UPCB vs Masagana

UPCB issued 5 fire insurance policies to Masagana for the period from May 22, 1991 to May 22, 1992.
Eventually, UPCB evaluated the policy, and decided not to renew them upon expiration on May 1992.
On April 6, 1992(around 2 weeks after the renewal of the policy), written notice was given to Masagana
regarding its decision to not renew. On June 13, 1992, fire razed Masagana's property covered by three
of the insurance policies (though note that the fire occurred after the expiration). It was only on July 13,
1992, that Masagana paid the premium for the renewal of the policies via 5 checks. The next day, (July
14) respondent filed a claim for the property razed by fire. UPCB rejected the claim alleging that the
policies expired and were never renewed, and returned the 5 checks. Masagana filed a claim in the RTC.
The RTC allowed Masagana to consign the premium, and ordered UPCB to pay indemnity for the
property destroyed by fire. The CA affirmed.

Whether UPCB is liable to pay indemnity for the fire? –NO

No policy was active when the fire took place. The policy expired on May 22, 1992, while the fire
occurred a month after.

We cannot say that the policy was renewed at the time the loss occurs as the insurance code says in Sec
77 (See Note 2) 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. 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. The allegation that UPCB had been granting 60-90 day credit term for the
renewal of the policies cannot trump Sec 77

Notes

1. SEE RESOLUTION FOR CONTINUATION!

2. SECTION 77. An insurer is entitled to payment of the premium as soon as the thing insured is
exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy
or contract of insurance issued by an insurance company is valid and binding unless and until the
premium thereof has been paid, except in the case of a life or an industrial life policy whenever
the grace period provision applies.
3. What was the point/ effect of UPCB deciding not to renew the policies? Did they forget about it?
Why did they accept the premium?

UPCB vs Masagana (Resolution)

**See facts above. The court here reconsidered its position.

Whether UPCB is liable to pay indemnity for the fire? –YES

Sec 77 is not absolute. It provides for exceptions:

1. In case of a life or industrial life policy whenever the grace period provision applies. (Sec 77)
2. Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive
evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation
therein that it shall not be binding until premium is actually paid. (Sec 78)
 3. The parties have agreed to the payment in installments of the premium and partial payment has
been made at the time of loss. (Makati Tuscany Condominium Corporation vs. Court of Appeals)
4. The insurer may grant credit extension for the payment of the premium
5. Estoppel

Given the 4th exception, Sec 77 (payment of premium requirement) could be disregarded in case the
insurer grants a credit extension as in this case. Although there is nothing in the contract that expressly
grants this, UPCB had consistently granted a 60- to 90-day credit term for the payment of premiums
despite its full awareness of Section 77. Estoppel bars it from taking refuge under said Section since
Masagana relied in good faith on such practice. Estoppel then is the fifth exception to Section 77.

Whether the notice of non-renewal given by UPCB prevented the renewal of the policy? –NO
Sec 26 of the policy said that UPCB had to give a notice of non-renewal at least 45 days prior to the end
of the policy in order to be effective, or else Masagana is entitled to renew the policy. (See Note 1). The
notice given by UPCB was given belatedly.

Notes

1. Renewal Clause. — Unless the company at least forty five days in advance of the end of the
policy period mails or delivers to the assured at the address shown in the policy notice of its
intention not to renew the policy or to condition its renewal upon reduction of limits or
elimination of coverages, the assured shall be entitled to renew the policy upon payment of the
premium due on the effective date of renewal.
2. “Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to
provide a credit term within which to pay the premiums. That agreement is not against the law,
morals, good customs, public order or public policy.”

Makati Tuscanny vs CA

Makati Tuscanny Condominium (Tuscanny) and American Home Assurance Co. (AHAC), entered into an
insurance contract where AHAC insured Tuscanny’s buildings. The contract was good for a year. The
Contract was renewed twice (So 1st policy – March 1982-1983, 2nd policy – March 1983-1984, 3rd policy –
March 1984-1985), and Tuscanny had been paying via installments (in 3 installments per policy). On the
last policy, Tuscanny only paid 2 installments, and refused to pay for the balance. AHAC filed a claim in
the RTC to claim the balance of the premium. Tuscanny filed an Answer with counterclaim saying that he
wanted to claim reimbursement for all the premiums he paid for all 3 policies. His theory was that the
policies were never binding as the policies had provisions that said that AHAC could deny liability before
payment of the premium (See Note 1) . He believes that the only way that a policy would be binding,
despite the fact that the premium has yet to be fully paid was if there was an acknowledgment in the
policy of the receipt of premium pursuant to Sec. 78 of the Insurance Code. The RTC denied bot claim
and counterclaim, whereas the CA ordered the payment of the balance of the premium, while affirming
the denial of the counterclaim. Hence this petition.

