INSURANCE LAW CASE DIGESTS 

 
 
I. GENERAL PROVISIONS OF THE INSURANCE CODE 
 
Del Rosario v. Equitable Insurance & Casualty Co. 
Simeon Del Rosario, father of the insured who died from drowning, filed a claim for payment with Equitable Insurance 
& Casualty Co. (EICC) but the latter refused to pay more than P1,000. Thereafter, Del Rosario filed a case against EICC 
with the RTC for the P2,000 balance, contending that under the policy, they are entitled to P1,000 to P3,000 as 
indemnity. The RTC ruled that Del Rosario is entitled to recover the total amount of P3,000. The RTC explained that, 
since the policy does not positively state a definite amount, there is an ambiguity in it that must be interpreted in favor 
of the insured and strictly against the insurer. 
RULING: The SC affirmed the RTC’s ruling. When the terms of an insurance policy are ambiguous, equivocal, or 
uncertain, then it must be construed strictly against the insurer, and liberally in favor of the insured, so as to effect the 
dominant purpose of indemnity or payment to the insured, especially where a forfeiture is involved. The reason for this 
rule is that the insured usually has no voice in the selection or arrangement of the words employed and that the 
language of the contract is selected with great care and deliberation by expert and legal advisers employed by, and 
acting exclusively in the interest of the insurance company. 
 
Taurus Taxi Co. v. Capital Insurance & Surety Co., Inc. 
On December 17, 1960, Capital Insurance & Surety Co., Inc. (Capital) delivered to the Respondent Plastic Era 
Manufacturing Co., Inc. (Plastic Era) its open fire policy, insuring its building, equipment, raw materials, products, and 
accessories located at Sheridan Street, Mandaluyong, Rizal, for the period between December 15, 1960 and December 
15, 1961, for up to P100,000 as coverage. Plastic Era, however, did not pay the premiums due. On January 8, 1961, 
Plastic Era delivered to Capital a check for P1,000 as its partial payment, post-dated to January 16, 1961. CISCO tried 
to deposit the check the next month but it was dishonored by the bank due to insufficient funds. According to the 
records, on January 19, 1961 Plastic Era had a balance of P1,193.41 in the bank. On January 18, 1961, Plastic Era’s 
properties were destroyed in a fire, amounting to a loss of P283,875 in value. It was later found out that the same 
properties were also insured by Philamgen Insurance Company (PIC) for P200,000. Capital then refused Plastic Era’s 
claim, on the ground of failure to pay the insurance premium, hence, there was no insurance contract to begin with. 
Both the CFI and the CA ruled that there was a valid insurance contract between Plastic Era and Capital, because an 
extension of credit was granted by Capital, despite failing to encash the payment. 
RULING: The SC affirmed the ruling of the lower courts. Article 1249 of the Civil Code provides that “the delivery of 
promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of 
payment only when they have been cashed, or when through the fault of the creditor they have been impaired.” In this 
case, Capital accepted the promise of Plastic Era to pay the insurance premium within 30 days from the effective date 
of policy. Considering that the insurance policy is silent as to the mode of payment, Capital 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. By accepting its promise to pay the insurance premium within 30 days from the effectivity date of the 
policy, Capital, in effect, extended credit to Plastic Era. Where credit is given by an insurance company for the 
payment of the premium, it has no right to cancel the policy for non-payment, except by putting the insured in default 
and giving him personal notice. Having held the check for such an unreasonably long period of time, Capital is 
estopped from claiming a forfeiture of its policy for non-payment even if the check had been dishonored later. 
 
CCC Insurance Corp. v.CA 
Carlos Robes insured with CCC Insurance Corp. (CCC) his Dodge Kingsway car against loss or damage through 
accident, for an amount not exceeding P8,000. On June 25, 1961, Domingo Reyes, the one driving Robes’ car, met a 
vehicular collision along Rizal Ave. Ext., Potrero, Rizal. CCC denied Robes’ claim, reasoning that the driver was not an 
"authorized driver.” Reyes, who cannot read and write, who has never passed any examination for drivers, and has not 
applied for a license from the duly constituted government agency entrusted with the duty of licensing drivers, cannot 
be considered an authorized driver. 
● “Authorized driver,” according to the policy, can be any of the following: 
○ The insured; or 
  
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 ○ Any person driving on the insured’s order or with his permission, provided that the person driving is 
permitted in accordance with licensing laws or regulations to drive the motor vehicle covered by this 
policy, or has been permitted and is not disqualified by order of a court by reason of any enactment 
or regulation from driving such motor vehicle. 
The lower courts ruled in favor of Robes, and CCC was ordered to indemnify Robes for the damage. 
RULING: CCC failed to prove that Reyes’ driver’s license is void, and officers from the Motor Vehicles Office were not 
examined as witnesses in order to determine the validity of Reyes’ license. There is also no proof that Robes knew the 
circumstances surrounding the issuance of Reyes’ license. Absent any proof to the contrary, Reyes’ license must be 
presumed to be valid and he must therefore be deemed as an authorized driver. 
 
Assoc. of Baptists for World Evangelism v. Fieldmen's Insurance Co. 
The Association of Baptists for World Evangelism, Inc., (ABWEI) is a domestic religious corporation, which has an 
insurable interest in a Chevrolet Carry, which was insured with Fieldmen’s Insurance Co. (FIC) under its Private Car 
Comprehensive Policy. Dr. Antonio Lim, the representative of ABWEI, placed the Chevrolet at the Jones Monument 
Mobilgas Service Station in Davao City, for it to be displayed for sale. The Chevrolet was under the care of the 
station's operator Rene Te. Romeo Catiben, one of the boys at the Jones Monument Mobilgas Service Station, and 
nephew of Te’s wife, took theChevrolet for a joy ride without the prior permission from Lim or Te. On Catiben’s way 
back to Davao City, the Chevrolet, due to some mechanical defect, accidentally bumped an electric post. Since the 
policy covers loss or damage caused by burglary or theft, ABWEI filed a claim with FIC, but the same was denied. In an 
action brought by ABWEI, the trial court ordered FIC to pay ABWEI P5,000 as indemnity for the damage sustained by 
the vehicle. FIC, however, disagrees with the trial court’s decision, contending that the car was not actually stolen, and 
that Catiben had no prior criminal conviction as to constitute his taking of the car as theft. 
RULING: Prior conviction for theft is not necessary. Catiben’s taking of the car for a joyride without permission from 
Lim or Te constitutes theft within the meaning of the insurance policy. 
 
Landicho v. GSIS 
Engr. Flaviano Landicho applied for an optional additional life insurance policy with GSIS. His application contained, 
among others, the following: “(c) that this application serves as a letter of authority to the Collecting Officer of our 
Office through the GSIS to deduct from my salary the monthly premium in the amount of P33.36, beginning the month 
of May 1964 and every month thereafter, until notice of its discontinuance shall have been received... (d) the failure to 
deduct from my salary the monthly premiums shall not make the policy lapse, however, the premium account shall be 
considered as indebtedness which, I bind myself to pay the System... (e) my policy shall be made effective on the first 
day of the month next following the month the first premium is paid, provided that it is not more than 90 days before 
or after the date of the medical exam was conducted, if required.” Thereafter, on June 1, 1964, GSIS issued a policy in 
favor of Landicho in the sum of P7,900. However, on June 29, 1966, Landicho died in an airplane crash. Mrs. Landicho 
filed a claim with GSIS for the sum of P15,800 as the double indemnity due under the policy. GSIS, however, denied 
her claim, on the ground that the policy was never in force because the premiums therefor were never paid. Mrs. 
Landicho contended that under subdivision (c), failure to deduct the premiums from the salary shall be considered as 
indebtedness, therefore, the policy was still in force despite lack of payment of the premiums. 
RULING: Mrs. Landicho is entitled to the insurance proceeds. The language of subdivisions (c), (d), and (e) of the 
policy created ambiguity, which should be resolved against the party responsible therefor.  
 
American Home Assurance Co. v. Tantoco Enterprises, Inc. 
Tantoco Enterprises, Inc. (TEI) is a coconut oil milling and refining company. It owned two mills, both located at its 
factory compound in Lucena City. The two oil mills are separately covered by fire insurance policies issued by 
American Home Assurance Co. (AHAC), On September 30, 1991, a fire broke out and gutted and consumed the new 
oil mill. AHAC rejected the claim for the insurance proceeds, on the ground that no policy was issued by it covering the 
burned oil mill. It stated that the new oil mill was under Building No. 15, while the insurance coverage extended only to 
the oil mill under Building No. 5. 
RULING: In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in 
giving effect to the insurance. In view of the custom of insurance agents to examine buildings before writing policies 
upon them, and since a mistake as to the identity and character of the building is extremely unlikely, the courts are 
inclined to consider the policy of insurance covers any building which the parties manifestly intended to insure, 
  
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however inaccurate the description may be. Notwithstanding, therefore, the misdescription in the policy, it is beyond 
dispute, to our mind, that what the parties manifestly intended to insure was the new oil mill. If the parties really 
intended to protect the first oil mill, then there is no need to specify it as new. Indeed, it would be absurd to assume 
that the TEI would protect its first oil mill for different amounts and leave uncovered its second one. 
 
Fortune Insurance & Surety Co., Inc. v. CA 
Fortune Insurance & Surety Co., Inc. (Fortune) entered into a Money, Security, and Payroll Robbery policy contract with 
Producers Bank of the Philippines (PBP). While in the process of transferring P725,000 in cash, under the custody of 
Maribeth Alampay (teller), PBP’s armored car, driven by Benjamin Magalong and escorted by Saturnino Atiga (security 
guard), was robbed. After investigation by the Pasay Police, Alampay, Magalong, and Atiga were charged with 
violation of P.D. No. 532. PBP demanded that Fortune pay for the loss of the P725,000 stolen, but Fortune refused, 
saying that the incident is excluded from the coverage of the insurance policy, Alampay, Magalong, and Atiga being 
employees of PBP. 
● “General Exceptions: The company shall not be liable in respect of… any loss caused by any dishonest, 
fraudulent, or criminal act of the insured, or any officer, employee, partner, director, trustee, or authorized 
representative of the insured…” 
RULING: Fortune is exempt from liability because all 3 acted as agents of PBP, even if the driver was a contractual 
employee from PRC Management Systems. The word “employee” in the insurance policy must be understood in its 
ordinary meaning. 
 
Sun Insurance Office, Ltd. v. CA 
Sun Insurance Office, Ltd. (Sun) issued a Personal Accident Policy in favor of Felix Lim, with a face value of P200,000. 
Lim was showing his new gun to his secretary, Pilar Nalagon, during a family gathering. She told him to be careful, but 
Lim assured her that the gun is not loaded. To prove it, he pointed the gun to his temple and fired. Unfortunately, the 
gun was in fact loaded and Lim died with a bullet wound on his head. Lim’s family claimed for the insurance proceeds, 
reasoning that Lim’s death was caused by an accident covered by the insurance, but this was denied by Sun. Sun 
insisted that the incident was solely caused by Lim’s own negligence, therefore, it cannot be considered an accident. 
RULING: While Lim was unquestionably negligent, there is nothing in the insurance policy that relieves the insurer of 
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. The term “accident” in insurance contracts must be construed and 
understood in its ordinary meaning: that which happens by chance or fortuity, without intention or design, and which is 
unexpected, unusual, and unforeseen. 
 
Guingon v. Del Monte 
Julio Aguilar was the owner and operator of several jeepneys insured with Capital Insurance & Surety Co., Inc. 
(Capital). On February 20, 1961, the jeepneys operated by Aguilar, driven by Iluminado del Monte and Gervacio 
Guingon, figured in a vehicular accident. Guingon died because of the collision, and Del Monte was thereafter charged 
with homicide through reckless imprudence and was penalized 4 months imprisonment. The heirs of Guingon filed an 
action for damages praying that P82,771.80 be paid to them jointly and severally by Del Monte, Aguilar, and Capital. 
The CFI ordered Del Monte and Aguilar to jointly and severally pay the heirs of Guingon the sum of P8,572.95 as 
damages for Guingon’s death, plus P1,000 for attorney’s fees, plus costs. The CFI also ordered Capital to pay P5,000 
plus P500 as attorney’s fees and costs, in partial satisfaction of the judgment rendered against Del Monte and Aguilar. 
Can the heirs sue the insured and the insurer jointly? 
RULING: The heirs of Guingon may sue the insured and the insurer jointly. 
● The policy contains the following provision: “the insurer agrees to indemnify the insured against all sums... 
which the insured shall become legally liable to pay in respect of death or bodily injury to any person...” 
● The right of a person injured to sue the insurer of the party at fault depends on whether the contract of 
insurance was intended to benefit third persons. 
○ Test: Where the contract provides for indemnity against liability to third persons, then third persons 
to whom the insured is liable, can sue the insurer. On the other hand, 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 through 
payment to third persons, said third persons' recourse being thus limited to the insured alone. 
  
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Tiu v. Arriesgado 
A cargo truck passing upon a bridge in Sitio Aggies had to park on the side of the road because its tires exploded. A 
bus operated by William Tiu and driven by Virgilio Laspinas drove by, failed to stop in time, and collided with the truck, 
which resulted in the injuries of several passengers. Pedro Arriesgado, one of the passengers, filed a complaint for 
breach of contract of carriage and damages against Tiu and Laspinas. Tiu and Laspinas, for their part, filed a 
third-party complaint against the following: Philippine Phoenix Surety and Insurance (PPSII), Tiu’s insurer; Benjamin 
Condor, the registered owner of the cargo truck; and Sergio Pedrano, the driver of the truck. 
PPSII, however, denied liability, because Tiu failed to attach a copy of the terms of the insurance contract when he 
filed the third-party complaint. PPSII also clarified that it had already indemnified the aggrieved passengers in the 
form of vouchers. The RTC and the CA ruled that PPSII is no longer liable in the third-party complaint. 
RULING:  
● The provisions of the Civil Code on Common Carriers apply in this case (Articles 1733, 1755, and 1756). It is 
undisputed that the passengers were not safely transported to their destination. Because of this breach of 
the contract of carriage, Tiu and Laspinas must prove that they exercised extraordinary diligence in the 
carrying out of the contract to avoid liability. 
● PPSII is still liable. The policy issued in favor of Tiu expressly provided that the limit of the insurer’s liability 
for each person was P12,000, while the limit per accident was pegged at P50,000. PPSII should have paid 
P1,113.80 for Pedro Arriesgado’s hospitalization expenses and P12,000 for the death of Felisa Arriesgado. 
The total amount of the claims, even when added to that of the other injured passengers which PPSII insists 
that it already settled, would not exceed the P50,000 limit under the insurance agreement. 
○ An insurer in a contract of indemnity for third-party liability is directly liable to the injured party up to 
the extent specified in the contract, but it cannot be held solidarily liable beyond that amount. 
 
Vda de Maglana v. Consolacion 
Lope Maglana was an employee of the Bureau of Customs. On December 20, 1978, while riding a motorcycle on his 
way to work, he was bumped by a jeep owned by Patricio Destrajo and driven by Pepito Into. The heirs of Maglana 
filed an action for damages against Destrajo and Afisco Insurance Corp. (Afisco). Petitioners (family of Maglana) 
attempted to claim the entire amount of P53,901.70 from Afisco. Afisco, however, insisted that it cannot be held 
solidarily liable for the entire amount because its liability only amounts to P20,000 based on its insurance policy with 
Destrajo. 
RULING: Afisco may only be held solidarily liable for the claim up to P20,000, and any excess of that amount must be 
demanded from Destrajo alone. In solidary obligations, the creditor may enforce the entire obligation against one of 
the solidary debtors. But in an insurance contract the insurer undertakes for a consideration to indemnify the insured 
against loss, damage, or liability arising from an unknown or contingent event. 
 
Villacorta v. IC 
Empire Insurance Co. (EIC) issued a Comprehensive Motor Car Insurance policy for Jewel Villacorta. EIC undertook to 
indemnify the insured against loss or damage to the car, caused by the following: 
● By accidental collision or overturning, or collision or overturning consequent upon mechanical breakdown or 
consequent upon wear and tear 
● By fire, external explosion, self-ignition or lightning, burglary, housebreaking, or theft 
● By malicious act 
The policy issued by EIC also contained an Authorized Driver Clause, which provides that if the person driving is other 
than the insured, he must have been duly authorized by the insured to make the insurance company liable for the 
driver's negligence. Villacorta brought her car to the repair shop. Without her knowledge, the employees of the shop 
took her car out for a joyride, during which the car figured a vehicular accident. The accident resulted in the death of 
some of the passengers and extensive damage to the car itself. Villacorta filed a claim for total loss of the car, but the 
insurance company denied the same, invoking the Authorized Driver Clause. The Insurance Commission (IC) upheld 
the denial of the insurance company, because the car was not actually stolen. Villacorta and her husband insist that 
they did not actually know the person who was driving their car. All they know is that they took it to a repair shop. 

  
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RULING: A car-owner who entrusts his car to an established car repair shop necessarily entrusts his car keys to the 
shop owner and the employees. This shows that the car-owner authorizes the employees to drive the car for 
legitimate reasons, like road-testing. 
 
Palermo v. Pyramid Insurance 
Andrew Palermo was driving his car with an expired license when he got into an accident. He filed a complaint against 
Pyramid Insurance for payment of his claim under his Private Car Comprehensive Policy, but Pyramid denied the 
claim, invoking the Authorized Driver Clause. Pyramid explained that, since he was no longer authorized by law to 
drive at that moment, he must be considered an unauthorized driver under the terms of the contract. 
● An Authorized Driver Clause provides that if the person driving is other than the insured, he must have been 
duly authorized by the insured to make the insurance company liable for the driver's negligence 
RULING: The driver of the vehicle was the insured himself, therefore he is still an "authorized" number. Driving with an 
expired license is a violation of the Motor Vehicle Law, and such violation does not bar the insured from recovering 
under the insurance contract. The Authorized Driver Clause may only be invoked when the driver is a person other 
than the insured himself. 
 
Tanco v. Philippine Guaranty Co. 
Arturo Tanco’s car was being driven by his brother, Manuel Tanco, when the car was involved in a collision with a 
pick-up delivery van. At that time, Manuel’s license was expired, and he was not able to renew the same until the week 
after the accident. Arturo filed a claim with Philippine Guaranty Co. (PGC) for the costs of the repairs, but PGC 
rejected the same. Arturo filed a claim with the trial court. Both the MTC and the CFI ruled in favor of Arturo, but PGC 
questioned such rulings, because of the exception clause in the policy, which states that “the company shall not be 
liable in respect of any accident, loss, damage, or liability caused, sustained, or incurred, while the insured vehicle is 
being driven by any person other than an Authorized Driver.” The policy further provides that the Authorized Driver 
refers to “the insured himself, or any person driving on the insured’s order or with his permission, provided that the 
person driving is permitted in accordance with the licensing or other laws or regulations to drive the motor vehicle, or 
has been permitted and is not disqualified by order of a court or by reason of any enactment or regulation in that 
behalf, from driving such motor vehicle.” 
RULING: The SC reversed the rulings of the lower courts. The exclusion clause invoked by PGC is clear. It does not 
refer to violations of law in general, which indeed would tend to render automobile insurance practically a sham, butto 
a specific situation where a person other than the insured himself, even upon his order or with his permission, drives 
the motor vehicle without a license or with one that has already expired. No principle of law or of public policy 
militates against the validity of such a provision. 
 
