Insurance Law: INSURANC LAW - Cac - Atty. Ceniza 1

INSURANC
LAW | cac | Atty. Ceniza 1

INSURANCE LAW
I. GENERAL CONCEPTS

INSURANCE, DEFINITION
R.A. 10607
SEC. 2: An agreement whereby one undertakes for a
Sec. Whenever used in this Code, the following consideration to indemnify another against loss, damage or
2 terms shall have the respective meanings liability arising from an unknown or contingent event.
hereinafter set forth or indicated, unless the o A contract of suretyship shall be deemed to
context otherwise requires: be an insurance contract, within the
meaning of this Code, only if made by a
(a) A contract of insurance is an agreement surety who or which, as such, is doing an
whereby one undertakes for a insurance business as hereinafter provided.
consideration to indemnify another against
loss, damage or liability arising from an Otherwise stated, it is a contract whereby one party called
unknown or contingent event. A contract the insurer undertakes for a consideration to pay another
of suretyship shall be deemed to be an party called the insured, or his beneficiary, upon the
insurance contract, within the meaning of happening of the peril insured against, whereby the party
this Code, only if made by a surety who or insured or his beneficiary suffers loss or damage or is exposed
which, as such, is doing an insurance to liability.
business as hereinafter provided.
TEST TO DETERMINE IF A CONTRACT IS ONE OF INSURANCE
(b) The term doing an insurance business or It is whenever the assumption of risk and the indemnification
transacting an insurance business, within of loss is the principal object and purpose of the contract.
the meaning of this Code, shall include:
1. Making or proposing to make, as
insurer, any insurance contract;
2. Making or proposing to make, as
surety, any contract of suretyship as a PARTIES
vocation and not as merely incidental
to any other legitimate business or 1. INSURER –
activity of the surety; • The party who promises to pay in case loss results
3. Doing any kind of business, including because the peril insured against occurred
a reinsurance business, specifically • Includes all partnerships, associations, cooperation
recognized as constituting the doing or corporation engaged as principals in the insurance
of an insurance business within the business
meaning of this Code; o Under the present law, individuals are not
4. Doing or proposing to do any business considered as insurers
in substance equivalent to any of the • To be an insurer, a Certificate of Authority (CoA)
foregoing in a manner designed to must be issued by the Insurance Commissioner.
evade the provisions of this Code. o Art. 193 “No insurance compamy shall
transact any insurance business in the
In the application of the provisions of Philippines until after it shall have obtained a
this Code, the fact that no profit is certificate of authority for that purpose from
derived from the making of insurance the Insurance Commissioner upon application
contracts, agreements or transactions therefor and payment by the company
or that no separate or direct concerned of the fees.”
consideration is received therefor, o A CoA is required because contracts of
shall not be deemed conclusive to insurance involve public interest and
show that the making thereof does regulation thereof by the State is necessary
not constitute the doing or o A CoA shall expire on the last day of
transacting of an insurance business. December, 3 years following its date of
issuance, and shall be renewable every 3
(c) As used in this Code, the term years thereafter.”
Commissioner means the Insurance
Commissioner.

2 INSURANCE LAW | cac | Atty. Ceniza

2. INSURED – ELEMENTS OF A CONTRACT OF INSURANCE (PARIS)
• The one who enters into a contract with the insurer
• The owner of the policy whose property or life is 1. Premium – the contract is for a consideration. Since the
insured or who took out the insurance over the life insurer promises to pay in case of occurrence of a peril,
of persons in whom he has insurable interest the insured pays a premium.
• The insured must have capacity to enter into 2. Assumption of Risk – the insurer assumes the risk.
contracts, otherwise the contract is voidable. • The insurer promises to pay the insured if the risk
o SPOUSES: Either spouse can enter into insured against occurs.
insurance contracts without the consent of • May either be in money or deliver the equivalent
the other of the property that was lost.
§ Sec. 3: “The consent of the spouse is not 3. Risk or Peril existing - the insured must be exposed to
necessary for the validity of an insurance the particular risk/s for which the policy is issued. The
policy taken out by a married person on insured is subject to a risk of loss by the happening of
his or her life or that of his or her the designated peril.
children” § Sec. 3: “Any contingent or unknown event,
• “His or her children” is not limited whether part or future, which may damnify a
only to the common children of person having an insurable interest, or create a
the spouse. An insurance contract liability against him, may be insured against.
may also be taken out on the life o Risk must be:
of a child who is not also the child 1. a contingent or unknown event, whether
of the other spouse. past or future
o MINORS: Cannot enter into insurance 2. must damnify the insured or create
contracts. Any contract so entered will be liability against him
considered voidable. (18) o the risk must be real and such that neither
the insured nor the insurance company may
hasten or prevent it.
3. BENEFICIARY – 4. Insurable Interest - Interest of the insured over the
• The person in whose favor the insurance was taken things or persons over which he may suffer pecuniary
by the insured and who will receive the proceeds of losses
the insurance in case of loss; may be a third person 5. Scheme to Distribute Losses - Such assumption of risk is
o A person having insurable interest over the part of a general scheme to distribute actual losses
life of another may obtain an insurance policy among a large group of persons bearing a similar risk.
and designate himself as the beneficiary
o Or, a person may insure his own life or *Note: an insurance contract must have ALL the essential
property and designate somebody else or a elements of a valid contract (C-O-C)
third person as the beneficiary 1. Consent – of the contracting parties
• In strict legal sense, the beneficiary is NOT a party 2. Object – the obligation to indemnify another against
to the contract unless he is the insured himself. loss, damage, or liability arising from an unknown or
o However, the beneficiary has the right to file contingent event (proceeds not the object)
an action against the insurer in case of loss. 3. Consideration – it is the premium, the rate of which
• Only the beneficiary can recover the proceeds is measured by the character of the risk assumed
o Sec. 53: “The insurance proceeds shall be
applied exclusively to the proper interest of CHARACTERISTICS OF CONTACT OF INSURANCE (CAPUI)
the person in whose name or for whose
benefit it is made unless otherwise specified 1. Conditional –the contract is executor to the insurer
in the policy.” and subject to conditions, the principal one of which
o The proceeds are the separate and individual is the happening of the event insured against it.
property of the beneficiary, and not of the 2. Aleatory /Adhesion – a contract where one of the
heirs of the person whose life was insured. parties or both reciprocally bind themselves to give
o It is only when there is NO designated or to do something in consideration of what the
beneficiary or when the designation is void, other shall give or do upon the happening of an
that the laws of succession are applicable à event which is uncertain, or which is to occur at an
proceeds will form part of the estate of the indeterminate time.
deceased insured. • A contract of insurance is a contract where
some of the rights of the parties of the contract
are contingent upon chance events
INSURANC LAW | cac | Atty. Ceniza 3

3. Personal – the contract is personal because the GAISANO VS INSURANCE COMPANY OF NORTH AMERICA
contract is entered into with due consideration to
the circumstances of the parties • Case where IMC and LSPI are suppliers of Gaisano.
4. Uberrimae Fidei – contract of utmost good faith, • They obtained fire insurance policies with book debt
that both parties must not only perform their endorsements on the “ready-made clothing which
obligation is good faith but they must also avoid have been sold or delivered to various customers and
material concealment or misrepresentations. dealers of the insured anywhere in the PH”
5. Indemnity - the insured should not collect more • A fire broke out in Gaisano which destroyed the stocks
than the actual cash value of the loss. This is meant • IMC and LSPI were paid by the insurance company
to prevent the insured from profiting from insurance under their policies, and the latter, having the right of
and to reduce moral hazard. subrogation, filed for reimbursement against Gaisano.
Except: 1. Life Insurance- because the • The RTC dismissed the complaint holding that the fire
amount to be paid by the insurer can never was purely accident. However, the CA reversed, in that
be equal to the value of the life that is being Gaisano’s obligation is not the delivery of the lost
insured goods but the payment of its unpaid account, thus the
2. Valued policies under which the insurer obligation is not extinguished even if due to fire.
will pay the value fixed in the policy • Gaisano denied liability on the ground that the
regardless of the actual cash value in case of property covered by the insurance policies were
total loss destroyed due to fortuitous event.
o CA erred in construing a re insurance policy
II. INTERPRETATION on book debts as one covering the unpaid
accounts of IMC and LSPI since such insurance
GENERAL RULE applies to loss of the ready-made clothing
POP RULE – the plain, ordinary and popular meaning materials sold and delivered to petitioner.
• “Accident” in the Dela Cruz case
o Accident did not acquire any technical WON the insurance is one over credit? YES.
meaning, thus the ordinary meaning
will be used It is well-settled that when the words of a contract are plain
• ‘When the words and language of the and readily understood, there is no room for construction.
documents are clear and plain or readily
understandable by an ordinary reader thereof, In this case, the questioned insurance policies provide
there is absolutely no room for interpretation or coverage for "book debts in connection with ready-made
construction anymore.” clothing materials which have been sold or delivered to
various customers and dealers of the Insured anywhere in the
EXCEPTION Philippines."
AMBIGUITY – any ambiguity will be resolved strictly against • Book debts are the "unpaid account still appearing in
the insurer and liberally in favor of the insured – so as to the Book of Account of the Insured 45 days after the
effect the dominant purpose of indemnity or payment to the time of the loss covered under this Policy."
insured - .
• “Arrest” in the Malayan case Nowhere is it provided in the questioned insurance policies
o Because there are ambiguities to what that the subject of the insurance is the goods sold and
type of arrest the policy can be used, delivered to the customers and dealers of the insured.
the ambiguity should be resolved
against the insurer Indeed, when the terms of the agreement are clear and
• Any doubt should be resolved against the explicit that they do not justify an attempt to read into it any
insurer since an insurance contract is a contract alleged intention of the parties, the terms are to be
of adhesion. This is because the doubt was understood literally just as they appear on the face of the
caused by the insurer who created the insurance contract.
policy contract.
• Art. 1377: “The interpretation of obscure words Thus, what were insured against were the accounts of IMC
or stipulation in a contract shall not favor the and LSPI with petitioner which remained unpaid 45 days after
party who caused the obscurity.” the loss through fire, and not the loss or destruction of the
goods delivered.