Whether the policies were valid despite the fact that they were paid in installments? –YES

The policies were binding as the records show that the parties intended subject insurance policies to be
binding and effective notwithstanding the staggered payment of the premiums. Such intention is proven
by the fact that AHAC was accepting payments for 3 years. Certainly, basic principles of equity and
fairness would not allow the insurer to continue collecting and accepting the premiums, although paid
on installments, and later deny liability on the lame excuse that the premiums were not prepaid in full.

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

Notes

1. Provisions
a. "2. Acceptance of this payment shall not waive any of the company rights to deny
liability on any claim under the policy arising before such payments or after the
expiration of the credit clause of the policy; and
b. "3. Subject to no loss prior to premium payment. If there be any loss such is not
covered."

Lalican vs Masagana

Eulogio applied and was granted an Insurance policy with Insular Life through agent Malaluan. The
policy was valued at P1.5M, and good for 20 years. Violeta (the wife) was named the primary
beneficiary. Under the terms of the policy, Eulogio was to pay the premiums (P8062 each) quarterly
(every 24 April, 24 July, 24 October and 24 January of each year), but Eulogio also had a 31 grace period
for the payment on each premium. Eulogio was unable to pay the premium on Jan 1998 (even with the
31-day grace period). On May 26, 1998Eulogio submitted an Application for Reinstatement together
with P8,062 (representing the amount he failed to pay. Insular Life denied the application as he left
unpaid the overdue interest thereon amounting to P322, he was thus directed to pay the interests as
well as the premiums for April and June. On Sept 17 1998, Eulogio thus filed a 2 nd application for
Reinstatement along with P17,500.00, representing payments for the overdue interest on the premium
for 24 January 1998, and the premiums which became due on 24 April 1998 and 24 July 1998. The
husband of Malaluan received the application and the payment since Malaluan was away. On the same
day (still Sept 17 1998) Eulogio died. Insular Life never approved the reinstatement upon being informed
that Eulogio already died. Despite the non-approval of the reinstatement, Violeta filed a claim for the
proceeds of the policy. Insular Life denied the claim as the policy was never reinstated, and thus also
sent a check to Violeta n the amount of P25,417 as a refund (the amount tendered by Eulogio so far).
Violeta filed a Complaint for Death Claim Benefit with the RTC. The RTC denied the claim as it was clear
in the policy that the reinstatement of the policy was only upn the approval of Insular Life during the
lifetime and/or good health of Eulogio. Since there was no approval, there was no reinstatement of the
policy. Violeta filed an MR but that was denied as the notice of appeal was not filed within the
reglementary period, thus the decision has already attained finality. Violeta then filed this Petition for
Review on Certiorari.

Whether this Petition was the proper remedy –NO

The RTC was correct in denying the appeal of Violeta as it was filed beyond the reglementary period, and
thus attained finality. The filing of this petition is not the proper remedy against the denial of the appeal
by the RTC. Rule 41, Section 1 of the Rules of Court, 28 provides that no appeal may be taken from an
order disallowing or dismissing an appeal. In such a case, the aggrieved party may file a Petition for
Certiorari under Rule 65 of the Rules of Court.

Whether Eulogio was able to reinstate the lapsed insurance policy on his life before his death on 17
September 1998 –NO

It was clear in the policy that:

…said Policy shall not be considered reinstated until this application is approved by the Company
during my/our lifetime and good health…

… I/We further agree that any payment made or to be made in connection with this application
shall be considered as deposit only and shall not bind the Company until this application is finally
approved by the Company during my/our lifetime and good health…

Such terms are unambiguous. In the instant case, Eulogio's death rendered impossible full compliance
with the conditions for reinstatement of the Policy. Insular Life never approved the policy. The payment
of the premium did not give Vileta an absolute right of reinstatement of the policy (See Note 4).
Malaluan, the agent, did not have the authority to approve Eulogio's Application for Reinstatement.

