INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
November 25 (Suaybaguio)
Today we will start with Insurance Law in general. When we
talk about insurance, we must necessarily trace the history.  The concept of Guilds, gave rise to what concept in
Where did the concept of Insurance start according to
the article that I assigned to you.
The first written insurance policy appeared in ancient times
on a Babylonian monument with the code of King
Hammurabi carved into it. The Hammurabi Code was one of
the first examples of written laws.
These ancient laws were extreme in most respects, but
one offered basic insurance in that a debtor didn't have to
pay back their loans if some personal catastrophe made it
impossible (disability, death, flooding, etc.).
(History of Insurance, Investopedia)
Discussion: So, Hamurabi he was the 6th king of the
dynasty. He was the one responsible for the first
qualifications of laws. The code of Hamurabi is known to be
very strict because it imposed physical penalties to those
who are not following the laws. However, so dun na papasok
ang concept of insurance.  It was generally strict, there was
physical penalty or punishment for violations but pano
pumasok ang concept of insurance during the time
of  Hamurabi?
In the case of Hamurabi, what are the contingencies?
Generally strict ako,  but in certain exceptional cases there
may be exemptions from liability and these are death, famine
etc.
After the Code of Hamurabi, where did we see next the
concept of Insurance?
Guild Protection
In the Dark and Middle Ages, most craftsmen were trained
through the guild system. Apprentices spent their childhoods
working for masters for little or no pay. Once they became
masters themselves, they paid dues to the guild and trained
their own apprentices. (History of Insurance, Investopedia)
What was the principle during the period when there
were Guilds? How does a Guild System work?  A basic system for funding voyages to the New World was
The wealthier guilds had large coffers that acted as a type of
insurance fund. If a master's practice burned down—a
common occurrence in the wooden hovels of medieval
Europe—the guild would rebuild it using money from its
coffers. If a master was robbed, the guild would cover their
obligations until money started to flow in again. If a master
was suddenly disabled or killed, the guild would support
them or their surviving family.
This safety net encouraged more people to leave farming to
take up trades. As a result, the amount of goods available for
trade increased, as did the range of goods and services
available. The style of insurance used by guilds is still around
today in the form of group coverage. (History of Insurance,
Investopedia)
Discussion: Practice or the business if there was fire
burning the business. So its a matter of the Master investing
money, giving it to the Guilds so that if something happens to
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him or his business, the Guilds will be the one to rebuild. So
that's the concept.
modern Insurance Law?
Group Coverage.
How does that work?
Discussion: Sinong  employed dito? Meron ba kayong
group insurance?
The employer will secure a policy. The policy will cover all
employees and all employees will now have a certificate of
participation. So they dont have the policy with them. They
only have a certificate of participation such that if something
happens to any of the employees, there will be
compensation for the employee if he is disabled, or for the
designated beneficiaries if he passes away.
The moment that the employee ceases to be an employee,
he is no longer part of that Group Life Insurance. 
Who pays for the premiums? 
It is usually the employer. Unless medyo salbahe employer
niyo, wala na siyang pera, binabawas sa sweldo yung
premium.  But generally, it is the employer who pays. 
So dapat yung  certificate of participation hawak hawak ni
employee.(?)  So that's the concept of Group Insurance. A lot
of people are covered by a single policy.
After the Guild Protection, Where did we see the concept
of Insurance? What kind of Insurance was catered to in
the Lloyd's?
Reducing Risk in Dangerous Waters
In the late 1600s, shipping was just beginning between the
New World and the old as colonies were being established
and exotic goods were ferried back. The practice
of underwriting emerged in the same London coffeehouses
that operated as the unofficial stock exchange for the British
Empire. A coffeehouse owned by Edward Lloyd, later
of Lloyd's of London, was the primary meeting place for
merchants, ship owners and others seeking insurance.
established. In the first stage, merchants and companies
would seek funding from venture capitalists. The venture
capitalists would help find people who wanted to be
colonists, usually those from the more desperate areas of
London, and would purchase provisions for the voyage.
In exchange, the venture capitalists were guaranteed some
of the returns from the goods the colonists would produce or
find in the Americas. It was widely believed you couldn't take
two left turns in America without finding a deposit of gold or
other precious metals. When it turned out this wasn't exactly
true, venture capitalists still funded voyages for a share of
the new bumper crop: tobacco. 
After the voyage was secured by venture capitalists, the
merchants and ship owners went to Lloyd's to hand over a
copy of the ship's cargo to so the investors and underwriters
who gathered there could read it. The people interested in
taking on the risk for a set premium signed at the bottom of
the manifest beneath the figure indicating the share of the
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
cargo for which they were taking responsibility (hence,
underwriting). In this way, a single voyage would have
multiple underwriters who tried to spread their own risk by
taking shares in several different voyages.
By 1654, Blaise Pascal, the Frenchman who gave us the first
calculator, and his countryman Pierre de Fermat, discovered
a way to express probabilities and thereby understand levels
of risk. Pascal's triangle led to the first actuary tables that
were, and still are, used when calculating insurance rates.
These formalized the practice of underwriting and made
insurance more affordable. (History of Insurance,
Investopedia)
Discussion: Marine Insurance.
Actually it started with cargo, which is still at that time being
transported through waters. Nung nagkaroon na ng  aircraft,
if you take a look at marine insurance under the Insurace
Code now, it covers aircrafts. Marine barges, marine bridges,
tunnels, wharfs, marine pa rin yan. Even jewellery, as we will
see later, is covered under Marine Insurance whether in
transit or not.  settlement.
How did it work? Was Lloyd's an Insurance Company?
So sometimes, "okay, I would assume the risk provided that I
will get a certain percentage of your earnings." diba? Kasi
pupunta yung mga  businessmen doon, they want to be
protected from the risk of loss, so someone will assume the
risk but in exchange for a certain percentage of the profits.
Nowadays, for your information, Lloyd's still exists. But it is
still, not an Insurance company, but a market place. Hindi
palengke ha?  Insurance MarketPlace. So it is still the same
mechanics, you go there, you want someone to assume the
risk. The one who assumes the risk is called the Syndicate.
Syndicate - Is the one that assumes the risks. He has
managing agents. There are brokers.
Broker - Brokers are supposed to make the syndicate and
the policy holders meet. Introduce kita, kailangan mo ng mag
aassume ng risk mo? I will introduce you.
Coverholders - They sometimes act as managing
agents. May concept na rin ng reinsurance dyan,  as we will
see later.  premiums, its not exactly 1M pesos yung makukuha mo,
Insurance Buyers - buyers.
So  market pa rin talaga.  5 people are involved.  For instance, for a 1.3M car, my insurance at the start was
1. Syndicate - Insurance company
2. Insurance Buyers - Insured
3. Managing Agent - Insurance agent
4. Broker
5. Coverholders
And Lloyd's has spread to the USA and to other areas. 
Now, why is fire also an importance concept?
Fire and Plague Protection
In 1666, the great fire of London destroyed around 14,000
buildings. London was still recovering from the plague that
ravaged it a year earlier, and many survivors found
themselves without homes. As a response to the chaos and
outrage that followed the burning of London, groups of
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underwriters who had dealt exclusively in marine insurance
formed companies that offered fire insurance.
Armed with Pascal's triangle, these companies quickly
expanded their range of business. By 1693, the first mortality
table was created using Pascal's triangle, and life insurance
soon followed.
Ano yung minana niya na principle from the Lloyds?
What concept was adopted in fire and plague situations?
Pascal's triangle. (from marine insurance)
Where did we see next the concept of Insurance?
The Slow Exodus to America
Insurance companies thrived in Europe, especially after
the Industrial Revolution. In America, the story was very
different. Colonists' lives were fraught with dangers that no
insurance company would touch. As a result of lack of food,
armed conflicts with indigenous people, and disease, almost
three out of every four colonists died in the first 40 years of
It took more than 100 years for insurance to establish itself in
America. When it finally did, it brought the maturity in both
practice and policies developed during that same period of
time in Europe. 
Discussion: Diba napansin niyo, diba ang US lagi ang
magaling,  but this time the concept actually started from
Europe. But among all of us na lang, tingin ko nag umpisa
pa rin sa  China.
Example, in Europe, mga  societies. Everybody will
contribute to the society but only if you will die, only if you will
suffer from fire. Diba? So again, dun kumikita and  Insurance
company. 
Example, in Davao, lets assume that there are 1,000 policy
holders for theft. How many people will experience theft?
hopefully none. So a person pays premium, so that if
something happens he will be covered. But in the hope that it
will not happen to him. Ano gusto niyo, bayaran kayo? or
yung hindi niyo maranasan? Syempre mas gusto niyo hindi
na lang. And if you take a look at the computation of
1M rin yung  premium. No. Its only a small amount. Usually
10%.
around 40k for one year. 1 year yun ah, so may renewal
yan every year. Comprehensive. Sino may sasakyan
dito?  Comprehensive is not required, but third party liability
is a requirement.
Paano nag evolve ang Insurance based on the Pascal's
triangle?
Discussion: Nowadays, there is an actuarial table. How
does it work? Here we have ages, lets say 100,000 people.
Random, in a particular community. At age 0, there are a
certain number people who will die. At age 1, how many
people will potentially die? There's also a number. This is the
mortality table. Why do they even have to discuss these
things? Because they have to compute the premium so that
the Insurance company will continue to earn. Kasi if lahat
naman kasi mamatay ng ganitong edad, edi lugi sila.  So they
have to compute. Profits pa din. 
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
As we will see later, when you enter into an insurance
contract, there is a consideration. Hindi pwedeng, libre libre.
Ano to swerte? Lotto? So dun nag evolve. Hindi ko na try
explain sa inyo ang  connection ng pascal's triangle but it is  Laws.
a probability. What is the probability? How many people will
die at this age? Pag tinignan niyo sa umpisa, medyo
marami, tapos medyo okay,  because of the state of science
and technology. And then on the latter part of life, yan na
naman, madami na naman. Ang pinaka ending,  there should
be profit for the Insurance company.
So doon nagumpisa ang  concept of Insurance. But you also
see it in everyday business. Yung sinabi ko sa
inyo,  distributing the risk. Huwag ilagay lahat ng itlog sa
iisang basket. Gusto niyo yung mas nakakatakot?
nakakatakot kasi involved si Gretchen Baretto.
Si Gretchen, allegedly, sabi ni Atong Ang, does not travel
with Tony Boy because they only have one child and if both
of them board the same plane and the plane crashes, then
the child will be an orphan. And that is the excuse for
Gretchen to embrace Atong Ang during long flights. She is
distributing the risks. Diba, they should not travel together,
they are distributing the risks. That's very simple and
practical. May pera ka,  will you invest it in one business? No.
You would want to distribute in many businesses, so that if
one fails, then you still have money in other ventures.  (with other similar riders) on the face of the policies.
The same principle was followed by John Gokongwei. Sabi
niya,  you think of 10 businesses and if there are 2 or 3 that
will succeed then you are okay. You dont put your money or
eggs in one basket.
When you talk about Insurance Law, we will discuss it using
the Insurance Code of 2013. You are fortunate because you
have reached this stage, because in my other classes we
discussed the 1979 Insurance Code. So narevise na siya.
Aside from that, you also look at PDIC Law. Philippine
Deposit Insurance Commission Law. It tackles Insurance on
bank deposits. We will tackle that later.
Along the way, you will have cross references to the Family
Code when we talk about the people who are not entitled to
become beneficiaries of policies. Yung mga disqualified to
receive donations. So we will cross refer to the Civil Code
and Family Code. Civil Code yun, sa Family Code naman,
who are entitled to get support. Because makikita natin  later,
a person can get a policy on the life of a person whom he
expects to support him.
Example: Buhay pa ba si Ramon Revilla? Si Jr buhay pa?
Dati kasi example ko si Dolphy. Marami kasing anak si
Ramon Revilla Sr.  So assuming that he's still alive he can
get a policy on the life of Bong Revilla, although baka mas
mayaman si Sr., because under the Family Code, he expects
to be supported by his child. So yung concept natin dati,  I
will get an insurance policy on my own life. Mali yun,  we will
see later na under Section 10, we can get policies on the life
of people who are supposed to support us, people who are
indebted to us. So bagong concept yun, im sure. Dati kasi
ganun ano natin e,  to get a policy on our own life, ngayon
hindi. Malalaman natin under Section 10, marami tayong
pwedeng kuhanan ng  insurance policies.
You have taken up Social Legislation. I assume that you
have mastered, GSIS Law, they are also Insurance Laws,
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but we will not take them up because I assume that you are
now masters of these laws. Ilan dapat ang contribution bago
maka enjoy ng  maternity benefits. Yan dapat alam niyo yan.
Kaya siya insurance,  so we have the GSIS and the SSS
RULE OF CONSTRUCTION
Now we go to Rule of Construction.
QUA CHEE GAN vs. LAW UNION
In the case of Qua Chee Gan vs. Law Union
What was the kind of policy that was tackled?
Fire Insurance.
How many fire insurance policies were involved?
Why did the insurance company deny the claims under
these fire insurance policies?
The insurance company alleges that the trial Court should
have held that the policies were avoided for breach of
warranty, specifically the one appearing on a rider pasted
And since we are discussing statutory construction,
what specific provision was the center of this
controversy? What was being interpreted or
implemented which was the basis for the claim and
which was also the basis for the denial of the claim?
The Memo of Warranty.
And the Memo of Warranty states?
Memo. of Warranty. - The undernoted Appliances for the
extinction of fire being kept on the premises insured hereby,
and it being declared and understood that there is an ample
and constant water supply with sufficient pressure available
at all seasons for the same, it is hereby warranted that the
said appliances shall be maintained in efficient working order
during the currency of this policy, by reason whereof a
discount of 2 1/2 per cent is allowed on the premium
chargeable under this policy.
Hydrants in the compound, not less in number than one for
each 150 feet of external wall measurement of building,
protected, with not less than 100 feet of hose piping and
nozzles for every two hydrants kept under cover in
convenient places, the hydrants being supplied with water
pressure by a pumping engine, or from some other source,
capable of discharging at the rate of not less than 200
gallons of water per minute into the upper story of the
highest building protected, and a trained brigade of not less
than 20 men to work the same.
In fine, how may hydrants were supposed to be there?
It is argued that since the bodegas insured had an external
wall perimeter of 500 meters or 1,640 feet, the appellee
should have eleven (11) fire hydrants in the compound, and
that he actually had only two (2), with a further pair nearby,
belonging to the municipality of Tabaco.
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
And how many hydrants were there?
Only 2.
Was the discount given?
Yes.
What was the main reason why the Supreme Court grant
the claims?  Gaisano Superstore Complex in Cagayan de Oro City,
The insurance company was aware, even before the policies
were issued, that in the premises insured there were only
two fire hydrants installed by Qua Chee Gan and two others
nearby, owned by the municipality of Tabaco, contrary to the
requirements of the warranty in question.
“We are in agreement with the trial Court that the appellant is
barred by waiver (or rather estoppel) to claim violation of the
so-called fire hydrants warranty, for the reason that knowing
fully all that the number of hydrants demanded therein never
existed from the very beginning, the appellant neverthless
issued the policies in question subject to such warranty, and
received the corresponding premiums.”
What statutory construction principle was applied in this
case?
Any ambiguities must be resolved in favor of the insured and
strictly against the insurer.  So what was the defense or argument of Gaisano when
Discussion: Kasi may ambiguity ba? Actually if you take a
look at the Memo of Warranty, there was a statement that
the hydrants requirement was met. "... Appliances for the
extinction fire being kept on the premises insured hereby... it
is hereby warranted." So there was an admission on the part
of the insurance company that the hydrants requirement was
met.
So that's the first rule. In case of ambiguity in the provision of
the contract of insurance, in case there is a need to interpret
in the first place, the interpretation will be strictly made
against the one causing the ambiguity, and loosely or
liberally in favor of the insured.
Very old case.
GAISANO CAGAYAN vs. INSURANCE COMPANY OF
NORTH AMERICA
In Gaisano Cagayan v. Insurance Company of North
America...
Levis and Wrangler, diba competitiors yan? But they got only
1 Insurance company. They got policies from 1 insurer.  is not for loss of goods by fire but for petitioner's accounts
How were the policies worded? What was the coverage
of the policies?
Intercapitol Marketing Corporation (IMC) is the maker of
Wrangler Blue Jeans. Levi Strauss (Phils.) Inc. (LSPI) is the
local distributor of products bearing trademarks owned by
Levi Strauss & Co.. IMC and LSPI separately obtained from
respondent fire insurance policies with book debt
endorsements. The insurance policies provide for coverage
on "book debts in connection with ready-made clothing
materials which have been sold or delivered to various
customers and dealers of the Insured anywhere in the
Philippines.
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When they say book debts, what was the definition?
The policies defined book debts as the "unpaid account still
appearing in the Book of Account of the Insured 45 days
after the time of the loss covered under this Policy.
Why were the 2 dealers or manufacturers claiming from
the insurance company?
owned by Gaisano Cagayan, Inc., containing the ready-
made clothing materials sold and delivered by IMC and
LSPI was consumed by fire. 
Included in the items lost or destroyed in the fire were stocks
of ready-made clothing materials sold and delivered by IMC
and LSPI.
On February 4, 1992, respondent filed a complaint for
damages against petitioner. It alleges that IMC and LSPI
filed with respondent their claims under their respective fire
insurance policies with book debt endorsements; that as of
February 25, 1991, the unpaid accounts of petitioner on the
sale and delivery of ready-made clothing materials with IMC
was P2,119,205.00 while with LSPI it was P535,613.00; that
respondent paid the claims of IMC and LSPI and, by virtue
thereof, respondent was subrogated to their rights against
petitioner; that respondent made several demands for
payment upon petitioner but these went unheeded.
it refused to pay the Insurance Company?
Petitioner contends that it could not be held liable because
the property covered by the insurance policies were
destroyed due to fortuities event or force majeure; that
respondent's right of subrogation has no basis inasmuch as
there was no breach of contract committed by it since the
loss was due to fire which it could not prevent or foresee;
that IMC and LSPI never communicated to it that they
insured their properties; that it never consented to paying the
claim of the insured.
Force majeure. So since there was force majeure, the
right of subrogation does not apply. Is the Supreme
Court ruling in favor of Gaisano?
Petitioner's argument that it is not liable because the fire is a
fortuitous event under Article 1174 of the Civil Code is
misplaced. As held earlier, petitioner bears the loss under
Article 1504 (1) of the Civil Code.
Moreover, it must be stressed that the insurance in this case
with IMC and LSPI that remained unpaid 45 days after the
fire. Accordingly, petitioner's obligation is for the payment of
money. As correctly stated by the CA, where the obligation
consists in the payment of money, the failure of the debtor to
make the payment even by reason of a fortuitous event shall
not relieve him of his liability. The rationale for this is that the
rule that an obligor should be held exempt from liability when
the loss occurs thru a fortuitous event only holds true when
the obligation consists in the delivery of a determinate thing
and there is no stipulation holding him liable even in case of
fortuitous event. It does not apply when the obligation is
pecuniary in nature.
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Under Article 1263 of the Civil Code, "[i]n an obligation to
deliver a generic thing, the loss or destruction of anything of
the same kind does not extinguish the obligation." If the
obligation is generic in the sense that the object thereof is
designated merely by its class or genus without any
particular designation or physical segregation from all others
of the same class, the loss or destruction of anything of the
same kind even without the debtor's fault and before he has
incurred in delay will not have the effect of extinguishing the
obligation. This rule is based on the principle that the genus
of a thing can never perish. Genus nunquan perit. An
obligation to pay money is generic; therefore, it is not
excused by fortuitous loss of any specific property of the
debtor.
Thus, whether fire is a fortuitous event or petitioner was
negligent are matters immaterial to this case. What is
relevant here is whether it has been established that
petitioner has outstanding accounts with IMC and LSPI.
Why was this case assigned under rules of
interpretation, statutory construction? What principle of
statutory construction was applied?
It is well-settled that when the words of a contract are plain
and readily understood, there is no room for construction. In
this case, the questioned insurance policies provide
coverage for "book debts in connection with ready-made
clothing materials which have been sold or delivered to
various customers and dealers of the Insured anywhere in
the Philippines."; and defined book debts as the "unpaid
account still appearing in the Book of Account of the Insured
45 days after the time of the loss covered under this Policy."
Nowhere is it provided in the questioned insurance policies
that the subject of the insurance is the goods sold and
delivered to the customers and dealers of the insured.
Indeed, when the terms of the agreement are clear and
explicit that they do not justify an attempt to read into it any
alleged intention of the parties, the terms are to be
understood literally just as they appear on the face of the
contract. Thus, what were insured against were the accounts
of IMC and LSPI with petitioner which remained unpaid 45
days after the loss through fire, and not the loss or
destruction of the goods delivered.
Discussion: In this case, very simple lang, if the account or
the payment is not made within 45 days then that is well
within the coverage of the book debts. Book debts has a
meaning in the policy, so you just apply. Wala namang
sinabi na pag force majeure hindi ka covered. 
There was an allegation, additional argument on the part
of Gaisano that it is the seller who should assume the
risk, is that correct? Sabi niya,  the owner should be the
one to assume the risk and in this case, the two policy
holders remained the owners. How did the Supreme
Court dispense with that argument?
The Supreme Court has struck down that argument,
The present case clearly falls under paragraph (1), Article
1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at
the seller's risk until the ownership therein is transferred to
the buyer, but when the ownership therein is transferred to
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the buyer the goods are at the buyer's risk whether actual
delivery has been made or not,  except that:
(1) Where delivery of the goods has been made to the buyer
or to a bailee for the buyer, in pursuance of the contract and
the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk from the
time of such delivery; (Emphasis supplied)
xxxx
Thus, when the seller retains ownership only to insure that
the buyer will pay its debt, the risk of loss is borne by the
buyer. Accordingly, petitioner bears the risk of loss of the
goods delivered.
IMC and LSPI did not lose complete interest over the goods.
They have an insurable interest until full payment of the
value of the delivered goods. Unlike the civil law concept of
res perit domino, where ownership is the basis for
consideration of who bears the risk of loss, in property
insurance, one's interest is not determined by concept of title,
but whether insured has substantial economic interest in the
property.
So who's the owner of the goods?
The Supreme Court cited the Civil Code provision,
ART. 1504.
Discussion: 1504 states that unless otherwise provided, the
owner of the goods will not bear the risk in case of
loss, noh? diba bear your own loss. However, if the reason
why the seller is still the owner is for purposes of securing
the performance of the obligation by the buyer. Diba, sabi ng
dalawang companies, kami pa rin owner ha, para maforce
ka Gaisano na bayaran kami. So that was the only purpose
and because it falls under that exception, sabi ng  Supreme
Court di applicable.  Dapat si Gaisano pa rin ang magbayad.
So subrogation was still applicable. So now you are being
introduced to the concept of Insurance. Kasi when we talk
about liabilities, diba  we bear our own liabilities. But this is
one of the exceptions to that civil code provision. An
insurance company can assume the risk for another person,
based on the principle of subrogation.
SUBROGATION
What is subrogation? 
- Process of legal substitution. 
- The insurer, after paying the amount covered by the
policy, steps into the shoes of the insured.
Example: A nabangga, sa halip na mag away pa sila, "oh
eto, puntahan mo yung Insurance company ko". So the
insurance company will now pay. The Insurance company
can now run after the one at fault. Legal substitution or what
we call subrogation. Para wala nang madaming salita. Kaya
lang kung yung bumanga sayo, motor, kamot ung ulo na
lang mabibigay sayo niyan,  unless, di mo nga alam kung
may TPL yan e. 
GULF RESORTS vs. PCIC
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
There is a rule of construction that in case of ambiguities in a
contract of adhesion, the interpretation shall be made
liberally in favor of the policy holder and strictly against the
Insurance company. Was this applied in the case of Gulf
Resorts v. PCIC?
No, because there was no contract of adhesion in this case.
Was there a contract of adhesion in the case of Gulf?
What is a contract of adhesion?
A contract of adhesion is a contract where only one party
prepares the contract and all the other party has to do is to
agree.
Discussion: In this case, it was not a contract of adhesion in
a technical sense because the contract was not the product
of only party. It was the subject of an agreement of both
parties.
Do you think the lone witness, or the swimming pool
owners should be terminated?
Discussion: Kasi diba amin siya ng amin, “did you mention
that to the insurance company?” yes. “So did you know that
the policy was limited to the 2 swimming pools?” yes. Dapat
iterminate noh? Based on his testimony he admitted that it
was a negotiated contract. It was not a pro-forma insurance
policy. There was a rider. Bakit kasi yung swimming pool
lang ang naisip nila na yun lang iinsure.  (c) by malicious act;
So in other words, the fine print rule also does not find
application in this case, because fine print means oh
pinapirma ka na lang, di mo alam. Ito hindi, negotiated
contract siya. So the ending is, there was no coverage for
the other properties except for the two swimming pools.
ALPHA INSURANCE vs. CASTOR
On February 21, 2007, respondent entered into a contract of
insurance, Motor Car Policy No. MAND/CV-00186, with
petitioner, involving her motor vehicle, a Toyota Revo DLX
DSL. The contract of insurance obligates the petitioner to
pay the respondent the amount of Six Hundred Thirty
Thousand Pesos (₱630,000.00) in case of loss or damage to
said vehicle during the period covered, which is from
February 26, 2007 to February 26, 2008.
In the case of Alpha Insurance vs. Castor what was that
specific provision that was being interpreted?
1.) The Company shall not be liable for:
xxxx
(4) Any malicious damage caused by the Insured, any
member of his family or by "A PERSON IN THE INSURED’S
SERVICE."
What was the vehicle in this case?
Toyota Revo DLX DSL.
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What did the owner do?
On April 16, 2007, at about 9:00 a.m., respondent instructed
her driver, Jose Joel Salazar Lanuza (Lanuza), to bring the
above-described vehicle to a nearby auto-shop for a tune-up.
However, Lanuza no longer returned the motor vehicle to
respondent and despite diligent efforts to locate the same,
said efforts proved futile.
Ngayon, he was trying to claim under the policy and
there was a denial of the claim. On what ground?
Significant portions of Section III of the Insurance Policy
states:
SECTION III – LOSS OR DAMAGE
The Company will, subject to the Limits of Liability, indemnify
the Insured against loss of or damage to the Schedule
Vehicle and its accessories and spare parts whilst thereon:
(a) by accidental collision or overturning, or collision or
overturning consequent upon mechanical breakdown or
consequent upon wear and tear;
(b) by fire, external explosion, self-ignition or lightning or
burglary, housebreaking or theft;
(d) whilst in transit (including the processes of loading and
unloading) incidental to such transit by road, rail, inland
waterway, lift or elevator.
xxxx
EXCEPTIONS TO SECTION III
The Company shall not be liable to pay for:
Loss or Damage in respect of any claim or series of claims
arising out of one event, the first amount of each and every
loss for each and every vehicle insured by this Policy, such
amount being equal to one percent (1.00%) of the Insured’s
estimate of Fair Market Value as shown in the Policy
Schedule with a minimum deductible amount of
Php3,000.00;
Consequential losses, depreciation, wear and tear,
mechanical or electrical breakdowns, failures or breakages;
Damage to tires, unless the Schedule Vehicle is damaged at
the same time;
Any malicious damage caused by the Insured, any member
of his family or by a person in the Insured’s service.6
In denying respondent’s claim, petitioner takes exception by
arguing that the word "damage," under paragraph 4 of
"Exceptions to Section III," means loss due to injury or harm
to person, property or reputation, and should be construed to
cover malicious "loss" as in "theft." Thus, it asserts that the
loss of respondent’s vehicle as a result of it being stolen by
the latter’s driver is excluded from the policy.
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
What phrase is now the center of attention in this case?
The phrase being interpreted in this case is the phrase
"malicious damage".
What was the allegation of Alpha in this case?
In this case, Alpha alleged that the term "malicious damage"
should be construed to cover malicious loss, as in theft.
Therefore, due to fact that it falls under the exceptions, Sec.
3 of the Insurance policy, it cannot be made liable for the
loss of the vehicle, which was carnapped by the driver.
At the level of the Regional Trial Court and the Court of
Appeals, who won?
It ruled in favor of Castor.
When it reached the Supreme Court?
The Supreme Court, ruled against Alpha Insurance
company, therefore it ruled in favor of Castro.
Why did Alpha lose?
Discussion: The theft by the employee of the owner cannot
be considered as "malicious damage", because malicious
damage is a damage that is the direct result from the
deliberate and willfull act of the insured, members of his
family, and any person in the insured's service who's clear
plan and purpose was to cause damage to the insured
vehicle for purposes of defrauding the insurer.
So very obvious diba?  When you ask your driver to bring the
car to an auto shop, there's nothing malicious there. And that
there's no intent to damage the vehicle. Of course, Alpha
was grasping at straws and it even said, "Kung babayaran
natin, parang pinayagan na rin natin na yung mismong
owner ang nag-- may ganun siya e. Pabalang na si Alpha
e,  grasping at straws. What did the Supreme Court say?
Okay, when we talk about insurance, we are covering a
person or an entity for gross negligence. Gross. Pag simply
negligence yan, anong simple negligence? Iniwan mong
bukas yung kotse mo sa Agdao. Oh kaya naglagay ka ng
posporo sa tabi ng LPG. Gross yan. Pero yung simple
negligence, that is supposed to be covered by an insurance
policy. So in this case, kung binigay niya yung kotse niya sa
kanyang empleyado, that's not gross negligence. At kung
siya mismo ang nagpanakaw,  that's fraud which is not
covered by an insurance policy. So gross negligence, is
tantamount to an intential act. Anything intentional. That's
why we dont award the coverage, the face value, to a person
who is guilty of Arson, because that's already intentionally
causing fire. Gross negligence is tantamount to an intentional
act.
So sabi ng Supreme Court, "ikaw naman, the act of the
driver is the act of the owner ba? parang hindi naman."  Why? The reason behind that is, when we discuss Industrial
What principle was enunciated in this case? What
statutory construction principle in interpreting contracts
of insurance?
“Moreover, contracts of insurance, like other contracts, are to
be construed according to the sense and meaning of the
terms which the parties themselves have used. If such terms
are clear and unambiguous, they must be taken and
understood in their plain, ordinary and popular
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sense. Accordingly, in interpreting the exclusions in an
insurance contract, the terms used specifying the excluded
classes therein are to be given their meaning as understood
in common speech.”
Discussion: When there are restrictive provisions in the
contracts capable of being interpreted in two ways, we will
adopt the one that will be in favor of the policy holder. Strictly
against the insurance company. So laging ganun ah. Bakit?
Kasi very rare naman yung Gulf case e.  Very rare yung
ganun na magnenegotiate kapag contract of insurance.
Usually nga ipapadala sayo, printed form, wala ka nang
choice e. Pag mag aapply ka, i-aatach nalang nila yung
scanned copy ng application mo. Pero yung policy
mismo, pro-forma. So that's a contract of adhesion, not
subject to negotiations.
Why do we need to regulate the Insurance business?
Discussion: Because it is subject to abuse, it is impressed
with public interest. Dati noh, hindi naregulate yung CAP.
Ang dami kong kilala na nabiktima nyan. They invested so
much and yet there was no coverage, so ngayon yung
mga pre-need, there's a circular that puts the pre-need
companies under the supervision of the Insurance
Commission. So there's a need, because its impressed with
public interest. 
STATURE OF LIMITATIONS
What is the prescriptive period of Insurance claims?
How long can a person file an action based on an
Insurance contract?
General Rule: 10 years from the time the cause of action
accrues.
Exception: Period may be increased or decreased BUT
- In Industrial Life: cannot be shorter than 6 years.
- In all other kinds of Insurance: cannot be shorter
than 1 year.
Discussion: If there's no period stipulated or agreed upon, it
will be 10 years reckoned from the day when the cause of
action accrues. The basis of the answer is the Civil Code,
1144. Diba  article 1144 of the Civil Code states that a person
has 10 years to file an action based on a written contract. 
Exceptions: 6 yrs and the 1yr. Basis, there are insurance
code provisions. Sections 63, 237(d)
When you take a look at Section 63, it states that a condition
which limits the time of commencing an action to a period of
less than 1 year shall be void. So, general rule is 10 years
but not shorter than 1 year, but in case of Industrial Life
Insurance, the period should not be shorter than 6 years.
Life, you will discover that this caters to those who have less
in life. They are the ones who can only pay a certain sum of
money as premium and the face value is also a small
amount also. Not more than 40 times yata,  the value of the
minimum wage in metro manila. So ibig sabihin, eto yung
mga excuses pag Industrial  as we will see later, because it
caters to market vendors, fishball vendors. May mga taong
walang masyadong educational attainment pero gusto rin
ng coverage. So dapat hindi  shorter ng  6 years sila. Kasi
hindi nila alam kung ano ang nasa batas. 
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
So 10 years, cannot be shorter than 1 year, but in Industrial,
cannot be shorter than 6 years. 
SUMMIT vs. HON. DE GUZMAN
In the case of Summit vs. Hon. De Guzman, what was the
allegation of Summit?
Summit here alleged that the claims of the insured are
already void by prescription, based on Sec. 384?
How did Summit avoid liability?
According to the petitioner company, the complaints of
private respondents, having been filed beyond the one-year
period provided in Section 384 of the Insurance Code, can
no longer prosper. Said law reads as follows:
SECTION 384. Any person having any claim upon
the policy issued pursuant to this chapter shall,
without any unnecessary delay, present to the
insurance company concerned a written notice of
claim setting forth the amount of his loss, and/or the
nature, extent and duration of the injuries sustained
as certified by a duly licensed physician. Notice of
claim must be filed within six months from date of
the accident, otherwise, the claim shall be deemed
waived Action or suit for recovery of damage due to
loss or injury must be brought, in proper cases, with
the Commission or the Courts within one year from
date of accident, otherwise the claimant's right of
action shall be prescribe. 
Discussion: In this case, it was 1 year. So there was a
specific provision under the contract, stating that filing of
claims before the Insurance Commission of the Court should
be within 1 year from the time the cause of action
accrued. Valid yun.
Pero bakit sabi ng Supreme Court, mali ang sinabi mo
Summit?  here?
“We find no merit in the contention of petitioner company.
There is absolutely nothing in the law which mandates that
the two periods must always concur. On the contrary, it is
very clear that the one-year period is only required "in proper
cases." It appears that petitioner company disregarded this
very significant phrase when it made its own interpretation of
the law. Had the lawmakers intended it to be the way
petitioner company assumes it to be, then the phrase "in
proper cases" would not have been inserted.”
Second point, did the cause of action accrue? Even
assuming that there was a 1 year period for filing of
claims, did the cause of action accrue? What are the
elements of a cause of action?
1. existence of Right of a person;
2. Obligation of the other person not to violate such right;
3. Act or omission of that other person violating the said
right;
4. Damage caused to the person having said right.
Did the cause of action here accrue?
Not yet, because the condition that there should be a refusal
coming from the insurer was 
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What was the strategy of Summit here?
In this case, Summit in the 3 petitions did not in any way take
steps to process the claim in the first case. In the second
case, the company failed to settle to claim. And in the 3rd,
the office of the insurance company did not settle the claim.
In short, the company kept on giving assurances that it will
settle the claims but eventually did not take action.
What was the action that was not taken by Summit,
which could have now gave rise to the accrual of the
action?
Discussion: Denial. Pinlay-along lang niya, "sige sige,
pagusapan natin." In other words, before the cause of action
accrues, there must have been denial by the insurance
company of the claims.
Since there was no accrual of cause of action, the
prescriptive period could not have started to run.
H.H. HOLLERO vs. GSIS
Do you agree that the same tenor was made in the case
of H.H. Hollero vs. GSIS?
Unlike the first case, here there was a denial of the insured.
The court here ruled the first denial of the claim must be
construed to be the rejection. 
Discussion: In the case of Hollero, san niya binilang? San
siya nag umpisang magbilang?
Tip: When the questions on your exam have
dates, may  significance yun.  The dates are important. 
In this case, it was important because there was counting of
the prescriptive period. What are the important dates
April 26, 1990 - GSIS and petitioner entered into a Project
Agreement (Agreement) whereby the latter undertook the
development of a GSIS housing project known as Modesta
Village Section B (Project). Petitioner obligated itself to
insurethe Project, including all the improvements, upon the
execution of the Agreement under a Contractors’ All Risks
(CAR) Insurance with the GSIS General Insurance
Department for an amount equal to its cost or sound value,
which shall not be subject to any automatic annual reduction.
June 21, 1990 - GSIS rejected the petitioners indemnity
claim.
more than 12 months thereafter - he filed the case.
Unlike the previous case, here the prescriptive period
already set in. Hence the denial of the claim. "Huwag na
kayong mag recon-recon dyan"  The moment its
denied, dapat nga bago madeny nag peprepare na kayo,
hanap na kayo abogado. Alam niyo na san magfile. 
So in the case of Hollero, the final rejection is not the
operative date, but it was the first rejection. Not the decision
on the reconsideration. 
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Okay, RECAP:
Rules of Interpretation.
1. If there's no ambiguity, do not interpret. Just apply
the simply meaning of the provision.
2. If there is an ambiguity and it is a contract of
adhesion, so one way, unfair. You will now interpret
liberally in favor of the policy holder and strictly
against the one who caused the ambiguity which is
the Insurance company.
3. But if its not a contract of adhesion in the first place,
it was a negotiated contract, then we just apply in
simple language the provisions of the contract.
Prescriptive Period
It is generally 10 years, unless your policy provides for
another prescriptive period but in no case will it be shorter
than 1 year, in other kinds of insurance. But in the case of
Industrial, not shorter than 6 years.(1144, 63, 376(d)).
Discussion: If you take a look at your Insurance Code, sa
akin lang ah, tingin ko lang. Medyo kalat.  I always say this to
my students, number 1, i try to teach subjects that are
practical. Almost all practical. I taught Sales, Credit
Transactions, very few i also taught Partnership, Agency, I
teach Labor Standards, I taught Labor Relations. So pag
inisip mo practical. So having said that, since this is
something very practical, and when you grow old, you will
see that investing in insurance contracts is really a must, I
want to simplify it for you. We do not follow the normal order
of the provisions, but we will take this subject in such a
way na kahit gulo-gulohin kayo, alam niyo. 
We tackled general concepts, Subrogation, Statutory
Construction, Prescriptive Period, Rules of Interpretation.
After that, we go to specifics of Life Insurance. If you take a
look at your Code, kalat kalat yan, but we will tackle it as Life
Insurace, lahat nandun na. Then we go the Non-Life,
property. Nuances ulit. Very specific. Payment of proceeds
after. How do you file the proceeds, how do you file claims?
What is the period. And then you have the Ground for
Rescission. Because a contract of Insurance is insurance is
one of good faith, utmost good faith, then very small
misrepresentations will give rise to rescission. As you will se
later, a person who passes away because of a plane
accident, the beneficiaries will not be entitled to anything if
he forgot to mention in his application form that he has lung
cancer. So walang connection diba? Ang kinamatay ay
aksidente, misrepresented niya lung cancer, pero na deny
ang claim niya. Ganun kastrikto ang insurance contract.
Hindi niya sasabihin na "oh the company is still liable
because there's no connection." No. In insurance, it is of
utmost good faith. So dyan na tayo papasok sa grounds for
rescission, konting mali lang pwede nang maging  ground for
rescission. Practical, pag dumating yung panahon na
nagfifill-up kayo ng application, may hindi kayo sure, huwag
kayong mambola. Tinanong ako sinong doktor ko, edi sinabi
ko "I dont remember". Bakit ka magprepretend. Lagay mo
"you dont know", huwag kang mambola. My agent was
telling me, huwag na,  more than 10 years na, huwag na. No,
because i know how insurance comapanies work. So of
utmost good faith. And then we'll discuss PDIC law, which is
basically insurance on your bank account. 
December 2, 2019 (Deiparine)
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II. GENERAL CONCEPTS
A. Contract of Insurance
What is a Contract of Insurance?
“Section 2 (a) A contract of insurance is an agreement
whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an
unknown or contingent event. xxx”
Is a contract of suretyship a contract of insurance?
“A contract of suretyship shall be deemed to be an insurance
contract, within the meaning of this Code, only if made by a
surety who or which, as such, is doing an insurance business
xxx”
B. Insurance Business
When is a surety considered to be doing an insurance
business?
“Section 2 (b) The term doing an insurance business or
transacting an insurance business, within 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 vocation and not as
merely incidental to any other legitimate business or
activity of the surety;
3. Doing any kind of business, including a reinsurance
business, specifically recognized as constituting the
doing of an insurance business within the meaning
of this Code;
4. Doing or proposing to do any business in substance
equivalent to any of the foregoing in a manner
designed to evade the provisions of this Code.”
Let’s be specific. When it comes to a SURETY COMPANY,
when is it considered to be doing an insurance business?
“2. Making or proposing to make, as surety, any
contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or
activity of the surety;”
When is it deemed as a vocation?
When we say vocation, it’s something that is done regularly;
with some degree of regularity. VERSUS, an incidental or a
lone transaction.
2016 TSN: When we say vocation, more or less, it
is a regular business. Hindi pwede at will or isolated
transaction. Dapat it is within the concept of
vocation or something that is regularly done as a
business.
So, when a surety company engages in an insurance
business habitually or regularly, then it is deemed to be
doing an insurance business. Otherwise, if it is just an
isolated transaction, it cannot be categorized as doing an
insurance business.
Does it mean that a surety company has to register or has to
secure a certificate of registration from the IC (Insurance
Commission) before it can operate as an insurance
business?
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
YES. Basis: Section 193.
“No insurance company shall transact any insurance
business in the Philippines until after it shall have obtained a
certificate of authority for that purpose from the
Commissioner upon application therefore and payment by
the company concerned of the fees hereinafter prescribed.
Xxx
No insurance company may be authorized to transact in the
Philippines the business of life and non-life insurance
concurrently, unless specifically authorized to do so by the
Commissioner: Provided, that the terms life and non-life
insurance shall be deemed to include health, accident and
disability insurance. xxx”
Do you mean to say it must secure registration, whether it is
engaged in insurance business vocationally or merely
incidental?
No.
Let’s go back to Section 2 (b) (2), which tells you that if it is a
vocation, it is a contract of insurance; contrarily, if it is not a
vocation or there is no regularity, then it is not considered as
a contract of insurance (I think ma’am meant an insurance
business).
In the latter case, there is no need to get a certificate of
registration for isolated transactions. Kasi surety company
man siya eh. Hindi siya doing an insurance business, bakit
mo siya ire-require ng registration?
So kung vocation, dapat may certificate of registration.
In the case of Philamcare v. CA, if we break down the
definition of a contract of insurance, what are the elements*?
1. The insured has an insurable interest or interest of
some kind, susceptible of pecuniary estimation;
2. The insured is subject to a risk of loss caused by
the happening of the designated perils;
3. The insurer assumes the risk of loss;
4. The assumption of risk is part of a general scheme
to distribute actual losses among a large group of
persons bearing a similar risk;
5. As consideration for the insurer’s promise, the
insured pays the premium.
Philamcare v. CA, GR 125678,March 18, 2002
Facts:
Ernani Trinos, deceased husband of respondent Julita
Trinos, applied for a health care coverage with petitioner
Philamcare Health Systems, Inc. In the standard application
form, he answered 'NO' to the following question: “Have you
or any of your family members ever consulted or been
treated for high blood pressure, heart trouble, diabetes,
cancer, liver disease, asthma or peptic ulcer?”
The application was approved and even extended for 13
months, until June 1, 1990.
During the period of the coverage, Ernani suffered a heart
attack resulting in confinement for a month at the Manila
Medical Center (MMC). While her husband was in the
hospital, respondent tried to claim the benefits under the
health care agreement. However, petitioner denied her claim
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saying that the Health Care Agreement was void. According
to petitioner, there was a concealment regarding Ernani’s
medical history.
When he was discharged, Ernani was brought home, placed
under the care of a physical therapist, confined again at the
Chinese General Hospital until he eventually died. Julita
then filed an action for damages againstPhilamcare
including its President Dr. Benito Reverente. RTC ruled in
favour of Julita, and this was affirmed by the CA except that
it deleted awards for damages and absolved Dr. Reverente.
Ruling:
1. Construction of Terms of Insurance
When the terms of insurance contract contain limitations on
liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his
obligation. Being a contract of adhesion, the terms of an
insurance contract are to be construed strictly against the
party which prepared the contract – the insurer. By reason of
the exclusive control of the insurance company over the
terms and phraseology of the insurance contract, ambiguity
must be strictly interpreted against the insurer and liberally
in favor of the insured, especially to avoid forfeiture. This is
equally applicable to Health Care Agreements. The
phraseology used in medical or hospital service contracts,
such as the one at bar, must be liberally construed in favor
of the subscriber, and if doubtful or reasonably susceptible
of two interpretations the construction conferring coverage is
to be adopted, and exclusionary clauses of doubtful import
should be strictly construed against the provider.
2. Definition and Elements of an Insurance
Contract
*Already mentioned and stated above.
3. Contingent or unknown event, defined:
Section 3 of the Insurance Code states that any contingent
or unknown event, whether past or future, which may
damnify a person having an insurable interest against him,
may be insured against. Every person has an insurable
interest in the life and health of himself.
4. Insurable Interest
Every person has an insurable interest in the life and health:
(a) of himself, of his spouse and of his children;
(b) of any person on whom he depends wholly or in
part for education or support, or in whom he has a
pecuniary interest;
(c) of any person under a legal obligation to him for
the payment of money, respecting property or
service, of which death or illness might delay or
prevent the performance; and
(d) of any person upon whose life any estate or
interest vested in him depends.
In the case at bar, the insurable interest of respondent’s
husband in obtaining the health care agreement was his
own health. The health care agreement was in the nature of
non-life insurance, which is primarily a contract of indemnity.
Once the member incurs hospital, medical or any other
expense arising from sickness, injury or other stipulated
contingent, the health care provider must pay for the same
1
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
to the extent agreed upon under the contract.
5. On issue of concealment/representation
Failure to disclose or misrepresentation of any material
information by the member in the application or medical
examination, whether intentional or unintentional, shall
automatically invalidate the Agreement from the very
beginning and liability of Philamcare shall be limited to return
of all Membership Fees paid. An undisclosed or
misrepresented information is deemed material if its
revelation would have resulted in the declination of the
applicant by Philamcare or the assessment of a higher
Membership Fee for the benefit or benefits applied for.
The answer assailed by petitioner was in response to the
question relating to the medical history of the applicant. This
largely depends on opinion rather than fact, especially
coming from respondent’s husband who was not a medical
doctor. Where matters of opinion or judgment are called
for, answers made in good faith and without intent to
deceive will not avoid a policy even though they are
untrue.
The fraudulent intent on the part of the insured must be
established to warrant rescission of the insurance contract.
Concealment as a defense for the health care provider or
insurer to avoid liability is an affirmative defense and the
duty to establish such defense by satisfactory and
convincing evidence rests upon the provider or insurer. In
any case, with or without the authority to investigate,
petitioner is liable for claims made under the contract.
Having assumed a responsibility under the agreement,
petitioner is bound to answer the same to the extent agreed
upon. In the end, the liability of the health care provider
attaches once the member is hospitalized for the disease or
injury covered by the agreement or whenever he avails of
the covered benefits which he has prepaid.
In the same case, do you think the Supreme Court would
have ruled in the same way if Trinos were a nurse?
No. The case would have been different if Trinos was a
nurse.
In the present case, Trinos was a layman who has no
knowledge in the medical field, he merely gave his opinion
on the matter. The answer was made in good faith. Further,
he gave permission to Philamcare to make further inquiries,
which it did not. In other words, it was incumbent for
Philamcare to prove that Trinos was in bad faith.
In this case, was it a contract of insurance?
Yes, all the elements of an insurance contract were present.
So, anong type of insurance daw ito, according to the SC?
The health care agreement was in the nature of non-life
insurance, which is primarily a contract of indemnity.
As we can see later, non-life insurance is a contract of
indemnity; while a life insurance is a contract of investment.
What is the incontestability clause? This was mentioned in
the Decision. (Note: petitioner raised the primary argument
that a health care agreement is not an insurance contract;
hence the "incontestability clause" under the Insurance Code
does not apply.)
Layman’s definition ni Atty Sagmit: Even if there was
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misrepresentation, if this has been going on for a long time,
then the insurance company cannot deny liability anymore.
Section 233(b) A provision that the policy shall be
incontestable after it shall have been in force during
the lifetime of the insured for a period of 2 years
from its date of issue as shown in the policy, or date
of approval of last reinstatement, except for
nonpayment of premium and except for violation of
the conditions of the policy relating to military or
naval service in time of war.
In the case of Philcare (Philippine Health Care vs. CIR),
what was the nature of the agreement between the parties?
It was a non-life insurance.
What was the main defense of Philcare here?
It claimed that petitioner's health care agreement was not a
contract of insurance subject to DST under Section 185 of
the 1997 Tax Code.
Philippine Health Care v. CIR, GR 167330, June 12, 2008
Petitioner essentially argues that its health care agreement
is not a contract of insurance but a contract for the provision
on a prepaid basis of medical services, including medical
check-up, that are not based on loss or damage. Petitioner
also insists that it is not engaged in the insurance business.
It is a health maintenance organization regulated by the
Department of Health, not an insurance company under the
jurisdiction of the Insurance Commission. For these reasons,
petitioner asserts that the health care agreement is not
subject to DST.
Ruling:
Under the law, a contract of insurance is an agreement
whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an
unknown or contingent event. The event insured against
must be designated in the contract and must either be
unknown or contingent.
Petitioner's health care agreement is primarily a contract of
indemnity. And in the recent case of Blue Cross Healthcare,
Inc. v. Olivares, this Court ruled that a health care
agreement is in the nature of a non-life insurance policy.
Contrary to petitioner's claim, its health care agreement is
not a contract for the provision of medical services.
Petitioner does not actually provide medical or hospital
services but merely arranges for the same and pays for
them up to the stipulated maximum amount of coverage. It is
also incorrect to say that the health care agreement is not
based on loss or damage because, under the said
agreement, petitioner assumes the liability and indemnifies
its member for hospital, medical and related expenses (such
as professional fees of physicians). The term "loss or
damage" is broad enough to cover the monetary expense or
liability a member will incur in case of illness or injury.
Under the health care agreement, the rendition of hospital,
medical and professional services to the member in case of
sickness, injury or emergency or his availment of so-called
"out-patient services" (including physical examination, x-ray
and laboratory tests, medical consultations, vaccine
administration and family planning counseling) is the
contingent event which gives rise to liability on the part of
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the member. In case of exposure of the member to liability,
he would be entitled to indemnification by petitioner.
Furthermore, the fact that petitioner must relieve its member
from liability by paying for expenses arising from the
stipulated contingencies belies its claim that its services are
prepaid. The expenses to be incurred by each member
cannot be predicted beforehand, if they can be predicted at
all. Petitioner assumes the risk of paying for the costs of the
services even if they are significantly and substantially more
than what the member has "prepaid." Petitioner does not
bear the costs alone but distributes or spreads them out
among a large group of persons bearing a similar risk, that
is, among all the other members of the health care program.
This is insurance.
So, it is a NON-LIFE INSURANCE CONTRACT.
We will see later that when the coverage does not include
the risk of death, even if we are dealing with human beings,
that is categorized as Non-life Insurance. It’s a contract of
indemnity. Ano yung contract of indemnity? Kung ano yung
ginastos, ibabalik.
Do you think the SC would have ruled in the same way if
Philcare was operating a clinic and it promises to provide
coverage for its employees?
It now makes the petitioner a provider of medical or hospital
services.
In the case of White Gold vs. Pioneer, is a Protection and
Indemnity Club (P&I Club) required to get a certificate of
registration from the Insurance Commission?
Yes.
How does a P&I Club works?
From the case, it is an association composed of shipowners
in general who band together for the specific purpose of
providing insurance cover on a mutual basis against liabilities
incidental to shipowning that the members incur in favor of
third parties.
White Gold v. Pioneer, GR 154514, July 28, 2005
Facts:
White Gold Marine Services (White Gold) procured a
protection and indemnity coverage for its vessels from
Steamship Mutual Underwriting (Steamship) through
Pioneer Insurance and Surety Corporation (Pioneer). White
Gold was issued by Pioneer a Certificate of Entry and
Acceptance, and receipts evidencing payments for the
coverage. When White Gold failed to fully pay its accounts,
Steamship Mutual refused to renew the coverage.
Steamship thereafter filed a case against White Gold for
collection of sum of money to recover the latter’s unpaid
balance. White Gold on the other hand filed a complaint
before the Insurance Commission claiming that Steamship
did not have a license to engage in the insurance business.
The Insurance Commission dismissed the complaint and
such dismissal was affirmed by the CA.
Issues:
(1) Is Steamship Mutual, a P & I Club, engaged in the
insurance business in the Philippines?
(2) Does Pioneer need a license as an insurance
agent/broker for Steamship Mutual?
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Ruling:
Re: Insurance Business
Section 2(2) of the Insurance Code enumerates what
constitutes "doing an insurance business" or "transacting an
insurance business". These are:
(a) making or proposing to make, as insurer, any
insurance contract;
(b) making, or proposing to make, as surety, any
contract of suretyship as a vocation and not as
merely incidental to any other legitimate business
or activity of the surety;
(c) doing any kind of business, including a
reinsurance business, specifically recognized as
constituting the doing of an insurance business
within the meaning of this Code;
(d) doing or proposing to do any business in
substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this
Code.
The same provision also provides, the fact that no profit is
derived from the making of insurance contracts, agreements
or transactions, or that no separate or direct consideration is
received therefor, shall not preclude the existence of an
insurance business.
The test to determine if a contract is an insurance contract
or not, depends on the nature of the promise, the act
required to be performed, and the exact nature of the
agreement in the light of the occurrence, contingency, or
circumstances under which the performance becomes
requisite. It is not by what it is called.
Basically, an insurance contract is a contract of indemnity. In
it, one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or
contingent event.
A P & I Club is "a form of insurance against third party
liability, where the third party is anyone other than the P & I
Club and the members." By definition then, Steamship
Mutual as a P & I Club is a mutual insurance association
engaged in the marine insurance business.
A marine insurance undertakes to indemnify the assured
against marine losses, such as the losses incident to a
marine adventure. Section 99 of the Insurance Code
enumerates the coverage of marine insurance.
Relatedly, a mutual insurance company is a cooperative
enterprise where the members are both the insurer and
insured. In it, the members all contribute, by a system of
premiums or assessments, to the creation of a fund from
which all losses and liabilities are paid, and where the profits
are divided among themselves, in proportion to their interest.
Additionally, mutual insurance associations, or clubs,
provide three types of coverage, namely, protection and
indemnity, war risks, and defense costs.
Re: License
The records reveal Steamship Mutual is doing business in
the country albeit without the requisite certificate of authority
mandated by Section 187 of the Insurance Code. It
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maintains a resident agent in the Philippines to solicit
insurance and to collect payments in its behalf. We note that
Steamship Mutual even renewed its P & I Club cover until it
was cancelled due to non-payment of the calls. Thus, to
continue doing business here, Steamship Mutual or through
its agent Pioneer, must secure a license from the Insurance
Commission.
Agent/Broker needs a separate license
Pioneer is the resident agent of Steamship Mutual as
evidenced by the certificate of registration issued by the
Insurance Commission. It has been licensed to do or
transact insurance business by virtue of the certificate of
authority issued by the same agency. However, a
Certification from the Commission states that Pioneer does
not have a separate license to be an agent/broker of
Steamship Mutual.
Although Pioneer is already licensed as an insurance
company, it needs a separate license to act as insurance
agent for Steamship Mutual.
True or False: In this case, all the decision-makers decided
in the same way. All the government agencies and courts
decided in the same way.
False. Both decisions of the Insurance Commission and
Court of Appeals held that there was no violation of the
Insurance Code and the respondents do not need a license
as insurer and insurance agent/broker. But in the Supreme
Court, it reversed the Decision.
The SC required Steamship to get a license. Although,
steamship is not a surety, it’s really ensuring its members.
Note: Just be mindful that the test to determine whether or
not it is engaged in insurance business is not the
nomenclature, but the nature of the transaction. If it falls
under any of those enumerated, then it is considered as
doing an insurance business even though the title thereof is
not indicative of the transactions.
What is a reinsurance?
Reinsurance is a contract by which an insurer procures a
third person to insure him against loss or liability by reason of
an original insurance.
Example : A is building a bridge. To ensure it against
destruction, it will now enter into an insurance contract with B
to insure it for P100Million. Malaki dba? So what will
B(insurer) do? It will now contract with a reinsurer, C, and it
will say to C, “C, can you cover me for P50Million because I
already entered into an Insurance Contract with A for
P100Million, but my financial situation will not allow me to
really cover. So, can you cover me for A, for P50Million?”
So may kontrata na ng insurance, pero sa laki ng amount,
the insurer will now contract with a third-party para siya din
insured. So, pag nangyari yung contingency na P100Million,
