Rizal Surety v CA G.R. No. 112360.

July 18, 2000

J. Purisima

Facts:
Rizal Surety issued a 1 million peso fire insurance policy with Transworld. This was increased to 1.5
million. A four span building was part of the policy. A fire broke out and gutted the building, together
with a two storey building behind it were gaming machines were stored. The company filed
its claims but to no avail. Hence, it brought a suit in court. It aimed to make Rizal pay for almost 3
million including legal interest and damages. Rizal claimed that the policy only covered damage on
the four span building and not the two storey building. The trial court ruled in Transworld’s favor and
ordered Rizal to pay actual damages only. The court of appeals increased the damages. The
insurance company filed a MFR. The CA answered by modifying the imposition of interest. Not
satisfied, the insurance company petitioned to the Supreme Court.

Issue:
WON Rizal Surety is liable for loss of the two-storey building considering that the fire insurance
policy sued upon covered only the contents of the four-span building.

Held: Yes. Petition dismissed.

Ratio:
The policy had clauses on the building coverage that read:
"contained and/or stored during the currency of this Policy in the premises occupied by them forming
part of the buildings situated within own Compound"
"First, said properties must be contained and/or stored in the areas occupied by Transworld and
second, said areas must form part of the building described in the policy xxx"
This generally means that the policy didn’t limit its coverage to what was stored in the four-span
building.
As to questions of fact, both the trial court and the Court of Appeals found that the so called "annex "
was not an annex building but an integral part of the four-span building described in the policy
and consequently, the machines and spare parts stored were covered by the fire insurance.
A report said: "Two-storey building constructed of partly timber and partly concrete hollow blocks
under g.i. roof which is adjoining and intercommunicating with the repair of the first right span of
the lofty storey building and thence by property fence wall."
"Art.1377. The interpretation of obscure words or stipulations in a contract shall not favor the party
who caused the obscurity"
Landicho v GSIS- the 'terms in an insurance policy, which are ambiguous, equivocal, or uncertain
are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured
so as to effect the dominant purpose of indemnity or payment to the insured’
The issue of whether or not Transworld has an insurable interest in the fun and amusement
machines and spare parts, which entitles it to be indemnified for the loss thereof, had been settled in
another SC case.
hilamcare v CA G.R. No. 125678. March 18, 2002
J. Ynares-Santiago

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 coverage for Php 75,000. 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 amounting to 76,000. Her husband
subsequently passed away. She filed a case in the trial court for the collection of the amount plus
damages. She was awarded 76,000 for the bills and 40,000 for damages. The CA affirmed but
deleted awards for damages. Hence, this appeal.

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

Held: No. Petition dismissed.

Ratio:
Petitioner claimed that it granted benefits only when the insured is alive during the one-year
duration. It contended that there was no indemnification unlike in insurance contracts. It supported
this claim by saying that it is a health maintenance organization covered by the DOH and not the
Insurance Commission. Lastly, it claimed that the Incontestability clause didn’t apply because two-
year and not one-year effectivity periods were required.
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.”
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 husband’s 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.
Hence, the contention of concealment isn’t valid.
They can’t 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 insured’s opinion. He wasn’t a medical doctor, so he can’t
accurately gauge his condition.
Henrick v Fire- “in such case the insurer is not justified in relying upon such statement, but is
obligated to make further inquiry.”
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.
“Having assumed a responsibility under the agreement, petitioner is bound to answer the same to
the extent agreed upon. In the end, the liability of the health care provider attaches once the
member is hospitalized for the disease or injury covered by the agreement or whenever he avails of
the covered benefits which he has prepaid.”
Section 27 of the Insurance Code- “a concealment entitles the injured party to rescind a contract of
insurance.”
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.”
Philippine Health Care Providers v CIR G.R. No.
167330 June 12, 2008
J. Corona

Facts:
The petitioner, a prepaid health-care organization offering benefits to its members. The CIR found
that the organization had a deficiency in the payment of the DST under Section 185 of the 1997 Tax
Code which stipulated its implementation:
“On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage, or
liability made or renewed by any person, association or company or corporation transacting the
business of accident, fidelity, employer's liability, plate, glass, steam boiler, burglar,
elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire
insurance)”
The CIR sent a demand for the payment of deficiency taxes, including surcharges and interest, for
1996-1997 in the total amount of P224,702,641.18.
The petitioner protested to the CIR, but it didn’t act on the appeal. Hence, the company had to go to
the CTA. The latter declared judgment against them and reduced the taxes. It ordered them to pay
22 million pesos for deficiency VAT for 1997 and 31 million deficiency VAT for 1996.
CA denied the company’s appeal an d increased taxes to 55 and 68 million for 1996 to 1997.

