G.R. No.
L-12707 August 10, 1918 stipulations, having been made a part of the
MRS. HENRY E. HARDING, and her husband,
plaintiffs-appellees,
vs.
COMMERCIAL UNION ASSURANCE
COMPANY, defendant-appellant.
The defendant, upon the information given by
plaintiff, and after an inspection of the
automobile by its examiner, having agreed that it
was worth P3,000, is bound by this valuation in
the absence of fraud on the part of the insured.
All statements of value are, of necessity, to a
large extent matters of opinion, and it would be
outrageous to hold that the validity of all valued
policies must depend upon the absolute
correctness of such estimated value. As was
said by the Supreme Court of the United States
in the case of the First National Bank vs.
Hartford Fire Insurance Co. (5 Otto, 673; 24 L.
ed., 563), at. p. 565 of the Lawyers Edition:
The ordinary test of the value of property is the
price it will commend in the market if offered for
sale. But that test cannot, in the very nature of
the case, be applied at the time application is
made for insurance. Men may honestly differ
about the value of property, or as to what it will
bring in the market; and such differences are
often very marked among those whose special
business it is to buy and sell property of all
kinds. The assured could do no more than
estimate such value; and that, it seems, was all
that he was required to do in this case. His duty
was to deal fairly with the Company in making
such estimate. The special finding shows that he
discharged that duty and observed good faith.
We shall not presume that the Company, after
requiring the assured in his application to give
the "estimated value," and then to covenant that
he had stated all material facts in regard to such
value, so far as known to him, and after carrying
that covenant, by express words, into the written
contract, intended to abandon the theory upon
which it sought the contract, and make the
absolute correctness of such estimated value a
condition precedent to any insurance whatever.
The application, with its covenant and
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policy, that presumption cannot be indulged
without imputing to the Company a purpose, by
studied intricacy or an ingenious framing of the
policy, to entrap the assured into incurring
obligations which, perhaps, he had no thought of
assuming.
Section 163 of the Insurance Law (Act No. 2427)
provides that "the effect of a valuation in a policy
of fire insurance is the same as in a policy of
marine insurance."
By the terms of section 149 of the Act cited, the
valuation in a policy of marine insurance is
conclusive if the insured had an insurable
interest and was not guilty of fraud.
We are, therefore, of the opinion and hold that
plaintiff was the owner of the automobile in
question and had an insurable interest therein;
that there was no fraud on her part in procuring
the insurance; that the valuation of the
automobile, for the purposes of the insurance, is
binding upon the defendant corporation, and that
the judgment of the court below is, therefore,
correct and must be affirmed, with interest, the
costs of this appeal to be paid by the appellant.
Argente v West Coast G.R. No. L-24899
March 19, 1928
Facts:
Bernardo Argente signed an application for joint
insurance with his wife in the sum of P2,000.
The wife, Vicenta de Ocampo, signed for the
same. All the information contained in the
applications was furnished the agent by
Bernardo Argente.
Argente was examined by Dr. Sta. Ana, a
medical examiner for the West Coast. The result
was recorded in the Medical Examiner's Report,
and with the exception of the signature of
Bernardo Argente, was in the hand-writing of
Doctor Sta. Ana. But the information or answers
to the questions contained on the face of the
Medical Examiner's Report were furnished the
doctor by Argente.
Vicenta de Ocampo, wife of the plaintiff, was
examined at her residence by the same doctor.
The spouses submitted to West Coast Life an
amended application, increasing the amount
to P15,000, and asked that the policy be
dated May 15, 1925. The amended application
was accompanied by the documents entitled
"Short Form Medical Report." In both of these
documents appear certain questions and
answers.
A temporary policy for P15,000 was issued to
Bernardo Argente and his wife as of May 15, but
it was not delivered until the first quarterly
premium on the policy was paid. More than thirty
days had elapsed since the applicants were
examined. Each of them was required to file a
certificate of health before the policy was
delivered.
Vicenta de Ocampo died of cerebral apoplexy.
Argente presented a claim in due form to the
West Coast Life Insurance Co. for the
payment of the sum of P15,000. It was
apparently disclosed that the answers given by
the insured in their medical examinations with
regard to their health were untrue. West Coast
refused to pay the claim and wrote Argente to
the effect that the claim was rejected due to
fraud.
The trial court held the policy null and void,
hence this appeal.
Issue: WON Argente and Ocampo were guilty of
concealment and thereby misled the insurer into
accepting the risk?
Held: Yes. Petition dismissed.
Ratio:
Vicenta de Ocampo, in response to the
question asked by the medical examiner,
answered no to "Have you ever consulted a
physician for or have you ever suffered from
any ailment or disease of the brain or
nervous system?" She also answered
“none” as to the question whether she
consumed alcohol of not.
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To the question, "What physician or physicians,
if any, not named above, have you consulted or
been treated by, within the last five years and for
what illness or ailment?" she answered "None."
But the facts show that she was taken to San
Lazaro Hospital, her case was diagnosed by the
admitting physician as "alcoholism”, moreover,
she was diagnosed with "phycho-neurosis."
Section 25 of the Insurance Code defined
concealment as "a neglect to communicate
that which a party knows and ought to
communicate."
The court held that the alleged concealment was
not immaterial and insufficient to avoid the
policy. In an action on a life insurance policy
where the evidence conclusively shows that the
answers to questions concerning diseases were
untrue, the truth of falsity of the answers become
the determining factor. If the true facts been
disclosed by the assured, the insurance would
never have been granted.
