I. General D.

Applicability of the Civil Code

A. Concept, purpose, or history i. Requisites for a valid contract under Civil Code
i. Concept: “Assurance” refers to an event which must happen while 1. Requisites of a valid contract: (Art. 1318, CC)
“insurance” refers to a contingent event which may/may not happen. a. Consent (Art. 1319, CC)
ii. Purpose: To transfer the risk of loss, damage, or liability from the insured to i. Certain offer + Absolute acceptance
the insurer through payment of premium under a legally binding contract. ii. Qualified acceptance = counter-offer
iii. History: Merchants during the flourishing of the trade needed to insure iii. Acceptance by letter or telegram binding
their goods/cargo. only from the time it came to the
B. Contract of Insurance – an agreement whereby one undertakes for a consideration to knowledge of the offeror.
indemnify another against loss, damage, or liability arising from an unknown or b. Object certain (Art. 1347, CC)
contingent event. (Sec 2(a), IC) i. Not outside commerce of men
C. Nature, Characteristics, distinguishing elements of an insurance contract ii. Future things (ex: future inheritance)
i. Fields of Classification: iii. Transmissible rights
1. Insurance against loss/impairment of property interest iv. Services not contrary to law, morals, good
2. Insurance against loss of earning power due to death customs, public order, and public policy
3. Insurance against contingent liability to make payment to c. Consideration (Art. 1353, CC)
another i. GR: Statement of a false cause = VOID
ii. Classifications: ii. EX: It is proved that contract is founded
1. Life insurance upon a true/lawful cause.
2. Non-life insurance Enriquez v. Sun Life Since insurance code is silent as to the methods followed for there to be a
3. Contracts of suretyship contract of insurance, the Civil Code shall apply suppletorily.
iii. Characteristics (I-VAC-CUP)
1. Contract of Indemnity Acceptance shall only be binding if it came to the knowledge of the offeror. Here,
2. Voluntary (ex: required by law) the insured never received the letter of approval of his policy.
3. Aleatory Perez v. CA When the applicant pays the premium and receives and accepts the policy while
4. Consensual he is in good health, the contract of insurance is deemed perfected.
5. Conditional
6. Unilateral Here, there is no contract even though applicant paid the premiums. Applicant
7. Personal was not informed of the acceptance as he was already dead.
iv. Risk distribution device: In an insurance, each person contributes to a De Lim v. Sun Life An application of insurance which has not been accepted or rejected is merely an
common fund out of which he is reimbursed for losses he may suffer. Thus, offer to make a contract.
each person pays for the protection against specified risks.
v. Elements of an Insurance Contract (IRAD-P) Here, the provisional policy is merely an acknowledgment of receipt of the
1. Insured has an insurable interest premium. It is not constitutive of a contract of insurance. It was still subject to
2. Insured is subject to the risk of loss the eventual approval of the application which did not happen in this case.
3. Insurer assumes the risk Musngi v. West Coast Statement of a false cause makes the contract void.
4. Assumption is part of a general scheme to distribute actual
losses among a large group of persons bearing similar risks Here, applicant knew that he was suffering from a number of ailments yet he
5. Insured pays premiums as consideration concealed such fact which constitutes fraud. His health is one of the
Gulf v. PH Charter Insurance premium is a consideration paid to an insurer for undertaking to considerations of the policy.
indemnify the insured against a specific peril. In fire, causalty, and marine ii. Civil Code provisions on Insurance
insurance, it becomes a debt as soon as the risk attaches. 1. Contracts of Insurance are governed by special laws (IC). Matters
not expressly provided by such shall be regulated by the Civil
Here, the premiums paid only covers the 2 swimming pools. Code. (Art. 2011, CC)
Philamcare v. CA Healthcare agreements are considered non-life insurance contracts which are 2. Persons forbidden from receiving donations under Art. 739, CC
primarily a contracts of indemnity. Once a member incurs medical expenses, the cannot be beneficiary of a life insurance policy: (Art. 2012, CC)
healthcare provider must pay for the same to the extent agreed upon. a. Between persons guilty of adultery or concubinage
(preponderance of evidence)
b. Between persons found guilty of the same criminal
offense
c. Those made to a public officer, or his wife, ascendant,
or descendant, by reason of his office (bribe)
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 Insular Life v. Ebrado GR: Common-law wife cannot be named as beneficiary in the life insurance
policy of a legally married man. It is against public policy.
EX: Purpose is for remuneration.
Zenith v. CA Aside from the damages specifically granted under the Insurance Code in case of
unreasonable delay in the payment of proceeds, Civil Code provisions on moral
and exemplary damages shall also apply.