Issues: WON a health care agreement in the nature of an insurance contract and therefore subject
to the documentary stamp tax (DST) imposed under Section 185 of Republic Act 8424 (Tax Code of
1997)

Held: Yes. Petition dismissed.

Ratio:
The DST is levied on the exercise by persons of certain privileges conferred by law for the creation,
revision, or termination of specific legal relationships through the execution of specific instruments.
The DST is an excise upon the privilege, opportunity, or facility offered at exchanges for the
transaction of the business. In particular, the DST under Section 185 of the 1997 Tax Code is
imposed on the privilege of making or renewing any policy of insurance (except life, marine, inland
and fire insurance), bond or obligation in the nature of indemnity for loss, damage, or liability.
Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of Blue
Cross Healthcare, Inc. v. Olivares, this Court ruled that a health care agreement is in the nature of a
non-life insurance policy.
Its health care agreement is not a contract for the provision of medical services. Petitioner does not
actually provide medical or hospital services but merely arranges for the same
It is also incorrect to say that the health care agreement is not based on loss or damage because,
under the said agreement, petitioner assumes the liability and indemnifies its member for hospital,
medical and related expenses (such as professional fees of physicians). The term "loss or damage"
is broad enough to cover the monetary expense or liability a member will incur in case of illness or
injury.
Philamcare Health Systems, Inc. v. CA.- The health care agreement was in the nature of non-life
insurance, which is primarily a contract of indemnity.
Similarly, the insurable interest of every member of petitioner's health care program in obtaining the
health care agreement is his own health. Under the agreement, petitioner is bound to indemnify any
member who incurs hospital, medical or any other expense arising from sickness, injury or other
stipulated contingency to the extent agreed upon under the contract.
Great Pacific v CA G.R. No. L-31845 April 30,
1979
J. De Castro

Facts:
Ngo Hing filed an application with the Great Pacific for a twenty-year endowment policy in the
amount of P50,000.00 on the life of his one-year old daughter Helen. He supplied the essential data
which petitioner Mondragon, the Branch Manager, wrote on the form. The latter paid the annual
premium the sum of P1,077.75 going over to the Company, but he retained the amount of P1,317.00
as his commission for being a duly authorized agent of Pacific Life.
Upon the payment of the insurance premium, the binding deposit receipt was issued Ngo Hing.
Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application form his
strong recommendation for the approval of the insurance application. Then Mondragon received a
letter from Pacific Life disapproving the insurance application. The letter stated that the said life
insurance application for 20-year endowment plan is not available for minors below seven years old,
but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the
offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company.
The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote
back Pacific Life again strongly recommending the approval of the 20-year endowment insurance
plan to children, pointing out that since the customers were asking for such coverage.
Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the recovery before the Court of First Instance of
Cebu, which ruled against him.

Issues:
1. Whether the binding deposit receipt constituted a temporary contract of the life insurance in
question
2. Whether Ngo Hing concealed the state of health and physical condition of Helen Go, which
rendered void the policy

Held: No. Yes. Petition dismissed.

Ratio:
The receipt was intended to be merely a provisional insurance contract. Its perfection was subject to
compliance of the following conditions: (1) that the company shall be satisfied that the applicant was
insurable on standard rates; (2) that if the company does not accept the application and offers to
issue a policy for a different plan, the insurance contract shall not be binding until the applicant
accepts the policy offered; otherwise, the deposit shall be refunded; and (3) that if the company
disapproves the application, the insurance applied for shall not be in force at any time, and the
premium paid shall be returned to the applicant.
The receipt is merely an acknowledgment that the latter's branch office had received from the
applicant the insurance premium and had accepted the application subject for processing by the
insurance company. There was still approval or rejection the same on the basis of whether or not the
applicant is "insurable on standard rates." Since Pacific Life disapproved the insurance application of
respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time.
The binding deposit receipt is conditional and does not insure outright. This was held in Lim v Sun.
The deposit paid by private respondent shall have to be refunded by Pacific Life.
2. Ngo Hing had deliberately concealed the state of health of his daughter Helen Go. When he
supplied data, he was fully aware that his one-year old daughter is typically a mongoloid child. He
withheld the fact material to the risk insured.
“The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute
and perfect candor or openness and honesty; the absence of any concealment or demotion,
however slight.”
The concealment entitles the insurer to rescind the contract of insurance.