MALAYAN INSURANCE CORP VS CA AND TKC MARKETING Be that as it may, exceptions to the general coverage are
construed most strongly against the company. Even an express
• Case where the issue is if the insured can claim from exception in a policy is to be construed against the underwriters
the insurer whose vessel was arrested by the civil by whom the policy is named, and for whose benefit the
authority. exception is introduced.

• Malayan Insurance claimed that the arrest of the
An insurance contract should be so interpreted as to carry out
vessel by civil authorities was an excepted risk under
the purpose for which the parties entered into the contract
the marine insurance policies.
which is, to insure against risks of loss or damage to the goods.
• CA: Under FCS Clause (Clause 12), the arrest by civil Such interpretation should result from the natural and
authorities is an excepted risk. However, the deletion reasonable meaning of language in the policy. Where restrictive
of the FSC Clause and the consequent adoption of the provisions are open to two interpretations, that which is most
Institute War Clauses (Cargo), made arrest and seizure favorable to the insured is adopted.
by judicial process one of the covered risks.
Indemnity and liability insurance policies are construed in
WON the arrest of the vessel was a risk covered under the accordance with the general rule of resolving any ambiguity
subject insurance policies. – YES. therein in favor of the insured, where the contract or policy is
WON the insurance policies must be strictly construed prepared by the insurer. A contract of insurance, being a
against the insurer. – YES. contract of adhesion, par excellence, any ambiguity therein
should be resolved against the insurer; in other words, it should
1. With the incorporation of the Institute War Clauses the be construed liberally in favor of the insured and strictly against
"arrest" caused by ordinary judicial process is deemed the insurer. Limitations of liability should be regarded with
included among the covered risks. This interpretation extreme jealousy and must be construed in such a way as to
becomes inevitable when the Institute War Clauses provided preclude the insurer from non-compliance with its obligations.
that "this insurance covers the risks excluded from the
Standard Form of English Marine Policy by the clause REX VERENDIA VS CA AND FIDELITY AND SURETY
'Warranted free of capture, seizure, arrest, etc. . . .'" or the
F.C. & S. Clause. • Case where Rex applied for an insurance policy with
• Jurisprudentially, "arrests" caused by ordinary judicial Fidelity and Surety Co (FSC) for his residential building,
process is also a risk excluded from the Standard Form and likewise insured the same with 2 other insurance
of English Marine Policy by the F.C. & S. Clause. companies.
• When the building was gutted with fire, Rex filed
2. Likewise, it must be borne in mind that such contracts are claims with all 3 companies but these were denied.
invariably prepared by the companies and must be accepted by • The insurance companies claim that Rex violated their
the insured in the form in which they are written. Any policy when he maliciously represented that at the
construction of a marine policy rendering it void should be time of the fire, a certain Roberto was leading the
avoided. Such policies will, therefore, be construed strictly building, when in fact it was Marcelo who was the
against the, company in order to avoid a forfeiture, unless no lessee.
other result is possible from the language used.
WON the contract of lease submitted by Verendia to support
*Contracts of insurance, being Adhesion contracts, and his claim on the fire insurance policy constitutes a false
which are unilaterally prepared by the insurance declaration which would forfeit his benefits under Section 13
company, must be construed strictly against the of the policy – YES.
insurance company and liberally in favor of the insured.

If a marine insurance company desires to limit or restrict the
An insurance contract, being a contract of indemnity, is the
operation of the general provisions of its contract by special
law between the parties. Its terms and conditions constitute
proviso, exception, or exemption, it should express such
limitation in clear and unmistakable language. Obviously, the
the measure of the insurer's liability and compliance
deletion of the F.C. & S. Clause and the consequent therewith is a condition precedent to the insured's right to
incorporation of subsection 1.1 of Section 1 of the Institute War recovery from the insurer.
Clauses (Cargo) gave rise to ambiguity. If the risk of arrest
occasioned by ordinary judicial process was expressly indicated As it is also a contract of adhesion, which is unilaterally
as an exception in the subject policies, there would have been no prepared by the insurance company, an insurance contract
controversy with respect to the interpretation of the subject should be liberally construed in favor of the insured and
clauses. strictly against the insurer company.


Considering that Verendia used a false lease contract to contracts for the parties; rather, they will intervene only
support his claim under Fire Insurance Policy No. F- 18876, when the terms of the policy are ambiguous, equivocal, or
the terms of the policy should be strictly construed against uncertain. The parties must abide by the terms of the
the him. Verendia failed to live by the terms of the policy, contract because such terms constitute the measure of the
specifically Section 13 insurer's liability and compliance therewith is a condition
precedent to the insured's right of recovery from the insurer.
Section 13 of the policy is expressed in terms that are clear
and unambiguous. While it is a cardinal principle of insurance law that a policy or
• "That all benefits under the policy shall be forfeited contract of insurance is to be construed liberally in favor of
if the claim be in any respect fraudulent, or if any the insured and strictly against the insurer company, yet
false declaration be made or used in support contracts of insurance, like other contracts, are to be
thereof, or if any fraudulent means or devises are construed according to the sense and meaning of the terms
used by the Insured or anyone acting in his behalf to which the parties themselves have used. If such terms are
obtain any benefit under the policy". clear and unambiguous, they must be taken and understood
in their plain, ordinary and popular sense. Moreover,
Verendia, having presented a false declaration to support his obligations arising from contracts have the force of law
claim for benefits (higher value, higher consideration) in the between the contracting parties and should be complied with
form of a fraudulent lease contract, he forfeited all benefits in good faith.
therein by virtue of Section 13 of the policy in the absence of
proof that Fidelity waived such provision.
TY VS FILIPINAS COMPANA DE SEGUROS
Worse, by presenting a false lease contract, Verendia
reprehensibly disregarded the principle that insurance • Case where the insured who was injured because a
contracts are uberrimae fidae and demand the most heavy object fell upon his left hand while trying to put
abundant good faith. out fire sought to claim from his insurance policy.
• He claims that it is enough that the insured is disabled
to such extent that he cannot substantially perform all
NEW LIFE ENTERPRISES V. COURT OF APPEALS acts or duties of the kind necessary in the prosecution
of his business.
• Case where NLE obtained insurance policies with 3 • The CA reversed the RTC ruling and held that under
insurance companies for its building and stocks the terms of the policy, for partial disability caused by
therein. loss of either hand to be compensable, the loss must
• When the building was gutted with fire, NLE filed result in the amputation of the hand.
claims with all 3 companies but these were denied
• The insurance companies claim that there was a WON petitioner can claim from the insurance policies? NO.
violation of Policy Condition No. '3' which requires the
insured to give notice of any insurance or insurances The provision is clear enough to inform the party entering
already effected covering the stocks in trade." into the contract that the loss to be considered a disability

entitled to indemnity, must be severance or amputation of
W/N Sy can claim against the three insurance companies for
that affected member from the body of the Insured.
violating the "Other Insurance Clause" NO.

The terms of the contract are clear and unambiguous. The The agreement contained in the policy is the law between the
insured is specifically required to disclose to the insurer any parties, and the Court cannot go beyond the clear and
other insurance and its particulars which he may have express conditions thereof.
effected on the same subject matter.

Thus where the terms of the policy are clear, express, and
The knowledge of such insurance by the insurer's agents,
even assuming the acquisition thereof by the former, is not specific that only amputation of the hand should be
the "notice" that would estop the insurers from denying the considered as a loss thereof, an interpretation that would
claim. include the fracture or other temporary disability not covered
by the policy would be unwarranted.
When the words and language of documents are clear and
plain or readily understandable by an ordinary reader
thereof, there is absolutely no room for interpretation or
construction anymore. Courts are not allowed to make

GULF RESORTS INC vs PHILIPPINE CHARTER INSURANCE DE LA CRUZ VS CAPITAL INSURANCE & SURETY
CORPORATION
• Case where the insured participated in a boxing
• Case where an earthquake struck and the properties contest in which he slipped and was hit by his
and 2 swimming pools of the insured were damaged. opponent on the left part of the back of the head
• The insured’s claim was denied on the ground that the which caused him to fall and hit head with the rope
insurance policy only afforded earthquake shock of the ring.
coverage to the 2 swimming pools of the resort. • Eduardo was insured "against death or disability
• Petitioner insists that the parties have intended to caused by accidental means".
extend the coverage through the attachment of the • The insurance company denied the claim of
phrase "Subject to: Other Insurance Clause, Typhoon insured’s son, petitioner, because the death was
Endorsement, Earthquake Shock Endorsement, caused by his participation in the boxing contest and
Extended Coverage Endorsement, FEA Warranty & was not accidental.
Annual Payment Agreement on Long Term Policies" to o The death of the injured was die to head-
the insurance policy. injury and said injury was sustained because
of his voluntary participation in the contest
Whether or not the insurance policy earthquake shock o And since his inclusion in the boxing card was
coverage extends to other property aside from the two voluntary on the part of the insured, he
swimming pools? NO. cannot be considered to have met his death
by "accidental means"
Petitioner cannot focus on the earthquake shock
endorsement to the exclusion of the other provisions. All the WON can claim? YES.
provisions and riders, taken and interpreted together,
indubitably show the intention of the parties to extend The terms "accident" and "accidental", as used in insurance
earthquake shock coverage to the two swimming pools only. contracts, have not acquired any technical meaning, and are
construed in their ordinary and common acceptation. Thus,
A careful examination of the premium recapitulation will the terms have been taken to mean that which happen by
show that it is the clear intent of the parties to extend chance or fortuitously, without intention and design, and
earthquake shock coverage only to the two swimming pools. which is unexpected, unusual, and unforeseen.