E. The Business of Insurance
i. “Doing an insurance business” (Sec 2(b), IC)
1. Insurer of an insurance contract
2. Surety in a contract of suretyship as a vocation (not incidental)
3. Reinsurance business
4. Other business substantially same to the aforementioned
designed to evade the Insurance Code
The following are not conclusive to the absence/presence of such contract:
1. No profit derived
2. No separate/direct consideration
White Gold v. Pioneer A mutual insurance company is a cooperative enterprise where the members are
both the insured and insurer. Here, the Club is a form of insurance against 3rd-
party liability (anyone other than the club members). It is a mutual insurance
association engaged in the marine insurance business. Its resident agent must
procure a separate license to transact insurance business.
Philamlife v. Ansaldo Insurance commissioner has the authority to regulate the business of insurance.
Here, the contract of agency between the agent and insurance company
(principal) is not within the jurisdiction of the Insurance Commissioner. It is not
an insurance business.
F. Construction of Insurance Contracts
i. Contracts of Adhesion: Contra Proferentem ––the interpretation of obscure
words/stipulations in a contract are resolved against the one causing the
ambiguity. (Art. 1377, CC)
Rizal Surety v. CA In case of ambiguities in insurance policies, it shall be construed against the
insurer since it is a contract of adhesion.
Here, the phrase “premises forming part of the buildings covered by the policy”
was construed to include the “annex” being an integral part of the buildings. It
was covered by the policy.
Landicho v. GSIS The provisions in the policy shows that insurer can automatically deduct from
the insured salary and failure to do so will not make the policy lapse. But there is
also a provision voiding the policy if first premium is not paid.
The policy was held as effective even though insured has not yet paid first
premium because of the ambiguity. Failure to pay did not make the policy lapse.
Fieldman v. Songco A contract of insurance is one of “perfect good faith” (uberrima fides) more so
for the insurer given that its dominant bargaining position carries with it stricter
responsibilities.
ii. When there is ambiguity or doubt
Del Rosario v. Equitable Since the policy did not state an amount for the “death by drowning,” it was
construed in favor of the insured. The latter was granted the maximum amount
of 3k under the policy.
Taurus v. Capital Workmen’s compensation act is a compensation not an indemnity. It will not
violate the prohibition of double insurance under the policy.
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CCC Insurance v. CA Motor Vehicles Law allows issuance of license without previous examination.
Here, driver was issued a licensed and can be considered an authorized driver
licensed by law. The policy should be liberally interpreted in favor of the insured.
Villacorta v. Insurance An owner who entrusts the car to a repair shop also entrusts the keys. If the
employees drive it, it will not violate the authorized driver clause as long as the
employee is licensed.
If the car is unlawfully taken, it triggers the theft clause. Here, the case was
unlawfully taken for a joyride with intent to gain (enjoyment) without owner’s
consent.
Association v. Fieldman Prior conviction is not needed for the crime of theft to make the insurer liable
under the theft clause. It must only be proved by preponderance of evidence
unless there is a provision specifically requiring such prior conviction. Here, the
joy ride constitutes theft and no provisions requiring prior conviction is stated.
Fortune v. CA Policy exempts the insurer if the loss was due to an “authorized representative”
of bank. Here, the guard and driver was considered such. The intent of the
insurer to place such exemption is to guard against liability arising from losses
due to fraud committed by persons granted unrestricted access to the money or
payroll in the bank. It was akin to an “agent.” Insurer is not liable.
Del Rosario v. Equitable -
Verendia v. CA Contract of insurance is the law between the parties. The policy states that any
false declaration forfeits the policy. Here, the declaration of a false lease
contract to support the claim forfeits the insured’s rights under the policy.
Qua Chee v. Law Union Ambiguities must be construed against the party that caused them. Here,
gasoline is not one of the mentioned articles specifically prohibited. It only
mentioned “oil” but gasoline is not oil. Thus, gasoline is not one of the articles
prohibited by the policy.
Paramount v. Sps. Theft is the taking of property without the owner’s consent for their own
Remondeulaz benefit. If what was entrusted to another is the material possession, the taking is
theft. If it is the juridical possession, the taking is estafa. Here, only the material
possession to introduce repairs of the car was given so the subsequent taking is
theft.
Meaning of Accident
Galanoc v. CA The insured is not considered as “making an arrest as an officer of law” because
the purpose of going with the police is not to make an arrest. Moreover, his
death is not “assault/murder” since it cannot be said that the killing is
intentional. Rather, the killing is accidental. The shot was merely fired to scare
away the people around the house–– not specifically against insured. Insurer is
liable under the supplemental contract covering accidental death.