he will pay but with assurance that C will cover him for half of
it. It’s reinsuring. The subject matter is the insurer’s risk, not
the bridge. A is not involved. It is between B and C.
Is it engaged in an Insurance Business? Yes. Reinsuring is
an insurance business.
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C. What may be insured against
What is the difference between loss and damage (in
Insurance)?
There is no difference, based on the case of Bonifacio vs.
Mora. The word "loss" in insurance law embraces injury or
damage. The said case define loss as:
"Loss in insurance, defined. - The injury or damage
sustained by the insured in consequence of the
happening of one or more of the accidents or
misfortune against which the insurer, in
consideration of the premium, has undertaken to
indemnify the insured."
Bonifacio v. Mora, GR L-20853, May 29,1967
Facts:
Enrique Mora, owner of an Oldsmobile sedan model 1956,
bearing plate No. QC - 8088, mortgaged the same to the
H.S. Reyes, Inc., with the condition that the former would
insure the automobile, with the latter as beneficiary.
It was agreed that any loss must be made payable to HS
Reyes.
During the effectivity of the insurance contract, the car met
with an accident. It was repaired by Bonifacio Bros.Inc. with
materials supplied by Ayala Auto Parts.
The proceeds on the insurance was made payable to
Enrique Mora. In the meantime, the car was delivered to
Enrique Mora without the consent of HS Reyes and without
payment to Bonifacio Bros and Ayala Auto Parts.
Issue:
Who is entitled to the insurance proceeds?
Ruling:
Mora- mortgagor.
HS Reyes- mortgagee.
Bonifacio and Ayala - third party.
The SC held that HS Reyes is entitled to the proceeds.
In the instant case the insurance contract does not contain
any words or clauses to disclose an intent to give any
benefit to any repairmen or material men in case of repair of
the car in question. The parties to the insurance contract
omitted such stipulation, which is a circumstance that
supports the said conclusion. On the other hand, the "loss
payable" clause of the insurance policy stipulates that "Loss,
if any, is payable to H.S. Reyes, Inc." indicating that it was
only the H.S. Reyes, Inc. which they intended to benefit.
What did HS Reyes suffer from? Was it loss or damage?
There was a contention on the part of Mora that: ‘I’m not
liable to Reyes, because in the first place, I will only become
liable if there was loss. But what it suffered was merely
damage.
But sabi ng Supreme Court, let’s not be very technical.
Insofar as Insurance Law is concerned, loss and damage
are the same.
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What happened in the case of Guingon vs. del Monte?
Caveat: This is a very old case. Wala pang concept of Third
Party Liability.
Guingon v. del Monte, GR L-22042, August 17, 1967
Facts:
Julio Aguilar owned and operated several jeepneys in the
City of Manila among which was one with plate number
PUJ-206-Manila. He entered into a contract with the Capital
Insurance & Surety Co., Inc. insuring the operation of his
jeepneys against accidents with third-party liability. In the
contract, the insurer will be held liable in case of death or
bodily injury to any person or damage to property. February
20, 1961 Iluminado del Monte, one of the drivers of the
jeepneys operated by Aguilar, while driving along the
intersection of Juan Luna and Moro streets, City of Manila,
bumped with the jeepney abovementioned one Gervacio
Guingon who had just alighted from another jeepney and as
a consequence the latter died some days thereafter.
As a corollary to such action, the heirs of Gervacio Guingon
filed an action for damages praying that the sum of
P82,771.80 be paid to them jointly and severally by the
defendants, driver Iluminado del Monte, owner and operator
Julio Aguilar, and the Capital Insurance & Surety Co., Inc.
The contract has a “no action clause” which states: “No
action shall lie against the Company unless, as a condition
precedent thereto, the Insured shall have fully complied with
all of the terms of this Policy, nor until the amount of the
Insured's obligation to pay shall have been finally
determined either by judgment against the Insured after
actual trial or by written agreement of the Insured, the
claimant, and the Company.”
Defense of Capital:
As a result of the clause above, the insurer contends that
the "no action" clause in the policy closes the avenue to any
third party which may be injured in an accident wherein the
jeepney of the insured might have been the cause of the
injury of third persons, alleging the freedom of contracts.
The foregoing issues raise two principal questions: (1) Can
plaintiffs sue the insurer at all? (2) If so, can plaintiffs sue the
insurer jointly with the insured?
Ruling:
The policy in the present case is one whereby the insurer
agreed to indemnify the insured "against all sums . . . which
the Insured shall become legally liable to pay in respect of:
a. death of or bodily injury to any person . . ."
Clearly, therefore, it is one for indemnity against liability;
from the fact then that the insured is liable to the third
person, such third person is entitled to sue the insurer.
The right of the person injured to sue the insurer of the party
at fault (insured), depends on whether the contract of
insurance is intended to benefit third persons also or only
the insured. And the test applied has been this: Where the
contract provides for indemnity against liability to third
persons, then third persons to whom the insured is liable,
can sue the insurer. Where the contract is for indemnity
against actual loss or payment, then third persons cannot
proceed against the insurer, the contract being solely to
reimburse the insured for liability actually discharged by him
thru payment to third persons, said third persons' recourse
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being thus limited to the insured alone.
Why did I assign this case under this topic?
It is assigned under the topic ‘What may be insured against’.
What may be insured against?
Section 3. Any contingent or unknown event, whether past
or future, which may damnify a person having an insurable
interest, or create a liability against him xxx.
That is why I assigned it here: which may damnify a person
or create a liability. Dalawa yan.
Diba Guingon distinguished between a contract which
provides for indemnity against liability to third persons AND a
contract for indemnity against actual loss or payment.
When we talk about risk of loss or liabililty in insurance law, it
may either be a direct damage to the policy holder OR it
will create a liability on the part of the policy holder.
Example, common carrier. Pag nag carry ng goods ang
common carrier, and the goods do not belong to the common
carrier, what is that? It creates a liability, di naman sa kanya
yun eh.
So, an insurance contract does not only address the person
who is suffering from the loss because of the happening of a
contingent or unknown event. It also assumes the risk of the
one who can be held liable.
Direct loss meaning damnified. Create a liability meaning you
will be made responsible for the loss.
In the Guingon case, siya mismo hindi naman siya namatay,
nakapatay siya. So ang tanong, covered ba yung TPL? Yes.
That is why I assigned this case.
If you take a look at the provisions of the Insurance Code, is
it technical? Oo, medyo technical. Is it Practical? Yes. Kasi
kahit nasa bahay kayo, may pwedeng mangyari, lalo na
ngayon panay lindol.
Technical because it goes against the provision of the Civil
Code:
Art. 1174 of the CC: Except in cases expressly
specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the
obligation requires the assumption of risk, (GR:) no
person shall be responsible for those events which
could not be foreseen, or which, though foreseen,
were inevitable.
But, an Insurance Contract is one of the exceptions. It thrives
on unforeseen events; it thrives on those though foreseen
are inevitable.
What is the difference between an unknown event and a
contingent event?
An unknown event is an event which is certain to happen,
but we do not know when (i.e. death).
A contingent event is an event which may or may not happen
(i.e. fire, accident, sinking of a ship, theft).
Cf: Article 1174 and Section 86.
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Section 86. Unless otherwise provided by the
policy, an insurer is liable for a loss of which a peril
insured against was the proximate cause, although
a peril not contemplated by the contract may have
been a remote cause of the loss; but he is not liable
for a loss of which the peril insured against was only
a remote cause.
Section 86 provides that it is only when the covered peril is
the proximate cause that there can be liability, which means
kung ang insurance mo Fire, dapat ang proximate cause mo
is fire. Hindi earthquake.
What is proximate cause?
Proximate cause has been defined as that which, in natural
and continuous sequence, unbroken by any efficient
intervening cause, produces injury, and without which the
result would not have occurred. (Maam refers to the
definition of proximate cause in the transpo case of Bataclan
vs. Medina re: torch)
D. Insurance for or against drawing of lottery
Can we get an insurance contract on the chances of winning
or losing in a lotto game?
No. Under Section 4 and 25, it provides:
Section 4. The preceding section does not authorize an
insurance for or against the drawing of any lottery, or for or
against any chance or ticket in a lottery drawing a prize.
Section 25. Every stipulation in a policy of insurance for the
payment of loss whether the person insured has or has not
any interest in the property insured, or that the policy shall be
received as proof of such interest, and every policy executed
by way of gaming or wagering, is void.
In the case of Uy vs. Palomar, what are the three elements
of lottery?
For lottery to exist, three elements must concur, namely:
consideration, prize, and chance.
Uy vs. Palomar, GR L-23248, February 28, 1969
Uy is an agent of the PCSO. For the Grand Christmas
Sweepstakes Draw,the PCSO directed its agents to
undertake every means possible to achieve its sales goal.
As such, Uy devised a “Grand Christmas Bonus Award”
plan, where the sub-agents who sell winning tickets, and the
purchasers of the tickets themselves, in addition to the prize
money from PCSO, would win certain items.
Pursuant to this, Postmaster Palomar issued a Fraud Order
and ordered Uy’s parcels containing sweepstakes tickets
and other personal mail to be refused for acceptance for
mailing, on the basis of the Postal Law which proscribes the
use of the mail system to conduct lotteries, gift enterprises,
schemes, etc. Uy filed a complaint challenging the issuance
of the fraud order.
The SC ruled that it has authority to review the Postmaster’s
decision, and that Uy’s plan did not constitute a lottery.
In the "Grand Christmas Bonus Award" plan of the appellee
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We do not see the presence of the element of consideration,
that is, payment of something of value, or agreement to pay,
for the chance to win the bonus or award offered.
True, that to be a participant in said plan, one must have to
buy a whole sweepstakes ticket (8) shares sold by the
Manuel Uy Sweepstakes Agency or by its sub-agents. But
the payment for the price of the sweepstakes ticket is the
consideration for the chance to win any of the prizes offered
by the PCSO in the sweepstakes draw of December 15,
1963. Wholly or partly, said payment cannot be deemed as
a consideration also for the chance to win the prizes offered
by the appellee. For nothing is asked of, or received from,
the buyer of the ticket more than the authorized price
thereof, and which price appears on the face of the ticket. In
fact, appellant admits that except for the price of the ticket,
those entitled to participate and benefit from the plan do not
part with any other consideration for the right to take part
and benefit therefrom. Indeed, as correctly observed by the
lower court, "there is absolutely no separate consideration
for the right to win any of the offered bonuses or awards.xxx
Why did I assign this case?
You are not allowed to insure any game of chance. Even if it
is not a lottery, it is still WAGERY.
What is a wager?
It is a game of chance. No insurance on games of chance.
*Ma’am complains nawala sa syllabus niya yung Londres
case na related to Uy case.*
Londres vs. National Life, G.R. No. L-5921, March 29,
1954
Kawawa yung insurance company sa Londres.
Before war, nagbayad ng premium,before the Japanese
occupation. Namatay yung policyholder after the Japanese
occupation. Yung dineposito sa bangko na pera, wala ng
value. So ang sinasabi ngayon ng insurance company,
‘Moratorium’, kasi nag war eh. Second argument, paano
naman yung premium wala ng value, lugi kami.
Sabi ng SC:
“Appellant, by entering into an insurance contract, cannot
claim, if it suffers loss, that the beneficiary cannot enrich
herself at its expense. This is a risk attendant to any
wagering contract. One who gambles and loses cannot be
heard to complain of his loss.”
"The parties herein gambled and speculated on the date of
the termination of the war and the liberation of the
Philippines by the Americans. This can be gleaned from the
stipulation about redemption, particularly that portion to the
effect that redemption could be effected not before the
expiration of one year from June 24, 1944. This kind of
agreement is permitted by law. We find nothing immoral or
unlawful in it."
Ma’am: A contract of insurance is a form of a wagering
contract, but it is not gambling which is prohibited by law..
You enter into this contract with a lot of risks. The risks
include yung value ng pera na dineposito mo before war,
zero na after war.
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III-Manresa
This is the only case which will define wagering.
January 6, 2020 (Sioson & Altiso)
As I have told you, after going through the General
Provisions, we will now go to the specifics.
What are the two main classifications of insurance?
1. Life Insurance
2. Property or Non-Life Insurance
Definition of Life Insurance under the Code
Section 181. Life insurance is insurance on human loves and
insurance appertaining thereto or connected therewith.
Does it cover the life of your favourite dog? For
instance, Taylor Swift wanted to insure the life of her cat,
can she do so under the life insurance policies?
No, it is human lives which is covered under life insurance.
True or false, an annuity contract is a life insurance
policy.
(really looooong recitation, with different answers)
Atty Sagmit: False, since there is a qualifier. The portion on
the retirement is just a definition of what an annuity is, that is
not a condition. The main condition for an annuity
contract to be qualified as a life insurance policy is for it
to be issued by a life insurance company.
Bakit? Pwede bang hindi? Have you heard of retirement
funds being held by banks? Being controlled by
financial institutions?
Kapag ganon, that is not a life insurance contract. It is an
annuity but the one issuing or handling it is not a life
insurance corporation.
Example: A is a corporation, magtatanong sayo,
gusto ko kasing mag-set aside ng funds for my
employees so when they retire I don’t need to give
out cash, I don’t get from my earnings. What should
I do?
Two choices: You can either go to a life insurance
corporation and let it manage their funds or you can
go to a non-life.
Sa first situation, it now qualifies as a life insurance policy.
So, ang qualifier doon, or the condition precedent is that.
Going back to my question, is that a true or a false? The
answer is False, because it is not categorical na in all
instances life sya. You should know by now, na if there is a
qualifier and not applicable in all instances, then it is a false.
(looong discussion/tip na in answering T/F questions, always
F if there is a qualifier)
What is an annuity contract? (Not really discussed, as she
jumped from one question to another. )
Based on De Leon: Under a life insurance contract, the
estate is created at death. Under the annuity contract, the
estate is fully liquidated by death. Reduced to its ultimate
simplicity, the idea can be expressed by comparing the
nature of the two types of agreements. In exchange for his
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premium, the purchaser of life insurance expects his insurer
to pay his beneficiary a specified sum upon his death. For his
premium, the purchaser of an annuity expects his insurer to
pay him a periodic income as long as he lives. Thus, under a
life insurance contract, the insurer starts paying upon the
death of the insured, whereas under an annuity contract, the
insurer stops paying upon the death of the insured.
True or False? A life insurance policy will give rise to
liability on the part of the insurance corporation only
when there is death or loss of life.
False, under the Code there could be a life insurance which
depends upon the survival on a certain period of time.
What are the other contingencies covered under the life
insurance policy
1. Death;
2. Survival
Is a health insurance policy a life or a non-life insurance
contract?
The basis is Gallardo v. Morales.
Gallardo v. Morales
There was a case against the two where the CFI of Manila
sentenced Morales to pay Gallardo P7,000. Thereafter, the
sheriff garnished and levied execution on the sum of P7,000
out of the P30,000 due from Capital Insurance & Surety Co.
to Morales as beneficiary under a personal accident policy
issued to Morales’ husband who died by assassination.
Morales asked the sheriff to quash and lift the garnishment
praying that the P7,000 be declared exempt from execution
being a life insurance policy, under Rule 39, Section 12 of
the Rules of Court.
It is important to know the nature of the policy, life or non-life
since the proceeds of a life insurance policy is exempted
from levy or execution.
Ruling: Generally, life insurance is distinct and different from
an accident insurance. However, when one of the risks
insured in the accident insurance is the death of the insured
by accident, then there are authorities to the effect that such
accident insurance may, also, be regarded as a life
insurance.
That is basically it, when one of the risks insured in a policy
is death, then it is categorized as a life insurance policy.
Who can issue life insurance policies?
Life insurance companies
Can a health insurance company issue both life and
non-life?
Yes.
In the case of Gallardo can we say that it is both life and
non-life?
No, because if you look at the provisions of the law, a life
insurance company can only issue life insurance policies.
So, if you need a health card which does not cover death,
you do not go to a life insurance corporation. You go to a
non-life. However, if a person wants to be covered for death,
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
among other risks, then he should go to a life insurance
company.
And the law says, you cannot engage in both. Kaya
pagsinabing Phil-Am Life, di pwedeng Phil-Am Non-Life. Isa
lang dapat.
Kinds of Life Insurance Policies
1. Ordinary Life
2. Limited Payment Life
3. Term Insurance
4. Endowment
5. Life Annuity
6. Accident
Ordinary Life Insurance
Based on De Leon: It is one under the terms of which the
insured is required to pay a certain fixed premium annually or
at more frequent intervals throughout his entire life and the
beneficiary is entitled to receive payment under the policy
only after the death of the insured.
This is your typical insurance concept. Before you enrolled in
this class, unless you are an insurance agent or you have a
policy, your normal concept of insurance is: A will pay
premiums until he dies, and when he dies, his beneficiaries
will get it. That is what you call the ordinary life insurance.
This is the cheapest kind. Eto yung medyo hindi afford
magbigay, kaya forever syang magbabayad.
Limited Payment Life
Based on De Leon: It is one under the terms of which the
premiums are payable only during a limited period of years,
usually ten, fifteen, or twenty. When the specified number of
premium payments have been made, the insurance is fully
paid for. It is like ordinary life policies in that it is payable only
at the death of the insured. The insured can take advantage
of the investment aspect of the policy. If the insured should
die within the specified period, his beneficiary is entitled to all
the proceeds of the policy without any liability for the unpaid
premiums. Because of the limited number of payments to be
made by the insured, the premiums are proportionately
higher.
As opposed to ordinary life, eto may konting allowance. 10,
15, or 20 years. For example, si A for 10 years can expect to
stop paying, and when the contingency happens that is the
time where the payment of proceeds will happen.
Term Insurance
Based on De Leon: It is one which provides coverage only if
the insured dies during a limited period. It is an insurance for
a fixed or a specific term, such as two, five, or ten years. If
the insured dies within the period specified, the policy is paid
to the beneficiary. If he survives the period, the contract
terminates or expires at the end of the time period. The
premium paid is levied during the specified terms and
increases with each renewal term or the amount of coverage
declines, and this is because as a person ages, the risk of
death increases
The person will pay the premiums and permits that the
person must die within a period of time. Example: the person
must die within a 20-year period. So, if the person dies on
the 22nd year, it is deemed terminated. The proceeds will not
be paid. Needless to say, medyo mura rin ito.
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Endowment
Based on De Leon: It is one under the terms of which the
insurer binds himself to pay a fixed sum to the insured if he
survives for a specified period (maturity date stated in the
policy), or, if he dies within such period, to some other
person indicated. The premium is higher because the cash
values of the policy grow more rapidly. This kind of policy
differs from the limited payment life policy in that in the case
of the latter, the policy is paid only upon the death of the
insured. Here, the insured stands a chance of being paid the
proceeds of the policy while still alive. After receiving the
face amount of the policy, all coverage will terminate. It has
an increasing cash surrender value but premiums are high,
as payment is required even after the end of the term if the
insured is still living.
Let’s say the endowment is 10 years. If he survives, then he
will get the money. If not, the proceeds will be given to his
beneficiaries. Either way panalo. That’s why sinabi ko last
time na hindi lang death ang contingency covered by life
insurance policy, it can be survival for a specific period, or
the cessation or continuation of life. Expensive ito.
Life Annuity
"By the aleatory contract of life annuity, the debtor binds
himself to pay an annual pension or income during the life of
one or more determinate persons in consideration of a
capital consisting of money or other property, whose
ownership is transferred to him at once with the burden of
the income." (Art. 2021, Civil Code.8)
The parties here can be three or more than three.
Unang una, debtor, sya nagiisue. As a business, yan ang
negosyo nila. Syempre, eto yung insurance company or
financial institution.
You have the annuitant, or the owner, sya ang creditor.
Now, si A ang daming pera saan nya ilalagay? Ibibigay nya
kay debtor. So, bigay sya ng bigay with the expectation that
once the money is accumulated, the debtor is the one who
will
give the money to the designated beneficiary.
Two stages for an annuity contract
1. Accumulation Phase
2. Annuitization Phase
Accumulation- ang daming pera ni A, bigay sya ng bigay.
Accumulate, so pondo pondo. Sa example ko kanina, the
company wants to set aside money for its employees, so it
will now deposit funds to the insurer or debtor.
Bakit sya naging debtor? The moment nagstop yung
accumulation phase, Annuitization Phase na tayo. Ano to?
Habang buhay si beneficiary, bibigyan ni debtor ng pension
si beneficiary.
Who is the beneficiary?
It can be the annuitant himself, or a designated third party.
So, yung example ko sa inyo, apat ang parties, kasi ang
corporation ang nagdeposit, at ang makikinabang is mga
employees nya. Pero, kung yung tao sobrang yaman, nanalo
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III-Manresa
sya ng lotto. Say si A, super dami nyang pera. He will put it
in the bank for instance, with the expectation na when he
reaches the age of 60, expected natin na si debtor na ang
magbibigay ng pension, until the beneficiary dies. So,
baliktad.
Ano yung sa life insurance? Kailangan may mamatay para
mabayaran. Here, hindi. Death becomes the resolutory
condition.
Normal procedure, kailangan may mamatay may
magsurvive, di ba. Pag nangyari yun, magbabayad si
insurance company. Sa annuity, baliktad. Habang buhay ang
pensioner, bibigyan sya nung debtor. Tapos kung si
pensioner namatay agad, edi masaya si debtor kasi ang
dami na-accumulate tapos konti lang ang naibalik nya.
Is it a life insurance policy?
Based on your definition, if it is issued by an insurance
company.
If it is issued or managed by a bank or financial institution,
the mechanics may be the same but it is not classified as a
life insurance policy, Gallardo case is the reason why we are
categorizing, because the proceeds can still be subject of
levy or garnishment.
Accident
Is it a life? When is it considered as life?
If it covers death, or when of the risks assumed is death.
Hindi necessary na death lang ha, it can be combined with
any other as long as nandun ang death.
When we say accident, this is actually a casualty insurance
is an insurance covering loss, or liability arising of an
accident.
What does it not cover?
It excludes certain types of losses which are exclusively
within the scope of other types of insurance such as fire and
marine insurance.
Fire is also an accident, but because it is categorized as
more specific, you do not characterize it as casualty
insurance.
Marine, also the same.
Based on De Leon:
Casualty insurance. — In insurance (not falling within the
scope of the other types of insurance) against perils which
may affect the person and/or property of the insured and give
rise to liability on his part to pay damages to others, the
subject matter is the risks involved in its use, or the insured's
risk of loss or liability, that he may suffer loss or be
compelled to indemnify for the loss suffered by a third
person.1 Casualty insurance includes personal accident and
health insurance as written by non-life insurance companies
and all insurance against loss or liability which is not within
the scope of the other types of insurance, namely, fire,
marine, suretyship and life, (see Sec. 174.)
Title
CASUALTY INSURANCE
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Sec. 174. Casualty insurance is insurance covering loss or
liability arising from accident or mishap, excluding certain
types of loss which by law or custom are considered as
falling exclusively within the scope of other types of
insurance such as fire or marine. It includes, but is not limited
to, employer's liability insurance, motor vehicle liability
insurance, plate glassinsurance, burglary and theft
insurance, personal accident and health insurance as written
by non-life insurance companies, and other substantially
similar kinds of insurance.
What are examples of casualty insurance?
Section 176. Casualty insurance xxx includes, but is not
limited to:
1. employer’s liability insurance,
2. motor vehicle liability insurance,
3. plate glass insurance,
4. burglary and theft insurance,
5. personal accident and health insurance as written
by non-life insurance companies, and
6. other substantially similar kinds of insurance.
Yun, qualified na naman. When it is written by a life
insurance company, then it is considered as life. Very
important dito ang workmen's compensation of course is
employees' compensation. SocLeg! It is considered as
casualty. Ang important dito na exclude si fire and marine.
Section 176. Casualty insurance is insurance
covering loss or liability arising from accident or
mishap, excluding certain types of loss which by
law or custom are considered as falling
exclusively within the scope of other types of
insurance such as fire or marine. xxx
What happened in Sun Insurance?
Pilar Nalagon, Lim's secretary, was the only eyewitness to
his death. It happened on October 6, 1982, at about 10
o'clock in the evening, after his mother's birthday party.
According to Nalagon, Lim was in a happy mood (but not
drunk) and was playing with his handgun, from which he had
previously removed the magazine. As she watched
television, he stood in front of her and pointed the gun at her.
She pushed it aside and said it might he loaded. He assured
her it was not and then pointed it to his temple. The next
moment there was an explosion and Lim slumped to the
floor. He was dead before he fell.
Why is there recovery?
He was testing the waters nu? But at the same time, he was
risking by pointing. By voluntarily entering into a situation of
killing himself. So, bakit nakarecover ang widow niya?
Diba the SC said that they are actually the same. Committing
suicide and voluntary exposing oneself on that situation are
actually the same. Diba parang gross negligence na yun eh?
What was the factual circumstance that made the Supreme
Court decide that this is covered under accident and there
should be recovery by his widow?
He did expose himself to the peril. But then, diba there was
3 a comparison here between suicide and willful exposure to
needless peril. They are the same because parang may
willfulness na pareho. But in this situation (Mr. Lim did not
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
know that the gun he pointed to his head was loaded) what
was the factual circumstance that lead to that conclusion?
Pinakita muna niya na diniskarga niya and it was his belief
na walang bala yun. Had he not done that, there could be no
recovery because if a person is in its normal state of mind
and he is aware of what a gun can do, what could one
expect if that person points the gun to his temple and he pull
the trigger? First is, it will kill the person. Kaya meron tayong
comparison like walking on a tightrope. You have to
understand that this is an old case, wala pa po yung
ginagawa niyo ngayon, bungee jumping. Lahat nalang
tinatalunan, zipline. Sige let’s compare nalang. What if the
person enters a dungeon of lions, do you actually expect to
survive unless you are actually a mythical creature? Diba
you don’t expect to go out alive unless you are Superman
jumping from the 24th floor of the building without any
harness, diba it’s actually suicide or willful disregard of one’s
life? That’s not an accident.
What is the definition of accident based on the Sun
Insurance case?
Okay, unforeseen or although foreseen, is unexpected pa
rin.
From FT:
The term "accident" has been defined as follows:
The words "accident" and "accidental" have never acquired
any technical signification in law, and when used in an
insurance contract are to be construed and considered
according to the ordinary understanding and common usage
and speech of people generally. In-substance, the courts are
practically agreed that the words "accident" and "accidental"
mean that which happens by chance or fortuitously, without
intention or design, and which is unexpected, unusual, and
unforeseen. The definition that has usually been adopted by
the courts is that an accident is an event that takes place
without one's foresight or expectation — an event that
proceeds from an unknown cause, or is an unusual effect of
a known case, and therefore not expected.  4
An accident is an event which happens without any human
agency or, if happening through human agency, an event
which, under the circumstances, is unusual to and not
expected by the person to whom it happens. It has also been
defined as an injury which happens by reason of some
violence or casualty to the injured without his design,
consent, or voluntary co-operation.
Comparison:
There was comparison as well of Lim’s act and a person
jumping from Quezon bridge. Sabi halos pareho lang, anong
sabi ng Supreme Court? There was a comparison between
a swimmer jumping off Quezon’s river and Mr. Lim pointing
his gun to his temple. There was a comparison made by
Sun Insurance, and how did the SC take that comparison?
From FT:
The contrary view is expressed by the petitioner thus:
Accident insurance policies were never intended to
reward the insured for his tendency to show off or for his
miscalculations. They were intended to provide for
contingencies. Hence, when I miscalculate and jump from
the Quezon Bridge into the Pasig River in the belief that I
can overcome the current, I have wilfully exposed myself to
peril and must accept the consequences of my act. If I drown
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I cannot go to the insurance company to ask them to
compensate me for my failure to swim as well as I thought I
could. The insured in the case at bar deliberately put the gun
to his head and pulled the trigger. He wilfully exposed
himself to peril.
Why is there no point of comparison between a person diving
in Quezon Bridge and Lim pointing the gun? Is there an
analogy? None. Why?
Lim basically is saying that he did not know that the gun was
loaded. That’s it. Di ba hindi niya alam? As opposed to
person or unless siguro bulag ka or siguro di mo alam saan
yung Quezon Bridge, sa may Quiapo yan, so kapag diyan ka
tumalon, alam mo yan ang current dyan. So there is no
analogy at all, that is why the widow of Lim recovered the
proceeds. Basically Lim was negligent and his negligent
caused him his life but it’s not to the extent of negligent that
will defeat a valid claim.
From FT:
The Court certainly agrees that a drowned man cannot go to
the insurance company to ask for compensation. That might
frighten the insurance people to death. We also agree that
under the circumstances narrated, his beneficiary would not
be able to collect on the insurance policy for it is clear that
when he braved the currents below, he  deliberately  exposed
himself to a  known  peril.
The private respondent maintains that Lim did not. That is
where she says the analogy fails. The petitioner's
hypothetical swimmer knew when he dived off the
Quezon Bridge that the currents below were dangerous.
By contrast, Lim did not know that the gun he put to his
head was loaded.
Lim was unquestionably negligent and that negligence cost
him his own life. But it should not prevent his widow from
recovering from the insurance policy he obtained precisely
against accident. There is nothing in the policy that relieves
the insurer of the responsibility to pay the indemnity agreed
upon if the insured is shown to have contributed to his own
accident. Indeed, most accidents are caused by negligence.
What happen if one joins a boxing contest and he dies, can
there be recovery? Yes. Basis? Dela Cruz v. Capital. What
was the cause of the death? When did he fall? Anong
nangyari?
On January 1, 1957, in connection with the celebration of the
New Year, the Itogon-Suyoc Mines, Inc. sponsored a boxing
contest for general entertainment wherein the insured
Eduardo de la Cruz, a non-professional boxer participated. In
the course of his bout with another person, likewise a non-
professional, of the same height, weight, and size, Eduardo
slipped and was hit by his opponent on the left part of the
back of the head, causing Eduardo to fall, with his head
hitting the rope of the ring. He was brought to the Baguio
General Hospital the following day. The cause of death was
reported as hemorrhage, intracranial, left.
Was there recovery? Yes. Why?
There is a definition of accident v. accidental, natural
expectation, unforeseen, unexpected. You don’t join a
boxing game with the expectation that the person will die. In
fact, di ba si Manny Pacquiao, he is alive.
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III-Manresa
There was denial by Capital, on what ground?
Sumali siya hindi ba, di naman siya hinamon. But the SC
said that it is considered as an accident. Plus of course,
boxing was not excluded under the policy.
From FT:
It is not disputed that during the ring fight with another non-
professional boxer, Eduardo slipped, which was
unintentional. At this opportunity, his opponent landed on
Eduardo's head a blow, which sent the latter to the ropes.
That must have caused the cranial injury that led to his
death. Eduardo was insured "against death or disability
caused by accidental means". Appellant insurer now
contends that while the death of the insured was due to head
injury, said injury was sustained because of his voluntary
participation in the contest. It is claimed that the participation
in the boxing contest was the "means" that produced the
injury which, in turn, caused the death of the insured. And,
since his inclusion in the boxing card was voluntary on the
part of the insured, he cannot be considered to have met his
death by "accidental means”
The terms "accident" and "accidental", as used in insurance
contracts, have not acquired any technical meaning, and are
construed by the courts in their ordinary and common
acceptation. Thus, the terms have been taken to mean that
which happen by chance or fortuitously, without intention
and design, and which is unexpected, unusual, and
unforeseen. An accident is an event that takes place without
one's foresight or expectation — an event that proceeds
from an unknown cause, or is an unusual effect of a known
cause and, therefore, not expected.1
Appellant however, would like to make a distinction between
"accident or accidental" and "accidental means", which is the
term used in the insurance policy involved here. It is argued
that to be considered within the protection of the policy, what
is required to be accidental is the means that caused or
brought the death and not the death itself. It may be
mentioned in this connection, that the tendency of court
decisions in the United States in recent years is to eliminate
the fine distinction between the terms "accidental" and
"accidental means" and to consider them as legally
synonymous.2 But, even if we take appellant's theory, the
death of the insured in the case at bar would still be entitled
to indemnification under the policy. The generally accepted
rule is that, death or injury does not result from accident or
accidental means within the terms of an accident-policy if it
is the natural result of the insured's voluntary act,
unaccompanied by anything unforeseen except the death or
injury.3  There is no accident when a deliberate act is
performed unless some additional, unexpected,
independent, and unforeseen happening occurs which
produces or brings about the result of injury or death. 4 In
other words, where the death or injury is not the natural or
probable result of the insured's voluntary act, or if something
unforeseen occurs in the doing of the act which produces the
injury, the resulting death is within the protection of policies
insuring against death or injury from accident.
In the present case, while the participation of the insured in
the boxing contest is voluntary, the injury was sustained
when he slid, giving occasion to the infliction by his opponent
of the blow that threw him to the ropes of the ring. Without
this unfortunate incident, that is, the unintentional slipping of
the deceased, perhaps he could not have received that blow
in the head and would not have died. The fact that boxing is
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attended with some risks of external injuries does not make
any injuries received in the course of the game not
accidental. In boxing as in other equally physically rigorous
sports, such as basketball or baseball, death is not ordinarily
anticipated to result. If, therefore, it ever does, the injury or
death can only be accidental or produced by some
unforeseen happening or event as what occurred in this
case.
If a person went to a drinking spree during Kadayawan and
was gun down, will it be covered under accident-insurance
policy? Yes. Basis? Finman v. CA
While said insurance policy was in full force and effect, the
insured, Carlie Surposa, died on October 18, 1988 as a
result of a stab wound inflicted by one of the three (3)
unidentified men without provocation and warning on the part
of the former as he and his cousin, Winston Surposa, were
waiting for a ride on their way home along Rizal-Locsin
Streets, Bacolod City after attending the celebration of the
"Maskarra Annual Festival."
Under what circumstance did the stabbing happened?
Where was he when he was stabbed? Under what
circumstance? Very important yun ah.
He was on his way home and he was waiting for his ride
home.
Do you think the SC would rule on the same way if he
engaged in a fight and was stabbed because of the fight?
No. Since it will be removed from the ambit of accident. May
provocation, may nakaaway siya. Eto eh, sino naman mag
eexpect habang nag hihintay ka ng jeep mo ay biglang may
gaganun sa iyo, diba? That would be covered now under the
accident. He voluntarily attended the Maskarra Festival, it
was not a risky activity but he died in the process so it is still
within the concept of an accident according to the SC.
From FT:
In the case at bar, it cannot be pretended that Carlie
Surposa died in the course of an assault or murder as a
result of his voluntary act considering the very nature of
these crimes. In the first place, the insured and his
companion were on their way home from attending a festival.
They were confronted by unidentified persons. The record is
barren of any circumstance showing how the stab wound
was inflicted. Nor can it be pretended that the malefactor
aimed at the insured precisely because the killer wanted to
take his life. In any event, while the act may not exempt the
unknown perpetrator from criminal liability, the fact remains
that the happening was a pure accident on the part of the
victim. The insured died from an event that took place
without his foresight or expectation, an event that proceeded
from an unusual effect of a known cause and, therefore, not
expected. Neither can it be said that where was a capricious
desire on the part of the accused to expose his life to danger
considering that he was just going home after attending a
festival. 
What are the CLASSES of life insurance?
1. Individual
2. Group
3. Industrial
4. Microinsurance
What is an individual life insurance?
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Protection based on individual application
What is a group life insurance?
Unit of selection is the group rather than the individual like a
policy covering a number of individual
What was the issue in the case of Pineda v. CA? What did
Captain Noval do in this case?
Namatayan na ang mga tao, akala mo tutulong siya, tapos
pagkakuha nung proceeds, pinocket.
Who is Captain Noval? What is his role in the scheme of
things? What is his position?
He is supposed to be the autorized officer of the corporation
and of course he became the attorney-in-fact.
So binayaran siya, ang sinabi ng company, hoy bayad na
kami ha, bat ako yung sinisingil niyo. Anong sabi ng SC?
Let’s focus on the group policy. The employer gets a policy
for all employees. The policy stays with the employer. All
employees have certificate of participation. That’s what they
have.
So anong dynamics dito? Ano ang role ni Noval in the
scheme of things, in a group life policy situation?
Noval is the agent of the insured.
Why is it important to point that out? That’s the main gist eh.
Since he was acting as an agent of the insurer and he
pocketed it, then that act binds the insurer. In which case,
nag dispalgo siya, hindi pa bayad yung mga beneficiaries.
So whenever there is a group insurance policy taken by the
insurer, the employer acts as an agent of the insurer. Hindi
niya nirerepresent yung mga tao niya. So yung pagnanakaw
niya as President and General Manager, hindi ibig sabihin
bayad na yung mga beneficiaries. Gets?
In the light of the disquisitions, PMSI, through its President
and General Manager, Capt. Nuval, acted as the agent of
Insular Life. It is now bound by the misconduct of its agent.
Di ba ang weird nu, in group insurance, the employer is the
agent of the group life company.
What is an industrial life policy?
Section 235. The term industrial life
insurance as used in this Code shall mean that form
of life insurance:
● under which the premiums are payable
either monthly or oftener,
● if the face amount of insurance
provided in any policy is not more than five
hundred times that of the current statutory
minimum daily wage in the City of Manila, and
● if the words industrial policy are printed
upon the policy as part of the descriptive matter. xxx
How much ang minimum wage in Metro Manila? It ranges
from P500.00 - P537.00 so multiplied by 500 times. Face
amount is the amount that is recovered by the beneficiary.
So if you multiply it, that is about P250,000, which means
that it is really to cater those who are able to pay very small
premiums. Face amount is the recovery amount. Premium
is what you paid to be covered.
How is it different from a microinsurance? It is a relatively
new concept.
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"Section 187. Microinsurance is a financial product
or service that meets the risk protection needs of
the poor where:
"(a) The amount of contributions,
premiums, fees or charges, computed on a daily
basis, does not exceed seven and a half percent
(7.5%) of the current daily minimum wage rate for
nonagricultural workers in Metro Manila; and
"(b) The maximum sum of guaranteed
benefits is not more than one thousand (1,000)
times of the current daily minimum wage rate
for nonagricultural workers in Metro Manila.
So poor na naman. Industrial and microindustrial caters
those who are poor in life. Ito yung comparison industrial 500
times recovery, microindustrial 1000 times. Sino ang mas
affordable? Industrial. The fact sa industrial 500 times, dito
1000 times ang recovery kasi proportional ang binabayad sa
makukuha eh. So which is more affordable? Sa industrial
250, 000. Sa microinsurance, 500,000. It’s 2 times.
Icompare niyo lang. So may microinsurace tayo pero may
industrial parin. The weird part is the special provisions
available to industrial is not given to microinsurance.
Makikita natin later, ah pag ganito nag lapse na, di ka
nakabayad ng premium. Pero pag industrial, meron ka pang
additional na 4 months which is not a concept in
microinsurance. So kung baga, gagawa sila ng law,
nagrevise, di pa nila (inaudible). Sa industrial hindi
masyadong required magpakita ng insurable interest,
pagdating sa micro hindi ganun. And they are supposed to
cater those who are less in life.
If you try to look at industrial later, ito yung mga kapitbahay
na nag tatapal sa pag oospital, pag papalibing, kahit hindi
kaano ano ang kapitbahay nila, they can recover under an
industrial policy. It caters to those persons who are less in
life.
What are mutual benefit associations? Are they engaged in
doing the business of microinsurance? No. Basis?
Section 188. No insurance company or mutual
benefit association shall engage in the business of
microinsurance unless it possesses all the
requirements as may be prescribed by the
Commissioner. The Commissioner shall issue such
rules and regulations governing microinsurance.
Did you read the business inquirer article about it? What is
the trend? Did you know there is no registered
microinsurance business here in Davao. The nearest you
can go to is in GenSan and it is a teacher’s association. So
kung may nag o-offer sa inyo ng insurance dito sa Davao,
sabi micro insurance, tandaan niyo there is no registered
microinsurance business in Davao. As of 2019, there are 33
registered MIB and there is none in Davao. Because of this,
anong ginagawang effort ng government to protect the
public?
While regulation was instituted as early as 2006, the
industry still grapples with cooperatives offering
unlicensed insurance products. Thus, the quest for
the formalization of these informal insurers
continues to be a challenge. In this regard, five
strategies have been identified to formalize their
activities:
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III-Manresa
a) partnership with formal insurers in the
form of a policy group;
b) license them as an intermediary, such
as an agent;
c) register as an MBA to engage in
microinsurance;
d) license them as microinsurance broker
with lower capital requirement; and
e) seek license as a commercial insurer or
an insurance cooperative.
Even if those who are engaged in the business of insurance
now, if we will apply the new Insurance Code, they have to
catch up with their capitalization. Actually by 2019 to 2020
dapat na ka catch up na sila eh, 2012 ang Code. So kung
hindi nila kaya yun, maybe as an agent, intermediary or tie
up sila with an existing one, wag lang yung unlicensed.
These are the efforts.
If you take a look at Section 194, we will discuss what is a
Mutual Benefit Association compared to a company. Ang
corp kasi shares, ang MBA kasi coop siya, so members. As
we will see later, there is a process of mutualization which
means a corporation can become a MBA. Ibebenta niya ang
shares magiging all members nalang. Pwede din naman na
all members convert into a company. We will discuss that
later.
The first microinsurance provider in the country was the
Center for Agriculture and Rural Development (CARD) MBA,
established in 2001. Just familiarize yourself with that.
When we deal with human life and if we are talking about as
one of the risk insured against is death, then it is categorize
as life.
NON-LIFE INSURANCE
Non-life or property naman, what are the kinds?
1. Fire
2. Casualty
3. Marine
4. Compulsory motor vehicle
5. Suretyship
True or False. An insurance against tornados is a fire
insurance.
SECTION 169. As used in this Code, the
term fire insurance shall include insurance
against loss by fire, lightning, windstorm,
tornado or earthquake and other allied risks,
when such risks are covered by extension to
fire insurance policies or under separate
policies.
FALSE. It is only fire insurance when it is covered by
extension to fire insurance policies or under separate
policies. May qualifier ulit. What if ang tornado policy is a not
a separate policy? What if the tornado policy is not an
extension policy? It is not fire. It is just a tornado policy.
Is an earthquake policy a fire insurance policy?
Generally, no unless covered by extension policy or separate
one.
What is casualty insurance?
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SECTION 176. Casualty insurance is
insurance covering loss or liability arising from
accident or mishap, excluding certain types of
loss which by law or custom are considered
as falling exclusively within the scope of other
types of insurance such as fire or marine. It
includes, but is not limited to, employer’s
liability insurance, motor vehicle liability
insurance, plate glass insurance, burglary and
theft insurance, personal accident and health
insurance as written by non-life insurance
companies, and other substantially similar
kinds of insurance.
What are the examples?
Section 176. Casualty insurance xxx includes, but is not
limited to:
1. employer’s liability insurance,
2. motor vehicle liability insurance,
3. plate glass insurance,
4. burglary and theft insurance,
5. personal accident and health insurance as written
by non-life insurance companies, and
6. other substantially similar kinds of insurance.
Memorize that! Casualty is accident or mishap except fire
and marine.
What is marine insurance?
SECTION 101. Marine Insurance
includes:
“(a) Insurance against loss of or
damage to:
“(1) Vessels, craft, aircraft, vehicles,
goods, freights, cargoes, merchandise,
effects, disbursements, profits, moneys,
securities, choses in action, instruments of
debts, valuable papers, bottomry, and
respondentia interests and all other kinds of
property and interests therein, in respect to,
appertaining to or in connection with any and
all risks or perils of navigation, transit or
transportation, or while being assembled,
packed, crated, baled, compressed or
similarly prepared for shipment or while
awaiting shipment, or during any delays,
storage, ransshipment, or reshipment
incident thereto, including war risks, marine
builder’s risks, and all personal property
floater risks;
“(2) Person or property in connection
with or appertaining to a marine, inland
marine, transit or transportation insurance,
including liability for loss of or damage arising
out of or in connection with the construction,
repair, operation, maintenance or use of the
subject matter of such insurance (but not
including life insurance or surety bonds nor
insurance against loss by reason of bodily
injury to any person arising out of ownership,
maintenance, or use of automobiles); 
(3) Precious stones, jewels, jewelry,
precious metals, whether in course of
transportation or otherwise; and
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III-Manresa
(4) Bridges, tunnels and other
instrumentalities of transportation and
communication (excluding buildings, their
furniture and furnishings, fixed contents and
supplies held in storage); piers, wharves,
docks and slips, and other aids to navigation
and transportation, including dry docks and
marine railways, dams and appurtenant
facilities for the control of waterways.
“(b) Marine protection and indemnity
insurance, meaning insurance against, or
against legal liability of the insured for loss,
damage, or expense incident to ownership,
operation, chartering, maintenance, use,
repair, or construction of any vessel, craft or
instrumentality in use of ocean or inland
waterways, including liability of the insured for
personal injury, illness or death or for loss of
or damage to the property of another person.
What is bottomry? How is it different from respondentia?
What is average? General and Particular Average? We will
discuss that pag abot natin ng marine.
Are the precious stones supposed to be in transit? NO.
Section 101 (3)
Does it cover loss of life or injury to person? Basis?
Be able to distinguish between marine and marine protection
indemnity. Magkaiba yun ha.
What is Compulsory Motor Vehicle? What does it
cover?
“SECTION 386. For purposes of this
chapter:
“(a) Motor Vehicle is any vehicle as
defined in Section 3, paragraph (a)
of Republic Act No. 4136, otherwise known as
the ‘Land Transportation and Traffic Code’.
“(b) Passenger is any fare paying
person being transported and conveyed in
and by a motor vehicle for transportation of
passengers for compensation, including
persons expressly authorized by law or by the
vehicle’s operator or his agents to ride without
fare.
“€ Third party is any person other
than a passenger as defined in this section
and shall also exclude a member of the
household, or a member of the family within
the second degree of consanguinity or affinity,
of a motor vehicle owner or land
transportation operator, as likewise defined
herein, or his employee in respect of death,
bodily injury, or damage to property arising out
of and in the course of employment. CDaTAI
“(d) Owner  or motor vehicle
owner means the actual legal owner of a
motor vehicle, in whose name such vehicle is
duly registered with the Land Transportation
Office;
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“€ Land transportation
operator  means the owner or owners of motor
vehicles for transportation of passengers for
compensation, including school buses.
“(f) Insurance
policy or  Policy refers to a contract of
insurance against passenger and third-
party liability for death or bodily injuries
and damage to property arising from motor
vehicle accidents.
It is the only insurance that is required by law.
Who is supposed to have this?
Tri-sikad, cover? What is the definition of covered vehicle?
Yes.
Habal habal? Yes.
(a) Motor Vehicle  is any vehicle as defined in Section 3,
paragraph (a) of Republic Act No. 4136, otherwise known as
the ‘Land Transportation and Traffic Code’.
“Motor Vehicle” shall mean any vehicle propelled by
any power other than muscular power using the
public highways, but excepting road rollers, trolley
cars, street-sweepers, sprinklers, lawn mowers,
bulldozers, graders, fork-lifts, amphibian trucks, and
cranes if not used on public highways, vehicles
which run only on rails or tracks, and tractors,
trailers and traction engines of all kinds used
exclusively for agricultural purposes.
Trailers having any number of wheels, when
propelled or intended to be propelled by attachment
to a motor vehicle, shall be classified as separate
motor vehicle with no power rating.
When we talk about compulsory motor vehicle, it is also
known as TPL (third party liability). It does not cover
damage to property. It only covers loss of life or injuries.
Gets?
What is suretyship?
SECTION 177. A contract of suretyship is an
agreement whereby a party called the surety
guarantees the performance by another party called
the principal or obligor of an obligation or
undertaking in favor of a third party called the
obligee. It includes official recognizances,
stipulations, bonds or undertakings issued by any
company by virtue of and under the provisions
of Act No. 536, as amended by Act No. 2206.
Is it the same as guaranty? What is the difference?
What is the nature of liability of a suretyship?
Joint or Several; Solidary. As opposed to guaranty which is
subsidiary. Sub-ikaw muna bago ako. Pag solid – kahit sino
sa atin ang pwedeng habulin. Because it assumes the
liability of another person, it is an exemption to the rule
because each party must bear its own loss and because it is
an exception, what does the Civil Code require in cases of a
suretyship agreement? Statute of Frauds. It assumes the
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III-Manresa
risk of another person so it must be something in writing. If it
is not in that particular form, what is the consequence? It is
unenforceable.
January 13, 2020 (Sosoban & Malicay)
Last time, we already discussed different the provisions
regarding life insurance – the different types of life insurance,
the different kinds. We also discussed a little bit of the
different kinds of non-life insurance. So, it’s very important to
note that we define what an accident is, what separates it
from willful intention on the part of the policyholder. We said
that, generally, when we talk about insurance policies we are
suppose to cover individuals for simple negligence and for
accidents. But when it is gross negligence or becomes willful
in nature, then it is now removed within the realm of the
coverage of an insurance policy.
We also said that the common misconception is that the
normal life insurance policy, and the usual, is A getting a
policy on his own life, making the proceeds payable to his
designated beneficiaries but we have seen in our discussion
that there are various types of insurance policies. [Story
about college friend who is an insurance agent]
What’s a variable policy? It is an investment, a portion of the
premiums will be saved as investment and a certain portion
will be for health.
Basically, what she is telling me is pag endowment, mahal.
Syempre! That is because there can be recovery either way.
If A passes away withina specific period then the
beneficiaries get the proceeds. If A survives, then there is
also recovery. So hindi na ito ang traditional na thinking natin
na dapat may mamatay bago magkaroon ng recovery.
We also discussed the concept of annuities – for those who
are very rich right now, for those who have children and who
have extra income, so you can actually; kasi nga life
insurance policies are contracts of investment. Yung
property, yan ay indemnity because there can be restoration
of properties. Sa life, you cannot restore life. So, sad to say,
it is considered as a life insurance that is a contract of
investment. You should have seen that in the cases that we
are going to discuss today.
So now, we are going into specifics.
What contingencies are covered under life insurance
policies?
Contingencies covered are
1. Death;
2. Survival of a specific period; and
3. Continuance or cessation of life.
What can be insured against?
[Section 3] Any contingent or unknown event, whether
past or future, which may damnify a person having an
insurable interest, or create a liabilty against him, may be
insured against, subject to the provisions of this chapter.
And we have disucssed what the difference between an
contingent and and unknown event is.
What is a contingent event?
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A contingent is something which may or may not happen.
What is the difference of a contingent and an unknown
event? [Magkaiba yan eh, hindi na man yan magka dugtong]
A:
1. Contingent Event – something which may or may
not happen;
2. Unknown event – something which is certtain to
happen but the time of occurrence is unknown.
[best example is death of a person]
Based on the provision, it’s not enough that you have an
unknown or a contigent event. What is the qualification?
A: …which may damnify a person having insurable interest
OR create a liability against him.
What is the difference between damnify a person and
create a liabilty?
1. Damnify a person – direct loss;
2. Create a liability – expose the person to a liability
[best example is TPL]
3.
**kaya nga TPL sya diba because the person himself does
not suffer any damage but because of the accident, a third
party is either injured or dies. Kaya tayo required kapag may
motor vehicle tayo to get a TPL precisely to cover that kind of
liabilty.
When can we get a policy?
We can get a policy for a contingent or uknown event that
will either create a liability or damnify a person.
Can a married woman get a policy on the life of one of
her children without the consent of the husband?
Yes. A married woman may take out an insurance on her life
or that of her children or that of her husband without the
consent of her husband. [Section 3]
Can a married man get a policy on the life of one of his
children without the consent of the wife?
Yes.
How does this differ from the old Section 3?
With regard to the qualification of the spouse, the old
Section 3 mentions “married woman” and it has been
recently changed into “spouse”
We also have the provision about minors saying that it is the
father first who can represent the minor.
What is the status of an insurance contract obtained by
the mother on the lives of the child without the consent
of the father?
Valid.
What is the status of a contract which is entered into by
a minor?
Voidable – valid until annulled.
Who is supposed to give the ratification?
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Section 182. “In the absence of a judicial guardian, the
father, or in the latter’s absence or incapacity, the mother,
of any minor, who is an insured or a beneficiary under a
contract of life, health, or accident insurance, may exercise,
in behalf of said minor, any right under the policy, without
necessity of court authority or the giving of a bond, where the
interest of the minor in the particular act involved does not
exceed Five hundred thousand pesos or in such reasonable
amount as may be determined by the Commissioner.”
How does Section 3 now explain the clause, “all rights,
title and interest in the policy of insurance taken out by
an original owner on the life or health of the person
insured shall automatically vest in the latter upon the
death of the original owner, unless otherwise provided
for in the policy.” – how do you understand that?
“In the new clause, it basically explains that upon death,
there is automatic transfer of the rights, title and interest in
the policy taken by the owner.”
[Atty S: May issue ako dito sa Section 3. Ano issue ko? Mas
malinaw yung old provision. It makes reference to a parent –
the old ha, getting a policy on the life of a minor and if the
parent passes away, the interests under the policy will now
be transferred to the minor. But, Section 3 as it now stands,
removed the part on the minors. This means, if we
understand it the way it stands now and we have now idea
what Section 3 is, it would seem that someone who gets a
policy under Section 10(b) – If A gets a policy on the life of
the spouse B and A dies ahead of B, B will now get all the
rights. Which, as we will see later, is not the case because A
used the life of B to get a policy. The husband, under
Section 10(b) can get a policy on the life of the wife naming
whoever he want kasi may insurable interest siya. Pero if
you will take a look at the rules later, if A passes away ahead
of B, it’s actually the estate of A who is supposed to enjoy.
Bakit ibibgay dun sa ginamit na buhay? This now makes the
last part of Section 3 confusing. Primarily because they just
took out the portion on minors. So, what do we do? How do
we reconcile it? Ako, minors pa rin – I will still interpret it in
the light of the old provision. So, if a parent gets a policy on
the life of a minor and the parent passes away then the
rights will now be transferred to the minor. You do not read it
as it is because as we will see later, its not really the Section
10(b) who will get the benefits. It is the estate of the one
paying the premium. We read it within the context of a parent
getting a policy on the life a minor child.]
Note: We read Section 3 in the light of the old Section 3.
So if a contract entered into by a minor is voidable, can
the insurance company assert the lack of personality of
the minor to escape liability?
No, maam.
[Atty S: What is the principle in oblicon that we use? When a
person or one party is incapacitated, the other party cannot
assert the incapacity of that party in order to evade liability]
In which case, Article 182 is very specific.
Who can act in behalf of minors and under what
conditions?
Abrasaldo|Altiso|Deiparine|Fernandez|Malicay|Milana|Sioson|Sosoban|Suaybaguio
Section 182. “In the absence of a judicial guardian, the
father, or in the latter’s absence or incapacity, the mother,
of any minor, who is an insured or a beneficiary under a
contract of life, health, or accident insurance, may exercise,
in behalf of said minor, any right under the policy.”
What rights can be exercised?
Article 182. “Such right may include, but shall not be limited
to obtaining a policy loan, surrendering the policy, receiving
the proceeds of the Policy, and giving the minor’s consent to
any transaction on the policy.”
And what is the conditions under which there is no need
for a declaration of a judicial guardian?
Article 182. “Where the interest of the minor in the particular
act involved does not exceed Five Hundred Thousand Pesos
(P500,000.00) or in such reasonable amount as may be
determined by the Commissioner.”
Note: So, five hundred thousand below (P500,000.00)
pwede na, which now tells us na if it exceeds five hundred
thousand, the father or the mother must now seek the
Court’s approval to be a judicial guardian.
Eh pano kung walang nanay or tatay?
Article 182. “In the absence or in case of the incapacity of the
father or mother, the grandparent, the eldest brother or sister
at least eighteen (1) years of age, or any relative who was
actual custody of the minor insured or beneficiary, shall act
as guardian without need of a court order or judicial
appointment as such guardian, as long as such person is not
otherwise disqualified or incapacitated.”
What type of negligence is out to be protected or
covered under an insurance policy?
Article 89. An insurer is not liable for a loss caused by the
willful act or through the connivance of the insured; but he is
not exonerated by the negligence of the insured, or of the
insurance agents or others.” [simple negligence]
If the loss is the result of a willful act or gross
negligence, the insurance company is not liable. True or
False
False. There is an exception, Section 89. “But he is not
exonerated by the negligence of the insured, or of the
insurance agents or others.”
[Atty S: When, for example, the loss is due to the willful act
of the policyholder, what is the rule? And what is our basis
for saying that? Generally, the insurer is not liable. Bakit
kapag sinadya hindi liable yung company? Its not an
accident anymore, it now removes it from simple negligence.
And that’s why, if you take a look at Section 89, “The insurer
is not liable for a loss caused by the willful act or through the
connivance of the insured; but he is not exonerated by the
neglugence of the insured, or of the insurance agents or
others.”]
A gets a life insurance policy on his own life on June 2,
2010, he then commits suicide on June 10, 2012 – is the
insurance company liable?
Yes. Because the suicide was committed after the policy has
been effective for a period of 2 years from the issuance of
the policy or last reinstatement.
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III-Manresa