In the subject policy, no premium payments were made with An accident is an event that takes place without one's
regard to earthquake shock coverage, except on the two foresight or expectation — an event that proceeds from an
swimming pools. There is no mention of any premium unknown cause, or is an unusual effect of a known cause and,
payable for the other resort properties with regard to therefore, not expected
earthquake shock.
While the participation of the insured in the boxing contest is
In sum, there is no ambiguity in the terms of the contract and voluntary, the injury was sustained when he slid, giving
its riders. Petitioner cannot rely on the general rule that occasion to the infliction by his opponent of the blow that
insurance contracts are contracts of adhesion which should threw him to the ropes of the ring. Without this unfortunate
be liberally construed in favor of the insured and strictly incident, perhaps he could not have received that blow in the
against the insurer company which usually prepares it. A head and would not have died. The fact that boxing is
contract of adhesion is xxx attended with some risks of external injuries does not make
any injuries received in the course of the game not accidental.
We cannot apply the general rule on contracts of adhesion to In boxing, as in other equally physically rigorous sports, such
the case at bar. Petitioner cannot claim it did not know the as basketball or baseball, death is not ordinarily anticipated
provisions of the policy. From the inception of the policy, to result. If, therefore, it ever does, the injury or death can
petitioner had required the respondent to copy verbatim the only be accidental or produced by some unforeseen
provisions and terms of its latest insurance policy from AHAC- happening or event as what occurred in this case.
AIU.
Death or disablement resulting from engagement in boxing
contests was not declared outside of the protection of the
insurance contract. Failure of the defendant insurance
company to include death resulting from a boxing match or
other sports among the prohibitive risks leads inevitably to
the conclusion that it did not intend to limit or exempt itself
from liability for such death.

UNITED MERCHANTS VS COUNTRY BAKERS INSURANCE INSULAR LIFE ASSURANCE COMPANY LTD vs KHU

• Case where insurer refuse to pay the claim on the • Case where the dispute is when the policy was
ground that the policy was fraudulent because it reinstated for the beneficiary to claim.
showed that there were no stocks and that insured • The insurer claims that when the insured died, the
had padded its inventory. policy was still contestable, and because the insured
• CBIC contends that because arson and fraud attended failed to disclose his diabetes, the insurer can rescind
the claim, UMC is not entitled to recover under the policy.
Condition No. 15 of the Insurance Policy.

Whether UMC is entitled to claim from CBIC the full Whether Felipe's reinstated life insurance policy is already
coverage of its fire insurance policy? NO. incontestable at the time of his death? YES.

Condition No. 15 of the Insurance Policy provides that all the The date of last reinstatement mentioned in Section 48 of the
benefits under the policy shall be forfeited, if the claim be in Insurance Code pertains to the date that the insurer
any respect fraudulent, or if any false declaration be made or approved the application for reinstatement. However, in light
used in support thereof. of the ambiguity in the insurance documents to this case, this
Court adopts the interpretation favorable to the insured in
in re insurance policies, which contain provisions such as determining the date when the reinstatement was approved.
Condition No. 15 of the Insurance Policy, a fraudulent
discrepancy between the actual loss and that claimed in the In this case, the parties differ as to when the reinstatement
proof of loss voids the insurance policy. was actually approved. Insular Life claims that it approved the
reinstatement only on December 27, 1999 (when last
In fire insurance policies, which contain provisions such as payment of the additional extra premium was made). On the
Condition No. 15 of the Insurance Policy, a fraudulent other hand, respondents contend that it was on June 22,
discrepancy between the actual loss and that claimed in the 1999 that the reinstatement took effect.
proof of loss voids the insurance policy.
CA did not commit any error in holding that the subject
All the circumstances point to the inevitable conclusion that insurance policy be considered as reinstated on June 22,
UMC padded its claim and was guilty of fraud, UMC violated 1999. This finding must be upheld not only because it accords
Condition No. 15 of the Insurance Policy. Thus, UMC forfeited with the evidence, but also because this is favorable to the
whatever benefits it may be entitled under the Insurance insured who was not responsible for causing the ambiguity or
Policy, including its insurance claim. obscurity in the insurance contract.

While it is a cardinal principle of insurance law that a contract An insurance contract is a contract of adhesion which must
of insurance is to be construed liberally in favor of the insured be construed liberally in favor of the insured and strictly
and strictly against the insurer company, contracts of against the insurer in order to safeguard the latter's interest
insurance, like other contracts, are to be construed according
to the sense and meaning of the terms which the parties Indeed, more than two years had lapsed from the time the
themselves have used. subject insurance policy was reinstated on June 22, 1999 vis-
a-vis Felipe's death on September 22, 2001. As such, the
If such terms are clear and unambiguous, they must be taken subject insurance policy has already become incontestable at
and understood in their plain, ordinary and popular sense. the time of Felipe's death.
Courts are not permitted to make contracts for the parties;
the function and duty of the courts is simply to enforce and
carry out the contracts actually made.


III. BENEFICIARIES
(Go back to page 2) KINDS OF BENEFICIARIES

What is a beneficiary? 1. Revocable vs Irrevocable
A beneficiary is a person whether natural or juridical for 2. Illegible to become beneficiaries
whose benefit the policy is issued and is the recipient of the 3. Disqualified as beneficiary
proceeds in the insurance. (one designated in the policy to
receive the insurance proceeds; person OR entity [through
representative] HEIRS OF MARAMAG

Who can be a beneficiary? • Insured named common law wife and common law
Any person in general can be a beneficiary. children as beneficiary
• Both legal and common law wife tried to claim from
Are there any exceptions? the proceeds.
Yes. The only persons disqualified from being a beneficiary
are those not qualified to receive donations under Art. 1. who can claim on the insurance proceeds? can party
739. They cannot be named beneficiaries of a life insurance NOT designated claim
policy by the person who cannot make any donation to him. 2. Can illegitimate spouse be designated as beneficiary?
• Art. 739. The following donations shall be void: 3. Can illegitimate children be designated as beneficiaries?
1. Those made between persons who were guilty 4. If designated beneficiary is illegitimate spouse and found
of adultery or concubinage at the time of the ineligible, can proceeds be paid to surviving heirs of the
donation; insured?
2. Those made between persons found guilty of
the same criminal offense, in consideration 1. THE RULE IN DESIGNATION: ONLY those designated
thereof; in the insurance policy can claim the proceeds
3. Those made to a public officer or his wife, therefore those who have not been designated has
descedants and ascendants, by reason of his no interest in the insurance policy. (hindi binanggit?
office. di makakakuha DUH)
RULE: ANYONE can be designated as beneficiary,
In case of adultery, concubinage does the disqualification except those prohibited by law to receive donation
extend to the illegitimate children?
2. Illegitimate spouse cannot be designated as
NO. The disqualification does not extend to the children, and
beneficiary. Basis? Civil Code. (If no applicable law in
as such, they may be made beneficiaries.
insurance code, look at the civil code) (no provision

in insurance code disqualifying, but civil code
What is the current rule regarding revocability of
provides that persons not entitled or allowed to
designation of beneficiary?
receive donation CANNOT be named as beneficiary)
The insured has the power to revoke the designation of the ILLEGITIMATE SPOUSE IS NOT AND CANNOT BE
beneficiary even without the consent of the latter, whether BENEFICIARY IN A LIFE INSURANCE POLICY.
or not such power is reserved in the policy. Such right must
be exercised specifically in the manner set forth in the policy 3. Designation valid. No proscription against
or contract. It is of course, extinguished at his death and designation of an illegitimate child.
CANNOT be exercised by his personal representatives or
assignees. 4. NOT NECESSARILY. If there are illegitimate children,
give to them. If none, proceeds will go to the estate.
Under the current rule, when does the insured lose the right Rules:
to change the beneficiary? 1. heirs CANNOT be beneficiaries unless
When the right to change the beneficiary is expressly waived they are designated as such
in the policy, the insured has no power to make such change 2. proceeds cannot go the estate because
without the consent of the beneficiary. they are only to get the insured if there
are none
What if the beneficiary dies before the insured and the
insured did not change the designation, who gets the NO OTHER QUALIFIED BENEFICIARIES
proceeds? - SINCE the children are the designated beneficiaries,
There is a divergence of opinion, but the general trend is to they are to get the share
give it to the estate of the beneficiary.

BENEFICIARY; Designation is not permanent HEIRS OF MARAMAG V DE GUZMAN MARAMAG

A. Revocable beneficiary vs Irrevocable Beneficiary • Case where the beneficiaries listed were the common
• R: beneficiary whose designation may be law wife and children.
revoked/changed at any time – • The common law wife was a suspect in the killing thus
o NO vested right; he retains the property right was disqualified from receiving any proceeds.
(discretion) until his last breath; • The petitioners thus (legitimate family) claim that
o SUBJECT TO ESTATE TAX (kasi hinawakan niya since illegitimate children are entitled to only half of
during his lifetime. it is the insured’s property the legitime of the legitimate children, the proceeds
until last breath) should be released to them
o pre-deceased of beneficiary (designated died • TC ruled in favor of the illegitimate children.
ahead of the insured) - beneficiary goes to the o Since Eva was disqualified as a beneficiary by
estate of the insured Insular Life, the entire proceeds would be paid to
the illegitimate children pursuant to Sec 53 of the
• IR: designation is permanent - vested right; Insurance Code. Only in cases where there are no
o insured already waived the right to change beneficiaries designated or when the only
beneficiary (waiver is the vested right in designated beneficiary is disqualified thatthe
favor of the beneficiary); proceeds should be paid to the estate of the
o no discretion na, its a transfer of right inter insured.
vivos;
o NO ESTATE TAX TO BE PAID (kasi dinonate W/N the members of the legitimate family are entitled to
na niya during his lifetime) the proceeds of the insurance for the illegitimate family –
o pre-deceased of beneficiary (designated NO
died ahead of the insured) - beneficiary
goes to the estate of the beneficiary It is clear that based on the provision that, the only persons
entitled to claim the insurance proceeds are either the
Default: REVOCABLE BENEFICIARY insured, if still alive, or the beneficiary, if the insured is
already deceased, upon the maturation of the policy.