Biagtan v. Insular Life Accidental death clause exempts the insurer from liability if insured dies from
bodily injury intentionally inflicted. The robbers thrusted sharp-pointed
instruments against insured resulting to 9 wounds (5 mortal) and his death. Since
the clause does not speak of the purpose of death but only the fact that the
injuries are intentionally inflicted, insurer is not liable. Intentional – implies the
exercise of reasoning faculties, consciousness, or voliation.
Finman v. CA Accident is an event that takes place without one’s foresight or expectation.
Here, the insured’s death while waiting for a ride home from the festival is
considered accidental. He died from an event that took place without his
foresight or expectation. There was also no capricious desire on his part to
expose his life to danger as he was just going home. Moreover, the policy does
not include “murder or assault” as part of the 10 instances exempting the insurer
→ the mention of one thing implies the exclusion of others.
 De la Cruz v. Capital Accident is an event that takes place without one’s foresight or expectation. The
death of the insured in a boxing match after he slipped and hit his head is an
accident. In boxing, death is not anticipated to happen. Insurer liable.
Sun Insurance v. CA Accident is an event that takes place without one’s foresight or expectation. The
insured’s pointing of the gun to his head and pulling the trigger is an accident. He
did not expect it to be loaded since he removed the magazine. He was just
negligent.
iii. When the terms of the contract are clear (Art. 1370, CC)
1. When the terms of contract are clear = Literal Meaning
2. When words are contrary to parties’ intent = Intent prevails
Misamis v. Capital Insurance contracts may be onerous but it does not justify the abrogation from
the express terms as it is still the law between the parties. Since it expressly
stated in the policy that liability is limited to 150 pesos, such should be followed.
New Life v. CA Court will only intervene when the terms of the policy are ambiguous. The policy
clearly states that insured must give notice to insurer about insurances acquired
or subsequently acquired covering same subject. Here, such condition is
violated. Notice to the insurer’s agents is not notice to the insurer so doctrine of
imputed knowledge is inapplicable (other way around).
Ty v. Filipinas If there is no ambiguity in the contract, the express terms are followed. The
policy expressly states that insured will only be entitled if there is amputation of
the hand. Here, since there is only disability, he is not entitled.
iv. Contract “uberimae fidae:” Perfect Good Faith
Qua Chee v. Law Union The contract of insurance is one of perfect good faith (uberimae fidae) not for
the insured alone but equally for the insurer ––even more so for the latter since
its dominant bargaining position carries with it stricter responsibilities.
Velasco v. Apostol Accident has already happened before the insured paid the insurer the first
premium. The fact of the accident was concealed by insured. Thus, there is a
presence of bad faith on the part of the insured which disregards the principles
that insurance contracts are uberrimae fidae and demands the most abundant
good faith.
G. Subrogation
i. The payment of the insurance company to the insured subrogates it to the
rights of the latter against the wrongdoer.
If the amount paid by the insurance company does not fully cover the injury
or loss, the aggrieved party (insured) can still recover the deficiency from
the wrongdoer. (Art. 2207, CC)
Fireman v. Jamila When the insurance company pays for the loss, such payment operates as an
equitable assignment to the insurer of the property and all remedies which the
insured may have for the recovery of such. It is by operation of law or pro tanto.
The rules on novation does not apply. No consent is needed.
PH American v. CA The right to subrogation does not grow out of privity of contract but upon
payment of the insurance company of the claim. Here, since every marine
insurance policy impliedly warrants that the vessel is seaworthy, the insurer has
accepted the risk of the unseaworthiness making it liable. Thus, it is subrogated
to the rights of the shipper against the carrier.
Delsan v. CA Payment by the insurance company to the insured shipper for the lost cargo
constitutes a waiver of its right to enforce the term of the implied warranty of
seaworthiness against the insured shipper. However, the payment does not
constitute as an automatic admission of the carrier’s seaworthiness. It does not
preclude its right to be subrogated against Delsan (the one who sent the goods).
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Pan Malayan v. CA GR: Upon payment by the insurance company, there is the right of subrogation.
EX: There is no subrogation under the following circumstances:
1. There is a waiver/release against the wrongdoer by the insured’s act
2. Insurer pays the insured the value of the lost goods without notifying
the carrier who also paid the insured in good faith. (Double payment)
3. Insurer pays the insured for a loss not covered by the policy.
(Voluntary Payment)
Sveriges v. Qua Chee When there is voluntary payment by a third person without the consent of the
debtor, he will not be subrogated. However, he can only be reimbursed to the
extent that the debtor is benefitted. Here, there is no subrogation but only
novation.