Summit Guaranty & Insurance Co., Inc. v. CA 
Certeza & Sons, Inc. (CSI) acquired a Toyota Jeep from Felipe Uy, which the former insured with Summit Guaranty & 
Insurance Co., Inc. (Summit) for third-party liability the amount of P20,000, for the period between October 19, 1976 
and October 19, 1977. On August 20, 1977, the insured vehicle was being driven by Rico Certeza, when it sideswept a 
pedestrian and collided with a jeepney owned by Daniel Dorillo. The accident caused the death of George Certeza, a 
passenger of the insured vehicle, and injuries to the pedestrian and to the passengers of the jeepney. CSI claimed for 
indemnification for the amounts they paid to the injured parties, but Summit denied the claim, reasoning that the 
incident falls under the excepted risk provision of the policy. A complaint was filed against it before the Insurance 
Commission (IC). When the IC ordered Summit to pay the sum of P20,000 with interest to the insured, Summit 
appealed the judgment to the CA, but the CA dismissed the petition. Summit then questioned the validity of the CA’s 
dismissal of the case, averring that the CA had no jurisdiction. 
RULING: Summit is estopped from invoking the plea of lack of jurisdiction after submitting itself to the jurisdiction of 
the CA and assailing its jurisdiction only after a judgment was rendered adverse to it. At any rate, Summit’s defense 
that it is not liable because the incident is an excepted risk is without merit. 
● The excepted risk provision exempts Summit from liability in case of death or injury to any person in the 
employment of the insured arising out of and in the course of such employment, and death or injury to a 
member of the insured’s household who is a passenger in the motor vehicle. 

  
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 ● There is no evidence that George was an employee of CSI, and that his death arose out of and in the course 
of his employment at CSI. The burden lies with Summit, and not CSI, to prove that George was an employee 
of CSI, for Summit to be exempted from liability. 
 
Gutierrez v. Capital Insurance & Surety Co., Inc. 
Capital Insurance & Surety Co., Inc. (Capital) insured on December 7, 1961 Agapito Gutierrez’s jeepney for 1 year 
against passenger and third-party liability. The policy provided that passenger liability would not exceed P5,000 per 
person, and under Item No. 13 thereof, it is required that the Authorized Drive be a holder of a valid and subsisting 
professional driver’s license. On May 29, 1962, Gutierrez’s jeepney was involved in an accident in Buendia Ave., 
Makati, which resulted in the death of a passenger named Agatonico Ballega. Teofilo Ventura, the jeepney driver, did 
not have his license during the time of the accident. Instead, he had a carbon copy of a traffic violation report issued 
by a policeman, dated February 22, 1962, with a notation that such traffic violation report will serve as a temporary 
operator’s permit for 15 days. In other words, Ventura was holding an expired temporary operator’s permit when the 
accident occurred. Gutierrez indemnified the widow of Ballega, but Capital refused to reimburse Gutierrez therefor, so 
Gutierrez filed an action against Capital before the trial court. 
RULING: Ventura’s expired temporary operator’s permit is the same as having an expired driver’s license. Therefore, 
the ruling in ​Tanco v. Philippine Guaranty Company​ applies in this case. The policy defines the term “authorized driver” 
to be the insured himself or any person driving on the insured’s order or with his permission, provided that he is 
permitted to drive under the licensing laws. 
   

  
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II. PARTIES TO AN INSURANCE CONTRACT 
 
Enriquez v. Sun Life Assurance Co. 
Joaquin Herrer applied for a life annuity on September 24, 1917. Two days later, he paid for the 6,000-Peso premium 
and was issued a receipt. The policy was issued on December 4, but on December 18, Herrer wrote a letter to Sun Life, 
asking for the withdrawal of his application. Sun Life sent a letter informing Herrer that his application has been 
approved, but Herrer never received it. 
● Article 1262 of the Civil Code provides that an acceptance made by letter shall not bind the person making 
the offer, except from the time it came to his knowledge. 
RULING: The contract for life annuity was never perfected, because Enriquez (administrator of Herrer’s estate) failed 
to prove that the approval of his application ever came to the knowledge of Herrer. 
● Before such insurance contract is perfected, the following must be accomplished: 
○ Medical examination of the applicant 
○ Approval of the application by the head office 
○ Approval must be communicated by the company to the applicant 
● In a life annuity contract, a large amount of money is paid to the insurance company, and if after the agreed 
upon period, the insured is still living, he is entitled to the the insurance claim, to be paid either in one lump 
sum or in periodic payments. The most common example of a life annuity contract is pension.  
 
Ty v. Filipinas Compania de Seguros 
Diosdado Ty was a Mechanic Operator employed by Broadway CottonFactory. In 1953, he obtained personal accident 
policies from 7 different insurance companies on different dates, all effective for 12 months. On December 23, 1953, a 
fire broke out in the factory while he was working, and a heavy object fell on his hand while he was trying to put out 
the fire. From December 1953 to February 1954, Ty received treatment at the National Orthopedic Hospital for 6 listed 
injuries. The attending surgeon certified that such injuries would cause temporary total disability of Ty’s left hand. 
When Ty claimed for compensation under the policies, the insurance companies refused to pay, because according to 
the policy, for the insured to claim for partial disability, the loss must have been caused by amputation. 
RULING: Ty cannot claim for compensation from the policies in question. When the policy defines partial disability as 
loss of either hand by amputation through the bones of the wrist, the insured cannot recover under the said policy for 
temporary disability caused by fractures. The provision is clear enough to inform the party entering into that contract 
that the loss, to be considered a disability entitled to indemnity, must be severance or amputation of the affected 
member of the body of the insured. 
 
Del Rosario v. Equitable Insurance & Casualty Co., Inc. [​ Digest in Part I] 
 
Misamis Lumber v. Capital Insurance & Surety Co., Inc. 
Misamis Lumber Corp. (Misamis), formerly Lanao Timber Mills, Inc., insured its Ford Falcon motor car with Capital 
Insurance & Surety Co., Inc. (Capital). The insured car was damaged when it hit a hollow block lying alongside the 
water hole, which the driver did not see because the approaching vehicle from the opposite lane did not dim its 
high-beam light. The car was then towed and repaired by Morosi Motors, costing P302.27. After repairs were made, 
Misamis made a report to Capital for the damage incurred, but Capital only admitted liability amounting to P150, 
reasoning that paragraph 4 of the policy limits the insurer’s repair liability to only P150. 
RULING: Misamis is not entitled to more than P150. The terms accepted and adhered to by the insured in an 
insurance contract is the law between the contracting parties. 
 
Verendia v. CA 
Rafael Verendia insured his residential building with Fidelity & Surety Insurance Co. (FSIC), Country Bankers Insurance 
(CBI), and Development Insurance (DI), and designated Monte de Piedad & Savings Bank (MPSB) as the beneficiary. 
On December 28, 1980, the building was completely destroyed by fire. When Verendia filed a claim with FSIC, the latter 
refused the claim, on the ground of misrepresentation, because the building was apparently leased to Marcelo Garcia, 
but he signed under the name of Roberto Garcia in the contract of lease. When brought before the courts, the trial 
court ruled in favor of FSIC, but the CA reversed the same, explaining that the misrepresentation made by Marcelo 
was not material. 
  
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RULING: The false declaration made by Verendia and Marcelo forfeits the benefits of the policy. Section 13 of the 
policy provides that “if the claim be, in any respect, fraudulent, or if any false declaration be made or used in support 
thereof, or if any fraudulent means or devices are used by the insured or anyone acting in his beheld to obtain any 
benefit under the policy, ...all benefits under the policy shall be forfeited.” Moreover, by presenting a false contract of 
lease, Verendia disregarded the principle that insurance contracts are ​uberrimae fidae​. 
 
Gulf Resorts, Inc. v. Philippine Charter Insurance 
Gulf Resorts, Inc. is the owner of the Plaza Resort in La Union. Gulf Resorts had its properties insured with American 
Home Assurance Co. (AHAC), the predecessor of Philippine Charter Insurance (PCI). 
● Under the first 4 policies for the years 1984-1988 the risk of loss from earthquake shocks was extended only 
to Gulf Resorts’ 2 swimming pools 
● A 5th policy was obtained from AHAC for 1988-1999, which had the following earthquake endorsement 
clause: "In consideration of the payment by the insured of the additional premium... the Company agrees... 
that this insurance covers loss or damage to shock to a ​ ny​ of the property insured by this policy, occasioned 
by or through or in consequence of an earthquake." 
After the earthquake, Gulf Resorts made a formal claim for the damage caused to its 2 swimming pools and 
clubhouse. The VP of AHAC informed him that only the 2 swimming pools will be covered by the insurance. 
Gulf Resorts filed a complaint against AHAC for the coverage of the damaged clubhouse, claiming that it was covered 
by the earthquake endorsement clause. It also contends that, since an insurance policy is a contract of adhesion, it 
must be strictly construed against the insurer. 
RULING: The earthquake endorsement clause applies only to the 2 swimming pools. All the provisions of an insurance 
policy must be read and interpreted in consonance with each other. Gulf Resorts may not focus on the earthquake 
endorsement clause to the exclusion of the other provisions. Also, Gulf Resorts cannot invoke the rule of strict 
construction of the policy against the insurer, because in the first place, there was no ambiguity in the terms of the 
policy. 
 
White Gold Marine Services v. Pioneer Insurance and Steamship Mutual Underwriting Association 
White Gold Marine Services (WGMS) procured a protection and indemnity coverage for its vessels from the Steamship 
Mutual Underwriting Association (SMUA) through Pioneer Insurance. WGMS failed to fully pay its accounts, so SMUA 
refused to renew its coverage. SMUA filed a case against WGMS for the unpaid balance. WGMS, on the other hand, 
filed a complaint against the 2 companies before the IC, claiming that SMUA violated Sections 186-187 of the 
Insurance Code, and that Pioneer violated Sections 299-301. 
● Section 186: "No person, partnership, or association of persons shall transact any insurance business in the 
Philippines except as agent of a person or corporation authorized to do the business of insurance in the 
Philippines..." 
● Section 187: "No insurance company shall transact any insurance business in the Philippines until after it has 
obtained a certificate of authority for that purpose..." 
● Section 299: "No insurance company doing business in the Philippines, nor any agent thereof, shall pay any 
commission or other compensation to any person for services in obtaining insurance, unless such person 
shall have first procured... a license to act as an insurance agent of such company or as an insurance 
broker..." 
● Section 300: "Any person who, for compensation, solicits or obtains insurance on behalf of any insurance 
company or transmits for a person other than himself an application for a policy... or offers or assumes to 
act in the negotiating of such insurance shall thereby become liable..." 
● Section 301: "Any person who, for any compensation, commission, or other thing of value, acts or aids in any 
manner in soliciting, negotiating, or procuring... any insurance contract... on behalf of an insured other than 
himself... shall be liable to all the duties, requirements, liabilities, and penalties to which an insurance broker 
is subject." 
RULING: Respondents admit that SMUA is a P&I Club and is not licensed to do business in the Philippines, although 
Pioneer is its resident agent. However, they assert that SMUA is not engaged in the business of insurance, therefore, 
WGMS's petition must fail. 

  
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 ● 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, SMUA is a mutual insurance association, and must therefore 
secure a license from the IC to continue doing business here. 
● Also, even though Pioneer already has a license as an insurance company, it needs to obtain a separate 
license to act as an insurance agent for SMUA. 
 
Eternal Gardens Memorial Park v. Philam Life 
Philam Life entered into a Credit Group Life Policy contract with Eternal Gardens Memorial Park (EGMP), under which 
the clients of EGMP who purchased burial lots from it on installment would be insured by Philam Life. EGMP was 
required to submit a list of new lot purchasers, copies of their applications, and the amount of the unpaid balances of 
the insured lot purchasers. After submission of the required documents, Philam Life stamped and approved the same. 
On August 20, 1984, EGMP sent an insurance claim letter to Philam for John Chuang’s death. Philam Life did not reply 
for more than 1 year, and eventually sent a letter denying the claim on May 20, 1986, on the ground that EGMP failed 
to prove that Philam Life ever received an application from Chuang. 
RULING: Philam Life cannot deny the claim simply because Chuang’s application can no longer be found. The letter 
dated December 29, 1982, which Philam Life stamped as received, stated that the insurance forms for the attached 
list of burial lot buyers were attached to the letter. Because of this acknowledgement made by Philam Life, the burden 
to prove that Chuang had no insurance application is on them. 
 
Philamcare Health Systems v. CA 
Ernani Trinos applied for a health care coverage with Philamcare, and answered “no” to the 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 for the health care agreement (HCA) was approved for a period of 1 year. The coverage included 
hospitalization benefits and out-patient benefits. After the 1-year period, he was granted an expanded coverage. 
During the second period of coverage, Ernani suffered a heart attack and was confined. His wife, Julita Trinos, tried to 
claim the benefits under the health care plan, but was denied. According to Philamcare, the HCA is void because of 
Ernani’s concealment of his medical history.  
RULING: The insurance contract is valid, and Ernani did not commit material concealment that will entitle Philamcare 
to rescind the contract. Philamcare cannot invoke the “invalidation of agreement” clause attached to the contract, 
which states that the failure of the insured to disclose certain information is a ground for revocation. Ernani was 
asked his opinion regarding any medical conditions he may or may not have. He is not a doctor, so it cannot be 
expected that he will be able to answer such questions accurately. 
● Concealment is the neglect of a party to communicate that which he knows and ought to communicate. The 
basis of the rule vitiating the contract in case of concealment is that it misleads or deceives the insurer into 
accepting the risk, or accepting it at the rate of premium agreed upon. The insurer, relying upon the belief 
that the insured will disclose every material fact within his knowledge, is misled into a belief that the 
circumstance withheld does not exist, and he is thereby induced to estimate the risk upon a false basis that it 
does not exist. 
● Although false, a representation of the expectation, intention, belief, opinion, or judgment of the insured will 
not avoid the policy if there is no actual fraud in inducing the acceptance of the risk. Fraudulent intent on the 
part of the insured must be established to warrant rescission of the contract. 
● Cancellation of health care agreements and insurance policies require the concurrence of the following: 
○ Prior notice of cancellation 
○ Notice must be based on the occurrence after the effective date of the policy of one or more of the 
grounds mentioned 
○ Must be in writing; mailed or delivered to the insured 
○ Must state the grounds relief upon provided in Section 64 of the Insurance Code 
 
Phil Health Care Providers v. CIR (2009) 
Philippine Health Care Providers Inc (PHCP) aims to “establish, maintain, conduct, and operate a prepaid group 
practice health care delivery system, or a health maintenance organization (HMO) to take care of the sick and 

  
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disabled persons enrolled in the healthcare plan, and to provide for the administrative, legal, and financial 
responsibilities of the organization.” 
In 2004, PHCP was required to pay over 100 million Pesos in VAT deficiencies. PHCP filed a Motion for 
Reconsideration and availed of tax amnesty by paying 5% of the amount due. 
The Commission on Internal Revenue (CIR) contended that PHCP is subject to the documentary stamp tax (DST) 
imposed under Section 185 of the Tax Code of 1997, because an HMO is a type of insurance. On the other hand, 
PHCP contended that its health care agreement is a contract for the provision of medical services, and not an 
insurance contract, therefore, they should not be subjected to the DST. 
● The DST is levied on the exercise of certain privileges conferred by law for the creation, revision, or 
termination of specific legal relationships through the execution of specific instruments. Two requisites 
must first concur before the DST can be imposed: 
○ The document must be a policy of insurance or an obligation in the nature of indemnity 
○ The maker should be transacting the business of accident, fidelity, employer’s liability, plate, glass, 
team boiler, burglar, elevator, automatic sprinkler, or other branch of insurance, except life, marine, 
inland, and fire insurance 
RULING: The CIR cannot subject PHCP to the DST because… 
● Various American courts have determined that HMOs are not in the insurance business. Applying the 
Principal Object and Purpose Test, American jurisprudence provides that a company whose main object is to 
provide members of a group with health services is not engaged in the insurance business. 
● Under R.A. No. 7875, an health maintenance organization is an entity that provides, offers, or arranges for 
coverage of designated health services needed by plan members for a fixed prepaid premium. PHCP, as an 
HMO, is supervised by the Department of Health and not by the Insurance Commission. 
● Although all the requisites of insurance are present in this case, still, the primary purpose of the parties in 
entering into the healthcare plan is not for transacting an insurance business. 
○ The insured has insurable interest 
○ The insured is subject to a risk of loss by the happening of the designated peril 
○ The insurer assumes the risk 
○ Such assumption of risk is part of the general scheme to distribute actual losses among a large 
group of persons bearing a similar risk 
○ In consideration of the insurer’s promise, the insured pays a premium 
● There  is  no  loss,  damage,  or  liability  on  the  part  of  its  members that should be indemnified by PHCP. Under 
the  agreement,  the  members  pay  a  predetermined  consideration  in  exchange  for  the  hospital,  medical,  and 
professional services rendered by the physicians affiliated with PHCP. 
● PHCP’s objective is to provide medical services at a reduced cost, and not to distribute risks like an 
insurance company. 
 
Filipinas Compania de Seguros v. Christern, Huenefeld & Co. 
Christern, Huenefeld & Co (CHC) is a German-controlled company organized under Philippine laws. On October 1, 
1941, CHC obtained a fire insurance policy from Filipinas Compania de Seguros (FCS), covering merchandise 
contained in a building located in Binondo. 
On February 27, 1942, during the Japanese military occupation, the building was burned down. The salvaged goods 
were sold at a public auction, and after deducting their value, the total loss suffered by CHC was computed at 
P92,650. FCS refused to pay for CHC's insurance claim on the ground that the policy ceased to be in force when the 
US declared war against Germany, but because of the order of the Director of the Bureau of Financing, it still paid the 
sum of P92,650 to CHC. 
RULING: Even if CHC is a company organized under Philippine laws, it is still considered an enemy corporation upon 
the outbreak of the war, because the majority of its stockholders were German subjects. An insurance policy ceases 
to be allowable as soon as an insured becomes a public enemy. However, elementary rules of justice require that the 
premium paid by CHC for the period covered by its policy should be returned. 
● “The purpose of war is to cripple the power and exhaust the resources of the enemy. It is inconsistent that 
one country should destroy its enemy’s property and repay in insurance the value of what has been 
destroyed, or that it should in such manner increase the resources of the enemy, or render it aid. The 

  
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 commencement of war determines, for like reasons, all trading intercourse with the enemy, which prior 
thereto, may have been lawful.” 
● “All intercourses between citizens of belligerent powers which is inconsistent with a state of war is 
prohibited by the law of nations. Such prohibition includes all negotiations, commerce, or trading with the 
enemy; all acts which will increase or tend to increase its income or resources; all acts of voluntary 
submission to it; or receiving its protection; also all acts concerning the transmission of money or goods; and 
all contracts relating thereto are thereby nullified.” 
 
Constantino v. Asia Life Insurance 
This appeal consolidates 2 cases. 
Asia Life Insurance Co. (ALIC) was incorporated in Delaware. ALIC issued a life insurance policy, insuring the life of 
Arcadio Constantino for 20 years (P3,000 coverage) for an annual premium of P175.04, with Paz Constantino as 
beneficiary. The first premium was paid which covered the period up to September 26, 1942, but the succeeding 
premiums were not. Arcadio died on September 22, 1944. Due to the Japanese occupation in the Philippines, ALIC 
had to close all of its branches in Manila from 1942 to 1945. 
On August 1, 1938, ALIC issued a life insurance policy, insuring the lives of Spouses Tomas Ruiz and Agustina Peralta, 
for the sum of P3,000 for 20 years. The annual premium stipulated was regularly paid from August 1938 to September 
1940. Effective August 1941, the mode of payment was changed from annual to quarterly, and such quarterly 
premiums were paid until November 1941. The last payment covered the period until January 31, 1942. Ruiz died on 
February 16, 1945, with Peralta as his beneficiary. Due to the Japanese occupation, it became impossible and illegal 
for Peralta to deal with ALIC. Peralta also borrowed from P234, which resulted in the cash surrender value of the 
policy to be sufficient to be in force only up to September 7, 1942. 
Both policies contained the following provision: “All premiums are due in advance and any unpunctuality in making 
such payment shall cause the policy to lapse, unless and except as kept in force by the grace period.” Paz and Peralta 
filed their respective claims as beneficiaries with ALIC. They alleged that non-payment of the premiums were caused 
by the closing of ALIC’s offices during the Japanese occupation, therefore, should be excused, and their policies 
should not be forfeited. 
RULING: Paz and Peralta cannot recover from their respective policies, even if their failure to pay their premiums were 
caused by the Japanese occupation. When the life insurance policy proves that non-payment of premiums will cause 
its forfeiture, war does not excuse non-payment and does not avoid forfeiture of the policy. Essentially, the reason 
why punctual payments are important is because the insurer calculator on the basis of prompt payments. 
 
