INSURANCE CASE TICKLER AND DIGEST

1. MANILA BANKERS LIFE INSURANCE CORPORATION v. ● April 24, 1997, MBLIC filed a case for rescission of the policy on
CRESENCIA P. ABAN the ground that it was obtained by fraud, concealment and/or
misrepresentation, hence voidable.

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Tickler: Section 48; Incontestability Clause; Insurers cannot be ● Aban motioned to dismiss, claiming that MBLIC was barred by
allowed to collect premiums on insurance policies, use these prescription under Sec. 48 of the Insurance Code.

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amounts and invest the same through the years, generating profits
and returns therefrom for their own benefit, and thereafter RTC: Granted the MTD. It was Sotero who obtained the insurance.
conveniently deny insurance claims by questioning the authority or CA: Affirmed.
integrity of their own agents or the policies they issued to their

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premium-paying clients; After 2 years, the defenses of concealment MBLIC Arguments:
or misrepresentation, no matter how patent or well-founded, will no ● its investigator testified that the insurance underwriter who
longer lie. solicited the insurance is a cousin of Aban’s husband and that it

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was Aban who paid the annual premiums;
Facts: ● Sec. 48 cannot apply if the beneficiary posed as the insured

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● July 3, 1993, Delia Sotero took a life insurance policy from under fraudulent circumstances;
MBLIC, designating Aban, her niece, as her beneficiary. ● Aban has no insurable interest in the life of her aunt;

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● August 30, 1993, MBLIC issued Sotero the policy w/ face value ● The policy was void ab initio, as such, cannot prescribe.
of 100k, after the requisite medical exam and payment of
premium. Issue: W/N the action is barred by prescription?
● April 10, 1996 (2 years, 7 months), Sotero died.
● July 9, 1996 (2 months after), Aban filed a claim for the Ruling: Yes.
proceeds.
A,
● MBLIC conducted an investigation and found the following: It was Sotero who obtained the insurance for herself. Fraudulent
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a. Sotero did not personally apply for insurance, as she intent of the insured must be established to entitle the insurer to
was illiterate; rescind. In the absence of such proof, no right to rescind arises.
b. Sotero was sickly since 1990;
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c. Sotero did not have financial capability to pay the The conclusions during investigation conducted by MBLIC after the
premiums; claim was filed is self-serving and may not be a basis of a cause of
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d. Sotero did not sign the July 3 application; action.

e. Aban was the one who filed for application and
designated herself as the beneficiary. Under Sec. 48, an insurer is given 2 years - from the effectivity of a
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● April 16, 1997, MBLIC denied Aban’s claim based on the life insurance contract and while the insured is alive - to discover or
aforesaid reasons and refunded the premiums paid. prove that the policy is void ab initio or is rescindible by reason of
fraudulent concealment, or misrepresentation. After the 2 year period
lapses, or when the insured dies within the period, the insurer must
 INSURANCE CASE TICKLER AND DIGEST

make good on the policy, even though the policy was obtained by The insurer is deemed to have the necessary facilities to discover
fraudulent concealment, or misrepresentation. This does not reward such fraudulent concealment or misrepresentation within a period of
insurance fraud, rather, penalizes the insurers who recklessly and 2 years.

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indiscriminately solicit and obtain business, for such recklessness
and lack of discrimination ultimately work to the detriment of bona After 2 years, the defenses of concealment or misrepresentation, no

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fide takers of insurance and the public in general. matter how patent or well-founded, will no longer lie.