What do you mean by last reinstatement? In the case of Calanoc v. CA there was a refusal to pay
by the insurance company. What was the basis? Ano
If the insured fails to pay the premium on time and the policy bang trabaho niya?
lapses, then you have to reinstate it. So you count it from
that period. Watchman.

Is it possible that the policy has been enforced for
shorter than two (2) years but the beneficiary can still
get the proceeds in case of suicide?
1. Unless the policy provides a shorter period;
2. Suicide committed in the state of insanity. [Section
183]
Step # 1: When it is a case of death by suicide, the first thing
that we check is the policy.  Yes there was liability.
Bakit siya nasa scene of the crime?
He was invited by the owner, at first he refused to give in he
told the lawyer to seek help to the policeman, and when the
lawyer sought help to the policeman, the police asked him to
come with them. He then died due to a gunshot fired inside
the house, he was shot in the abdomen.
How did the SC rule din this case? Was there a liability
on the part of the Insurance Company?
 

Discussion: If the policy says it is an excluded cause, kahit
10 years pa yan, excluded yan. So kapag kayo nag aaply ng
policy napaka practical contract of adhesion  pero pwede
kayong mag pa change lagyan niyo nang rider, kung may
plano kayo... plano mag suicide! So pwede niyo ipa change
yun, but if it is an exclusive clause, wala na tayo niyan, game
over. Even if 5 years ay an nag eexist, wala na excluded.
Even if State of Insanity, excluded parin.  intentional for there is the possibility that the malefactor
Step # 2: If it is not excluded (it doesn’t necessarily mean
included). The next thing that you will check is the state of
mind of the person.
Discussion: Kasi kung insane siya, kahit pa 1 year pa lang
yung policy ay an it is now removed within realm of willful
act. Kasi in the first place bakit excluded ang suicide,
because it is intentional. It is not gross negligence ha. It is
not pointing the gun and thinking that it is not loaded ha. It is
not intentional (insanity), because the person was not in the
proper state of mind, it is now removed within the realm of
intentional acts.  as opposed to Calanoc v. CA?
But didn't he intentionally subject himself to that,
because he could have said to the Policeman he cannot
leave his job. What removes it from the ambit of
intentionality? There is a portion in the decision where it
said that it could not have been intentional.
from the FT. Nor can it be said that the killing was
had fired the shot merely to scare away the people
around for his own protection and not necessarily to kill
or hit the victim. In any event, while the act may not
exempt the triggerman from liability for the damage
done, the fact remains that the happening was a pure
accident on the part of the victim. The victim could have
been either the policeman or Atty. Ojeda for it cannot be
pretended that the malefactor aimed at the deceased
precisely because he wanted to take his life.
Is this the same reasoning used in the case of Biagtan v.
Insular? What factual circumstance made it intentional

If the person is normal, what is the next thing that we
will look for?
Step # 3: Take a look at the date (period) first, baka pasok
na siya sa 2 years or longer.
Discussion: Suicide generally because it is intentional it is
not supposed to be compensable, but ganun ang steps niyo,
take a look at the policy- not excluded, then take a look at
the state of mind- not insane. Okay the last resort, take a
look at the period.
from the FT: Whether the robbers had the intent to kill or
merely to scare the victim or to ward off any defense he
might offer, it cannot be denied that the act itself of inflicting
the injuries was intentional. But where a gang of robbers
enter a house and coming face to face with the owner, even
if unexpectedly, stab him repeatedly, it is contrary to all
reason and logic to say that his injuries are not intentionally
inflicted, regardless of whether they prove fatal or not. As it
was, in the present case they did prove fatal, and the robbers
have been accused and convicted of the crime of robbery
with homicide.

Why is there a 2 year mark?
Because I think the policy behind the law is that, if the person
intended to commit suicide at the time he got the policy, he
would not have waited 2 years. There is no pre-meditation,
no initial intention to commit suicide.
Discussion: These are old cases no, the reason why we are
discussing this is to know the difference between intentional
and not intentional, and in the end it is not really intentionally
subjecting oneself, dun parin tayo sa concept na "Did you
figure in that situation with full knowledge that there might be
a possibility of death" yun parin no, Accident v. Intentional.

In the case of Gallardo v. Morales what was the issue?
The issue is WON there was suicide? Was there an element
of intention? (in relation to our topic)
How did he die?  factor to determine if there would be payment or none. Hindi
He was assassinated. Again, a reiteration that this personal
accident policy is a life insurance because one of the risk
insured against is death. 
Etong mga provisions kasi na andito, napaka specific kasi ng
policy, kapag intentional yung killing- kaya natin dinidiscuss
accident v. intentional. At the end, it is the policy holder who
will determine kung ang kanyang act ay intentional o hindi,
and the lack of intention of the policy holder will now be the
yung, intentional ba ang pag patay sa kanya nandun parin
tayo sa punto na kung accident, bayaran. Pero if there is
gross negligence, walang bayad.