Great Pacific Life Assurance v. CA and Medarda Leuterio 
Development Bank of the Philippines (DBP) obtained a group life insurance from Great Pacific Life Assurance (Grepa), 
to insure the lives of the eligible housing loan mortgagors of DBP. On November 11, 1983, Dr. Wilfredo Leuterio, a 
housing debtor of DBP, applied for membership in the group life insurance. He answered the following in the 
application form: 
● “Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer, diabetes, 
lung, kidney, or stomach disorder, or any other physical impairment?” - No 
● “Are you now, to the best of your knowledge, in good health?” - Yes 
On August 6, 1984, Dr. Leuterio died due to “massive cerebral hemorrhage” and DBP submitted a claim to Grepa. 
Grepa denied the claim, alleging that since Dr. Leuterio did not disclose in his insurance application that he had been 
suffering from hypertension, which caused his death, he may not be covered by the policy. DBP filed a complaint 
against Grepa, and the lower courts ruled in favor of DBP. 
Grepa seeks to annul the decision of the CA on the following grounds: 
● It is Dr. Leuterio’s widow (private respondent) sued for the insurance claim without being a party-in-interest, 
therefore, the trial court acquired no jurisdiction over the case 
● Dr. Leuterio concealed the fact that he has hypertension, which might have caused his death, and this is a 
ground for denial of the insurance claim 
RULING: 
● Dr. Leuterio did not cede to the mortgagee all his rights or interests in the insurance, based on the provisions 
of the policy. When DBP submitted the insurance claim, Grepa denied payment thereof, interposing the 
defense of concealment committed by Dr. Leuterio. Thereafter, DBP collected the debt from the mortgagor 
  
A S L ♛ |​ ​11 
 and took the necessary action of foreclosure on the residential lot of Mrs. Leuterio. Therefore, Mrs. Leuterio 
may still file the suit. 
○ The rationale of a group insurance policy of mortgagors, otherwise known as a Mortgage 
Redemption Insurance, is a device for the protection of both the mortgagee and the mortgagor. On 
the part of the mortgagee, it has to enter such form of contract so that in the event of an 
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. 
○ Consequently, where the mortgagor pays the insurance premium, making the loss payable to the 
mortgagee, the insurance is on the mortgagor’s interest, and the mortgagor continues to be a party 
to the contract. In this type of insurance, the mortgagee is simply the appointee of the insurance 
fund, such loss-payable clause does not make the mortgagee a party to the contract. 
● Also, the medical findings submitted by Grepa were not conclusive because they did not have an autopsy 
conducted. 
○ Concealment exists where the insured had knowledge of a fact material to the risk, and honesty, 
good faith, and fair dealing requires that he should communicate it, but he intentionally withholds 
the same. In this case, the SC found no proof of Dr. Leuterio’s fraudulent intent. Therefore, Grepa is 
still liable to pay the insurance claim. 
 
Geagonia v. CA 
Armando Geagonia is the owner of Norman’s Mart located in Agusan del Sur. He obtained a fire insurance policy from 
Country Bankers Insurance (CBI) for P100,000, for the period of December 22, 1989 to December 22, 1990, covering 
their stock-in-trade, consisting mostly of dry goods such as RTWs for men and women, and other usuals. Geagonia 
declared in the policy that Mercantile Insurance (MI) was the co-insurer for P50,000. 
● The insurance contained the following provision under Condition No. 3: “The insured shall give notice to the 
Company of any insurance(s) already effected, or which may subsequently be effected... this condition shall 
not apply when the total insurance in force at the time of the loss or damage is not more than P200,000.” 
On May 27, 1990, an accidental fire broke out in the public market and Geagonia’s stocks-in-trade were completely 
destroyed. He filed a claim with CBI but the company denied it, because it was found out that at the time of the loss, 
Geagonia’s stocks-in-trade were likewise covered by an insurance policy under Philippine First Insurance (PFI). 
Geagonia insisted that he was not aware of the policy under PFI, and that it was Cebu Tesing Textile that obtained 
such policies and paid for the premiums thereof, without informing him 
RULING: The Court does not believe that Geagonia was unaware of the policy under PFI, because records show that 
he even renewed such policy for 2 more years. However, it can be seen from the provisions of the policy under CBI 
that the prohibition under Condition No. 3 only applies to double insurance, and the nullity of the policy shall only be to 
the extent exceeding P200,000 of the total policies obtained. Therefore, CBI is still liable to assume a co-insurer’s 
liability up to a loss not exceeding P200,000. Condition No. 3 in the policy under CBI is a provision allowed by Section 
75 of the Insurance Code. It is commonly known as the “additional” or “other insurance” clause. The purpose of such 
clause is to prevent over-insurance. 
 
Palileo v. Cosio 
On December 18, 1951, Cherie Palileo obtained from Beatriz Cosio a loan in the sum of P12,000. To secure the 
payment of the loan, Cosio required Palileo to sign a document named “Conditional Sale of Residential Building” with 
the right to repurchase (but this document did not express their true intention, because their true intention was simply 
to secure the payment of the loan). After the execution of such document, Cosio insured the building against fire for 
the sum of P15,000 and the insurance policy was issued in her name. A fire broke out and partly destroyed the 
building. Cosio was able to claim P13,107 from the insurance company as indemnity. Palileo demanded that the 
insurance payout be credited to her. 
Where a mortgagee, independently of the mortgagor, insures the mortgaged property in his own name and for his own 
interest, he is entitled to the insurance proceeds in case of loss, but in such case, he is not allowed to retain his claim 
against the mortgagor, but is passed by subrogation to the insurer, to the extent of the money paid. The mortgagee, in 
case of loss, may only recover upon the insurance policy to the extent of his credit at the time of the loss. Therefore, 
Cosio may keep the insurance proceeds but must return the overpayment to Palileo. 
  
A S L ♛ |​ ​12 
 
III. INSURABLE INTEREST 
 
Gercio v. Sun Life Assurance Co. of Canada 
Sun Life Assurance Co. of Canada (Sun Life) issued a 20-year endowment insurance policy on the life of Hilario Gercio 
on January 29, 1910. The policy was for the sum of P2,000, to be paid on February 1, 1930 or if the insured should die 
before the said date, then to his wife, Andrea Zialcita, if she survives him. The policy did not contain any provision 
reserving to the insured the right to change the beneficiary. In 1919, Zialcita was convicted of adultery, and a decree 
of divorce was issued in September 1920. In March 1922, Gercio formally notified Sun Life that he had revoked his 
“donation” in favor of Zialcita, and that he wanted to designate his present wife, Adela Garcia, as the beneficiary of his 
existing policy. Sun Life refused to change the beneficiary in the policy, so Gercio filed a petition for ​mandamus 
against Sun Life. 
RULING: The wife has an insurable interest in the life of her husband. The beneficiary has an absolute vested interest 
in the policy from the date of its issuance and delivery, so when a life insurance policy is taken out by the husband in 
which the wife is named as beneficiary, she has a subsisting interest in the policy. If the husband wishes to retain to 
himself the control and ownership of the policy, he may so provide in the policy. But if the policy contains no provision 
authorizing such change of beneficiary without the beneficiary’s consent, then he cannot make such change. 
● A life insurance policy of a husband made payable to the wife as beneficiary is the separate property of the 
beneficiary and beyond the control of the husband. The effect produced by divorce under the Philippine 
Divorce Law (Act No. 2710) merely provides that the decree of divorce shall dissolve the community property 
as soon as such decree becomes final. Absence of a statute to the contrary, that if a policy is taken out upon 
a husband's life the wife is named as beneficiary therein, a subsequent divorce does not destroy her rights 
under the policy. Neither the husband, nor the wife, nor both together have the power to destroy the vested 
interest of the children in the policy. 
 
Insular Life Assurance Co., Ltd. v. Ebrado 
Buenaventura Ebrado was issued a life plan by Insular Life Assurance Co., Ltd. (Insular). He designated Carponia 
Ebrado as his beneficiary, referring to her as his wife. When the insured died, Carponia tried to claim the proceeds of 
the said plan, but this was denied by Insular, on the ground that Carponia was the common-law wife, and not the legal 
wife of the insured. Pascuala Ebrado, the legal wife of the insured, filed a claim with Insular instead. Insular then filed 
an action for interpleader. 
RULING: Carponia is not entitled to the insurance proceeds. The Civil Code prohibits donations made between 
persons guilty of adultery or concubinage. This rule is also applicable in insurance contracts, because for matters not 
specifically provided for by the Insurance Law, the general rules on Civil Law shall be applied. A life insurance policy is 
no different from a civil donation as far as the beneficiary is concerned, since both are founded on liberality. 
 
Nario v. Philam Life Insurance Co. 
Alejandra Santos-Nario applied for and was issued a life insurance policy by Philam Life Insurance Co. (Philam) under 
a 20-year endowment plan, with a face value of P5,000. Her husband, Delfin Nario, and their minor son, were her 
irrevocable beneficiaries. Alejandra then applied for a loan on the above policy with Philam which she is entitled to as 
a policyholder, after the policy has been in force for 3 years. The purpose of such loan was for their son’s education. 
The application bore the signature and consent of Delfin as one of the beneficiaries of the policy and as 
father-guardian of their minor son. Philam denied the loan application, contending that the written consent of the 
minor son must not only be given by his father as legal guardian, but must also be authorized by the court in a 
guardianship proceeding. Alejandra then informed Philam that she would like to surrender her policy and demand its 
cash value, which then amounted to P520, but Philam denied the surrender of the policy, on the same ground raised in 
the denial for the loan application. Thereafter, Alejandra filed an action against Philam. Philam contended that the 
loan application and the surrender of the policy involved acts of disposition and alienation of the property rights of the 
minor, and such acts require a guardianship proceeding before the court. 
RULING: The loan application and the surrender of the policy both constitute acts of disposition or alienation of 
property rights, and not merely acts of management or administration, because they involve incurring or termination 
of contractual obligations. Under the Civil Code and the Rules of Court, the father is constituted as the minor’s legal 
administrator of his property, and when the property of the child is worth more than P2,000, the father must file a 
  
A S L ♛ |​ ​13 
petition for guardianship and post a guardianship bond. Although the current cash value of the plan is P520, it is 
important to note that the vested interest or right of the beneficiaries in the policy should be measured on its full face 
value and not on its cash surrender value, for in case of death of the insured, the beneficiaries are paid on the basis of 
its face value, and in case the insured should discontinue paying premiums, the beneficiaries may continue paying it 
and are entitled to an automatic extension of the term or paid-up insurance options. The said vested right under the 
policy cannot be divisible at any given time. 
 
Villanueva v. Oro 
West Coast Life Insurance Co. (West Coast) issued 2 insurance policies on the life of Esperanza Villanueva, one for 
P2,000 maturing on April 1, 1943, and the other for P3,000 maturing on March 31, 1943. In both policies, West Coast 
agreed to pay the amount either to Esperanza, if still living, on Apr 1, 1943, or to her beneficiary, Bartolome Villanueva, 
or the father of the insured, immediately upon receipt of the proof of death of Esperanza. The policies also gave her 
the right to change the beneficiary. In 1940, Bartolome died, and he was substituted as beneficiary under the policies 
by Mariano, Esperanza’s brother. Esperanza died in 1944 without having collected the insurance proceeds. Adverse 
claims for the proceeds were presented by the estate of Esperanza on one hand and by Mariano on the other. The CFI 
held that the estate of Esperanza was entitled to the proceeds to the exclusion of the estate of Mariano. 
RULING: Under the policies, the insurance proceeds will be paid to either the insured, if he lived on the dates of 
maturity, or to the beneficiary, if the insured died during the continuance of the policies. The first contingency 
excludes the second, and vice versa. Since the insured was still living on April 1 and March 31, 1943, the proceeds are 
payable exclusively to her or to her estate, unless she had, before her death, otherwise assigned the matured policies. 
To sustain the beneficiary’s claim would be to altogether eliminate from the policies the condition that the insurer 
“agrees to pay to the insured if living.” 
 
Philam Life Insurance Co. v. Pineda 
Rodolfo Dimayuga procured an ordinary life insurance policy from Philam Life Insurance Co. (Philam) and designated 
his wife and 6 children as irrevocable beneficiaries. He then filed a petition to amend the designation of the 
beneficiaries from irrevocable to revocable. He alleged that all 6 children consented to this amendment. CFI Judge 
Gregorio Pineda granted Dimayuga’s request. 
RULING: The designation of irrevocable beneficiaries cannot be changed or amended without the consent of all the 
irrevocable beneficiaries. Also, the 6 children in question were all minors during the time when Dimayuga filed the 
petition with the CFI, therefore, they had no capacity to give their consent. Under the Insurance Act, the irrevocable 
beneficiary designated in a life insurance contract cannot be changed without the consent of the beneficiary because 
he has a vested interest in the policy. There was an express stipulation to this effect: “It is hereby understood and 
agreed that, notwithstanding the provisions of this policy to the contrary, inasmuch as the designation of the 
primary/contingent beneficiary/beneficiaries in this Policy has been made without reserving the right to change said 
beneficiary/ beneficiaries, such designation may not be surrendered to the Company, released or assigned; and no 
right or privilege under the Policy may be exercised, or agreement made with the Company to any change in or 
amendment to the Policy, without the consent of the said beneficiary/beneficiaries.” The alleged acquiescence of the 
6 children cannot be considered an effective ratification due to the fact that they were minors. Neither could they act 
through their father insured since their interests are quite divergent from one another. Therefore, the parent-insured 
cannot exercise rights/privileges pertaining to the insurance contract, for otherwise, the vested rights of the 
irrevocable beneficiaries would be rendered inconsequential. Of equal importance is the well-settled rule that the 
contract between the parties is the law binding on both of them and for so many times, this court has consistently 
issued pronouncements upholding the validity and effectivity of contracts. Likewise, contracts which are the private 
laws of the contracting parties should be fulfilled according to the literal sense of their stipulations, for contracts are 
obligatory, no matter in what form they may be, whenever the essential requisites for their validity are present The 
change in the designation of was not within the contemplation of the parties. Judge Pineda instead made a new 
contract for them. It acted in excess of its authority when it did so. 
 
Vda. de Consuegra v. GSIS 
Jose Consuegra was employed as a shop foreman of the Office of the District Engineer in Surigao Del Norte. When he 
was still alive, he contracted two marriages. His first marriage was with Rosario Diaz, with whom he had 2 children, 
Jose Consuegra Jr. and Pedro, but both children predeceased him. The second marriage was with Basilia Berdin, with 
  
A S L ♛ |​ ​14 
whom he had 7 children. His second marriage was made in good faith. Because he was a GSIS member, the proceeds 
of his life insurance were paid by GSIS to Berdin and her children who were the named beneficiaries in the policy. 
Consuegra was in government service for around 22 years, so he was entitled to retirement insurance benefits, for 
which no beneficiary was designated. Both families filed their respective claims with GSIS, and GSIS ruled that the 
insurance proceeds must be paid out as follows: 
● 1/2 (8/16) to Diaz 
● 1/16 to Berdin 
● 1/16 to each of the 7 children of the second marriage 
Berdin went to CFI to appeal the decision of GSIS, but the CFI affirmed the decision of GSIS. 
RULING: Both families are entitled to half of the retirement benefits. The beneficiary named in the life insurance does 
not automatically become the beneficiary in the retirement insurance. When Consuegra, before 1943, designated his 
beneficiaries in his life insurance, he could not have intended those beneficiaries of his life insurance as also the 
beneficiaries of his retirement insurance because the provisions on retirement insurance under GSIS came about only 
when C.A. No. 186 was amended by R.A. No. 660 on June 18, 1951. Section 11(b) thereof clearly indicates that there 
is a need for the employee to file an application for retirement insurance benefits when he becomes a GSIS member 
and to state his beneficiary. The life insurance and the retirement insurance are separate and distinct systems of 
benefits paid out from 2 separate and distinct funds. In case of failure to name a beneficiary in an insurance policy, 
the proceeds will accrue to the estate of the insured. And when there exists two marriages, each family will be entitled 
to one-half of the estate. 
 
Filipino Merchants Insurance Co., Inc. v. CA 
Choa Tiek Seng, consignee of the shipment of 600 metric tons of fishmeal, contained in new gunny bags of 90 kilos 
each, to be shipped from Thailand to Manila. The cargo was insured under an all-risks policy. However, only 59.94 
metric tons arrived in Manila. When the cargo was unloaded unto the arrastre contractor E. Razon, Inc., Filipino 
Merchants Insurance Co., Inc. (FMIC)’s surveyor ascertained and certified that in such discharge, 105 bags were in 
bad order condition, and this was reflected in the survey report of Bad Order cargoes. Before delivery to Choa Tiek 
Seng, E. Razon's Bad Order Certificate showed that a total of 227 bags were in bad order condition. Choa Tiek Seng 
brought an action against FMIC, and FMIC brought a third-party complaint against Compagnie Maritime Des 
Chargeurs Réunis (CMDCR) and/or E. Razon, Inc. The RTC ordered FMIC to pay Choa Tiek Seng and reimburse 
CMDCR and E. Razon. The CA, however, ruled that Chao Tiek Seng has no insurable interest over the cargo, and 
therefore the policy should be annulled. 
RULING: Choa Tiek Seng has insurable interest over the cargo. The general rule is that 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 shifts to the insurer to show the 
exception to the coverage. As the vendee/consignee of the goods in transit, Choa Tiek Seng has existing interest. His 
interest over the goods is based on the perfected contract of sale. 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 he performed the 
conditions of the sale. The contract of shipment, whether under FOB, CIF, 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. 
 
San Miguel Brewery v. Law Union & Rock Insurance Co. 
The owner of P.D. Dunn had agreed, through a contract of mortgage, to insure the mortgaged property for its full value 
at his own expense and to indorse the policies in such manner as to authorize San Miguel Brewery (SMB) to receive 
the proceeds in case of loss and to retain such part thereof as might be necessary to satisfy the remainder then due 
upon the mortgage debt. Instead, however, of effecting the insurance himself, Dunn authorized and requested SMB to 
procure insurance on the property in the amount of P15,000 at Dunn's expense. SMB insured the property only as a 
mortgagee. Dunn sold the property to Henry Harding. The insurance was not assigned by Dunn to Harding. When it 
was destroyed by fire, the 2 insurance companies settled with SMB to the extent of the mortgage credit. When the 
issue was brought before the court, the RTC ruled that Harding is not entitled to the difference between the mortgage 
credit and the face value of the policies. 

  
A S L ♛ |​ ​15 
Does SMB have insurable interest as mortgagee, only to the extent of the mortgage credit? Does Harding have 
insurable interest as owner? 
RULING: While SMB has insurable interest as mortgagee, Harding has no insurable interest as owner. Section 19 of 
the Insurance Act provides that “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 55 of the same Act also provides 
that “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.” Undoubtedly, these policies might have been so framed as to be 
“payable to the SMB, mortgagee, as its interest may appear, remainder to whomsoever, during the continuance of the 
risk, may become the owner of the interest insured.” Such clause would have proved an intention to insure the entire 
interest in the property, not merely the insurable interest of SMB, and would have shown exactly to whom the money, 
in case of loss, should be paid. But the same is not so written. The blame for the situation thus created rests, however, 
with SMB rather than with the insurance companies, and there is nothing in the record to indicate that the insurance 
companies were requested to write insurance upon the insurable interest of the owner or intended to make 
themselves liable to that extent. If by inadvertance, accident, or mistake, the terms of the contract were not fully set 
forth in the policy, the parties are entitled to have it reformed. But to justify the reformation of a contract, the proof 
must be of the most satisfactory character, and it must clearly appear that the contract failed to express the real 
agreement between the parties In the case now before us the proof is entirely insufficient to authorize reformation. 
 