Insurance Case Digest: Enriquez V. Sun Life

Assurance Co. Of Canada (1920)
G.R. No. L-15895 November 29, 1920

Lessons Applicable: Perfection (Insurance)

FACTS:

 September 24, 1917: Joaquin Herrer made application to the Sun Life Assurance
Company of Canada through its office in Manila for a life annuity
 2 days later: he paid P6,000 to the manager of the company's Manila office and was
given a receipt
 according to the provisional receipt, 3 things had to be accomplished by the
insurance company before there was a contract:
 (1) There had to be a medical examination of the applicant; -check
 (2) there had to be approval of the application by the head office of the company;
and - check
 (3) this approval had in some way to be communicated by the company to the
applicant - ?
 November 26, 1917: The head office at Montreal, Canada gave notice of acceptance
by cable to Manila but this was not mailed
 December 4, 1917: policy was issued at Montreal
 December 18, 1917: attorney Aurelio A. Torres wrote to the Manila office of the
company stating that Herrer desired to withdraw his application
 December 19, 1917: local office replied to Mr. Torres, stating that the policy had
been issued, and called attention to the notification of November 26, 1917
 December 21, 1917 morning: received by Mr. Torres
 December 20, 1917: Mr. Herrer died
 Rafael Enriquez, as administrator of the estate of the late Joaquin Ma. Herrer filed to
recover from Sun Life Assurance Company of Canada through its office in Manila for
a life annuity
 RTC: favored Sun Life Insurance
ISSUE: W/N Mr. Herrera received notice of acceptance of his application thereby
perfecting his life annuity

HELD: NO. Judgment is reversed, and the Enriquez shall have and recover from the Sun
Life the sum of P6,000 with legal interest from November 20, 1918, until paid, without
special finding as to costs in either instance. So ordered.

Civil Code

Art. 1319 (formerly Art.1262)

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract. The offer must
be certain and the acceptance absolute. A qualified acceptance constitutes a
counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the
time it came to his knowledge. The contract, in such a case, is presumed to have
been entered into in the place where the offer was made.

 not perfected because it has not been proved satisfactorily that the acceptance of
the application ever came to the knowledge of the applicant

nsurance Case Digest: Eternal Gardens

Memorial Park Corp. V. Philippine American
Life Insurance Corp. (2008)
G.R. No. 166245 April 9, 2008

Lessons Applicable: Exception to Perfection (Insurance)

FACTS:

 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 balance
 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
contract.

HELD: YES. CA reversed

 construed in favor of the insured and in favor of the effectivity of the insurance
contract
 Upon a party’s 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
unambiguous
 Pacific Timber v CA G.R. No. L-38613
February 25, 1982
 J. De Castro

 Facts:
 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.
 Workmen’s 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 Workmen’s 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.
 Woodmen’s 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.
 Woodmen’s 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 petitioner’s favor while the CA dismissed the case.
Hence this appeal.

 Issues:
 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.

 Ratio:
 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 can’t 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 objection.
 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.
COMMISSIONER OF INTERNAL REVENUE v. LINCOLN
PHILIPPINE LIFE INSURANCE COMPANY, INC. (now JARDINE-
CMA LIFE INSURANCE COMPANY, INC.) and THE COURT OF
APPEALS. G.R. No. 119176. March 19, 2002. 379 SCRA 423.
FACTS:

Respondent Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance
Company, Inc.) is a domestic corporation engaged in life insurance business. Respondents issued a
special kind of life insurance policy known as the Junior Estate Builder Policy, in which there is a
clause providing for an automatic increase in the amount of life insurance coverage upon attainment
of a certain age by the insured without the need of issuing a new policy.

CIR then issued deficiency documentary stamps tax assessment corresponding to the amount of
automatic increase of the sum assured on the policy issued by respondent.

Respondent filed a petition with the CTA which was held in their favor. The CIR appealed with the
CA affirming the decision of the CTA.
ISSUE: Whether a new insurance policy is distinct from the main policy making it liable for
additional taxes.

RULING:

YES.

The subject insurance policy at the time it was issued contained an automatic increase clause.
Although the clause was to take effect on a later date, it was written into the policy at the time of its
issuance.

Section 173 of the NIRC provides that the payment of documentary stamp taxes is done at the time
the act is done. Section 183 of the NIRC provides that the tax base for the computation of
documentary stamp taxes on life insurance policies is the amount fixed in policy.

Here, although the automatic increase in the amount of life insurance coverage was to take effect
later on, the amount of the 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.

The additional insurance was an obligation subject to a suspensive obligation, but still a part of the
insurance sold to which respondent was liable for the payment of the documentary stamp tax. The
deficiency of documentary stamp tax imposed on respondent is not on the amount of the original
insurance coverage, but on the increase of the amount insured upon the effectivity of the Junior
Estate Builder Policy.

