS: A contract of group life insurance was executed between petitioner and DBP. Grepalife agreed to insure the lives of
eligible housing loan mortgagors of DBP. Leuterio, a physician and a housing debtor of DBP applied for membership in the
group life insurance plan. In an application form, Leuterio answered questions concerning his health condition. Grepalife then
issued a Certificate, as insurance coverage of Leuterio, to the extent of his DBP mortgage indebtedness. Later, Leuterio died due
to massive cerebral hemorrhage. Consequently, DBP submitted a death claim to Grepalife. Grepalife denied the claim alleging
that. Leuterio was not physically healthy when he applied for an insurance coverage. Grepalife insisted that Leuterio did not
disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted
concealment that justified the denial of the claim. The widow of the respondent Medarda, filed a complaint with the RTC, against
Grepalife for Specific Performance with Damages. During the trial, Dr. Mejia, who issued the death certificate, was called to
testify. Dr. Mejias findings, based partly from the information given by the respondent widow, stated that Leuterio complained of
headaches presumably due to high blood pressure. The inference was not conclusive because Leuterio was not autopsied, hence,
other causes were not ruled out.


1. Who is the proper party to bring the suit, the widow or the mortgagee (DBP)?
2. WON there was concealment as to justify Grepalifes non-payment of the insurance proceeds


1. Widow. The rationale of a group insurance policy of mortgagors, otherwise known as the mortgage redemption insurance, is
a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form
of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the
proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor
from paying the obligation. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event
of death; the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness.
Consequently, where the mortgagor pays the insurance premium under the group insurance policy, making the loss payable to
the mortgagee, the insurance is on the mortgagors interest, and the mortgagor continues to be a party to the contract. In this type
of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not make the
mortgagee a party to the contract. Sec. 8 of the Insurance Code provides that unless the policy provides, where a mortgagor of
property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of
insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to
the original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same effect,
although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to be performed by
the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by the

2. The second assigned error refers to an alleged concealment that the petitioner interposed as its defense to annul the insurance
contract. 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 assured, but he designedly and intentionally withholds the same. The
fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Misrepresentation as
a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and
convincing evidence rests upon the insurer. In the case at bar, the petitioner failed to clearly and satisfactorily establish its defense,
and is therefore liable to pay the proceeds of the insurance. A life insurance policy is a valued policy. Unless the interest of a
person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or
health is the sum fixed in the policy.

11. Lalican vs The Insular Life Assurance Company Limited

Facts: Violeta is the widow of the deceased Eulogio C. Lalican. During his lifetime, Eulogio applied for an insurance policy with
Insular Life. Insular Life through its agent in Gapan City issued in favor of Eulogio insurance policy which contained a 20-Year
Endowment Variable Income Package Flexi Plan with two riders. Violeta was named as the primary beneficiary. Under the terms
of the policy, Eulogio was to pay the premiums on a quarterly basis until the end of the 20-year period of the policy. According to
the Policy Contract, there was a grace period of 31 days for the payment of each premium subsequent to the first. If any premium
was not paid on or before the due date, the policy would be in default, and if the premium remained unpaid until the end of the
grace period, the policy would automatically lapse and become void. Eulogio paid the first premiums due. However, he failed to
pay the subsequent premiums due which later lapse the grace period of 31 days. The policy, therefore, lapsed and became
void. Eulogio submitted an Application for reinstatement of the policy. Later, Insular Life notified Eulogio that his Application
for Reinstatement could not be fully processed because, although he already deposited payment for the premium, he left unpaid
the overdue interest thereon. Thus, Insular Life instructed Eulogio to pay the amount of interest and to file another application
for reinstatement. Eulogio was likewise advised to pay the premiums that subsequently became due plus interest. Eulogio went to
submit a second Application for Reinstatement of the policy, including payments for the overdue interest on the premium and
the premiums. As the agent was away on a business errand, her husband received Eulogios second Application for Reinstatement
and issued a receipt for the amount Eulogio deposited. Eulogio died of cardio-respiratory arrest secondary to electrocution.