Sps. Cha v. CA 
Spouses Nilo Cha and Stella Uy-Cha entered into a 1-year lease contract with CKS Development Corp. (CKS), 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. However, the 
spouses still insured against loss by fire their merchandise inside the leased premises for P500,000 with United 
Insurance Co., Inc. (United) 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 a fire insurance, wrote to United to have 
the proceeds be paid directly to them. But United refused to do so, and this led CKS to file an action against United 
and the spouses before the trial court. The RTC ordered United to pay the amount of P335,063.11 to CKS and the 
spouses to pay P50,000 as exemplary damages and P20,000 as attorney’s fees and costs of suit. The CA affirmed the 
RTC’s decision but ruled that the spouses will not pay the exemplary damages and attorney’s fees. United contended 
that CKS has no insurance interest because Spouses Cha violated the stipulation. 
RULING: According to Section 18 of the Insurance Code, “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 fire insurance, taken by the Spouses Cha over their merchandise is primarily a contract of 
indemnity. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time 
the loss occurs. The automatic assignment of the policy to CKS under the provision of the lease contract is void for 
being contrary to law and public policy. The proceeds of the fire insurance policy thus rightfully belong to the Spouses 
Cha. The liability of the spouses to CKS for violating their lease contract is a separate and distinct issue. 
 
Garcia v. Hong Kong Fire & Marine Insurance Co. 
Domingo Garcia had his merchandise insured by Hongkong Fire and Marine Insurance Co. (HFMIC). However, HFMIC 
made a mistake and issued a policy covering the building where the merchandise was stored, and such building was 
not owned by Garcia. The policy was written in English, of which Garcia was ignorant, so did not notice the error. The 
policy was later assigned by Garcia to Philippine National Bank (PNB) to secure a loan. PNB acknowledged receipt of 
said policy, referring to it as a policy covering the merchandise, and HFMIC made the necessary endorsements to 
PNB. The building which housed the merchandise was later razed by fire. HFMIC refused to pay the proceeds to 
Garcia, due to the fact that the insurance policy was taken out on the building and not on the merchandise.  
RULING: Garcia is still entitled to the insurance proceeds. HFMIC’s defense is purely technical. The mistake was 
obviously on the part of the HFMIC when it issued the wrong policy. It cannot deny such allegation due to the fact that 
it even confirmed with PNB the nature of the policy in question when it was endorsed. 
 
 
 
  
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Bachrach v. British American Assurance Co. 
E.M. Bachrach insured goods belonging to a general furniture store (iron and brass bedsteads, toilet tables, chairs, ice 
boxes, bureaus, washstands, mirrors, and sea-grass furniture) stored in the ground floor and first story of his house 
and dwelling. He acquired the insurance policy from an authorized agent of the British American Assurance Co. 
(BAAC). A fire broke out and resulted in the total loss of the goods insured. When Bachrach filed his claim with BAAC, 
the latter denied the same, alleging that: 
● Bachrach has transferred his interest in some of the goods covered by the policy to H.W. Peabody & Co. to 
secure his indebtedness 
● Bachrach also transferred his interest in some of the goods covered by the policy to Macke to secure certain 
obligations assumed by Macke and on behalf of Bachrach 
● Bachrach willfully placed a gasoline can containing 10 gallons of gasoline close to the goods insured, 
thereby greatly increasing the risk of fire 
RULING: BAAC must still indemnify Bachrach for the loss. The keeping of flammable oils on the premises, though 
prohibited by the policy, does not void it, if such keeping is incidental to the business. There was no provision in the 
policy prohibiting the keeping of paints and varnishes upon the premises where the insured goods were stored. If the 
company intended to rely upon a condition of that character, it ought to have been plainly expressed in the policy. 
With regard to the issue of transferring interests to the goods, BAAC contended that alienation of the interest in the 
property insured will result in the forfeiture of the policy. There is no alienation, within the meaning of the Insurance 
Law, until the mortgagee acquires a right to take possession by default under the terms of the mortgage. No such 
right is claimed to have accrued in this case, and the alienation clause is therefore inapplicable. 
 
Ong Lim Sing v. FEB Leasing & Finance Corp. 
On March 9, 1995, FEB Leasing & Finance Corp. (FEB) entered into an agreement of lease of equipment and motor 
vehicles with JVL Food Products (JVL) and Petitioner Vicente Ong Lim Sing, Jr.. On the same date, Petitioner 
executed an Individual Guaranty Agreement with FEB to guarantee the prompt and faithful performance of the terms 
and conditions of the aforesaid lease agreement. Corresponding Lease Schedules with Delivery and Acceptance 
Certificates over the equipment and motor vehicles formed part of the agreement. Under the contract, JVL was 
obliged to pay FEB an aggregate gross monthly rental of P170,494.00. JVL defaulted in the payment of the monthly 
rentals. As of July 31, 2000, the amount in arrears, including penalty charges and insurance premiums, amounted to 
P3,414,468.75. On August 23, 2000, FEB sent a letter to JVL demanding payment for the said amount, but JVL failed 
to pay. 
Does JVL, as the lessee, have an insurable interest over the leased items? Should JVL and Petitioner be jointly and 
severally liable for the insured financial lease? 
RULING: The lease contract, under Section 14 thereof, provides that the equipment shall be insured at the cost and 
expense of the lessee against loss, damage, or destruction from fire, theft, accident, or other insurable risk for the full 
term of the lease. This is a binding and valid stipulation. Petitioner, as a lessee, has an insurable interest in the 
equipment and motor vehicles leased. Section 17 of the Insurance Code provides that the measure of an insurable 
interest in property is the extent to which the insured might be damnified by loss or injury thereof. It cannot be denied 
that JVL will be directly damnified in case of loss, damage, or destruction of any of the properties leased. It has also 
been held that the test of insurable interest in property is whether the assured has a right, title or interest therein that 
he will be benefited by its preservation and continued existence or suffer a direct pecuniary loss from its destruction 
or injury by the peril insured against. 
 
Heirs of Loreto Mamarag v. Mamarag 
Loreto Maramag designated as beneficiary his concubine Eva de Guzman Maramag for his life insurance policies 
issued by Insular Life Assurance Co., Ltd. (Insular) and Great Pacific Life Assurance Corp. (Grepa). Petitioners in this 
case are the legitimate wife and children of Loreto, while Respondents are Loreto’s illegitimate family. Petitioners 
alleged that Eva was a suspect in the killing of Loreto, so she must be disqualified from receiving any proceeds from 
Loreto’s insurance policies. 
Can Eva claim the insurance proceeds even though she is prohibited under the Civil Code from receiving donations 
from Loreto? 
RULING: Any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a 
life insurance policy of the person who cannot make any donation to him. If a concubine is made the beneficiary, it is 
  
A S L ♛ |​ ​17 
believed that the insurance contract will still remain valid, but the indemnity must go to the legal heirs and not to the 
concubine, for evidently, what is prohibited under Art. 2012 is the naming of the improper beneficiary. The general rule 
is that only persons entitled to claim the insurance proceeds are either the insured, if still alive; or the beneficiary, if 
the insured is already deceased, upon the maturation of the policy. The exception to his rule is where the insurance 
contract was intended to benefit third persons who are not parties to the same, in the form of favorable stipulations or 
indemnity. In such a case, third parties may directly sue and claim from the insurer. It is only in cases where the 
insured has not designated any beneficiary, or when the designated beneficiary is disqualified by law to receive the 
proceeds, that the insurance policy proceeds shall redound to the benefit of the estate of the insured. 
 
Gaisano Cagayan, Inc. v. Insurance Company of North America 
Intercapitol Marketing Corp. (IMC) is the maker of Wrangler Blue Jeans. Levi Strauss Philippines, Inc. (LSPI) is the 
local distributor of products owned by Levi Strauss & Co. IMC and LSPI separately obtained from the Insurance 
Company of North America (ICNA) 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.” 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." The policies also provide for the following conditions: 
● Warranted that ICNA shall not be liable for any unpaid account in respect of the merchandise sold and 
delivered by the insured which are outstanding at the date of loss for a period in excess of 6 months from the 
date of the covering invoice or actual delivery of the merchandise, whichever shall first occur; 
● Warranted that the insured shall submit to ICMA within 12 days after the close of every calendar month all 
amounts shown in their books of accounts as unpaid and thus become receivable items from their 
customers and dealers. 
Gaisano Cagayan, Inc. (GCI) is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the 
Gaisano Superstore Complex in Cagayan de Oro City was consumed by fire. Included in the items destroyed in the fire 
were stocks of ready-made clothing materials sold and delivered by IMC and LSPI. ICMA filed a complaint for 
damages against Gaisano, alleging that IMC and LSPI were paid for their claims and that the unpaid accounts of GCI 
on the sale and delivery of ready-made clothing materials with IMC and LSPI were P2,119,205.00 and P535,613.00, 
respectively. The RTC dismissed ICMA’s complaint. It held that the fire was purely accidental, and that the cause of 
the fire was not attributable to the negligence of the GCI. The RTC also said that IMC and LSPI retained ownership of 
the delivered goods and must bear the loss. The CA set aside the decision of the RTC, and ordered GCI to pay ICMA 
the P2,000,000 and the P500,000 that ICMA paid to IMC and LSPI.  
RULING: 
● IMC and LSPI must bear the risk of loss because they expressly reserved ownership of the goods by 
stipulating in their sales invoices that “it is further agreed that merely for purpose of securing the payment of 
the purchase price, the above described merchandise remains the property of the vendor.” 
● GCI is liable for the unpaid accounts. It must be noted that the insurance obtained in this case is not for the 
loss of goods by fire, but for GCI’s accounts with IMC and LSPI that remained unpaid 45 days after the fire 
incident. Accordingly, GCI’s obligation is the payment of money. Since the obligation to pay money is generic, 
the occurrence of a fortuitous event will not extinguish the obligation. 
 
RCBC v. CA (G.R. No. 128833) 
Rizal Commercial Banking Corp. (RCBC), Binondo Branch, initially granted a credit facility of P30,000,000 to Goyu & 
Sons, Inc. (GSI). GSI applied again, and through the recommendation of the officers of RCBC Binondo (Uy Chun Bing 
and Eli Lao), RCBC’s Executive Committee increased GSI’s credit facility from P20,000,000 to P50,000,000, then to 
P90,000,000, then finally to P117,000,000. As security, GSI executed 2 real estate mortgages and 2 chattel mortgages 
in favor of RCBC. GSI obtained in its name 10 insurance policies on the mortgaged properties from Malayan Insurance 
Company, Inc. (MICI). In February 1992, GSI was issued 8 insurance policies in favor of RCBC. On April 27, 1992, one 
of GSI’s factory buildings was burned, so it claimed against MICI for the loss, but the same was denied. MICI averred 
that the insurance policies were either attached pursuant to writs of attachments or garnishments, or that creditors 
claim to have a better right. GSI filed a complaint for specific performance and damages with the RTC. RCBC, one of 
GSI’s creditors, also filed with MICI its formal claim over the proceeds of the insurance policies, but the said claims 
were also denied for the same reasons that MICI denied GSI’s claims. 
  
A S L ♛ |​ ​18 
RULING: RCBC, as mortgagee, has a right over the insurance policies taken by GSI in case of loss. Settled is the rule 
that mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property, such 
that each one of them may insure the same property for his own sole benefit. Although it appears that GSI obtained 
the subject insurance policies naming itself as the sole payee, the intentions of the parties, as shown by their 
contemporaneous acts, must be given due consideration in order to better serve the interest of justice and equity. 
 
   

  
A S L ♛ |​ ​19 
IV. CONCEALMENT AND REPRESENTATION 
 
Vda. de Canilang v. CA 
Jaime Canilang consulted Dr. Wilfredo Claudio and was diagnosed as suffering from “sinus tachycardia.” Jaime 
consulted the same doctor again on August 3, 1982, and this time was found to have “acute bronchitis.” The next day, 
on August 4, 1982, Jaime applied for a non-medical insurance policy with Great Pacific Life Assurance Corp. (Grepa) 
naming his wife, Thelma Canilang, as his beneficiary. Jaime was issued an ordinary life insurance policy with the face 
value of P19,700. A year later, Jaime died of “congestive heart failure,” “anemia,” and “chronic anemia.” Thelma, as 
beneficiary, filed a claim with Grepa, which was denied on the ground that the insured had concealed material 
information regarding his health. Thelma then filed a complaint with the Insurance Commission (IC) against Grepa, 
contending that as far as she knows, her husband was not suffering from any disorder and that he died of kidney 
disorder. The IC ordered Grepa to pay the widow the insurance proceeds, holding that there was no intentional 
concealment on the part of Jaime, and that Grepa had waived its right to inquire into the health condition of the 
applicant by the issuance of the policy despite the lack of answers to some of the pertinent questions in the insurance 
application. 
RULING: The fact that Jaime failed to disclose that he had twice consulted with Dr. Claudio, who had found him to be 
suffering from “sinus tachycardia” and “acute bronchitis,” cannot be disregarded. The information which Jaime failed 
to disclose was material to the ability of Grepa to estimate the probable risk he presented as a subject of life 
insurance. Had Jaime disclosed his visits to his doctor, the diagnosis made, and the medicines prescribed by such 
doctor in the insurance application, it may be reasonably assumed that Grepa would have made further inquiries and 
would have probably refused to issue a non-medical insurance policy or, at the very least, required a higher premium 
for the same coverage. 
 
Sun Life Assurance Co. of Canada v. CA 
Robert John Bacani obtained a life insurance contract for himself from Sun Life Assurance Co. (Sun Life), designating 
his mother, Bernarda Bacani, as the beneficiary. He was issued a policy valued at P100,000 with double indemnity in 
case of accidental death. Sometime after, the insured died in a plane crash. Bernarda filed a claim with Sun Life, but 
Sunlife rejected the claim on the ground that the insured did not disclose material facts relevant to the issuance of the 
policy, thus rendering the contract of insurance voidable. Sun Life discovered that 2 weeks prior to Robert’s 
application for insurance, he was examined and confined at the Lung Center of the Philippines, where he was 
diagnosed for renal failure. The RTC, as affirmed by the CA, ruled that the fact concealed was not the cause of death 
of the insured, and that matters relating to the medical history of the insured is deemed to be irrelevant since Sun Life 
waived the medical examination prior to the approval and issuance of the insurance policy. 
RULING: The matter concealed may still be a ground for Sun Life to declare the policy void. Section 26 of the 
Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all 
facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the 
other has no means of ascertaining. Anent the finding that the facts concealed had no bearing to the cause of death 
of the insured, it is a well-settled rule that the insured need not die of the disease he had failed to disclose to the 
insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed 
insurance policy or in making inquiries.  
 
Ng Gan Zee v. Asian Crusader Life Assurance Corp. 
In 1962, Kwon Nam applied for and was issued a 20-year endowment insurance on his life, and designated his wife, 
Ng Gan Zee, as the beneficiary, from Asian Crusader Life Assurance Corp. (ACLAC). He stated in his application that 
he was operated on for a tumor of the stomach associated with ulcer. In 1963, Kwong Nam died of cancer of the liver 
with metastasis. ACLAC refused to pay the insurance proceeds on the ground of false information. It was found that 
prior to his application, Kwong Nam was diagnosed to have peptic ulcers, and that during the operation, what was 
removed from Kwong Nam’s body was actually a portion of the stomach and not tumor. 
RULING: An insurance contract cannot be rescinded on the ground of imperfect information in the application. Kwong 
Nam did not have sufficient knowledge as to distinguish between a tumor and a peptic ulcer. His statement in his 
application was made in good faith. ACLAC should have made an inquiry into the declared illness and operation of 
Kwong Nam when it appeared on the face of the application that a question appeared to be imperfectly answered. 
ACLAC’s failure to inquire constituted a waiver of the imperfection in the answer. 
  
A S L ♛ |​ ​20 
 
Saturnino v. Philam Life Insurance Co. 
Two months prior to the issuance of her insurance of the policy by Philam Life Insurance Co. (Philam), Estefania 
Saturnino was operated on for cancer, wherein her right breast was completely removed, including the pectoral 
muscles and the glands found in the right armpit. Notwithstanding the fact of her operation, Estefania did not make a 
disclosure thereof in her application for the insurance policy. She stated therein that she did not have, nor had she 
ever had, cancer or other tumors, nor did she have or ever had any of the other illnesses/conditions listed in the 
application. She also attested in such application that she had never consulted any physician, undergone any 
operation, or suffered any injury within the 5 years preceding the time of her application, including illnesses or 
diseases peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual disorders. The application 
contained a provision stating that Estefania’s declarations therein constituted a basis for the issuance of the policy. 
When Estafania died due to pneumonia, her surviving husband, Ignacio Saturnino, filed a claim with Philam, but 
Philam denied the same on the ground of Estefania’s false misrepresentations of material facts in her application for 
the insurance. Ignacio defended that Philam waived its right to avoid the contract on the ground of false 
misrepresentation when it issued a non-medical insurance for Estefania. 
RULING: The information given by Estafania in the application was false. The question to determine is whether or not 
these facts falsely represented were material. The Insurance Law provides that “materiality is to be determined not by 
the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication 
is due, in forming his estimate of the proposed contract, or making his inquiries.” The waiver of medical examination 
renders even more material the information required of the applicant concerning previous condition of health and 
diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into 
consideration in deciding whether to issue the policy or not. 
Edillon v. Manila Bankers Life Insurance Corp. 
In April 1969, Carmen Lapuz applied for a life insurance policy with Manila Bankers Life Insurance Corp. (MB Life). In 
the application, she stated that her date of birth is on July 11, 1904, which denoted that she is around 64 years old at 
that time. Her application was approved and she was issued a policy, with her sister, Regina Edillon, designated as her 
beneficiary. In May 1969, however, Lapuz died of a car accident. Edillon filed a claim with MB Life for the insurance 
proceeds, but MB Life refused to pay because the certificate of insurance contained a provision excluding its liability 
to pay claims to persons under 16 or over 60. 
RULING: Lapuz’s age was not concealed in the application or in the policy. MB Life is deemed to have waived the 
aforementioned provision for still issuing a policy in favor of Lapuz, despite knowing that she was already 64 years old 
at the time the application therefor was submitted. 
 