B. Qualification In this case, the petitioners are third parties to the insurance
• Anyone can be a beneficiary, except those contracts, thus, are not entitled to the proceeds. Insular Life
disqualified to receive donation as provided in the and Grepalife have no obligation to turn over the proceeds to
civil code them.
• if the beneficiary is disqualified, the portion is to be
forfeited in favor of other beneficiaries Because no legal proscription exists in naming as beneficiaries
• if there are no other beneficiaries, goes to the estate the children of illicit relationships by the insured, the shares
o NOT directly to the estate, the proceeds will be of Eva in the insurance proceeds, whether forfeited by the
subjected to regular settlement of estate of the court in view of the prohibition on donation under Art 739 of
deceased insured the Civil Code or by the insurers themselves based on the
insurance contracts, must be awarded to the remaining
• Adultery and concubinage- proof of guilt: ONLY designated beneficiaries, the illegitimate children, to the
PREPONDERANCE OF EVIDENCE; no conviction with exclusion of the petitioners.
the court is required.
o fact that parties are into adulterous It is only in cases where the insured has not designated any
relationship disqualifies them from being beneficiary or when the designated beneficiary is disqualified
beneficiaries by law to recieve the proceeds, that the insurance policy
o not subject to conviction or prior proceeds shall redound to the benefit of the estate of the
conviction; that is why only preponderance insured.
of evidence is required

*Do not confuse beneficiary with insurable interest
• designation of beneficiary: NO requirement of Sec. The insurance proceeds shall be applied
insurable interest 53 exclusively to the proper interest of the
person in whose name or for whose benefit it
is made unless otherwise specified in the
policy.

• The insured was also entitled to retirement
GEN RULE: only persons entitled to claim the insurance insurance benefits but he did designate any
proceeds are either the insured, if still alive; or the beneficiary who would receive the retirement
beneficiary, if the insured is already deceased, upon the insurance due to him.
maturation of the policy. • Both wives filed a claim. GSIS granted half to each.

EXCEPT: a situation where the insurance contract was To whom should the retirement insurance benefit be paid
intended to benefit third persons who are not parties to the due to the failure of designating a beneficiary? – Both are
same in the form of favorable stipulations or indemnity. In entitled to half
such a case, third parties may directly sue and claim from the
insurer Law creating the Government Service Insurance System is
Commonwealth Act 186 enacted on 1936. (at this time, what
SOUTHERN LUZON EMPLOYEES’ ASSOC. V GOLPEO was required was only a life insurance policy)

• Case where the company has a resolution stating Commonwealth Act 186, was amended by RA 660 in 1951
that a member may designate his common-law wife (which now provided that a retirement insurance be also
as his beneficiary and or children with her and that established, apart from the life insurance).
such persons so named will be the sole persons to be
recognized by the association regarding claims for When Consuegra designated his beneficiaries in his life
condolence contributions. insurance he could not have intended those beneficiaries of
• The deceased here had 3 families (3 sets of his life insurance to also be the beneficiaries of his retirement
claimants), he however listed his common law wife insurance because the provisions on retirement insurance
and their children as the beneficiaries. under the GSIS came about only on 1951. Hence, it cannot be
• The legal wife contend that the proceeds should be said that because herein appellants were designated
given to them as the stipulation is void for being beneficiaries Consuegra's life insurance they automatically
contrary to law, moral or public policy. became beneficiaries also of his retirement insurance.

W/N the legal wife is entitled to the condolence contribution Under the law, (since the life insurance fund and the
– NO retirement insurance fund are two separate and distinci
systems of benefits to its memebers), there is a need for the
The decision is based mainly on the theory that the contract employee to file an application for retirement insurance
between the plaintiff and the deceased Roman A. Concepcion benefits when he becomes a member of GSIS and he should
partook of the nature of an insurance and that, therefore, the state in his application the beneficiary of his retirement
amount in question belonged exclusively to the beneficiaries insurance. Hence, the beneficiary named in the life insurance
• Jurisprudence: the proceeds of the life- insurance does not automaticelly become the beneficiary in the
policy belongs exclusively to the defendant as his retirement insurance unless so designated.
individual and separate property. That the proceeds • Proceeds of a life insurance are paid to whomever is
of an insurance policy belong exclusively to the named the beneficiary in the policy and it may not
beneficiary and not to the estate of the person necessarily be the heir of the insured. The insured may
whose life was insured, and that such proceeds are designate any person as beneficiary unless disqualified
the separate and individual property of the bene under the Civil Code. Absence any beneficiary named
ciary and not of the heirs of the person whose life the proceeds will go to the estate of the insured.
was insured • The retirement insurance is primarily for the benefit of
the employee. If he reaches the age of retirement, he
Held, that said beneficiaries are exclusively entitled to the gets the retirement benefits to the exclusion of the
death benfit, the agreement between the deceased member designated beneficiaries. The designated beneficiary
and the association being analogous to insurance. can only claim the the proceeds if the employee dies
before retirement. If there was no desifnated
VDA. DE CONSUEGRA V GSIS beneficiary, the proceeds will accrue to his estate and
will be given to his legal heirs.
• Case with 2 marriages, first with no living children,
and second, contracted in good faith while the first GSIS had correctly ruled to divide the proceeds of the
was subsisting, bearing 7 children. retirement insurance equally to Diaz (the first living wife, in
• The proceeds of the life insurance policy with GSIS which the marriage still subsisted) and Berdin (wherein the
nd
were paid to the 2 wife and children who were second marriage was contracted in good faith), along with her
named the beneficiaries in the policy. children.

INSULAR LIFE V EBRADO IV. INSURABLE INTEREST

• Case with 2 marriages. Sec. No contract or policy of insurance on
• During the pre-trial, the parties agreed and 18 property shall be enforceable except for the
stipulated that Pascuala was the legitimate wife and benefit of some person havong an insurable
had 6 children with Buenaventura. During his interest in the proprety insured.
lifetime, Buenaventura lived with Carponia as his
common-law wife (bearing 4 children) although he INSURABLE INTEREST, sir notes
was not legally separated from his legal wife
• that interest a person has in the subject matter
W/N the common-law wife that is named as the beneficiary insured where he has a connection/relation with,
receive the proceeds of the insurance policy – NO such that the person will derive pecuniary
benefit/relation with, such that the person will
The contract of life insurance is governed by the general rules derive pecuniary benefit/advantage from the
of the civil law regulating contracts. And Under Art 2012 of preservation or suffer pecuniary loss/damage if it is
the NCC: lost/destroyed/terminated
“Any person who is forbidden from receiving any • does not apply only to property but also to life
donation under article 739 cannot be named o you do not put value on the life of a person
beneficiary of a life insurance policy by the person
who cannot make any donation to him.” • The interest insured has over persons or things of
which he may suffer loss or pecuniary damage in
Common-law spouses are barred from receiving donations case of loss or deterioration of the person or thing
from each other. Art 739 of the NCC provides: OR gain upon its preservation
“The following donations shall be void: o not accurately good in life insurance
1. Those made between persons who were guilty of because you cant put value on the life of a
adultery or concubinage at the time of donation; person
Xxxx” § one is not insured more because of
one’s economic value
A life insurance policy is no different from a civil donation o contract of insurance = contract of
insofar as the beneficiary is concerned. Both are founded indemnity ; you will recover to the extent
upon the same consideration: liberality. A beneficiary is like a you have been damnified
donee because from the premiums of the policy which the
insured pays out of liberality, the beneficiary will receive the 3 important provisions:
proceeds of the insurance. 1. grounded on the insurable interest in life in Sec. 10
2. To what extend in property in sec. 14
As a consequence, the proscription in Art 739 of the NCC 3. Insurable interest existence in life and property Sec. 19
should equally operate in life insurance contracts and the + ALSO SEC. 25 (4)
mandate of Art 2012 cannot be laid aside.

A beneficiary in a life insurance policy is no different from a Sec. Every person has an insurable interest in the
donee. Both the recipients of pure beneficence. So long as 10 life and health:
marriage remains the threshold of family laws, reason and (a) Of himself, of his spouse and of his
morality dictate that the impediments imposed upon married children;
couple should likewise be imposed upon extra- marital (b) Of any person on whom he depends wholly
relationship. If legitimate relationship is circumscribed by or in part for education or support, or in
these legal disabilities, with more reason should an illicit whom he has a pecuniary interest;
relationship be restricted by these disabilities. (c) Of any person under a legal obligation to
him for the payment of money, or
In addition, a conviction for adultery of concubinage is not respecting property or services, of which
necessary before the disablities mentioned in Art 739 may death or illness might delay or prevent the
effectuate. The law plainly states that the guilt of the party performance; and
may be proved in the same action for declaration of nullity of (d) Of any person upon whose life any estate
donation. It would be sufficient of evidence preponderates or interest vested in him depends.
upon the guilt of the consort for the offense indicated. The

quantum of proof in criminal cases is not demanded.