Notes

1.) Violeta also tried to argue that the failure of her Counsel to file the ntice of appeal within the
reglementary period was because her counsel was sick. Violeta merely made a general averment
of her former counsel's poor health, lacking relevant details and supporting evidence. By
Violeta's own admission, her former counsel's health rapidly deteriorated only by the first week
of July 2008 . The events pertinent to Violeta's Notice of Appeal took place months before July
2008. In any case A client is bound by his counsel's mistakes and negligence.
2.) Violeta also raised the issue of the existence of her husband’s insurable interest, but such issue
is immaterial in this case.
3.) The policy became void on 24 February 1998 (Jan 24 + 31 day grace period)
4.) "The stipulation in a life insurance policy giving the insured the privilege to reinstate it upon
written application does not give the insured absolute right to such reinstatement by the mere
fiing of an application. The insurer has the right to deny the reinstatement if it is not satisfied as
to the insurability of the insured and if the latter does not pay all overdue premium and all other
indebtedness to the insurer. After the death of the insured the insurance Company cannot be
compelled to entertain an application for reinstatement of the policy because the conditions
precedent to reinstatement can no longer be determined and satisfied.

Gulf Resorts vs Philippine Charter Insurance Corp

Gulf Resorts regularly insures its swimming pools from earthquakes and shocks with respondent
American Home Assurance Company (AHAC-AIU). Another insurance was issued which was similar to
the previously issued policies, but this one had an endorsement/rider that read "Endorsement to
Include Earthquake Shock”. An earthquake transpired, and Gulf Resorts filed a claim. Gulf believed that
the current policy covered extended earthquake shock coverage to all of the insured properties (not
merely the swimming pools). The independent adjuster found that AHAC-AIU was only liable for the 2
swimming pools; all the other damage claimed have no coverage. Gulf Resorts thus filed a claim alleging
that the policy covered extended earthquake shock coverage to all of the insured properties (not merely
the swimming pools. The lower courts denied Gulf Resort’s claim, and ruled that only the 2 swimming
pools were covered. Hence this Rule 45 petition.

Whether the policy covered all the insured properties (not merely the swimming pools) –NO

On its own, it was clear that the policy only covered the 2 swimming pools. It expressly provided in the
location of risk that in the designation of location of risk, only the two swimming pools were specified..
Gulf Resorts, however argued that there was a rider on the policy wherein no qualifications were placed
on the scope of the earthquake shock coverage. The court, however noted that Gulf Resorts cannot
focus on the earthquake shock endorsement to the exclusion of the other provisions. All the provisions
and riders, taken and interpreted together, indubitably show the intention of the parties to extend
earthquake shock coverage to the two swimming pools only. This is because Gulf Resorts paid the same
premium it paid as in the previous policies entered by it it the past, ands those policies only covered the
2 swimming pools. There is no mention of any premium payable for the other resort properties with
regard to earthquake shock.

Notes

1. “An insurance premium is the consideration paid an insurer for undertaking to indemnify the
insured against a specified peril. In fire, casualty, and marine insurance, the premium payable
becomes a debt as soon as the risk attaches. In the subject policy, no premium payments were
made with regard to earthquake shock coverage, except on the two swimming pools. There is
no mention of any premium payable for the other resort properties with regard to earthquake
shock”

Malayan Insurance vs PAP Co.

Malayan Insurance issued a Fire Insurance Policy for P15M to PAP covering its machineries found in the
Sanyo Building, PEZA, Cavite. This was effective for 1 year (May 1996-May 1997). Nearly a year later, the
insurance was renewed at an “as is basis” (May 1997-May 1998). During the subsistence of the renewal
policy, the machineries were destroyed by fire. The PAP filed an insurance claim against Malayan, but
Malayan denied the claim since apparently during the 1 st policy, the insured machineries were moved
by PAP to another location (Pace Factory, although still in PEZA)(The machineries were moved Sept
1996). PAP filed a complaint in the RTC. The RTC held that Malayan was liable, and the CA affirmed.
Hence this petition.
Whether Malayan is liable? –NO

First of all, there was a clear condition in the policy that PAP first had to obtain the consent of Malayan if
it was going to move the equipment from the Sanyo Factory, else the insurance ceases to attach. PAP
failed to inform Malayan that the equipment was moved to the Pace factory. Malayan argued that they
informed RCBC (which was the sister company of Malayan), but the Court held that this was not enough
as RCBC was still not the agent of Malayan.