Sec. 48 regulates both the actions of insurers and prospective takers The phrase “during the lifetime” in Sec. 48 simply means that the
of life insurance. It gives insurers enough time to inquire whether the policy is no longer considered in force after the insured has died. The

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policy was obtained by fraudulent concealment, or key phrase is “for a period of 2 years.”
misrepresentation; on the other hand, it forewarns scheming
individuals that their attempts at insurance fraud would be timely As to the defense of MBLIC that its agent is the cousin of Aban’s

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uncovered. At the same time, legitimate policy holders are absolutely husband, MBLIC would have discovered this had it conducted an
protected from unwarranted denial of their claims or delay in the earnest investigation. For its negligence and inaction, the Court

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collection of insurance proceeds occasioned by allegations of cannot consider this allegation. If insurers cannot vouch for the
fraudulent concealment or misrepresentation by insurers. integrity and honesty of their agents and the policies they issue, they

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should cease doing business. They have only themselves to blame.
Life insurance policies that pass the statutory 2 year period are
essentially treated as legitimate and beyond question, and the Insurers may not be allowed to delay the payment of claims by filing
individuals who wield them are made secure by the thought that they frivolous cases, hoping that it may be put off for years or even
will be paid promptly upon claim. In this manner, Sec. 48 contributes decades. In the meantime, they benefit from collecting the interest
A,
to the stability of the insurance industry. and/or returns on both the premiums and the insurance proceeds
which should otherwise go to their beneficiaries.
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Sec. 48 prevents a situation where the insurer knowingly continues
to accept annual premium payments on life insurance, only to later The business of insurance is a highly regulated commercial activity,
on deny a claim on the policy on specious claims of fraudulent and is imbued with public interest. An insurance contract is a
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concealment or misrepresentation. contract of adhesion which must be construed liberally in favor of the
insured and strictly against the insurer.
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The “incontestability clause” is a provision in law that after a policy of

life insurance made payable on the death of the insured shall have
been in force during the lifetime of the insured for a period of 2 years
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from the date of its issue or of its last reinstatement, the insurer
cannot prove that the policy is void ab initio or is rescindible by
reason of fraudulent concealment or misrepresentation.
 INSURANCE CASE TICKLER AND DIGEST

2. SUN LIFE OF CANADA v. SANDRA TAN KIT Sun’s Argument: No interest should have been imposed because
the CA decision does not provide any legal or factual basis therefor;
Tickler: Smoker; Guilty of Concealment; CA wrongfully imposed that it timely tendered TK the refund but they rejected and that it is

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compensatory interest. not guilty of delay or unjust rescission to make it liable for interest.

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Facts: Issue: W/N Sun is liable to pay interest on the premium to be
● Tan Kit (TK) is the widow and beneficiary of Norberto, whose refunded?
application for life insurance with a face value of 300k was
granted by Sun on October 28, 1999. Ruling: No. Simultaneous to its giving of notice to TK that it was

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● February 19, 2001 (1 yr and 3 months), Norberto died of rescinding the policy due to concealment, Sun tendered the refund of
disseminated gastric carcinoma (stomach cancer). TK filed a premium. However, TK refused since they were seeking for the
claim under the policy. proceeds of the policy. Because of this, Sun filed for a judicial

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● Sun denied on account of Norberto’s failure to fully and faithfully rescission where CA found Norberto guilty of concealment and thus
disclose in his insurance application material and relevant upheld the rescission. Sun did not incur delay or unjustifiably deny

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information about his health and smoking history. the claim.
● Norberto answered “No” to the question inquiring whether he

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had smoked cigarettes or cigars within the last 12 months prior There are 2 kinds of interest - monetary and compensatory.
to filling out the application. Monetary interest refers to the compensation set by the
● In the medical report of Dr. Chua, one of the physicians that parties for the use or forbearance of money. No such interest
Norberto consulted for his illness, reveals that he was a smoker shall be due unless it has been expressly stipulated in
and had only stopped smoking in August 1999. writing.
A,
● According to Sun, its underwriters would not have approved the
application had they been given the correct information, hence Compensatory interest refers to the penalty or indemnity for
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its liability is limited to the refund of all the premiums paid. damages imposed by law or by courts.
Accordingly, it gave a check for P13,080 as the refund.
● TK refused to accept the check and insisted on the insurance Clearly, the interest imposed by CA is not monetary since there is no
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proceeds. use or forbearance of money involved and the interest was not one
● Sun filed a complaint for rescission. which was agreed upon by the parties in writing.
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RTC: Ordered Sun to pay proceeds of insurance. As a form of damages, compensatory interest is due only if the
obligor is proven to have failed to comply with his obligation.
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CA: Reversed and set aside. Norberto is guilty of concealment,