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GR: If there is gross negligence on the part of the insured,
there shall be no payment of insurance.
EX: SECTION 89. An insurer is not liable for a loss
caused by the willful act or through the connivance of
the insured; but he is not exonerated by the negligence
of the insured, or of the insurance agents or others.
Discussion: But generally when there is... example as
applied in covered insurance, diba pag arson, mag kokolekta
ka sa Fire Insurance Policy, ikaw naman ang sumunog, so it
now becomes an intentional act because again an insurance
policy is suppose to cover a portion for acts of simple
negligence, not gross negligence, intentional acts, or suicide.
In the case of Dela Cruz v. Capital  was there a willful act
resulting to non-liability? What removed it from the
concept of willful act?
No, because what happened was an accident.
from the FT. The fact that boxing is attended with some risks
of external injuries does not make any injuries received in the
course of the game not accidental. In boxing as in other
equally physically rigorous sports, such as basketball or
baseball, death is not ordinarily anticipated to result. If,
therefore, it ever does, the injury or death can only be
accidental or produced by some unforeseen happening or
event as what occurred in this case.  performance; [Section 10]
Sun Insurance v. CA. Was there an intentional act and
was there a recovery? What removed it from the willful
act?
No intentional act. The gun here was not loaded, and the
pointing of the gun was done in good faith to show that the
gun was not really loaded.
What is Insurable Interest?
Insurable Interest is that interest which the law requires the
owner of an insurance policy to have in the person of thing
insured to prevent the contract from becoming a wagering
contract.
 A person is deemed to have an insurable interest in
the subject matter insured where he has a relation
or connection with or concern in it that he will derive
pecuniary benefit or advantage from its preservation
and will suffer pecuniary loss or damage from its
destruction termination or injury by the happening of
the event insured against.
Discussion: Since we are talking about Life the happening
of a contingent event will damnify or there will be a form of
loss on the part of the person, kasi yung create liability  that
is only applicable to property. 
Extreme Example: Hindi pwedeng kumuha ng policy si A
just in case mapatay niya si B kasi baka maging liabile siya
sa isang criminal act, walang ganun.  si A, he can now get a policy on the life of A.
It is only applicable in the case of property insurance, if you
are speaking not only life. So eto will really damnify a person.
In whose life does a person have insurable interest?
SECTION 10. Every person has an insurable interest in
the life and health:
(a) Of himself, of his spouse and of his children;
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(b) Of any person on whom he depends wholly or in part
for education or support, or in whom he has a pecuniary
interest;
(c) Of any person under a legal obligation to him for the
payment of money, or respecting property or services,
of which death or illness might delay or prevent the
performance; and
(d) Of any person upon whose life any estate or interest
vested in him depends.
True or False. Only those enumerated under Section 10
their lives can be used to get a policy of Life Insurance.
TRUE. (Anong principle sa Statutory Construction
yan?)  expressio unius est exclusio alterius, what is
deemed excluded is not included.
Discussion: This is a very exclusive list.
Problem: A is the best friend of B, they are like sisters to
each other, in fact they are co-owners of a condominium
unit wihich was not affected by the earthquake. Can A
get a policy on the life of B, naming herself as
beneficiary, because she will suffer terrible loss if B
passes away.
Yes. (c) Of any person under a legal obligation to him for the
payment of money, or respecting property or services, of
which death or illness might delay or prevent the
Problem: A and B are spouses can B get a policy on the
life of A when the marriage has already been annulled.
No Ma'am
Problem: Will your answer be the same if the policy was
obtained while they were married and when A passes
away after the annulment. At the time the policy was
obtained they were married, but at the time of death they
were no longer married.
SECTION 19. An interest in property insured must exist
when the insurance takes effect, and when the loss occurs,
but need not exist in the meantime; and interest in the life or
health of a person insured must exist when the insurance
takes effect, but need not exist thereafter or when the loss
occurs.
True or False. In the case of life insurable interest must
exist only at the time of issuance, but not at the time of
death. 
False. The answer is false because when the insurable
interest arises from the payment of a legal obligation
insurable interest in the lives will exists not only at the time
you get the policy but also at the time of death.
Problem: Si A may utang kay B pag namatay si B, pag
namatay si A patay ang singilan, wala nang bayad. So
para ma insure si B na mababayaran siya kasi namatay
May insurable ba siya sa umpisa or wala?
There was an insurable interest.
Before namatay si B nabayaran na niya ang utang
namatay si B. Can A still get the proceeds from the life
insurance policy. May Insurable Interest pa ba siya.
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There is none, because the liability is already paid or
satisfied.
Is it correct to say that in life insurance, insurable
interest must exist at the start but may or may not exist
at the end, is it accurate to say that?
No, pag utang na yung pinag uusapan natin, dapat 2 points
in time nag eexist yung insurable interest.
Discussion: Hindi pwede aba kumuha ka nang policy
nabayaran na yung utang kokolekta kapa ulit. Eh, ang main
reason mo for getting the policy is to utang.  education policies, or investment, survival of specific period,
In the case of El Oriente v. Posadas, diba naka kuha nang
policy on the life of the employee kasi ang galing galing niya,
nag aakyat siya nang pera sa company.
But at the start is there an insurable interest?
None.  A person must take a life insurance over the life of a person
In this case a valued employee earns so much money, and
the employer obtained an insurance policy para kung may
mangyari sakanya.
Syempre pag meron kang magaling na empleyado at pag
namatay the company will suffer some loss. So he has an
insurable interest here.
What if at the time of death hindi mo na siya empleyado,
will you suffer some loss?
No more.
Discussion: Pag capable of pecuniary estimation ang basis
niyo for insurable interest, parang nagiging property
insurance na siya.
Insurable interest must exist not only from the start, but also
at the time of loss. Otherwise, pinagkikitaan niyo na yang
insurance policy. Anong loss mo di mo na siya empleyado,
anong loss mo di mo na siya partner or nag bayad na siya ng
utang.
This is not the same sa annulment kasi yung annulment
based on love and affection wala yung expiration.
So pag annulment applicable it must exist only at the start,
but not at the time of death.
VERY IMPORTANT!!! So pag sinabi ko sainyo na in Life
Insurance insurable interest must exist only at the start but
not at the time of loss that is not exactly accurate.
Because if based on money, tapos wala na yung connection
so ano pa yung insurable interest mo sa end bakit ka
kokolekta.
Why are we limiting ourselves to people enumerated
under Section 10.
Actually the main reason is something that we have already
discussed, to avoid wagering policies, and to avoid the
temptation of bringing about the event.
Discussion: Can you imagine kukuha ka ng policy para sa
kapit bahay mo, eh wala ka namang pagmamahal sa kanya
eh tas kikita. That is why we have movies na ang plot ay
pinatay niya si ganito kasi alam niya siya ang beneficiary.
Kaya hindi pwedeng lumampas sa Section 10.
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Bakit tayo may insurable interest on ourselves, bakit
ourselves.
We have an insurable interest in making ourselves, loved or
healthy.
Bakit kasama ang spouse and children.
Love and Affection
Discussion: We should not take it within the context of
laging debt, there are life insurance policy that are also
or those conditioned upon reaching a certain age. Again a
life insurance policy is a contract of investment.
Why can we get a policy on the life of a person who is
supposed to support us.
who provides for education or support because the person
who gets that interest would want that person to continue to
provide education and support.
Who are these people?
Article. 195. Subject to the provisions of the succeeding
articles, the following are obliged to support each other
to the whole extent set forth in the preceding article:
(1) The spouses;
(2) Legitimate ascendants and descendants;
(3) Parents and their legitimate children and the
legitimate and illegitimate children of the latter;
(4) Parents and their illegitimate children and the
legitimate and illegitimate children of the latter; and
(5) Legitimate brothers and sisters, whether of full or
half-blood.
[Asked for celebrity examples for numbers 2-5]
Let us complicate things a little further. Brothers and
Sisters not legitimately related under 196, whether of the
full or half-blood. Art. 196. Brothers and sisters not
legitimately related, whether of the full or half-blood, are
likewise bound to support each other to the full extent
set forth in Article 194, except only when the need for
support of the brother or sister, being of age, is due to a
cause imputable to the claimant's fault or negligence.
Eto not legitimately related, what do you mean by that?
Best example of this Dolphy, never married anyone. Kahit
mag kapatid silang buo, but there is no existing married, yun
yung not legitimately related. Kung sa tatay lang sila
magkapatid, not legitimately related, half-blood.
Ano ang ang special rule with regards to brothers and
sisters not legitimately related
GR: They are allowed to support each other.
EX:  1. Legal Age;
2. that person of legal age, should not be supported
because of his or her own negligence.
Bakit tayo may insurable interest?
Kasi pag nawala ang tao wala nang support, so we suffer
some loss.
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If one person gets a life insurance policy on any of the
persons enumerated under Section 10, should there be a
limit as to the face value or the coverage.
GR: In life insurance, there is no limit in the amount the
insured can insure his life.
EX: In creditor-debtor relationship where the creditor insures
the debtor, the limit of insurable interest is equal to the
amount of the debt.
EX to the EX: When the debtor himself took the insurance
policy on his life in favor of the creditor, there is no limit in the
amount.
Discussion: Okay kaya nga sinabi nating capable of
pecuniary estimation, so legal obligation limited only to that.
So sa El Oriente kung ano lang yung tinataas na pera ng
employee dun ka lang. Sa case of creditor-debtor, only up to
the extent of the debt, pag mortgagee or mortgagor, yung
owner ng property yung debtor diba, so ginagamit niya ang
property as collateral, the debtor himself can insure up to the
full value of the property, syempre owner siya eh, pag
nasunog goodbye. Pero si creditor, mortgagee, only up to
the extent of the utang. But the owner can insure it to the full
extent of the fair market value. Pero pag love and affection,
unlimited as long as you are willing to pay the premiums.
Practical Advice: Until you are young, get a policy, kasi
habang tumatanda, tumataas ang premiums, you should
already get it 20s pa lang. I-declare niyo kahit yung mga
sauna niyo pang sakit.  E.g.:
January 20, 2019 (Fernandez)
LIFE INSURANCE POLICY
What is a policy of insurance?
Section 49 of the Insurance Code (RA 10607) provides that
the written instrument in which a contract of insurance
is set forth, is called a policy of insurance.
What is the general form of a policy of insurance?
Section 50 of the same code provides that the policy shall be
in printed form.
Any exception?
Pursuant to RA 10607, the policy may be in electronic form
subject to the pertinent provisions of Republic Act No. 8792,
otherwise known as the ‘Electronic Commerce Act’ and to
such rules and regulations as may be prescribed by the
Commissioner.
If you take a look at the old Insurance Code (Presidential
Decree 612) you will see there that typewritten. So its
either printed form or electronic. Since it is a contract of
adhesion, it is actually most often than not in printed form.
And if there are additions there are blank spaces.
What are put in blank spaces?
Pursuant to Section 50 of the same code, any word, phrase,
clause, mark, sign, symbol, signature, number, or word
necessary to complete the contract of insurance shall be
written on the blank spaces provided therein.
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How do you differentiate a rider from a warranty,
endorsement and clause?
Rider- a printed or typewritten stipulation contained on a
piece of paper attached to the policy and forming an integral
part of the policy.
E.g.: 1. One of an investment contract. There is a rider
for health and disability.
2. Or it is an ordinary contract or a life insurance
contract but there is a clause as to investment.
Comment: Minsan mas maganda may rider. In the case of
Sun Life, I was advised that their critical illness policy is not
so good. So mas maganda pa mag investment ka tapos i-
rider mo yung critical illness. In my age that is an addition of
P50, 000 per annum. Kesa naman mag bayad ka P150,000
for critical illness lang.
Warranty- inserted or attached to a policy to eliminate
specific potential increases of hazard during the policy owing
to the actions of the insured or condition of the property. An
agreement between the insured and the insurer on certain
matters relating to the life of insurer in cases of loss.
Affirmation of something that is being true, has been done by
the policy holder.
Warranty (in layman’s term)- may pertain to past, present,
or future. It limits the possibility of risk happening.
Past- A warrants that this building has not been
destroyed by fire ever since.
Present- A warrants that there are 100 fire
extinguishers inside the building.
Future: A warrants that the building will never be
used for anything that will use fire or any flammable
substance.
Clause- Stipulations agreed upon by both parties.
E.g.: 1. In case of loss the insured will receive a P100,000.
Endorsement- any provision added to the insurance
contract altering its scope or application.
E.g.: 1. Since it expands you can include Acts of God.
2. An ordinary car insurance may cover only those
outside acts of god, and that after the Yolanda,
Pablo, it is either automatic or an endorsement.
What are the 2 requirements before these riders, clauses,
warranty, endorsement can be considered valid?
As provided for by Section 50 of the Insurance Code,
1st requirement:
The descriptive title or name of the rider, clause,
warranty or endorsement is mentioned and written on the
blank spaces provided in the policy and
2nd requirement:
The rider, clause, warranty or endorsement issued
after the original policy shall be countersigned by the
insured or owner, which countersignature shall be taken as
his agreement to the contents of such rider, clause, warranty
or endorsement.
Countersigned at all times?
No, it need not be countersigned if it applied for by the
insured or policy holder.
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Who are parties to the life insurance contract/policy?
Insurer, Insured, Cesti Qui Vie, and the Beneficiary.
Aside from the parties to the contract, what are other details
that should be in the life insurance policy?
Section 51 provides a policy of insurance must specify:
(a) The parties between whom the contract is made;
(b) The amount to be insured except in the cases of open or
running policies;
(c) The premium, or if the insurance is of a character where
the exact premium is only determinable upon the termination
of the contract, a statement of the basis and rates upon
which the final premium is to be determined and the mode of
payment;
(d) The property or life insured;
(e) The interest of the insured in property insured, if he is not
the absolute owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to continue.
Why is it stipulated that there should be a statement of as to
the interest when the property being insured is not owned by
the one making the policy?
The concept of insurable interest. It also will determine
how much a property can be insured.
E.g.: 1. If mortgagee-creditor haggang sa utang lang.
2. If lessee only up to a certain extent.
3. Agent na nagbebenta ng property pwede rin up
to the extent of his potential earnings.
True/False. Binding receipts are the same as cover notes?
False. Basis is the case of Great Pacific v. CA. GR L-
31845.
Great Pacific v. CA. GR L-31845 April 30, 1979
Facts:
On March 14, 1957, private respondent Ngo Hing
filed an application with the Great Pacific Life
Assurance Company for a twenty-year endownment
policy in the amount of P50,000.00 on the life of his
one-year old daughter Helen Go. Said respondent
supplied the essential data which petitioner
Lapulapu D. Mondragon, Branch Manager of the
Pacific Life in Cebu City wrote on the corresponding
form in his own handwriting. Mondragon finally type-
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wrote the data on the application form which was
signed by private respondent Ngo Hing. The latter
paid the annual premuim the sum of P1,077.75
going over to the Company.
Upon the payment of the insurance premuim, the
binding deposit receipt was issued to private
respondent Ngo Hing. Likewise, petitioner
Mondragon handwrote at the bottom of the back
page of the application form his strong
recommendation for the approval of the insurance
application.
Then on April 30, 1957, Mondragon received a letter
from Pacific Life disapproving the insurance
application. The letter stated that the said life
insurance application for 20-year endowment plan is
not available for minors below seven years old, but
Pacific Life can consider the same under the
Juvenile Triple Action Plan, and advised that if the
offer is acceptable, the Juvenile Non-Medical
Declaration be sent to the company.
Helen Go died of influenza with complication of
bronchopneumonia. Private respondent sought the
payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the
recovery of the same before the Court of First
Instance of Cebu, which rendered the adverse
decision as earlier refered to against both
petitioners.
Issue:
whether the binding deposit receipt constituted a
temporary contract of the life insurance in question.
Ruling:
Binding deposit receipt is intended to be merely
a provisional or temporary insurance contract
and only upon compliance of the following
conditions:
(1) that the company shall be satisfied that the
applicant was insurable on standard rates;
(2) that if the company does not accept the
application and offers to issue a policy for a different
plan, the insurance contract shall not be binding
until the applicant accepts the policy offered;
otherwise, the deposit shall be reftmded; and
(3) that if the applicant is not ble according to the
standard rates, and the company disapproves the
application, the insurance applied for shall not be in
force at any time, and the premium paid shall be
returned to the applicant.
Clearly implied from the aforesaid conditions is that
the binding deposit receipt in question is merely
an acknowledgment, on behalf of the company,
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that the latter's branch office had received from
the applicant the insurance premium and had
accepted the application subject for processing
by the insurance company; and that the latter will
either approve or reject the same on the basis of
whether or not the applicant is "insurable on
standard rates." Since petitioner Pacific Life
disapproved the insurance application of respondent
Ngo Hing, the binding deposit receipt in question
had never become in force at any time.
The binding deposit receipt is, manifestly,
merely conditional and does not insure outright.
As held by this Court, where an agreement is made
between the applicant and the agent, no liability
shall attach until the principal approves the risk and
a receipt is given by the agent. The acceptance is
merely conditional and is subordinated to the act of
the company in approving or rejecting the
application.
Thus, in life insurance, a "binding slip" or "binding
receipt" does not insure by itself.
Comment: In a contract of life insurance the application is
not accepted unless there is payment of the first premium.
Just because the premium is received does not mean that
you already have a binding contract. Whether temporarily or
permanently. Pag nag apply kayo dun kayo nag bigay ng
pera, tapon lang sa basurahan yan. Di kayo pwedeng i-sue
for specific performance sa life. It’s either you want to get the
investment or not. Contract of investment.
Pagdating sa properties lets say A is insuring his house
against fire, the moment he wants to insure, he must pay.
And if he doesn’t pay there can be an action for specific
performance. Under the Insurance Code, the moment the
property is exposed to peril, you have to pay the premium.
Pwede mo bang sabihin di ko muna gagamitin kotse ko para
di manakaw, eh kahit saan naman pwedeng nakawin yan
eh. So if the policyholder does not pay the first premium,
there can be an action for specific performance not so in life.
Contract of Indemnity.
What are cover notes?
Section 52 provides that cover notes are those that may be
issued to bind insurance temporarily pending the issuance of
the policy. 
For a period of?
60 days.
At all times?
No, it may be extended or renewed beyond such 60 days
with the written approval of the Commissioner.  amount herein acknowledged shall be returned.
Is it possible to extend without the approval of the Insurance
Commissioner?
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Yes, if he determines that such extension is not contrary to
and is not for the purpose of violating any provisions of the
Code.
What’s the difference between cover notes and binding
receipts?
Cover note- sign of good will. Temporarily protects the
applicant. Can be 60 days, can be longer than that.
Binding receipt- an acknowledgement that you have paid
the premium. But your application can still be disapproved.
And your premium returned.
Comment: Pag nag apply ang isang tao for life insurance,
magbabayad sya ng premium hindi ibig sabihin tanggap na
yon. It may either be approved or disapproved; if
disapproved, ibabalik sayo ang bayad ganun lang.
Situation:
1. if may mga agent na nag sabing “sige na, issuehan
kita binding receipt.
2. Pero pag sinabi ni agent na “sige na bigyan kita
cover note, good will yun. Covered ka for 60 days
whether approved or disapproved.
De Lim v. Sun Life GR L-15774 November 29,
1920
Facts:
On July 6, 1917, Luis Lim y Garcia made application
to the Sun Life Assurance Company of Canada for a
policy of insurance on his life in the sum of P5,000.
In his application Lim designated his wife, Pilar C.
de Lim, the plaintiff, as the beneficiary. The first
premium of P433 was paid by Lim, and upon such
payment the company issued what was called a
"provisional policy." Luis Lim y Garcia died on
August 23, 1917, after the issuance of the
provisional policy but before approval of the
application by the home office of the insurance
company.
The instant action is brought by the beneficiary, Pilar
C. de Lim, to recover from the Sun Life Assurance
Company of Canada the sum of P5,000, the amount
named in the provisional policy.
The "provisional policy" upon which this action rests
reads:
The above-mentioned life is to be assured in
accordance with the terms and conditions contained
or inserted by the Company in the policy which may
be granted by it in this particular case for four
months only from the date of the application,
provided that the Company shall confirm this
agreement by issuing a policy on said application
when the same shall be submitted to the Head
Office in Montreal. Should the Company not issue
such a policy, then this agreement shall be null and
void ab initio, and the Company shall be held not to
have been on the risk at all, but in such case the
Issue:
whether or not what was issued was a cover note to
held Sun Life liable to the beneficiary.
Ruling:
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What was issued was only a binding receipt. The
insurance shall become effective only when the
"application shall be approved and the policy duly
signed by the secretary at the head office of the
company and issued." It constituted no agreement
at all for preliminary or temporary insurance.
What if the policy states that it shall also cover all medical
personnel in the hospital. And Doctor A wants to claim
against that policy. What is the requirement of the law?
Section 56 can be invoked by the doctor; which provides that
“When the description of the insured in a policy is so general
that it may comprehend any person or any class of persons,
only he who can show that it was intended to include him,
can claim the benefit of the policy.”
What is the requirement for an insurance policy to be valid or
becomes effective?
Must be approved by the commissioner.
Is it the same requirement for rider, clause, warranty,
endorsement?
Yes
What are the required provisions for an Individual life
insurance policy?
SEC. 233. In the case of individual life or
endowment insurance, the policy shall contain in
substance the following conditions:
“(a) A provision that the policyholder is entitled to a
grace period either of thirty (30) days or of one (1)
month within which the payment of any premium
after the first may be made, subject at the option of
the insurer to an interest charge not in excess of six
percent (6%) per annum for the number of days of
grace elapsing before the payment of the premium,
during which period of grace the policy shall
continue in full force, but in case the policy becomes
a claim during the said period of grace before the
overdue premium is paid, the amount of such
premium with interest may be deducted from the
amount payable under the policy in settlement;
“(b) A provision that the policy shall be incontestable
after it shall have been in force during the lifetime of
the insured for a period of two (2) years from its
date of issue as shown in the policy, or date of
approval of last reinstatement, except for
nonpayment of premium and except for violation of
the conditions of the policy relating to military or
naval service in time of war;
“(c) A provision that the policy shall constitute the
entire contract between the parties, but if the
company desires to make the application a part of
the contract it may do so provided a copy of such
application shall be indorsed upon or attached to
the policy when issued, and in such case the policy
shall contain a provision that the policy and the
application therefor shall constitute the entire
contract between the parties;
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“(d) A provision that if the age of the insured is
considered in determining the premium and the
benefits accruing under the policy, and the age of
the insured has been misstated, the amount
payable under the policy shall be such as the
premium would have purchased at the correct age;
“(e) If the policy is participating, a provision that the
company shall periodically ascertain and apportion
any divisible surplus accruing on the policy under
conditions specified therein;
“(f) A provision specifying the options to which the
policyholder is entitled to in the event of default in a
premium payment after three (3) full annual
premiums shall have been paid. Such option shall
consist of:
“(1) A cash surrender value payable upon surrender
of the policy which shall not be less than the reserve
on the policy, the basis of which shall be indicated,
for the then current policy year and any dividend
additions thereto, reduced by a surrender charge
which shall not be more than one-fifth (1/5) of the
entire reserve or two and one-half percent (2½%) of
the amount insured and any dividend additions
thereto; and
“(2) One or more paid-up benefits on a plan or plans
specified in the policy of such value as may be
purchased by the cash surrender value.
“(g) A provision that at any time after a cash
surrender value is available under the policy and
while the policy is in force, the company will
advance, on proper assignment or pledge of the
policy and on sole security thereof, a sum equal to,
or at the option of the owner of the policy, less than
the cash surrender value on the policy, at a
specified rate of interest, not more than the
maximum allowed by law, to be determined by the
company from time to time, but not more often than
once a year, subject to the approval of the
Commissioner; and that the company will deduct
from such loan value any existing indebtedness on
the policy and any unpaid balance of the premium
for the current policy year, and may collect interest
in advance on the loan to the end of the current
policy year, which provision may further provide that
such loan may be deferred for not exceeding six (6)
months after the application therefor is made;
“(h) A table showing in figures cash surrender
values and paid-up options available under the
policy each year upon default in premium payments,
during at least twenty (20) years of the policy
beginning with the year in which the values and
options first become available, together with a
provision that in the event of the failure of the
policyholder to elect one of the said options within
the time specified in the policy, one of said options
shall automatically take effect and no policyholder
shall ever forfeit his right to same by reason of his
failure to so elect;
“(i) In case the proceeds of a policy are payable in
installments or as an annuity, a table showing the
minimum amounts of the installments or annuity
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payments;
“(j) A provision that the policyholder shall be entitled
to have the policy reinstated at any time within three
(3) years from the date of default of premium
payment unless the cash surrender value has been
duly paid, or the extension period has expired, upon
production of evidence of insurability satisfactory to
the company and upon payment of all overdue
premiums and any indebtedness to the company
upon said policy, with interest rate not exceeding
that which would have been applicable to said
premiums and indebtedness in the policy years prior
to reinstatement.
“Any of the foregoing provisions or portions thereof
not applicable to single premium or term policies
shall to that extent not be incorporated therein; and
any such policy may be issued and delivered in the
Philippines which in the opinion of the
Commissioner contains provisions on any one or
more of the foregoing requirements more favorable
to the policyholder than hereinbefore required.
“This section shall not apply to policies of group life
or industrial life insurance.
Comment:
Grace period provision (Sec. 233 (a) )- If a person has an
individual life insurance policy, and he fails to pay his
premiums, di nya kailangan mag panic agad. Di sya
maglalapse pero kailangang imonitor nyo.
Incontestability clause (Section 233 (b) )- Sa insurance
konting kasinungalingan lang o konting concealment will be
a ground not to pay.
E.g.: In an application form, have you been hospitalized for
a heart ailment? Nakalimutan mo highblood ka pala. Or yung
may hisroty ba ng diabetes sa family. So you can say you
don’t know.
The moment there is now a claim it will be a ground to deny
the claim. Except if the policy has been enforced for 2 years
or longer. Why? Because 2 years na di pa naresearch ng
insurance company yon? So somethings wrong. Parang
suicide di ka naman maghihintay ng 2 years na mag suicide.
Misstatement of age (Section 233 (d) )-
E.g.: If A were 27 but what he places in the application is 25
and his premium is 48k a year, for 600k coverage. Is hthe
premium adjusted? No. at 27 at 48k the coverage may be
lower. Hindi ka pagbabayarin ng additional dahil mas
matanda ka. Ang mawawla ay yung macocolelect mong
proceeds if the contingency happens.
Misstatement of age is excused. It is not a ground to rescind.
Because I think they consider it normal for people to misstate
their age. This is not concealment nor misrepresentation
What is a participating policy?
These are insurance policies that participate or share in the
profits of the insurance company's participating fund.
Comment: We go back the concept of an insurance policy
being a contract of investment. Sometimes my brother
receives a mail from sun life na may check. But the
premiums here are higher than in mutual.
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Section 233 (f)- These are the options available to a person
who has allowed his policy to lapse. Nag plase hindi sya
nagbayad nung grace period. Ayaw na nyang ireinstate, so
pwede nyang kunin ang cash surrender value.
Cash surrender value
A part of the payment made (similar to the Maceda law).
After paying a certain period of time, the premiums that the
policy holders pay is not exactly the coverage. Kung gusto
mo 1 million ang coverage mo sa sunog, di naman 1 million
ang premiums na binabayad mo. Yung binayad mo sobra pa
yun. Yung sobra yun yung cash surrender value. I surrender
my polcy you give me cash.
What is the reinstatement period for life insurance policy?
within three (3) years from the date of default of premium.
What happens if there is an exercise of the right to
reinstatement? What are the conditions for reinstatement?
1. upon production of evidence of insurability
satisfactory to the company and
2. upon payment of all overdue premiums and any
indebtedness to the company
Comment: This is the problem when a person allows his
policy to lapse. The person was insurable at the time he got
the policy; pasado sa medical. But then nakalimutan niya,
may grace period pero nag lapse din. Ayaw din nyang icash
surrender , ayaw din nyang gamitin yung ibang default
options. Gusto niyang irevive. Pero ang problema, kailangan
mag pa check up na naman sya; he has to show that he is
still insurable. Aside from that he has to pay all his
indebtedness.
How about in group?
There is no reinstatement in group. Because its is your
employer paying the premium. No lapse.
In industrial?
2 years.
Is there a grace period in group life?
Yes, 30 days or 1 month.
Is there an incontestability clause in group?
Yes.
Is there a misstatement of age provision in group life?
A: “(e) A provision specifying an equitable adjustment of
premiums or of benefits or of both to be made in the event
that the age of a person insured has been misstated, such
provision to contain a clear statement of the method of
adjustment to be used;
Is there a participating policy in group?
None
Cash surrender value in group?
Only the designated beneficiaries can claim from the life
insurance policy?
False.
Section 234 “(f) A provision that any sum becoming due by
reason of death of the person insured shall be payable to the
beneficiary designated by the insured, subject to the
provisions of the policy in the event that there is no
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III-Manresa

designated beneficiary, as to all or any part of such sum, death of the insured, or if the
living at the death of the insured, and subject to any right beneficiary is the estate of
reserved by the insurer in the policy and set forth in the the insured, or is a minor, or
certificate to pay at its option a part of such sum not dies before the insured, or is
exceeding Five hundred pesos (P500.00) to any person not legally competent to give
appearing to the insurer to be equitably entitled thereto by valid release, then the
reason of having incurred funeral or other expenses incident insurer may make any
to the last illness or, death of the person insured; payment thereunder to the
executor or administrator
of the insured, or to any of
the insured's relatives by
January 27, 2020- Altiso blood or legal adoption or
connections by marriage
FACILITY OF PAYMENT CLAUSE or to any person
appearing to the insurer to
What is the facility of payment clause? What kind of life be equitably entitled
insurance is the facility of payment clause present? In both thereto by reason of
group life and industrial, there is what we call the facility of having incurred expense
payment clause. Recall that I ask last time, TRUE or for the maintenance,
FALSE. Only a designated beneficiary can collect the medical attention or burial
proceeds of a life insurance policy. You answered NO. The of the insured;
reason is the existence of the facility of payment clause in
group and industrial. How much can given to a person who is not a beneficiary in
a group life?
What’s the difference between the facility of payment in - sum not exceeding Five hundred pesos (P500.00)
group and the facility of payment in industrial?
Do we have the same limitation in industrial? No.
Group Industrial
Section 234 Section 236 Please take care of knowing under what conditions a non-
beneficiary can collect from the insurance policy in a group
(f) A provision that any "(k) A provision that when and industrial life. Sa industrial, there are many
sum becoming due by a policy shall become a circumstances. Take care of the conditions. Please
reason of death of the claim by death of the memorize under what conditions do we apply the facility of
person insured shall be insured, settlement shall payment clause in group and in industrial. We don’t have the
payable to the beneficiary be made upon receipt of same provisions in individual life.
designated by the insured, due proof of death, or not What if an employee who is a member of a group insurance
subject to the provisions of later than two (2) months policy or is one of the insured stops being insured, what is
the policy in the event that after receipt of such proof; the consequence? Di ba i.e. lahat ng employees ng ABC
there is no designated xxx Company covered, may certificate of participation lang ang
beneficiary, as to all or any bawat empleyado. What happens when a person stops
part of such sum, living at "(m) A space on the front or being an employee of that corporation? What happens to
the death of the insured, the back of the policy for the him?
and subject to any right name of the beneficiary
designated by the insured Section 234. "(h) A provision that if the
reserved by the insurer in
with a reservation of the insurance, or any portion of it, on a person covered
the policy and set forth in
insured's right to designate under the policy ceases because of termination of
the certificate to pay at its
or change the beneficiary employment or of membership in the class or classes
option a part of such
after the issuance of the eligible for coverage under the policy, such person shall
sum not exceeding Five
policy. The policy may also be entitled to have issued to him by the insurer, without
hundred pesos (P500.00)
provide that no designation evidence of insurability, an individual policy of life
to any person appearing
or change of beneficiary insurance without disability or other supplementary
to the insurer to be
shall be binding on the benefits, provided application for the individual policy
equitably entitled thereto
insurer until endorsed on the and payment of the first premium to the insurer shall be
by reason of having
policy by the insurer, and made within thirty (30) days after such termination,
incurred funeral or other
that the insurer may refuse and provided further that:
expenses incident to the
last illness or death of to endorse the name of any (1) The individual policy shall be on any one of
the person insured;  proposed beneficiary who the forms, except term insurance, then customarily
does not appear to the issued by the insurer at the age and for an amount not in
insurer to have an insurable excess of the coverage under the group policy; and
interest in the life of the
insured. Such policy may "(2) The premium on the individual policy shall
also contain a provision that be at the insurer's then customary rate applicable to the
if the beneficiary designated form and amount of the individual policy, to the class of
in the policy does not risk to which such person then belongs, and to his age
surrender the policy with attained on the effective date of the individual policy.
due proof of death within the
period stated in the policy,
which shall not be less than
thirty (30) days after the

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III-Manresa

In other words, he becomes entitled to an individual interest A provision month or

insurance policy by the same insured which should be charge not that the thirty (30)
applied for within what period? in excess of policyholder days; and
- within thirty (30) days after such termination six percent is entitled to that during
(6%) per a grace the period of
If something happens to that person within that period that annum for period of grace, the
he is applying for an individual policy, what is the the number either thirty policy shall
consequence? Basis? of days of (30) days or continue in
grace of one (1) full force, but
Section 234. "(j) A provision that if a person elapsing month for the if during
insured under the group policy dies during the thirty before the payment of such grace
(30)-day period within which he would have been payment of any premium period the
entitled to an individual policy issued to him in the due after the policy
accordance with paragraphs (h) and (i) above and premium, first, during becomes a
before such individual policy shall have become during which which grace claim, then
effective, the amount of life insurance which he period of period the any overdue
would have been entitled to have issued to him as grace the death benefit and unpaid
an individual policy shall be payable as a claim policy shall coverage premiums
under the group policy whether or not application for continue in shall may be
the individual policy or the payment of the first premium full force, but continue in deducted
has been made; in case the force, unless from any
policy the amount
GRACE PERIOD becomes a policyholder payable
claim during shall have under the
Strictly speaking, we don’t call it grace period. Grace period the said given the policy in
is when a policy holder fails to pay the premiums so there is period of insurer settlement;
no automatic lapsation of the policy but there is a grace grace before written notice
period in? Where? In what kind of life insurance? the overdue of
All of three kinds premium is discontinuan
paid, the ce in
Are they the same? No. amount of advance of
There is a grace period for all the three kinds. such the date of
premium discontinuan
with interest ce and in
INDIVIDUAL GROUP INDUSTRIAL
may be accordance
SECTION "SECTION SECTION
deducted with the
233. In the 234. No 236. In the
from the terms of the
case of policy of case of
amount policy. The
individual life group life industrial life
payable policy may
or insurance insurance,
under the provide that
endowment shall be the policy
policy in the
insurance, issued and shall contain
settlement; policyholder
the policy delivered in in substance
shall be
shall contain the the following
liable for the
in substance Philippines provisions:
payment of
the following unless it "(a) 
a  pro
conditions: contains in A provision
rata  premiu
"(a)  substance that the
m for the
A provision the following insured is
time the
that the provisions, entitled to a
policy is in
policyholder or provisions grace period
force during
is entitled to which in the of four (4)
such grace
a grace opinion of weeks within
period;
period either the which the
of thirty (30) Commission payment of
days or of er are more any
REINSTATEMENT
one (1) favorable to premium
month within the persons after the first
Is there a reinstatement clause for all the life insurance?
which the insured, or at may be
No. Only in individual and group life insurance.
payment of least as made,
any favorable to except that
Is the period the same? No.
premium the persons where
after the first insured and premiums
What is the right to reinstatement? What does it do? Under
may be more are payable
what conditions?
made, favorable to monthly, the
What are the 3 requirements in reinstatement in individual
subject at the period of
life policy? What are the conditions in industrial?
the option of policyholders grace shall
the insurer : be either
to an "(a)  one (1) INDIVIDUAL INDUSTRIAL

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III-Manresa

Section Section 236.

233."(j) A provision "(j) A provision that the Q: Who are the parties to an insurance contract?
that the policyholder policy may be 1. insured
shall be entitled to reinstated at any time 2. insurer
have the policy within two (2) years 3. beneficiary
reinstated at any time from the due date of 4. in some cases, cest que vie – [se-qwe-vee]
within three (3) years the premium in default
from the date of default unless the cash Q: Who can be an insurer?
of premium payment surrender value has A: Section 6.
unless the cash been paid or the period
surrender value has of extended term Q: May a mutual benefit association be an insurer?
been duly paid, or the insurance expired,
extension period has upon production of Ma’am: Okay, what does the Code say? Bakit relevant? Kasi
expired, upon evidence of insurability may bar question na what are mutual benefit associations?
production of evidence satisfactory to the And if you know the concept then you’d be able to answer
of insurability company and payment my question.
satisfactory to the of arrears of premiums
company and upon with interest at a rate Answer: NO.
payment of all overdue not exceeding six
premiums and any percent (6%) per Basis?
indebtedness to the annum payable Section 190 of the Insurance Code which states “For
company upon said annually; purposes of this Code, the term insurer or insurance
policy, with interest company shall include all partnerships, associations,
rate not exceeding that cooperatives or corporations, including government-owned
which would have or -controlled corporations or entities, engaged as principals
been applicable to said in the insurance business, excepting mutual benefit
premiums and associations.”
indebtedness in the
policy years prior to Comment: May “kaya lang” yan eh. Kaya lang, another
reinstatement. provision would tell you that among its members, it can
provide xxx diba we’ve already discussed that. Meron nga
Last time I told you, do not ask me why are the periods tayong listahan ng mga registered micro-business
different. Industrial life policies are supposed to cater those associations.
who are less in life and yet the insured is given a shorter
period within which to reinstate. Kasi as we can see later They are allowed to provide insurance coverage only for its
marami ng binigay na palugit or options to the industrial life members. But generally, it cannot operate as an insurer of
insurance policy. non-members. Are you getting me? Diba anjan yan. Ay
mukhang tama! Hindi pwede. Pero may exception, among its
Pag nag quiz tayo, yung coverage ng quiz di na natin ita- members, of course, it can extend.
tackle. Fair?
That’s why you have the cooperative sphere, diba, claiming
QUIZ: to be, mutual benefit societies, mutual benefit associations,
1. What is industrial life insurance? providing insurance to its members. Pero if hindi siya
2. What is the special rule with respect to non-payment of registered as a micro-insurer, hindi pwede.
premiums in industrial life?
3. In industrial life, what is the consequence if 3 full years Q: Under Sections 190 – 197, what are some of the things
premiums are paid and the policy lapses? that the Insurance Commissioner must take into
4. In relation to no. 3, what is the consequence when 5 full consideration or must look at in evaluating an applicant for
years premiums had been paid in industrial and the policy insurer?
lapse?
5. In industrial life, what is the period within which payment A: No such certificate of authority shall be granted to any
of the proceeds should be made/paid? such company until the Commissioner shall have satisfied
6. What is the minimum period during which a person can file himself by such examination as he may make and such
a case based on an industrial life policy? Or what is the rule evidence as he may require that such company is qualified
with respect to cause of action with regard to industrial life by the laws of the Philippines to transact business therein,
insurance policy? that the grant of such authority appears to be justified in the
7. When is an insurance contract deemed perfected? light of local economic requirements, and that the direction
8. What’s the difference between a cover note and a and administration, as well as the integrity and responsibility
provisional receipt? of the organizers and administrators, the financial
9. What happens when death occurs during the grace organization and the amount of capital, reasonably assure
period? the safety of the interests of the policyholders and the public.
10. What happens to the insurance policy in case there is
nonpayment of premiums during war? Q: What is the capitalization requirement for domestic
corporation?
We’re done supposed to be up to premiums. We will
proceed to parties to a contract up to the end of the outline. A: (Section 194) Domestic corporation, at least one billion
pesos (P1,000,000,000).
February 3 Part I- Abrasaldo
Q: One billion, one shot? (di ako sure ito pagka rinig ko)

