1. GREAT PACIFIC LIFE INSURANCE CORP. V.

COURT OF APPEALS
G.R.No. 113899, 13 October 1999, 316 SCRA 677
FACTS:
There was an existing group life insurance executed between Great Pacific Life Assurance (Grepalife) and the
Development Bank of the Philippines (DBP). Grepalife agreed to insure the lives of eligible housing loan mortgagors of
DBP. In November 1983, Wilfredo Leuterio, mortgagor of DBP applied to be a member of the group life insurance. He
filled out a form where he indicated he never consulted any physician regarding any illness (heart condition etc) and that
he is in good health. He was eventually included in the group life insurance and he was covered for the amount of his
indebtedness (P86,200.00).
In August 1984, Wilfredo died. DBP submitted a death claim but it was denied by Grepalife as it insisted that Wilfredo
actually concealed that he was suffering from hypertension at the time of his insurance application. Grepalife relied on
the statement made by the doctor who issued Wilfredo’s death certificate wherein it was stated that Wilfredo’s
immediate cause of death was massive cerebral hemorrhage secondary to hypertension or hypertension as a “possible
cause of death”.
Since Grepalife refused to pay the insurance claim filed by DBP, Medarda Leuterio (widow) sued Grepalife. Grepalife
assailed the suit and insisted that Medarda is not a proper party in interest. The lower court ruled in favor of Medarda
and the court ordered Grepalife to pay the amount of the insurance to DBP. The Court of Appeals affirmed this decision
in 1993. Grepalife appealed to the Supreme Court. In 1995, pending resolution of the case in the SC, DBP foreclosed
the property of Medarda.
ISSUE:
Whether or not DBP has insurable interest as creditor.
HELD:
YES. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-payable
clause does not make the mortgagee a party to the contract.
Section 8 of the Insurance Code provides: “Unless the policy provides, where a mortgagor of property effects insurance
in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a
mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the
original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same
effect, although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to
be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had
been performed by the mortgagor.”
The insured Dr. Wilfredo Leuterio did not cede to the mortgagee all his rights or interests in the insurance. When
Grepalife denied payment, DBP collected the debt from the mortgagor and took the necessary action of foreclosure on
the residential lot of Dr. Wilfredo Leuterio.
Insured may be regarded as the real party in interest, although he has assigned the policy for the purpose of collection,
or has assigned as collateral security any judgment he may obtain.

2. SUNLIFE ASSURANCE COMPANY OF CANADA vs. COURT OF APPEALS G.R. No. 105135, 22 June 1995
FACTS:
Robert John Bacani procured a life insurance contract for himself from Sunlife Assurance Company, designating his
mother Bernarda Bacani, herein private respondent, as the beneficiary. He was issued a policy valued at P100,000.00
with double indemnity in case of accidental death. Sometime after, the insured died in a plane crash. Bernarda filed a
claim with Sunlife Assurance, seeking the benefits of the insurance policy taken by her son. However, 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. Sunlife Assurance discovered that two weeks prior to his application
for insurance, the Robert 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, held that the fact that was 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 petitioner
waived the medical examination prior to the approval and issuance of the insurance policy.
 
ISSUE: Whether or not the concealment of such material fact, despite it not being the cause of death of the insured, is
sufficient to render the insurance contract voidable
 
HELD:
 