GR: Insurance contract = immediate subrogation
EX: Other contracts = voluntary payment of third persons
1. w/o consent and knowledge = recover only to the extent benefitted
2. w/ consent and knowledge = subrogated to all rights
Rizal v. Manila Railroad If the contract stipulates a limited liability, the right to subrogation is only limited
to the value (limited liability) paid to insured. Here, since the insurance claim is
only 500 and it is also the value paid by the insurer to the insured, the insurer
can only be subrogated to claim the 500, not more.
St. Paul v. Macondaray Insurance company can only be subrogated to the extent of the value of the
limited liability. The exchange rate of the claim paid to the subrogee (insured)
shall be based on the date of the loss or damage.
National Union v. Stolt As subrogee of the shipper, the insurer is contractually bound by the terms of
the Charter party. Since there is an arbitration clause, it should also follow such.
Cebu v. William GR: If there is limited liability in the contract with the insured, the debtor can
only pay to the extent of the stipulated amount.
EX:
1. The facts and circumstances warrant a different interpretation, or
2. Court finds the value as unconscionable.
Here, since the vessel was insured for 45M (amount was paid by insurer) and it
was beyond economic salvage, the debtor cannot just limit its liability against
insurer-subrogee to 1M based on their contract with insured. It is unfair.
H. The Business of Insurance
i. “Doing an insurance business” (Sec 2(b), IC)
1. Insurer of an insurance contract
2. Surety in a contract of suretyship as a vocation (not incidental)
3. Reinsurance business
4. Other business substantially same to the aforementioned
designed to evade the Insurance Code
White Gold v. Pioneer -
Philamlife v. Ansaldo -
PH Health v. CIR In this case, the healthcare agreements do not satisfy the elements of an
insurance contract. There is no indemnification because the member merely
avails of medical services to be paid or already paid in advance at a pre-agreed
price under the agreement. The benefits can be taken even without any peril,
loss, or damage. Its objective is to provide medical services at reduced cost, not
to distribute the risk like an insurer.
 II. Contract of Insurance
A. What is an insurance contract?
i. An agreement whereby one undertakes for a consideration to indemnify
another against loss, damage, or liability arising from an unknown or
contingent event. (Sec 2(a), IC)
B. Requisites of a Contract of Insurance
i. Elements of an Insurance Contract (IRAD-P)
1. Insured has an insurable interest
2. Insured is subject to the risk of loss
3. Insurer assumes the risk
4. Assumption is part of a general scheme to distribute actual
losses among a large group of persons bearing similar risks
5. Insured pays premiums as consideration
C. What may be insured?
i. Against any contingent or unknown event (past or present) which may:
(Sec. 3, IC)
1. Damnify a person having insurable interest, or
2. Create a liability against him
ii. The following cannot be insured: (Sec. 4, IC)
1. Drawing of any lottery
2. Chance or ticket in a lottery drawing a prize
D. Parties to Insurance Contracts
i. Who may be insurer: Every corporation, partnership, or association
authorized to transact insurance business. (Sec. 6, IC)
ii. Who may be insured: Anyone (ex: public enemy) (Sec. 7, IC)
Filipinas v. Christern As soon as the insured of an insurance contract becomes a public enemy of the
insured, the policy becomes ineffective. The nationality of the corporation shall
be determined through the control test ––based on the nationality of the
majority of the controlling stockholders of the corporation.
Constantino v. Asia Life Since premiums are not debts, its payment is optional which would result either
in the subsistence or forfeiture of the policy.
GR: Non-Payment of premiums = forfeiture of policy
EX:
1. Agreement
2. Waiver
3. Estoppel
4. Law
Fidela v. Crown Life In times of war, the opening of an interim office by the insurance company is in
the nature of a privilege and does not constitute a duty to inform the insurers of
such. Here, since there was non-payment of premiums during the war, the policy
has lapsed.
iii. Mortgagor/Mortgagee
1. Act of the mortgagor = Act of the mortgagee: The insurance is
deemed to be upon the interest of mortgagor if he gets an
insurance in his own name providing that: (Sec. 8, IC)
a. Loss is payable to the mortgagee, or
b. Assigns a policy of insurance to mortgagee
2. Acts of the mortgagor ≠ rights of the mortgagee: If the insurer:
(Sec. 9, IC)
a. Assents to the transfer of the insurance from
mortgagor to mortgagee, and
b. Imposes further obligations to mortgagee
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Palileo v. Cosio
San Miguel v. Law Union
Geagonia v. CA
Saura v. PH international
PH National v. CA
E. Insurable Interest
3. Every interest or liability with respect to a R/P property where a
peril may directly damnify the insured is an insurable interest.