Concealment must, in the absence of inquiries,
be not only material, but fraudulent, or the fact
must have been intentionally withheld. If no
inquiries are made and no fraud or design to
conceal enters into the concealment the contract
is not avoided.
The assurer is entitled to know every material
fact of which the assured has exclusive or
peculiar knowledge, as well as all material facts
which directly tend to increase the hazard or risk
which are known by the assured, or which ought
to be or are presumed to be known by him. And
a concealment of such facts vitiates the policy.
If the assured has exclusive knowledge of
material facts, he should fully and fairly disclose
the same, whether he believes them material or
not. The determination of the point whether there
has or has not been a material concealment
must rest largely in all cases upon the exact
terms of the contract.
Tan v. Court of Appeals
G.R. No. 48049, 29 June 1989, 174 SCRA 403
FACTS:
In September 1973, Tan Lee Siong applied for a
life insurance under the Philippine American Life
Insurance Company (PHILAMLIFE). He stated
in the application form that he has no health
issues whatsoever and so in November 1973 he
was issued a life insurance policy in the amount
of P80,000.00. He listed his sons as
beneficiaries (Emilio Tan et al). In April 1975,
Tan Lee Siong died due to hepatoma. His sons
filed an insurance claim but PHILAMLIFE denied
the same as it alleged that Tan Lee Siong
concealed the fact that he was hypertensive,
diabetic, and was suffering from hepatoma at the
time of his application for the insurance.
The beneficiaries averred that PHILAMLIFE can
no longer rescind the insurance contract
because the insured is already dead. They
invoke Section 48 of the Insurance Code which
they interpreted to mean that an insurer can only
rescind an insurance contract during the lifetime
of the insured; and that such rescission should
be done within two years prior to the filing of a
suit involving the insurance.
ISSUE:
Whether or not the interpretation of the Tan
brothers is correct.
RULING:
No. The pertinent section in the Insurance Code
provides:
Section 48. Whenever a right to rescind a
contract of insurance is given to the insurer by
any provision of this chapter, such right must be
exercised previous to the commencement of an
action on the contract.
After a policy of life insurance made payable on
the death of the insured shall have been in force
during the lifetime of the insured for a period of
two years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the
policy is void ab initio or is rescindable by reason
of the fraudulent concealment or
misrepresentation of the insured or his agent.
The so-called “incontestability clause”
precludes the insurer from raising the
defenses of false representations or
concealment of material facts insofar as
health and previous diseases are concerned
if the insurance has been in force for at least
two years during the insured’s lifetime. The
phrase “during the lifetime” found in Section 48
simply means that the policy is no longer
considered in force after the insured has died.
The key phrase in the second paragraph of
Section 48 is “for a period of two years.”
Note that the policy was in force for only one
year and 5 months when Tan Lee Siong died.
This means that PHILAMLIFE can still contest
and rescind the policy issued by reason of
the misrepresentation made by Tan Lee
Siong.
Further, because of Tan Lee Siong’s statement
that he does not have any health issues, the
insurance company was misled into
believing that he was healthy and so it did
not deem a medical checkup to be necessary
and that ultimately led to the issuance of the
life insurance policy.
Manila Bankers Life Insurance Corporation
vs Aban
G.R. No. 175666 July 29, 2013
Facts: On July 3, 1993, Delia Sotero (Sotero)
took out a life insurance policy from Manila
Bankers Life Insurance Corporation (Bankers
Life), designating respondent Cresencia P. Aban
(Aban), her niece, as her beneficiary. Petitioner
issued Insurance Policy No. 747411 (the policy),
with a face value of P 100,000.00, in Sotero’s
favor on August 30, 1993, after the requisite
medical examination and payment of the
insurance premium. On April 10, 1996, when the

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insurance policy had been in force for more
than two years and seven months, Sotero
died. Respondent filed a claim for the insurance
proceeds on July 9, 1996. Petitioner
conducted an investigation into the claim,
and came out with the following findings: 1.
Sotero did not personally apply for insurance
coverage, as she was illiterate; 2. Sotero was
sickly since 1990; 3. Sotero did not have the
financial capability to pay the insurance
premiums on Insurance Policy No. 747411; 4.
Sotero did not sign the July 3, 1993 application
for insurance; and 5. Respondent was the one
who filed the insurance application, and x x x
designated herself as the beneficiary. For the
above reasons, petitioner denied respondent’s
claim on April 16, 1997 and refunded the
premiums paid on the policy.
Issue: Whether or not Manila Bankers is barred
from denying the insurance claims based on
fraud or concealment.
Held: Yes. The “incontestability clause” is a
provision in law that after a policy of life
insurance made payable on the death of the
insured shall have been in force during the
lifetime of the insured for a period of two (2)
years from the date of its issue or of its last
reinstatement, the insurer cannot prove that
the policy is void ab initio or is rescindible by
reason of fraudulent concealment or
misrepresentation of the insured or his
agent.
The purpose of the law is to give protection to
the insured or his beneficiary by limiting the
rescinding of the contract of insurance on the
ground of fraudulent concealment or
misrepresentation to a period of only two (2)
years from the issuance of the policy or its last
reinstatement.
The insurer is deemed to have the necessary
facilities to discover such fraudulent
concealment or misrepresentation within a
period of two (2) years. It is not fair for the
insurer to collect the premiums as long as
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the insured is still alive, only to raise the
issue of fraudulent concealment or
misrepresentation when the insured dies in
order to defeat the right of the beneficiary to
recover under the policy.