A. Of himself, of his spouse and of his children; Sec. An interest in property insured must exist
19 when the insurance takes effect, and when
• Pwede magpainsure husband without his consent? – YES the loss occurs, but need not exist in the
• Children without knowledge? - YES meantime; and interest in the life or health of
o ^^because you have insurable interest a person insured must exist when the
o ^^^spouse: legal spouse dapat insurance takes effect, but need not exist
o ^^^children: no technical definition thereafter or when the loss occurs.
o ^^^^parent?: GEN RULE: NO.
Exception/Qualification: paragraph 2 When should the insurable interest be present?
Life vs Property
B. Of any person on whom he depends wholly or in part for • Life insurance- present at the time the policy takes
education or support, or in whom he has a pecuniary effect (april 1, 2000 in the example) and need not be
interest; present thereafter

• Mr. Ferraris example. The girl, whom he has no H —> W *beneficiary is H
relationship with, but is wholly dependent on him. April 1, 1999 - marriage
April 1, 2000 - insurance
C. Of any person under a legal obligation to him for the Feb 14, 2005 - annulment
payment of money, or respecting property or services, of
which death or illness might delay or prevent the *insurance policy claimed 2005- VALID
performance; and *if claim filed April 1, 2006 and Nov 1, 2005
(died) - VALID
• Leuterio case: DBP insured for Grepalife the borrowers
à no relationship but DBP stands to lose if the debtor • Property Insurance - must exist BOTH at the time
will die while obligation is existing policy takes effect and at the time of the loss, BUT
NEED NOT EXIST IN THE MEANTIME!
D. Of any person upon whose life any estate or interest
vested in him depends. Two scenarios:
1. O - owner of Serao Jeep —> obtained insurance policy
• Ms. Yap case Ms. Yap came from rich family; real April 1,2017
properties; lawyer; real properties remained idle later sold the Jeep on April 2, 2017
• Mr. Ocampo - lawyer, but decided to be a farmer; no jeep carnapped April 3, 2017
property; pumuta kay miss yap; hiram ako bukid, aararo Who can get? NONE!!! No insurable interest at the
ko, ano man ang aking maaani ay akin time of loss.
• Ms. Yap: okay. If something happens to me, iwan them UNLESS INSURANCE COMPANY ALLOW THAT THE
to my tagapagmana POLICY WOULD TRANSFER
• Mr. Ocampo can insure because he has insurable
interest. 2. O - owner of Serao Jeep —> obtained insurance policy
April 1,2017
Sec. An insurable interest in property may consist later sold the Jeep on April 2, 2017 (conditional sale
14 in: buyer has 30 days)
(a) An existing interest; the Jeep was returned to O April 3, 2017
(b) An inchoate interest founded on an O parked it outside his house and was subsequently
existing interest; or carnapped
(c) An expectancy, coupled with an existing Carnapped + collision = TOTAL LOSS
interest in that out of which the Who can get? OWNER! Owner can recover even if
expectancy arises. that there is a period between the time of the taking
of the insurance and the time of the loss that Owner
• Extends to existing interest - current interest; had no insurable interest over the car.
• Inchoate (yet to ripen to existing interest) interest (need not exist in the meantime)
founded on an existing interest - halamaang maliit; The insurance is deemed suspended during the
gimelena tree example; inchoate interest (the intervening period.
expectancy of the sale) on the existing interest
(halamaang maliit); insurable


Is a waiver of insurable interest in insurance policy, valid? The basis of such requirement of insurable interest in
NO! Sec. 25: property insured is based on preventing a person from taking
out an insurance policy on property upon which he has no
Sec. Every stipulation in a policy of insurance for insirable interest and collecting the proceeds in case of the
25 the payment of loss whether the person loss of the property.
insured has or has not any interest in the
property insured, or that the policy shall be In this case, CKS has no insurable interest in the goods and
received as proof of such interest, and every merchandise inside the leased premises under Sec 17 of the
policy executed by way of gaming or Insurance Code.
wagering, is void.
Therefore, CKS cannot validly be a beneficiary of the fire
insurance policy iver the merchandise. The insurable interest
INSURABLE INTEREST: over the merchandise remains with the sps Cha.
• One of the most basic and essential requirements in
an insurance contract. The automatic assignment of the policy to CKS under the
• It is that interest a person has in the subject matter lease contract is void for being contrary to law and/or public
insured where he has a connection or relation with, policy.
such that the person will derive pecuniary benefit or
advantage from the preservation or suffer pecuniary GAISANO CAGAYAN V INSURANCE COMPANY OF NA
loss or damage if it is lost, destroyed or deteriorated
• If the insured has no insurable interest over the life • Case where IMC and LSPI are suppliers of Gaisano.
or property he insures, the insurance contract is • They obtained fire insurance policies with book debt
considered unenforceable. endorsements on the “ready-made clothing which
• Consent of the insured (if not the same person who have been sold or delivered to various customers
pays for the insurance) is not necessary and dealers of the insured anywhere in the PH”
• A fire broke out in Gaisano which destroyed the
stocks
SPOUSES CHA & UNITED INSURACE V CA & CKS • IMC and LSPI were paid by the insurance company
DEVELOPMENT under their policies, and the latter, having the right
of subrogation, filed for reimbursement against
• Case where the lease contract provided that lessee Gaisano.
shall not insure against fire the chattels, • Petitioner argues that IMC bears the risk of loss
merchandise, etc placed in the leased premises because it expressly reserved ownership of the
without obtaining the written consent and approval goods by stipulating in the sales invoices that "[i]t is
of the lessor; if the lessee obtains the insurance further agreed that merely for purpose of securing
without the consent of the lessor, the policy is the payment of the purchase price the above
deemed assigned and transferred to the lessor for its described merchandise remains the property of the
own benefit. vendor until the purchase price thereof is fully paid."
• However, notwithstanding the stipulation, lessee still
acquired a policy. A fire broke out and upon Petitioner bears the risk of loss of the goods delivered.
knowledge, of the insurance policy procured by the
spouses and demanded from United Insurance that IMC and LSPI did not lose complete interest over the goods.
the proceeds of the insurance contract be paid They have an insurable interest until full payment of the value
directly to it based on its lease contract with the sps of the delivered goods. Unlike the civil law concept of res
Cha. United Insurance refused the claim. perit domino, where ownership is the basis for consideration
of who bears the risk of loss, in property insurance, one's
W/N CKS has insurable interest over the insured property, interest is not determined by concept of title, but whether
allowing it to beocme a beneficiary of the insurance – NO insured has substantial economic interest in the property
(WON paragraph 18 of the lease contract entered into
between CKS and the Cha spouses is valid) Therefore, an insurable interest in property does not
necessarily imply a property interest in, or a lien upon, or
A non-life insurance policy is primarily a contract of possession of, the subject matter of the insurance, and
indemnity. Insurable interest in the property insured must neither the title nor a beneficial interest is requisite to the
exist at the time the insurance takes effect and at the time existence of such an interest, it is sufficient that the insured is
the loss occurs. so situated with reference to the property that he would be


liable to loss should it be injured or destroyed by the peril of the debtor’s death before his indebtedness with DBP shall
against which it is insured. have been fully paid, an amount to pay the outstanding
indebtedness shall first be paid to the creditor and the
Anyone has an insurable interest in property who derives a balance, if any, shall then be paid to the beneficiary/ies
benefit from its existence or would suffer loss from its designated by the debtor.”
destruction.
In Gonzales La O v Yek Tong Lin Fire & Marine Insurance Co.,
Indeed, a vendor or seller retains an insurable interest in the it was held that “although a policy issued to a mortgagor is
property sold so long as he has any interest therein, in other taken out for the benefit of the mortgagee and is made
words, so long as he would suffer by its destruction, as where payable to him, the mortgagor may sue in his own name,
he has a vendor's lien. especially where the mortgagee’s interest is less than the full
amount recoverable under the policy.”
In this case, the insurable interest of IMC and LSPI pertain to
the unpaid accounts appearing in their Books of Account 45 And since a policy of insurance upon life or health may pass
days after the time of the loss covered by the policies. by transfer, will, or succession to any person, whether he has
insurable interest or not, such person may recover it
GREPALIFE V CA & LEUTERIO whatever the insured might have recovered. Thus, Medarda
may file the suit against Grepalife.
• Case with the group life insurance with Grepalife and
DBP. MASTURE INSURANCE POLICY:
• Dr. Leuterio applied for the group plan and was 3M INSURED; 3M UTANG; 1.7 NABAYARAN NA;
issued the corresponding policy. Upon his death, NAMATAY:
both Mrs. Leuterio and DBP filed a claim with • 3-1.7 = 1.3 BAYAD SA UTANG
Grepalife. Grepalife denied the claims on the ground • 1.7 BIGAY SA BENEFICIARIES
that Dr. Leuterio failed a material fact, specifically his
hypertension. It also contended that Mrs. Leuterio
was not the proper party to file the case. V. CONCEALMENT

W/N Medarda can file a suit against Grepalife to recover the Misrepresentation and concealment
proceed of the insurance policy – YES • Ground for denial of liability
• Not limited only in life insurance; also in property
The rationale of a group insurance policy of mortgagors (aka insurance
mortgage redemption insurance) is to be a device for the
protection of both the mortgagee and mortgagor. Concealment vs Misrepresentation

• Both if done in material fact is sufficient to rescind
For the mortgagee (DBP), it has to enter into such form of contract of insurance
contract so that if the mortgagor dies during the subsistence o if not on a material fact - NOT sufficient to
of the mortgage contract, the proceeds from the insurance deny the claim
will be applied to the payment of the martgage debt, relieving o ex: failing to disclose sore eyes
the heirs of the mortgagor from paying the obligation.
• C = paglilihim;

• M = pagsinungaling
For the mortgagor (Wilfredo), in the event of his death, the

mortgage obligation will be extinguished by the application of
• Basis for rule on C&M: contract of good faith
the insurance proceeds to the mortgage indebtedness.

• No need for causal connection between fact
Consequently, the mortgagor pays the insurance premium
concealed and cause of death.
under the group insurance policy, making the loss payable to
o What law requires only that there is
the mortgagee. The insurance is still on the mortgagor’s
misrepresentation or concealment.
interest and he continues to be a party to the contract.