giving Sun the right to rescind. Sun is ordered to reimburse the Sun properly complied with its obligation under the law and contract.
premiums paid WITH interest at the rate of 12% from the time of Hence, it should not be made liable to pay compensatory interest.
death until fully paid.
 INSURANCE CASE TICKLER AND DIGEST
3. THE INSULAR LIFE ASSURANCE COMPANY v. PAZ Y. KHU
Tickler: Reinstatement; Ambiguity; Letter of Acceptance v.
Endorsement Letter; June 1999 v. December 1999.
Facts:
● March 6, 1997, Felipe Khu applied for life insurance with
Insular. He accomplished the required medical questionnaire
where he did not declare any illness or adverse medical
condition.
● June 22, 1997, the policy that Insular issued Felipe took effect.
● June 23, 1999, Felipe’s policy lapsed due to nonpayment of
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premium from June 22, 1999-June 23, 2000.
● Sept 7, 1999, Feline applied for reinstatement and paid P25,020
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as premium. Except for the change in his occupation of being
self employed to being the Municipal Mayor of Binuangan,
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Misamis Orientalm, all other information in his application for
reinstatement was identical to those in his original policy.
● Oct 12, 1999, Insular told Felipe that his application may only
be considered if he agreed to certain conditions such as
payment of additional premium and cancellation of the riders
Felipe agreed.
A,
pertaining to premium waiver and accidental death benefits.
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● Dec 27, 1999, Felipe paid the additional premiums of P3,054.
● Jan 7, 2000, Insular issued an Endorsement which reads: “This
certifies that as agreed by the Insured, the reinstatement of this
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policy has been approved by the Company on the
understanding that the following changes are made on the
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policy effective June 22, 1999.
● June 23, 2000, Felipe paid the annual premium covering June
22, 2000-June 22, 2001.
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● July 2, 2001, he also paid the annual premium covering June
22, 2001-June 21, 2002.
● Sept 22, 2001, Felipe died. The causes of death are as follows:
Immediate: End stage renal failure, Hepatic failure;
Antecedent: Congestive heart failure, Diffuse myocardial
ischemia;
Underlying: Diabetes, Alcoholism, and Pneumonia
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● Oct 5, 2001, the respondent beneficiaries filed with Insular a
claim under the reinstated policy.
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● Insular denied and told them that they will be rescinding the
reinstated policy due to concealment and misrepresentation of
Felipe.
● Insular contends that Felipe did not disclose his diabetes and
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alcoholic liver cirrhosis which he already had prior to his
application for reinstatement and that it would not have
reinstated the policy had Felipe disclosed such material
information. That when he died, the policy was still contestable.
Insulars Arguments:
● The 2 year contestability period had not yet lapsed.
● The policy was reinstated only on December 27, 1999, the date
when Felipe paid the additional extra premium.
● There was no ambiguity in the letter and the endorsement.
Respondents Arguments:
● The phrase “effective June 22, 1999” found in both the letter of
acceptance and endorsement is unclear whether it refers to the
“reinstatement of the policy” or to the “changes are made on the
policy”
RTC: Ordered Insular to pay with legal interest from demand until
fully paid. Found ambiguity in the endorsement letter.
CA: Affirmed.
Issue: W/N Felipe’s reinstated policy is already incontestable?
Ruling: Yes. The policy should be considered as reinstated on June
22, 1999. This finding is not only in accordance with evidence, but
 INSURANCE CASE TICKLER AND DIGEST

also favorable to the insured who was not responsible for causing ADDITIONAL NOTES:
ambiguity or obscurity in the insurance contract.
The Insurance Code provides that:

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In the Letter of Acceptance, Felipe declared that he was accepting
“the imposition of an additional x x x premium; effective June 22, Section 48. Whenever a right to rescind a contract of

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1999” insurance is given to the insurer by any provision of this
chapter, such right must be exercised previous to the
The phrase in this Letter does not refer explicitly to the effectivity of commencement of an action on the contract.
the reinstatement.