YES. 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 well settled 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. The SC, therefore, ruled that petitioner properly exercised its right
to rescind the contract of insurance by reason of the concealment employed by the insured. It must be emphasized that
rescission was exercised within the two-year contestability period as recognized in Section 48 of The Insurance Code.
WHEREFORE, the petition is GRANTED and the Decision of the Court of Appeals is REVERSED and SET ASIDE.
3. PHILAMCARE HEALTH SYSTEMS, INC. VS. COURT OF APPEALS AND JULITA TRINOS
G.R. NO. 125678, MARCH 18, 2002
FACTS:
Respondent Julita Trinos’ deceased husband, Ernani Trinos applied for a health care coverage with Philamcare Health
Systems, Inc. In the standard application form, he answered NO to the following question:  Have you or any of your
family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver disease,
asthma or peptic ulcer?
The application was approved and extended for 13 months, until June 1, 1990.
During the period of the coverage, Ernani suffered a heart attack resulting in confinement for a month at the Manila
Medical Center (MMC). While Emani was in the hospital, his wife, Julita, tried to claim the benefits under the health care
agreement. However, Philamcare denied her claim saying that the Health Care Agreement was void on the ground that
there was a concealment regarding Ernani’s medical history.
After his discharge, Ernani was brought again at the Chinese General Hospital where he died. Julita then filed an action
for damages against Philamcare including its President Dr. Benito Reverente. RTC ruled in favour of Julita, and this was
affirmed by the CA except that it deleted awards for damages and absolved Dr. Reverente.
ISSUE:
Whether or not the agreement is a contract of indemnity.
RULING:
Yes. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. The
insurable interest of respondent’s husband in obtaining the health care agreement was his own health. 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.
Elements of an Insurance Contract
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a
consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. An
insurance contract exists where the following elements concur:
(a) The insured has an insurable interest;
(b) The insured is subject to a risk of loss by the happening of the designated peril;

(c) The insurer assumes the risk;

(d) Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons
bearing a similar risk; and
(e) In consideration of the insurer’s promise, the insured pays a premium.
W/N Emani concealed a material fact in his application
SC: The answer assailed by petitioner was in response to the question relating to the medical history of the applicant.
This largely depends on opinion rather than fact, especially coming from respondent’s husband who was not a medical
doctor. Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive
will not avoid a policy even though they are untrue.
The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract.16
Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty
to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In any case, with
or without the authority to investigate, petitioner is liable for claims made under the contract. Having assumed a
responsibility under the agreement, petitioner is bound to answer the same to the extent agreed upon. In the end, the
liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the
agreement or whenever he avails of the covered benefits which he has prepaid.
Under Section 27 of the Insurance Code, "a concealment entitles the injured party to rescind a contract of insurance."
The right to rescind should be exercised previous to the commencement of an action on the contract.17 In this case, no
rescission was made. Besides, the cancellation of health care agreements as in insurance policies require the
concurrence of the following conditions:
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. By reason of the exclusive control of the insurance company
over the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer and
liberally in favor of the insured, especially to avoid forfeiture.

NOT THE LEGAL WIFE

The health care agreement is in the nature of a contract of indemnity. Hence, payment should be made to the party who
incurred the expenses. It is not controverted that respondent paid all the hospital and medical expenses. She is
therefore entitled to reimbursement. The records adequately prove the expenses incurred by respondent for the
deceased’s hospitalization, medication and the professional fees of the attending physicians.
NOTES:
Construction of Terms of Insurance
When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his obligation. Being a contract of adhesion, the terms of an insurance
contract are to be construed strictly against the party which prepared the contract – the insurer. By reason of the
exclusive control of the insurance company over the terms and phraseology of the insurance contract, ambiguity must
be strictly interpreted against the insurer and liberally in favor of the insured, especially to avoid forfeiture. This is
equally applicable to Health Care Agreements. The phraseology used in medical or hospital service contracts, such as
the one at bar, must be liberally construed in favor of the subscriber, and if doubtful or reasonably susceptible of two
interpretations the construction conferring coverage is to be adopted, and exclusionary clauses of doubtful import
should be strictly construed against the provider.
Contingent or unknown event, defined
Section 3 of the Insurance Code states that any contingent or unknown event, whether past or future, which may
damnify a person having an insurable interest against him, may be insured against. Every person has an insurable
interest in the life and health of himself.
Insurable Interest
Every person has an insurable interest in the life and health:
(a) of himself, of his spouse and of his children;
(b) of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary
interest;
(c) of any person under a legal obligation to him for the payment of money, respecting property or service, of which
death or illness might delay or prevent the performance; and
(d) of any person upon whose life any estate or interest vested in him depends.
Concealment / Misrepresentation as a defense
Failure to disclose or misrepresentation of any material information by the member in the application or medical
examination, whether intentional or unintentional, shall automatically invalidate the Agreement from the very beginning
and liability of Philamcare shall be limited to return of all Membership Fees paid. An undisclosed or misrepresented
information is deemed material if its revelation would have resulted in the declination of the applicant by Philamcare or
the assessment of a higher Membership Fee for the benefit or benefits applied for.
The fraudulent intent on the part of the insured must 