It can also be said that with the transfer of the location of the subject properties, without notice and
without Malayan's consent, after the renewal of the policy, PAP clearly committed concealment,
misrepresentation and a breach of a material warranty. Under Section 27 of the Insurance Code, "a
concealment entitles the injured party to rescind a contract of insurance. Moreover, under Section 168
of the Insurance Code, the insurer is entitled to rescind the insurance contract in case of an alteration in
the use or condition of the thing insured.

Note: Why is it “after the renewal of the policy”. Shouldn’t it be

Notes

1. Re: Alteration (Sec 168) - an insurer can exercise its right to rescind an insurance contract when
the following conditions are present:
a. the policy limits the use or condition of the thing insured;
b. there is an alteration in said use or condition;
c. the alteration is without the consent of the insurer;
d. the alteration is made by means within the insured's control; and
e. the alteration increases the risk of loss.

Florendo vs Philamplans

Manuel Florendo filed an application for a pension plan with Philam Plans, although it was Perla
Abacede, the sales agent whi filled up the information for him. The pension plan also included insurance
coverage with Philam Plans. If he were to die, his beneficiary would receive the proceeds of the
insurance. His wife, Lourdes, was the beneficiary11 after the approval of the insurance, Manuel died of
blood poisoning. Lourdes tried to claim the insurance, but Philam Plans denied the claim after finding
out that Manuel was on maintenance medicine for his heart and had an implanted pacemaker. Further,
he suffered from diabetes mellitus and was taking insulin. Lourdes to her claim to the RTC. The RTC
ordered Philamplans to pay, but the CA reversed. Hence this petition.

Whether Phila Plans should pay? –NO

The court finds that Manuel failed to disclose the fact that he had prior conditions upon the filing of the
application. Pursuant to Section 27 of the Insurance Code, Manuel's concealment entitles Philam Plans
to rescind its contract of insurance with him.
Lourdes tried to argue that Philam Plans saw the unfilled spaces in Manuel's pension plan application
relating to his medical history. Philam Plans then should have turned it to him for completion. The court
however finds that Lourdes cannot shift the blame to Philam Life. In the application, Manuel checked
the options that stated that he is in good health, has never been treated for heart condition etc. (See
Note 2)

Lourdes tried to argue that the concealment was not Manuel’s fault as it was Perla, the sales agent, who
filled up the application for him. The court however points out that the responsibility fo filling up the
application is Manuel’s, even if he actually had someone else fill it up for him.

Lourdes also argues that the application only requires applicants to disclose treatments up to 5 years
before filling up the application. The court finds that the fact that Manuel had a pacemaker imnplanted
in his body meant that he was currently undergoing treatment. Besides Manuel was also taking edicine
for his heart condition and diabetes when he submitted his pension plan application.

Finally, Lourdes argues 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 court however points out
that the Incontestability Clause in the contract gives the insurance company 1 year before it is precluded
from denying liability for health reasons. Manuel died on the 11 th month, and so Philam Plans could still
deny liability

Notes

1. Inurance plan- If principal was to die, beneficiary would receive proceeds equivalent to pre-
need price (997,050)
2. I have never been treated for heart condition, high blood pressure, cancer, diabetes, lung, kidney
or stomach disorder or any other physical impairment in the last five years.
3. Lourdes could not seek comfort from her claim that Perla had assured Manuel that the state of
his health would not hinder the approval of his application and that what is written on his
application made no difference to the insurance company. But, indubitably, Manuel was made
aware when he signed the pension plan application that, in granting the same, Philam Plans and
Philam Life were acting on the truth of the representations contained in that application.