(Sec. 13, IC)
4. GR: The insurance proceeds shall be applied exclusively to the
interest of the person in whose name (insured) or for whose
benefit (beneficiary) it is made.
EX: Otherwise specified in the policy. (Sec. 53, IC)
The insurer is subrogated to the rights of the mortgagee under the mortgage.
Here, mortgagee insured the mortgaged property and recovered the value when
it was burned by fire. The proceeds should go to the mortgagee and the insurer
is subrogated to its rights to claim the value of the subsisting loan from the
mortgagor.
Since the policy is in the name of the owner, the mere transfer of the thing does
not effect a transfer of the policy.
Mortgagor and mortgagee has an independent insurable interest which may be
in one or separate policies.
→ Mortgagor = value of the mortgaged property
→ Mortgagee = interest of the property to the extent of the value of the debt
In case both procures an insurance, there is no cause of double insurance.
The notice of cancellation of a policy should be clear and unequivocal preferably
in writing and should be given to the insured. Here, the notice was given to the
beneficiary only, not to the insured.
If the TCT is in the name only of one spouse,
GR: It is considered separate property of such spouse.
EX: Mortgagee knows of facts where it must be cautious
i. Meaning, necessity for insurable interest
1. Meaning: Insurable interest is the right or relationship in regard
to the subject matter of the insurance such that the insured will
derive pecuniary benefit/advantage from its preservation and
will suffer pecuniary loss/damage from its destruction,
termination, or injury by the happening of the event insured
against.
2. Necessity: To prevent wagering contracts where the insured has
no interest in the thing insured and will sustain no loss upon the
happening of an event. It is against public policy.
ii. Insurable Interest in Life Insurance
1. Every person has an insurable interest in the life/health of the
following: (Sec. 10, IC)
a. Self, spouse, or children
b. Whom he wholly/partly depends for education or
support OR whom he has pecuniary interest
c. Person with obligation to him to pay money, respect
property or service
d. Person upon whose life any estate or interest vested
in him depends
2. When should the insurable interest exist: (Sec. 19, IC)
a. In Property: When the insurance takes effect AND
when the loss occurs
 b. In the Life/Health of a Person: When the insurance 2. Notice must be based on the occurrence after effectivity of policy
takes effect (ex: creditor = must also exist at the time 3. In writing, mailed, or delivered to insured
of loss) 4. Must state the grounds relief upon
3. Insurance policy upon health/life may pass to any person w/n he
has an insurable interest via: 4. Life insurance is payable upon:
a. Transfer a. Death of the person
b. Will b. Survival on a specified period
c. Succession c. Contingent on the continuance or cessation of life
El Oriente v. Posadas Insurance proceeds are not taxable. It is not income but compensation ––a Contract for payment of endowments/annuities = life insurance
substitution of money value for something permanently lost.
iii. Beneficiaries The following can act in behalf of the minor without need of
1. GR: The insured has a right to change the beneficiary designated. court authority or bond if the minor’s interest does not exceed
EX: Right is expressly waived in the policy. 500k or any reasonable amount determined by Commissioner:
a. Father (if no judicial guardian)
If the insured does not change the beneficiary during his lifetime, b. Mother (if father is absent or incapacitated)
the designation is deemed irrevocable. (Sec. 11, IC) c. Grandparent (if parents are absent or incapacitated)
2. In a Life Insurance Policy, the beneficiary’s interest is forfeited if d. Eldest sibling (at least 18 years old)
he is the principal, accomplice, or accessory to the death of the e. Any relative (has actual custody of child)
insured. The forfeited share shall pass to: (Sec. 12, IC)
a. Other beneficiaries Payment made by the insurer under this section shall
b. Paid in accordance of the policy contract (if no (a)) absolve it of liability under the contract.
c. To the estate of insured (if no (b)) Villanueva v. Oro There is a stipulation that beneficiary will only be entitled to the proceeds of the
3. Persons forbidden from receiving donations under Art. 739, CC insurance if insured dies within the period of the coverage. Here, insured
cannot be beneficiary of a life insurance policy: (Art. 2012, CC) survived the period of the coverage so beneficiary is not entitled. The proceeds
a. Between persons guilty of adultery or concubinage will go to the estate of the insured.