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III-Manresa
A: No, ma’am. There are instances for existing insurance
company they are required that they shall have a net worth
by June 30, 2013 of Two hundred fifty million pesos
(P250,000,000.00).
Q: Okay, but eventually, when should they reach the one
billion?
A: By December or not later than December 31, 2022.
Oh diba may ganun pa so one billion is a difficult figure.
Q: What is the capitalization requirement with respect to
foreign corporation?
A: Section 197 – No insurance company organized or
existing under the government or laws other than those of
the Philippines shall engage in business in the Philippines
unless possessed of unimpaired capital or assets and
reserve of not less than One billion pesos
(P1,000,000,000.00).
Q: What’s the difference between the capitalization
requirement for domestic corporations and foreign
corporations? Dalawa sila one billion, what else? Are they
the same in all aspects?
A: In foreign corporation, there is a condition that states that
at least fifty percent (50%) of such securities shall consist of
bonds or other instruments of debt of the Government of the
Philippines.
Comment: Okay, so may ganon no, kasi nga we are talking
about foreign corporation that is not registered in the
Philippines. So for the insurance commissioner to give a
certificate of authority, there must be evidence that ito may
pera ‘to at ang iyong iinvest ay Philippine corporation.
Q: Can an individual person be an insurer?
A: An individual person may not be an insurer.
Q: Basis?
A: Section 6 which provides that “Every corporation,
partnership, or association, duly authorized to transact
insurance business as elsewhere provided in this Code, may
be an insurer.”
Comment: Formerly, person nakalagay jan. Take a look at
the old insurance code but I think the new insurance code
xxx that a person cannot come up with one billion just to
operate.
Requirements:
1. It must be an association, corporation, partnership;
2. Capitalization (with respect to foreign corporation, there is
an added requirement);
Q: What else? What are the considerations of an insurance
commission before it issues a certificate of authority?
3. The fees have been paid;
Q: What else? What is the requirement with respect to the
officers of the corporation? Ano dapat na showing jan?
Abrasaldo|Altiso|Deiparine|Fernandez|Malicay|Milana|Sioson|Sosoban|Suaybaguio
4. In order to protect the public in general, the person must
be of good moral character, unquestioned integrity and
recognized competence.
Comment: So pati yung officers tinitingnan because an
insurance company is a impressed with public interest.
Q: What is the requirement with respect to the name of the
corporation?
A: The Commissioner must be satisfied that the name of the
company is not that of any other known company transacting
a similar business in the Philippines, or a name so similar as
to be calculated to mislead the public.
Comment: Okay if you remember in Labor Law, a recruit is
not supposed to be engaged in what kind of business?
Travel agencies. Primarily because of conflict of interests.
Q: What is the counterpart with respect to insurance
corporation?
A: Adjustment company.
Q: What is an adjustment company?
A: An adjustment company is a company whenever there is
an contingency insurer, it is the adjustment company that
investigates as to the validity of the claim.
Comment: Adjustment company – validity and the extent
amount. Example, fire insurance, magkano ba yung damage,
is there validity in the amount of the claim.
Q: So, bakit bawal?
Comment: Syempre diba, baka konti lang yung bayaran if
there is an affiliation between the insurance company and
the adjustment company, the tendency is to either defeat the
claim or to lessen the amount. Para makikinabang si
insurance company.
Q: How long is the effectivity of the certificate of authority?
A: Under Section 193 – three years.
Q: Can it be renewed?
A: Yes for another three years.
Q: What is the condition for renewal?
A: Subject to the company’s continuing compliance with the
provisions of this Code, circulars, instructions, rulings or
decisions of the Commission.
Q: Can a partnership engage both in life and non-life
insurance?
A: As a rule, it is not allowed.
Q: Why not? What is the policy behind the rule? Bakit bawal
eh may capital naman ako ah?
Comment: Kaya siya hindi pwede kasi diba we already
described what a health and disability plan is.
So we have a situation na one corporation will be insuring a
person for dapat may death as one of the risks insured
against, treat it as life. Tapos you have the same corporation
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III-Manresa
treating the same subject matter as property for health and
disability. So magkaiba yung thrust nila.
It’s just like a person getting a policy on his life insuring it
against death making his girlfriend as beneficiary. Tapos
insuring the property of that person against fire making the
same girlfriend as beneficiary. So iisang corporation.
So ang tendency, kung makakabenefit sa life itong si
girlfriend, ang tendency, ah, pwede din siguro sa property.
When that actually defies the provision of the Insurance
Code.
Magkakaroon na siya ngayon ng parang uniformity nalang sa
xxx or i-de-deny niya yung property, i-de-deny din niya ‘tong
sa life. They are poles apart, so there seems to be an
apparent conflict in the conduct of business itself.
Tska ang hirap naman. Nagbebenta ako ng life eh. Eh meron
ka na bang car insurance (?), so nawawala yung nadidivert
yung public interest with respect to issuance of life insurance
policy.
Q: Can the city of Davao, local government, enforce a policy
that ABC insurance company should comply with additional
requirements before it can operate in Davao City?
A: No. Section 193 – No insurance company issued with a
valid certificate of authority to transact insurance business
anywhere in the Philippines by the Insurance Commissioner,
shall be barred, prevented, or disenfranchised from issuing
any insurance policy or from transacting any insurance
business within the scope or coverage of its certificate of
authority, anywhere in the Philippines, by any local
government unit or authority, for whatever guise or reason
whatsoever, including under any kind of ordinance,
accreditation system, or scheme. Any local ordinance or
local government unit regulatory issuance imposing such
restriction or disenfranchisement on any insurance company
shall be deemed null and void ab initio.
Comment: Okay so if there is already a certificate of authority
issued by the national government, specifically the insurance
commission, there can be no further rules on accreditation
imposed by the local government.
Q: What are the documentary requirements for filing an
application for a certificate of authority?
A: Section 195 – Every company must, before engaging in
the business of insurance in the Philippines, file with the
Commissioner the following:
(a) A certified copy of the last annual statement or a verified
financial statement exhibiting the condition and affairs of
such company;
(b) If incorporated under the laws of the Philippines, a copy
of the articles of incorporation and bylaws, and any
amendments to either, certified by the Securities and
Exchange Commission to be a copy of that which is filed in
its Office;
(c) If incorporated under any laws other than those of the
Philippines, a certificate from the Securities and Exchange
Commission showing that it is duly registered in the
mercantile registry of that Commission in accordance with
the Corporation Code.
Q: Going back to the Mutual Benefit Association, can it
operate as a charitable organization?
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A: No. Section 403 – In no case shall a mutual benefit
association be organized and authorized to transact
business as a charitable or benevolent organization, and
whenever it has this feature as incident to its existence, the
corresponding charter provision shall be revised to conform
with the provision of this section. Mutual benefit association,
already licensed to transact business as such on the date
this Code becomes effective, having charitable or
benevolent feature shall abandon such incidental purpose
upon effectivity of this Code if they desire to continue
operating as such mutual benefit associations.
Comment: Okay there is a rule that it cannot but there is an
exception to the rule. Condition on the effectivity of the New
Insurance Code.
Q: Bakit kaya? Bakit bawal mag operate as a charitable
organization ang insurance Mutual Benefit Association?
A: It would be diverted to charitable reason. It would defeat
the
purpose. Ubusan ng pera. It was established in the first place
to provide benefits to its members tapos ngayon magbibigay
kayo. Sabi ng Insurance Code, hindi, it cannot operate.
Unless at the time the Code was enforced, it was already
operated (as charitable organization) pero it will still have a
limit as to until when it can operate as such.
Q: Who cannot be insured? Is there anyone who cannot be
insured?
A: Yes. According to Section 7 – a public enemy cannot be
insured.
Q: Who is a public enemy? Is public enemy No. 1 a public
enemy? Is the No. 1 kidnapper wanted a public enemy?
A: In the case of Filipinas, it is stated there that a public
enemy is a nation including its citizens or subjects within the
Philippines who are at war.
Q: So at this time, is there anyone who cannot be insured by
the Philippine Insurance company?
A: No. The Philippines is not at war.
In the case of Filipinas, what is the issue?
The issue here whether the respondent can claim under the
policy?
Q: Bakit hindi siya pwede makaclaim?
A: The petitioner refused to pay the claim on the ground that
the policy in favor of the respondent had ceased to be in
force on the date the United States declared war against
Germany, the respondent Corporation (though organized
under and by virtue of the laws of the Philippines) being
controlled by the German subjects and the petitioner
being a company under American jurisdiction when said
policy was issued on October 1, 1941.
Q: What’s wrong if they’re German?
A: This happened during the World War II.
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Comment: So it is a company with American jurisdiction and
then there was a war between Germany and the United
States.
Q: So who’s claiming?
A: Huenefeld which is controlled by German citizens.
Comment: So what is the purpose of war? The purpose of
war is to defeat your opponent and to replete the resources.
Tapos eto ka, mag c-claim ka bigla dun sa insurance nung
kalaban.
That’s why the Insurance Code states that only those who
are not public enemies may be insured.
So yung mga member Abbu Sayaff, hindi yun pwede,
Lahat ng mga members ng NPA, pwede ‘yon.
So the Philippines is not at war with any country then any
national or person of any nationality can be insured.
In the case of Filipinas: The purpose of war is to cripple the
power and exhaust the resources of the enemy, and it is
inconsistent that one country should destroy its enemy's
property and repay in insurance the value of what has been
so destroyed, or that it should in such manner increase the
resources of the enemy, or render it aid, and the
commencement of war determines, for like reasons, all
trading intercourse with the enemy, which prior thereto may
have been lawful.
Q: What is the right to borrow the policy?
A: Section 233 (g) – (g) A provision that at any time after a
cash surrender value is available under the policy and
while the policy is in force, the company will advance,
on proper assignment or pledge of the policy and on sole
security thereof, a sum equal to, or at the option of the owner
of the policy, less than the cash surrender value on the
policy, at a specified rate of interest, not more than the
maximum allowed by law, to be determined by the company
from time to time, but not more often than once a year,
subject to the approval of the Commissioner; and that the
company will deduct from such loan value any existing
indebtedness on the policy and any unpaid balance of
the premium for the current policy year, and may collect
interest in advance on the loan to the end of the current
policy year, which provision may further provide that such
loan may be deferred for not exceeding six (6) months after
the application therefor is made.
Q: Teka, insured, tell me, what is the right to borrow?
Assume that you are an agent and you are explaining it to
me.
Comment: This can be used for automatic premium loan but
it is not the same as automatic premium loan.
Diba a contract of life insurance is a contract of investment.
Remember? So when a person does not have enough
money, ano ang pwede niyang gawin sa policy niya?
So what is the mechanics? Ito, may dala akong policy,
sasabihin ko wala na akong pera, anong i-a-advise mo sa
akin?
Q: What is pledge?
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A: A pledge is a contract wherein as a security for obligation,
the debtor pledges personal property to the creditor wherein
the creditor keeps the pledged item until the performance of
the obligation has been complied with.
Q: How is this different from the chattel mortgage?
A: In pledge, there is delivery of the object. In chattel
mortgage, there is no need for delivery, first difference.
Second difference, in pledge, there can be no action for
deficiency.
Sige nga try niyo ngayon mag prenda kayo ng fake na
Rolex. Mangutang kayo ng 10k. Pag nabenta yan ng 2k, di
na kayo pwedeng singilin.
In chattel, pwede (there is an action for deficiency).
In both cases, if there is an excess, it can be returned to the
owner.
Pledge Chattel Mortgage
There is delivery of the There is no need for
object delivery.
There can be no action for There is an action for
deficiency deficiency
In both cases, if there is an excess, it can be returned to
the owner.
Q: Ano applicable dito sa right to borrow on the policy?
Chattel o pledge?
A: It is a contract of pledge.
Q: So ano gagawin ko may dala akong papel, ano gagawin
ko sa papel?
A: The policy in the hands of the insured shall be given to the
insurer as a pledge and until the policyholder is able to pay
the obligation that was loan, the insurer keeps the policy.
Comment: Pag meron tayong life insurance policy, you can
pledge it so you can obtain a loan subject to the imposition of
interest.
Consistent tayo, pag life insurance, it is a contract of
investment.
So yan yung right to borrow.
As to whether that may be used for whatever purpose, yun
ba yung automatic premium loan, it’s not the same.
Q: What is the right to dividends?
A: Section 233 – when the policy is participating, so in a
sense, the policyholder is entitled to the profits derived by the
insurer.
Q: When can the insurer declare surplus or amounts for
dividends?
Comment: Ito yung sinasabi ko sa inyo, yung kuya ko walang
pera, may natanggap na envelope from Sun Life, pag bukas
niya cheque. Dividends. Mas mahal yung ganitong policy
kasi you are participating in the surplus of the corporation.
Q: What are the conditions for declaring dividends?
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
A: Section 201 – No domestic insurance corporation shall
declare or distribute any dividend on its outstanding stocks
unless it has met the minimum paid-up capital and net worth
requirements under Section 194 and except from profits
attested in a sworn statement to the Commissioner by the
president or treasurer of the corporation to be remaining on
hand after retaining unimpaired:
(a) The entire paid-up capital stock;
(b) The solvency requirements defined by Section 200;
(c) In the case of life insurance corporations, the legal
reserve fund required by Section 217;
(d) In the case of corporations other than life, the legal
reserve fund required by Section 219; and
(e) A sum sufficient to pay all net losses reported, or in the
course of settlement, and all liabilities for expenses and
taxes.
Comment: Okay, familiarize yourself in those items, in other
words, kung hindi niya na maintain yung mga ‘yon, hindi siya
pwede mag declare ng surplus.
Ang dami nun ha. Dapat yung paid up capital, ok. Solvency
requirements, legal reserve fund.
So before nakadeclare, na make sure that these are intact.
So hindi pwede yung gusto ko lang mag declare, bigay natin.
Yun pala next year lugi na. Kaya pala nag declare.
Q: What kinds of life insurance policies have dividends?
A: Individual life and industrial life insurance.
Comment: Not present in group life, bakit kaya? Again, we
take a look at the nature of the group life insurance policy.
It’s just one policy for all members.
So hindi siya yung tipong mag d-derive ka pa ng surplus, ang
dami dami niyo na. The tendency is there is really no
surplus.
Q: What are the rights of reinstatement in life and in what
kinds of life insurance policies?
A: Section 233 (j) – In the case of individual life or
endowment insurance, the policy shall contain in substance
the following conditions:
(j) A provision that the policyholder shall be entitled to
have the policy reinstated at any time within three (3)
years from the date of default of premium payment
unless the cash surrender value has been duly paid, or the
extension period has expired, upon production of evidence of
insurability satisfactory to the company and upon payment of
all overdue premiums and any indebtedness to the company
upon said policy, with interest rate not exceeding that which
would have been applicable to said premiums and
indebtedness in the policy years prior to reinstatement.
and Section 236 (j) – In the case of industrial life
insurance, the policy shall contain in substance the following
provisions:
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(j) A provision that the policy may be reinstated at any
time within two (2) years from the due date of the
premium in default unless the cash surrender value has
been paid or the period of extended term insurance expired,
upon production of evidence of insurability satisfactory to the
company and payment of arrears of premiums with interest
at a rate not exceeding six percent (6%) per annum payable
annually.
Conditions:
1.) Individual life – 3 years
Industrial life – 2 years
2.) There must be evidence of insurability
3.) Payment of overdue premiums
Part II- Sam Milana
Q: Is it the same provision in industrial?
No.
Industrial life Conditions:
1.) 2 years from the date of the premium;
2.) There must be evidence of insurability; and
3.) Payment of overdue premiums.
Comment: yung period lang naman yung pinagkaiba.
Q: In the case of Andres, was there a valid reinstatement?
No valid reinstatement because the last condition of payment
of overdue premiums was not complied with.
Q: There was payment of 65 pesos, bakit di na reinstate?
There is no reinstatement because apellant’s failure to remit
the balance before the death of his wife operated to deprive
him of any right to waive the policy and recover the face
value thereof.
Q: How did the court rule as to the contention that there was
a waiver by the insurer of the payment of the 65 pesos?
SC: Nothing in these expressions that would indicate an
intention on the insurer's part to waive the full payment of the
overdue premium as prerequisite to the reinstatement of the
lapsed policy, considering the well settled rule that a waiver
must be clear and positive, and intent to waive shown clearly
and convincingly
Q: What is the right to transfer or bequeath?
SEC. 184. A policy of insurance upon life or health may pass
by transfer, will or succession to any person, whether he has
an insurable interest or not, and such person may recover
upon it whatever the insured might have recovered.
Note: Bequeath refers to the transferring of a personal
property through succession.
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Example: A owns a car which has theft insurance. A
bequeath the car to B under his will. A dies. B now owns the
car, together with the insurance policy.
Comment: As we will see later, within the context of life
insurance, anyone can be designated a beneficiary. If A gets
a policy of insurance, the only person who is required to
have an insurable interest is the Cestui que vie.
Q: Who is the cestui que vie?
SEC. 10. Every person has an insurable interest in the life
and health:
“(a) Of himself, of his spouse and of his children;
“(b) Of any person on whom he depends wholly or in part for
education or support, or in whom he has a pecuniary
interest;
“(c) Of any person under a legal obligation to him for the
payment of money, or respecting property or services, of
which death or illness might delay or prevent the
performance; and
“(d) Of any person upon whose life any estate or interest
vested in him depends.
Comment: Is there a limit? No. In fact, you can get several
policies on one cestui que vie.
The old concept was the only cestui que vie was yung life
lang natin. But actually, kung nakapunta kayo sa Section 10,
ang daming pwede because a contract of life insurance is a
contract of investment.
Tatlo na yung parties. We have the insured, the insurer, the
cestui que vie.
Q: Who is the last party?
The beneficiary.
Q: Can you use the life of your neighbor to get a policy?
No, unless he is one of those enumerated under Section 10.
Because, again, the concept of insurable interest is to avoid
bringing about the event.
Q: Can the wife get a policy on the life of the husband
making the proceeds are payable to her bestfriend?
Yes, because the only condition is for the insured, the one
paying the premium, to have insurable interest on the cestui
que vie, but pwede niyang i-name kahit sinong gusto niya.
Gusto kong ipabigay ang benefits sa orphanage, sa
bestfriend, sa mga anak.
The only limitation is that it must not be against the law,
public order, and public policy.
Q: Can the husband get a policy on the life of his legitimate
son making the proceeds payable to his illegitimate
daughter?
He can get but it can be invalidated. It can be questioned. It
can be against public policy because there is no law
prohibiting it.
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Comment: But strictly speaking, the only person who must
have insurable interest is only the insured on the life of the
cestui que vie. Which now brings us to the right to transfer.
Kasi si wife, pwede niyang I transfer ang insurance na
kinuha niya kay husband to anyone she wants. Wag niya
lang ipalam because made-defeat lang yung purpose na si
“anybody” can bring about the event. Transferrable siya eh.
Bakit? “Eh, wala akong pambayad ng utang eh. Pero alam
mo may insurance policy ako. Ako yung beneficiary dun. Ako
din yung nagbabayad. I-ta-transfer ko na lang sayo,
pambayad ko sa utang.”
Only the insured is required to have an insurable interest, not
the beneficiary.
Do not confuse cestui que vie with beneficiary. In life
insurance, the only person who is required to have insurable
interest is the one paying the premium (the insured), it may
also be the cestui que vie because he has an insurable
interest on his own life. Others in Section 10 pwede rin
niyang kuhanan.
Q: In the case of Sun Life, why was it important to determine
if there was cash surrender value?
“Upon the question whether a life insurance policy having no
surrender value can be seized upon execution, this court has
not passed; but the same considerations would apparently
be controlling upon this point that have determined the
position of the courts on the question whether such a policy
passes to the assignee in insolvency. In other words, a policy
devoid of a cash surrender value cannot be either "leviable
assets" or "assets in insolvency (Sun Life Assurance vs.
Ingersoll, 1921)."
Q: What is “cash surrender value”? San nanggagaling yan?
“Cash surrender value, as applied to a life insurance policy,
is
the amount that the insured, in case of default, after the
payment of at least three full annual premiums, is entitled to
receive if he surrenders the policy and releases his claims
upon it. The more premiums the insured has paid, the
greater will be the cash surrender value, but the value is
always a lesser sum than the total amount of premiums paid
(De Leon).”
Nature of Cash Surrender Value:
The cash surrender value arises from the fact that the fixed
annual premium is much in excess of the annual risk during
the earlier years of the policy, an excess made necessary in
order to balance the deficiency of the same premium to meet
the annual risk during the latter years of the policy.
Comment: How does it work? When an applicant to a life
insurance policy, fills out the application, disapproved, ang
sinasabi sa kanya, “okay, you’re premium will be P10,000
quarterly (P40,000 annually)”. For the next how many years,
yun lang ang babayaran mo. The premium is not increased.
Now, why is there “cash surrender value”? Kasi actually on
the first year, dapat nag babayaran mo lang ay P5,000 eh.
Pero dahil ang gusto ng insurance company na iisang rate
lang ang bayaran mo throughout the years, dito sa mga first
few years na bata ka pa, may sobra ka eh. So first year,
maaring dapat P20,000 lang. So may excess ka ngayon na
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
P20,000. Second year, baka ganun ulit. Pagdating ng third
year, baka dapat P30,000 lang, nagbayad ka ng P40,000,
may P10,000 na sobra. Pagdating ng year 10, mag P40,000
ka na. wala ka nang sobra.
So saan nanggagaling ang cash surrender value? Doon sa
mga years na dapat hindi pa yun yung binabayad mo pero
yun na. Uniform.
And that’s where upon payment of premiums for three
annual premiums, full payment, you now get, if A forgets to
pay his premiums, either:
1) automatic premium loan;
2) if automatic premium loan, grace period;
3) if still hasn’t paid, nag lapse na, right to reinstatement;
4) pag di pa rin na reinstate, ganito na, cash surrender
value.
Diba? Ang daming options eh because the law wants the
person to be able to maintain his policy.
Bakit siya cash surrender value? You surrender the policy,
you get the cash. First default option.
Q: What kind of insurance are we talking about in the case of
GREPA Life?
A: Group Life Insurance.
Q: Ano ang commonality nila bakit sila nagkaroon ng policy?
A: They are housing loan mortgagors of DBP.
Q: Why was there refusal to pay on the part of GrePa?
A: Because GrePa alleged that there was concealment or
non-disclosure that he had hypertension by denying the
question in the application of whether he had or consulted a
physician for a heart condition, high blood pressure, etc.
Q: Was hypertension established?
A: No. It was not established. Parang nag speculate na lang
sila.
Q: Was there recovery by the widow?
A: The SC held that there must be recovery by the widow. In
private respondent's memorandum, she states that DBP
foreclosed in 1995 their residential lot, in satisfaction of
mortgagor's outstanding loan. Considering this supervening
event, the insurance proceeds shall inure to the benefit of the
heirs of the deceased person or his beneficiaries. Equity
dictates that DBP should not unjustly enrich itself at the
expense of another (Nemo cum alterius detrimenio protest).
Hence, it cannot collect the insurance proceeds, after it
already foreclosed on the mortgage. The proceeds now
rightly belong to Dr. Leuterio's heirs represented by his
widow, herein private respondent Medarda Leuterio.
Comment: Pecuniary estimation. Diba sabi ko sa inyo, pag
capable of pecuniary estimation or based on an obligation,
insurable interest must exist both at the start and at the time
of death. Pero kung at the time of death wala nang utang,
aba ano pa ang isinisingil ni DBP?
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Ang point dito ay, ang utang dapat both times nag-eexist ang
insurable interest sa life.
Q: What is the requirement with respect to the beneficiaries?
A: No need for insurable interest.
Q: Can anybody be a beneficiary? What are the
disqualifications?
A: No. Those who are disqualified in accepting donations
enumerated in Article 739 of the Civil Code.
Article 739. The following donations shall be void:
(1) Those made between persons who were guilty of adultery
or concubinage at the time of the donation;
(2) Those made between persons found guilty of the same
criminal offense, in consideration thereof;
(3) Those made to a public officer or his wife, descendants
and ascendants, by reason of his office.
The difference between (1) and (2) is that the finding of guilt
is not required in (1) whereas the finding of guilt in (2) is
required.
Q: What is the rule with respect to changing of beneficiaries?
SEC. 11. The insured shall have the right to change the
beneficiary he designated in the policy, unless he has
expressly waived this right in said policy. Notwithstanding the
foregoing, in the event the insured does not change the
beneficiary during his lifetime, the designation shall be
deemed irrevocable.
COMMENT: I want you to take note that if the reason for
appointing the person as beneficiary is because of some
pecuniary obligation, pwede kasi ganito eh, si A may utang
kay B na 1 million. Sino ang pwedeng kumuha ng policy
kanino? Who can get the policy on the life of the debtor?
A: Creditor and debtor.
Comment: so si A, may utang siya diba? What he can do is
to get a policy on his life making the proceeds payable to the
creditor. If the creditor also gets a policy on the life of the
debtor making the proceeds payable to himself, eh di
nakadalawa na to si creditor. What is the limit of the
payment? Only the amount of the obligation.
When must exist? Both at the time of the getting the policy
and at the time of the death of the debtor.
Q: Can the debtor change the beneficiary to another person?
Halimbawa siya ang kumuha ng policy, making the proceeds
payable to the creditor. Walang kinuha si creditor.
A: No. He cannot change except with the consent of the
creditor because it is deemed irrevocable because there is
an interest. Designation of beneficiary as interest. Until
nandyan ang utang, he cannot change unless with the
consent of the creditor. Kasi coupled with an interest. Kaya
ka kumuha para babayaran mo yung utang. But generally it’s
revocable.
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
February 10, 2020- Sosoban
So, now we go to Non-Life Insurance. We have already
discussed the salient provisions of life insurance – now, we
will hear the counter-part provisions. As I told you before we
started with the general concepts and we then went to the
specifics. Now, we go to the specifics of non-life or property
insurance.
Q: What is the rule with respect to non-life insurance?
When will there be recovery?
A: (Proximate Cause Rule)
Section 86. Unless otherwise provided by the policy, an
insurer is liable for a loss of which a peril insured against was
the proximate cause, although a peril not contemplated by
the contract may have been a remote cause of the loss; but
he is not liable for a loss of which the peril insured against
was only a remote cause.
Q: What is Proximate Cause?
A: Proximate Cause is the cause that which in a natural and
continuous sequence, unbroken by any new independent
cause, produces an event without which the event would not
have occurred.
Immediate Cause is that which peril which appear closest to
the time of the loss.
Comment: So, proximate cause is different form immediate
cause. When you talk about immediate, it’s the time element.
Immediate means the event that happened immediately
before the loss. Kaya siya immediate.
Proximate on the other hand, sets the ball rolling and without
which, the incident would not have occurred. So possible na
yung unang nangyari, yun yung proximate cause. Pero yung
pinaka malapit sa loss – immediate lang yun. Pero it can
also be na yung pinaka immediate is also the proximate; if
there is no supervening event in between.
Q: What if a house is covered by a fire policy and there
is an earthquake. Because of the earthquake, the wires
short-circuited and then there was fire and this
destroyed two walls of the house. Will there be recovery
under the fire insurance policy?
A: There may not be any recovery because the proximate
cause of the fire which destroyed the two walls was the
short-circuited wires which was caused by the earthquake.
Q: And what is the role of fire in the scheme of things?
A: The fire was the immediate cause of the burning of the
walls.
Q: What if the contents of the house are covered by an
earthquake insurance policy and because of the
earthquake, there was fire and in the course of rescuing
it from the fire there was loss of the furnitures and
fixtures inside the house. Will there be recovery?
A: SECTION 87. An insurer is liable where the thing insured
is rescued from a peril insured against that would otherwise
have caused a loss, if, in the course of such rescue, the thing
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is exposed to a peril not insured against, which permanently
deprives the insured of its possession, in whole or in part; or
where a loss is caused by efforts to rescue the thing insured
from a peril insured against.
There may still be insurance recoverable.
Note: You have a policy, but na expose siya sa ibang hindi
naman covered sa policy. So, you were rescuing it from or in
the course of rescuing it because of the incident that is not
covered by the policy.
Q: Would your answer be the same if it were a fire
insurance policy?
A: The answer will not be the same because the proximate
cause was the earthquake.
Note: Pareho kasi silang in the course of rescue diba? So
kung fire, what are you supposed to be protecting your
property from? Fire.
Q: What was the loss?
A: Fire. But the proximate cause was the earthquake and the
fire was only the immediate cause.
Maam: Kasi diba in the course of rescue, it was exposed to
a risk that is not covered by the policy there can still be
recovery. Eh ito covered eh.
Q: Should we apply the Proximate Cause rule? Or the In
The Course of Rescue Rule?
[hindi sinagot ni maam, isipin daw natin and answer]
Q: What was the issue in the case of Heirs of
Coscolluela v. Rico?
A: The issue in this case is whether or not the dismissal here
is proper based on the application of the exception clause in
the policy.
Q: What was the main defense of the insurance
company?
A: The damage or loss arose from a civil commotion or was
a direct result thereof.
Maam: So ang sinasabi, ito kasi is one the excluded risks.
Q: What was the ruling of the Supreme Court?
A: The dismissal was not proper. It is because a policy of
insurance with a narration of excception tendingto work a
forfeiture of the policy shall be interpreted liberally in favor of
the insured and strictyly against the insurance company or
the party for whose benefit they are inserted. And, where the
insurer denies liability for a loss alleged to be due to a rick
not insured against, but fails to establish the truth of such
fact by ocnrete proofs, the Court rules that the insurer is
liable under the terms and conditions of the policy by which it
has bound itself.
Maam: So, the general rule is there can be recovery. The
exception is when there is evidence to defeat the claim. The
burden of proving, of course, is on the insurance company.
“Construe in such a way as to preclude the insurer from
denying the claim.” So, in other words, absent any evidence
that there was rebellion and that the loss of the property is
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
due to civil commotion then we go back to the general rule –
the proximate cause being a covered peril.
Q: What if Comprehensive Motor Vehicle Insurance
states that “damage due to earthquake is not covered”
then there is an earthquake causing a tsunami resulting
to a total wreck of a car. Will there be recovery?
A: No, there will be no recovery since the insurance policy
provides that damage due to earthquake is not covered and
the proximate cause for the loss or damage was the
earthquake.
Maam: And if that specific peril is an exempted peril and that
is the proximate cause, there will be no recovery – even if it
was exposed to another peril. Ang issue pa din is yung
proximate cause.
SECTION 88. Where peril is especially excepted ina contract
of insurance, a loss, which would not have occurred but for
such peril, is thereby excepted although the immediate
cause of the loss was a peril which was not excepted.
Q: What is the issue in Paris vs Phoenix?
A: The issue is whether or not the explosion is the proximate
cause in order for the insured to claim from the insurance
policy.
Q: What were the grounds for refusal of the claim?
A: The insurance company mentioned four (4) special
defenses in denying the claim.
1. The company was not the insured named in the
policy, and that the insurance was of no legal force
and effect with the company;
2. The policy of the insurance did not cover any loss or
damage occasioned by explosion, and that the loss
was occasioned by an explosion and was not
covered by the policy;
3. The claim of the plaintiff is fraudulent as to the
quantity and value of the insured property at the
time of the fire;
4. The loss in question was caused by the willful act of
Peter Johnson.
Maam: So, we will focus first on forfeiture because of willful
act, what was the ruling of the Supreme Court?
A: As to the first one, in the explosion, the Court here
observed that according to the testimonies about the
explosion, neither Johnson nor Banta, the ones in the
building at that time, heard or claim that they saw anything
that exploded. They just heard an explosion but it is unknown
to them what is the cause of the explosion. According to the
Supreme Court that as to this explosion contention, the
burden of proof is on the part of the insurance company to
prove that indeed the explosion was the proximate cause of
the fire.
Q: Why should the insurance company prove that?
Based on what provision of law?
A: The provision here is n the provisions of the policy.
Q: If you were the lawyer for the insurance company,
what kind of evidence would you have presented to
justify the denial?
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A: To justify the denial, there should be competent evidence
that the explosion has caused the fire.
Q: What was the policy about? What kind of policy was
it?
A: It is a Fire Insurance Policy.
Q: Why would you want to establish that the explosion
was caused by fire? Eh, for the insurance company ka
eh. How can you defeat the claim?
Maam: Kasi in this case, the Supreme Court ruled that there
should be recovery. So, if you were the lawyer for the
insurance company, how would you have presented the
evidence para hindi maka claim?
A: That the explosion is the proximate cause because
accroding to the terms of the insurance policy, explosion is
an excluded or exempted peril. If there is a loss arising from
the explosion, then the insurance company would deny any
claim from the insured.
Maam: Yes, so if it was occasioned by explosion, it will not
be paid by the insurance company. So nung sinabi na wala
na mang naka establish na may explosion eh, but alam
namin may fire so automatically covered siya. So the
evidence that should have been presented was the existence
of explosion and that it was the proximate cause. Tapos
syempre, yung willful act or connivance was that the
Supreme Court did not find any evidence.
Q: What if a restaurant owner’s employee smokes within
the premises and causes fire. Will there be recovery?
A: There will be no recovery. The applicable provision of law
is Section 89.
SECTION 89. An insurer is not liable for a loss caused by the
willful act or throught the connivance of the insured; but he is
not exonerated by the negligence of the insured, or of the
insurance agents or others.
Here, the others may be the employees and what is
contemplated under Section 89 is only simple negligence.
However, what caused the fire was gross negligence brought
by the employee of the restaurant owner.
Maam: Pero hindi siya yung employer mismo but again,
agent siya.
Q: Would your answer be the same if it were a customer
who smoked near the area of flammable substances?
A: The answer would not be the same because the customer
is not an agent of the owner of the restaurant.
Maam: Again, we distiguish between simple negligence,
gross negligence (which is tantamount to a willful act), and a
willful act. Again, based on the Rules of Court provision that
anyone who does something knows the consequences of his
own act. So, it is now within the realm of willfulness. Just like
in life – ang counter-part naman natin sa life is suicide.
Q: In the case of Prats vs Phoenix, what was the issue
here?
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
A: The issue in this case is whether or not Prats may recover
the proceeds from the insurance policy.
Q: Ano yung mga facts which were considered by the
Supreme Court as indicative of arson or willful act of
setting the property on fire?
A: In this case, before the fire, the goods were removed and
was given to one Abolafia without invoices. A party here,
Domingo Romero, assisted one Morete to rent a place near
the building which stored the subject of the insurance policy.
And then Morete with one Prats, different from the owner,
procured two cans of petroleum a night before the fire. Then
he ordered his muchacho to stand by and stop anyone who
will attempt to turn the alarm.
Maam: In the case of Prats, there is a fraudulent claim. Ang
daming pinang gagawa. Tapos, may can of petroleum pa.
Q: Ano sabi ng Supreme Court?
A: The Supreme Court said in this case that Prats cannot
recover under the insurance policy because under Section
89 of the Insurance Code, the insurer is not liable when the
thing is lost due to the willful act or in connivance with the
insured.
Maam: So klarong arson. In fact, one here in Davao seems
to be guilty of that. In this case, meron pang fake invoices.
Tapos namigay pa ng pera sa mga kapitbahay in anticipation
of the claim. So halata.
Q: In the case of East vs Globe?
A: In this case the issue is whether or not the insurer is liable
for the loss caused by the intentional act of the insured and
whether or not the insurer is also liable when the claim of the
insured is fraudulent.
Q: Ano yung mga facts na nagsabi na fraudulent yan?
A: Here, the insured presented an inventory of the insured
furniture and the value of which at the time of the fire was
Php 52, 061.99. However, during the report it was shown
that there was also another inventory for the damaged and
undamaged furniture and –
Q: Saan yung sunog?
A: Sa second floor and most of the insured furnitures were
on the first floor.
Maam: Oh, diba halata. Intact ang first floor pero grabe and
inventory niya.
Q: What were found in the premises?
A: The report of the fire department was that there were
three cans of gasoline and a kapok saturated with gasoline.
Maam: And aside from that, may utang pa siya.
Q: Saan nga siya may utang?
A: “It further appears from the record that at the time of the
fire the plaintiff was heavily indebted to the Manila Finance &
Discount Corporation, to the Bank of the Philippine Islands,
and to Attorney Alfonso E. Mendoza.”
Abrasaldo|Altiso|Deiparine|Fernandez|Malicay|Milana|Sioson|Sosoban|Suaybaguio
Maam: Oh, diba. Eh, si attorney, isa siya sa mga nakaka
alam. The fact that the insured only approximately 202
pieces of furniture in the building at the time of the fire and
sought to compel the insurance companies to pay for 506
pieces conclusively shows that its claim was not honestly
conceived. Tapos meron pang documentation ng arson. The
reason why, as we will se later, there should be notice of loss
immediately within a reasonable period, in case of fire, is
because it is very easy to hide evidence of arson. You will
see later pag nasa claims na tayo there should be notice of
loss bacause of fire within a reasonable period; otherwise,
the claim will be denied. Kasi nga ang dali dali mag tago ng
ebidensya ng arson.
Insurable interest in life insurance – when we talk about
insurable interest, what provision comes to mind? Section
10. Pag dating sa property, Section 13.
SECTION 13. Every interest in property, whether real or
personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril might
directly damnify the insured, is an insurable interest.
Okay, andito nanaman yun “creats a liability” and or “directly
damnifies”.
Q: Ano ulit difference nun? We have already discussed
that.
A: Create a liability = the person himself does not suffer any
loss but he has to pay someone; so he now becomes liable
and to protect himself from liability, he will get a policy
Damnify = direct loss
Q: What does Act 3833 provide?
A: Act No. 3893 provides for the General Bonded
Warehouse Act where a warehouse man who is licensed to
in the business to receive commodities for storage is obliged
to get a policy against fire.
Q: Why? So, ano yan? Directly Damnify or Create
Liability?
A: It creates a liability on the party because of the things that
is deposited in his care is lost, he shall be liable for the value
of the thing.
Maam: So, the person himself cannot suffer any loss but if
the goods deposited are lost then he now becomes liable to
the extent of the value of the property.
Q: What are the different forms of insurable interest?
A: SECTION 14. An insurable interest in property may
consist in:
(a) An existing interest;
(b) An inchoate interest founded on an existing interest;
or
(c) An expectancy, coupled with an existing interest in
that out of which the excpectancy arises.
Q: Example of existing interest?
A: An existing interest, for example, on the part of the
mortgagor of the property mortgaged – has an existing
interest in the property mortgaged.
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Q: Because?
A: He is the owner. He cannto mortgage something he
doesn’t own.
Q: How about the mortgagee?
A: He also has an existing interest on the property
mortgaged because it is the security for the debt.
Q: When must he have the insurable interest?
A: SECTION 19. An interest in property insured must exist
when the insurance takes effect, and when the loss occurs,
but need not exist in the meantime; and interest in the life or
health of a person insured must exist when the insurance
takes effect, but need not exist thereafter or when the loss
occurs.
Maam: Because, a mortgagee may have an insurable
interest now, but once the debt is paid, wala na siyang
interest doon sa collateral or sa security.
What if the owner himself was the one who got the policy
and making the creditor the beneficiary? That can be forever,
kahit wala nang utang.
Q: Inchoate interest founded on an existing interest?
A: For example, a stockholder has an inchoate interest in the
properties of the company of which he is a stockholder.
Maam: Okay, shareholder. Pag shareholder ka sa isang
kompanya, di mo naman pwedeng sabihin na oy akin yang
tatlong poste jan. It’s merely an inchoate interest but couple
with an existing interest. Everything has to be based on an
existing interest. Hindi pwedeng speculative.
Q: If you bet on a lotto ticket, can you insure yourself
against losing?
A: No. It will be in the nature of a wagering policy if you were
to insure yourself against losing.
Maam: Yes, it would be in the nature of a wagering policy
because there is no actual interest. Laging coupled with an
existing interest.
Q: Can an heir insure one of the properties of the
potential decedent?
A: He can only get an insurance policy on whatever he is
supposed to get if it is an irrevocable will.
Maam: Hindi pwede, kasi hindi coupled. This is an
expectation but it is not coupled with an existing interest.
Bakit? Eh, kung marami palang anak sa labas itong lolo
niya. Diba may extra-judicial settlement of estate pa. Or
baka what if by the time mamatay wala nang properties puro
utang pala.
Q: What is an example of an expectancy couple with an
existing interest?
A: For example, the owner of a business would get an
insurance against a contigency which may cause loss of
profits from a cessation or interruption of his business.
Abrasaldo|Altiso|Deiparine|Fernandez|Malicay|Milana|Sioson|Sosoban|Suaybaguio
Maam: Or agent, with respect to the commission he is
supposed toget. Or, farmer with respect to crops or potential
earnings. Coupled with an existing interest yan.
Q: What is the liability of a carrier or depository? Does
he have an insurable interest?
A: Yes, under Section 15 of the Insurance Code.
SECTION 15. A carrier or depository of any kind has an
insurable interest in a thing held by him as such, to the
extent of his liability but not to exceed the value thereof.
Maam: So, hindi pwede na ang liability niya up to P500,000
tapos kumuha siya ng insurance for 1 million. Pinagkakitaan
niya. Again, if a contract of life insurance is deemed a
contract of investment; a contract of property insurance is a
contract of indemnity. You cannot be indemnified for more
than your insurable interest. Hindi niyo it pwedeng pagka
kitaan.
Q: What was the issue in the case of Lampano vs Jose?
Sino yung mga concerned na tao dito?
A: There are three (3) persons in this case. First, Lampano
then Barretto, the building contractor. Lastly, Jose. Jose here
sold the house to Lampano.
Q: Who got the policy?
A: Barretto, the building contractor. So, after the completion
of the house and before it was destroyed by fire, Baretto took
out an insurance policy with the consent of Jose in the
amount of Php 4,000.00. The controversy arose when the
Lampano insisted that Jose made an agreement with her
that such insurance policy will be delivered to her.
[Maam: So here’s the situation, the contractor got a policy on
the house. The old owner promised the new owner, “okay,
pagka benta ko sayo, ililipat ko din ang insurance ni
contractor.”
Q: What was the ruling of the Supreme Court?
A: The Supreme Court cited jurisprudence in which they said
that where different persons have different interests in the
same property, the insurance taken by one in his own right
and in his own interest does not in any way insure to the
benefit of another. And also, the Supreme Court held here
that strangers to the contract cannot require in their own right
any interest in the insurance money, except through an
assignment or some contract with which they are connected.
So the Supreme Court also ruled here with regard to
Barretto’s insurable interest. The court held that a building
contractor has an insurable interest in the completed building
pending the payment of the construction price.
Maam: Yun, yun ang qualification dun. There was an unpaid
construction fee. Pero kung paid na, ano pa ang interest
niya? So meron siyang insurable interest pending the
payment. But once it is fully paid, wala na si construction
company.
Q: What was the issue in the case of Traders vs
Golangco?
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
A: The issue in this case is whether or not the Golangco has
an insurable interest on the rent of the building premises
which may lawfully or validly be subject of insurance
Q: Bakit siya may insurable interest?
A: Here, Golangco was the lessee of the property owned by
the Church and on April 7, 1949, Golangco applied for a fire
insurance policy with Traders Insurance wherein the fire
policy states that “all the insurance covered under said
policy, includes the rent or other subject atter of insurance in
respect of or in connection with any building or any property
contained in any building. And on June 5, 1949 the building
was burned so Golangco here requested Traders Insurance
to pay the amount of Php 10,000.00
Maam: So, sabi ng Supreme Court, very obvious na may
insurable interest. Because he was enitled to the rentals. So
with Gaisano, ang important lang dito, could there be
recovery when there was loss due to force majuere? The
Surpeme Court said, okay there was force majeure but what
was being insured here was the unpaid value of the goods.
So there is now a demand to pay and that is what is insured.
Hindi na yung mismong goods.
February 24, 2020- Mahusay
Preview: Last time we started discussing the specific
provisions in property insurance for non-life. I think we
stopped on Section 16.
But first let’s have a review/recap:
Q: What’s the concept of insurable interest in property in
insurance
A: Section 13. Every interest in property, whether real or
personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril might
directly damnify the insured, is an insurable interest.
Mam: But of course, the provision doesn’t say na ‘to
damnifya person or create a liability against a person. So, it
works both ways. So insurable interest exists not only when
one stands to be burdened by a liability but also when there
is direct loss.
Q: What are the forms of insurable interest in property
insurance?
Section 14. An insurable interest in property may consist in:
(a) An existing interest;
(b) An inchoate interest founded on an existing interest; or
(c) An expectancy coupled with an existing interest in that
out of which the expectancy arises.
Mam: So taltlong forms.
Examples:
(a) Existing Interest: such in the case of an owner
(b) Inchoate Interest coupled with an existing interest: in a
case of a shareholder or a stockholder
(c) Expectancy coupled with an existing interest: when you
expect to get rentals, fruits, when there is damage to
property which will give rise to rentals sana, then, there is
now insurable interest.
Abrasaldo|Altiso|Deiparine|Fernandez|Malicay|Milana|Sioson|Sosoban|Suaybaguio
So if we have section 10 for insurable interest in life
insurance, the counterpart is the concept and the forms
under property insurance.
Q: Can an heir get an insurance policy on his expected
legitime?
A: No mam for his right is just inchoate.
Q: Why?
Mam: So, in other words, it is not coupled with an existing
interest plus for reasons under your succession. Ang
stockholder, inchoate din yan kasi alam nya na meron syang
ownership sa corporation pero sabi ko nga, he cannot claim
the he owns the building, the door, the poste. These are
supposed to be liquidated muna.
Q: CLASSIC TRUE OR FALSE- In life insurance, ‘the face
value of the policy is unlimited’. True or False? It will depend
on the amount of premiums that the insured can afford. For
instance, for 1 million coverage at this stage, pwede ang
annual premium is 50K, pwede nya bang gawing 2 million?
Like sky is the limit? Depending on the ability of the insured
to pay the premium? True or False?
Mam: Look at the scenario, if someone offers you a life
insurance policy, tama bang sabihin na pwede kahit
magkano basta affor yung premium? At all instances?
Analyze.
A: False, it is not unlimited because we have the concept of
pecuniary estimation of the interest.
Q: Sa pecuniary, yes. That’s life insurance. So, what is the
limit in the face value when there is a pecuniary interest?
What are examples of insurable interest in pecuniary
estimation in life?
A: Creditor-Debtor Relationship, Mam.
Q: In that case, who can get a life insurance policy?
A: the creditor mam.
Q: How much is the face value?
A: The face value mam is the amount of the loan or payment
Mam: So, hindi sky is the limit. Inulit ulit ko sa inyo yan. 😊
that’s why it is false to say that the face value of the policy in
life insurance is unlimited because we have an exception,
and that is in the case of life insurance policies based on
pecuniary interest. Debtor-Creditor, Partners, Employer-
Employee.
So, kung magkano lang yung dinadala nyang kita sa
companya yun lang pwedeng masasabing loss. Kung
magkano lang yung pinapasok nya sa partnership, yun lang
ang pwede mong iinsured. And that also brings us to the
concept on when must an insurable interest exist? Lahat
yan, pwedeng one point in time lang sa life. Pero pagdating
sa pecuniary, it must exist in two points. What if hindi mon a
sya partner nung namatay sya? What if di mo na sya
empleyado? What if bayad ng yung utang?
General Rule: Insurable interest in life must exist only at the
start.
Exception: Pecuniary Estimation, two points in time.
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Q: In property insurance, what is the amount of the value of
the insurance policy? How do we know? How do we
measure?
Section 17. The measure of an insurable interest in property
is the extent to which the insured might be Damnified by loss
or injury thereof.
Mam: So, this is similar to Life insurance coupled with
pecuniary interest. Kung magkano lang yung damage or
liability, yun lang pwedeng iinusre in property insurance.
Example: Building. The insurable interest should not exceed
the value of the building. So, the building cannot be insured
more than the value of the building.
Q: Who is supposed to get the value of the policy.
A: Owner, Lessee, Mortgagee, unpaid builder/construction
company as discussed in one case.
In case of an unpaid builder, it can only insure up to the
extent of the unpaid construction fee. It is allowed because
they have different interests, they have different extent of
insurable interest.
In the case of Filipino, what was the issue?
What was insured in this case?
FILIPINO MERCHANTS v. CA
FACTS:
This is an action brought by the consignee of the shipment of
fishmeal loaded on board the vessel SS Bougainville and
unloaded at the Port of Manila on or about December 11,
1976 and seeks to recover from the defendant insurance
company the amount of P51, 568.62 representing damages
to said shipment which has been insured by the defendant
insurance company under Policy No. M-2678. The defendant
brought a third party complaint against third party defendants
Compagnie Maritime Des Chargeurs Reunis and/or E.
Razon, Inc. seeking judgment against the third (sic)
defendants in case Judgment is rendered against the third
party plaintiff.
It appears from the evidence presented that in December
1976, plaintiff insured said shipment with defendant
insurance company under said cargo Policy No. M-2678 for
the sum of P267,653.59 for the goods described as 600
metric tons of fishmeal in new gunny bags of 90 kilos each
from Bangkok, Thailand to Manila against all risks under
warehouse to warehouse terms. Actually, what was imported
was 59.940 metric tons not 600 tons at $395.42 a ton CNF
Manila. The fishmeal in 666 new gunny bags were unloaded
from the ship on December 11, 1976 at Manila unto the
arrastre contractor E. Razon, Inc. and defendant's surveyor
ascertained and certified that in such discharge 105 bags
were in bad order condition as jointly surveyed by the ship's
agent and the arrastre contractor. The cargo was also
surveyed by the arrastre contractor before delivery of the
cargo to the consignee and the condition of the cargo on
such delivery was reflected in E. Razon's Bad Order
Certificate No. 14859, 14863 and 14869 covering a total of
227 bags in bad order condition. Defendant's surveyor has
conducted a final and detailed survey of the cargo in the
warehouse for which he prepared a survey report with the
findings on the extent of shortage or loss on the bad order
bags totalling 227 bags amounting to 12,148 kilos. Based on
said computation the plaintiff made a formal claim against
the defendant Filipino Merchants Insurance Company for
Abrasaldo|Altiso|Deiparine|Fernandez|Malicay|Milana|Sioson|Sosoban|Suaybaguio
P51,568.62 the computation of which claim is contained
therein. A formal claim statement was also presented by the
plaintiff against the vessel dated December 21, 1976, but the
defendant Filipino Merchants Insurance Company refused to
pay the claim. Consequently, the plaintiff brought an action
against said defendant as adverted to above and defendant
presented a third-party complaint against the vessel and the
arrastre contractor.
ISSUES:
1. Whether or Not CA erred in its interpretation and
application of the "all risks" clause of the marine insurance
policy when it held the petitioner liable to the private
respondent for the partial loss of the cargo, notwithstanding
the clear absence of proof of some fortuitous event, casualty,
or accidental cause to which the loss is attributable.
2. Whether or Not private respondent had no insurable
interest in the subject cargo, hence, the marine insurance
policy taken out by private respondent is null and void.
RULING:
1. NO. petitioner contends that an "all risks" marine policy
has a technical meaning in insurance in that before a claim
can be compensable it is essential that there must be "some
fortuity, " "casualty" or "accidental cause" to which the
alleged loss is attributable and the failure of herein private
respondent, upon whom lay the burden, to adduce evidence
showing that the alleged loss to the cargo in question was
due to a fortuitous event precludes his right to recover from
the insurance policy.
However, the SC ruled that, an "all risks policy" should be
read literally as meaning all risks whatsoever and covering
all losses by an accidental cause of any kind. The terms
"accident" and "accidental", as used in insurance contracts,
have not acquired any technical meaning. They are
construed by the courts in their ordinary and common
acceptance. Thus, the terms have been taken to mean that
which happens by chance or fortuitously, without intention
and design, and which is unexpected, unusual and
unforeseen. An accident is an event that takes place without
one's foresight or expectation; an event that proceeds from
an unknown cause,or is an unusual effect of a known cause
and, therefore, not expected.
The term "all risks" cannot be given a strained technical
meaning, the language of the clause under the Institute
Cargo Clauses being unequivocal and clear, to the effect that
it extends to all damages/losses suffered by the insured
cargo except (a) loss or damage or expense proximately
caused by delay, and (b) loss or damage or expense
proximately caused by the inherent vice or nature of the
subject matter insured.
Generally, the burden of proof is upon the insured to show
that a loss arose from a covered peril, but under an "all risks"
policy the burden is not on the insured to prove the precise
cause of loss or damage for which it seeks compensation.
The insured under an "all risks insurance policy" has the
initial burden of proving that the cargo was in good condition
when the policy attached and that the cargo was damaged
when unloaded from the vessel; thereafter, the burden then
shifts to the insurer to show the exception to the coverage.
10 As we held in Paris-Manila Perfumery Co. vs. Phoenix
Assurance Co., Ltd. 11 the basic rule is that the insurance
company has the burden of proving that the loss is caused
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
by the risk excepted and for want of such proof, the company
is liable.
Coverage under an "all risks" provision of a marine insurance
policy creates a special type of insurance which extends
coverage to risks not usually contemplated and avoids
putting upon the insured the burden of establishing that the
loss was due to the peril falling within the policy's coverage;
the insurer can avoid coverage upon demonstrating that a
specific provision expressly excludes the loss from coverage.
A marine insurance policy providing that the insurance was
to be "against all risks" must be construed as creating a
special insurance and extending to other risks than are
usually contemplated and covers all losses except such as
arise from the fraud of the insured. The burden of the
insured, therefore, is to prove merely that the goods he
transported have been lost, destroyed or deteriorated.
Thereafter, the burden is shifted to the insurer to prove that
the loss was due to excepted perils. To impose on the
insured the burden of proving the precise cause of the loss
or damage would be inconsistent with the broad protective
purpose of "all risks" insurance. In the present case, there
being no showing that the loss was caused by any of the
excepted perils, the insurer is liable under the policy.
2. Anent the issue of insurable interest, we uphold the ruling
of the respondent court that private respondent, as
consignee of the goods in transit under an invoice containing
the terms under "C & F Manila," has insurable interest in said
goods. Herein private respondent, as vendee/consignee of
the goods in transit has such existing interest therein as may
be the subject of a valid contract of insurance. His interest
over the goods is based on the perfected contract of sale. 18
The perfected contract of sale between him and the shipper
of the goods operates to vest in him an equitable title even
before delivery or before be performed the conditions of the
sale. The contract of shipment, whether under F.O.B., C.I.F.,
or C. & F. as in this case, is immaterial in the determination
of whether the vendee has an insurable interest or not in the
goods in transit. The perfected contract of sale even without
delivery vests in the vendee an equitable title, an existing
interest over the goods sufficient to be the subject of
insurance.
Discussion:
Q: When is there transfer of ownership?
A: Generally, when there is delivery.
Q: Dito bakit pwede sya kahit di pa naman sya owner? What
is FOB? CIF? C and F?
A: These are just the arrangement between the parties as to
who will shoulder what. Regardless of the arrangements, in
this case, the vendee-consignee already had an equitable
title over the goods. Hence, it had the right to get a property
insurance for the loss.
Let’s go back to Section 10.
Q: In life insurance, is it required that the person who is
supposed to support can actually support the one getting a
policy?
A: No. Section 195 and 196.
Abrasaldo|Altiso|Deiparine|Fernandez|Malicay|Milana|Sioson|Sosoban|Suaybaguio
Mam: Example, Si Bong Revilla pwedeng kumuha ng
insurance policy para sa buhay ng kanyang tatay. So hindi
kailangan.
Q: In property insurance, can a policy be obtained based on
expected loss?
A: It cannot be mam for there should be an existing interest.
Q: Why do you think the law is stricter in property insurance?
A: The law seems to be stricter in property insurance for it is
much easier to bring about the event mam. Like pwede nya
lang sunugin ang property nya mam.
Mam: We are talking about property so we cannot have it as
speculative for instance, “may katabi kasi kaming gasoline
station eh so baka magkasunog, madamay pa bahay ko. So
iinsure ko ang gasoline station”
Mam: Pwede ba yun? Tapos sasabihin nyo eh kasi sa
support diba kahit di capable of giving support to me, I can
get a policy. Those are two different principles.
There is a greater temptation to bring about the event in
property insurance compared to life that’s why it’s stricter.
Q: In life insurance, when must insurable interest exist?
A: At the time when the policy is obtained, mam. However, it
may not exist at the time of the loss.
Q: In property insurance, when must insurable interest exist?
A: It must exist, when the insurance takes effect and when
the loss occurs, but it may not exist in the meantime.
Section 19. An interest in property insured must exist when
the insurance takes effect, and when the loss occurs, but
need not exist in the meantime; and interest in the life or
health of a person insured must exist when the insurance
takes effect, but need not exist thereafter or when the loss
occurs.
Mam: So, may ganung qualification ha? Na it may not exist
in the meantime. What is the rationale?
Example: You have a car, you insured it, tapos binenta mo,
tapos binili mo ulet ka si namiss mo. Tapos nacarnap. The
question is do you satisfy the requirement of having
insurable interest for purposes of recovery?
The answer is Yes. Even if in the meantime, in between di
mo sya owned. Best Example: Anulled na mag asawa.
CHUCUHE v. INSURANCE COMMISSION
FACTS:
On April 19, 1975, the spouses Palomo obtained a
P100,000.00 loan from Tal Tong Chache, Inc. To secure
payment, a mortgage was executed over their land and
building in favor or Tai Tong Chuache & Co. On April 25,
1975, Arsenio Chua, representative of Tai Tong Chuache &
Co. insured the latter’s interest with the Traveller’s Multi-
Indemnity Corporation for P100,000.00 (P70,000.00 for the
building and P30,000.00 for the content thereof). The
building and the contents were subsequently totally razed by
fire.
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Upon demand, Traveller’s Insurance alleged that Tai Tong is
not entitled to indemnity under its policy for lack on insurable
interest and that spouses Palomo had already paid in full
their mortgage indebtedness to Tai Tong.
ISSUE:
Whether at the time of the occurrence of the peril insured
against, petitioner Tai Tong as mortgagee had no more
insurable interest over the insured property.
RULING:
The record of the case shows that the petitioner, to support
its claim for the insurance proceeds, offered as evidence the
contract of mortgage which has not been cancelled or
released. It has been held in a long line of cases that when
the creditor is in possession of the document of credit, he
need not prove non-payment for it is presumed. Moreover,
petitioner’s claim that the loan extended to the Palomos has
not yet been paid was corroborated by Asuzena Palomo who
testified that they are still indebted to herein petitioner.
The respondent insurance company, having issued a policy
in favor of herein petitioner which policy was of legal force
and effect at the time of the fire, it is bount by its terms and
conditions.
DISCUSSION:
Q: What other evidence was presented to show that the
indebtedness was still unpaid?
A: the debtor herself admitted that they are still indebted to
the creditor. Diba? The burden of proof is upon the debtor
and the debtor herself admitted it. Hence, there is still
insurable interest in the part of the mortgagee-creditor.
Let’s move on. (opo mam, kahit mashaket ☹ )
Q: What if a car is sold. For example, A sold a car to B. the
car has an insurance policy. What is sold was the car only,
however it was carnapped. Who can recover the proceeds?
Section 20. Except in the cases specified in the next four
sections, and in the cases of life, accident, and health
insurance, a change of interest in any part of a thing insured
unaccompanied by a corresponding change of interest in the
insurance, suspends the insurance to an equivalent extent,
until the interest in the thing and the interest in the insurance
are vested in the same person.
Section 58. The mere transfer of a thing insured does not
transfer the policy, but suspends it until the same person
becomes the owner of both the policy and the thing insured.
Mam: The transfer of ownership over the property without the
accompanying transfer of ownership over the policy,
suspends the policy until ownership over the thing and policy
belong to one person.
Change of Ownership of Property
Section 20 and 58: A change of interest in any part of a
thing insured unaccompanied by a corresponding change of
interest suspends the insurance until the interest in the thing
and interest in the insurance are vested on the same person
Illustration
• A owns a car which is insured against theft
• A sells the car to B. The policy was not included in the sale.
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• If the car is carnapped, neither A nor B can recover under
the policy.
• A cannot recover because he does not own the car at the
time of the theft.
• B cannot recover because he does not own the policy
No one can recover. Insurable interest must exist at the time
of the issuance of the insurance policy and at the time of the
loss.
Until the ownership over the policy and ownership over the
property is vested in one person, the policy is suspended.
(Lifted from Atty. Sagmit’s PPT)
Q: Would the same principle be applied if the transfer of
property is by succession?
Section 23. A change of interest, by will or succession, on
the death of the insured, does not avoid an insurance; and
his interest in the insurance passes to the person taking his
interest in the thing insured.
Mam: So if the transfer is by succession, automatically, the
policy is also transferred.
SAN MIGUEL v. LAW UNION
FACTS:
DP Dunn, then the owner of the property to which the
insurance in this case relates, mortgaged the same to the
San Miguel Brewery to secure a debt. In the contract of
mortgage, Dunn agreed to keep the property insured at his
expense and authorized San Miguel, in case of loss, to
receive the proceeds of the insurance. San Miguel effected
the insurance itself. The General Manages of San Miguel
applied to Law Union for insurance stating that the company
was interested in the property only as a mortgagee.
Law Union, however, issued its policy only for the half of the
insured amount and procured a policy for the other half from
Filipinas Compania de Seguros. Both policies were issued in
the name of the company as the insured. The premiums
were paid by San Miguel and charged to Dunn. Dunn sold
the property to herein appellants, Henry Harding, but
assignment of the insurance or of the policies was not, at
that time made to him.
The property was destroyed by fire. San Miguel Instituted an
action for the purpose of recovering upon the policies.
Harding claimed for himself the right to recover the difference
between the petitioner’s mortgage credit and the face value
of the policies. The insurance companies admitted their
liability to San Miguel but denied liability to Harding.
Insurance companied effected a settlement with San Miguel
to the extent of its mortgage credit. The trial judge ruled that
Harding had no right of action against the insurance
companies.
ISSUE:
Whether or not San Miguel, as the mortgagee, has an
insurable interest?
RULING:
Harding has no cause of action. He is not a party to the
contracts and cannot maintain an action thereon. His claim is
merely an equitable and subsidiary nature and must be
made effective, if at all, through San Miguel in whose name
the contracts are written. San Miguel, as the mortgagee,
undoubtedly had an insurable interest therein but it could not,
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in any event, recover upon those policies an amount in
excess of its mortgage credit. As regards Harding, an
obstacle for recovery is found in the fact that the ownership
of the property had been changed without any corresponding
change having been effected in the policy of insurance.
Discussion:
Mam: Who is San Miguel in this case?
A: Mortgagee mam.
Q: Who obtained the insurance policy?
A: San Miguel.
Mam: The new owner here would like to get the proceeds of
an insurance which was obtained by a mortgagee, not even
the old owner.
Q: Would the Supreme Court rule the same if it was DUNN
who got the policy?
A: Yes.
Q: Did San Miguel have insurable interest in the first place.
And what form among the three forms?
A: Yes. Existing Interest, mam.
Q: To what extent?
A: The amount of the loan.
Let’s proceed:
Illustration:
A and B entered into a fire insurance contract. The property
was burned and some of the goods inside were recovered.
But after the fire, the property was transferred to another
place. Can there be a denial of the claim based on the
transfer done by the policy holder?
Another illustration:
A is the owner of a building. He got a fire insurance policy on
the building. It was burned but only the half portion of the
building. After the fire, A transferred ownership to B. Can A
still recover under the policy?
Section 21. A change of interest in a thing insured, after the
occurrence of an injury which results in a loss, does not
affect the right of the insured to indemnity for the loss.
Mam: But of course, what if the change of interest happened
after, what is the rule?
Balik tayo dun sa principle, change of interest or ownership,
if accompanied by a change of ownership over the policy,
pwede maka recover si new owner. Otherwise, no one can
claim.
Q: What is the rule when there is a change of interest in one
or more several things na separately insured naman?
Section 22. A change of interest in one or more of several
distinct things, separately insured by one policy, does not
avoid the insurance as to the others.
SPOUSES CHA v. CA
FACTS:
Spouses Nilo Cha and Stella Uy-Cha and CKS Development
Corporation entered a 1 year lease contract with a stipulation
not to insure against fire the chattels, merchandise, textiles,
goods and effects placed at any stall or store or space in the
leased premises without first obtaining the written consent
and approval of the lessor. But it insured against loss by fire
their merchandise inside the leased premises for P500,000
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with the United Insurance Co., Inc. without the written
consent of CKS
On the day the lease contract was to expire, fire broke out
inside the leased premises and CKS learning that the
spouses procured an insurance wrote to United to have the
proceeds be paid directly to them. But United refused so
CKS filed against Spouses Cha and United.
RTC: United to pay CKS the amount of P335,063.11 and
Spouses Cha to pay P50,000 as exemplary damages,
P20,000 as attorney’s fees and costs of suit
CA: deleted exemplary damages and attorney’s fees
ISSUE:
Whether or not the CKS has insurable interest because the
spouses Cha violated the stipulation
RULING:
NO. CA set aside. Awarding the proceeds to spouses Cha.
Sec. 18. No contract or policy of insurance on property shall
be enforceable except for the benefit of some person having
an insurable interest in the property insured.
A non-life insurance policy such as the fire insurance policy
taken by petitioner-spouses over their merchandise is
primarily a contract of indemnity. Insurable interest in the
property insured must exist a t the time the insurance takes
effect and at the time the loss occurs. The basis of such
requirement of insurable interest in property insured is based
on sound public policy: to prevent a person from taking out
an insurance policy on property upon which he has no
insurable interest and collecting the proceeds of said policy
in case of loss of the property. In such a case, the contract
of insurance is a mere wager which is void under Section 25
of the Insurance Code.
SECTION 25. Every stipulation in a policy of Insurance for
the payment of loss, whether the person insured has or has
not any interest in the property insured, or that the policy
shall be received as proof of such interest, and every policy
executed by way of gaming or wagering, is void.
Section 17. The measure of an insurable interest in property
is the extent to which the insured might be damnified by loss
of injury thereof.
The automatic assignment of the policy to CKS under the
provision of the lease contract previously quoted is void for
being contrary to law and/or public policy. The proceeds of
the fire insurance policy thus rightfully belong to the spouses.
The liability of the Cha spouses to CKS for violating their
lease contract in that Cha spouses obtained a fire insurance
policy over their own merchandise, without the consent of
CKS, is a separate and distinct issue which we do not
resolve in this case.
Discussion:
Mam: A non owner does not have insurable interest over the
goods. So, it cannot benefit from the insurance policy even if
there was a stipulation to that effect.
Section 25. Every stipulation in a policy of insurance for the
payment of loss whether the person insured has or has not
any interest in the property insured, or that the policy shall be
received as proof of such interest, and every policy executed
by way of gaming or wagering, is void.
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III-Manresa