Section 48 serves a noble purpose, as it
regulates the actions of both the insurer and the
insured. Under the provision, an insurer is given
two years – from the effectivity of a life insurance
contract and while the insured is alive – to
discover or prove that the policy is void ab initio
or is rescindible by reason of the fraudulent
concealment or misrepresentation of the insured
or his agent. After the two-year period lapses, or
when the insured dies within the period, the
insurer must make good on the policy, even
though the policy was obtained by fraud,
concealment, or misrepresentation. This is not to
say that insurance fraud must be rewarded, but
that insurers who recklessly and indiscriminately
solicit and obtain business must be penalized,
for such recklessness and lack of discrimination
ultimately work to the detriment of bona fide
takers of insurance and the public in general.
SUN LIFE v. MA. DAISY SIBYA G.R. No.
211212, June 08, 2016 Insurance,
Concealment, Two-year Contestability Period
NOVEMBER 14, 2018
FACTS:
On January 10, 2001, Atty. Jesus Sibya, Jr.
applied for life insurance with Sun Life. In his
Application for Insurance, he indicated that
he had sought advice for kidney problems.
Sun Life approved the application and issued
Insurance Policy No. 031097335.
The policy indicated the respondents as
beneficiaries and entitles them to a death benefit
of P1,000,000.00 should Atty. Jesus Jr. dies
on or before February 5, 2021, or a sum of
money if Atty. Jesus Jr. is still living on the
endowment date.
On May 11, 2001, Atty. Jesus Jr. died as a
result of a gunshot wound. As such, Ma. Daisy
filed a Claimant’s Statement with Sun Life to
seek the death benefits indicated in his
insurance policy.
However, Sun Life denied the claim on the
ground that the details on Atty. Jesus Jr.’s
medical history were not disclosed in his
application. Simultaneously, Sun Life tendered
a check representing the refund of the premiums
paid by Atty. Jesus.
The respondents claimed that Atty. Jesus Jr. did
not commit misrepresentation in his application
for insurance.
The RTC held that Atty. Jesus Jr. did not
commit material concealment and
misrepresentation when he applied for life
insurance with Sun Life. It observed that
given the disclosures and the waiver and
authorization to investigate executed by Atty.
Jesus Jr. to Sun Life, the latter had all the
means of ascertaining the facts allegedly
concealed by the applicant.
ISSUE:
Whether or not there was concealment or
misrepresentation when Atty. Jesus Jr.
submitted his insurance application with Sun
Life.
RULING:
In Manila Bankers Life Insurance Corporation v.
Aban, the Court held that if the insured dies
within the two-year contestability period, the
insurer is bound to make good its obligation
under the policy, regardless of the presence or
lack of concealment or misrepresentation. The
Court held:
Section 48 serves a noble purpose, as it
regulates the actions of both the insurer and the
insured. Under the provision, an insurer is given
two years – from the effectivity of a life insurance
contract and while the insured is alive – to
discover or prove that the policy is void ab
initio or is rescindible by reason of the
fraudulent concealment or misrepresentation
of the insured or his agent. After the two-year
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period lapses, or when the insured dies within
the period, the insurer must make good on the
policy, even though the policy was obtained by
fraud, concealment, or misrepresentation. This is
not to say that insurance fraud must be
rewarded, but that insurers who recklessly and
indiscriminately solicit and obtain business must
be penalized, for such recklessness and lack of
discrimination ultimately work to the detriment of
bona fide takers of insurance and the public in
general.
In the present case, Sun Life issued Atty.
Jesus Jr.’s policy on February 5, 2001. Thus,
it has two years from its issuance, to investigate
and verify whether the policy was obtained by
fraud, concealment, or misrepresentation. Upon
the death of Atty. Jesus Jr., however, on May
11, 2001, or a mere three months from the
issuance of the policy, Sun Life loses its right
to rescind the policy. As discussed in Manila
Bankers, the death of the insured within the two-
year period will render the right of the insurer to
rescind the policy nugatory. As such, the
incontestability period will now set in.
As correctly observed by the CA, Atty. Jesus Jr.
admitted in his application his medical treatment
for kidney ailment. Moreover, he executed an
authorization in favor of Sun Life to conduct
investigation in reference with his medical
history.
Indeed, the intent to defraud on the part of
the insured must be ascertained to merit
rescission of the insurance contract.
Concealment as a defense for the 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 the present case, Sun Life failed
to clearly and satisfactorily establish its
allegations, and is therefore liable to pay the
proceeds of the insurance.
POLICY
Lalican vs The Insular Life Assurance
Company Limited
G.R. No. 183526 August 25, 2009
Facts:
Violeta is the widow of the deceased Eulogio
C. Lalican (Eulogio). During his lifetime, Eulogio
applied for an insurance policy with Insular Life.
On 24 April 1997, Insular Life, through
Josephine Malaluan (Malaluan), its agent in
Gapan City, issued in favor of Eulogio Policy No.
9011992, which contained a 20-Year
Endowment Variable Income Package Flexi
Plan worth P500,000.00, with two riders
valued at P 500,000.00 each. Thus, the value of
the policy amounted to P1,500,000.00. Violeta
was named as the primary beneficiary. P Under
the terms of Policy No. 9011992, Eulogio was to
pay the premiums on a quarterly basis in the
amount of 8,062.00, payable every 24 April, 24
July, 24 October and 24 January of each year,
until the end of the 20-year period of the policy.