(preponderance of evidence) i. Insurable Interest in Property Insurance
b. Between persons found guilty of the same criminal 5. Every interest or liability with respect to a R/P property where a
offense peril may directly damnify the insured is an insurable interest.
c. Those made to a public officer, or his wife, ascendant, (Sec. 13, IC)
or descendant, by reason of his office (bribe) 6. An insurable interest in property may consist in: (Sec. 14, IC)
Insular Life v. Ebrado - a. Existing interest;
De Consuegra v. GSIS Failure to state the beneficiaries in the retirement insurance means that the b. Inchoate interest founded on an existing interest; or
proceeds therein shall go to the insured’s estate and shall be distributed to his c. Expectancy coupled with an existing interest where
legal heirs. such expectancy arises
Southern v. Golpeo Common law wife and children may be beneficiaries of the death benefits since 7. The insurable interest of the carrier/depositary of the things
they are instituted as beneficiaries in the insurance policy. held by him is only to the extent of his liability but not exceeding
Maramag v. Maramag GR: The persons entitled to the proceeds of the insurance policy are: the value of the property. (Sec. 15, IC)
1. Insured, if alive; or 8. Mere contingent or expectant interest neither founded on an
2. Beneficiaries, if insured is dead actual right nor upon a valid contract is not insurable. (Sec. 16,
EX: If the insurance contract is intended to benefit third persons who are not IC)
parties to the contract (stipulations pour autrui), third parties may claim and 9. Measure of insurable interest = extent by which the insured
directly sue the insurer. might be damnified by its loss or injury. (Sec. 17, IC)
10. If the insured does not have an insurable interest on the
When the policy proceeds shall redound to the benefit of the estate: property, contract/policy of insurance is unenforceable. (Sec. 18,
1. There are no instituted beneficiaries; or IC)
2. Beneficiary is disqualified by law 11. Void stipulations in an Insurance Policy: (Sec. 25, IC)
a. For the payment of loss whether or not the person
insured has an insurable interest
It is not prohibited by law to name illegitimate children as beneficiaries. b. That the policy shall be received as proof of interest
Philamcare v. CA The following conditions must concur before the cancellation of healthcare c. Policy executed by way of gaming/wagering
agreements as insurance policies: Harvardian v. Country Test in determining insurable interest is w/n one will derive pecuniary
1. Prior notice of cancellation to insured benefit/loss over such thing regardless whom it is titled. Harvardian has an
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 insurable interest in the property because they are actually using it even though b. Change of interest in one or more of several distinct
it is in the name of one of its stockholders. things separately insured in one policy (Sec. 22, IC)
Commercial v. Lepanto Shipper has insurable interest over the goods even though the policy is in the c. Change of interest by will or succession on the death
name of the consignee. Here, there is a stipulation that shipper has an interest of the insured (Sec. 23, IC)
over the policy as the owner. There is proprietary interest. d. Transfer of interest by one of several partners, joint
Harding v. Commercial Since the insured has an insurable interest over the car gifted by his husband and owners, or owners-in-common, who are jointly
there is no proof of fraud in the valuation of the car, insured can claim from the insured, to others (Sec. 24, IC)
policy. e. Life, accident, and health insurance (Sec. 20, IC)
Lampano v. Jose Insurance taken by one in his own right and own interest does not in any way 14. Void stipulations in an Insurance Policy: (Sec. 25, IC)
inure to the benefit of another. It is payable to the insured regardless of the a. For the payment of loss whether or not the person
nature and extent of his interest in the property provided that it exists at the insured has an insurable interest
time of the making of the contract and at the time of loss. Here, the contractor b. That the policy shall be received as proof of interest
procured an insurance for the unpaid balance of the construction service which c. Policy executed by way of gaming/wagering
was under his name. Tai Tong v. Insurance The insured still has insurable interest because its debt is not yet paid. The
Gaisano v. Insurance In property insurance, the basis of the insurable interest is whether the insured insurer has the burden of proving of the extinguishment of credit. Here, the
has a substantial economic interest in the property. Ownership is not the basis document of credit is still with the creditor. Thus, there is a presumption that the
for such interest. Here, what was insured was the unpaid debt so it does not credit still subsists.
matter who owns the property. Bachrach v. British Chattel mortgage is not an alienation which avoids the policy pursuant to the
Ong v. FEB Leasing Lessee has an insurable interest in the property leased because the measure of alienation clause which requires that the alienation must be with the consent of
an insurable interest in property is the extent to which the insured might be the insurer. The insured is still the owner. For a violation of the alienation clause,
damnified by loss or injury thereof. there must be absolute transfer of ownership.