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After a policy of life insurance made payable on the death of
The reinstatement was conditioned upon payment of additional the insured shall have been in force during the lifetime of the
premium not only prospectively, but also retroactively. Hence by insured for a period of two (2) years from the date of its issue

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paying the additional premium on December 1999, Felipe had paid or of its last reinstatement, the insurer cannot prove that the
for the insurance coverage starting June 22, 1999 policy is void ab initio or is rescindable by reason of the

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fraudulent concealment or misrepresentation of the insured
In the Endorsement, the obscurity is patent. The first sentence is or his agent.

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not clear whether the phrase “effective June 22, 1999” refers to “the
reinstatement of this policy” or to the “changes are made on the In Lalican v. The Insular Life Assurance Company, it was held that
policy.” the reinstatement of the insured’s policy is to be reckoned from the
date when the application was processed and approved by the
Given the obscurity, the construction favorable to the insured will be insurer. There it was held that:
adopted by the courts.
A, To reinstate a policy means to restore the same to
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The policy is deemed reinstated as of June 22, 1999. Thus the premium-paying status after it has been permitted to lapse.
period of contestability has lapsed.
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It must be remembered that an insurance contract is a contract of

adhesion which must be construed liberally in favor of the insured
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and strictly against the insurer.

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 INSURANCE CASE TICKLER AND DIGEST
4. SUN LIFE OF CANADA v. SIBYA et al
Tickler: Incontestability clause; Gun shot; Died within the 2 year
period; “no recurrence”; honest opinion only; kidney ailment;
Facts:
● January 10, 2001, Atty. Jesus Sibya (AJ) applied for life
insurance. In his application, he indicated the following:
“Last 1987, had undergone lithotripsy due to kidney stone
under Dr. Mendoza at National Kidney Institute (NKI),
discharged after 3 days, no recurrence as claimed.”
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● Feb 5, 2001, Sun approved the application and issued the
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policy. The policy indicated the respondents as beneficiaries
and entitles them to a death benefit of 1m if AJ dies on or
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before Feb 5, 2021, or a sum of money if AJ is still living on the
endowment date.
● May 11, 2001, AJ died due to a gunshot wound.
● Ma. Daisy Sibya (MDS) filed a claim with Sun to seek the death
benefits.
●
A,
August 27, 2001, Sun denied on the ground that AJ’s medical
history were not disclosed in his application, and simultaneously
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tendered a check representing the refund of the premiums.
● Sept 17, 2001, Sibyas reiterated their claim.
● Sun filed a complaint for rescission alleging that AJ did not
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disclose in his application his previous medical treatment at NKI
in May and August of 1994 which reveals that AJ was in “renal
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failure” and at high risk medical condition. Had it known such
fact, it would not have issued the policy.
● Sibyas claimed that AJ did not misrepresent in his application.
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That he was in good faith and even authorized Sun to inquire
further into his medical history for verification purposes. That
the complaint is just a ploy to avoid payment of claims.
RTC: Ordered Sun to pay. It violated 241 and 242 in refusing to pay.
CA: Affirmed but absolved Sun from violation of 241 and 242.
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Issue: W/N the action is barred by the incontestability clause?
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Ruling: Yes. After the two-year period lapses, or when the insured
dies within the period, the insurer must make good on the policy,
even though the policy was obtained by fraud, concealment, or
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misrepresentation.
In the Aban Case, the Court held that if the insured dies within the
two-year contestability period, the insurer is bound to make good its
obligation under the policy, regardless of the presence or lack of
concealment or misrepresentation.
In this case, the policy was issued on Feb 5, 2001. Sun has 2 years
from its issuance, to investigate and verify whether the policy was
obtained by fraud, concealment, or misrepresentation.
However, upon the death of AJ after 3 months from the issuance of
the policy, Sun loses its right to rescind the policy. As discussed in
the case of Aban, the death of the insured within the two-year period
will render the right of the insurer to rescind the policy nugatory. As
such, the incontestability period will now set it.
Assuming that the incontestability period has not yet set in, still, Sun
failed to show that AJ committed concealment and
misrepresentation. AJ admitted in his application his medical
treatment for kidney ailment. He even executed an authorization in
favor of Sun to conduct an investigation in reference with his medical
history.
With regard to allegations of misrepresentation, AJ was not a
medical doctor, and his answer “no recurrence” may be construed as
 INSURANCE CASE TICKLER AND DIGEST

an honest opinion. 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.