According to the Policy Contract, there was a
grace period of 31 days for the payment of
each premium subsequent to the first. If any
premium was not paid on or before the due
date, the policy would be in default, and if
the premium remained unpaid until the end
of the grace period, the policy would
automatically lapse and become void.
Eulogio paid the premiums due on 24 July 1997
and 24 October 1997. However, he failed to
pay the premium due on 24 January 1998,
even after the lapse of the grace period of 31
days. Policy No. 9011992, therefore, lapsed
and became void. Eulogio submitted to the
Cabanatuan District Office of Insular Life,
through Malaluan, on 26 May 1998, an
Application for Reinstatement of Policy No.
9011992, together with the amount of P
8,062.00 to pay for the premium due on 24
January 1998. In a letter dated 17 July 1998,
Insular Life notified Eulogio that his
Application for Reinstatement could not be
fully processed because, although he already
deposited P8,062.00 as payment for the 24
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January 1998 premium, he left unpaid the
overdue interest thereon amounting to
P322.48. Thus, Insular Life instructed Eulogio to
pay the amount of interest and to file another
application for reinstatement. Eulogio was
likewise advised by Malaluan to pay the
premiums that subsequently became due on 24
April 1998 and 24 July 1998, plus interest. On 17
September 1998, Eulogio went to Malaluans
house and submitted a second Application
for Reinstatement of Policy No. 9011992,
including the amount of P17,500.00,
representing payments for the overdue interest
on the premium for 24 January 1998, and the
premiums which became due on 24 April 1998
and 24 July 1998. As Malaluan was away on a
business errand, her husband received Eulogios
second Application for Reinstatement and
issued a receipt for the amount Eulogio
deposited. A while later, on the same day, 17
September 1998, Eulogio died of cardio-
respiratory arrest secondary to electrocution.
Issue:
Whether or not Eulogio had an existing insurable
interest in his own life until the day of his death
in order to have the insurance policy validly
reinstated.
Held:
No. An insurable interest is one of the most
basic and essential requirements in an
insurance contract. In general, an insurable
interest is that interest which a person is
deemed to have in the subject matter insured,
where he has a relation or connection with or
concern in it, such that the person will derive
pecuniary benefit or advantage from the
preservation of the subject matter insured and
will suffer pecuniary loss or damage from its
destruction, termination, or injury by the
happening of the event insured against. The
existence of an insurable interest gives a
person the legal right to insure the subject
matter of the policy of insurance. Section 10
of the Insurance Code indeed provides that
every person has an insurable interest in his
own life. Section 19 of the same code also
states that an interest in the life or health of a
person insured must exist when the insurance
takes effect, but need not exist thereafter or
when the loss occurs.
In the instant case, Eulogios death rendered
impossible full compliance with the conditions for
reinstatement of Policy No. 9011992. True,
Eulogio, before his death, managed to file his
Application for Reinstatement and deposit the
amount for payment of his overdue premiums
and interests thereon with Malaluan; but Policy
No. 9011992 could only be considered
reinstated after the Application for
Reinstatement had been processed and
approved by Insular Life during Eulogios lifetime
and good health.
The stipulation in a life insurance policy giving
the insured the privilege to reinstate it upon
written application does not give the insured
absolute right to such reinstatement by the mere
filing of an application. The insurer has the right
to deny the reinstatement if it is not satisfied as
to the insurability of the insured and if the latter
does not pay all overdue premium and all other
indebtedness to the insurer. After the death of
the insured the insurance Company cannot be
compelled to entertain an application for
reinstatement of the policy because the
conditions precedent to reinstatement can no
longer be determined and satisfied.
Malaluan did not have the authority to approve
Eulogios Application for Reinstatement.
Malaluan still had to turn over to Insular Life
Eulogios Application for Reinstatement and
accompanying deposits, for processing and
approval by the latter.
Violeta did not adduce any evidence that
Eulogio might have failed to fully understand
the import and meaning of the provisions of
his Policy Contract and/or Application for
Reinstatement, both of which he voluntarily
signed. While it is a cardinal principle of
insurance law that a policy or contract of
insurance is to be construed liberally in favor of
the insured and strictly as against the insurer
company, yet, contracts of insurance, like other
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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
sense.
ENRIQUEZ VS. SUN LIFE INSURANCE OF
CANADA
G.R. No. L-15895; November 29, 1920
FACTS:
This is an action made by the adminstrator of the
estate of Joaquin Herrer of P6,000.00 paid by
the deceased for a life annuity on the ground
that the contract for a life annuity had not been
perfected.
Joaquin Herrer made an application with Sun
Life for a life annuity. He paid the amount of
P6,000.00 to the Manila manager who gave him
a "provisional" receipt "subject to medical
examination and approval of the Company's
Central Office." The application was forwarded
to the head office in Canada and the policy was
issued on December 4, 1917 in Canada.
Meanwhile, on December 18, 1917, Herrer's
attorney wrote to the Manila Office stating that
Herrer wanted to withdraw his application to
which the office wrote a letter dated November
26, 1917 stating that the policy had already been
issued. The letter was received by the
attorney on December 21, 1917. Herrer had
died a day earlier on December 20, 1920.
The trial court ruled that the contract had been
perfected, hence this appeal.