Issue: WON Eulogio had an existing insurable interest in his own life until the day of his death in order to have the insurance
policy validly reinstated.
Held: No. An insurable interest is one of the most basic and essential requirements in an insurance contract. In general, an
insurable interest is that interest which a person is deemed to have in the subject matter insured, where he has a relation or
connection with or concern in it, such that the person will derive pecuniary benefit or advantage from the preservation of the
subject matter insured and will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of
the event insured against. The existence of an insurable interest gives a person the legal right to insure the subject matter of the
policy of insurance. Section 10 of the Insurance Code indeed provides that every person has an insurable interest in his own life.
Section 19 of the same code also states that an interest in the life or health of a person insured must exist when the insurance
takes effect, but need not exist thereafter or when the loss occurs. The stipulation in a life insurance policy giving the insured the
privilege to reinstate it upon written application does not give the insured absolute right to such reinstatement by the mere filing of
an application. The insurer has the right to deny the reinstatement if it is not satisfied as to the insurability of the insured and if
the latter does not pay all overdue premium and all other indebtedness to the insurer. After the death of the insured the
insurance Company cannot be compelled to entertain an application for reinstatement of the policy because the conditions
precedent to reinstatement can no longer be determined and satisfied.
12. Philam v Pineda

Facts: Pineda procured an ordinary life insurance policy from the petitioner company and designated his wife and children as
irrevocable beneficiaries. He then filed a petition to amend the designation of the beneficiaries in his life policy from irrevocable
to revocable.

1. WON the designation of the irrevocable beneficiaries could be changed or amended without the consent of all the irrevocable
2. WON the irrevocable minor beneficiaries could give consent to the change in designation

Held: No. Under the Insurance Act, the beneficiary designated in a life insurance contract cannot be changed without the consent
of the beneficiary because he has a vested interest in the policy. There was an express stipulation to this effect: It is hereby
understood and agreed that, notwithstanding the provisions of this policy to the contrary, inasmuch as the designation of the
primary/contingent beneficiary/beneficiaries in this Policy has been made without reserving the right to change said beneficiary/
beneficiaries, such designation may not be surrendered to the Company, released or assigned; and no right or privilege under the
Policy may be exercised, or agreement made with the Company to any change in or amendment to the Policy, without the
consent of the said beneficiary/beneficiaries. The alleged acquiescence of the six (6) children beneficiaries of the policy cannot be
considered an effective ratification due to the fact that they were minors. Neither could they act through their father insured since
their interests are quite divergent from one another. Therefore, the parent-insured cannot exercise rights and/or privileges
pertaining to the insurance contract, for otherwise, the vested rights of the irrevocable beneficiaries would be rendered
inconsequential. Of equal importance is the well-settled rule that the contract between the parties is the law binding on both of
them and for so many times, this court has consistently issued pronouncements upholding the validity and effectivity of contracts.
Likewise, contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their
stipulations, for contracts are obligatory, no matter in what form they may be, whenever the essential requisites for their validity
are present

13. Gaisano Cagayan, Inc. V. Insurance Company Of North 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. 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. The 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
alleged that it cannot be held liable because it was destroyed due to fortuities event or force majeure

ISSUE: WON Insurance Company of North America can claim against Gaisano Cagayan for the debt that was isnured

HELD: YES. The 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. 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. The 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. The 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. 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.