Florendo v. Philam Plans, Inc. 
On October 23, 1997, Manuel Florendo filed an application for a comprehensive pension plan with Philam Plans, Inc. 
(Philam Plans) after some convincing by Respondent Perla Abcede. The plan had a pre-need price of P997,050.00, 
payable in 10 years, and had a maturity value of P2,890,000 after 20 years. Manuel signed the application and left to 
Perla the task of supplying the information needed in the application. Respondent Celeste Abcede, Perla’s daughter, 
signed the application as sales counselor. Aside from pension benefits, the comprehensive pension plan also 
provided life insurance coverage to Manuel. This was covered by a Group Master Policy that Philam Life Insurance 
Co. (Philam Life) issued to Philam Plans. Under the master policy, Philam Life was to automatically provide life 
insurance coverage, including accidental death, to all who signed up for Philam Plans’ comprehensive pension plan. If 
the plan holder died before the maturity of the plan, his beneficiary was to instead receive the proceeds of the life 
insurance, equivalent to the pre-need price. Further, the life insurance was to take care of any unpaid premium until 
the pension plan matured, entitling the beneficiary to the maturity value of the pension plan. On October 30, 1997, 
Philam Plans issued the pension plan agreement to Manuel, with Petitioner Lourdes Florendo, his wife, as beneficiary. 
In time, Manuel paid his quarterly premiums. Eleven months later, Manuel died of blood poisoning. Lourdes filed a 
claim with Philam Plans for the payment of the benefits under her husband’s plan. Because Manuel died before his 
pension plan matured and his wife was to get only the benefits of his life insurance, Philam Plans forwarded her claim 
to Philam Life. On May 3, 1999 Philam Plans wrote Lourdes a letter, declining her claim. Philam Life found that Manuel 
was on maintenance medicine for his heart, had an implanted pacemaker, suffered from diabetes mellitus, and was 
taking insulin. Lourdes renewed her demand for payment under the plan but Philam Plans rejected it, so she filed an 
action against Philam Plans before the RTC. The RTC ordered Philam Plans, Perla, and Celeste, solidarily, to pay 
  
A S L ♛ |​ ​21 
Lourdes all the benefits from her husband’s pension plan. The RTC further ruled that Manuel was not guilty of 
concealing the state of his health from his pension plan application. The CA, nonetheless, reversed the RTC’s decision, 
holding that insurance policies are traditionally contracts ​uberrimae fidae​ or contracts of utmost good faith, and as 
such, it required Manuel to disclose to Philam Plans conditions affecting the risk of which he was aware or material 
facts that he knew or ought to know. 
RULING: There was concealment on the part of Manuel. 
● Lourdes pointed out that, seeing the unfilled spaces in Manuel’s pension plan application relating to his 
medical history, Philam Plans should have returned it to him for completion. Since Philam Plans chose to 
approve the application just as it was, it cannot cry concealment on Manuel’s part. But Lourdes is shifting to 
Philam Plans the burden of putting on the pension plan application the true state of Manuel’s health. It must 
be noted that since Philam Plans waived medical examination for Manuel, it had to rely largely on him stating 
the truth regarding his health in his application. For, after all, he knew more than anyone that he had been 
under treatment for heart condition and diabetes for more than 5 years preceding his submission of that 
application. But he kept those crucial facts from Philam Plans. 
● Lourdes also insisted that Manuel had concealed nothing, since Perla, the soliciting agent, knew that Manuel 
had a pacemaker implanted on his chest about 20 years before he signed up for the pension plan. But by its 
tenor, the responsibility for preparing the application belonged to Manuel, because if he furnished Perla the 
needed information and delegated to her the filling up of the application, then she acted on his instruction, 
not on Philam Plans’ instruction. 
● Lourdes additionally pointed out that any defect or insufficiency in the information provided by his pension 
plan application should be deemed waived after the same has been approved, the policy has been issued, 
and the premiums have been collected. The SC cannot agree. The comprehensive pension plan that Philam 
Plans issued contains a 1-year incontestability period, part of which states that “the above incontestability 
clause precludes the insurer from disowning liability under the policy it issued on the ground of concealment 
or misrepresentation regarding the health of the insured after a year of its issuance.” Since Manuel died in 
the 11th month following the issuance of his plan, the 1-year incontestability period has not yet set in, 
therefore, Philam Plans was not barred from questioning Lourdes’ entitlement to the benefits of her 
husband’s pension plan. 
 
Great Pacific Life Assurance v. CA and Medarda Leuterio ​[Digest in Part II] 
 
Soliman v. US Life 
US Life issued a 20-year endowment life policy on the joint lives of Patricio Soliman and his wife Rosario, each of 
them being the beneficiary of the other. In March 1949, the spouses were informed that the premium for January 1949 
was still unpaid and the 31-day grace period had already expired, and they were furnished long-form health 
certificates for the reinstatement of the policies. In April 1949, they submitted the certificates and paid the premiums 
therefor. In January 1950, Rosario died of acute dilation of the heart, and thereafter, Patricio filed a claim for the 
proceeds of the insurance. US Life denied the claim and filed for the rescission of the contract on the ground that the 
certificates failed to disclose that Rosario had been suffering from bronchial asthma for 3 years prior to their 
submission. 
RULING: The insurer is once again given 2 years from the date of reinstatement to investigate into the veracity of the 
facts represented by the insured in the application for reinstatement. When US Life sought to rescind the contract on 
the ground of concealment/misrepresentation, the 2-year period had not yet elapsed. Hence, the contract can still be 
rescinded. 
 
Harding v. Commercial Union Assurance Co. 
Henry Harding bought a car for P2,000 in 1915, which he gave to his wife. While Mrs. Harding was having the car 
repaired at the Luneta Garage, an agent of Smith Bell & Co., which in turn is Commercial Union Assurance Co. 
(CUAC)’s agent, Luneta Garage induced Mrs. Harding to insure the car with CUAC. Mrs. Harding agreed, and Smith 
Bell & Co. sent an agent to Luneta Garage, who, together with the manager of Luneta Garage, appraised the car and 
declared that its present value was P3,000. This amount was written in the proposal form which Mrs. Harding signed. 
Subsequently, the car was damaged by fire. CUAC refused to indemnify Mrs. Harding the entire amount of P3,000 
because the car’s present value was only P2,800 at the time of the damage. 
  
A S L ♛ |​ ​22 
RULING: CUAC is still liable to pay P3,000. Where it appears that the proposal form, while signed by the insured was 
made out by the person authorized to solicit the insurance (Luneta Garage and Smith Bell & Co.), the facts stated in 
the proposal, even if incorrect, will not be regarded as warranted by the insured, in the absence of willful 
misstatement. Under such circumstances, the proposal is to be regarded as the act of the insurer. 
 
Insular Life Assurance Co. v. Feliciano (73 PHIL 201) 
Evaristo Feliciano filed an application with Insular Life Assurance Co. (Insular), upon the solicitation of one of its 
agents. It appears that during that time, Feliciano was already suffering from tuberculosis. Such fact appeared during 
the medical exam, but the examiner and Insular’s agent ignored it. Thereafter, Feliciano was made to sign an 
application form and the blank spaces were filled by the medical examiner and the agent, making it appear that 
Feliciano was a fit subject of insurance. Feliciano was not fully aware of the contents of the application form because 
he cannot read/understand English. When Feliciano died, Insular refused to pay the proceeds to his beneficiaries, on 
the ground of concealment. 
RULING: Insular is bound by its agent’s acts. The insurance business has grown so vast and lucrative within the past 
century. Nowadays, even people of modest means enter into insurance contracts. Agents who solicit contracts are 
paid large commissions on the policies secured by them. They act as general representatives of insurance 
companies. In the case at bar, the true state of health of the insured was concealed by the agent of the insurer. The 
insurer’s medical examiner approved the application, knowing that the applicant was sick. This situation is one in 
which of two innocent parties must bear a loss for his reliance upon a third person. It seems reasonable that as 
between the two of them, the one who employed and gave character to the third person as its agent should be the one 
to bear the loss. Hence, Insular must pay the insurance proceeds to the beneficiaries. 
 
Insular Life Assurance Co. v. Feliciano (74 Phil 468) 
Insular filed a motion for reconsideration of the SC’s decision in the case of I​ nsular Life Assurance vs Feliciano (73 
PHIL 201)​. Insular averred that Feliciano is not entitled to the claim because the insurance policy is void a ​ b initio​;that 
he connived with the insurance agent and the medical examiner;and that at best, Feliciano is only entitled to refund or 
the reimbursement of what he has paid in premium. 
RULING: WhenFeliciano, the applicant for insurance, signed the application in blank and authorized the soliciting agent 
and/or medical examiner of Insular to write the answers for him, he made them his own agents for that purpose, and 
he was responsible for their acts in that connection. If they falsified the answers for him, he could not evade the 
responsibility for the falsification. He was not supposed to sign the application blank. He knew that the answers to the 
questions therein contained would be “the basis of the policy,” and for that very reason he was required with his 
signature to vouch for truth thereof. 
 
Qua Chee Gan vs. Law Union & Rock Insurance Co. 
Qua Chee Gan, a merchant, owned 4 warehouses in Albay which were used for the storage of copra and hemp. The 
warehouses, together with their contents, were insured with Law Union & Rock Insurance Co. (LURIC) for a total of 
P370,000, and the losses were made payable to Philippine National Bank (PNB) as mortgagee of the hemp and copra. 
On July 21, 1940, a fire of undetermined cause broke out and lasted for almost 1 whole week. Bodegas 1, 3, and 4, 
including the merchandise stored therein, were destroyed completely. Qua Chee Gan then informed LURIC of the 
unfortunate event and submitted the corresponding fire claims totaling P398,562.81, which was later reduced to 
P370,000. LURIC refused to pay, on the ground that there were violations of the warranties and conditions in the 
policy, filing of fraudulent claims, and that the fire had been deliberately caused by the insured. LURIC then filed an 
action before the CFI, but the CFI ruled in favor of Qua Chee Gan. In the present case, LURIC contended that under the 
Memorandum of Warranty between the parties, there should be no less than 1 hydrant for each 150 ft of external wall 
measurements of the compound. However, Qua Chee Gan had a total of 1,640 ft of external wall, but he only had 2 
hydrants (he was supposed to have 11 based on the agreement). LURIC also averred that there was a provision in the 
policy against the storage of gasoline, and since 36 cans of gasoline were found in Bodega 2 after the fire, the policy 
may be avoided. 
RULING: While it is true that Qua Chee Gan lacked the required number of hydrants, LURIC still issued the policy, which 
constitutes a waiver of the warranty. It is a well-settled rule that the insurer, at the time of the issuance of a policy, 
has the knowledge of existing facts, which if insisted on, would invalidate the contract from its very inception, such 

  
A S L ♛ |​ ​23 
knowledge constitutes a waiver of conditions in the contract inconsistent with known facts, and the insurer is stopped 
thereafter from asserting the breach of such conditions.  
Also, regarding the storage of gasoline, the SC is of the opinion that based on the provisions of the policy, gasoline 
was not one of the prohibited articles, because the provision relied upon by LURIC refers only to “oils.” 
 
   

  
A S L ♛ |​ ​24 
V. INCONTESTABILITY 
 
Tan Chay Heng v. West Coast Life Insurance 
Tan Chay Heng, as beneficiary of Tan Ceang, filed an action for insurance claim against West Coast Life Insurance 
(WCLI) with the trial court. WCLI filed its original Answer denying the claim, contending that there was vitiation of 
consent through fraud, therefore, no contract of insurance between Tan Ceang and WCLI was ever perfected. Tan 
Chay Heng filed a demurrer to WCLI’s defense, arguing that according to Section 47 of the Insurance Act, “whenever a 
right to rescind a contract of insurance is given to the insurer, such right must be exercised previous to the 
commencement of an action on the contract.” The trial court granted the demurrer and rendered a decision in favor of 
Tan Chay Heng. 
RULING: Section 47 of the Insurance Act does not apply in this case. WCLI does not seek to have the alleged 
insurance contract rescinded. Instead, it denies that it ever made any contract of insurance on the life of Tan Ceang or 
that any such a contract ever existed, and that is the question which it seeks to have litigated by its special defense. In 
the very nature of things, if the defendant never made or entered into the contract in question, there is no contract to 
rescind, and, hence, Section 47 upon which the lower court based its decision in sustaining the demurrer does not 
apply. 
 
Argente v. West Coast Life Insurance Co. 
A joint life insurance policy was issued to Bernardo Argente and his wife Vicenta upon payment of the premium, by 
West Coast Life Insurance CO. (WCLI). On November 18, 1925, during the effectivity of the policy, Vicenta died of 
cerebral apoplexy. Thereafter, Bernardo claimed payment of the insurance proceeds but WCLI denied the claim. In the 
Medical Examiner’s report, Vicenta gave the following responses to the questions in the application: 
● “How frequently do you use beer, wine, spirits and other intoxicants?” - “beer only in small quantities” 
● “What physician have you consulted or been treated by within the last 5 years and for what illness or 
ailment?” - “none” 
It is, however, not disputed that in 1924, Vicenta was taken to a hospital for what was first diagnosed as alcoholism, 
and later changed to manic-depressive psychosis, and then again changed to psychoneurosis. 
RULING: Bernardo is not entitled to the payment of the proceeds due to Vicenta’s misrepresentations in the 
application for her insurance. Such misrepresentations are false with respect to her state of health and that she knew 
and was aware that the representations so made by her were false. In an action on a life insurance policy where the 
evidence conclusively shows that the answers to questions concerning diseases were untrue, the truth or falsity of the 
answer becomes the determining factor. If the policy was obtained by fraudulent misrepresentations, the contract of 
insurance was never legally existent. 
 
Philamcare Health Systems v. CA [​ Digest in Part II] 
 
Soliman v. US Life​ [Digest in Part IV] 
 
Tan v. CA (174 SCRA 403) 
Tan Lee Siong was issued a policy by Philam Life Insurance Co. (Philam) on November 6, 1973. On April 26, 1975, Tan 
died of hepatoma. His beneficiaries then filed a claim with Philam for the proceeds of the insurance. However, 
Philamlife wrote to the beneficiaries in September 1975 denying their claim and rescinding the contract on the ground 
of misrepresentation. The beneficiaries averred that Philam can no longer rescind the contract on the ground of 
misrepresentation as rescission must allegedly be done “during the lifetime of the insured,” within 2 years and prior to 
the commencement of the action following the wording of Section 48, paragraph 2 of the Insurance Act. 
RULING: Philam may still rescind the insurance contract. The phrase “during the lifetime” found in Section 48 simply 
means that the policy is no longer in force after the insured has died. The key phrase in the second paragraph is “for a 
period of two years.” 
 
Manila Bankers Life Insurance Corp. v. Aban 
Under Sec. 48 of the Insurance Code, 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 rescindable. As the policy was 
issued on August 30, 1993 and the insured died on April 10, 1996, the insurance policy was thus in force for a period 
  
A S L ♛ |​ ​25 
of 3 years, 7 months, and 24 days. DOCTRINES: 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. Delia Sotero took out a life insurance policy from Manila Bankers Life Insurance Corp. (MB Life) 
and designated Cresencia Aban, her niece, as her beneficiary. MB Life issued the policy on August 30, 1993, with a 
face value of P100,000. On April 10, 1996, Sotero died, and this prompted Aban filed a claim for the insurance 
proceeds. MB Life denied Aban’s claim for the following reasons: Sotero did not personally apply for insurance 
coverage as she was illiterate; Sotero was actually sickly since 1990 and she did not disclose this fact; she did not 
have the financial capability to pay the premiums; and it was Aban who sign the application for insurance and not 
Sotero. MB Life filed a petition for the annulment of the insurance contract with the RTC. The main thesis of the 
complaint was that the policy was obtained by fraud, concealment and/or misrepresentation. Aban filed a motion to 
dismiss, claiming that MB Life’s cause of action was barred by prescription, pursuant to Section 48 of the Insurance 
Code, and the RTC granted Aban’s motion to dismiss. 
● Section 48 of the Insurance Code: “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 2 years from the date of its issue or 
of its last reinstatement, the insurer cannot prove that the policy is void a ​ b initio​ or is rescindible by reason of 
the fraudulent concealment or misrepresentation of the insured or his agent.”  
RULING: The RTC correctly granted Aban’s motion to dismiss. 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 2 years, from the effectivity of a life 
insurance contract and while the insured is alive, to discover or prove that the policy is void a ​ b initio​ or is rescindible 
by reason of the fraudulent concealment or misrepresentation of the insured or his agent. After the 2-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. Congress felt this was a sufficient answer to the various 
tactics employed by insurance companies to avoid liability.Records show that the policy was issued on August 30, 
1993, the insured died on April 10, 1996, and the claim was denied on April 16, 1997. The insurance policy was thus in 
force for a period of 3 years, 7 months, and 24 days. Considering that the insured died after the 2-year period, MB Life 
is, therefore, barred from proving that the policy is void a
​ b initio​ by reason of the insured fraudulent concealment or 
misrepresentation or want of insurable interest on the part of the beneficiary, herein respondent. 
 
   

  
A S L ♛ |​ ​26 
VI. POLICY 
 
Enriquez v. Sun Life Assurance Co. ​[Digest in Part II] 
 
Perez v. CA (323 SCRA 613) 
Primitivo Perez had been insured by BF Lifeman Insurance Corp. (Lifeman) since 1980 for P20,000. In October 1987, 
an agent of Lifeman, Rodolfo Lalog, visited Primitivo and convinced him to apply for an additional insurance coverage 
of P50,000, to avail of the ongoing promotional discount of P400 if the premium were paid annually. Primitivo 
accomplished the application form for the additional insurance coverage. Virginia Perez, his wife, paid P2,075.00 to 
Lalog. The receipt issued by Lalog indicated the amount received was a “deposit.” Unfortunately, Lalog lost the 
application form accomplished by Primitivo, so on October 28, 1987, he asked Primitivo to fill out another application 
form. On November 1, 1987, Primitivo was made to undergo the required medical examination, which he passed. 
Lalog forwarded the application for the additional insurance of Primitivo, together with all its supporting papers, to the 
office of Lifeman in Quezon, which in turn was supposed to forward the papers to the Lifeman Manila office. On 
November 25, 1987, Primitivo died while he was riding a ​banca​ which capsized during a storm. At the time of his 
death, his application papers for the additional insurance were still with the Lifeman Quezon office. Lalog testified 
that when he went to follow up the papers, he found them still in the Quezon office and so he personally brought the 
papers to the Manila office. It was only on November 27, 1987 that the said papers were received in Manila. Without 
knowing that Primitivo died on November 25, 1987, Lifeman approved the application and issued the corresponding 
additional policy on December 2, 1987 for P50,000. Virginia went to the Lifeman Manila office to claim the benefits 
under the insurance policies of the deceased, and she was paid P40,000.00 under the first insurance policy for 
P20,000 (double indemnity in case of accident) but the insurance company refused to pay the claim under the 
additional policy coverage of P50,000. Lifeman explained that since the policy was approved and issued only after 
Primitivo’s death, no contract of insurance was actually perfected. Consequently, Lifeman refunded the amount of 
P2,075 which Virginia had paid as premium. Lifeman then filed for the rescission and the declaration of nullity of the 
insurance policy with the RTC, and Virginia defended that the deceased had fulfilled all his prestations under the 
contract and all the elements of a valid contract are present. The RTC ruled in favor of Virginia but the CA reversed the 
RTC’s decision. 
RULING: The CA is correct in ruling that the contract was not perfected. An insurance contract is one whereby, for a 
stipulated consideration, one party undertakes to compensate the other for loss on a specified subject by specified 
perils. Because it is a contract, consent must be manifested by the meeting of the offer and the acceptance upon the 
thing and the cause which are to constitute the contract. When Primitivo filed an application for insurance, paid 
P2,075.00, and submitted the results of his medical examination, his application was subject to the acceptance of 
Lifeman. The perfection of the contract of insurance between the deceased and respondent corporation was further 
conditioned upon compliance with the following provision printed on the application form: "there shall be no contract 
of insurance unless and until a policy is issued on this application and that the said policy shall not take effect until 
the premium has been paid and the policy delivered to and accepted by me/us in person while I/We, am/are in good 
health." The assent of Lifeman therefore was not given when it merely received the application form and all the 
requisite supporting papers of the applicant. Its assent was given when it issued the corresponding policy to the 
applicant. Consequently, there was absolutely no way the acceptance of the application could have been 
communicated to the applicant for the latter to accept since the applicant, at that time, was already dead. 
 