4. THELMA VDA. DE CANILANG vs. COURT OF APPEALS G.R. No. 92492, 17 June 1993
FACTS:
Jaime Canilang applied for a “non-medical” insurance policy with Great Pacific Life Assurance Company naming his
wife, Thelma Canilang as his beneficiary. But he did not disclose the fact that he was diagnosed as suffering from sinus
tachycardia and that he has consulted a doctor twice. Jaime was issued an ordinary life insurance policy with the face
value of P19,700.00. Jaime died of “congestive heart failure”, “anemia”, and “chronic anemia”. Thelma, as beneficiary of
the insured, filed a claim with Great Pacific which the insurer denied upon the ground that the insured had concealed
material information from it. Hence, Thelma filed a complaint against Great Pacific with the Insurance Commission for
recovery of the insurance proceeds.
 
ISSUE: Whether or not the non-disclosure of certain facts about the insured’s previous health conditions is material to
warrant the denial of the claims of Thelma Canilang
 
HELD: YES. The SC agreed with the Court of Appeals that the information which Jaime Canilang failed to disclose was
material to the ability of Great Pacific to estimate the probable risk he presented as a subject of life insurance. Had
Canilang disclosed his visits to his doctor, the diagnosis made and medicines prescribed by such doctor, in the
insurance application, it may be reasonably assumed that Great Pacific 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. The materiality of the information withheld by Great Pacific did not depend upon the state of mind of
Jaime Canilang. A man’s state of mind or subjective belief is not capable of proof in our judicial process, except through
proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn.
Neither does materiality depend upon the actual or physical events which ensure. Materiality relates rather to the
“probable and reasonable influence of the facts” upon the party to whom the communication should have been made, in
assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance;
that “probable and reasonable influence of the facts” concealed must, of course, be determined objectively, by the judge
ultimately. WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the Court of Appeals
dated 16 October 1989 in C.A.-G.R. SP No. 08696 is hereby AFFIRMED. No pronouncement as to the costs.