Traders v. Golangco Golangco has an insurable interest over the rents, as expressly stated in the San Miguel v. Law Union -
policy. It existed during the execution of the contract of insurance and at the F. Concealment and Representation
time of the loss of the property on the basis of a compromise agreement with i. Concealment
the owner where he is given the right to collect the rents. 1. Concealment – a neglect to communicate that which a party
Lopez v. del Rosario A policy taken by the depositary over the deposits held by it in trust insures to knows and ought to communicate. (Sec. 26, IC)
the benefit of the owners upon its loss. This is regardless if the owners did not 2. It can be intentional or unintentional which entitles the injured
request, know about it, or ratify it. party the remedy of rescission. (Sec. 27, IC)
San Miguel v. Law Union - 3. The following must be communicated to the other party in good
Sps. Cha v. CA The stipulation providing for automatic assignment of insurance procured faith: (Sec. 28, IC)
without consent of the lessor is void for being against public policy. The assignee a. All material facts within his knowledge
does not have an insurable interest over the subject of the fire insurance. It is b. Those which he makes no warranty
just a wagering contract. c. Those that the other has no means of ascertaining
Garcia v. HK Fire Insurer is liable for the insurance even if the policy erroneously covered a 4. Insured’s intentional and fraudulent omission to communicate
different subject matter because of its failure to notify the insured of such error. matters proving or tending to prove a falsity of a warranty
ii. When insurable interest must exist; transfers of interest entitles the insurer the right to rescind. (Sec. 29. IC)
12. When should the insurable interest exist: (Sec. 19, IC) 5. GR: The following information need not be communicated:
a. In Property: When the insurance takes effect AND a. Those which the other knows
when the loss occurs b. Those which the other ought to know in the exercise
b. In the Life/Health of a Person: When the insurance of ordinary care
takes effect (ex: creditor = must also exist at the time c. Those which the other waives communication
of loss) d. Those that prove or tend to prove the existence of a
13. GR: Change of interest in any part of the thing insured without non-material risk excluded by a warranty
changing the interest in the insurance = suspends the insurance e. Those that relate to a non-material risk excluded from
to an equivalent extent UNTIL both interest of thing and the policy
insurance is vested with the same person. (Sec 20, IC) EX: If asked about it, the party must answer.
6. Materiality – determined by the probable and reasonable
EX: In the following instances, the insurance is not affected: influence of the facts upon the party whim the communication is
a. Change of interest in a thing insured after the due in: (Sec. 31, IC)
occurrence of an injury which results in a loss (Sec. a. Forming his estimate on the disadvantages of the
21, IC) proposed contracts; or
b. Making his inquiries.
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 7. Parties of an insurance contract are bound to know: (Sec. 32, IC)
a. All the general clauses which:
i. Open to his inquiry
ii. May affect the political/material perils
contemplated;
b. All general usages of trade
8. Waiver of the right to information of material facts: (Sec. 33, IC)
a. Express waiver = terms of insurance
b. Implied waiver = neglect to make inquiry to such facts
9. GR: Information of the nature/amount of the interest of an
insured need not be communicated.
EX: There is an inquiry → burden is on the insurer. (Sec. 34, IC)
10. Informations of his own judgment (i.e., opinions) are not bound
to be communicated even upon inquiry. (Sec. 35, IC)
Argente v. West Coast In the absence of inquiry, concealment must be fraudulent and intentional. Here,
there was concealment of alcoholism and the diagnosis of psychoneurosis which
is a ground to rescind the contract. The insurer would not have entered into the
contract had it known of such information.
Great Pacific v. CA There is concealment since there is a failure to disclose of daughter’s Down
Syndrome in the application even though it is physically manifest. Moreover, the
binding receipt is merely an acknowledgment of the receipt of the premium and
is not tantamount to an approval of the insurance.
Saturnino v. PH Since the insured answered “no” to the question in the application for insurance
whether he is diagnosed with cancer, there is concealment of a material fact.
Thus, insurer can rescind the contract.
Canilang v. CA Under the Code, concealment may be intentional or unintentional. Here, the
acceptance of a blank answer in the insurance application is not a waiver on the
part of the insurer of its right to rescind. It is an intentional concealment. To hold
it against the insured is to render such provision nugatory.
Sun Life v. Bacani The lack of a requirement for a medical examination prior to the grant of the
policy is not a waiver on the part of the insured to rescind the contract upon
findings of concealment. All the more does the applicant required to disclose
such material information. Moreover, the cause of the death of the applicant
need not relate to the undisclosed fact for the insured to have the right to
rescind.
Philamcare v. CA - void or rescindable due to concealment or misrepresentation
Yu Pang v. CA Due to the applicant’s concealment of this previous hospitalization and ailments,
the insured was deprived to make inquiries about such. It would have had a
bearing as to the amount of premiums it will require or in the
approval/disapproval of the policy.