In this type of policy insurance, the mortgagee is simply an

appointee of the insurance fund and not a party to the
contract. Sec. A neglect to communicate that which a party
26 knows and ought to communicate, is called a
In this case, Wilfredo did not cede to DBP all his rights or concealment.
interests in the insurance, the policy stating that “in the event

Sec. A concealment whether intentional or NG GAN ZEE VS ASIAN CRUSADER LIFE ASSURANCE CORP.
27 unintentional entitles the injured party to (ACLAC)
rescind a contract of insurance.
• Case where the insurer refused to pay the proceeds
• Good faith is no defense in concealment. of the insurance on the ground of false and
misleading information.
• The insured stated that he was operated for a tumor
on his stomach about the size of a hen’s egg when in
truth and in fact he was operated for peptic ulcer
and a specimen removed from the patient's body
was 'a portion of the stomach measuring 12 cm. and
Sec. Each party to a contract of insurance must 19 cm. along the lesser curvature with a diameter of
28 communicate to the other, in good faith, all 15 cm. along the greatest dimension.
facts within his knowledge which are
material to the contract and as to which he Was there material concealment?- NO.
makes no warranty, and which the other has
not the means of ascertaining. 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 me
same."

"The concealment must, in the absence of inquiries, be not
only material, but fraudulent, or the fact must have been
intentionally withheld."
Sec. An intentional and fraudulent omission, on
29 the part of one insured, to communicate Assuming that the answer given by Kwong is false, as claimed
information of matters proving or tending to by the ACLAC, Sec. 27 of the Insurance Law, nevertheless
prove the falsity of a warranty, entitles the requires that fraudulent intent on the part of the insured be
insurer to rescind. established to entitle the insurer to rescind the contract.
“Sec. 27. Such party to 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."

In this case remember that Kwong had informed the

appellant's medical examiner that the tumor for which he
Sec. Materiality is to be determined not by the
was operated on was "associated with ulcer of the stomach''.
31 event, but solely by the probable and
In the absence of evidence that the insured had sufficient
reasonable influence of the facts upon the
medical knowledge as to enable him to distinguish between
party to whom the communication is due, in
"peptic ulcer" and "a tumor", his statement that said tumor
forming his estimate of the disadvantages of
was "associated with ulcer of the stomach," should be
the proposed contract, or in making his
construed as an expression made in good faith of his belief as
inquiries.
to the nature of his ailment and operation. Indeed, such
statement must be presumed to have been made by him
without knowledge of its incorrectness and without any
MATERIALITY: the test is if the knowledge would influence or deliberate intent on his part to mislead ACLAC.
affect the parties in making the contract.


SUNLIFE ASSURANCE COMPANY OF CANADA (ASCC) VS CA GREPALIFE V CA & LEUTERIO
AND SPS BACANI
• Case with the group life insurance with Grepalife and
• Case where the insurer refused to pay the proceeds DBP.
because upon investigation, it appeared that the • Dr. Leuterio applied for the group plan and was
insured was examined and confined in the the Lung issued the corresponding policy. Upon his death,
Center of the PH where he was subject to numerous both Mrs. Leuterio and DBP filed a claim with
tests two weeks prior to his application, which is in Grepalife. Grepalife denied the claims on the ground
contravention of his statement that he has not that Dr. Leuterio failed a material fact, specifically his
consulted any doctor, nor subjected to tests in the hypertension.
last 5 years.
W/N Wilfredo concealed that he had hypertension, which
WON there was material concealment and would vitiate the insurance contract – NO.
misrepresentation? – YES.
Petitioner: Dr. Leuterio failed to disclose that he had
Section 26 of the Insurance Code is explicit in requiring a hypertension, which might have caused his death. Thus, it
party to a contract of insurance to communicate to the other, may annul the insurance contract.
in good faith, all facts within his knowledge which are
material to the contract and as to which he makes no Concealment exists where the assured had knowledge of a
warranty, and which the other has no means of ascertaining. fact material to the risk, and honesty, good faith, and fair
"A neglect to communicate that which a party knows dealing requires that he should communicate it to the
and ought to communicate, is called concealment." assured, but he designedly and intentionally withholds the
same.
The terms of the contract are clear. The insured is specifically
required to disclose to the insurer matters relating to his In this case, Grepalife merely relied on the testimony of the
health. attending physician, Dr. Mejia, as supported by the
information given by the widow of the decedent. Such
The information which the insured failed to disclose were statement of the physician, which was merely inferred from
material and relevant to the approval and the issuance of the the widow’s statetment, is hearsay.
insurance policy. The matters concealed would have
definitely affected ACCA’s action on his application, either by There was no sufficient proof showing that the insured had
approving it with the corresponding adjustment for a higher suffered from hypertension. Aside from the statement of the
premium or rejecting the same. insured's widow who was not even sure if the medicines
taken by Dr. Leuterio were for hypertension, Grepalife had
A disclosure may have warranted a medical examination of not proven nor produced any witness who could attest to Dr.
the insured by petitioner in order for it to reasonably assess Leuterio's medical history.
the risk involved in accepting the application.
Grepalife had failed to establish that there was concealment
Thus, "good faith" is no defense in concealment. Robert’s made by the insured, hence, it cannot refuse payment of the
failure to disclose the fact that he was hospitalized for two claim.
weeks prior to filing his application for insurance, raises grave
doubts about his bonafides. It appears that such concealment The fraudulent intent on the part of the insured must be
was deliberate on his part. established to entitle the insurer to rescind the contract.
Misrepresentation as a defense of the insurer to avoid
Anent the finding that the facts concealed had no bearing to liability is an affirmative defense and the duty to establish
the cause of death of the insured, it is well settled that the such defense by satisfactory and convincing evidence rests
insured need not die of the disease he had failed to disclose upon the insurer.
to the insurer. It is sufficient that his non- disclosure misled
the insurer in forming his estimates of the risks of the In the case at bar, the petitioner failed to clearly and
proposed insurance policy or in making inquiries. satisfactorily establish its defense, and is therefore liable to
pay the proceeds of the insurance.


NEW LIFE ENTERPRISES V. COURT OF APPEALS WON Manuel guilty of concealing his illness- YES.

• Case where NLE obtained insurance policies with 3 Petitioner: PPI should have returned the application to
insurance companies for its building and stocks Manuel when it saw the unfilled spaces in the pension plan
therein. application. Since PPI shose to approve the application it now
• When the building was gutted with fire, NLE filed cannot cry concealment on Manuel’s part. Further, PPI never
claims with all 3 companies but these were denied queried Manuel directly regarding the state of his health.
• The insurance companies claim that there was a
violation of Policy Condition No. '3' which requires the SC: Lourdes is shifting to PPI the burden of putting on the
insured to give notice of any insurance or insurances pension plan application the true state of Manuel's health.
already effected covering the stocks in trade." She forgets that since PPI waived medical examination for
Manuel, it had to rely largely on his stating the truth
WON there was concealment? YES. regarding his health in his application. For, after all, , he knew
more than anyone that he had been under treatment for
The terms of the contract are clear and unambiguous. The heart condition and diabetes for more than ve years
insured is specifically required to disclose to the insurer any preceding his submission of that application. But he kept
other insurance and its particulars which he may have those crucial facts from Philam Plans.
effected on the same subject matter. The knowledge of such
insurance by the insurer's agents, even assuming the When Manuel signed the pension plan application, he
acquisition thereof by the former, is not the "notice" that adopted as his own the written representations and
would estop the insurers from denying the claim. The so- declarations embodied in it. It shows from these
called theory of imputed knowledge (knowledge of the agent representations that he concealed his chronic heart ailment
is knowledge of the principal) does not apply in this case. and diabetes from PPI.

Policy Condition No. 15, reads in part: Since Manuel signed the application without filling in the
"…. if any false declaration be made or used in details regarding his continuing treatments for heart
support thereof, . . . all benefits under this Policy condition and diabetes, the assumption is that he has never
shall be forfeited ..." been treated for the said illnesses in the last five years
preceding his application. But this is untrue since he had been
The condition warrants and justifies the forfeiture of the on "Coumadin," a treatment for venous thrombosis, and
benefits under the insurance contract. insulin, a drug used in the treatment of diabetes mellitus, at
that time.
As held in Pacific Banking Corp vs CA: “The unrevealed
insurances makes the insured guilty of a false declaration; a Lourdes insists that Manuel had concealed nothing since
clear misrepresentation and a vital one because where the Perla, the soliciting agent, knew that Manuel had a
insured had been asked to reveal but did not, that was pacemaker implanted on his chest in the 70s or about 20
deception. Otherwise stated, had the insurer known that years before he signed up for the pension plan.
there were many co-insurances, it could have hesitated or But remember, the responsibility for preparing the
plainly desisted from entering into such contract. Hence, the application belonged to Manuel. Nothing in it implies
insured was guilty of clear fraud. As the insurance policy that someone else may provide the information that
against fire expressly required that notice should be given by PPI needed. Manuel cannot sign the application and
the insured of other insurance upon the same property, the disown the responsibility for having it filled up.
total absence of such notice nullifies the policy.”
Lourdes next points out that it made no difference if Manuel
FLORENDO VS PHILAM PLANS INC. failed to reveal that he had a pacemaker implanted since this
did not fall within the five-year timeframe that the disclosure
• Case where the insurer refused to pay the proceeds contemplated.
on the ground of material representation. But a pacemaker is an electronic device implanted
o Manuel was on maintenance medicine for into the body and connected to the wall of the heart,
his heart and had an implanted pacemaker; designed to provide regular, mild, electric shock that
and he suffered from diabetes mellitus and stimulates the contraction of the heart muscles and
was taking insulin. restores normalcy to the heartbeat.That Manuel still
• Comprehensive pension plan with Philam Plans + Life had his pacemaker when he applied for a pension
insurance with Philam Life plan is an admission that he remained under


treatment for irregular heartbeat within five years that what was not disclosed is immaterial since the
preceding that application. insurance was non-material

Manuel had been taking medicine for his heart condition and WON there was concealment justifying nonpayment of
diabetes when he submitted his pension plan application. claim? Yes.
These clearly fell within 5-year period. Pursuant to Section 27
of the Insurance Code, Manuel's concealment entitles Philam Appellants: no fraudulent concealment of the truth as much
Plans to rescind its contract of insurance with him. as the insured herself did not know, since her doctor never
told her, that the disease for which she had been operated
GREPALIFE VS CA on was cancer.