5. TAN V. COURT OF APPEALS

G.R. No. 48049, 29 June 1989, 174 SCRA 403
FACTS:
In September 1973, Tan Lee Siong applied for a life insurance under the Philippine American Life Insurance Company
(PHILAMLIFE). He stated in the application form that he has no health issues whatsoever and so in November 1973 he
was issued a life insurance policy in the amount of P80,000.00. He listed his sons as beneficiaries (Emilio Tan et al). In
April 1975, Tan Lee Siong died due to hepatoma. His sons filed an insurance claim but PHILAMLIFE denied the same
as it alleged that Tan Lee Siong concealed the fact that he was hypertensive, diabetic, and was suffering from
hepatoma at the time of his application for the insurance.
The beneficiaries averred that PHILAMLIFE can no longer rescind the insurance contract because the insured is
already dead. They invoke Section 48 of the Insurance Code which they interpreted to mean that an insurer can only
rescind an insurance contract during the lifetime of the insured; and that such rescission should be done within two
years prior to the filing of a suit involving the insurance.
ISSUE:
Whether or not the interpretation of the Tan brothers is correct.
RULING:
No. The pertinent section in the Insurance Code provides:
Section 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter,
such right must be exercised previous to the commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of
the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that
the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured
or his agent.
The so-called “incontestability clause” precludes the insurer from raising the defenses of false representations or
concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force
for at least two years during the insured’s lifetime. The phrase “during the lifetime” found in Section 48 simply means
that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of
Section 48 is “for a period of two years.”
Note that the policy was in force for only one year and 5 months when Tan Lee Siong died. This means that
PHILAMLIFE can still contest and rescind the policy issued by reason of the misrepresentation made by Tan Lee Siong.
Further, because of Tan Lee Siong’s statement that he does not have any health issues, the insurance company was
misled into believing that he was healthy and so it did not deem a medical checkup to be necessary and that ultimately
led to the issuance of the life insurance policy.
6. FLORENDO VS PHILAM PLANS
G.R. No. 186983, February 22, 2012        
FACTS:
On October 23, 1997 Manuel Florendo filed an application for comprehensive pension plan with respondent Philam
Plans after some convincing by respondent Perla Abcede. The plan had a pre-need price of ₱997,050.00, payable in 10
years, and had a maturity value of ₱2,890,000.00 after 20 years. Manuel signed the application and left to Perla the
task of supplying the information needed in the application.Respondent Ma. 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 Florendo.This
was covered by a Group Master Policy that 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.
On September 15, 1998, Manuel died of blood poisoning. Subsequently, Manuel’s wife Lourdes filed a claim with
Philam Plans for the payment of the benefits under her husband’s plan. However, Philam Plans declined Lourdes’
claim. Apparently, Philam Life found 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 renewed her demand for payment under the planbut Philam Plans rejected it,prompting her to file action
against the pension plan company.
The RTC ruled in favor of Lourdes. However, the Court of Appeals (CA) reversed the RTC decision, holding that
insurance policies are traditionally contracts uberrimae fidae or contracts of utmost good faith. 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.
ISSUES:
1. Whether or not Manuel is guilty of concealing his illness when he kept blank and did not answer questions in his
pension plan application regarding the ailments he suffered from
2. Whether or not Manuel was bound by the failure of respondents Perla and Ma. Celeste to declare the condition of his
health in the pension plan application; and
3. Whether or not Philam Plans’ approval of Manuel’s pension plan application and acceptance of his premium
payments precluded it from denying Lourdes’ claim.
RULING:
Yes, Manuel is guilty of concealing his illness.
Since Manuel signed the application without filling in the details regarding his continuing treatments for heart condition
and diabetes, the assumption is that he has never been treated for the said illnesses in the last five years preceding his
application. This is implicit from the phrase “If your answer to any of the statements above (specifically, the statement: I
have never been treated for heart condition or diabetes) reveal otherwise, please give details in the space provided
for.” But this is untrue since he had been on “Coumadin,” a treatment for venous thrombosis,and insulin, a drug used in
the treatment of diabetes mellitus, at that time.
2. Yes, Manuel was bound by the failure of respondents Perla and Ma. Celeste to declare the condition of his health in
the pension plan application.
Lourdes contends that the mere fact that Manuel signed the application in blank and let Perla fill in the required details
did not make her his agent and bind him to her concealment of his true state of health. But, Manuel forgot that in signing
the pension plan application, he certified that he wrote all the information stated in it or had someone do it under his
direction.
Assuming that it was Perla who filled up the application form, Manuel is still bound by what it contains since he certified
that he authorized her action. Philam Plans had every right to act on the faith of that certification.
3. No, Philam Plans’ approval of Manuel’s pension plan application and acceptance of his premium payments precluded
it from denying Lourdes’ claim.
The comprehensive pension plan that Philam Plans issued contains a one-year incontestability period.  Since Manuel
died on the eleventh month following the issuance of his plan, the one year incontestability period has not yet set in.
Consequently, Philam Plans was not barred from questioning Lourdes’ entitlement to the benefits of her husband’s
pension plan.