ISSUES:
Whether or not the policyholder had received
notice of the acceptance of his policy;
Whether or not the contract of life annuity was
perfected.
HELD:
1. NO. The facts clearly show that Herrer was
not informed of the acceptance of the policy
before his death.
2. NO. The contract was not perfected. Art.
1262 provides that acceptance by letter does
not bind the person making the offer except
from the time it came to his knowledge. The
pertinent fact is that according to the provisional
receipt, the insurance company had to: 1)
conduct a medical examination; 2) had to obtain
the head office's approval; and 3) somehow
communicate such approval. It is true that the
letter notifying acceptance was deposited in the
post office, but the fact of notification is a
rebuttable presumption and the facts clearly
show that Herrer never received the notice of the
acceptance before his death.
G.R. No. L-32986 November 11, 1930
FRANCISCO JARQUE, plaintiff-appellee,
vs.
SMITH, BELL & CO., LTD., ET AL.,
defendants.
UNION FIRE INSURANCE CO., appellant.
Benj. S. Ohnick for appellant.
Vicente Pelaez for appellee.
OSTRAND, J.:
The plaintiff was the owner of the motorboat
Pandan and held a marine insurance policy for
the sum of P45,000 on the boat, the policy being
issued by the National Union Fire Insurance
Company and according to the provisions of a
"rider" attached to the policy, the insurance
was against the "absolute total loss of the
vessel only." On October 31, 1928, the ship ran
into very heavy sea off the Islands of Ticlin, and
it became necessary to jettison a portion of
the cargo. As a result of the jettison, the
National Union Fire Insurance Company was
assessed in the sum of P2,610.86 as its
contribution to the general average. The
insurance company, insisting that its obligation
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did not extend beyond the insurance of the
"absolute total loss of the vessel only, and to
pay proportionate salvage of the declared
value," refused to contribute to the settlement of
the general average. The present action was
thereupon instituted, and after trial the court
below rendered judgment in favor of the
plaintiff and ordered the defendant National
Union Fire Insurance Company to pay the
plaintiff the sum of P2,610.86 as its part of the
indemnity for the general average brought about
by the jettison of cargo. The insurance company
appealed to this court and assigns as errors (1)
"that the lower court erred in disregarding the
typewritten clause endorsed upon the policy,
Exhibit A, expressly limiting insurer's liability
thereunder of the total loss of the wooden vessel
Pandan and to proportionate salvage charges,"
and (2) "that the lower court erred in concluding
that defendant and appellant, National Union
Fire Insurance Company is liable to contribute to
the general average resulting from the jettison of
a part of said vessel's cargo."
I. As to the first assignment of error, little need
be said. The insurance contract, Exhibit A, is
printed in the English common form of marine
policies. One of the clauses of the document
originally read as follows:
Touching the Adventures and Perils which the
said National Union Fire Insurance Company is
content to bear, and to take upon them in this
Voyage; they are of the Seas, Men-of-War, Fire,
Pirates, Rovers, Thieves, Jettison, Letters of
Mart and Countermart, Surprisals, and Takings
at Sea. Arrest, Restraint and Detainments, of all
Kings Princes and People of what Nation,
Condition or Quality so ever; Barratry of the
Master and Marines, and of all other Perils,
Losses and Misfortunes, that have or shall come
to the Hurt, Detriment, or Damage of the said
Vessel or any part thereof; and in case of any
Loss or Misfortunes, it shall be lawful for the
Assured, his or their Factors, Servants, or
assigns, to sue, labour and travel for, in and
about the Defense. Safeguard, and recovery of
the said Vessel or any Charges whereof the said
Company, will contribute, according to the rate
and quantity of the sum herein assured shall be
of as much force and Virtue as the surest Writing
or Policy of Insurance made in LONDON.
Attached to the policy over and above the said
clause is a "rider" containing typewritten
provisions, among which appears in capitalized
type the following clause:
AGAINST THE ABSOLUTE TOTAL LOSS OF
THE VESSEL ONLY, AND TO PAY
PROPORTIONATE SALVAGE CHARGES OF
TEH DECLARED VALUE.
At the bottom of the same rider following the
type written provisions therein set forth are the
following words: "Attaching to and forming part
of the National Union Fire Insurance Co., Hull
Policy No. 1055."
It is a well settled rule that in case
repugnance exists between written and
printed portions of a policy, the written
portion prevails, and there can be no question
that as far as any inconsistency exists, the
above-mentioned typed "rider" prevails over the
printed clause it covers. Section 291 of the
Code of Civil Procedure provides that "when an
instrument consists partly of written words and
partly of a printed form and the two are
inconsistent, the former controls the latter."
(See also Joyce on Insurance, 2d ed., sec.
224, page 600; Arnould on Marine Insurance,
9th ed., sec. 73; Marine Equipment Corporation
vs. Automobile Insurance Co., 24 Fed. (2d), 600;
and Marine Insurance Company vs. McLahanan,
290 Fed., 685, 688.)
II. In the absence of positive legislation to the
contrary, the liability of the defendant insurance
company on its policy would, perhaps, be limited
to "absolute loss of the vessel only, and to pay
proportionate salvage of the declared value." But
the policy was executed in this jurisdiction and
"warranted to trade within the waters of the
Philippine Archipelago only." Here the liability for
contribution in general average is not based on
the express terms of the policy, but rest upon the
9|Page
theory that from the relation of the parties and
for their benefit, a quasi contract is implied by
law. Article 859 of the Code of Commerce is still
in force and reads as follows:
ART. 859. The underwriters of the vessel, of the
freight, and of the cargo shall be obliged to pay
for the indemnity of the gross average in so far
as is required of each one of these objects
respectively.