• Case with the mongoloid baby where the father did SC: NOPE. The concealment of the fact of the operation itself
not disclose the said ailment. was fraudulent, as there could not have been any mistake
about it, no matter what the ailment. Further, in order to
WON Ngo Hing concealed the state of health and physical avoid a policy it is not necessary to show actual fraud on the
condition of Helen Go- YES. part of the insured.

In this jurisdiction, a concealment, whether intentional or
Court is of the firm belief that private respondent had unintentional, entitles the insurer to rescind the contract of
deliberately concealed the state of health and physical insurance, concealment being de ned as "negligence to
condition of his daughter Helen Go. communicate that which a party knows and ought to
communicate"
When private respondent supplied the required essential
data for the insurance application form, he was fully aware Argante vs West Coast Life Insurance:
that his one-year old daughter is typically a mongoloid child. "'The basis of the rule vitiating the contract in cases of
Such a congenital physical defect could never be ensconced concealment is that it misleads or deceives the insurer
nor disguised. Nonetheless, private respondent, in apparent into accepting the risk, or accepting it at the rate of
bad faith, withheld the fact material to the risk to be assumed premium agreed upon. The insurer, relying upon the
by the insurance company. belief that the assured will disclose every material fact
within his actual or presumed knowledge, is misled into a
As an insurance agent of Pacific Life, he ought to know, as he belief that the circumstance withheld does not exist, and
surely must have known, his duty and responsibility to supply he is thereby induced to estimate the risk upon a false
such a material fact. Had he divulged said significant fact in basis that it does not exist.”
the insurance application form, Pacific Life would have
verified the same and would have had no choice but to MANILA BANKERS VS ABAN
disapprove the application outright.
• Case where insurer refused to pay on the ground
The contract of insurance is one of perfect good faith that the insured was sickly, and it was the
(uberrima fides meaning good faith; absolute and perfect beneficiary herself who filed and application and
candor or openness and honesty; the absence of any designated herself as the beneficiary.
concealment or deception, however slight, not for the • Insurer filed an action for rescission on the ground
insured alone but equally so for the insurer. Concealment is a that the policy was obtained by fraud, concealment
neglect to communicate that which a party knows and ought and or misrepresentation. And even though it was
to communicate Whether intentional or unintentional the already filed beyond the 2 year contestable period,
concealment entitles the insurer to rescind the contract of they cannot be barred because the policy was
insurance Private respondent appears guilty thereof. obtained under fraudulent circumstances.

No insurance contract was perfected between the parties Whether or not Manila Bankers is barred from denying the
with the concealment, as legally defined, having been insurance claims based on fraud or concealment. – YES.
committed by herein private respondent.
Firstly, the Court will not depart from the trial and appellate
SATURNINO VS PH AMERICAN LIFE courts' finding that it was Sotero who obtained the insurance
for herself, designating respondent as her beneficiary. With
• Case where the insured did not disclose that she had this crucial finding of fact — that it was Sotero who obtained
breast cancer and the beneficiaries were contending the insurance for herself — petitioner's case is severely
weakened. "Fraudulent intent on the part of the insured must

be established to entitle the insurer to rescind the contract." SUNLIFE OF CANADA PH VS SIBYA
In the absence of proof of such fraudulent intent, no right to
rescind arises. • Case where the insured died 3 months after the
issuance of the policy and the insurer refused to pay
Second, the results and conclusions arrived at during the on the ground that details on his medical history
investigation conducted unilaterally by petitioner after the were not disclosed in his application.
claim was filed may simply be dismissed as self-serving and o alleged that Atty. Jesus Jr. did not disclose in his
may not form the basis of a cause of action given the insurance application his previous medical
existence and application of Section 48. treatment at the National Kidney Transplant
Institute in May and August of 1994.
Under the provision (Sec 48.) , an insurer is given two years — o insured was in "renal failure" and at a high risk
from the effectivity of a life insurance contract and while the medical condition.
insured is alive — to discover or prove that the policy is void
ab initio or is rescindible by reason of the fraudulent WON there was concealment when Atty. Jesus Jr. submitted
concealment or misrepresentation of the insured or his his insurance application with Sun Life – NO.
agent. After the two-year period lapses, or when the insured
dies within the period, the insurer must make good on the In Manila Bankers Life Insurance Corporation v. Aban, the
policy, even though the policy was obtained by fraud, Court held that if the insured dies within the two-year
concealment, or misrepresentation. contestability period, the insurer is bound to make good its
• Sec. 48 gives the insurers enough time to inquire obligation under the policy, regardless of the presence or lack
whether the policy was obtained by fraud, of concealment or misrepresentation.
concealment, or misrepresentation; on the other
hand, it forewarns scheming individuals that their In the present case, Sun Life issued Atty. Jesus Jr.'s policy on
attempts at insurance fraud would be timely February 5, 2001. Thus, it has two years from its issuance, to
uncovered — thus deterring them from venturing investigate and verify whether the policy was obtained by
into such nefarious enterprise fraud, concealment, or misrepresentation. Upon the death of
Atty. Jesus Jr., however, on May 11, 2001, or a mere three
Accordingly, Life insurance policies that pass the statutory 2- months from the issuance of the policy, Sun Life loses its right
year period are essentially treated as legitimate and the to rescind the policy. As discussed in Manila Bankers, the
insurance company will have to make do on the policy. death of the insured within the two-year period will render
the right of the insurer to rescind the policy nugatory. As
In this, case, for nearly three years, petitioner collected the such, the incontestability period will now set in.
premiums and devoted the same to its own profit. It cannot
now deny the claim when it is called to account. Section 48 Assuming the incontestatbility period has not yet set in, the
must be applied to it with full force and effect. petition is still dismissed since Sun Life failed to show that
• (The policy was issued on August 30, 1993, the Atty. Jesus Jr. committed concealment and
insured died on April 10, 1996, and the claim was misrepresentation.
denied on April 16, 1997. The insurance policy was in
force for a period of 3 years, 7 months, and 24 days.) Atty. Jesus Jr. admitted in his application his medical
• (Considering that the insured died after the two-year treatment for kidney ailment. Moreover, he executed an
period, the plaintiff-appellant is, therefore, barred authorization in favor of Sun Life to conduct investigation in
from proving that the policy is void ab initio by reference with his medical history.
reason of the insured's fraudulent concealment or
misrepresentation or want of insurable interest on Indeed, the intent to defraud on the part of the insured must
the part of the beneficiary.) be ascertained to merit rescission of the insurance contract.
Concealment as a defense for the insurer to avoid liability is
The so-called "incontestability clause" precludes the insurer an af rmative defense and the duty to establish such defense
from raising the defenses of false representations or by satisfactory and convincing evidence rests upon the
concealment of material facts insofar as health and previous provider or insurer.
diseases are concerned if the insurance has been in force for
at least two years during the insured's lifetime. Sun Life’s failure to clearly and satisfactorily establish its
allegations hold it liable to pay the proceeds of the insurance.


Not all forms of concealment will warrant rescission. It will Sec. Whenever a right to rescind a contract of
depend on the materiality of the concealed fact. 48 insurance is given to the insurer by any
• simple concealment not basis for rescission provision of this chapter, such right must be
exercised previous to the commencement of
1. Sec. 45 in relation to Sec. 48 an action on the contract.
Sec. 45 - representation that is material can be
ground for rescission After a policy of life insurance made payable
Sec. 48 - contestability period of 2 years on the death of the insured shall have been
in force during the lifetime of the insured for
a period of two (2) years from the date of its
Sec. If a representation is false in a material point, issue or of its last reinstatement, the insurer
45 whether affirmative or promissory, the cannot prove that the policy is void ab initio
injured party is entitled to rescind the or is rescindable by reason of the fraudulent
contract from the time when the concealment or misrepresentation of the
representation becomes false. insured or his agent.