Commissioner of Internal Revenue v. Lincoln Philippine Life Insurance Co. 
Lincoln Philippine Life Insurance Co., Inc. (LPLIC), now Jardine-CMA Life Insurance Company, Inc., is a domestic 
corporation engaged in life insurance business. LPLIC issued a special kind of life insurance policy known as the 
“Junior Estate Builder Policy,” in which there is a clause providing for an automatic increase in the amount of life 
insurance coverage upon attainment of a certain age by the insured, without the need of issuing a new policy. The 
Commissioner of Internal Revenue (CIR) then issued deficiency documentary stamps tax assessment corresponding 
to the amount of automatic increase of the sum assured on the policy issued by LPLIC. LPLIC filed a petition with the 
CTA, which ruled in its favor. The CIR appealed with the CA, but the CA affirmed the decision of the CTA. 
Is a new insurance policy, distinct from the main policy, subject to additional taxes? 
RULING: Yes. The subject insurance policy, at the time it was issued, contained an automatic increase clause. 
Although the clause was to take effect on a later date, it was written into the policy at the time of its issuance. Section 
  
A S L ♛ |​ ​27 
173 of the NIRC provides that the payment of documentary stamp taxes is done at the time the act is done. Section 
183 of the NIRC provides that the tax base for the computation of documentary stamp taxes on life insurance policies 
is the amount fixed in policy. Here, although the automatic increase in the amount of life insurance coverage was to 
take effect later on, the amount of the increase was already definite at the time of the issuance of the policy. Thus, the 
amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the 
automatic increase clause because it was already determinable at the time the transaction was entered into and 
formed part of the policy. The additional insurance was an obligation subject to a suspensive obligation, but still a 
part of the insurance sold to which respondent was liable for the payment of the documentary stamp tax. The 
deficiency of documentary stamp tax imposed on LPLIC is not on the amount of the original insurance coverage, but 
on the increase of the amount insured upon the effectivity of the Junior Estate Builder Policy. 
 
Lim v. Sun Life Assurance Co. of Canada (41 Phil 263) 
On July 6, 1917, Luis Lim applied for a policy of life insurance with Sun Life Assurance Co. of Canada (Sun Life) in the 
amount of P5,000. He designated his wife, Pilar Lim, as his beneficiary. The first premium of P433 Luis Sun Life 
issued a “provisional policy” for him. Such policy contained the provisions that “the abovementioned 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 4 months only from the date of the application, provided that the company 
shall confirm this agreement by issuing a policy on said application; should the company no 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 shall be returned.” Luis died on August 23, 1917, after the issuance of the provisional 
policy, but before the approval of the application by Sun Life. Pilar filed a petition with the court to recover from Sun 
Life the 5,000-Peso coverage stated in the policy. 
RULING: Pilar cannot collect the P5,000 coverage amount. The contract of insurance was not consummated by the 
parties. The abovequoted agreement clearly stated that the agreement should not go into effect until the home office 
of Sun Life has confirmed it by issuing a policy. It was nothing but an acknowledgment by Sun Life that it has received 
a sum of money agreed upon as the first year’s premium upon a policy to be issued upon the application if it is 
accepted by Sun Life.  
 
Great Pacific Life Assurance Co. v. CA (89 SCRA 543) 
Ngo Hing filed an application with Great Pacific Life Assurance Co. (Grepa) for a 20​-year endowment policy in the 
amount of P50,000 on the life of his 1-​year-old daughter Helen Go. Ngo Hing supplied the essential data on a form 
with his own handwriting before Lapulapu Mondragon, the Branch Manager of Grepa, which the latter then type​d. After 
payment of the premium and issuance of the binding deposit receipt, Mondragon wrote at the bottom of the back 
page of the application form his recommendation for the approval of the insurance application. However, it was 
disapproved by Grepa on the ground that the plan is not available for minors below 7 years old. The non​-acceptance 
of the insurance plan was not communicated to Ngo Hing until then the death of Helen due to influenza with 
complications of bronchopneumonia. Thereafter, Ngo Hing sought the payment of the proceeds of the insurance, but 
having failed in his effort, filed an action against Grepa before the CFI, which ruled in favor of Ngo Hing. Grepa 
contended that the binding deposit receipt issued to Ngo Hing did not constitute a temporary life insurance contract 
for Helen. Grepa added that, because Ngo Hing concealed the state of health and physical condition of Helen, the 
insurance contract is rendered void. 
RULING: The binding receipt is merely conditional and does not insure outright. 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. The SC also found 
that Ngo Hing had deliberately concealed the state of health and physical condition of his daughter. When Ngo Hing 
supplied the required data for the insurance application form, he was fully aware that his child suffers from Down 
Syndrome (the SC used the term “mongoloid” child). Such a congenital physical defect should never be disguised. In 
apparent bad faith, Ngo Hing withheld the fact material to the risk to be assumed by Grepa. Hence, the insurance 
contract is void. 
 
 
 
  
A S L ♛ |​ ​28 
Pacific Timber Export Corp. v. CA 
Pacific Timber Export Corp. (Pacific) secured temporary insurance from the Workmen's Insurance Co. (WIC) for its 
export of logs to Japan. WIC issued a cover note insuring the cargo on March 13, 1963, then the regular marine 
insurance policies were issued by WIC in favor of Pacific on Apr 2, 1963. After the issuance of the cover note but 
before the issuance of the policies, some of the logs intended to be exported were lost due to a typhoon. Pacific filed 
its claim with WIC, but the latter refused, contending that said loss may not be considered as covered under the cover 
note because such became null and void by virtue of the issuance of the marine policies. 
RULING: The cover note is valid and binding. The fact that no separate premium was paid on the cover note before the 
loss was insured against occurred does not militate against the validity of Pacific’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 required to be paid on a cover note. If the note is to be treated as a separate policy instead 
of integrating it to the regular policies subsequently issued, its purpose would be meaningless for it is in a real sense a 
contract, not a mere application. 
 
Development Bank of the Philippines v CA (231 SCRA 370) 
Juan Dans, together with his family, applied for a loan of P500,000 with the Development Bank of the Philippines 
(DBP). As principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage redemption 
insurance (MRI) with the DBP MRI Pool. A loan in the reduced amount was approved and released by DBP. From the 
proceeds of the loan, DBP deducted the payment for the MRI premium. The MRI premium of Dans, less the DBP 
service fee of 10%, was credited by DBP to the savings account of DBP MRI Pool. Accordingly, the DBP MRI Pool was 
advised of the credit. Dans subsequently died of cardiac arrest, and the DBP MRI Pool notified DBP that Dans was not 
eligible for MRI coverage, being over the acceptance age limit of 60 years at the time of application. DBP informed 
Dans’ wife of the disapproval of her late husband’s MRI application. DBP offered to refund the premium which the 
deceased had paid, but the wife refused to accept the same, demanding payment of the face value of the MRI or an 
amount equivalent of the loan. She, likewise, refused to accept an ​ex gratia​ settlement which DBP later offered.  
RULING: The DBP MRI Pool should not be held liable to pay the face value of the contract. The power to approve MRI 
applications is lodged with the DBP MRI Pool. The pool, however, did not approve the application. There is also no 
showing that it accepted the sum which DBP credited to its account with full knowledge that it was payment for the 
premium. There was as a result no perfected contract of insurance, hence, the DBP MRI Pool cannot be held liable on 
a contract that does not exist. 
 
Bonifacio Bros v. Mora 
Enrique Mora mortgaged his Oldsmobile sedan car to HS Reyes Inc., with the condition that Mora would insure the car 
and designate HS Reyes, Inc. as beneficiary. The car was then insured with State Insurance Company (SIC). During the 
effectivity of the insurance contract, the car figured in an accident. SIC then assigned the accident to an insurance 
appraiser for investigation and appraisal of the damage. Mora, without the knowledge and consent of HS Reyes, Inc., 
authorized Bonifacio Bros to fix the car, using materials supplied by the Ayala Auto Parts Co. Mora was billed 
P2,102.73 for the cost of labor and materials. The bill was sent to SIC’s appraiser, and SIC drew a check in the amount 
of the insurance proceeds and entrusted the check to its appraiser for delivery to the proper party. The car was 
delivered to Mora without the consent of HS Reyes, Inc., and without payment to Bonifacio Bros and Ayala Auto Parts 
Co. Upon the theory that the insurance proceeds should be directly paid to them, Bonifacio and Ayala Auto Parts Co. 
filed a complaint against Mora and SIC with the MTC for collection of the sum of P2,102.73. SIC filed its answer with a 
counterclaim for interpleader, requiring Bonifacio and HS Reyes, Inc. to interplead in order to determine who has a 
better right to the proceeds. 
Was there privity of contract between Bonifacio Bros and Ayala Auto Parts Inc.on one hand, and SIC on the other? 
RULING: No cause of action exists in favor of Bonifacio Bros and Ayala Auto Parts, Inc., in so far as the proceeds of 
insurance are concerned. Their claim, if at all, is merely equitable in nature and must be made effective through Mora. 
This conclusion is deducible, not only from the principle governing the operation and effect of insurance contracts in 
general, but is clearly covered by the express provisions of Section 53 of the Insurance Code. 
 
 
 
  
A S L ♛ |​ ​29 
Coquia v. Fieldmen’s Insurance 
On Dec. 1, 1961, Fieldmen’s Insurance Co. (FIC) issued in favor of Manila Yellow Taxicab, a common carrier, an 
insurance policy with a stipulation that FIC shall indemnify the insured of the sums which the latter may be held liable 
for, with respect to “death or bodily injury to any fare-paying passenger, including the driver and conductor.” The policy 
also stated that “in the event of the death of the driver, the company shall indemnify his personal representatives and, 
at the company’s option, may make indemnity payable directly to the claimants or heirs of the claimants.” During the 
policy’s effectivity, one of the taxicabs of the insured, driven by Carlito Coquia, met an accident and Coquia died. FIC 
refused to pay Coquia’s parents (Petitioners), the only heirs. FIC contended that Coquia’s parents have no cause of 
action against it, because they have no contractual relationship with FIC. 
RULING: Petitioners have the right to collect on the policy. Although, in general, only parties to a contract may bring an 
action based thereon, this rule is subject to exceptions, one of which is when the contract contains a stipulation in 
favor of a third person under Article 1311 of the Civil Code. 
 
Guingon v. Del Monte [​ Digest in Part I] 
 
Del Val v. Del Val 
Petitioners and private respondents are brothers and sisters, and are the only heirs and next of kin of Gregorio del Val 
who died intestate. It was found out that the deceased took out insurance on his life for the sum of P40,000 and made 
it payable to Respondent Andres del Val as sole beneficiary. After Gregorio’s death, Andres collected the proceeds of 
the policy. Out of the insurance proceeds, Andres paid out P18,000 to redeem some real property which Gregorio had 
sold to third persons during his lifetime. The said redemption of the property was made by Andres’ lawyer in the name 
of Andres and Petitioners (but Andres was not aware that the redemption was made in their names). Petitioners 
questioned Andres’ act of taking the insurance proceeds, reasoning that the sum belonged to Gregorio’s entire estate 
and not to Andres personally. Petitioners filed a complaint for partition of property, including the insurance proceeds, 
with the trial court. Andress defended that he is the sole owner of the proceeds because he was the only designated 
beneficiary, and he is also the sole owner of the property redeemed because the insurance proceeds were used to 
redeem the same. 
RULING: Petitioners do not have a right over the insurance proceeds. The contract of life insurance is a special 
contract and the destination of the proceeds thereof is determined by special laws which deal exclusively with the 
subject. The Civil Code has no provisions which relate directly and specifically to life-insurance contracts or to the 
destination of life insurance proceeds. Thus, the contention of Petitioners that the insurance proceeds should be 
considered as a donation or gift, and should be included in the estate of the deceased, is untenable. Since the 
repurchase has been made in the names of all the heirs instead of the Andres alone, Petitioners claim that the 
property belongs to the heirs in common and not to the defendant alone. The SC held that if it is established by 
evidence that that was his intention and that the real estate was delivered to Petitioners with that understanding, then 
it is probable that their contention is correct and that they are entitled to share equally with the defendant. However, it 
appears from evidence that the conveyances were taken in the name of Petitioners without the knowledge and 
consent of Andres, or that it was not his intention to make a gift to them of real estate, when it belongs to him. 
 
Insular Life Assurance Co., Ltd. v. Ebrado​ [Digest in Part III] 
 
Ang v. Fulton Fire Insurance Co. 
On September 9, 1953, Fulton Fire Insurance Co. (FFIC) issued a fire insurance policy in favor of P&S Department 
Store (owned by the Spouses Paulo and Sally Ang) over stocks of general merchandise, consisting principally of dry 
goods, contained in a building occupied by the Angs. The premium is P500.00 annually. The policy was renewed for 
another year in September 1954. However, on December 17, 1954, the store was destroyed by fire. The Angs executed 
the first claim form together with all the necessary papers, and they were all forwarded to the Manila Adjustment Co., 
FFIC’s adjusters. In January of the following year, Paulo and 10 others were charged for arson in a criminal case but 
Paulo was eventually acquitted. FFIC denied the Angs’ claim for the insurance proceeds in April 1956, so in the 
following month, the Angs filed a case against Paramount Surety & Insurance Co. (PSIC), FFIC’s agent, to assert the 
claim, but the trial court dismissed the same. In May 1958, the Angs filed a case against FFIC to recover from it the 
face value of the policy. FFIC contended that, under Paragraph 13 of the policy, “if the loss or damage is occasioned 
by the willful act of the insured, or if the claim is made and rejected but no action is commenced within 12 months 
  
A S L ♛ |​ ​30 
after such rejection, all benefits under the policy would be forfeited.” According to FFIC, since the Angs received the 
notice of denial in April 1956, and they filed action only in May 1958, all the benefits under the policy have been 
forfeited.  
RULING: The Angs can no longer claim under the policy. The condition contained in the insurance policy that claims 
must be presented within 1 year after rejection is not merely a procedural requirement. The condition is an important 
matter, essential to a prompt settlement of claims against insurance companies, as it demands that insurance suits 
be brought by the insured while the evidence as to the origin and cause of destruction have not yet disappeared. It is 
in the nature of a condition precedent to the liability of the insurer, or in other terms, a resolutory cause, the purpose of 
which is to terminate all liabilities in case the action is not filed by the insured within the period stipulated. The 
bringing of the action against the PSIC cannot have any legal effect except that of notifying the agent of the claim. 
Beyond such notification, the filing of that action can serve no other purpose.  
 
Filipino Merchants Insurance Co., Inc. v. CA ​[Digest in Part III] 
 
Mayer Steel Pipe Corp. v. CA 
In 1983, Hong Kong Government Supplies Department (HKGSD) contracted with Mayer Steel Pipe Corp. (MSPC) for 
the manufacture and supply of various types of steel pipes and fittings. From August to October 1983, MSPC shipped 
the pipes and fittings to HKGSD, evidenced by several invoices. Prior to the shipping, MSPC insured the pipes and 
fittings against all risks with South Sea Surety & Insurance Co., Inc (SSSIC) and Charter Insurance Corp. (CIC). MSPC 
and HKGSD jointly appointed Industrial Inspection Inc. (III) as third-party inspector to examine whether the pipes and 
fittings are manufactured in accordance with the specifications in the contract. III certified that all the pipes and 
fittings to be in good order condition before they were loaded in the vessel. However, when the goods reached 
HKGSD, it was discovered that a substantial portion thereof was damaged. MSPC and HKGSD filed a claim against 
SSSIC and CIC for indemnity under the insurance contract. CIC paid HKGSD the amount of HK$64,904.75. HKGSD 
demanded for the payment of the balance of HK$299,345.30 but this was refused by CIC, so HKGSD filed an action to 
recover the HK$299,345.30 balance. CIC defended that the insurance surveyor's report allegedly showed that the 
damage is a factory defect. The RTC ruled in favor of MSPC but the CA reversed the RTC’s decision, based on Section 
3(6) of the COGSA. 
● Section 3(6) of the COGSA: “The carrier and the ship shall be discharged from all liability in respect of loss or 
damage unless suit is brought within one year after delivery of the goods or the date when the goods should 
have been delivered applies not only to the carrier but also to the insurer.” 
RULING: Section 3(6) of the COGSA does not apply in this case. Under this provision, only the carrier's liability is 
extinguished if no suit is brought within 1 year. But the liability of the insurer is not extinguished because the insurer's 
liability is based, not on the contract of carriage, but on the contract of insurance which is governed by the Insurance 
Code. An insurance contract generally prescribed in 10 years if no other period of prescription is provided therein, in 
accordance with Article 1144 of the Civil Code. 
 
Ang Giok Chip v. Springfield Fire & Marine Insurance Co. 
Ang Giok Chip insured his warehouse for the total value of Php 60,000 under several policies. One of these, amounting 
to P10,000, was with Springfield Fire & Marine Insurance Co. (Springfield). His warehouse burned down, so he 
attempted to recover P8,000 from Springfield as indemnity for his loss. Springfield interposed its defense on a rider in 
the policy, fixing the amount of hazardous goods that can be stored in the building to be covered by the insurance. 
Springfield alleged that Ang Giok Chip violated the 3% limit by placing hazardous goods to as high as 39% of all the 
goods stored in the building. Ang Giok Chip’s suit to recover, nonetheless, was granted by the trial court. When 
Springfield appealed this decision, Ang Giok Chip defended that the warranty relied upon by Springfield is invalid, 
because it does not comply with the Insurance Act, because it was merely pasted on the policy. 
RULING: The warranty relied upon by Springfield is valid. 
Section 65 of the IInsurance Act states that "every express warranty, made at or before the execution of a policy, must 
be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy, as making 
a part of it." The warranty/rider Springfield is referring to was pasted on the left margin of the policy and it stated that 
“it is hereby declared and agreed that during the currency of this policy no hazardous goods be stored in the Building 
to which this insurance applies or in any building communicating therewith, provided, always, however, that the 
Insured be permitted to stored a small quantity of the hazardous goods specified below, but not exceeding in all 3% of 
  
A S L ♛ |​ ​31 
the total value of the whole of the goods or merchandise contained in said warehouse.” Any express warranty or 
condition is always a part of the policy, but, like any other part of an express contract, may be written in the margin, or 
contained in proposals or documents expressly referred to in the policy, and so made a part of it. It is well-settled that 
a rider attached to a policy is a part of the contract, to the same extent and with like effect as it actually embodied 
therein.The warranty/rider relied upon by Springfield is contained in the policy itself, because by the contract of 
insurance agreed to by the parties it was made to be a part. It was not a separate instrument agreed to by the parties. 
The receipt of the policy by the insured without objection binds him. It was his duty to read the policy and know its 
terms. He also never chose to accept a different policy by considering the earlier one as a mistake. Hence, the rider is 
valid. 
 
Malayan Insurance Co. v. Cruz Arnaldo 
On June 7, 1981, Malayan Insurance Co., Inc. (MICI) issued to Coronacion Pinca a fire insurance policy covering her 
property, for the amount of P14,000, effective from July 22, 1981 to July 22, 1982. On October 15,1981, MICI allegedly 
cancelled the policy for non-payment of premium and sent the corresponding notice to Pinca. On December 24, 1981, 
payment of the premium for Pinca was received by Domingo Adora, an agent of MICI. On January 15, 1982, Adora 
remitted this payment to MICI, together with other payments. On January 18, 1982, Pinca's property was completely 
burned. When the case was brought before the Insurance Commission (IC), the IC granted Pinca’s claim for 
compensation for her burned property, and ruled that MICI’s cancellation of the policy was invalid. 
RULING: Pinca is still entitled to compensation. 
● A valid cancellation must, therefore, require concurrence of the following conditions: 
○ There must be prior notice of cancellation to the insured; 
○ The notice must be based on the occurrence, after the effective date of the policy, of one or more of 
the grounds mentioned; 
○ The notice must be in writing, mailed, or delivered to the named insured, at the address shown in the 
policy; 
○ It must state which of the grounds mentioned in Section 64 is relied upon and that upon written 
request of the insured, the insurer will furnish the facts on which the cancellation is based.  
MICI explained that it cancelled the policy on October 15, 1981 for non-payment of premium. To support this 
assertion, MICI presented one of its employees, who testified that "the original of the endorsement and credit memo 
were sent to the assured by mail through our mailing section." However, there is no proof that the notice, assuming it 
complied with the other requisites mentioned above, was actually mailed to and received by Pinca. What is 
questionable in this case is that while the insured and Adora had no knowledge, MICI still allowed the remittance of 
Pinca’s payments, and only returned such payments a month later, after it had learned of the occurrence of the loss of 
Pinca’s property. These circumstances make the motives of MICI highly suspect, to say the least, and cast serious 
doubts upon its candor. 
 