Pineda v Insular G.R. No. 105562 September 27,

1993
J. Davide Jr.

Facts:
PMSI obtained a group insurance policy for its sailors. 6 of the sailors, during the effectivity of the
policy, perished while the ship sank in Morocco. The families of the victims then wanted to claim the
benefits of the insurance. Hence, under the advice of Nuval, the president of PMSI, they executed a
special power of attorney authorizing Capt. Nuval to, "follow up, ask, demand, collect and receive"
for their benefit the indemnities.
Insular drew against its account 6 checks, four for P200,00.00 each, one for P50,000.00 and another
for P40,00.00, payable to the order the families. The checks were given to PMSI. Nuval, the PMSI
president, pocketed the amounts in his bank account.
When the families went to insular to get the benefits, their request was denied because Insular
claimed that the checks were already given to PMSI.
The families filed a petition with the Insurance Commission. They won and Insular was ordered to
pay them 500 a day until the amount was furnished to them. The insurance Commission held that
the special powers of attorney executed by complainants do not contain in unequivocal and clear
terms authority to Nuval to obtain and receive from respondent company insurance proceeds arising
from the death of the seaman-insured; also, that Insular Life did not convincingly refuted the claim of
Mrs. Alarcon that neither she nor her husband executed a special power of authority in favor of Capt.
Nuval and that it did not observe Sec 180(3), when it released the benefits due to the minor children
of Ayo and Lontok, when the said complainants did notpost a bond as required-
Insular Life appealed to the CA. CA modified the decision of the Insurance Commission, eliminating
the award to the minorchildren.
Hence, this petition by the beneficiary families.

Issues:
1. WON Insular Life should still be liable to the complainants when they relied on the special powers
of attorney, which Capt. Nuval presented as documents, when they released the checks to the latter.
2. WON Insular Life should be liable to the complainants when they released the check in favor of
Ayo and Lontok, even if no bond was posted as required.

Held: Yes to both. Petition granted.

Ratio:
1. The special powers of attorney "do not contain in unequivocal and clear terms authority to Capt.
Nuval to obtain, receive, receipt from respondent company insurance proceeds arising from the
death of the seaman-insured.
Insular Life knew that a power of attorney in favor of Capt. Nuval for the collection and receipt of
such proceeds was a deviation from its practice with respect to group policies.
They gave the proceeds to the policyholder instead of the beneficiaries themselves. Even the Isnular
rep admitted that he gave the checks to the policyholder.
Insular Life recognized Capt. Nuval as the attorney-in-fact of the petitioners. However, it acted
imprudently and negligently in the premises by relying without question on the special power of
attorney.
Strong vs. Repide- third persons deal with agents at their peril and are bound to inquire as to the
extent of the power of the agent with whom they contract.
Harry E. Keller Electric Co. vs. Rodriguez- The person dealing with an agent must also act with
ordinary prudence and reasonable diligence. Obviously, if he knows or has good reason to believe
that the agent is exceeding his authority, he cannot claim protection… the party dealing with him
may not shut his eyes to the real state of the case, but should either refuse to deal with the agent at
all, or should ascertain from the principal the true condition of affairs.
Insular delivered the checks to a party not the agent of the beneficiaries.
2. Art. 225. The father and the mother shall jointly exercise legal guardianship over the property of
their unemancipated common child without the necessity of a court appointment. In case of
disagreement, the father's decision shall prevail, unless there is judicial order to the contrary.
Where the market value of the property or the annual income of the child exceeds P50,000, the
parent concerned shall be required to furnish a bond in such amount as the court may determine,
but not less than ten per centum (10%) of the value of the property or annual income, to guarantee
the performance of the obligations prescribed for general guardians.
“If the market value of the property or the annual income of the child exceeds P50,000.00, a bond
has to be posted by the parents concerned to guarantee the performance of the obligations of a
general guardian.”
On group insurance :
Group insurance is essentially a single insurance contract that provides coverage for many
individuals, particularly for the employees of one employer.
There is a master agreement issued to an employer. The employer acts as the collector of the dues
and premiums. Disbursement of insurance payments by the employer is also one of his duties.
They require an employee to pay a portion of the premium, which the employer deducts from wages
while the remainder is paid by the employer. This is known as a contributory plan as compared to a
non-contributory plan where the premiums are solely paid by the employer.
Although the employer may be the policyholder, the insurance is actually for the benefit of the
employee. In a non-contributory plan, the payment by the employer of the entire premium is a part of
the total compensation paid for the services of the employee.
The primary aim of group insurance is to provide the employer with a means of procuring insurance
protection for his employees at a low cost and thereby retain their loyalty and efficiency.
Insular v Ebrado G.R. No. L-44059 October 28,
1977
Facts:
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 entitledto 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

Ratio:
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. 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 isn’t 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 children.