Mam: So hindi pwede sabihin na A can recover from the Discussion:

policy notwithstanding the absence of insurable interest. That
is void. Mam: The issue in this case is Whether an insurance
company can deny liability on the premise that it was the one
What else is considered void stipulation? who committed the error. So, the court ruled here it cannot
deny liability based on its own error.
2 Void Stipulations under Section 25:
LIM CUAN SY v. THE NORTHERN ASSURANCE
1. The policy is proof of insurable interest. (just COMPANY
because nakapagpakita ka ng policy, does not
mean tha you have insurable interest.) FACTS:
At the time of the fire which gave rise to this lawsuit there
2. Notwithstanding the lack of insurable interest, one was a Chinese firm engaged in the business of selling
can benefit. textiles at 174 Rosario Street, in the City of Manila. This
business was conducted indifferently, in Chinese fashion,
under the names of "Hong Liong," "Lim Cuan Sy," and "Lim
GARCIA v. HONGKONG
Cuan Sy & Co.," though it was organized and registered as a
mercantile partnership under the designation last above
FACTS:
given. The name "Lim Cuan Sy," one of the designations of
Garcia was a merchant who owned a bazaar. His friend
the business, is the name of one of the partners in the
assisted him in taking a fire insurance policy for his
business, who actually owned, at the time this action arose,
merchandise. However, it was indicated in the policy that
about one-third of the business.
what was insured was the building where it was stored in—
which didn't show the true intent of the parties. It was found
At the time of the accident, LIM CUAN SY was in China, and
out that the insurance policy was in English, which is in a
his son, LIM TEC SUAN acted as an agent and manager of
language that Garcia was ignorant of.
the business. Later on, the firm found out that it is in need of
a large place to be used as storage of its stock not
Later, he decided to mortgage the insured merchandise to
necessary for costumer’s exhibition. Plaintiff placed said
the (PNB) bank. He wrote a letter to the insurance company,
stock to a bodega designated as A-1, No. 62, Urbiz tondo
asking for an indorsement so that he can properly mortgage
Street.
his merchandise. In his letter, he wrote therein that what was
insured was the merchandise and not the building. The
Plaintiff secured an insurance policy to be issued by the local
insurance company made the necessary endorsements to
agent of said defendant’s company for the effects stored in
PNB.
said bodega for loss by fire. The policies were written in the
name of plaintiff, Lim Cuan Sy, as the insured.
The building which housed the merchandise was later razed
by fire. The insurance company refused to pay due to the
Then a fire broke up, destroying all the effects stored in the
fact that the policy indicates insurance on the building and
bodega. Plaintiff claim from defendant’s company the value
not on the merchandise.
of the insurance policy but the later refuse to heed on such
demand alleging that plaintiff misrepresented himself as the
ISSUE:
owner of the effects while in fact said effects was owned by
Whether or not the defendant is justified in not paying the
the business under the names of “Hong”, “Lim” and Lim
policy.
Cuan Sy & Co.”.
RULING:
ISSUE:
Although the policy was in possession of the bank, the
Whether or not Plaintiff misrepresented himself as the
insurance company had among its own records all of the
insured exempting defendant company from paying the
data and information upon which the policy was issued, as a
policy.
matter of fact, its agents knew or should have known the kind
of property insured.
RULING:
There is no question but that when this policy of insurance
In the final analysis, Garcia wanted insurance upon a stock
was written, the agent of the company knew that he was
of goods, which he owned, and he received and paid for a
insuring a stock of goods the identity of which was not in
policy on a building, which he didn't own, and while the policy
doubt, and which pertained to a business commonly known
was in force and effect, both the building and the stock of
as the business of Lim Cuan Sy; and inasmuch as the
merchandise, were completely destroyed by fire. Garcia’s
defendant was content to take the premium corresponding to
merchandise was in the building described in the policy.
the insurance on goods of the value of those then contained
in the bodega, the company should not now be permitted to
The defense of the insurer is purely technical. The mistake
escaped responsibility merely upon the lack of conformity
was obviously on the part of the insurer when it issued a
between the name used in the policy and the true name of
wrong policy. It cannot deny such allegation due to the fact
the legal entity existing under our law.
that it even confirmed with PNB the nature of said policy
when it was endorsed. Garcia could not have noticed the
If questions had been put to the agent of the insured at the
mistake due to his ignorance of the English language.
time the policies were written and misrepresentation had
been deliberately made with respect to the ownership, a
It is very apparent that a mistake was made in the issuance
different problem would have been presented.
of the policy. Hence, the plaintiff would be entitled to recover
on the policy for the loss of the building