7. PACIFIC TIMBER V CA G.R. NO. L-38613 FEBRUARY 25, 1982

Facts:
The plaintiff secured temporary insurance from the defendant for its exportation of 1,250,000 board feet of Philippine
Lauan and Apitong logs to be shipped from Quezon Province to Okinawa and Tokyo, Japan.
Workmen’s Insurance issued a cover note insuring the cargo of the plaintiff subject to its terms and conditions.
The two marine policies bore the numbers 53 HO 1032 and 53 HO 1033. Policy No. 53 H0 1033 was for 542 pieces of
logs equivalent to 499,950 board feet. Policy No. 53 H0 1033 was for 853 pieces of logs equivalent to 695,548 board
feet. The total cargo insured under the two marine policies consisted of 1,395 logs, or the equivalent of 1,195.498 bd. ft.
After the issuance of the cover note, but before the issuance of the two marine policies Nos. 53 HO 1032 and 53 HO
1033, some of the logs intended to be exported were lost during loading operations in the Diapitan Bay.
While the logs were alongside the vessel, bad weather developed resulting in 75 pieces of logs which were rafted
together co break loose from each other. 45 pieces of logs were salvaged, but 30 pieces were verified to have been lost
or washed away as a result of the accident.
Pacific Timber informed Workmen’s about the loss of 32 pieces of logs during loading of SS woodlock.
Although dated April 4, 1963, the letter was received in the office of the defendant only on April 15, 1963. The plaintiff
claimed for insurance to the value of P19,286.79.
Woodmen’s requested an adjustment company to assess the damage. It submitted its report, where it found that the
loss of 30 pieces of logs is not covered by Policies Nos. 53 HO 1032 and 1033 but within the 1,250,000 bd. ft. covered
by Cover Note 1010 insured for $70,000.00.
The adjustment company submitted a computation of the defendant's probable liability on the loss sustained by the
shipment, in the total amount of P11,042.04.
Woodmen’s wrote the plaintiff denying the latter's claim on the ground they defendant's investigation revealed that the
entire shipment of logs covered by the two marine policies were received in good order at their point of destination. It
was further stated that the said loss may be considered as covered under Cover Note No. 1010 because the said Note
had become null and void by virtue of the issuance of Marine Policy Nos. 53 HO 1032 and 1033.
The denial of the claim by the defendant was brought by the plaintiff to the attention of the Insurance Commissioner.
The Insurance Commissioner ruled in favor of indemnifying Pacific Timber. The company added that the cover note is
null and void for lack of valuable consideration. The trial court ruled in petitioner’s favor while the CA dismissed the
case. Hence this appeal.
Issues:
WON the cover note was null and void for lack of valuable consideration
WON the Insurance company was absolved from responsibility due to unreasonable delay in giving notice of loss.
Held: No. No. Judgment reversed.

Ratio:
1. The fact that no separate premium was paid on the Cover Note before the loss occurred does not militate against the
validity of the contention even if no such premium was paid. All Cover Notes do not contain particulars of the shipment
that would serve as basis for the computation of the premiums. Also, no separate premiums are required to be paid on
a Cover Note.
The petitioner paid in full all the premiums, hence there was no account unpaid on the insurance coverage and the
cover note. If the note is to be treated as a separate policy instead of integrating it to the regular policies, the purpose of
the note would be meaningless. It is a contract, not a mere application for insurance.
It may be true that the marine insurance policies issued were for logs no longer including those which had been lost
during loading operations. This had to be so because the risk insured against is for loss during transit, because the logs
were safely placed aboard.
The non-payment of premium on the Cover Note is, therefore, no cause for the petitioner to lose what is due it as if
there had been payment of premium, for non-payment by it was not chargeable against its fault. Had all the logs been
lost during the loading operations, but after the issuance of the Cover Note, liability on the note would have already
arisen even before payment of premium. Otherwise, the note would serve no practical purpose in the realm of
commerce, and is supported by the doctrine that where a policy is delivered without requiring payment of the premium,
the presumption is that a credit was intended and policy is valid.
2. The defense of delay can’t be sustained. The facts show that instead of invoking the ground of delay in objecting to
petitioner's claim of recovery on the cover note, the insurer never had this in its mind. It has a duty to inquire when the
loss took place, so that it could determine whether delay would be a valid ground of objection.
There was enough time for insurer to determine if petitioner was guilty of delay in communicating the loss to respondent
company. It never did in the Insurance Commission. Waiver can be raised against it under Section 84 of the Insurance
Act.