The article is mandatory in its terms, and the
insurers, whether for the vessel or for the freight
or for the cargo, are bound to contribute to the
indemnity of the general average. And there is
nothing unfair in that provisions; it simply places
the insurer on the same footing as other persons
who have an interest in the vessel, or the cargo
therein at the time of the occurrence of the
general average and who are compelled to
contribute (art. 812, Code of Commerce).
In the present case it is not disputed that the
ship was in grave peril and that the jettison of
part of the cargo was necessary. If the cargo
was in peril to the extent of call for general
average, the ship must also have been in great
danger, possibly sufficient to cause its absolute
loss. The jettison was therefore as much to the
benefit of the underwriter as to the owner of the
cargo. The latter was compelled to contribute to
the indemnity; why should not the insurer be
required to do likewise? If no jettison had take
place and if the ship by reason thereof had
foundered, the underwriter's loss would have
been many times as large as the contribution
now demanded. lawphil.net
The appealed judgment is affirmed with the cost
against the appellant. So ordered.
Pacific Timber v CA G.R. No. L-38613
February 25, 1982
J. De Castro
Facts:
The plaintiff secured temporary insurance
from the defendant for its exportation of
1,250,000 board feet of Philippine Lauan and
Apitong logs to be shipped from Quezon
Province to Okinawa and Tokyo, Japan.
Workmen’s Insurance issued a cover note
insuring the cargo of the plaintiff subject to its
terms and conditions.
The two marine policies bore the numbers 53
HO 1032 and 53 HO 1033. Policy No. 53 H0
1033 was for 542 pieces of logs equivalent to
499,950 board feet. Policy No. 53 H0 1033 was
for 853 pieces of logs equivalent to 695,548
board feet. The total cargo insured under the two
marine policies consisted of 1,395 logs, or the
equivalent of 1,195.498 bd. ft.
After the issuance of the cover note, but before
the issuance of the two marine policies Nos. 53
HO 1032 and 53 HO 1033, some of the logs
intended to be exported were lost during
loading operations in the Diapitan Bay.
While the logs were alongside the vessel, bad
weather developed resulting in 75 pieces of logs
which were rafted together co break loose from
each other. 45 pieces of logs were salvaged,
but 30 pieces were verified to have been lost
or washed away as a result of the accident.
Pacific Timber informed Workmen’s about the
loss of 32 pieces of logs during loading of SS
woodlock.
Although dated April 4, 1963, the letter was
received in the office of the defendant only on
April 15, 1963. The plaintiff claimed for
insurance to the value of P19,286.79.
Woodmen’s requested an adjustment company
to assess the damage. It submitted its report,
where it found that the loss of 30 pieces of logs
10 | P a g e
is not covered by Policies Nos. 53 HO 1032 and
1033 but within the 1,250,000 bd. ft. covered by
Cover Note 1010 insured for $70,000.00.
The adjustment company submitted a
computation of the defendant's probable liability
on the loss sustained by the shipment, in the
total amount of P11,042.04.
Woodmen’s wrote the plaintiff denying the
latter's claim on the ground they defendant's
investigation revealed that the entire shipment of
logs covered by the two marine policies were
received in good order at their point of
destination. It was further stated that the said
loss may be considered as covered under Cover
Note No. 1010 because the said Note had
become null and void by virtue of the issuance of
Marine Policy Nos. 53 HO 1032 and 1033.
The denial of the claim by the defendant was
brought by the plaintiff to the attention of the
Insurance Commissioner. The Insurance
Commissioner ruled in favor of indemnifying
Pacific Timber. The company added that the
cover note is null and void for lack of valuable
consideration. The trial court ruled in petitioner’s
favor while the CA dismissed the case. Hence
this appeal.
Issues:
WON the cover note was null and void for lack of
valuable consideration
WON the Insurance company was absolved
from responsibility due to unreasonable delay in
giving notice of loss.
Held: No. No. Judgment reversed.
Ratio:
1. The fact that no separate premium was
paid on the Cover Note before the loss
occurred does not militate against the
validity of the contention even if no such
premium was paid. All Cover Notes do not
contain particulars of the shipment that would
serve as basis for the computation of the
premiums. Also, no separate premiums are
required to be paid on a Cover Note.
The petitioner paid in full all the premiums,
hence there was no account unpaid on the
insurance coverage and the cover note. If the
note is to be treated as a separate policy instead
of integrating it to the regular policies, the
purpose of the note would be meaningless. It is
a contract, not a mere application for insurance.
It may be true that the marine insurance policies
issued were for logs no longer including those
which had been lost during loading operations.
This had to be so because the risk insured
against is for loss during transit, because the
logs were safely placed aboard.
The non-payment of premium on the Cover Note
is, therefore, no cause for the petitioner to lose
what is due it as if there had been payment of
premium, for non-payment by it was not
chargeable against its fault. Had all the logs
been lost during the loading operations, but after
the issuance of the Cover Note, liability on the
note would have already arisen even before
payment of premium. Otherwise, the note would
serve no practical purpose in the realm of
commerce, and is supported by the doctrine that
where a policy is delivered without requiring
payment of the premium, the presumption is that
a credit was intended and policy is valid.