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III-Manresa
The company should be considered stopped from defeating
its policy on the ground stated. The contract of insurance
cannot be avoided upon the ground suggested. It is evident
that the misrepresentation complained of was not
fraudulently made, and it could only have resulted from
ignorance on the part of the insured.
Discussion:
Mam: The issue in this case is whether or not the insured
designation in the policy would render the insurance policy
void.
xxxxxxxxxxxxxxxx Joke time 😊 xxxxxxxxxxxxxxxxx
Mam: (nag inquire sa nationality ng students kasi Chinese
ang petitioner involved) Sinong Chinese dito?
Students: Si Mr. Amora, mam.
Mam: Sino pa?
Students (led by Mr. Malicay): Si Juris, mam.
Mam: Oh Mr. Mahusay ilang percent?
Juris: Sugar level mam? HAHAHAHAHAHA
Mam: Okay, let’s go back, what was the basis of the denial of
the claim?
A: There was fraud and misrepresentation mam.
Mam: So the company should not be permitted to escape
responsibility based on the false allegation that there was
misrepresentation. At the outset, it already knew who the real
policy holder is.
RCBC v. CA
FACTS:
GOYU applied for credit facilities and accommodations with
RCBC. As security for its credit facilities with RCBC, GOYU
executed two real estate mortgages in favor of RCBC. Under
each of these four mortgage contracts, GOYU committed
itself to insure the mortgaged property with an insurance
company approved by RCBC, and subsequently, to endorse
and deliver the insurance policies to it.
GOYU obtained in its name a total of ten insurance policies
from MICO.
On April 27, 1992, one of GOYU’s factory buildings in
Valenzuela was gutted by fire. Consequently, GOYU
submitted its claim for indemnity on account of the loss
insured against. MICO denied the claim on the ground that
the insurance policies were either attached pursuant to writs
of attachments/garnishments issued by various courts or that
the insurance proceeds were also claimed by other creditors
of GOYU alleging better rights to the proceeds than the
insured. GOYU filed a complaint for specific performance
and damages.
RCBC, one of GOYU’s creditors also filed with MICO its
formal claim over the proceeds of the insurance policies, but
said claims were also denied for the same reasons that
MICO denied GOYU’s claim.
ISSUE:
Whether or not RCBC, as mortgagee, has any right over the
insurance policies taken by GOYU, the mortgagor, in case of
the occurrence of loss.
RULING:
It is settled that a mortgagor and a mortgagee have
separate and distinct insurable interests in the same
mortgaged property, such that each of them may insure the
same property for his own sole benefit. There is no question
that GOYU could insure the mortgaged property for its own
exclusive benefit. In the present case, although it appears
thte GOYU, obtained the subject insurance policies naming
itself as the sole payee, the intentions of the parties as
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shown by their contemporaneous acts, must be give due
considerations in order to better serve the interest of justice
and equity.
It is to be noted that nine endorsement documents were
prepared by Alchester in favor of RCBC. The Court is in a
quandary how Alchester could arrive at the ideas of
endorsing any specific policy in favor of any particular
beneficiary or payee other than the insured had not such
Discussion:
Q: What was the basis of Goyu for saying that RCBC is not
entitled to the proceeds? What is the relationship of Goyu
and RCBC? Was there a right in the part of the RCBC to
claim the insurance proceeds because of the fire?
A: Yes. There was right.
Q: Out of the10 properties, only 8 were indorsed in favor of
the creditor. Does it matter? What did the Court say?
A: No mam. What the court would look at is the intention of
the parties.
Mam: Automatic na ‘yon when one gets a loan, and there is
security, then, it (the REM) is automatic in favor of the
creditor.
VERY IMPORTANT POINT:
Mam: In a creditor-debtor relationship, If the creditor is the
one who got the insurance policy on a property/security, the
creditor can only have the face value limited to the DEBT.
BUT when it is the debtor who gets the insurance policy on
the property, he can actually say “give the full proceeds to
the creditor.” – this works in both life and property insurance.
Illustration:
So, si A may utang kay B, 1 million. Who can get a life
insurance policy on the life of A?
1. A himself.
2. B, as the creditor.
If si B ang kumuha, limited to the obligation. Pero if yung
mismong may buhay, si A, it can be for a bigger amount and
he can say na all the proceeds shall go to B.
AGAIN (TO EMPHASIZE)
Pag si creditor ang kumuha – limited sa utang, whether it is
on the life or property of the debtor.
Pero kung si debtor mismo ang kumuha using his own life or
his property, pwedeng unlimited. Sky is the limit.
Rationale:
Why? It’s based on his will. Gusto nyang tumanaw ng utang
na loob kasi pinautang sya. As long as kaya nyang bayaran
ang premiums, and he has insurable interest, walang
problema. He can designate any beneficiary in life. The
same goes with property.
PARAMOUNT v. CASTRO
FACTS:
PPSBI applied for and obtained insurance from Paramount,
which accordingly issued Group Master Policy No G-086
effective September 1, 2004. Under Section 20, Art. IV of
said policy, "all death benefits shall be payable to the
creditor, PPSBI, as its interest may appeal.
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III-Manresa
Meanwhile, Virgilio Castro, Cherry Castro's husband and
Glenn's father - obtained a housing loan from the PPSBI in
the amount of P 1.5 Million. PPSBI required Veirgilio to apply
for a mortgage redemption insurance for the said insurance
policy, Virgilio named Cherry and Glenn as beneficiaries.
Paramount issued Certificate No. 041913 effective 12 March
2008 in his favor, subject to the terms and conditions of
Group Master Policy No. G-086.
In Febraury 2009, Virgilio died of septic shop. Consequently,
a claim was filed for death benefits under the individual
insurance coverage issued under the group policy.
Paramount however denied the claim, on the ground of the
failure of Virgilio to disclose material information, or material
concealment or misrepresentation. It said that when Virgilio
submitted his insurance application in March 2008, he made
some material representations by answering "no" to
questions on whether he had any adverse health history and
whether he had sought medical advice or consultation
concerning it. Paramount learned that in 2005, Virgilio had
sought consultation after complaining of a dull pain in his
lumbosacral area. Because of the alleged material
concealment or misrepresentation, it declared Virgilio's
individual insurance certificate no 041913 rescinded, null,
and absolutely void from the very beginning and refused to
honor its obligation as insurer of the P1.5 million loan.
Paramount filed a complaint with RTC. It prayed that
Application and Insurance Certificate covering the individual
insurance of Virgiliio be declared null and void by reason of
material concealment and misrepresentation.
Castros argued that Virgilio had not made any material
misrepresentation. They contended that he had submitted
the necessary evidence of insurability to the satisfaction of
Paramount. Castro filed a motion to include PPSBI as a third
party defendant in the nullification case instituted by
Paramount arguing that PPSBi stepped into the shoes of
Cherry and Glenn after the death of Virgilio by virtue of
Mortgage Redemption Insurance and that the obligation to
pay the third party defendant (PPSBI) passed on the
Paramount, not to them as Virgilio's hiers; Court denied the
motion arguing that the case would be fully appreciated and
resolved without involving PPSBI as a third party defendant.
CA reversed and granted the petition by allowing third party
complaint to be filed against the PPSBI and ruled that
Castros were freed from the obligation to pay the bank by
virtue of subrogation, as the latter would collect the loan
amount pursuant to the MRI issued by Paramount in Virgilios
favor.
PPSBI opposed with reasons that it is only seeking the
nullification of Virgilio's individual insurance certificate, and
not the group insurance policy forged between it and the
PPSBI. That the nullification action filed has nothing to do
with the PPSBI.
ISSUE:
Whether CA erred in remanding the case to the RTC for the
admission of the Third Party Complaint against PPSBI.
RULING:
No. Should Paramount succeed in having the individual
insurance certificate nullified, the PPSBI shall then proceed
against the Castros. This would contradict the provisions of
the group insurance policy that ensure the direct payment by
the insurer to the bank (creditor).
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Mortgage Redemption Insurance is as device for the
protection of both the mortgage and the mortgagor: on the
part of the mortgagee, it has to enter into such form of
contract so that in the event of the unexpected demise of the
mortgagor during the subsistence of the mortgage contract,
the proceeds from such insurance will be applied to the
payment of the mortgage debt, thereby relieving the heirs of
the mortgagor from paying the obligation. In a similar vein,
ample protection is given to the mortgagor under such a
concept so that in the event of death, the mortgage
obligation will be extinguished by the application of the
insurance proceeds to the mortgage indebtedness.
In this case, the PPSBI, as the mortgagee-bank, required
Virgilio to obtain an MRI from Paramount to cover his
housing loan. The issuance of the MRI, as evidenced by the
Individual Insurance Certificate in Virgilio's favor, was derived
from the group insurance policy issued by Paramount in
favor of the PPSBI. Paramount undertook to pay the PPSBI "
the benefits in accordance with the Insurance Schedule,
upon receipt and approval of due proof that the member has
incurred a loss for which benefits are payable.
Discussion:
Q: What was the type of Insurance entered in here?
A: It was an individual insurance contract derived from a
group policy.
Mam: The main issue here is whether it is correct to implead
Philippine Postal Bank. What is supposed to be impleaded.
A: The Court said yes, mam.
Q: What is sought to be avoided by impleading Philippine
Postal Bank?
A: Multiplicity of Suits.
Let’s proceed.
What do you call the DOCUMENT where the contract of
Insurance is set forth?
-POLICY OF INSURANCE.
Section 49. The written instrument in which a contract of
insurance is set forth, is called a policy of insurance.
Section 50. The policy shall be in printed form which may
contain blank spaces; and any word, phrase, clause, mark,
sign, symbol, signature, number, or word necessary to
complete the contract of insurance shall be written on the
blank spaces provided therein.
Any rider, clause, warranty or endorsement purporting to be
part of the contract of insurance and which is pasted or
attached to said policy is not binding on the insured, unless
the descriptive title or name of the rider, clause, warranty or
endorsement is also mentioned and written on the blank
spaces provided in the policy.
Unless applied for by the insured or owner, any rider, clause,
warranty or endorsement issued after the original policy shall
be countersigned by the insured or owner, which
countersignature shall be taken as his agreement to the
contents of such rider, clause, warranty or endorsement.
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III-Manresa
Notwithstanding the foregoing, the policy may be in
electronic form subject to the pertinent provisions of Republic
Act No. 8792, otherwise known as the ‘Electronic Commerce
Act’ and to such rules and regulations as may be prescribed
by the Commissioner.
Q: With respect to property insurance, what is the important
thing that we need to see?
Section 51. A policy of insurance must specify:
(a) The parties between whom the contract is made;
(b) The amount to be insured except in the cases of open or
running policies;
(c) The premium, or if the insurance is of a character where
the exact premium is only determinable upon the termination
of the contract, a statement of the basis and rates upon
which the final premium is to be determined;
(d) The property or life insured;
(e) The interest of the insured in property insured, if he is not
the absolute owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to continue.
Mam: The period is most applicable in the case of property
insurance kasi unlike sa life na tuloy tuloy lang, sa property
one year-one year yan usually.
Q: What is the counter part of cestui que vie. If you have
cestui que vie in life insurance, what is the counterpart in
property insurance?
A: The property.
Section 56. When the description of the insured in a policy is
so general that it may comprehend any person or any class
of persons, only he who can show that it was intended to
include him, can claim the benefit of the policy.
Section 57. A policy may be so framed that it will inure to the
benefit of whomsoever, during the continuance of the risk,
may become the owner of the interest insured.
Q: What is the special rule with respect to the cancellation of
property insurance policies that is not present in life
insurance?
Section 66. In case of insurance other than life, unless the
insurer at least forty-five (45) days in advance of the end of
the policy period mails or delivers to the named insured at
the address shown in the policy notice of its intention not to
renew the policy or to condition its renewal upon reduction of
limits or elimination of coverages, the named insured shall be
entitled to renew the policy upon payment of the premium
due on the effective date of the renewal. Any policy written
for a term of less than one (1) year shall be considered as if
written for a term of one (1) year. Any policy written for a
term longer than one (1) year or any policy with no fixed
expiration date shall be considered as if written for
successive policy periods or terms of one (1) year.
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Mam: In other words, before there can be cancellation of
property insurance, there has to be notice at least 45 days
before the date or expiration. There has to be the right to
renew. Please take note of this because we will discuss this
when go to our future topics.
ANG GIOK V. SPRINGFIELD
FACTS:
Ang Giok Chip doing business under the name and style of
Hua Bee Kong Si was formerly the owner of a warehouse.
The contents of the warehouse were insured with the three
insurance companies. One insurance policy was taken out
with the Springfield Fire and Marine Insurance Company.
The warehouse was destroyed by fire, while the policy
issued by the latter company was in force.
Plaintiff instituted an action in the CFI against the defendant
to recover a proportional part of the loss. Defenses were
interposed on behalf of the insurance company, one being
planted on a violation of warranty F fixing the amount of
hazardous goods which might be stored in the insured
building.
ISSUE:
Whether a warranty referred to in the policy as forming part
of the contract of insurance and in the form of a rider to
insurance policy is null and void.
RULING:
There are two well recognized doctrines:
1.) it is well settled that a rider attached to a policy is part of
the contract, to the same extent and with like effect as it
actually embodied therein.
2.) It is equally well settled that an express warranty must
appear upon the face of the policy, or be clearly incorporated
therein and made a part thereof by explicit reference, or by
words clearly evidencing such intention.
Section 65 says that every express warranty must be
“contained in the policy itself”. The word “contained,”
according to the dictionaries, means “included,” “inclosed,”
“embraced,” “comprehended” etc. When, therefore, the
courts speak of a rider attached to the policy, and thus
“embodied” therein, or of a warranty “incorporated” in the
policy, it is believed that he phrase “contained in the policy
itself” must necessarily include such rider and warranty.
As to the alternative relating to “another instrument,”
“instrument” as here used could not mean a mere slip of
paper like a rider, but something akin to the policy itself,
which in section 48 of the Insurance Act is defined as “The
written instrument, in which a contract of insurance is set
forth.” In California, every paper writing is not necessarily an
“instrument” within the statutory meaning of the term. The
word “instrument has a well defined definition in California,
and as used in the Codes invariably means some written
paper or instrument signed and delivered by one person to
another, transferring the title to, or giving a lien, on property,
or giving a right to debt or duty. In other words, the rider,
warranty F, is contained in the policy itself, because by the
contract of insurance agreed to by the parties it is made to
form a part of the same, but is not another instrument signed
by the insured and referred to in the policy as forming a part
of it.
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Discussion:
Mam: Warranty F here in simple terms is: Hazardous Goods
shall not exceed 3% Was there violation with regard to this
warranty?
A: Yes.
Mam: It was a valid clause and there was a violation.
PHIL. PHOENIX v. WOODWORKS
FACTS:
Upon defendant's application, plaintiff issued in its favor Fire
Insurance Policy No. 9749 for P500,000.00 whereby plaintiff
insured defendant's building, machinery and equipment for a
term of one year from July 21, 1960 to July 21, 1961 against
loss by fire. It is undisputed that defendant did not pay the
premium stipulated in the Policy when it was issued nor at
any time thereafter.
Plaintiff demanded in writing for the payment of said amount.
Defendant disclaimed any liability contending that it need not
pay premium "because the Insurer did not stand liable for
any indemnity during the period the premiums were not
paid."
Plaintiff commenced action to recover the amount of
P7,483.11 as "earned premium." Defendant controverted
basically on the theory that its failure to pay the premium
after the issuance of the policy put an end to the insurance
contract and rendered the policy unenforceable.
ISSUE:
Whether or not the insurance contract has already lapsed for
non-payment of premium.
RULING:
YES. The policy provides for pre-payment of premium.
Accordingly; when the policy is tendered the insured must
pay the premium unless credit is given or there is a waiver,
or some agreement obviating the necessity for prepayment.
To constitute an extension of credit there must be a clear
and express agreement therefor.
No clear agreement that a credit extension was accorded
defendant. And even if it were to be presumed that plaintiff
had extended credit from the circumstances of the
unconditional delivery of the Policy without prepayment of
the premium, yet it is obvious that defendant had not
accepted the insurer's offer to extend credit, which is
essential for the validity of such agreement.
An acceptance of an offer to allow credit, if one was made, is
as essential to make a valid agreement for credit, to change
a conditional delivery of an insurance policy to an
unconditional delivery, as it is to make any other contract.
Such an acceptance could not be merely a mental act or
state of mind, but would require a promise to pay made
known in some manner to defendant.
Since the premium had not been paid, the policy must be
deemed to have lapsed.
The non-payment of premiums does not merely suspend but
put, an end to an insurance contract, since the time of the
payment is peculiarly of the essence of the contract.
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The rule is that under policy provisions that upon the failure
to make a payment of a premium or assessment at the time
provided for, the policy shall become void or forfeited, or the
obligation of the insurer shall cease, or words to like effect,
because the contract so prescribes and because such a
stipulation is a material and essential part of the contract.
This is true, for instance, in the case of life, health and
accident, fire and hail insurance policies.
The burden is on an insured to keep a policy in force by the
payment of premiums, rather than on the insurer to exert
every effort to prevent the insured from allowing a policy to
elapse through a failure to make premium payments. The
continuance of the insurer's obligation is conditional upon the
payment of premiums, so that no recovery can be had upon
a lapsed policy, the contractual relation between the parties
having ceased.
Discussion:
Mam: If you recall, I told you in life insurance, if you file an
application for policy but you refused to pay the first
premium, the company cannot collect from you (no specific
performance).
Sa life, mag aapply ka, di ka magbabayad = di ka interesado.
Pero pagdating sa property? Ayan dito connected sa kaso.
Mam: The issue in this case is whether a property insurance
policy is considered to have lapsed upon nonpayment of the
premium.
Q: Would the Court have ruled in the same way if
Woodworks never paid any premium?
Mam: This is the weird part, if there was nonpayment of the
premium and there was no installment scheme, there was no
credit extension, there would have been no policy.
In case the contingency happens, di makakarecover ng
proceeds. So, cancelled. Ito ang weird pero pwede mag file
si Insurance Company ng Specific Performance.
Illustration:
There was a contract of insurance upon property against fire.
Nagkaroon ng sunog. So madedeny ang claim kasi di naman
bayad ang premiums.
Pero if payable within 90 days, kung may ganong installment
scheme, you can see later on na okay lang. Pero pag walang
ganun, NO RECOVERY.
Pero same situation, nagkaroon ngayon ng option si
Insurance Company na mangolekta, pwede syang
mangolekta. Kumbaga, si Insurance Company ang mag
didictate. In life, it’s the policy holder who dictates.
So, the moment that the property is exposed to the risk
insured against, there should be payment of the premium.
The choice is in the hands of the Insurance Company.
Del Rosario Case is a life insurance case. But what is
important in this case is the principle na in case there is an
ambiguity in any stipulation, it must be resolved in favor of
the policy holder.
PACIFIC TIMBER v. CA
FACTS:
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 INSURANCE LAW 2019-2020 TRANSCRIPTION
Based on the lectures of Atty. Cristina Sagmit
III-Manresa
On 19 March 1963, the Pacific Timber Export Corporation
(PTEC) secured temporary insurance from the Workmen's
Insurance Company Inc. (WICI) for its exportation of
1,250,000 board feet of Philippine Lauan and Apitong logs to
be shipped from the Diapitan Bay, Quezon Province to
Okinawa and Tokyo, Japan.
WICI issued on said date Cover Note 1010, insuring the said
cargo of PTEC "Subject to the Terms and Conditions of the
WORKMEN'S INSURANCE COMPANY, INC. printed Marine
Policy form as filed with and approved by the Office of the
Insurance Commissioner." The regular marine cargo policies
were issued by WICI in favor of PTEC on 2 April 1963. The
two marine policies bore the numbers of 53 HO 1032 and 53
HO 1033.
The total cargo insured under the two marine policies
accordingly consisted of 1,395 logs, or the equivalent of
1,195,498 bd. ft. After the issuance of Cover Note 1010, but
before the issuance of the two marine policies, some of the
logs intended to be exported were lost during loading
operations in the Diapitan Bay. The logs were to be loaded
on the 'SS Woodlock' which docked about 500 meters from
the shortline of the Diapitan Bay. The logs were taken from
the log pond of PTEC and from which they were towed in
rafts to the vessel. At about 10:00 a.m. on 29 March 1963,
while the logs were alongside the vessel, bad weather
developed resulting in 75 pieces of logs which were rafted
together to break loose from each other 45 pieces of logs
were salvaged, but 30 pieces were verified to have been lost
or washed away as a result of the accident.
PTEC subsequently submitted a Claim Statement
demanding payment of the loss under Policies 53 HO 1033,
and 53 HO 1033, in the total amount of P19,286.79.
WICI requested the First Philippine Adjustment Corporation
to inspect the loss and assess the damage. In its report, the
adjustment company found that 'the loss of 30 pieces of logs
is not covered by Policies 53 HO 1032 and 1033 inasmuch
as said policies covered the actual number of logs loaded on
board the SS Woodlock. However, the loss of 30 pieces of
logs is within the 1,250,000 bd. ft. covered by Cover Note
1010 insured for $70,000.00.
Eventually, the adjustment company submitted a
computation of WICI's probable liability on the loss sustained
by the shipment, in the total amount of P11,042.04. On 13
January 1964, WICI wrote PTEC denying the latter's claim,
on the ground that its investigation revealed that the entire
shipment of logs covered by the two marine policies 53 HO
1032 and 53 HO 1033 were received in good order at their
point of destination. It was further stated that the said loss
may not be considered as covered under Cover Note 1010
because the said Note had become null and void by virtue of
the issuance of Marine Policies 53 HO 1032 and 1033.
The denial of the claim by WICI was brought by PTEC to the
attention of the Insurance Commissioner by means of a letter
dated 21 March 1964. In a reply letter dated 30 March 1964,
Insurance Commissioner Francisco Y. Mandanas observed
that it is only fair and equitable to indemnify the insured
under Cover Note 1010, and advised early settlement of the
said marine loss and salvage claim. On 26 June 1964, WICI
informed the Insurance Commissioner that, on advice of their
attorneys, the claim of PTEC is being denied on the ground
that the cover note is null and void for lack of valuable
consideration.
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The Court of First Instance of Manila ruled in favor of PTEC
and against WICI which ordered the latter to pay the sum of
P11,042.04 with interest at the rate of 12% interest from
receipt of notice of loss on 15 April 1963 up to the complete
payment, the sum of P3,000.00 as attorney's fees and the
costs. The Court of Appeals, however, reversed the decision
of the trial court and thus dismissed PTEC's complaint with
costs. PTEC filed the petition for review.
ISSUE:
Whether the Cover Note is without consideration, is null and
void, and thus recovery cannot be made thereon.
RULING:
NO. The Cover Note was not without consideration. The fact
that no separate premium was paid on the Cover Note
before the loss insured against occurred, does not militate
against the validity of PTEC's contention, for no such
premium could have been paid, since by the nature of the
Cover Note, it did not contain, as all Cover Notes do not
contain particulars of the shipment that would serve as basis
for the computation of the premiums. As a logical
consequence, no separate premiums are intended or
required to be paid on a Cover Note. This is a fact admitted
by an official of WICI, Juan Jose Camacho, in charge of
issuing cover notes of WICI. At any rate, it is not disputed
that PTEC paid in full all the premiums as called for by the
statement issued by WICI after the issuance of the two
regular marine insurance policies, thereby leaving no
account unpaid by PTEC due on the insurance coverage,
which must be deemed to include the Cover Note.
If the Note is to be treated as a separate policy instead of
integrating it to the regular policies subsequently issued, the
purpose and function of the Cover Note would be set at
naught or rendered meaningless, for it is in a real sense a
contract, not a mere application for insurance which is a
mere offer. It may be true that the marine insurance policies
issued were for logs no longer including those which had
been lost during loading operations. This had to be so
because the risk insured against is not for loss during loading
operations anymore, but for loss during transit, the logs
having already been safely placed aboard. This would make
no difference, however, insofar as the liability on the cover
note is concerned, for the number or volume of logs lost can
be determined independently, as in fact it had been so
ascertained at the instance of WICI itself when it sent its own
adjuster to investigate and assess the loss, after the
issuance of the marine insurance policies. The adjuster went
as far as submitting his report to WICI, as well as its
computation of WICI's liability on the insurance coverage.
This coverage could not have been no other than what was
stipulated in the Cover Note, for no loss or damage had to be
assessed on the coverage arising from the marine insurance
policies.
For obvious reasons, it was not necessary to ask PTEC to
pay premium on the Cover Note, for the loss insured against
having already occurred, the more practical procedure is
simply to deduct the premium from the amount due PTEC on
the Cover Note. The non-payment of premium on the Cover
Note is, therefore, no cause for PTEC to lose what is due it
as if there had been
Discussion:
-some of the logs here was destroyed because of bad
weather.
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Q: Does one actually pay for coverage under a cover note?
A: No, mam.
Mam: Diba ang sinabi dito sa case, if the cover note would
be treated separately from the 2 marine insurance policies,
this would render (null? not?) the purpose of the cover note.
What is the purpose of a cover note? in life insurance we
said, as a sign of good will, when a person applies for a
policy, the person is given temporary coverage for a period
of 60 days.
So, if something happens during that period, there shall be
recovery. Good will yun ehh.
Pero kung sasabihin ngayon ng insurance company na
nakabit yan dun sa marine insurance, bakit ka pa nag cover
note? Nasaan ang good will?
A cover note is not supposed to be separate from the 2
marine insurance policies. When something happens during
the period of the cover note. There should be recovery. This
is what the Supreme Court emphasized in this case.
KINDS OF NON-LIFE INSURANCE POLICIES
Section 59. A policy is either open, valued or running.
Section 60. An open policy is one in which the value of the
thing insured is not agreed upon, and the amount of the
insurance merely represents the insurer’s maximum liability.
The value of such thing insured shall be ascertained at the
time of the loss.
Section 61. A valued policy is one which expresses on its
face an agreement that the thing insured shall be valued at a
specific sum.
Section 62. A running policy is one which contemplates
successive insurances, and which provides that the object of
the policy may be from time to time defined, especially as to
the subjects of insurance, by additional statements or
indorsements.
Open – Value of thing is not agreed upon but is to be
ascertained at time of loss.
Valued – expresses on its face an agreement that the thing
shall be valued at a specific sum.
Running – successive insurances.
Two Kinds of Values
• Face value – maximum amount which may be recovered
under the policy
• Valuation- value of the subject matter agreed on by the
parties
Who sets the value? Both parties. If they cannot agree, they
go to a third person for purposes of putting a value.
Open v. Valued
• Open - has a face value but has NO valuation of the thing.
Valuation is done after the loss.
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• Valued - has both face value and valuation of the thing (at
the start/at the time the policy is issued) (LIFTED FROM
ATTY. SAGMIT’S PPT)
Mam: a valued policy has two values because the face value
is the maximum but the valuation is supposed to be followed
unless there is fraud or misrepresentation.
Q: Example of a running policy?
A: Insurance on a merchandise store.
HARDING v. COMMERCIAL
FACTS:
It is alleged by plaintiffs and admitted by defendant that
plaintiffs are husband and wife and residents of the city of
Manila; that the defendant is a foreign corporation organized
and existing under and by virtue of the laws of Great Britain
and duly registered in the Philippine Islands, and Smith, Bell
& Co. (limited), a corporation organized and existing under
the laws of the Philippine Islands, with its principal domicile
in the city of Manila, is the agent in the Philippine Islands of
said defendant.
The plaintiffs alleged that the plaintiff Mrs. Henry E. Harding
was the owner of a Studebaker automobile, that on said
date; in consideration of the payment to the defendant of the
premium of P150, by said plaintiff, Mrs. Henry E. Harding,
with the consent of her husband, the defendant by its duly
authorized agent, Smith, Bell & Company (limited), made its
policy of insurance in writing upon said automobile was set
forth in said policy to be P3,000 that the value of said
automobile was set forth in said policy (Exhibit A) to be
P3,000; that on March 24, 1916, said automobile was totally
destroyed by fire; that the loss thereby to plaintiffs was the
sum of P3,000; that thereafter, within the period mentioned in
the said policy of insurance, the plaintiff, Mrs. Henry E.
Harding, furnished the defendant the proofs of her said loss
and interest, and otherwise performed all the conditions of
said policy on her part, and that the defendant has not paid
said loss nor any part thereof, although due demand was
made upon defendant therefor.
RULING:
The defendant, upon the information given by the plaintiff,
and after an inspection of the automobile by its examiner,
having agreed that it was worth P3,000, is bound by the
valuation in the absence of fraud on the part of the insured.
Plaintiff was the owner of the automobile in question. He has
an insurable interest therein. There was no fraud on her part
in procuring the insurance. Hence, the valuation of the
automobile , for the purpose of insurance, is binding upon
the defendant corporation.
DEVELOPMENT v. IAC
Development case, it’s kinda weird the insurance company
was saying the building was insured but not the elevators.
The Supreme Court ruled that it’s absurd and ridiculous.
With regard to the amount, ang sinasabi ng Insurance
Company, sumobra yung claim nyo sa valuation ng building.
The Insurance Company said that we can only cover you up
to a certain amount.
The Supreme Court said that there is no showing to that
effect. It is an open policy. So, the valuation shall be made at
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
the time of the loss. And at the time of the loss, the building
was insured for 2.5 Million and there was no evidence of 5.8
so there should be payment of an amount totaling to (……)
OPEN: only the face value is there. The valuation is
determined at the time of the loss. But it should not exceed
the face value.
VALUED: there’s face value and valuation. Valuation is valid
until proven to be secured through fraud or
misrepresentation.
RUNNING: No definite value. On certain dates, there has to
be an appraisal of the value of the thing. No face value and
valuation.
March 9 (Part 1)- Sioson
Premium
When is an insurer entitled to the payment of premium?
 An insurer is entitled to payment of the premium as
soon as the thing insured is exposed to the peril
insured against. This is called the cash and carry
rule. So, you pay cash and then you carry the
policy, para mas madali nyo matandaan.
Section 77. An insurer is entitled to payment of the premium
as soon as the thing insured is exposed to the peril insured
against. Notwithstanding any agreement to the contrary, no
policy or contract of insurance issued by an insurance
company is valid and binding unless and until the premium
thereof has been paid, except in the case of a life or an
industrial life policy whenever the grace period provision
applies, or whenever under the broker and agency
agreements with duly licensed intermediaries, a ninety (90)-
day credit extension is given. No credit extension to a duly
licensed intermediary should exceed ninety (90) days from
date of issuance of the policy.
Let me emphasize, unlike in life insurance where a person
can say “okay, I will file my application but I do not want to
pay the premium”, then I am not covered. In property
insurance, except for marine, where travel does not happen,
one cannot say that the property is not exposed to the peril,
so the owner will choose not the pay the premium. Because
the moment the property is exposed to the peril there must
be payment of the premium over the premium of the
insurance policy. Unlike in life, where no specific
performance case can be filed or collection case. In
property, it is the option of the insurance company, it’s either
okay hindi ka covered, of if something happens, there can be
no payment or the insurer can also pursue the payment of
the premiums- for collection.
This Section 77 has been amended and then revised again,
etc.. Based on what you have read, is there an exception to
the cash and carry rule?
Exceptions to the Cash and Carry Rule/ Exceptions to
Section 77
1. In the case of a life or an industrial policy whenever
the grace period provision applies (Sec. 77);
2. Whenever under the broker and agency
agreements with duly licensed intermediaries, a 90-
day extension is given;
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3. When there is an acknowledgment in a policy or
contract of insurance of receipt of premium even if
there is a stipulation therein that it shall not be
binding until the premium is actually paid (Sec. 78.);
4. When there is an agreement allowing the insured to
pay the premium in installments and partial
payment has been made at the time of loss;
5. When there is an agreement to grant the insured
credit extension for the payment of the premium,
and loss occurs before the expiration of the credit
term; and
6. When estoppel bars the insurer from invoking
Section 77 to avoid recovery on a policy providing a
credit term for the payment of the premiums, as
against the insured who relied in good faith on such
extension.
Actually, if you take a look at Section 77, it has evolved to
include that 90-day credit extension. So, it is very specific,
para hindi na confusing. Kasi nirevise tapos tinanggal ang
exceptions, but the decided cases say there are still
exceptions.
When is the insured entitled to the return of the
premium?
1. Return of the whole premium: When no part of the
thing insured has been exposed to any of the perils
insured against (Sec. 80a);
Example: When the loss occurs before the effective
date of the insurance.
2. When the insurance is for a definite period and the
insured surrenders his policy before the termination
thereof (Sec. 80b);
Do not include this muna, malilito kayo. Sa payment
of proceeds yan, so under 82 there are five.
3. When the contract is voidable and subsequently
annulled because of the fraud or misinterpretations
of the insurer or his agent (Sec. 82);
4. When the contract is voidable because of the
existence of facts of which the insured was ignorant
without his fault;
5. When the insurer never incurred any liability under
the policy because of the default of the insured
other than actual fraud;
6. When there is over-insurance; and
7. When rescission is granted due to the insurer’s
breach of contract.
(This was not cited during the recitation.)
Okay, you have to be familiar at this point doon sa instances
enumerated under 82. Ayun lang muna, hindi tayo masyado
magdu-dwell sa other grounds.
Section 82. A person insured is entitled to a return of the
premium when the contract is voidable, and subsequently
annulled under the provisions of the Civil Code; or on
account of the fraud or misrepresentation of the insurer, or of
his agent, or on account of facts, or the existence of which
the insured was ignorant of without his fault; or when by any
default of the insured other than actual fraud, the insurer
never incurred any liability under the policy.
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
A person insured is not entitled to a return of premium if the
policy is annulled, rescinded or if a claim is denied by reason
of fraud.
What are voidable contracts?
Under the Civil Code, A contract is voidable:
 When one of the parties has no capacity to give
consent.
 When consent is invalidated by mistake, violence,
intimidation, undue influence, or fraud.
Once a voidable contract is ratified, hindi na sya mavo-void.
So, be familiar with the voidable contracts. You have to read
that vis-à-vis your provisions of Insurance Code. Also, we
have to be familiarized with the prescriptive periods for
annulling: four years from the discovery or four years from
the time of intimidation, etc..
Philippine Phoenix Surety & Insurance Company v.
Woodworks
Facts: Woodworks was issued a Fire Insurance Policy
covering its building, machinery, and equipment for one year,
from July 21, 1960-July 21, 1961. However, it failed to pay
the premium stipulated in the Policy when it was issued or
anytime thereafter.
On April 19, 1961, Phoenix notified Woodworks of the
cancellation of the policy though an Indorsement containing
the amount demanded for the payment of the unexpired
period of 94 days, and claimed the balance representing
earned premium from July 21, 1960-Aptil 18, 1961.
On the other hand, Woodworks denied liability contending
that it need not pay the premium because the Insurer did not
stand liable for any indemnity during the period the premiums
were not paid.
Issue: WON the policy has lapsed, hence no recovery of
unpaid premiums can be made
Ruling: Yes.
Insurance is a contract, whereby one undertakes for a
consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event. The
consideration is the premium. The premium must be paid at
the time and in the way and manner specified in the policy,
and if not so paid, the policy will lapse and be forfeited by its
own terms.
Clearly, the Policy provides for pre-payment of premium.
Accordingly, “when the policy is tendered the insured must
pay the premium unless credit is given or there is a waiver,
or some agreement obviating the necessity for pre-payment.”
To constitute an extension of credit, there must be a clear
and express agreement therefor.”
From the Policy provisions, we fail to find any agreement that
a credit extension was accorded defendant. And if it were to
be presumed that plaintiff had extended credit from the
circumstances of the unconditional delivery of the Policy
without prepayment of the premium, yet it is obvious that
defendant had not accepted the insurer’s offer to extend
credit, which is essential for the validity of such agreement.
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Since the premium had not been paid, the policy must be
deemed to have lapsed.
“The non-payment of premiums does not merely suspends
but puts an end to an insurance contract, since the time of
the payment is peculiarly of the essence of the contract.”
In fact, if the peril insured against had occurred, plaintiff, as
insurer would have had a valid defense against recovery
under the Policy it had issued.
Arce v. Capital
Facts: The insurance company issued a renewal certificate
for a fire insurance. Anticipating that the premium will not be
paid one time, Arce promised to pay on January 4, which
was accepted by Capital Insurance. Here comes January 4,
and there was no payment of the premium. On January 6,
the residential house was destroyed by fire. Pedro Arce now,
through his wife, is now claiming for the proceeds of the
insurance.
Issue: WON there was a valid insurance contract between
Arce and Capital Insurance
Ruling: The SC here cited Section 72 of the then Insurance
Act which states that, “No policy issued by an insurance
company is valid and binding unless and until the premium
thereof is paid.”
Considering the Pedro Arce failed to pay the premium, and
there was actually no payment, there is no valid insurance
contract.
There was even an allegation that, “my daughter was not
authorized to sign the waiver”. However, it doesn’t even
matter because in the first place there was nothing to waive.
There can be no effective policy until and unless there was
payment of the premium.
Capital v. Plastic Era
Facts: When Capital Insurance delivered to Plastic Era its
open fire policy whereby the former undertook to insure the
latter’s property, the latter did not pay the premium, but
instead executed an acknowledgement receipt with a
promise to pay the premium within 30 days from December
17, 1960, the effectivity date of the policy. Capital Insurance
duly accepted the receipt. On January 8, 1961, Plastic Era in
partial payment of the premium delivered a check of P1,000,
postdated January 16, 1961. Petitioner tried to deposit the
check only on February 20, 1961, and the same was
dishonored for lack of sufficient funds. But the records show
that as of January 19, 1961, Plastic Era had sufficient funds
with the bank to cover the check.
On January 18, 1961, or two days after the insurance
premium became due, the insured properties were destroyed
by fire. In due time, Plastic Era notified Capital Insurance of
the loss and demanded payment of indemnity for loss.
Capital insured refused on the ground of non-payment of
premium.
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Issue: WON there was a valid policy hence the insurer has
no right to cancel the same for non-payment of the premium
Ruling: Yes
Based on FT:
Significantly, in the case before Us the Capital Insurance
accepted the promise of Plastic Era to pay the insurance
premium within thirty (30) days from the effective date of
policy. By so doing, it has implicitly agreed to modify the
tenor of the insurance policy and in effect, waived the
provision therein that it would only pay for the loss or
damage in case the same occurs after the payment of the
premium. Considering that the insurance policy is silent as to
the mode of payment, Capital Insurance is deemed to have
accepted the promissory note in payment of the premium.
This rendered the policy immediately operative on the date it
was delivered. The view taken in most cases in the United
States:
... is that although one of conditions of an insurance policy is
that "it shall not be valid or binding until the first premium is
paid", if it is silent as to the mode of payment, promissory
notes received by the company must be deemed to have
been accepted in payment of the premium. In other words, a
requirement for the payment of the first or initial premium in
advance or actual cash may be waived by acceptance of a
promissory note ...
Precisely, this was what actually happened when the Capital
Insurance accepted the acknowledgment receipt of the
Plastic Era promising to pay the insurance premium within
thirty (30) days from December 17, 1960. Hence, when the
damage or loss of the insured property occurred, the
insurance policy was in full force and effect. The fact that the
check issued by Plastic Era in partial payment of the
promissory note was later on dishonored did not in any way
operate as a forfeiture of its rights under the policy, there
being no express stipulation therein to that effect.
In the absence of express agreement or stipulation to that
effect in the policy, the non-payment at maturity of a note
given for and accepted as premium on a policy does not
operate to forfeit the rights of the insured even though the
note is given for an initial premium, nor does the fact that the
collection of the note had been enjoined by the insured in
any way affect the policy.
... If the check is accepted as payment of the premium even
though it turns out to be worthless, there is payment which
will prevent forfeiture.
By accepting its promise to pay the insurance premium
within thirty (30) days from the effectivity date of the policy —
December 17, 1960 Capital Insurance had in effect extended
credit to Plastic Era. The payment of the premium on the
insurance policy therefore became an independent obligation
the non-fulfillment of which would entitle Capital Insurance to
recover. It could just deduct the premium due and unpaid
upon the satisfaction of the loss under the policy. It did not
have the right to cancel the policy for nonpayment of the
premium except by putting Plastic Era in default and giving it
personal notice to that effect. This Capital Insurance failed to
do.
Abrasaldo|Altiso|Deiparine|Fernandez|Malicay|Milana|Sioson|Sosoban|Suaybaguio
On the contrary Capital Insurance had accepted a check for
P1,000.00 from Plastic Era in partial payment of the premium
on the insurance policy. Although the check was due for
payment on January 16, 1961 and Plastic Era had sufficient
funds to cover it as of January 19, 1961, Capital Insurance
decided to hold the same for thirty-five (35) days before
presenting it for payment. Having held the check for such an
unreasonable period of time, Capital Insurance was
estopped from claiming a forfeiture of its policy for non-
payment even if the check had been dishonored later.
Recitation and Discussion:
Issue: WON there was a valid policy hence the insurer has
no right to cancel the same for non-payment of the premium
Ruling: Yes, although the giving of a promissory note or
acknowledgment receipt does not give effect to payment, in
this case there was an implicit agreement to modify the letter
of the insurance policy.
If you look at the bulk of questions in the bar exam, medyo
marami sya pwede itanong dito. Marami talaga, may mga
nuisances lang.
The mode of payment of premium in this case was through
giving a check for the partial payment.
You were given dates, again. I told you before, that it is so
hard to think of dates which are not connected to your
birthday, or to the birthdays of your family members. Again, if
you are given dates, it means that they are very important.
The fire insurance policy was issued here on December 17,
1960. The coverage of the policy was the building, the
equipment, the raw materials, and accessories. The risk was
in case of fire. The period is after the payment of the
premium anytime between December 15, 1960- December
15, 1961, the insurance company shall make good of such
loss and damage. In this case, there was no immediate
payment of premiums but Plastic Era here gave an
acknowledgement receipt where it was accepted by Capital
Insurance. The partial payment was made on January 8,
1961 (post-dated check), dated January 16, 1961. However,
it was not immediately deposited or encashed. It was only
encashed only on February 20, 1961, but was dishonored for
lack of sufficient funds. The fire occurred on January 18,
1961.
Around the time that it was dishonored, wala na talagang
pondo. So the question is: Was there payment of premiums?
Syempre ang sasabihin ng Plastic Era, nagbayad ako hindi
mol ang inencash, kasalanan ko bang wala nang pondo yun
e late kana? Sabi naman nung isa, “eh dapat nandun palagi
yung perang yun.”
The SC here ruled that, there was payment. It stated that
“although one of the conditions of an insurance policy is that
it shall not be valid or binding until the first premium is paid, if
it is silent as to the mode of payment, promissory notes
received by the company must be deemed to have been
accepted in payment of the premium.” So, here the
requirement for the payment of the first premium in advance
or in actual cash may be waived by acceptance of a
promissory note.
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Okay, so generally cash and carry rule. But there was
acknowledgement and acceptance of the promissory note.
Hence, in effect it allowed the policyholder to pay later.
Question: Would the SC decided on the same way if Capital
Insurance deposited the check on January 16, and there
was no funds? Ganito kasi yan, ang petsa ng check January
16, dineposit nya after more than one month. Pagkadeposit
nya, wala nang laman. So, sabi ng SC there was a promise
and you also accepted it. Now, you are already estopped
because you deposited very belatedly. Di ba based on the
principle that when the check was held for an unreasonable
time before presenting it for payment, the insurer may be
held estopped from claiming for a forfeiture if the check is
dishonored.
I’ll give you another situation. What if on the day of the check
itself it was deposited, however it was not made good again,
tumalbog. Ahhh, wala nang estoppel dyan. Talagang walang
intention na pondohan. In which case, there was no payment
of premium.
Unreasonable time, five days after? Unreasonable na ba
yun? For me, hindi pa eh. Pero yung sa situation na one
month and one day after, unreasonable na yun. There was a
promise to pay, the promise was accepted, tinanggap yung
postdated check, tapos pinostdated mo pa ng bongga, edi
lalo na. Eto yung sinasabing kung pwede mo nang gawin
today, wag mon ang ipagpabukas. May isa pa tayong case
na ganun yung Gaisano. Ang sabi, “huy pickupin mo na
yung check.” Ay bukas nalang kasi may birthday.
Velasco v. Apostol
Recitation and Discussion:
Facts: The peril happened was a collision between a taxi
and a car which also hitted a jeepney. The accident
happened on November 27, 1973, while the initial payment
of premium was paid only on December 11, 1973. So, after
the accident na. The insurance company here accepted the
payment.
Issue: WON the credit extension agreement would excuse
non-payment of premium and to make the insurance policy
valid
Is there a valid insurance contract? Inaccept naman ang
payment.
Ruling: No. The SC said that the payment was accepted by
the insurer without any knowledge that the risk insured
against had already occurred since such fact was concealed
by the insured and was not revealed to the insurer. Thus, the
delivery of the policy was far from being unconditional.
Based on FT: The accident for which respondent insurance
company is sought to be held liable occurred on November
27, 1973 while the initial premium was paid only on
December 11, 1973.
Was there an implied credit extension scheme between the
parties? (None)
Abrasaldo|Altiso|Deiparine|Fernandez|Malicay|Milana|Sioson|Sosoban|Suaybaguio
Based on FT: Had there really been a credit extension the
insured would not have had any apprehension or hesitation
to inform the respondent insurance company at the time of or
before the payment of the premium that an accident for
which the insurer may be held liable had already happened.
In fact, there is authority to hold that under such
circumstances notice alone is necessary and the insured
need not pay the premium because whatever premium may
have been due may already be deducted upon the
satisfaction of the loss under the policy.
Aside from the supposed unconditional delivery of the policy,
which has been demonstrated to be baseless, petitioners
failed to point out “any other circumstances showing that
prepayment of the premium was not intended to be insisted
upon.” They have thus failed to discharge the burden of
proving their allegation of the existence of the purported
credit extension agreement. Indubitably, their insurance
claim must fail.
Okay, if there was really a credit extension scheme agreed
upon by the parties, the delivery of the policy would have
been converted from unconditional to conditional (upon the
payment of the premium). In this case, there was a clear
intention to deceive. Simple lang, nangyari na pala tapos
hindi sinabi. Clear, there was no compliance with the cash
and carry, also there were no exceptions. Hence, there was
no valid policy.
Valenzuela v. CA (labor case)
Paano nasingitan ng Section 77 ang isang labor case?
Facts: Valenzuela is a General Agent of Philamgen who was
able to solicit marine insurance from one of his clients, Delta
Motors in the amount of P4.4M from which he was entitled to
a commission of 32%. Because of the refusal of Valenzuela
in sharing his commission to Philamgen and its officers, the
insurance company later on terminated his services.
Now, the insurance company wanted him to be liable for the
non-payment of premium by Delta Motors. Philamgen
contended that the Valenzuela is jointly and severally liable
with the insured for the unpaid premiums. (That is where
Section 77 enters.)
Issue: WON the agent is liable to Philamgen for the unpaid
and uncollected premiums due to the insured
Ruling: No. Valenzuela is not liable. Section 77 of the
Insurance Code provides that the remedy for the non-
payment of premiums is to put an end to and render the
insurance policy not binding, it provides:
Section 77. Notwithstanding any agreement to the contrary,
no policy or contract of insurance is valid and binding unless
and until the premiums thereof have been paid except in the
case of a life or industrial life policy whenever the grace
period provision applies (P.D. 612, as amended)
Based on FT: (Citing the case of Phoenix v. Woodworks)
The non-payment of premium does not merely suspend but
puts an end to an insurance contract since the time of the
payment is peculiarly of the essence of the contract.
Perforce, since admittedly the premiums have not been paid,
the policies issued have lapsed. The insurancw coverage did
not go into effect or did not continue and the obligation of
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
Philamgen as insurer ceased. Hence, for Philamgen which
had no more liability under the lapsed and inexistent policies
to demand, much less sue Valenzuela for the unpaid
premiums would be the height of injustice and unfair dealing.
In this instance, with the lapsing of the policies through the
non-payment of premiums by the insured there were no
more insurance contracts to speak of.
Recit: Since this is a non-life policy, non-payment of
premiums would have the effect that the policy would not be
valid. Therefore, it also means that they cannot deny the
validity of the insurance and at the same time invoke its
validity when they are trying to collect from the agent.
Okay, so sabihin nila “uhm, okay hindi nagbayad ng
premium yung client, so singilin natin.” Tapos nung di pa rin
nagbayad, “uhm valid to, tara singilin natin yung agent na
hindi nakakolekta.” The SC said that the non-payment of
premium gives rise to an ineffective policy, citing Section 77.
So, the policies have lapsed, the insurance coverage did not
go in effect, and Philamgen had no more liability under the
lapsed insurance policies, and Valenzuela is no longer liable
under the unpaid premiums.
Philippine Pryce Assurance Corporation v. CA
Facts: Respondent Gegroco Inc. filed a complaint for
collection of sum of money against petitioner, alleging that
petitioner issued two surety bonds in behalf of its principal
Sagum General Merchandise.
The mode of payment here was by check. The check
bounced, unlike in other cases where the checks were
deposited after a long time, in this case it was deposited
immediately. The only difference is here, it is a surety.
Because there is a counter-part cash and carry rule, the
surety. It is the same principle. When you say surety, you
are covering someone for the performance of an obligation.
As soon as that obligation is there, there must be payment of
premium, so same principle.
Issue: WON the petitioner is liable under the surety bonds
issued
Ruling: Yes. The SC said they cannot escape liability
because according to the exception provided under Section
177:
“The surety is entitled to payment of the premium as soon as
the contract of suretyship or bond is perfected and delivered
to the obligor. No contract of suretyship or bonding shall be
valid and binding unless and until the premium therefor has
been paid, except where the obligee has accepted the bond,
in which case the bond becomes valid and enforceable
irrespective of whether or not the premium has been paid by
the obligor to the surety.”
Naglabrel na ba kayo? I’ll give you an example para mas
madali. So ang sinasabi dito ng petitioner, wala raw syang
authority to issue the bond. Basically, he is saying na he is
not authorized to issue a surety bond, when it did is an
admission of fraud committed against respondent. Parang
ganito, nagdecide si Labor Arbiter na puntahan yung
company, and natalo yung company sa kaso say, illegal
dismissal. Hindi masaya si company, what is the next
recourse?
Abrasaldo|Altiso|Deiparine|Fernandez|Malicay|Milana|Sioson|Sosoban|Suaybaguio
The company will go to NLRC. Kung nasa Mindanao kayo,
nasa CDO. But since a decision has most probably
monetary award, then the company must post an appeal
bond aside from an appeal fee. Appeal bond covers the
monetary award. So, tatanggalin ang attys fees, damages,
that is the monetary award. The company lalo na kung
malaking amount will not cash out but will go to a surety
company. The surety company must be licensed and
accredited. Now, if the award is let say P10M, the surety
bond must be P10M. If the company goes to a surety
company which is not licensed, or is not accredited like in
this case, (ahh wala akong authority eh to issue a surety
bond), problema yan. BUT if the NLRC accepted it, then
there is now the obligation to pay premium. Hindi na
pwedeng sabihin ni surety company na wala akong authority
to issue the bond, hindi na pwedeng sabihin ni company nae
di I will not pay you. Kasi kung tinggap ni obligee? In other
words, you have the counter part of Section 77, which we
will see later in a surety or a surety agreement or surety
bond.
So, this is the principle na you cannot use your own
deficiency to escape liability, same with one cannot use the
incapacity of another party to escape liability. So, dito hindi
pinatakas ng ang petitioner from liability. Since, the
respondent accepted the surety bond, that is one of the
exceptions, nandun yon. Nasa cash and carry pa rin sya.
Reparations v. Universal
Issue: WON Universal is liable for the payment of premiums
on the performance bond
Ruling: Yes, the Court emphasized the principle here that
the premium is the consideration for furnishing a
performance bond and the obligation to pay the same
subsists for as long as the liability of the surety exists.
From the FT: The claim of the surety company to the effect
that the trial court erred in not awarding it the amount of
P7,251.42, as premiums on the performance bonds, is well
taken. The payment of premiums on the bonds to the surety
company had been expressly undertaken by Universal in the
indemnity agreements executed by it in favor of the surety
company. The premium is the consideration for furnishing
the binds and the obligation to pay the same subsists for as
long as the liability of the surety shall exist. Hence, Universal
shall pay the amount of P7,251.42 to the surety company.
Again, based on surety, cash and carry pa din. As long as
there is performance bond that is issued, then the premium
must be paid.
Makati Tuscany Condominium Corp v. CA
Facts: AHAC, represented by American International
Underwriters (Phils.) issued in favor of Makati Tuscany
insurance policy for the latter’s building and premises for a
period beginning March 1, 1982 up to March 1, 1983. The
premium was paid on installments, all of which were
accepted by private respondent.
The policy was subsequently replaced and renewed for a
term covering March 1, 1983 to March 1, 1984. Again, the
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
payment of premiums were made in installments, and
accepted by private respondent.
For the last time, it was renewed until March 1 , 1985. On
this renewed policy, petitioner made two installment
payments which were both accepted by private respondent.
Thereafter, petitioner refused to pay the balance of the
premium, and claimed that the policy was never binding and
valid, and no risk was attached to the policy. It then asked for
the refund of the premiums paid for 1982-1985.
Issue: WON the payment in installments of the premiums
due under the insurance policy invalidates the contract of
insurance by virtue of Section 77 of the Insurance Code
Ruling: No
From the FT: We hold that the subject policies are valid even
if the premiums were paid on installments. The records
clearly show that petitioner and private respondent intended
subject insurance policies to be binding and effective
notwithstanding the staggered payment of the premiums.
The initial insurance contract was entered into in 1982 was
renewed in 1983, then in 1984. In those three years, the
insurer accepted all the installment payments. Such
acceptance of payments speaks loudly of the insurer’s
intention to honor the policies it issued to petitioner.
Certainly, basic principles of equity and fairness would not
allow the insurer to continue collecting and accepting the
premiums, although paid on installments, and later deny
liability on the lame excuse that the premiums were not
prepaid in full.
Recit: There were three insurance contracts in this case. In
that three instances, the payments were made in
installments. Eh, nakakaraos naman. However, nagaway sila
because on the third insurance contract, Makati Tuscany
refused to pay the balance of the premiums (he already paid
the two, so isa nalang ang kulang ayaw nya pa ipalusot.
Take note, walang nangyari dito.
Q: Walang nangyari, but what gave rise to the case?
Makati contends that there was no valid insurance policy
because it violates Section 77 of the Insurance Code.
Q: What did the SC said? Nakalusot ba sya?
No. The SC said, it was valid even though the payment was
made in installments. The intention of the petitioner and
respondent in this case is clear, that they intended the policy
to be valid and binding between them.
Q: If we are to compare this with the case of Phoenix,
are they the same?
No. The SC said in this case that here, there was payment of
premiums. However, in the case of Phoenix there was none,
despite the grace period given.
In the case of Phoenix, there was acceptance of the initial
payment of P3,000 and then collecting the remaining later.
But there was always an parang an agreement na “okay
binding to ha.” Ganun ang usapan nila. In this case, there
was no bond of law to be established until full payment was
made. In Phoenix, the company sued for balance. In this
case, there was also a case for balance kasi dapat may full
payment of the proceeds. So basically, ang sinasabi dito si
Abrasaldo|Altiso|Deiparine|Fernandez|Malicay|Milana|Sioson|Sosoban|Suaybaguio
insurance company choice nya kung ipapalapse nya or kung
sisingilin nya ang balance. Syempre, practical, kung ikaw
ang insurance company tapos nangyari ang event, edi akin
na ang balance mo. Eto, it’s a matter of fulfilling the
obligation to pay the money. There was no happening of the
contingency pa, gets? Again, in property insurance there can
be a case for collection, unlike in life.
Malayan v. Arnaldo
Facts: On June 7, 1981, MICO (petitioner) issued a Fire
Insurance Policy in favor of private respondent Pinca
effective on July 22, 1981 until July 22, 1982.
On October 15, 1981, MICO allegedly cancelled the policy
for non-payment of the premium and sent the notice to
Pinca.
On December 24, 1981, payment of the premium for Pinca
was received by Adora, agent of MICO.
On January 15, 1982, Adora remitted this payment to MICO,
together with the other payments.
On January 18, 1982, Pinca’s property was completely
burned.
On February 5, 1982, Pinca’s payment was returned by
MICO to Adora on the ground that her policy had been
cancelled earlier. But Adora refused to accept it.
Issue: WON the belated payment of proceeds (after the
alleged insurer’s cancellation) produced a valid insurance
policy
Ruling: Yes
Based on FT:
The petitioner relies heavily on Section 77 of the Insurance
Code.
The above provision is not applicable because payment of
the premium was in fact eventually made in this case.
Notably, the premium invoice issued to Pinca at the time of
the delivery of the policy on June 7, 1981 was stamped
“Payment Received” by Domingo Adora. This is important
because it suggests an understanding between MICO and
the insured that such payment could be made later, as agent
Adora had assured Pinca. In any event, it is not denied that
this payment was actually made by Pinca to Adora, who
remitted the same to MICO.
As to MICO’s allegation of cancellation: We do not share
MICO's view that there was no existing insurance at the time
of the loss sustained by Pinca because her policy never
became effective for non-payment of premium. Payment was
in fact made, rendering the policy operative as of June 22,
1981, and removing it from the provisions of Article 77,
Thereafter, the policy could be cancelled on any of the
supervening grounds enumerated in Article 64 (except
"nonpayment of premium") provided the cancellation was
made in accordance therewith and with Article 65.
SEC. 65. All notices of cancellation mentioned in the
preceding section shall be in writing, mailed or delivered to
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa

the named insured at the address shown in the policy, and

shall state (a) which of the grounds set forth in section sixty- The period for the fire policy is July 22, 1981-July 22, 1982.
four is relied upon and (b) that, upon written request of the The policy was delivered on June 7, 1981. The cancellation
named insured, the insurer will furnish the facts on which the for non-payment was cancelled on October 15, 1981 as
cancellation is based. alleged by Malayan. The payment of the premium was made
on December 24, 1981. The property was burned on January
A valid cancellation must, therefore, require concurrence of 18, 1982.
the following conditions:
Q: Was the payment made on January 15, 1982 accepted
(1) There must be prior notice of cancellation to the insured;  by the insurer?

(2) The notice must be based on the occurrence, after the Yes, it was accepted.
effective date of the policy, of one or more of the grounds
mentioned;
Q: After the happening of the contingency or the event,
(3) The notice must be (a) in writing, (b) mailed, or delivered what did the insurance company do?
to the named insured, (c) at the address shown in the policy; 
The insurance company returned the payments made by
(4) It must state (a) which of the grounds mentioned in Pinca.
Section 64 is relied upon and (b) that upon written request of
the insured, the insurer will furnish the facts on which the O di ba, nung nagbayad tinanggap, tapos nung nangyari ang
cancellation is based. event, sinoli ang pera.

MICO's claims it cancelled the policy in question on October

15, 1981, for non-payment of premium. To support this Q: Should there be payment of the proceeds?
assertion, it presented one of its employees, who testified
that "the original of the endorsement and credit memo" — Yes, because MICO accepted the payment, and the insured
presumably meaning the alleged cancellation — "were sent here was thinking that the policy was effective on July 22,
the assured by mail through our mailing section"  However, 1981 until 1982. However, MICO contends that since the
there is no proof that the notice, assuming it complied with payment was made belatedly, it was already cancelled.
the other requisites mentioned above, was actually mailed to
and received by Pinca. All MICO's offers to show that the The SC here emphasized, that the payment was received
cancellation was communicated to the insured is its even after the said cancellation.
employee's testimony that the said cancellation was sent "by
mail through our mailing section." without more. The So, here, there was a very weak evidence of cancellation. In
petitioner then says that its "stand is enervated by the legal fact, it was merely an allegation on the part of the insurance
presumption of regularity and due performance of duty." (not company. At that time, it was still within the one year period
realizing perhaps that "enervated" means "debilitated" not whether we count it from the day of the issuance of the
"strengthened"). policy or from the payment (which was done on December,
tapos January) and then nasunog, January.
On the other hand, there is the flat denial of Pinca, who says
she never received the claimed cancellation and who, of So, ang sabi dito, there was acceptance of payment and
course, did not have to prove such denial Considering the there was an acknowledgement. If you take a look at the
strict language of Section 64 that no insurance policy shall Insurance Code, acknowledgment of payment is evidence of
be cancelled except upon prior notice, it behooved MICO's to payment of premiums.
make sure that the cancellation was actually sent to and
received by the insured. The presumption cited is unavailing
against the positive duty enjoined by Section 64 upon MICO
and the flat denial made by the private respondent that she March 9 (Part II)- Malicay
had received notice of the claimed cancellation.
Q: How many contracts of insurance did Masagana
It stands to reason that if Pinca had really received the said
have?
notice, she would not have made payment on the original
policy on December 24, 1981. Instead, she would have
A: Masagana had 5, under the same company.
asked for a new insurance, effective on that date and until
one year later, and so taken advantage of the extended
period. The Court finds that if she did pay on that date, it was
Q: What is the system between the 2 parties?
because she honestly believed that the policy issued on
June 7, 1981, was still in effect and she was willing to make
A: The system between the 2 parties is that everytime there
her payment retroact to July 22, 1981, its stipulated
is an insurance contract obtained by Masagana there is a 60-
commencement date. After all, agent Adora was very
90 pay credit arrangement between the two company even if
accomodating and had earlier told her "to call him up any
the effectivity term have already been finished there is still a
time" she was ready with her payment on the policy earlier
system of credit arrangement which would mean that there is
issued. She was obviously only reciprocating in kind when
a renewal of the said contract.
she paid her premium for the period beginning July 22, 1981,
and not December 24, 1981.
Discussion:  Renewal although premium is paid after 60 to 90
days so ganun lage, may isang taon in this case na iba ang
Recitation and Discussion: nangyari, weird to, what happened that year.