   

  
A S L ♛ |​ ​32 
VII. WARRANTIES 
 
Prudential Guarantee & Assurance, Inc. v. Trans-Asia Shipping Lines 
Trans-Asia Shipping Lines (TASL) is the owner of the vessel MV Asia Korea. TASL obtained a marine insurance 
contract from Prudential Guarantee & Assurance, Inc. (PGAI) covering MV Asia Korea for loss/damage of the hull and 
machinery arising from perils, for the sum of P40,000,000, for the period between July 1, 1993 and July 1, 1994. On 
October 25, 1993, while the policy was in force, a fire broke out while MV Asia Korea was undergoing repairs at the 
port of Cebu. The following day, TASL filed its notice of claim for the damage sustained by the vessel. TASL reserved 
its right to subsequently notify PGAI as to the full amount of the claim upon final survey and determination by average 
adjuster Richard Hogg International (RHI) of the damage sustained by MV Asia Korea. An adjuster’s report on the fire 
in question was submitted by RHI, and TASL executed a document denominated "Loan and Trust Receipt” in which 
TASL received from PGAI P3,000,000. Thereafter, PGAI denied the insurance claim of TASL because TASL violated the 
warranty denominated as “warranted vessel classed and class maintained” PGAI then requested for the return of the 
P3,000,000. TASL filed a complaint with the RTC, alleging that the P3,000,000 was the balance of the indemnity due. 
RULING: TASL did not violate the warranty relied upon by PGAI. The Senior Manager of PGAI’s Marine and Aviation 
Division already made a categorical admission that MV Asia Korea was properly classed during the time when the 
policy was being applied for. 
 
Young vs. Midland Textile Insurance Co. 
K.S. Young owned a candy and fruit store in Escolta and occupied a building as both his residence and bodega. Young 
entered into a contract of insurance with Midland Textile Insurance Co. (MTIC) for coverage against fire. One of the 
conditions of the policy stated that “It is hereby declared and agreed that during the pendency of this policy, no 
hazardous goods be stored or kept for sale, and no hazardous trade or process be carried on, in the building to which 
this insurance applies, or in any building connected therewith.” In February 1913, Young placed 3 boxes of fireworks in 
the insured building, intended to be used for Chinese New Year. A few days later, the insured building got partially 
destroyed by fire. The said fireworks, however, were found in the part of the building that was not destroyed by the 
fire. Records show that the fireworks in no way contributed to the fire or to the loss occasioned by the fire.  
RULING: Although the fireworks did not cause the fire, the placing of such fireworks in the insured building still 
constitutes a breach of warranty.If the insured cannot bring himself within the conditions of the policy, he is not 
entitled to recover for the loss. The terms of the policy constitute the measure of the insurer’s liability, and in order to 
recover the insured must show himself within those terms; and if it appears that the contract has been terminated by 
a violation of its conditions by the insured, then there can be no right of recovery.  
 
American Home Assurance Co. v. Tantuco Enterprises ​[Digest in Part I] 
 
Ang Giok Chip v. Springfield Fire & Marine Insurance Co.​ [Digest in Part VI] 
 
Qua Chee Gan vs. Law Union & Rock Insurance Co. [​ Digest in Part IV] 
 
Bachrach v. British American Assurance Co. ​[Digest in Part III] 
 
Geagonia v. CA [​ Digest in Part II] 
 
United Merchants Corp. v. Country Bankers Insurance Corp. ​[Digest in Part VII] 
 
   

  
A S L ♛ |​ ​33 
VIII. PREMIUM 
 
UCPB General Insurance Co., Inc. v. Masagana Telemart Inc. 
On April 15, 1991, UCPB General Insurance Co. (UCPB) issued 5 insurance policies covering various properties owned 
by Masagana Telemart Inc. (MTI) against fire, for the period from May 22, 1991 to May 22, 1992. In March 1992, UCPB 
evaluated the policies and decided not to renew them upon expiration of their terms on May 22, 1992. UCPB advised 
MTI’s broker, Zuellig Insurance Brokers, Inc. (ZIBI), of its intention not to renew the policies. On April 6, 1992, UCPB 
gave written notice to MTI of the non-renewal of the policies at the address stated in the policies. On June 13, 1992, 
fire razed MTI’s property covered by 3 of the insurance policies UCPB issued. MTI presented to UCPB’s Head Office 
cashier 5 manager’s checks in the total amount of P225,753.95, representing premium for the renewal of the policies 
from May 22, 1992 to May 22, 1993. No notice of loss was filed by MTI under the policies prior to July 14, 1992. On 
July 14, 1992, MTI filed with UCPB its formal claim for indemnification of the insured property razed by fire. On the 
same day, UCPB returned to MTI the 5 manager’s checks that it tendered, and at the same time rejected MTI’s claim, 
on the ground that the policies had expired and were not renewed, and that the fire occurred on June 13, 1992, before 
MTI’s tender of premium payment. 
RULING: MTI is not entitled to recover in this case. An insurance policy, other than life, issued originally or on renewal, 
is not valid and binding until actual payment of the premium. Any agreement to the contrary is void. The parties may 
not agree expressly or impliedly on the extension of creditor time to pay the premium and consider the policy binding 
before actual payment. Here, the payment of the premium for renewal of the policies was tendered on July 13, 1992, a 
month after the fire occurred on June 13, 1992. MTI did not even give the insurer a notice of loss within a reasonable 
time after occurrence of the fire. 
 
Sps. Tibay v. CA, (G.R. No. 119655) 
Fortune Life & General Insurance Co. (Fortune) issued a fire insurance policy in favor of Violeta Tibay on her 2-storey 
residential building. The insurance was for P600,000, covering the period from January 23, 1987 to January 23, 1 988. 
On January 23 1987, Violeta paid only P600.00 of 3,000-Peso premium and left a balance. The insured building was 
completely destroyed by fire shortly after, and VIoleta immediately paid the remaining balance of the premium, and 
filed a claim on the policy. Her claim was referred to the adjuster, Goodwill Adjustment Services, Inc. (GASI), which 
immediately wrote Violeta requesting her to submit the necessary documents for investigation and processing. 
Violeta complied and signed a non-waiver agreement. Fortune denied Violeta’s claim on the ground of violation of the 
Insurance Code. Violeta sued for damages in the amount of P600,000, representing the total coverage of the policy.  
RULING: The insurance contract cannot be valid and binding upon only partial payment of the premium. Section 77 of 
the Insurance Code states that no policy or contract of insurance issued by an insurance company is valid and binding 
unless and until the premium has been paid. Nothing in the provision suggests that the parties may not agree to allow 
payment of the premiums in installment, or to consider the contract as valid and binding upon payment of the first 
premium. If the premium is not paid in the manner prescribed in the policy as intended by the parties, the policy is 
ineffective. Partial payment, even when accepted as a partial payment, will not keep the policy alive. 
 
Arce v. Capital Insurance & Surety Co., Inc. 
Pedro Arce has been insuring his residential house with Capital Insurance & Surety Co., Inc. (Capital) since 1961. In 
November 1965, Capital sent to Arce a Renewal Certificate to cover the period from December 5, 1965 to December 
5,1966 and requested payment of the corresponding premium. Anticipating that the premium could not be paid on 
time, Arce asked for an extension, which Capital granted immediately. After the lapse of the requested extension, Arce 
still failed to pay. Thereafter, the insured house was totally destroyed by fire. Upon Arce’s presentation of claim for 
indemnity, he was told by Capital that no indemnity was due because the premium was not paid. Nonetheless, Capital 
tendered a check for P300 as financial aid for Arce, which was received by his daughter. Arce sued for indemnity, and 
the trial court ruled that Capital is still liable to indemnify Arce for the loss. 
RULING: Capital is not obliged to indemnify Arce. Section 77 of the Insurance Code states that no policy or contract of 
insurance issued by an insurance company is valid and binding unless and until the premium has been paid. Arce was 
given a grace period to pay the premium but he failed to pay within the given time. He cannot now insist that Capital is 
obligated to indemnify him. 
 
 
  
A S L ♛ |​ ​34 
Makati Tuscany Condominium Corp. v. CA 
Sometime in 1982, American Home Assurance Co. (AHAC), represented by American International Underwriters (AIU), 
issued in favor of Makati Tuscany Condominium Corp. (MTCC) an insurance policy covering the latter's building and 
premises, for a period beginning 1 March 1982 and ending 1 March 1983, with a total premium of P466,103.05. The 
premium was paid on installments on March 12, 1982, May 20, 1982, June 21, 1982 and November 16, 1982, all of 
which were accepted by AHAC. Successive renewals of the policies were made in the same manner. In 1984, the 
policy was again renewed and MTCC made 2 installment payments, both accepted by AHAC, the first on February 6, 
1984 for P52,000 and the second, on June 6, 1984 for P100,000. Thereafter, MTCC refused to pay the balance of the 
premium. AHAC filed an action to recover the unpaid balance of P314,103.05 for the policy. MTCC explained that it 
discontinued the payment of premiums because the policy did not contain a credit clause in its favor. MTCC further 
claimed that the policy was never binding and valid, and no risk attached to the policy. It then pleaded a counterclaim 
for P152,000 for the premiums already paid for 1984-1985, and in its answer with amended counterclaim, sought the 
refund of P924,206.10 representing the premium payments for 1982-1985. The RTC dismissed the complaint and 
counterclaim, and the CA, on appeal, ordered MTCC to pay the balance of the premiums due. 
RULING: Payment on installment of the premiums due does not invalidate an insurance contract under Section 77 of 
the Insurance Code. 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 prepared in full. At the very least, both parties should be deemed in estoppel to question the 
arrangement they have voluntarily accepted. Moreover, as correctly observed by the appellate court, where the risk is 
entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was 
exposed to the risk insured for any period, however brief or momentary. The obligation to pay premiums when due is 
ordinarily an indivisible obligation to pay the entire premium. 
 
Manufacturers Life Insurance Co. v. Bibiano L. Meer 
Manufacturers Life Insurance Co. (Manulife) was engaged in the insurance business in the Philippines for more than 5 
years before and including the year 1941. But due to war, it closed its office in Manila from 1942 to 1945. Manulife 
issued a number of life insurance policies in the Philippines containing non-forfeiture clauses. Since the insured failed 
to pay from 1942 to 1946, Manulife applied the provision of the automatic premium loan clauses, and the net amount 
of premiums so advanced or loaned totaled P1,069,254.98. On this sum, the Collector of Internal Revenue assessed 
P17,917.12. The assessment was made pursuant to Section 255 of the NIRC, which put taxes on insurance premiums 
paid by money, notes, credits or any substitutes for money. Manulife contended that when it made premium loans or 
premium advances by virtue of the non-forfeiture clauses, it did not collect premiums within the meaning of the above 
sections of the law, and therefore it is not amenable to the tax provided. 
RULING: The premium advances made under the automatic premium loan clause of Manulife’s policies are deemed 
“premium collected” under the NIRC. “A person secures a 20-years endowment policy for P5,000 from Manulife and 
pays an annual premium of P250. He pays the first 10 yearly premiums amounting to P2,500 and on this amount, 
Manulife pays the taxes. Also, the cash value of said policy after the payment of the 10th annual premium amounts to 
P1,000.” When on the 11th year the annual premium fell due and the insured remitted no money within the grace 
period, Manulife treated the premium then overdue as paid from the cash value, the amount being loaned to the 
policyholder who could discharge it at any time with interest at 6%. The insurance contract, therefore, continued in 
force for the 11th year. In effect Manulife loaned to the person P250 and the latter in turn paid with that sum the 
annual premium on his policy. The Company therefore collected the premium for the 11th year. Manulife “became a 
creditor” of the loan, but not of the premium that had already been paid. And it is entitled to collect interest on the 
loan, not on the premium. The insured paid the premium for the eleventh; but in turn he became a debtor of the 
company for the sum of P250. This debt he could repay either by later remitting the money to the insurer or by letting 
the cash value compensate for it. The debt may also be deducted from the amount of the policy should he die 
thereafter during the continuance of the policy. There was new credit for the advances made. True, the company 
could not sue the insured to enforce that credit. But it has means of satisfaction out of the cash surrender value.  
 
GSIS vs. Prudential Guarantee & Assurance, Inc. 
In March 1999, the National Electrification Administration (NEA) entered into a Memorandum of Agreement (MOA) 
with GSIS insuring all the real and personal properties mortgaged to it by electrical cooperatives, under an all-risks 
policy. The total sum insured under the policy was P16,731,141,166.80, out of which 95% (15,894,584,108.40) was 
  
A S L ♛ |​ ​35 
reinsured by GSIS with Prudential Guarantee & Assurance, Inc. (PGAI) for a period of 1 year from March 5, 1999. Under 
the reinsurance request note and the reinsurance binder, GSIS paid PGAI reinsurance premiums for the first 3 
quarters, but failed to pay the 4th and other succeeding premiums due, despite demands. This prompted PGAI to file a 
complaint against GSIS before the RTC. 
RULING: PGAI has the right to be paid by GSIS for the 4th and last reinsurance premiums. In the case of ​Makati 
Tuscany Condominium Corp. v. CA​, the Court already ruled that the non-payment of subsequent installment premiums 
would not prevent the insurance contract from taking effect. Hence, PGAI is entitled to the remaining balance of the 
premiums. 
 
South Sea Surety & Insurance Co. v. CA 
Valenzuela Hardwood and Industrial Supply, Inc. (VHIS) shipped with Seven Brothers’ vessel, MV Seven Ambassador, 
940 round logs at the port of Isabela, for shipment to Manila. VHIS insured the shipment against loss and/or damage 
with South Sea Surety & Insurance Co. (SSSIC) for P2,000,000. On January 24, 1984, VHIS paid the premium in the 
form of a check to Victorio Chua, an agent of SSSIC. Unfortunately, the day after the premium was paid, MV Seven 
Ambassador sank. On January 30, 1984, the check was tendered to SSSIC but it refused to accept the payment. 
SSSIC, instead, cancelled the policy for non-payment of the premium. When the case was brought before the RTC, the 
RTC ruled in favor of VHIS, against SSSIC and Seven Brothers. On appeal, the CA absolved Seven Brothers, based on 
the stipulation in the charter party that the shipowner is exempted from liability in case of loss. SSSIC defended that 
Chua was not an authorized agent to receive payment, therefore, the policy can be cancelled on the ground of 
non-payment of premium. 
RULING: Chua is an authorized representative of SSSIC to receive payment. Hence, VHIS’s payment to Chua on 
January 24 is valid and the policy cannot be cancelled on the ground of non-payment of premium. 
 
Malayan Insurance Co. v. Cruz Arnaldo ​[Digest in Part VI] 
 
American Home Assurance Co. v. Tantoco Enterprises, Inc. ​[Digest in Part I] 
 
   

  
A S L ♛ |​ ​36 
IX. LOSS AND NOTICE OF LOSS 
 
United Merchants Corp. v. Country Bankers Insurance Corp. ​[Digest in Part VII] 
 
Country Bankers Insurance Corp. vs. Lianga Bay & Community Multipurpose Cooperative, Inc. 
Lianga Bay & Community Multipurpose Cooperative, Inc. (LBCMC) acquired a fire insurance policy from Country 
Bankers Insurance Corp. (CBI) in 1989, covering the former’s stock-in-trade, for the period between June 20, 1989 and 
June 20, 1990. On July 1, 1989, LBCMC’s building was gutted by fire and reduced to ashes, resulting in the total loss 
of all its stock-in-trade. LBCMC submitted a report to CBI for its claim, but CBI denied the same, on the ground that, 
based on the documents, the building was set on fire by 2 NPA rebels who wanted to obtain canned 
goods, rice, and medicines, and that such loss was an excepted risk under paragraph 6 of the policy. 
RULING: CBI is still liable to compensate LBCMC under the insurance contract. 
CBI averred that the cause of the loss was an exce[ted risk under the terms of the fire insurance policy. Where a risk is 
excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk constitutes a 
defense which the insurer may urge, since it has not assumed that risk, and from this, it follows that an insurer 
seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the loss 
comes within the purview of the exception or limitation set up. 
CBI relied on the Sworn Statements of Jose Lomocso and Ernesto Urbiztondo, and on the Spot Report of Arturo 
Juarbal dated July 1, 1989. However, the SC found that these statements were only hearsay and hence, inadmissible 
in evidence. 
 
FGU Insurance Corp. vs. CA, (G.R. No. 137775) 
Anco Enterprises (Anco), a partnership between Ang Gui and Co To, was engaged in the business of shipping, 
operating 2 common carriers. MT Anco was a tugboat while DB Lucio was a barge with no engine of its own. 
On September 23, 1979, San Miguel Corp. (SMC) shipped its goods from Mandaue on board DB Lucio, for towage by 
MT Anco On September 30, DB Lucio was towed by MT Anco, but upon arrival at the port, MT Anco left immediately. 
The clouds grew dark and the waves got bigger and bigger, so SMC’s District Sales Supervisor, Fernando Macabuag, 
requested Anco’s representative to transfer DB Lucio to a safer place, but the latter refused. Around midnight, DB 
Lucio sank, along with all of SMC’s shipments. The loss amounted to P1,346,197. When SMC claimed indemnification 
from Anco, Anco defended that under their agreement, Anco will not be liable for any losses or damages resulting to 
the cargoes by reason of fortuitous event. Anco also averred that the shipment was insured with FGU Insurance Corp. 
(FGU) for only P858,500, so SMC cannot claim more than that amount. Anco filed a claim for its insurance policy with 
FGU, but FGU denied liability, alleging that Anco and SMC failed to exercise ordinary diligence over the care and 
supervision of the shipments. 
RULING: FGU is exempted from liability to Anco for the lost shipments because of Anco’s negligence. Under Article 
1739 of the Civil Code, “in order that a common carrier may be exempted from responsibility, the natural disaster must 
have been the proximate and only cause of the loss… the common carrier must exercise due diligence to prevent or 
minimize loss before, during, and after the occurrence of flood, storm, or other natural disaster, in order that the 
common carrier may be exempted from liability…” 
 
Sun Insurance Office, Ltd. v. CA ​[Digest in Part I] 
 
Pacific Timber Export Corp. v. CA ​[Digest in Part VI] 
 
Malayan Insurance Co. v. Cruz Arnaldo ​[Digest in Part VI] 
 
Travellers Insurance & Surety Corp. v. CA 
Feliza Vineza de Mendoza, an old lady, was hit by a taxicab. The taxicab was later identified and a case was filed 
against the driver and Armando Abellon, the owner. Later, the case was amended to include Travellers Insurance & 
Surety Corp. (TISC), the insurer of Abellon’s taxicab. Both the RTC and the CA ordered that the Abello, TISC, and the 
driver be held solidarily liable to indemnify for the death of Feliza. 
RULING: 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 
  
A S L ♛ |​ ​37 
persons cannot proceed against the insurer, the contract being solely to reimburse the insured for liability actually 
discharged by him through payment to third persons. The said third persons' recourse is limited to the insured alone. 
The lower courts failed to distinguish between the private respondent's cause of action against Abello, and the driver 
of the taxicab and his cause of action against TISC. The former is based on torts and quasi-delicts while the latter is 
based on contract. 
 