8. Great Pacific Life Assurance Corporation vs. CA, 89 SCRA 543);

GREAT PACIFIC LIFE ASSURANCE CO. V. COURT OF APPEALS, G.R. NO. L-31845, L-31878, [APRIL 30, 1979]

FACTS: It appears that on March 14, 1957, private respondent Ngo Hing filed an application with the Great Pacific Life Assurance
Company (hereinafter referred to as Pacific Life) for a twenty-year endowment policy in the amount of P50,000.00 on the life of his
one-year old daughter Helen Go. Ngo Hing supplied the essential data which Lapulapu D. Mondragon, the Branch Manager of the
Pacific Life in Cebu City wrote on the corresponding form in his own handwriting (Exhibit I-M). Mondragon finally type-wrote the
data on the application form which was signed by private respondent Ngo Hing. The latter paid the annual premium, the sum of
P1,077.75 going over to the Company, but he retained the amount of P1,317.00 as his commission for being a duly authorized
agent of Pacific Life. Upon the payment of the insurance premium, the binding deposit receipt (Exhibit E) was issued to private
respondent Ngo Hing. Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application form his strong
recommendation for the approval of the insurance application. Then on April 30, 1957, Mondragon received a letter from Pacific
Life disapproving the insurance application (Exhibit 3-M). The letter stated that the said life insurance application for 20-year
endowment plan is not available for minors below seven years old, but Pacific Life can consider the same under the Juvenile Triple
Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent to the Company.

The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to private
respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote back Pacific Life again strongly recommending the approval of
the 20-year endowment life insurance on the ground that Pacific Life is the only insurance company not selling the 20-year
endowment insurance plan to children, pointing out that since 1954 the customers, especially the Chinese, were asking for such
coverage (Exhibit 4-M).

It was when things were in such state that on May 28, 1957 Helen Go died of influenza with complication of broncho-pneumonia.
Thereupon, private respondent sought the payment of the proceeds of the insurance, but having failed in his effort, he filed the
action for the recovery of the same before the Court of First Instance of Cebu, which rendered the adverse decision as earlier
referred to against both petitioners.

ISSUES:

(1) whether the binding deposit receipt (Exhibit E) constituted a temporary contract of the life insurance in question; NO

(2) whether private respondent Ngo Hing concealed the state of health and physical condition of Helen Go, which rendered void the
aforesaid Exhibit E. YES.

HELD:

1. provisions printed on Exhibit E show that the binding deposit receipt is intended to be merely a provisional or temporary
insurance contract and only upon compliance of the following conditions: (1) that the company shall be satisfied that the
applicant was insurable on standard rates; (2) that if the company does not accept the application and offers to issue a
policy for a different plan, the insurance contract shall not be binding until the applicant accepts the policy offered;
otherwise, the deposit shall be reftmded; and (3) that if the applicant is not ble according to the standard rates, and the
company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid
shall be returned to the applicant.

INSURANCE CONTRACT; “BINDING DEPOSIT RECEIPT.” — Where the binding deposit receipt is intended to be merely a provisional
or temporary insurance contract, and that the receipt merely acknowledged, on behalf of the insurance company, that the latter’s
branch office had received from the applicant the insurance premium and had accepted the application subject for processing by
the insurance company, such binding deposit receipt does not become in force until the application is approved.

PERFECTION OF CONTRACT. — A binding deposit receipt which is merely conditional does not insure outright. Thus, where an
agreement is made between the applicant and the agent, no liability will attack 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.

MEETING OF THE MIND. — A contract of insurance, like other contracts, must be assented to by both parties either in person or by
their agents. The contract, to be binding from the date of the application, must have been a completed contract, one that leaves
nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. There can be
no contract of insurance unless the minds of the parties have met in agreement.

FAILURE OF AGENT TO COMMUNICATE THE REJECTION TO APPLICANT. — The failure of the insurance company’s agent to
communicate to the applicant the rejection of the insurance application would not have any adverse effect on the allegedly
perfected temporary contract. In the first place, there was no contract perfected between the parties who had no meeting of their
minds. Private respondent, being an authorized agent is indubitably aware that said company does not offer the life insurance
applied for. When he filed the insurance application in dispute he was therefore only taking a chance that the company will approve
the recommendation of the agent for the acceptance and approval of the application in question. Secondly, having an insurable
interest on the life of his daughter, aside from being an insurance agent and office associate of the branch, the applicant must have
known and followed the progress on the processing of such application and could not pretend ignorance of the Company’s rejection
of the 20-year endowment life insurance application.