14. Ong Lim Sing V. FEB Leasing And Finance Corp.

FACTS: FEB Leasing and Finance Corporation (FEB) leased equipment and motor vehicles to JVL Food Products. At the same
date, Vicente Ong Lim Sing, Jr. (Lim) executed an Individual Guaranty Agreement with FEB to guarantee the prompt and
faithful performance of the terms and conditions of the lease agreement. JVL defaulted in the payment of the monthly rentals and
refused to pay despite demands. FEB filed a complaint for damages and replevin. JVL and Lim admitted the existence of the
lease agreement but asserted that it is in reality a sale of equipment on installment basis, with FEB acting as the financier

ISSUE: WON JVL and Lim should jointly and severally be liable for the insured financial lease

HELD: YES. A contract of adhesion is as binding as any ordinary contract. The Lease Contract with corresponding Lease
Schedules with Delivery and Acceptance Certificates is, in point of fact, a financial lease within the purview of R.A. No. 8556.
FEB leased the subject equipment and motor vehicles to JVL in consideration of a monthly periodic payment. The periodic
payment by petitioner is sufficient to amortize at least 70% of the purchase price or acquisition cost of the said movables in
accordance with the Lease Schedules with Delivery and Acceptance Certificates. JVL entered into the lease contract with full
knowledge of its terms and conditions. Lim, as a lessee, has an insurable interest in the equipment and motor vehicles leased. In
the financial lease agreement, FEB did not assume responsibility as to the quality, merchantability, or capacity of the
equipment. This stipulation provides that, in case of defect of any kind that will be found by the lessee in any of the equipment,
recourse should be made to the manufacturer. The financial lessor, being a financing company, i.e., an extender of credit rather
than an ordinary equipment rental company, does not extend a warranty of the fitness of the equipment for any particular
use. Thus, the financial lessee was precisely in a position to enforce such warranty directly against the supplier of the equipment
and not against the financial lessor. We find nothing contra legem or contrary to public policy in such a contractual arrangement

15. Philam Health Systems v CA

Facts: Ernani Trinos applied for a health care coverage with Philam. He answered no to a question asking if he or his family
members were treated to heart trouble, asthma, diabetes, etc. The application was approved for 1 year. He was also given
hospitalization benefits and out-patient benefits. After the period expired, he was given an expanded coverag. During the period,
he suffered from heart attack and was confined at MMC. The wife tried to claim the benefits but the petitioner denied it saying
that he concealed his medical history by answering no to the aforementioned question. She had to pay for the hospital bills. Her
husband subsequently passed away. She filed a case in the trial court for the collection of the amount plus damages.

Issue: WON a health care agreement is not an insurance contract; hence the incontestability clause under the Insurance Code
does not apply.

Held: No. 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. Also, section 3
states: every person has an insurable interest in the life and health: (1) of himself, of his spouse and of his children. In this case,
the husbands health was the insurable interest. The health care agreement was in the nature of non-life insurance, which is
primarily a contract of indemnity. The provider must pay for the medical expenses resulting from sickness or injury. While
petitioner contended that the husband concealed materialfact of his sickness, the contract stated that: that any physician is, by
these presents, expressly authorized to disclose or give testimony at anytime relative to any information acquired by him in his
professional capacity upon any question affecting the eligibility for health care coverage of the Proposed Members. This meant
that the petitioners required him to sign authorization to furnish reports about his medical condition. The contract
also authorized Philam to inquire directly to his medical history. They cant also invoke the Invalidation of agreement clause
where failure of the insured to disclose information was a grounds for revocation simply because the answer assailed by the
company was the heart condition question based on the insureds opinion. He wasnt a medical doctor, so he cant accurately
gauge his condition. Section 27 of the Insurance Code- a concealment entitles the injured party to rescind a contract of
As to cancellation procedure- Cancellation requires certain conditions: (1)Prior notice of cancellation to insured; (2) Notice must
be based on the occurrence after effective date of the policy of one or more of the grounds mentioned; (3) Must be in writing,
mailed or delivered to the insured at the address shown in the policy; (4) Must state the grounds relied upon provided in Section
64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based. None were fulfilled by the
provider. As to incontestability- The trial court said that under the title Claim procedures of expenses, the defendant Philamcare
Health Systems Inc. had twelve months from the date of issuance of the Agreement within which to contest the membershipof
the patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the patient was sick
of diabetes or hypertension. The periods having expired, the defense of concealment or misrepresentation no longer lie.