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III-Manresa
Q: What happened that year?
A: That year ma'am the effectivity term was May 1991- May
1992, however on June 30, 1992 the properties insured was
burnt.
Discussion: Ano 2 floors sakanya, 3 floors sa building, kaya
siya Telamart edi Tela, parang wall niya yun nung araw alam
niyo naman, mga deprive- so nasunog.
Q: Was it still within the contract?
A: Yes still within the contract.
Q: Was there already payment of premiums at the
time of the fire?
A: No, there was none, they paid after one month, July 30.
Discussion: Nakuha niyo yung scheme? Every year there is
a 60-90day credit period and then within that period, bayad,
na renew ng ilang beses, on that particular year
unfortunately the fire happened, and the payment of the
premium happened 1 month after the fire.
Issue: W/R there is a valid contract of fire insurance in lieu of
the renewal credit arrangement.  parin sa 60-90 credit arrangement.
Q: Should there be payment to Masagana?
A: Yes there should be payment. The SC ruled in this case
that...
General Rule: As contemplated under Section 77 of PD
612 the policy or contract of insurance, shall only be valid
and binding if there is payment of premiums.
However in this case the supreme court had laid down the 5
exceptions to Section 77. (from the FT)
1. As provided under Section 77 itself, and that is, in
case of a life or industrial life policy whenever the
grace period provision applies.
2. As covered by Section 78 of the Insurance Code,
which provides: SECTION 78. Any
acknowledgment in a policy or contract of
insurance of the receipt of premium is
conclusive evidence of its payment, so far as to
make the policy binding, notwithstanding any
stipulation therein that it shall not be binding
until premium is actually paid.
3. As laid down in Makati Tuscany vs. CA, wherein
we ruled that Section 77 may not apply if the parties
have agreed to the payment in installments of the
premium and partial payment has been made at the
time of loss.
4. Also laid down in Makati Tuscany vs. CA, that the
insurer may grant credit extension for the payment
of the premium. This simply means that if the
insurer has granted the insured a credit term for the
payment of the premium and loss occurs before the
expiration of the term, recovery on the policy should
be allowed even though the premium is paid after
the loss but within the credit term.
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5. Estoppel. It would be unjust and inequitable if
recovery on the policy would not be permitted
against Petitioner, which had consistently granted a
60- to 90-day credit term for the payment of
premiums despite its full awareness of Section 77.
Estoppel bars it from taking refuge under said
Section, since Respondent relied in good faith on
such practice.
The SC ruled the UCPB insurance is estopped because as
previously mentioned before there is already a credit
arrangement between the two and everytime the effectivity
term expires, the insurance is renewed annually.
Furthermore the SC stated that Masagana has complied with
the Insurance Contract in good Faith.
Discussion:  I just want to point out no, initially the SC doesn’t
want to grant this is a decision on MR ay un a ayaw niya
yung thought na nangyari na yung event dun palang mag
babayad ng premium, but then looking at the facts, imagine,
saakin ha from my experience, where he reverses itself,
actually pag nag MR ka dapat tinapon ay u sa bintana yan
eh. But in this case there was an analysis with the history of
the relationship between the insured and the insurer it was
clear that every year there was an credit extension
arrangement its just that on that specific year, the event
happened, so the question now, is the payment of the
premium is still within that 60-90days, it was! If ikaw naman
si Masagana, if hindi mo pa siniksik sa 60-90days,
katangahan ay un diba? Talang sinigurado niya na pasok
Gaisano v. Development Insurance
Issue: WON there is a binding insurance between the
parties.
Q: What was covered in this case?
A: There was a comprehensive commercial vehicle policy for
3 vehicles owned by Gaisano.
Discussion:  Okay, eto yung sinasabi ko sainyo, yung pwede
niyo na gawin ngayon, wag niyo nang ipag-pabukas. Let us
take a look at the dates, so there was a Commercial Vehicle
policy 1.5Million, kasi tatlong kotse ito. So there was a
statement of account...
Q: What was the date of the check?
A: The check issued by Gaisano to Transpacific which is the
agent of the defendant was dated on September 27, 1996.
Q: There was a notice to pickup the check here. Was it
picked up on the same date?
A: No, Transpacific informed the petitioner that it could not
pickup the check for the reason that the President of their
company was having a birthday. (oh yan, unahin ang
birthday)
Q: What happened to the Company Vehicle?
A: On the same day that the check was dated, the vehicle
was stolen from the company manager who was using it.
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III-Manresa
Q: Where was the check picked up?
A: The check was picked up the day after on September 28,
1996.
Q: When was there a notice of the loss?
A: The notice of the loss, was sent by the manager who was
using the car only on October 1, 1996.
Discussion: So the statement of account September 27 ang
check hindi pinick up, September 27 ng gabi awala ang
kotse, and then pinick up ang check on September 28 no
information of the loss vehicle was given, medyo bad faith
no. Nag notify na sila October 1.
Q: Was there a valid contract of insurance?
A: The SC held that there was no valid contract of insurance
because Section 77 of the Insurance Code provides
that, unless premium is paid the insurance policy is not valid
and binding.  So the petitioner in their appeal questioned the
decision because they believe that their situation was among
the exceptions of Section 77, which falls under the 4th and
5th exception, because they contended that the parties
intended the Contract of Insurance to be immediately
effective upon issuance, despite the non-payment of the
premium.
Discussion: Remember this, why am I putting so much
emphasis on this portion of the line, because if you take a
look at the insurance law questions sa Commercial, almost
every year merong ganito tumalbog ang cheke, ng ganitong
petsa, or cheke na walang petsa, these are actual bar
questions, merong nag installment one time, or two time. So
is that already a binding payment.
Payment of Premiums:
GENERAL RULE: Cash and Carry basis- nonpayment of the
first premium prevents the contract from becoming
binding. (Sec. 77 requires full payment of the premium.)
Exceptions:
1. In the case of a life or an industrial life policy
whenever the grace period provision applies;
2. Written acknowledgement of the receipt of premium
by the insurer (Sec 78);
3. Credit extension for the payment of premium was
agreed upon (UCPB v. Masagana);
4. Parties agreed to the payment in installments of the
premium and partial payment has been made at the
time of loss (Makati Tuscany Condominium v. CA);
5. Obligee has accepted the bond or suretyship
contract in which case such bond or suretyship
becomes valid and enforceable irrespective of
whether or not the premium has been paid by the
obligor to the surety. (Sec 177); and
6. Parties are barred by estoppel.
But look at the facts of the situation, was there a clear
agreement to have an exception? Sa isang case sinabi there
was an implied agreement to have payment by installment,
pero kung wala naman tayong nakikitang evidence that there
was an agreement to pay in installment, we go back to the
general rule, which is Section 77. If there was an alleged
implied agreement to extend a credit arrangement kung hindi
siya express medyo malabo kasi credit arrangement yun eh,
unless you can establish it by history as in the case of
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UCPB, yung tipong 5 years na tayo magkarelasyon, alam ko
nag babayad ka 60-90days okay lang. You must also bear in
mind that in property insurance, there must be a notice of
cancellation. 
Point of the matter is nag agree ba kayo ng installment? If
yes, no choice, there is a binding contract, and when you say
installment there must be a schedule of the instlallment
payment. Pag naka bayad na ng isa yan ibig sabihin
tumatakbo na yung policy.
BAR Q: There was a payment of 2 installments the third one,
he was late in paying however, nasunog, he paid a day after
the fire. Was there a binding agreement?
Installment means you have specific dates and if may naka
lagay duon na, "the moment an installment is not made, it is
either the whole payment shall be due, or it is already a
lapse policy" dun kayo titingin. What is the consequence of
not paying on time. Kahit naka bayad na ng dalawang
installment kung hindi mo na honor ang subsequent
installment, at nangyari ang event you look at the terms of
the payment, kung nag lapse or dapat mag bayad ka ng buo.
Kung nag lapse, edi walang recovery, kung sinabing mag
bayad ka ng buo, yung ibabayad sayo babawasan nalang ng
premiums, that's how it works. This topic talks
about Installments.
What about Credit Extensions, take a look at history, if
there is no express agreement, take a look at the history of
the parties. In UCPB case okay for the past 5 years, meron
kayong bayaran tapos ngayon sabi mo sakin ayaw mo, kasi
nangyari yung event. 
Note: But if there is no evidence of exception, you always go
back to Section 77, if there is no payment of premiums then
there is no effective policies.
Have I told you guys hindi ako nag uulit ng questions?
Basta the cases that I gave to you are very important, like
take note yung pag deposit kelan yun? Yun relationship ano
yung established history like in UCPB, In the Makati Case
walang nangyari pero gusto ka singilin, it is an effective
policy when you start paying by installments.
Q: Parties to the contract, this is basically a
review anyone except a public enemy. Definition of
Public Enemy.
A: Public Enemy is a citizen or national of any country with
which the Philippines is at war.
We have the case on this topic right? Because the purpose
of war is to disable. Alam niyo dapat ang concept ng public
enemy ha so eto yung sinasabi ko sainyo na MILF question
na pinapauso ko na nasa Bar din. 
So mortgagor, mortgagee alam niyo na dapat to ha that's
very basic, so both of them can get a policy on the property
but up to a different extent only.
So mortgagor, mortgagee alam niyo na dapat to ha that's
very basic, so both of them can get a policy on the property
but up to a different extent only.
 The insurable interest of the mortgagor is to the full value
of the Subject Matter.
 The insurable interest of the mortgagee is only up to the
extent of the indebtedness.
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Concept of Insurer and Insurance Companies, mutual benefit
associations dapat alam niyo rin yan. So basically it should
follow the capitalization but dito equity lang.
Alam niyo dapat ang mutualization, capitalization for
domestic. Like what should be maintained before there are
claimants of dividends. Certificate of Authority good for 3
years.
Now we go to Double Insurance vs. Reinsurance.
Bakit ganyan ang title, maniwala kayo at sa hindi may bar
question, what is the difference between the two. If you take
a look at my notes na matagal nang nasa inyo, there is a
tabular comparison. That is in the provision ha, ginawan ko
lang ng Tabular.
Double Insurance defined.
SECTION 95. A double insurance exists where the same
person is insured by several insurers separately in
respect to the same subject and interest.
Q: Who discussed Malayan v. Philippine First. According
to Malayan Section 93 is not exactly complete, because
what are the elements of Double Insurance.
A: The requisites in order for double insurance to arise are
as follows:
1. The person insured is the same;
2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.
Discussion: f you take a look at the definition itself it doesn't
mention of the same risk. Take a look at the definition, only
the subject is the same, same interest, same insured two or
more insurer, but it doesn't mention anything about the risk.
So that is very important. Kung ang kinuha ni A ay fire kay X
company, tapos kumuha siya ng theft policy, that is not
double insurance.
VERY IMPORTANT TO POINT OUT: There is no such thing
as double insurance in life, because sabi nga natin, as long
as pasok sa Section 10, as long as the person is willing to
pay the premiums walang problema because life insurance
policy is a contract of investment, in property it is a contract
of indemnity. That is why very generous tayo sa mga other
insurance policies/clauses.
Mode of Payment in case of Double Insurance:
Kung maraming insurance policies, tapos mag cocollect how
is it made?
SECTION 96. Where the insured in a policy other than
life is overinsured by double insurance.
(a) The insured, unless the policy otherwise provides,
may claim payment from the insurers in such order as
he may select, up to the amount for which the insurers
are severally liable under their respective contracts;
Example: Where A has a house it is valued at 180,000 PHP
(Ma'am comments anong bahay yun?) A procured 3
insurance policies in favor of the house from X insurance
company for 60,000 PHP from Y company for 180,000 PHP
and from Z company for 240,00 PHP. For example the house
was burned, How much is the worth of the house?  180K.  fraction is that?
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Applying Par (a): The insured here may claim payment in
such order as he may select up to the amount for which the
insurance is severally liable under their respected
contract. So pano yun? As to the first payment, A can claim
to X only 60K or A can also claim from Y 180K in full or from
Z company 240K only which is the value of the insurable
interest. 
Discussion:  So in anyway gusto niya iclaim lahat ang 180K,
kumuha ng 20K dito, 60K dito or 100K kahit kanino- that
is Par (a).
(b) Where the policy under which the insured claims is a
valued policy, any sum received by him under any other
policy shall be deducted from the value of the policy
without regard to the actual value of the subject matter
insured;
Example:  When the policy under which the insured claims is
a valued policy, in this case if A recovered 60K from
insurance company X, he may only recover, 120K from
either company Y or company Z or both as long as it doesn't
exceed the 120K because he already claimed 60K from
company X.
(c) Where the policy under which the insured claims is
an unvalued policy, any sum received by him under any
policy shall be deducted against the full insurable value,
for any sum received by him under any policy;
Discussion: If we take a look at C, when we say unvalued
yung policy it only has a face value, (Unvalued- the
valuation shall be done at the time of the happening of the
event) basically the same principle.
(d) Where the insured receives any sum in excess of the
valuation in the case of valued policies, or of the
insurable value in the case of unvalued policies, he must
hold such sum in trust for the insurers, according to
their right of contribution among themselves;
Note: This paragraph was skip because it is basic daw.
(e) Each insurer is bound, as between himself and the
other insurers, to contribute ratably to the loss in
proportion to the amount for which he is liable under his
contract.
Example:  Here you have to compute, the formula is…
Formula:
Amount of Policy X Loss = Liability of Insurer
Total Insurance Taken
Example:
P150,000 X P200,000 = P103,448.27
P290,000
Q: What are the total of the policies na nakuha niya? 
A: 480K. 
Q:Let us take a look at the first insurance company, ano
ang enumator(?) mo dian? 
A: So 60K the total amount of the policy that was insured. 
Q:So first insurance company 60K over 480K. What
 
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III-Manresa

HOW TO CHECK: In this example it total niyo lahat dapat

A: 1/8 So for Y company 180/480.  P180,000, and it total niyo rin ang fraction, dapat 1 siya.

Q:Are you guys following? Yung numerator is the value Anyways, pahihirapan ko ba kayo ng ganun? Hindi na
of the policy of the company over the sum. What is the siguro, kasi medyo mathematically challenged na kayo
fraction?  eh. (Thanks Ma'am, best compliment ever char).  There will
be a problem like that but that is for purposes of testing
A: 3/8  whether you understand. Will there be computations? Yes.
Will there be lots? Depende. Iniisip ko pa if mag-papa MCQ
Q:What about Z Company?  ako eh.

A: 240/480 or 4/8.  Basically you get the fraction the coverage over the total
loss, and then you multiply it with the loss, then you get the
Q: Anong silbi ng mga fraction? proportion or fraction that you can get from that particular
  insurance company. Pag tinotal niyo dapat covered siya ah,
A: Ang silbi ng fractions ay dalawa. hindi sobra hindi kulang, so thank you.

Q: kung ang pinag uusapan natin ang premiums, is it the
same or premiums dapat ang i total mo?
A: For the first one Ma'am you have to total the total
insurable interest that was issued.
Q: So it is not the same fraction?
A: It is the same Ma'am
Discussion: Kaya siya the same kasi yung pag kakagawa ng
situation proportional yung premium sa coverage, but it is not
only the same fraction. Yun ang tatandaan niyo, I will just
discuss it later.  A: No, Ma'am it is different.
Discussion:  If you take a look at pars. (a)-(c), even up to par.
(e) you get the impression that even if there are many
policies 1 can only collect up to the extent of his insurable
interest, again on the principle laging gina ulit ni Ma'am
because this will form part in the answers, because property
insurance policy is a contract of indemnity hindi niyo dapat
ito pagkakitaan, kung ano lang ang loss yun lang ang pwede
niyong ma collect. Kaya sa isang case, super excited,
andaming kinuhang policy, so anong nangyari, naka collect
lang siya up to the extent of insurable interest.
Q: Is double insurnace, over-insurance?

Overinsurance exists when the amount of the insurance is

Q: So yung binigay mo sakin na fraction, i-mumultiply ko beyond the value of the insured’s insurable interest.
siya saan, to get what?
DOUBLE INSURANCE OVER-INSURANCE
A: You mutiply it to the loss of the insured and you will get
Same person is insured by Amount of insurance is
the liability insure in favor of the insurer.
several insurers in respect to beyond the value of the
Discussion: Kasi you have a situation where there is over-
the same subject and insured’s insurable
insurance by double insurance, eto yun par (e) Section 96.
interest. interest.
Total amount of policies Insurance taken must
Discussion: So may situation na kumuha siya ng maraming
taken need not exceed the always be more than the
policies pag tinotal mo, pagkakakitaan na nila eto which is
value of insurable interest amount of insurable
not suppose to happen, so how do you divide? diba kasi
(does not necessarily mean interest.
yung kanina kung kanino mo gusto kumuha, yung
over-insurance)
pangalawa pag nakuha mo na to eto nalang pwede mong
kunin, eto parang proportional lahat sila kukuhanan niyo There are always several One insurer is sufficient.
magkano? Based duon sa fraction na yun. Get the fraction of insurers.
X, multiply it to the loss and that is the only amount charged Effects: Effects:
X (See example below.) 1. In case of loss, the In case of loss, the
insurers are liable company is bound to pay
severally to the only to the extent of the
extend of their real value of the property
coverage. The lost. The insured is
insured can recover entitled to recover the
from any of them or amount of premium
all of them to the corresponding to the
extent of his loss. excess in value of the
2. Insured can recover property.
before or after the
loss, from both
insurers the excess
premium he has
paid.

Q: When there is double insurance is there over-

insurance?

A: Not necessarily.

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III-Manresa

refer to the Tabular Form for distinction of double insurance

Q: When there is over-insurance is there double
insurance?
A: No Ma'am.
Q: Give me an example of double that was not over.
A: When X insured his house for a fire insurance policy with
Y Company, and then subsequently gets another fire
insurance policy with Z Company, over his house.  known to the insured. That is why as we can see in the
Discussion: That is a case of double that is not over. Dalawa
kinuhanan mo, the elements are there, pero pag tinotal mo
either kulang pa sa insurable interest mo or tama lang.
v. reinsurance:
Discussion:  (re: 4th distinction) That is very important to
point out, sa Reinsurance, ang na-uusap lang si insurer at si
reinsurer, walang pakiealam si insured, basta siya pag
nangyari ang event bayaran mo ako, kung san mo kukunin
yan bahala ka.
So it is even possible that the reinsurance contract is not
cases, hindi pwedeng dumiretso si policy holder sa reinsurer,
pinag pipilitan sa isang case yan ha.
March 9 (Part III) -Abrasaldo

Q: Give me an example of over-insurance which is not That’s why as we will see in the cases, hindi pwedeng
double. dumeretso si policyholder sa reinsurer. Pinagpipilitan sa
isang case ‘yan.
A: Over-insurance when X insures his house against fire and
the value of the house is 180K but X procured an insurance Q: in the case of Equitable, what was the main issue here?
policy over 180K.
A: the issue here is w/n Rural Insurance is liable to
Discussion: Isang policy lang, 180K ang interest niya pero Equitable?
yung kinuha niyang policy 200K isa lang yun, walang double
yung, but there is over. But when the 2 combined, then we
apply Section 96.  Q: What was the main allegation?

A: Here, Rural Insurance alleged that Equitable failed to

Q: What is reinsurance? Is it the same as double satisfy the condition precedent which is the submission of the
insurance? dispute to the arbitrator which is vital under the insurance
agreement.
A: SECTION 97. A contract of reinsurance is one by
which an insurer procures a third person to insure him
against loss or liability by reason of such original Q: There was a mention of the word “facultative”, the crux or
insurance. that main argument. Not supposed to pay because there is
only facultative reinsurance. What is facultative?
DOUBLE INSURANCE REINSURANCE
Insurer remains as Insurer becomes insured. A: Here, the term facultative is used in the insurance
insurer. contracts and to be so used in this case because there is the
Subject matter is property. Insurer’s risk is the subject right of the insurer to accept or not to accept the participation
matter. in the xxx but once the share is accepted, as it was in this
Same interest and risks. Different risk and interest case, the obligation is absolute and the liability assumed
are insured. thereof can be discharged by one and only way which is the
The insured is the party in The original insured has no payment of the share of the losses.
interest in all matters. interest in the contract of
reinsurance. Q: ‘yun yung pinaka dynamic ng reinsurance. In this case,
who was the insurer?
Discussion: So basically we are talking about an insurance
company which wants to be insured itself, sa laki ng liability A: The insurer (original) is Equitable Insurance
niya kumuha pa siya ng isa pang insurance to cover part of
the liability. Q: And the reinsurer was?
A: Rural Insurance
Q: Give me an example.
Q: and what did they do?
A: When A the insured procures an insurance policy from Y
the insurance company and Y subsequently re-insures such A: Here, there were two insurance policies which were
risk to insurance company. reinsured by Rural Insurance and they failed to pay the
demands of the Equitable Insurance despite the having
Discussion: Primarily because malaki yung liability, let us assumed the risk.
say it is a 100Million or 200Million contract tapos hindi
naman naka cover lahat, so kung baga i-cover mo ako. Comment: First transaction, cooperative marketing. Second,
transaction was for electric xxx supplies. Parehong nangyari
Q: What is the subject matter in reinsurance? ‘yung event, ayaw magbayad ng reinsurer.

A: In reinsurance, the subject matter is the insurer's risk. The Supreme Court said ‘yun ang dynamics dun. When the
company was engaged as reinsurer and there was a

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III-Manresa
contract, part of the risk should be covered by the
reinsurance company.
Facultative, walang kwenta yan kasi basically there was
acceptance of the risk. But this is a matter between the
insurer and reinsurer. Walang involvement si insured.
Q: Pioneer v. Yap, issue?
A: Whether or not the insurer will be absolved from the
liability under the fire policy considering that the insured
violated its co-insurer clause?
Q: How many insurance policies were obtained by Yap in
this case?
A: There were three policies but the second was replaced by
another xxx
Q: Ang first?
A: The first is Pioneer. Second, Great American Insurance
which was substituted by North West and third, Federal
Insurance
Q: Was this a case of double insurance?
A: Yes.
Q: What was the risk?
A: The risk was the fire.
Q: Elements ng double insurance?
A:
1. Insured – Yap
2. Subject matter – the holds of Yap’s building
3. Under the same risk – fire
4. More than one insurer – 3 insured.
The same interest because it was the same person, right?
So, capacity, in his capacity as owner of the goods. So
pasok siya.
Q: Bakit ayaw magbayad ng Pioneer?
A: Pioneer does not want to pay because it is alleging that
the insured violated the co-insurer clause between it and Yap
because it states that the insured shall give notice to the
company of any insurer already effected or which may
subsequently be effected covering the property hereby
insured and unless such notice be given, particulars of such
insurance be stated or endorsed under this policy by or on
behalf of the company for the occurrence of any loss or
damage, all benefits under this policy shall be forfeited.
And what happened here was that when Yap here took
another fire insurance policy with Federal, it was not with the
consent of Pioneer or he did not give knowledge to Pioneer.
Comment: Pioneer ‘yung nauna. ‘Yung Great American, may
consent. Subsitution may consent? Yes. ‘Yung third, Federal,
‘yan yung wala.
Basically, sinasabi niya ayy, hindi ako babayad because you
violated it, tama ba ‘yon?
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A: The Supreme Court held that yes. Pioneer should not be
liable. The Court held here that policies that provide for
clauses which shall be void if the insured incurs additional
insurance without the consent of the insurer is valid.
Q: What’s the purpose of having that clause?
A: The purpose of having this clause is for the prevention of
overinsurance and thus over the perpetration of fraud. The
public as well as the insurer is interested in preventing the
situation in which xxx be profitable to the insured.
Comment: Okay, so ‘yun lagi yung sinasabi ko na pag
property insurance, hindi dapat pagkakitaan because it is a
contract of indemnity.
Is it valid to have that clause? Yes.
Q: What was the issue in Geagonia case?
A: Whether or not there was double insurance, the
determination of which is fatal to the insured’s right to
recovery? The Supreme Court ruled that there was no
double insurance.
Q: What was the missing element?
A: The insurable interest. There was different insurable
interest in the different policy.
Q: Sino ba nag insure dito?
A: The petitioner here is the insured one. He’s the owner of a
xxx and he insured the stock in trade which principally is
consisting of RTW to the respondent, the Country Bankers
Insurance Corporation. And then there was a condition in the
policy which imposes the condition to the insured to disclose
or the duty to inform the insurer if he has already insured the
said property to some other insurance companies.
Q: Was there a violation of that clause in this case?
A: Actually, petitioner here has knowledge that the property
was already insured to another insurance company.
However, the Court said that since there was different
insurable interest because what was insured before the PFIC
is – the policy indicates that
Q: What removes it from the ambit of double insurance?
A: It was the insurable interest. The interest between the
mortgagee and the mortgagor.
Comment: In the first case, hindi parehong insured yung
person kasi mortgagor-mortgagee. Second, iba yung
interest. Although we’re talking about the same property, the
same risk, same insurance company. Doon natin makikita na
yung missing elements are:
1. Nature of the interest
2. Person insured
So, we go to the discussion again, alam na natin up to what
extent dapat mag insure si mortgagor. Mortgagor is the
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa
owner and up to what extent mag-i-insure si mortgagee-
creditor.
Amount of the loan and sa owner naman, the amount of the
property.
Another reminder: But if it was the owner who got the policy,
meaning the mortgagee as beneficiary, then it can be to the
extent of the full value of the property.
It is only when the mortgagee is the one getting that it is
limited to the amount xxx.
Q: Pioneer, what was the issue?
A: Whether or not Pioneer is the real party in interest to
institute the action for collection of sum of money against the
xxx
Q: Ano ang relasyon ng mga parties sa kaso na ‘to? Who are
the parties?
A: Lim – owner/operator. He and Bormacheco contributed
some funds used in the purchase of the above aircrafts and
spare parts. The funds were supposed to be their
contributions to a new corporation proposed by Lim to
expand his airline business. But in this case, the said
aircrafts were mortgaged by Lim to Pioneer insurance
Company because in this case, Lim defaulted in his payment
to Japan Domestic xxx.
Q: Ano bang naging relasyon ni John at ni Southern (SAL)?
A: seller—buyer.
Q: What transaction did they have?
A: Bumili siya ng dalawang eroplano. So buyer—seller.
Bumili si Lim kay JAL ng dalawang eroplano.
To secure the payment of the purchase price, what did Lim
or SAL do? (Skipped)
Q: Gibson, issue?
A: (hindi ko maintindihan )
Q: Who are the parties here?
A: Malayan, Gibson, Lepanto. Lepanto is the policyholder.
Q: What were the things that were covered in the marine
policy?
A: Copper, gold and silver concentrates from Poro San
Fernando to Tacoma, Washington.
Q: What happened to the goods?
A: When the two vessels were in the course of transporation,
it encountered heavy weather and rough seas which caused
it to roll, pitch and vibrate heavily so that certain shifting
boards in the vessel broke and part of the cargo shifted
transversely.
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Q: What is the role of the Gibson?
A: Gibson was the reinsurer of Malayan.
Q: Was Gibson the only reinsurer?
A: No.
Q: The motion to intervene, what was the ruling of the Court
on the motion to intervene?
A: Gibson cannot intervene because it will just disrupt the
suit between Lepanto and Malayan because here Gibson
was one of the reinsurer and it will be highly improbably for
the reinsurer to intervene the case.
Q: Ano ngayon ang nagiging papel niya kung hindi siya
ipapa-intervene? What was the rationale, aside from
avoiding delay? Anong consequence pag reinsurer siya?
A: He can institute an action to protect his rights.
Q: How will it be done? So Lepanto is claiming from
Malayan. Malayan has reinsurance contract with Gibson. So
anong magiging dynamics nun kung hindi siya
makakaintervene? What did the Court say?
A: Lepanto claims that Gibson would not be immediately be
liable to Malayan and if Lepanto would lose…
Q: Anong dyanmics pag reinsurance? Kasi ito diba parang
logical, reinsurer ako kailangan makaintervene ako. So the
fact na hindi siya pina-intervene, ano sabi ng Supreme
Court? How does it work? So may liability kayo kay Lepanto,
sino sasagot sa liability according to Supreme Court?
A: It would be Malayan.
Q: What would be the recourse of Malayan?
A: To file an action against Gibson.
Comment: In this case, the reinsurer was not allowed to
intervene because it would cause delay. Kasi, hindi lang siya
ang reinsurer, ang dami eh, lahat sumali na. Sabi ng Court,
the contract (original insurance contract) is between the
insurer and insured (Malayan and Lepanto). So, siya
magbabayad kung liable. Pag liable, ang kausap lang ni
Lepanto is Malayan. Wala si Gibson sa eksena. Malayan can
run after Gibson for the portion that it’s supposed to reinsure.
Malayan case, basically, no double insurance, in this case.
Q: Bakit walang double insurance?
A: No double insurance because of the fact that Malayan and
Philippine First Insurance have no…
Q: Who are the parties, first?
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III-Manresa
A: We have Wyeth Philippines who entered into an
agreement or contract of carriage with Reputable. Reputable
here insured the safety of the goods to be delivered to the
Mercury Drug. Now, before the contract, Wyeth required
Reputable to have this special insurance policy over
P1Million.
Comment: So ang parties – Wyeth, forwarder, Reputable.
A: The insurer of Wyeth is Philippine First Insurance where
the special insurance policy was from Malayan.
Q: Ilang insurance policies ang pinaguusapan? And is that
double insurance?
A: Two insurance policies and it is not a case of double
insurance because as a rule, to have double insurance, there
has to be the same parties representing the same insurable
interest.
In this case, Philippine Insurance insured the goods. The
other one, Malayan Insurance insured the contract of
carriage, the safety of the goods to be delivered to Mercury
Drug. It is not the same because the contract of Malayan and
Reputable is a special insurance policy that was required by
Wyeth.
Pareho lang diba, safety of the goods = against loss of
goods. Edi pareho lang? Gatas yan eh (yung goods). So it’s
double insurance, right?
A: No. The insurance of Philippine First was in consideration
of the legal and insurable interest over its own goods. On the
other hand, what was issued by Malayan to the Reputable
was over the latter’s insurable interest over the safety of the
goods which may be the basis of Reputable’s liability.
Comment: Yung isa, direct damage to the owner of the milk.
Yung isa naman, as the forwardee, siya ang nagta-transport
eh. Magsu-suffer ba siya ng loss kung nawala yung milk?
Hindi, pero may liability, mag-a-arise. So magkaiban yun.
Q: So alin dun sa elements ng double insurance ang absent?
A: The absent elements were the 1.) person insured is not
the same; 2.) identity of the interest of the insured.
Syempre Wyeth, value of the goods. Ito namang isa, arising
from the carriage contract.
Comment: What do you do in the provisions in the Marine
Insurance? Bar questions. Pag tinanong kayo what is Marine
Insurance, ibigay niyo na lahat. Memorize. Am I going to ask
it? I don’t know but the Bar might.
Q: Distinguish Marine Insurance from Marine Protection and
Indemnity.
A: Marine Insurance – like property insurance, indemnifies
the insured for loss or damages of the property.
Marine Protection and Indemnity – is like liability insurance
which protects the insured against violating for loss or
damage of property or the personal injury, illness or death
xxx
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Comment: Okay, pag may tao na involve, may injury, illness
or death, hindi yan life insurance. Marine Protection and
Indemnity. Kapag Marine Insurance, hindi ka limited sa mga
nasa dagat. Hindi rin tayo limited to the objects which are in
transit. Kahit nga jewelry anjan eh. Warfs, barges.
Q: What’s the difference between the bottomry and
respondentia?
A: Bottomry – where the ship is used as the security of a
principal loan to finance a voyage
Respondentia – cargo which used for security against a loan.
Q: Why did I ask you about that?
A: Under Section 158 of the Insurance Code – the xxx of
Marine Insurance is conclusive between the parties thereto.
However, this does not apply when there is a thing that
hypothecated by bottomry or respondentia.
Q: Ano yang hypothecated?
A: It is when the thing is used for bottomry or respondentia.
Q: What is the principle whether it is bottomry or
respondentia? Ano bang nagiging transaction ng mga
creditor-debtors?
A: In the bottomry loan, only the excess of its value for the
amount is insurable xxx. The lendor can only use the
investment if the ship sinks in bottomry. And it is only
payable upon xxx
Q: How does it work? If a person gets a bottomry loan, what
is the nature of the transaction and the liability in case of
loss?
A: If a person gets a bottomry loan, the lender in the
bottomry is entitled to a higher rate of interest; the lendor
finances the voyage of the ship and the shipowner
mortgages the ship as security for the loan.
Q: Ganito nalang, kung pano mo tatandaan kung ship or
goods. Syempre, bottomry boat – ship. Para matandaan
niyo.
Ano ang nagyayari sa isang bottomry kapag nag sink ang
ship?
If there is a bottomry loan, what is the insurable interest of
the shipowner?
A: Only the excess of its value.
Q: Example?
A: For example, the vessel worth P2M, there’s a bottomry
loan for P800,000 so the shipowner may only insure P1.2M
which is the excess over the value of the amount secured.
Q: Why?
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III-Manresa
A: Because he has no insurable interest over the loan.
Q: Eh, property parin naman nya yun ah? Bakit di niya
pwedeng i-full value?
Comment: When there is a bottomry loan, and the security
disappears or is lost. What happens to the loan? Deemed
paid, diba?
If it’s a 2M worth of vessel and P800,000 is obtained as loan.
The owner can only insure the vessel up to P1.2M because
ang loss lang sa kanya is P1.2. Yung 800k pag nag sink
yung vessel, deemed paid. That’s the essence. Kahit 2M
yung kanyang insurable interest, quits na yung 800k pag nag
disappear yung ship niya eh.
If you take a look at the insurable interest of the owner, it is
only the excess of its value over the amount secured by
bottomry.
Kung yan, ginamit niyo as security sa utang, ang loss niyo
nalang, hindi niyo na babayaran yung utang eh pag nag sink
yun eh.
Expected freightage is something that can be insured. It is an
expectancy coupled with the existing interest. Pag nawala
yan, pwede niyo i-cover yan by an insurance policy.
Q: What’s a charter?
A: Charter is a contract by which an entire ship or some
principles part thereof is lend by the owner to another person
for the specified time.
Q: What are the two kinds?
A: Bareboat and contract of affreighment. The difference
between the two –
Q: Pano kung sasakay nalang si A? Sasakay lang siya, wala
na siyang iisipin. San ‘yun? What’s the difference between
the two?
A: Bareboat – owner turns over full possession and control of
the vessel.
Hindi lang siya sasakay, dadalhin niya lahat pati tao. Pina
renta ang yun kotse sa’yo, parang ganun.
Affreightment – the owner retains possession of command
and navigation of the ship while the charterer merely has use
of the space of the vessel in return for payment.
Comment: Yan yung sinasabi kong sasakay ka lang. It is
bottomry.
Q: Malayan, what was the issue?
A: Whether the arrest xxx ordinary judicial process is
covered by the insurance policy?
Q: Ano ang subject matter of the insurance policy?
A: The goods that were transit from here in the Philippines.
Soya Bean milk. Arrested in South Africa.
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Q: Was it considered as a peril of the sea or a peril of the
ship? What is covered by marine insurance? Pag sinabi
mong marine, peril of the sea or peril of the ship?
Peril of the sea – natural and nothing anticipated. Kasi kung
naanticipate yun, typhoon. That’s not a peril of the sea.
That’s a peril of the ship.
In this case, was the arrest considered peril of the sea or
peril of the ship? Is it a covered risk?
A: Yes, it is a covered risk.
Q: Eh sabi dito does not include ordinary xxx processes
A: Arrest that are included are only those involve in a war xxx
but in this case, the arrest was without war. It should be
excluded therein.
Comment: Arrest in ordinary judicial process is covered.
Hindi lang political or executive acts of the government.
Q: Cathay, what was the subject matter?
A: Subject matter in this seamless steel pipes. There was a
rusting of the steel pipes.
Q: Peril of the ship or peril of the sea?
A: It was peril of the sea and the Court distinguished and
defined what is a peril of the sea and peril of the ship.
Rusting of steel pipes in the course of a voyage is a "peril of
the sea" in view of the toll on the cargo of wind, water, and
salt conditions – considered as peril of the sea.
Peril of the ship – nag violate ka ng mga warranties, wala
kang enough na equipment, not enough manpower. Nag
deviate ka from the route dapat.
But if the incident is natural and inevitable – considered peril
of the sea which is covered by Marine Insurance Policy.
Q: Choa case, subject matter?
A: It imported lactose crystals from Holland. It was due to
spillage and loss from the port of Holland to Manila. The
damage was 403 out of 600.
Q: The Supreme Court again went through the concept of
perils of the sea or perils of navigation – what’s the concept?
A: the damage done to the goods were perils of the ship
rather than perils of the sea because it was due on the
damage which resulted from unseaworthiness, which are
waves or those fortuitous events.
Q: Define the perils of the sea –the Supreme Court
enumerated what are kinds of the marine casualties covered
by that.
Comment: It’s very important to point out that only perils of
the sea are covered by marine insurance policy. But you
have to know the concept. Ano ba yung perils of the sea?
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III-Manresa
A distinction should be made between "perils of the
sea" which render the insurer liable on account of
the loss and/or damage brought about thereof and
"perils of the ship" which do not render the insurer
liable for any loss or damage. Perils of the sea or
perils of navigation embrace all kinds of marine
casualties, such as shipwreck, foundering,
stranding, collision and every specie of damage
done to the ship or goods at sea by the violent
action of the winds or waves. They do not
embrace all loses happening on the sea. A peril
whose only connection with the sea is that it arises
aboard ship is not necessarily a peril of the sea; the
peril must be of the sea and not merely one
accruing on the sea.
There must, in order to make the insurer liable be
"some casualty," something which could not be
foreseen as one of the necessary incidents of the
adventure. The purpose of the policy is to secure an
indemnity against accidents which may happen, not
against events which must happen.
Comment: Again, natural and inevitable activities of the sea.
Ang ship – man-made.
Q: Filipino v. CA, ruling?
A: It was contended here that Filipino Merchant is not liable
for insurance policy because they are contending what
happened was not covered under the “all risk” clause. They
are saying that all risk clause has a technical meaning. There
must be a fortuity or casualty, accidental cause to which the
alleged loss is attributable and the failure to present does not
warrant the insurance claim.
The Court ruled that “all risk” should be held literally as
meaning all risks whatsoever and covering all losses by an
accidental cause of any kind. The meaning of this must not
be restrained and here the Court ruled that Filipino Merchant
is liable because coverage under an "all risks" provision of a
marine insurance policy creates a special type of insurance
which extends coverage to risks not usually contemplated
and avoids putting upon the insured the burden of
establishing that the loss was due to the peril falling within
the policy's coverage.
Comment: “All risk” policy is the most expensive policy
because of the nature. All risk nga eh. The only condition
being was it something that was voluntarily brought about?
May gross negligence ba? Or was it something willfully
brought about by policyholder? Kung ang sagot ay NO, ah
kahit anong risk yan, covered na ‘yan. Kaya siya mahal.
Q: Caltex v. Sulpicio, what happened here?
A: MT Vector and MV Doña Paz collided.
Q: What’s the relationship with MT Vector with Caltex?
A: Caltex charted with MT Vector – so the goods are the
gasoline. Petroleum products.
Q: So daming namatay, why is Caltex being held liable?
A: It was alleged that Caltex was the charterer of the MT
Vector, thus, the ownership was with Caltex.
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Q: Eh voyage charter siya. Ano yung pinaka ground nun?
What was supposed to be negligent of/responsible for?
A: It was alleged that Caltex did not take steps to have M/T
Vector's certificate of inspection and coastwise license
renewed; proceeded to ship its cargo despite defects found
by Mr. Carlos Tan of Bataan Refinery Corporation; and
witnessed M/T Vector submitting fake documents and
certificates to the Philippine Coast Guard.
Q: Ano sabi ng Supreme Court?
A: The Court said that the charterer of a vessel has no
obligation before transporting its cargo to ensure that the
vessel it chartered complied with all legal requirements. The
duty rests upon the common carrier simply for being
engaged in "public service."
Comment: So in this case, as a mere voyage charterer,
Caltex has the right to presume that the ship was secured at
tska may clearance din from the Philippine Coast Guard so
there was no liability on the part of Caltex.
Q: Mayer, issue?
A: Whether or not the insurers are still liable for the damage
of the goods particularly steel pipes?
Comment: Very important yung parties. So dapat para
kanino i-file, very important ‘yun. Take note that. Again,
discussion of all risk policy.
Q: What is fire insurance?
A: Fire insurance – shall include insurance against loss by
fire, lightning, windstorm, tornado or earthquake and other
allied risks, when such risks are covered by extension to fire
insurance policies or under separate policies.
Comment: Very important: baka sabihin niyo, lightning, ay
covered by fire. May qualification ha?
1. There should be a separate policy – dapat may
nakakabit na policy.
Q: How do you do a valuation in fire sa open policy?
Supposed to value it at the time of the fire. How do you value
it?
A: The measure of indemnity in an insurance against fire is
the expense it would be to the insured at the time of the
commencement of the fire to replace the thing lost or injured
in the condition in which it was at the time of the injury.
Q: Del Castillo, issue?
A: Whether respondent is liable to petitioner as the insured?
Q: Why not liable?
A: Here, it is stipulated in their policies that in case of
earthquakes, volcanic eruptions, and also under abnormal
conditions, any damage arising therefor, it is expressly not
included in their insurance? In this, case the Court said they
are not liable because the fire that broke the xx was caused
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Based on the lectures of Atty. Cristina Sagmit
III-Manresa

by the fire when this building in front of the said bakery was
looted and. The Court considered that since during those
times, there was war – abnormal conditions.

Q: What’s the difference between friendly fire or hostile fire?

A: Pag may apoy bas a kamay ko ngayon, hostile or

friendly? Hostile. Not supposed to be there.

Q: Filipinas Tan, ruling?

A: Filipinas should pay Tan because first there was no

increased risk here because:
(1) sealing of, and the placing of posters on, the building by
the Japanese Forces did not increase the hazard or risk to
which the building was exposed and, therefore, the
insurance did not cease to attach under article 8 of the
policies; and

(2) that the fire which destroyed the building "was purely an
ordinary and accidental one, unrelated to war, invasion, civil
commotion, or to the abnormal conditions arising therefrom,”.

Comment: If you see fire in a stove, that’s friendly, of course.

Hostile fire is not supposed to be there but it’s there.

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