CONCEALMENT OF MATERIAL FACT. — The contract of insurance is one of perfect good faith (uberrima fides meaning good faith;
absolute and perfect candor or openness and honestly; the absence of any concealment or deception, however slight [Black’s Law
Dictionary, 2nd Edition], not for the insured alone but equally so for the insurer. Concealment is a neglect to communicate that
which a party knows and ought to communicate (Section 25, Act 2427). Whether intentional or unintentional, the concealment
entities the insurer to rescind the contract of insurance.

CASE AT BAR. — The failure of the father who applied for a life insurance policy on the life of his daughter to divulge the fact that
his daughter is a mongoloid, a congenital physical defect that could never be disguised, constitutes such concealment as to render
the policy void. And where the applicant himself is an insurance agent, he ought to know, as he surely must have known, his duty
and responsibility to supply such a material fact, and his failure to divulge such significant fact is deemed to have been done in bad
faith.

10. Makati Tuscany v CA G.R. No. 95546 November 6, 1992

Facts:
American International Underwriters issued a policy in favor of Makati Tuscany Condominium Corporation with a total
premium of P466,103.05. The company issued a replacement policy. Premium was again paid. In 1984, the policy was
again renewed and private respondent issued to petitioner another policy. The petitioner paid 152,000 pesos then
refused to furnish the balance.
The company filed an action to recover the unpaid balance of P314,103.05.
The condominium administration explained that it discontinued the payment of premiums because the policy did not
contain a credit clause in its favor and that the acceptance of premiums didn’t 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 prior to premium payment, loss wasn’t covered.
Petitioner sought for a refund.  The trial court dismissed the complaint and counterclaim owing to the argument that
payment of the premiums of the policies were made during the lifetime or term of said policies, so risk attached under
the policies.
The Court of Appeals ordered petitioner to pay the balance of the premiums owing to the reason that it was part of an
indivisible obligation.
Petitioner now asserts that its payment by installment of the premiums for the insurance policies invalidated them
because of the provisions of Sec. 77 of the Insurance Code disclaiming liability for loss for occurring before payment of
premiums.

Issue: Whether payment by installment of the premiums due on an insurance policy invalidates the contract of
insurance, in view of Sec. 77 of P.D. 612

Held: Judgment affirmed.