2. The defense of delay can’t be sustained. The
facts show that instead of invoking the ground of
delay in objecting to petitioner's claim of
recovery on the cover note, the insurer never
had this in its mind. It has a duty to inquire when
the loss took place, so that it could determine
whether delay would be a valid ground of
objection.
There was enough time for insurer to determine
if petitioner was guilty of delay in communicating
the loss to respondent company. It never did in
the Insurance Commission. Waiver can be
raised against it under Section 84 of the
Insurance Act.
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Great Pacific v CA G.R. No. L-31845 April 30,
1979
J. De Castro
Facts:
Ngo Hing filed an application with the Great
Pacific for a twenty-year endowment policy in
the amount of P50,000.00 on the life of his one-
year old daughter Helen. He supplied the
essential data which petitioner Mondragon, the
Branch Manager, wrote on the form. The latter
paid the annual premium the sum of P1,077.75
going over to the Company, but he retained the
amount of P1,317.00 as his commission for
being a duly authorized agent of Pacific Life.
Upon the payment of the insurance premium,
the binding deposit receipt was issued Ngo Hing.
Likewise, petitioner Mondragon handwrote at the
bottom of the back page of the application form
his strong recommendation for the approval of
the insurance application. Then Mondragon
received a letter from Pacific Life disapproving
the insurance application. The letter stated that
the said life insurance application for 20-year
endowment plan is not available for minors
below seven years old, but Pacific Life can
consider the same under the Juvenile Triple
Action Plan, and advised that if the offer is
acceptable, the Juvenile Non-Medical
Declaration be sent to the company.
The non-acceptance of the insurance plan by
Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo
Hing. Instead, on May 6, 1957, Mondragon
wrote back Pacific Life again strongly
recommending the approval of the 20-year
endowment insurance plan to children, pointing
out that since the customers were asking for
such coverage.
Helen Go died of influenza. Ngo Hing sought the
payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for
the recovery before the Court of First Instance of
Cebu, which ruled against him.
Issues:
1. Whether the binding deposit receipt
constituted a temporary contract of the life
insurance in question
2. Whether Ngo Hing concealed the state of
health and physical condition of Helen Go,
which rendered void the policy
Held: No. Yes. Petition dismissed.
Ratio:
The receipt was intended to be merely a
provisional insurance contract. Its perfection was
subject to compliance of the following conditions:
(1) that the company shall be satisfied that the
applicant was insurable on standard rates; (2)
that if the company does not accept the
application and offers to issue a policy for a
different plan, the insurance contract shall not be
binding until the applicant accepts the policy
offered; otherwise, the deposit shall be refunded;
and (3) that if the company disapproves the
application, the insurance applied for shall not
be in force at any time, and the premium paid
shall be returned to the applicant.
The receipt is merely an acknowledgment that
the latter's branch office had received from the
applicant the insurance premium and had
accepted the application subject for processing
by the insurance company. There was still
approval or rejection the same on the basis of
whether or not the applicant is "insurable on
standard rates." Since Pacific Life disapproved
the insurance application of respondent Ngo
Hing, the binding deposit receipt in question had
never become in force at any time. The binding
deposit receipt is conditional and does not insure
outright. This was held in Lim v Sun.
The deposit paid by private respondent shall
have to be refunded by Pacific Life.
2. Ngo Hing had deliberately concealed the
state of health of his daughter Helen Go. When
he supplied data, he was fully aware that his
one-year old daughter is typically a mongoloid
12 | P a g e
child. He withheld the fact material to the risk
insured.
“The contract of insurance is one of perfect
good faith uberrima fides meaning good
faith, absolute and perfect candor or
openness and honesty; the absence of any
concealment or demotion, however slight.”
The concealment entitles the insurer to rescind
the contract of insurance.
G.R. No. L-15774 November 29, 1920
PILAR C. DE LIM, plaintiff-appellant,
vs.
SUN LIFE ASSURANCE COMPANY OF
CANADA, defendant-appellee.
Sanz and Luzuriaga for appellant.
Cohn and Fisher for appellee.
MALCOLM, J.:
This is an appeal by plaintiff from an order of the
Court of First Instance of Zamboanga sustaining
a demurrer to plaintiff's complaint upon the
ground that it fails to state a cause of action.
As the demurrer had the effect of admitting the
material facts set forth in the complaint, the facts
are those alleged by the plaintiff. On July 6,
1917, Luis Lim y Garcia of Zamboanga 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
herein, 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 as follows:
Received (subject to the following stipulations
and agreements) the sum of four hundred and
thirty-three pesos, being the amount of the first
year's premium for a Life Assurance Policy on
the life of Mr. Luis D. Lim y Garcia of
Zamboanga for P5,000, for which an application
dated the 6th day of July, 1917, has been made
to the Sun Life Assurance Company of Canada.
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
amount herein acknowledged shall be returned.
[SEAL.] (Sgd.) T. B. MACAULAY,
President.
(Sgd.) A. F. Peters, Agent.
Our duty in this case is to ascertain the correct
meaning of the document above quoted. A
perusal of the same many times by the writer
and by other members of the court leaves a
decided impression of vagueness in the mind.
Apparently it is to be a provisional policy "for four
months only from the date of this application."
We use the term "apparently" advisedly,
because immediately following the words fixing
the four months period comes the word
"provided" which has the meaning of "if."