Ng Gan Zee vs Asian Crusader Life Insurance

Kwong Nam applied for a 20-year endowment insurance on his life with Asian Crusader Life Insurance
(Asian Crusader) his wife (Ng Gan Zee)as the beneficiary. The insurance was approved. Kwong Nam died
of cancer and his wife tried to file an insurance claim, but Asian Crusader denied the claim because they
allege that Kwong Nam made untru statements in his application:

 He answered No when asked if a life insurance company refused his application before
 He made an insufficient statement of the truth when he informed the company that he was
operated on for a tumor of the stomach which was associated with ulcer of the stomach. He in
fact operated on for “peptic ulcer”
The Insurance Commissioner found that there was no material concealment, and so the company had to
pay. The CFI affirmed. Hence this petition.

Whether Asian Crusader Life Insurance is liable? –YES

With regard to the first alleged misrepresentation (No to question: “a life insurance company refused his
application before?”), the court found that there was misrepresentation. There was no evidence that
another life insurance company (Insular Life) denied its application in the past. What appears in
evidence weas that Insular Life approved Kwong Nam's request for reinstatement and amendment of
his lapsed insurance policy.

With regard to the second alleged misrepresentation, court says that assuming that the aforesaid
answer given by the insured is false, as claimed by the appellant. Sec. 27 of the Insurance Law, above-
quoted, nevertheless requires that fraudulent intent on the part of the insured be established to entitle
the insurer to rescind the contract. Kwong Nam was not a medical expert, and the statement he gave
(although lacking from the viewpoint of a medical expert) was sufficient to be construed as an
expression made in good faith of his belief as to the nature of his ailment and operation

The court found that while from the viewpoint of a medical expert, the information communicated was
imperfect, the same was nevertheless sufficient to have induced appellant to make further inquiries
about the ailment and operation of the insured. It has been held that where, "upon the face of the
application, a question appears to be not answered at all or to be imperfectly answered, and the
insurers issue a policy without any further inquiry, they waive the imperfection of the answer and
render the omission to answer more fully immaterial Sec 28 (may now be seen in Sec 33 of the current
code)

Philamcare vs CA

Ernani Trinos applied for healthcare coverage with Philamcare. He had to answer a questionnaire
wherein he answered “No” to one of the questions “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? (If Yes, give details)”. His application was approved for 1 year, and was later extended
for another year. During the period for coverage, Ernani suffered a heart attack wherein he had to be
hospitalized in Manila Medical Center (MMC) While there the doctors of MMC found out that he was
hypertensive, diabetic and asthmatic. When the wife of Trinos tried to claim the health benefits with
Philamcare, they denied the claim alleging that the agreement was void as there was a concealment on
the part of Ernani Trinos regarding his condition, which the MMC doctors found out. The wife had to pay
the hospitalization expenses herself (76,000). After that, Ernani had to a physical therapis, had to be
checked in twice in a Chinese General Hospital. Ernani eventually died. The wife filed an action for
damages against Philam in the RTC. The RTC ordered Philamcare to pay reimbursement of 76,000 plus
damages and atty’s fee. The CA affirmed but deleted the damages. Hence this petition. Philam argues
that: 1.) a health care agreement is not an insurance contract; hence the "incontestability clause" under
the Insurance Code does not apply….

Whether the health care agreement was an insurance contract? –YES

The health care agreement was in the nature of non-life insurance, which is primarily a contract of
indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury
or other stipulated contingent, the health care provider must pay for the same to the extent agreed
upon under the contract.

Whether Ernani concealed a material fact in his application, thus voiding the contract? –NO

The answer assailed by petitioner was in response to the question relating to the medical history of the
applicant. This largely depends on opinion rather than fact, especially coming from respondent’s
husband who was not a medical doctor. Jurisprudence provides that where matters of opinion or
judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy
even though they are untrue. Thus the fraudulent intent on the part of the insured must be established
to warrant rescission of the insurance contract. In any case, even if there was a concealment, Sec 27 of
the code allows a rescission on the part of the insurer which must be made before the commencement
of an action on the contract. Rescission/cancellation requires

1. 1. Prior notice of cancellation to insured;

2. Notice must be based on the occurrence after effective date of the policy of one or more of the
grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon
request of insured, to furnish facts on which cancellation is based.

None of the above pre-conditions was fulfilled in this case.