   

  
A S L ♛ |​ ​38 
X. REINSURANCE AND DOUBLE INSURANCE 
 
Gonzales Lao v. Yek Tong Lin Fire & Marine Insurance Co., Ltd. 
Emilio Gonzales Lao was issued 2 fire insurance policies by Yek Tong Lin Fire & Marine Insurance Co. (YTL) for 
P100,000, covering his leaf tobacco products, which were stored in Gonzales Lao’s building. Article 3 of the insurance 
policies provide that “any insurance in force upon all or part of the things insured must be declared in writing by the 
insured and he should cause the company to mention it in the policy; without such requisite, such policy will be 
regarded as null and void…” Notwithstanding this provision, Gonzales Lao acquired additional insurance policies from 
other insurers, covering the products that were not covered by YTL’s policies. On January 11, 1928, Gonzales Lao’s 
building burned down. When Gonzales Lao sought to claim under his insurance policy from YTL, YTL denied liability, 
on the ground that Gonzales Lao violated Article 3 of the policies. Gonzales Lao contended that he did not actually 
acquire additional insurance on the same products, rather, he merely procured other insurance policies for the 
remaining volume that YTL did not cover. 
RULING: Since the products stored in the same building cannot be separated from one another, they must be treated 
as one indivisible subject matter. Therefore, Gonzales Lao still violated Article 3. 
 
General Insurance & Surety Corp. vs. Ng Hua 
In 1952, General Insurance & Surety Corp. (GISC) issued a fire insurance policy in favor of Ng Hua, covering the 
contents of the latter’s Central Pomade Factory. The policy contained a provision which states that, should there be 
any other insurance already effected or to be subsequently procured, the insured shall give notice to the insurer. Ng 
Hua declared that there was none. The very next day, Ng Hua’s building and the goods stored therein were destroyed 
by fire. Ng Hua filed a claim with GISC, but GSIC denied the same, because it was discovered that Ng Hua had 
obtained an insurance policy from General Indemnity Co. for the same goods and for the same period of time. 
RULING: GISC can refuse to indemnify Ng Hua. Violation of the warranty against other insurances entitles the insurer 
to rescind the insurance policy, because such misrepresentation is fatal. 

Union Manufacturing Co., Inc. vs. Philippine Guaranty Co. (G.R. No. L-27932) 
On January 12, 1962, Union Manufacturing Co., Inc. (UMC) obtained certain loans from the Republic Bank in the total 
sum of P415,000. To secure the payment thereof, UMC executed real and chattel mortgages on certain properties. 
The Republic Bank procured from Philippine Guaranty Co., Inc. (PGC) an insurance coverage on loss against fire for 
P500,000 over the properties of UMC, with the annotation that loss or damage, if any, under said cover note, is payable 
to Republic Bank as its interest may appear, subject however to the printed conditions of PGC’s Fire Insurance Policy 
Form. On September 6, 1964, a fire occurred in the premises of UMC and on October 6, 1964, UMC filed its fire claim 
with the PGC, through its adjuster, which was denied through a letter by PGC on the following ground: “Policy 
Condition No. 3 and/or the ‘Other Insurance Clause’ of the policy was violated because you did not give notice to us of 
the other insurance which you had taken from New India Assurance for P80,000, Sincere Insurance & Investment Co. 
for P25,000 and Manila Insurance Co. for P200,000 with the result that these insurances of which we became aware 
of only after the fire, were not endorsed on our policy.” 
RULING: Whether notice of other insurance upon the same property must be given in writing, or whether a verbal 
notice is sufficient to render an insurance valid which requires such notice, we hold that in the absolute absence of 
such notice when it is one of the conditions specified in the fire insurance policy, the policy becomes null and void. If 
the insured has violated or failed to perform the conditions of the contract, and such a violation or want of 
performance has not been waived by the insurer, then the insured cannot recover. 
 
Philam Life Insurance Co. v. Auditor General 
Facts: In January 1950, Philam Life Insurance Co. (Philam) and American International Reinsurance Co. (AIRCo), a 
foreign company, entered into a reinsurance treaty where Philam agreed to reinsure with AIRCo the excess of life 
insurance on the lives of persons written by Philam. In their agreement, it was also stipulated that even though Philam 
is already on a risk for its maximum retention under policies previously issued, when new policies are applied for and 
issued, they can cede automatically any amount, within the limits specified. No question ever arose with respect to 
the remittances made by Philam to AIRCo before July 16, 1959, the date of approval of the Margin Law. Subsequently, 
the Central Bank (CB) collected the sum of P268,747.48 as foreign exchange margin on Philam’s remittances to 
AIRCo, made subsequent to July 16, 1959. Philam then filed with the CB a claim for refund for the same amount, 
  
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arguing that the reinsurance premiums remitted were paid in January 1950 and are therefore exempt from the 25% 
foreign exchange margin fee. The acting legal counsel of the Monetary Board resolved that reinsurance contracts 
entered into and approved by the CB before July 17, 1959 are exempt from the payment of the 25% foreign exchange 
margin, even if the remittances therefor are made after July 17, 1959. Still, the CB Auditor denied Philam’s claim for 
refund. 
RULING: Philam’s claim is not covered by the exemption. For the exemption to come into play, there must be a 
reinsurance policy or, as in the reinsurance treaty provided, a “reinsurance cession” which may be automatic or 
facultative.  
● To distinguish, a reinsurance policy is a contract of indemnity one insurer makes with another to protect the 
first insurer from a risk it has already assumed. On the other hand, a reinsurance treaty is merely an 
agreement between two insurance companies whereby one agrees to surrender and the other to accept 
reinsurance business pursuant to provisions specified in the treaty. Treaties are contracts for insurance; 
reinsurance policies or cessions are contracts of insurance. 
Although the reinsurance treaty precedes the Margin Law by over 9 years, nothing in that treaty obligates Philam to 
remit to AIRCo a fixed, certain, and obligatory sum by way of reinsurance premiums. All that the reinsurance treaty 
provides on this point is that Philam “agrees to reinsure.” The treaty speaks of a probability; not a reality. Philam’s 
obligation to remit reinsurance premiums becomes fixed and definite upon the execution of the reinsurance cession. 
Because, for every life insurance policy surrendered to AIRCo, Philam agrees to pay a premium. It is only after a 
reinsurance cession is made that payment of reinsurance premium may be exacted, as it is only after Philam seeks to 
remit that reinsurance premium that the obligation to pay the margin fee arises. 
 
Fieldmen’s Insurance Co. v. Asian Surety & Insurance Co. 
On various dates, Asian Surety & Insurance Co. (ASIC) and Fieldmen's Insurance Co. (FIC) entered into 7 reinsurance 
agreements or treaties under the general terms of which ASIC, as the ceding company, undertook to cede to FIC, as 
the reinsuring company, a specified portion of the amount of insurance underwritten by ASIC upon payment to FIC of 
a proportionate share of the gross rate of the premium applicable with respect to each cession after deducting a 
commission. The agreements were to take effect from specific dates and were to be in force until cancelled by either 
party upon previous notice of at least 3 months, by registered mail, to the other party, the cancellation to take effect as 
of December 31 of the year in which notice was given. In September and December 1961, FIC sent letters to ASIC 
expressing its desire to cancel all the agreements between them as of December 31, alleging that ASIC had already 
incurred numerous violations. ASIC received the letters but failed to reply. In February 1962, FIC sent another letter to 
ASIC repeating the fact of cancellation and now requesting ASIC to submit its final accounting of all cessions made to 
the former for the preceding months when the reinsurance agreements were in force. Meanwhile, one of the risks 
reinsured by FIC issued in favor of GSIS became a liability when the insured property was burned in February 1962. 
ASIAN immediately sent a letter to FIC notifying the latter of the loss and stating: “We beg to reiterate that your letter 
of December 7, 1961, terminating said treaties by December 31, 1961, is not in accordance with the terms thereof, 
since there was no prior 3 months' notice. However, considering the attitude express in your aforesaid letter of 
December 7, 1961, we are willing to waive the provision that said treaties may be cancelled on December 31st of any 
year, and will consider them cancelled at the end of 3 months from December 7, 1961, by which time we shall be able 
to render the final accounting you desire.” FIC filed a petition for declaratory relief with the CFI, alleging its first letter 
of notification on September 19,1961 was sufficient to meet the 3-month period before cancellation and asking to 
obtain an order directing ASIC to render final accounting of the transactions between them with respect to said 
reinsurance treaties as of the cut-off date. The CFI rendered 6 out of 7 of those agreements cancelled as of December 
1961, but agreed with ASIC that FIC is still liable for as long the previously contracted policies are still valid. The CFI 
also ordered FIC to make an accounting with ASIC within 30 days. The CA affirmed the CFI’s decision, with 
modification, eliminating the order for accounting. 
Does the cancellation have the effect of also terminating the liability of FIC as reinsurer, with respect to the policies or 
cessions issued prior to the termination of the principal reinsurance contracts or treaties? 
RULING: Only the cancelled agreements are being considered here, 2 of which contain provisions, which clearly and 
expressly recognize the continuing effectivity of the policies ceded under them for reinsurance notwithstanding the 
cancellation of the contracts themselves. 

  
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 ● Article 10 of the Facultative Obligatory Reinsurance Treaty Fire provides that “in the event of termination of 
this agreement ..., the liability of the FIC under current cessions shall continue in full force and effect until 
their natural expiry..." 
● 4th paragraph of Article VI of the Personal Accident Reinsurance Treaty states: “On the termination of this 
agreement from any cause whatever, the liability of FIC under any current cession, including any amounts 
due to be ceded under the terms of this agreement and which are not cancelled in the ordinary course of 
business, shall continue in full force until their expiry, unless ASIC shall, prior to the 31st December next 
following such notice, elect to withdraw the existing cessions…” 
It is therefore clear that FIC is still liable despite the cancellation of the agreements. Such cessions continued to be in 
force until their respective dates of expiration. The GSIS policy is still valid and subsisting at the time of loss, and FIC 
is liable therefor.  
 
Artex Development Co. v. Wellington Insurance Co. 
Wellington Insurance Co., Inc. (Wellington) insured for P24,346,509 the buildings, stocks, and machinery of Artex 
Development Co., Inc., (ADC) against loss or damage by fire or lightning, upon payment by ADC of the corresponding 
premiums. On August 2, 1963, the said properties were insured for an additional sum of P883,034. On May 12, 1963, 
Wellington insuredADC against business interruption (use and occupancy) for P5,200,000. Unfortunately, on 
September 22, 1963, the buildings, stocks, and machinery of ADC’s spinning department were burned. ADC submitted 
a notice of the loss and damage to Wellington, and the loss was referred to HH Bayne Adjustment Co. and Allied 
Adjustment Co. According to the report of the adjusters, the total property loss suffered by ADC was tP10,106,554.40 
and the total business interruption loss was P3,000,000. Wellington has paid the sum of P6,481,870.07 of the property 
loss and P1,864,134.08 on business interruption loss to ADC, leaving a balance of P3,624,683.43 and P1,748,460, 
respectively. The lower court ordered Wellington to pay ADC the balance, with interest and 15% attorney's fees. 
Wellington refused, contending that the lower court should have ruled instead that ADC’s cause of action should have 
been directed against the reinsurers and not against Wellington directly. 
RULING: There is no privity of contract between the insured and the reinsurers. ADC can only move for the 
enforcement of its insurance contract with its insurer. Unless there is a specific grant in, or assignment of, the 
reinsurance contract in favor of the insured or a manifest intention of the contracting parties to the reinsurance 
contract to grant such benefit or favor to the insured, the insured, not being privy to the reinsurance contract, has no 
cause of action against the reinsurer. Article 1311 of the Civil Code expresses the universal rule that "Contracts take 
effect only between the parties, their assigns and heirs" ADC, not being a party or privy to Wellington's reinsurance 
contracts, therefore, cannot directly demand enforcement of such reinsurance contracts. 
 
Avon Insurance, et al. v. CA 
Yupangco Cotton Mills (YCM) entered into an insurance contract with Worldwide Security & Insurance Co. (WSIC) 
covering several of its properties, which were then covered by reinsurance treaties between WSIC and several foreign 
reinsurance companies, including Petitioner-companies. These reinsurance agreements had been made through an 
international broker acting for WSIC. While the policies were in effect, YCM’s properties were razed in fire, giving rise 
to their indemnification. WSIC acknowledged a remaining balance and assigned to YCM all the reinsurance proceeds 
still collectible from the reinsurance companies. Thus, as assignee and original insured, YCM instituted a collection 
suit against Petitioners. Petitioners denied liability, averring that they are foreign corporations not doing business in 
the Philippines, therefore, they cannot be subject to the jurisdiction of its courts. 
Issue: Whether or not petitioners are foreign corporations doing business in the Philippines. 
Ruling: To qualify Petitioners’ business of reinsurance within the Philippine forum, resort must be made to the 
established principles in determining what is meant by “doing business in the Philippines.” 
● The term ordinarily implies a continuity of commercial dealings and arrangements, and contemplates, to that 
extent, the performance of acts or works or the exercise of the functions normally incident to and in 
progressive prosecution of the purpose and object of its organization. 
● No allegation or demonstration was made for the existence of Petitioners’ domestic agent, but WSIC and 
YCM simply averred that Petitioners are doing business, not only abroad, but in the Philippines as well. It 
does not appear at all that Petitioners had performed any act which would give the general public the 
impression that they had been engaging, or intended to engage in its ordinary and usual business 
undertakings in the country. The reinsurance treaties between Petitioners and WSIC were made through an 
  
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 international insurance broker, and not through any entity or means remotely connected with the Philippines. 
Moreover, there is authority to the effect that a reinsurance company is not doing business in a certain state 
merely because the property or lives which are insured by the original insurer company are located in that 
state. 
○ The reason for this is that a contract of reinsurance is generally a separate and distinct 
arrangement from the original contract of insurance, whose contracted risk is insured in the 
reinsurance agreement. Hence, the original insured has generally no interest in the contract of 
reinsurance. Indeed, if a foreign corporation does not do business here, there would be no reason 
for it to be subject to the State’s regulation. 
As observed, insofar as the State is concerned, Petitioner foreign corporations have no legal existence. Therefore, to 
subject them to the courts’ jurisdiction would violate the essence of sovereignty. 
 
Pioneer Insurance & Surety Corp. v. Yap 
Oliva Yap was the owner of a store in a 2-storey building where she sold shopping bags and footwear. Chua Soon 
Poon, her son-in-law, was in charge of the store. Yap took out a fire insurance policy from Pioneer Insurance & Surety 
Corp. (Pioneer) with a value of P25,000, covering her stocks, office furniture, fixtures, and fittings. Among the 
conditions in the policy executed by the parties are the following: 
● “Unless such notice be given and the particulars of such insurance or insurances be stated in, or endorsed on 
this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under 
this Policy shall be forfeited” 
● “Any false declaration or breach or this condition will render this policy null and void.” 
Another insurance policy for P20,000 was issued by Great American Insurance Co. (GAIC) covering the same 
properties. The endorsement recognized co-insurance by Northwest Insurance Co. for the same value. Yap took out 
another fire insurance policy for P20,000 covering the same properties from Federal Insurance Company, Inc., which 
was procured without notice to and the written consent of Pioneer. A fire broke out in the building, and the store was 
burned. Yap filed an insurance claim, but the same was denied for a breach. Yap filed a claim for payment of the face 
value of her fire insurance policy with Pioneer, but Pioneer refused to pay because she never informed the company of 
other insurers. When brought before the trial courts, both the RTC and the CA ruled in favor of Yap. 
RULING: The rule in this state and practically all of the states is to the effect that a clause in a policy to the effect that 
the procurement of additional insurance without the consent of the insurer renders the policy void is a valid provision. 
The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. 
   

  
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XI. CLASSES OF INSURANCE 
 
A. Marine Insurance 
 
1. Malayan Insurance Corp v. CA, G.R. No. 119599, March 20, 1997 
2. La Razon Social Go Taioco y Hermanos v. Union Insurance Society of Canton Ltd, G.R. No. 13983 
3. Cathay Insurance Co. v. CA, G.R. No. 76145 
4. Delsan Transport Line Inc. v. CA, GR No. 127897 
5. The Philippine American General Insurance Co. Inc. v. CA, G.R. No. 116940 
6. Pan Malayan Insurance Co. v. CA, G.R. No. 95070 
7. Oriental Assurance Corp v. CA, G.R. No. 94052 
8. Federal Express Corp. v. American Home Assurance Co., G.R. No. 150094 
9. Sulpicio Lines v. First Lepanto Taisho Insurance Corp., G.R. No.140349 
10. American Home Assurance Co v. Tantuco Enterprises 
11. Prudential Guarantee & Assurance Inc. v. Trans-Asia Shipping Lines 
12. Filipino Merchants Insurance Co., Inc. v. CA 
13. Roque v. IAC, 139 SCRA 596 
14. Choa Tiek Seng v. CA, 183 SCRA 223 
 
B. Fire Insurance 
 
1. Ong Gua Chan v. Century Insurance Co., Ltd., G.R. No. L-22738 
2. Malayan Insurance Co. Inc. vs. PAP Co., Ltd., G.R. No. 200784 
3. Allied Banking Corp. v. Cheng Yong and Lilia Gaw, GR No.151040 
4. DBP Pool of Accredited Insurance Co. v. Radio Mindanao Network, Inc., GR No. 147039 
 
C. Casualty Insurance 
 
1. NFD International Manning Agents Inc v. Illescas, 631 SCRA 629 (2010) 
2. Biagtan v. The Insular Life Assurance Co., Ltd. 44 SCRA 58 (1972) 
3. Calanoc v. CA, 98 Phil. 79 (1955) 
4. Finman General Assurance Corp v. CA, 213 SCRA 493 (1992) 
 
D. Suretyship 
 
1. Prudential Guarantee Assurance Inc v. Equinox Land Corp., GR Nos. 15205-06  
2. Arranz v. Manila Fidelity & Surety Co., 1010 Phil 272 (1957) 
3. Capital Insurance. & Surety Co., Inc. v. Ronquillo Trading, 123 SCRA 426 
4. Philippine Pryce Assurance Co. v. CA, G.R. No. 107062 
 
E. Life Insurance 
 
1. Del Val v. Del Val 
2. BPI v. Posadas, 56 Phil 215 
3. Insular Life Assurance Co., Ltd. v. Ebrado 
4. Republic v. Sun Life Assurance Co. of Canada, GR No. 158085 
5. Kanapi v. Insular Life Assurance Co., G.R. No. L-5642 
6. Biagtan v. Insular Life Assurance Co, G.R. No. L-25579 
7. Calanoc v. CA, G.R. L-8151 December 16, 1955 
8. Dela Cruz v. Capital Insurance & Surety Co, G.R. No. L-21574 
9. Finman General Assurance Corp. v. CA, G.R. No. 100970 
 
 
  
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F. Cash Surrender Value 
 
1. Manufacturer’s Life Insurance Co. v. Meer 
 
XII. CLAIMS SETTLEMENT AND SUBROGATION 
 
1. Tio Khe Chio v. CA, 202 SCRA 119 
2. Finman General Assurance Corp. v. CA, 361 SCRA 214 
3. Country Bankers Insurance Corp. v. Lianga Bay and Community Multi-Purpose Cooperative 
4. Cebu Shipyard & Engineering Works, Inc v. William Lines, Inc., 306 SCRA 762 (1999) 
 
XIII. COMPULSORY MOTOR VEHICLE LIABILITY INSURANCE 
 
1. Perla Compania de Seguros v. CA, G.R. No. 96452 
2. Perla Compania de Seguros v. Ancheta, G.R. No. L-49699 
3. GSIS v. CA, 308 SCRA 559 
4. First Quezon City Insurance Co. v. CA, 218 SCRA 525 
 
XIV. REGULATION OF THE INSURANCE BUSINESS  
 
1. Philippine American Life Insurance Co. v. Ansaldo, 234 SCRA 509 

  
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