Ratio:
Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing 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.
Petitioner concluded that there cannot be a perfected contract of insurance upon mere partial payment of the premiums
because under Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the premium thereof
has been paid, notwithstanding any agreement to the contrary. As a consequence, petitioner seeks a refund of all
premium payments made on the alleged invalid insurance policies.
We hold that the subject policies are valid even if the premiums were paid on installments. The records clearly show
that petitioner and private respondent intended subject insurance policies to be binding and effective notwithstanding
the staggered payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then
in 1984. In those three (3) years, the insurer accepted all the installment payments. Such acceptance of payments
speaks loudly of the insurer's intention to honor the policies it issued to petitioner.
Quoting the CA decision:
“While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the
contract, we are not prepared to rule that the request to make installment payments duly approved by the insurer, would
prevent the entire contract of insurance from going into effect despite payment and acceptance of the initial premium or
first installment. Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment
by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far
as to make the policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties
from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement
granting credit extension. So is an understanding to allow insured to pay premiums in installments not so proscribed.
The reliance by petitioner on Arce vs. Capital Surety and Insurance Co. is unavailing because the facts therein are
substantially different from those in the case at bar. In Arce, no payment was made by the insured at all despite the
grace period given. Here, petitioner paid the initial installment and thereafter made staggered payments resulting in full
payment of the 1982 and 1983 insurance policies. For the 1984 policy, petitioner paid two (2) installments although it
refused to pay the balance.
It appearing from the peculiar circumstances that the parties actually intended to make three (3) insurance contracts
valid, effective and binding, petitioner may not be allowed to renege on its obligation to pay the balance of the premium
after the expiration of the whole term. 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.
11. UCPB GENERAL INSURANCE CO., INC. V. MASAGANA TELAMART, INC., G.R. NO. 137172, [JUNE 15, 1999],
367 PHIL 539-545
FACTS: On April 15, 1991, petitioner issued five (5) insurance policies covering respondent’s various property
described therein against fire, for the period from May 22, 1991 to May 22, 1992.
In March 1992, petitioner evaluated the policies and decided not to renew them upon expiration of their terms on May
22, 1992. Petitioner advised respondent’s broker, Zuellig Insurance Brokers, Inc. of its intention not to renew the
policies.
On April 6, 1992, petitioner gave written notice to respondent of the non-renewal of the policies at the address stated in
the policies.
On June 13, 1992, fire razed respondent’s property covered by three of the insurance policies petitioner issued.
On July 13, 1992, respondent presented to petitioner’s cashier at its head office five (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 respondent under the policies prior to July 14, 1992.
On July 14, 1992, respondent filed with petitioner its formal claim for indemnification of the insured property razed by
fire.
On the same day, July 14, 1992, petitioner returned to respondent the five (5) manager’s checks that it tendered, and at
the same time rejected respondent’s claim for the reasons (a) that the policies had expired and were not renewed, and
(b) that the fire occurred on June 13, 1992, before respondent’s tender of premium payment.
On July 21, 1992, respondent filed with the Regional Trial Court, Branch 58, Makati City, a civil complaint against
petitioner for recovery of P18,645,000.00, representing the face value of the policies covering respondent’s insured
property razed by fire, and for attorney’s fees.
On October 23, 1992, after its motion to dismiss had been denied, petitioner filed an answer to the complaint. It alleged
that the complaint “fails to state a cause of action”; that petitioner was not liable to respondent for insurance proceeds
under the policies because at the time of the loss of respondent’s property due to fire, the policies had long expired and
were not renewed.
ISSUE: whether the fire insurance policies issued by petitioner to the respondent covering the period May 22, 1991 to
May 22, 1992, had expired on the latter date or had been extended or renewed by an implied credit arrangement
though actual payment of premium was tendered on a latter date after the occurrence of the risk (fire) insured against.
HELD: Yes. Upon a meticulous review of the records and reevaluation of the issues raised in the motion for
reconsideration and the pleadings filed thereafter by the parties, we resolved to grant the motion for reconsideration.
The following facts, as found by the trial court and the Court of Appeals, are indeed duly established:
1. For years, Petitioner had been issuing fire policies to the Respondent, and these policies were annually renewed.
2. Petitioner had been granting Respondent a 60- to 90-day credit term within which to pay the premiums on the
renewed policies.
3. There was no valid notice of non-renewal of the policies in question, as there is no proof at all that the notice sent by
ordinary mail was received by Respondent, and the copy thereof allegedly sent to Zuellig was ever transmitted to
Respondent.
4. The premiums for the policies in question in the aggregate amount of P225,753.95 were paid by Respondent within
the 60- to 90-day credit term and were duly accepted and received by Petitioner’s cashier.
The instant case has to rise or fall on the core issue of whether Section 77 of the Insurance Code of 1978 (P.D. No.
1460) must be strictly applied to Petitioner’s advantage despite its practice of granting a 60- to 90-day credit term for the
payment of premiums.
Section 77 of the Insurance Code of 1978 provides:
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.
The first exception is provided by Section 77 itself, and that is, in case of a life or industrial life policy whenever the
grace period provision applies.
The second is that covered by Section 78 of the Insurance Code, which provides:
SECTION 78. Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence
of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding
until premium is actually paid.
A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals, wherein we ruled
that Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial
payment has been made at the time of loss. 
By the approval of the aforequoted findings and conclusion of the Court of Appeals, Tuscany has provided a fourth
exception to Section 77, namely, that the insurer may grant credit extension for the payment of the premium. This
simply means that if the insurer has granted the insured a credit term for the payment of the premium and loss occurs
before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the
loss but within the credit term.
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. The agreement binds the parties. Article 1306 of the Civil Code provides:
ARTICLE 1306. The contracting parties may establish such stipulations clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
Finally in the instant case, it would be unjust and inequitable if recovery on the policy would not be permitted against
Petitioner, which had consistently granted a 60- to 90-day credit term for the payment of premiums despite its full
awareness of Section 77. Estoppel bars it from taking refuge under said Section, since Respondent relied in good faith
on such practice. Estoppel then is the fifth exception to Section 77.