MISREPRESENTATION/ FALSE REPRESENTATION: if the facts
fail to correspond with assertions or stipulations. The incontestability period is ONE YEAR ONLY for a Term
Insurance coverage under a GROUP LIFE INSURANCE POLICY.
REMEDY: entitles the aggrieved party to the right to The one year contestability period is part of the Standard
rescind the contract. Contract Provisions for Health, Pension and Memorial pre-
need plans that are required by the Insurance Commission.
WHEN RESCISSION UNAVAILABLE:
1. when there is a waiver - The insurer has two years from the date of issuance of
2. when an action has already been commenced the insurance contract within which to contest the
on the contract policy.
3. when incontestable clause applies - After 2 years, the defenses of concealment or
misrepresentation, no matter how patent or well
*With the passage of RA 10607, the insurer can still rescind founded, no longer lie.
the policy even if it accepted the premium despite knowledge - “After the 2 year period lapses, or when the insured
of the ground for rescission provided that other defenses are dies within the period, the insurer must make good on
not available like the incontestability clause. the policy, even though the policy was obtained by
fraud, concealment or misrepresentation.”
-
-


VI. WARRANTIES Warranty: an affirmation of fact or a promise that forms part
of the terms and conditions of the policy.
Insurer has many tools to avoid liability. Common:
1. material misrepresentation Sec. A warranty may relate to the past, the
2. material concealment 68 present, the future, or to any or all of these
3. material breach of warranty Sec. A warranty is either expressed or implied.
67
Breach of Warranty - look at the basis for the right of insurer
to rescind the contract KINDS:
1. EXPRESS WARRANTY: one that is stated in the policy
Ex: or any of its attachments.
1. Malayan - machineries were transferred from one
place to another —> alteration —> not Sec. Without prejudice to Section 51, every
communicated, insurer can deny the claim 70 express warranty, made at or before the
2. Changing the tires of the car —> big alteration —> execution of a policy, must be contained in
cannot claim anymore the policy itself, or in another instrument
signed by the insured and referred to in the
Kinds of Warranty: policy as making a part of it.
1. express vs implied
express - clearly provided for in the policy 2 ways of making an express warranty:
implied - not in the policy itself, but by the nature of 1. it must be contained in the policy itself
the contract, it is presumed to be in the policy even 2. it may be expressed in another instrument
if it is not provided that the separate instrument is signed
EX: vessel —> seaworthiness by the insured and referred to in the policy

2. promissory warranty vs affirmative warranty Ex: - Statement in the life insurance policy that the
affirmative warranty - you affirm the existence at the insured has not been involved in any vehicular
time of the issuance accident for the past 10 years or has never been
EX: Qua Chee Gan case -> required number charged with any crime involving moral turpitude.
of fire hydrants - Statement that there should be no gasoline in
estoppel will apply the insured building
promissory warranty - you promise to abide
EX: Insurance company requires 10 fire 2. IMPLIED WARRANTY: a natural element of the
hydrants, at that time you only had 5 —> contract imposed by law and is a part of the policy
“promise gagawa ako in 3 months dyan na without the need that it be stated in the policy.
yan!”
3. AFFIRMATIVE WARRANTY: an affirmation of fact
What if the promissory warranty is not complied that exists at the time they are made. It is an
with? undertaking that some positive allegation of fact is
GEN RULE: Insurer can RESCIND the contract, true.
because of material breach of warranty
4. PROMISSORY WARRANTY: stipulates that certain
EXCEPTIONS: (from complying with the conditions of things shall be done or a specified condition shall
the warranty) exist during the currency of life of the insurance
1. incident insured against happened prior to the contract. In promissory warranty, one party is bound
expiration of the period given within which the by an executor stipulation.
promissory warranty should be complied with
(nangyari na bago magexpire) Sec. A statement in a policy, which imparts
2. If it becomes prohibited or illegal in the place 72 that it is intended to do or not to do a
where the undertaking has to be complied with thing which materially affects the risk, is a
3. when compliance becomes impossible warranty that such act or omission shall
take place.
Sec. When, before the time arrives for the
73 performance of a warranty relating to the


future, a loss insured against happens, or 2. Hemp Warranty (prohibition against storage of
performance becomes unlawful at the gas à Qua Chee Gan admitted having stored 36
place of the contract, or impossible, the cans of gasoline inside the Bodega)
omission to fulfill the warranty does not
avoid the policy. WON Qua Chee Gan committed a breach of the warranties?
– NO.
Promissory Warranty may either be:
1. Positive act – an insured in a fire insurance may 1. On the Fire Hydrant Warranty – NO breach.
warrant that the firewall of the building be modified
to the height and specifications stated in the policy
The insurance company is barred by waiver/estoppel to claim
2. Omission – in the case where the insured warrants
violation of the warranty because it KNEW FULLY WELL that
that he will not store gasoline or kerosene in the
insured building. the number of hydrants it required never existed from the
beginning and yet it still issued the policy and received the
BREACH OF WARRANTY BY THE INSURED: Breach of premiums.
warranty renders the contract defeasible. However, the • This is proven from the testimony that the insurance
insurer must PROVE such breach consistent with the rule that company’s agents inspected the premises prior to
any violation must be established by the person who is the issuance and saw the only 2 (+2) hydrants
making such allegation. available.
• This knowledge now constitutes a waiver of the
REMEDY: A party may rescind the policy of there is breach of conditions in the contract.
warranty on the part of the other party.

There is thus no violation of the warranty that would justify
Sec. The violation of a material warranty, or other non-payment. It would be clos to fraud to allow the insurance
74 material provision of a policy, on the part of
company to claim that the policy is void ab initio after it had
either party thereto, entitles the other to
been collecting the premiums.
rescind.

Sec. A policy may declare that a violation of
75 specified provisions thereof shall avoid it, 2. On the Hemp Warranty – NO breach.
otherwise the breach of an immaterial
provision does not avoid the policy. The contract did not specifically mention “gas” among the
prohibited articles in the “hemp warranty”. What was written
Sec. 74 and 75 allow the party to rescind or to avoid the was “oils” which meant “lubricants” and not gasoline.
policy ONLY IN CASE OF MATERIAL BREACH.
As the ambiguity was under the exclusive control of the
However, if the policy itself provides that breach of warranty insurance company, the ambiguity must be construed strictly
or a provision avoids the policy, the warranty is deemed to be against the insurer and liberally in favor of the insured.
material. And any breach, though immaterial, becomes
material. If the insurance company clearly prohibited the storage of
gas, there is no reason why it could not be expressly and
Non-compliance with a warranty is excused when: clearly provided for in the policy. Besides, the gasoline kept
1. by reason of a change of circumstances, the
by the insured was only incidental to his business, being no
warranty ceases to be applicable to the
more than a customary 2 days supply for the five or six motor
circumstances of the contract
vehicles used for transporting of the stored merchandise, and
2. compliance with the warranty is rendered unlawful
by any subsequent law it is well settled rule that the keeping of in flammable oils on
the premises, through prohibited by the policy, does not void
QUA CHEE GAN vs LAW UNION AND ROCK INSURANCE it if such keeping is incidental to the business

• Case where the insurer refused to pay the claims on The contract of insurance is one of perfect good faith
the ground of breach of warranty of: (uberrimae fidei) not for the insured alone, but equally so for
1. Fire Hydrant Warranty (that there should be one the insurer; in fact, it is more so for the latter, since its
hydrant every 150ft of wall, thus there should dominant bargaining position carries with it stricter
be 11 hydrants à Qua Chee Gan only had 2, and responsibility. By reason of the exclusive control of the
another 2 nearby belonging to the municipality) insurance company over the terms and phraseology of the

insurance contract, the ambiguity must be strictly interpreted On the contrary, the insured was able to comply with the warranty.
against the insurer and liberally in favor of the insured, In the new oil mill there were numerous portable fire extinguishers,
specially to avoid a forfeiture. 2 fire houses, fire hydrant, emergency fire engine, all in good
working condition.

The rule is that to avoid a policy, the claim led by the
Further, the SC reiterated that warranties should not only be strictly
insured must contain false and fraudulent statements with construed against the insurer but it also be reasonably interpreted.
intent to defraud the insurer. • Considering that there were already several appliances,
there was no need for an internal hydrant.
PALERMO VS PYRAMID INSURANCE
MALAYAN INSURANCE VS PAP CO.
• Case where the insurer refused to pay the claim on the
ground that there was breach as Palermo was not
• Case where the insured refused to pay the claim on
authorized to drive, as provided in the policy, because his
license has expired.
the ground that at the time the loss occurred, Pap Co
had transferred the machineries and equipment
WON Palermo violated the insurance policy? – NO. different from that stated in the policy. (From Sanyo
Building to Pacific Place Building, though in the same
An authorized driver provided in the policy are: compound)
1. the insured
2. any person driving on insured’s order, who is permitted in
accordance with the laws or regulations to drive
WON there was a breach of warranty? YES.

Considering that it was Palermo himself, the insured, who drove the The policy issued forbade the removal of the insured
vehicle at the time of the accident, he is an “authorized driver” properties, unless sanctioned by Malayan as provided in
under the policy. Condition 9(c) of the renewed policy.

While the Motor Vehicle Law prohibits a person without a license or The renewed policy expressly sets a condition that any
with an expired license from operating a car, an infraction of the
removal of insured property must be with consent of
Motor Vehicle Law is NOT a bar to recover under the insurance
company. Though it may subject him to penal sanctions. Malayan and absent such consent, would free the insurer
from any liability.
The requirement that the driver should not be disqualified by the
court of law applied only when the driver is one driving on insured’s In this case, Pap Co. failed to notify and obtain the required
order; and not when it is the insured himself driving. consent.
1. There was no evidence showing that Malayan was
Palermo can claim, Pyramid Insurance must make do on the policy. informed of the transfer from Sanyo to Pacific Pace
2. RCBC was not the right entity to inform Malayan.
AMERICAN HOME ASSURANCE VS TANTUNCO ENT.
a. Although RCBC and Malayan are sister

companies and RCBC referred Pap Co to
• Case where the insured owned 2 oil mills and the new oil mill
Malayan, these 2 were not agents of each
was gutted with fire. Insurer refused to pay on the ground of
other and the notification to RCBC did not
breach of warranty.
satisfy the requirement set in the policy.
• Insured violated the express terms of the Fire Extinguishing

Appliances Warranty. According to the insured, the warranty
obligates the insured to maintain all the appliances specified and
The violation of Condition 9(c) freed Malayan from liability.
considering insured failed to install internal hydrants, there’s a
breach. Considering that the original policy was renewed on an “as is”
basis, it follows that the renewal policy carried with it the
WON there was a breach of warranty? NO. same stipulations and limitations. The Terms and Conditions
in the renewed policy state that the machineries and
The warranty did not require the insured to provide for all the equipment were in Sanyo Bld, however, they were burned in
appliances indicated therein. Neither does it appear that the list is Pacific Place. Thus, as there was an uncontested removal, the
exclusive. transfer was at Pap Co’s own risk.

What the warranty mandates is that the insured should maintain fire
fighting appliances that are in good-working condition in its
premises.

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