Otherwise stated, the policy for four months is
expressly made subjected to the affirmative
condition that "the company shall confirm this
agreement by issuing a policy on said
13 | P a g e
application when the same shall be submitted to
the head office in Montreal." To reenforce the
same there follows the negative condition —
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." Certainly, language could
hardly be used which would more clearly
stipulate that the agreement should not go into
effect until the home office of the company
should confirm it by issuing a policy. As we read
and understand the so-called provisional policy it
amounts to nothing but an acknowledgment on
behalf of the company, that it has received from
the person named therein the sum of money
agreed upon as the first year's premium upon a
policy to be issued upon the application, if the
application is accepted by the company.
It is of course a primary rule that a contract of
insurance, like other contracts, must be
assented to by both parties either in person or
by their agents. So long as an application for
insurance has not been either accepted or
rejected, it is merely an offer or proposal to
make a contract. The contract, to be binding
from the date of the application, must have been
a completed contract, one that leaves nothing to
be done, nothing to be completed, nothing to be
passed upon, or determined, before it shall take
effect. There can be no contract of insurance
unless the minds of the parties have met in
agreement. Our view is, that a contract of
insurance was not here consummated by the
parties.lawph!l.net
Appellant relies on Joyce on Insurance.
Beginning at page 253, of Volume I, Joyce
states the general rule concerning the agent's
receipt pending approval or issuance of policy.
The first rule which Joyce lays down is this: If the
act of acceptance of the risk by the agent and
the giving by him of a receipt, is within the scope
of the agent's authority, and nothing remains but
to issue a policy, then the receipt will bind the
company. This rule does not apply, for while
here nothing remained but to issue the policy,
this was made an express condition to the
contract. The second rule laid down by Joyce is
this: Where an agreement is made between the
applicant and the agent whether by signing an
application containing such condition, or
otherwise, that no liability shall attach until the
principal approves the risk and a receipt is given
buy the agent, such acceptance is merely
conditional, and it subordinated to the act of the
company in approving or rejecting; so in life
insurance a "binding slip" or "binding receipt"
does not insure of itself. This is the rule which
we believe applies to the instant case. The third
rule announced by Joyce is this: Where the
acceptance by the agent is within the scope of
his authority a receipt containing a contract for
insurance for a specific time which is not
absolute but conditional, upon acceptance or
rejection by the principal, covers the specified
period unless the risk is declined within that
period. The case cited by Joyce to substantiate
the last principle is that a Goodfellow vs. Times
& Beacon Assurance Com. (17 U. C. Q. B.,
411), not available.
The two cases most nearly in point come from
the federal courts and the Supreme Court of
Arkansas.
In the case of Steinle vs. New York Life
Insurance Co. ([1897], 81 Fed., 489} the facts
were that the amount of the first premium had
been paid to an insurance agent and a receipt
given therefor. The receipt, however, expressly
declared that if the application was accepted by
the company, the insurance shall take effect
from the date of the application but that if the
application was not accepted, the money shall
be returned. The trite decision of the circuit court
of appeal was, "On the conceded facts of this
case, there was no contract to life insurance
perfected and the judgment of the circuit court
must be affirmed."
In the case of Cooksey vs. Mutual Life Insurance
Co. ([1904], 73 Ark., 117) the person applying
for the life insurance paid and amount equal to
the first premium, but the application and the
14 | P a g e
receipt for the money paid, stipulated that the
insurance was to become effective only when
the application was approved and the policy
issued. The court held that the transaction did
not amount to an agreement for preliminary or
temporary insurance. It was said:
It is not an unfamiliar custom among life
insurance companies in the operation of the
business, upon receipt of an application for
insurance, to enter into a contract with the
applicant in the shape of a so-called "binding
receipt" for temporary insurance pending the
consideration of the application, to last until the
policy be issued or the application rejected, and
such contracts are upheld and enforced when
the applicant dies before the issuance of a policy
or final rejection of the application. It is held, too,
that such contracts may rest in parol. Counsel
for appellant insists that such a preliminary
contract for temporary insurance was entered
into in this instance, but we do not think so. On
the contrary, the clause in the application and
the receipt given by the solicitor, which are to be
read together, stipulate expressly that 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; Mohrstadt vs. Mutual Life Ins. Co.,
115 Fed., 81, 52 C. C. A., 675; Steinle vs. New
York Life Ins. Co., 81 Fed., 489, 26 C. C. A.,
491." (See further Weinfeld vs. Mutual Reserve
Fund Life Ass'n. [1892], 53 Fed, 208' Mohrstadt
vs. Mutual Life Insurance Co. [1902], 115 Fed.,
81; Insurance co. vs. Young's Administrator
[1875], 90 U. S., 85; Chamberlain vs. Prudential
Insurance Company of America [1901], 109
Wis., 4; Shawnee Mut. Fire Ins. Co. vs. McClure
[1913], 39 Okla., 509; Dorman vs. Connecticut
Fire Ins. Co. [1914], 51 contra, Starr vs. Mutual
Life Ins. Co. [1905], 41 Wash., 228.)
We are of the opinion that the trial court
committed no error in sustaining the demurrer
and dismissing the case. It is to be noted,
however, that counsel for appellee admits the
liability of the company for the return of the first
premium to the estate of the deceased. It is not
to be doubted but that the Sun Life Assurance
Company of Canada will immediately, on the
promulgation of this decision, pay to the estate
of the late Luis Lim y Garcia the of P433.

The order appealed from, in the nature of a final

judgment is affirmed, without special finding as
to costs in this instance. So ordered.

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