Colado v. Insular Acceptance of the late payment of the premiums by the insurer is not a waiver of
its right to rescind upon findings of concealment. Moreover, the incontestability
clause does not apply because there was actually an application for
reinstatement of insurance where there has been a non-disclosure of liver
cancer. The 2-year incontestability period is reckoned from the execution of
such.
ii. Representation
1. It may be oral/written. (Sec. 36, IC)
2. It may be made during/before the issuance of policy (Sec. 37, IC)
3. The language of a representation is to be interpreted by the
same rules as the language of contracts in general. (Sec. 38, IC)
4. A representation as to the future: (Sec. 39, IC)
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a. GR: It is deemed a promise.
b. EX: It was merely a statement of belief or expectation
5. A representation: (Sec. 40, IC)
a. Cannot qualify an express provision in a contract of
insurance
b. May qualify an implied warranty
6. It can be altered or withdrawn only before the insurance takes
effect. (Sec. 41, IC)
7. It is presumed to refer to the date of the contract’s effectivity.
(Sec. 42, IC)
8. GR: When the insured has no personal knowledge of a fact, he
may: (Sec. 43, IC)
a. Repeat the information he has and believes to be true
with an explanation that it is based from another; or
b. Submit the information in its entirety to the insurer
EX: It proceeds from an agent of the insured who is duty-bound
to give the information.
9. False representation – when the facts fail to correspond with its
assertions or stipulations. (Sec. 44, IC)
10. Remedy of an injured party if there is a false representation in a
material point (affirmative/promissory) is rescission from the
time the representation becomes false. (Sec. 45, IC)
11. Materiality – determined by the probable and reasonable
influence of the facts upon the party whim the communication is
due in: (Sec. 31 v-v 46, IC)
a. Forming his estimate on the disadvantages of the
proposed contracts; or
b. Making his inquiries.
12. The provisions of this chapter applies to a modified contract of
insurance. (Sec. 47, IC)
13. Insurer’s exercise of its right to rescind must precede the
insured’s commencement of an action on the contract.
Incontestability Clause: In life insurance policies payable on the
death of the insured, the insurer cannot prove that the policy is
after the lapse of 2 years during the lifetime of the insured
from the date of the policy’s issuance or from its last
reinstatement. (Sec. 48, IC)
Edillon v. Manila Bakers Acceptance of premiums and the issuance of a policy is a waiver by the insurer of
the condition in its policy excluding persons more than 60 years old. It ought to
know that the insured is more than such age since she stated her birthday in the
application.
Insular v. Feliciano Insurer’s medical agents misrepresented that applicant is qualified even though
he is not. Their representation binds the insurer.
Insular v. Feliciano (MR) The first decision is reversed. Due to connivance between the insured and the
insurer’s medical agents, the latter were considered as agents of the insured.
Moreover, there is representation by insured that he is in good health even
though he clearly knows he is not.
GR: The misrepresentation of insurer’s medical agent binds the insurer.
EX: There is connivance between such agents and insured.
 Ng Zee v. Asian The acceptance of premiums and lack of inquiry (even though it knows of the
insured’s previous operation) is a waiver by the insurer of such concealment.
Great Pacific v. CA There is no concealment since the insurer failed to discharge the burden of
proving such. There was no autopsy conducted to prove the existence of
previous illness and it merely relied on the testimony of the wife.
Tan Chay v. West Coast The incontestability clause does not lie against the insurer because there was no
contract to begin with so the action instituted by the insured upon the contract
is void (lack of cause of action). The right to rescind still exists.
iii. Incontestability Clause
1. Insurer’s exercise of its right to rescind must precede the
insured’s commencement of an action on the contract.

Incontestability Clause: In life insurance policies payable on the

death of the insured, the insurer cannot prove that the policy is
void or rescindable due to concealment or misrepresentation
after the lapse of 2 years during the lifetime of the insured
from the date of the policy’s issuance or from its last
reinstatement. (Sec. 48, IC)
Tan v. CA Insurer’s rescission must precede the insured’s action upon the contract. The
policy only becomes incontestable after 2 years from its issuance. Here, there is
still no lapse of 2 years and the rescission by insurer was exercised prior to the
institution of the action upon the policy. It can still be contested.
Manila Bankers v. Aban The inaction and negligence of the insurer prevails over the fraud of the insured
and its agent because it can ascertain its veracity has it exercised due diligence.
There is no concealment or misrepresentation. It cannot rescind.
Sun Life v. Sibya The burden of proving concealment lies with the insurer. If no concealment or
misrepresentation proven, the incontestability clause does not apply. The insurer
will not have the right to rescind.

If the insured dies within the 2-year period:

GR: The incontestability clause can be invoked.
EX: If there is no concealment/misrepresentation, it cannot be invoked.

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