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The intent to defraud must be ascertained to merit rescission.

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Concealment as a defense to avoid liability is an affirmative defense
and the duty to establish it by satisfactory and convincing evidence
rests upon the provider or insurer. In this case, Sun failed to clearly
and satisfactorily establish its allegation, and is therefore liable to

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pay the proceeds of the insurance.

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 INSURANCE CASE TICKLER AND DIGEST
5. ALPHA INSURANCE AND SURETY v. CASTOR
Tickler: Car insurance; theft by driver; Loss is not included in the
term damage.
Facts:
● Feb 21, 2007, Castor entered into a contract of insurance
(Motor Car Policy [MCP]) with Alpha, involving her Toyota Revo.
● The MCP obligates Alpha to pay Castor 630k in case of loss or
damage to said vehicle during the period covering Feb 26, 2007
to Feb 26, 2008.
● April 16, 2007, Castor instructed her driver, Lanuza, to bring the
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car to a nearby auto-shop for tune up. Lanuza did not return the
car and despite diligent efforts to locate the car, it was futile.
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● Castor promptly reported the incident to the police and notified
Alpha and demanded payment of the insurance proceeds.
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● July 5, 2007, Alpha denied, alleging that under the MCP under
the Exceptions to Section 3, it is not liable for any malicious
damage caused by the Insured, any member of his family or by
“A PERSON IN THE INSURED’S SERVICE.”
● Castor filed a complaint for sum of money with damages.
A,
RTC: Ordered Alpha to pay 466k plus legal interest of 6%.
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CA: Affirmed in toto.
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Issue: W/N the loss of Castor’s car is excluded under the MCP?
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Ruling: No. Under Section 3(b) of the MCP, Alpha obligates itself,
among others, to indemnify the insured against loss of or damage x x
x by theft.
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Under the Exceptions to Section 3, Alpha is not liable to pay, among
others, for any malicious damage x x x by a person in the Insured’s
service.
Alpha argues that the word “damage” under Exceptions to Section 3,
means loss due to injury or harm to person, property or reputation,
and should be construed to cover malicious “loss” as in “theft.”
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Theft perpetrated by the driver of the insured is not an exception to
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the coverage from the MCP, since Section 3 did not qualify as to who
would commit the theft. Thus, even if the theft is committed by the
driver of the insured, there being no categorical declaration of
exception, the same must be covered.
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Contracts of insurance, like other contracts, are to be construed
according to the sense and meaning of the terms which the parties
themselves have used. If such terms are clear and unambiguous,
they must be taken and understood in their plain, ordinary and
popular sense. Accordingly, in interpreting the exclusions in an
insurance contract, the terms used specifying the excluded classes
therein are to be given their meaning as understood in common
speech.
The words “ loss” and “damage” mean different things. “Loss” refers
to the act or fact of losing, or failure to keep in possession. “Damage”
means deterioration or injury to property.
Therefore, Alpha cannot include the loss of the vehicle under the
“Exceptions to Section 3,” since the same only refers to “malicious
damage,” or more specifically, “injury” to the vehicle. It clearly does
not contemplate loss of property.
Lastly, a contract of insurance is a contract of adhesion. When the
terms of the 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.
 INSURANCE CASE TICKLER AND DIGEST

6. ALVAREZ II v. SUN LIFE OF CANADA ● Dec 6, 2005, petitioner sent a letter demanding the payment of
insurance claim. Sun denied.
Tickler: NOTICE (CASE NOT FOUND); Affirmative declarations ● Dec 18, 2006, petitioner filed a complaint for breach of contract.

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does not negate existence of concealment; Death of insured did not
trigger the incontestability clause. RTC: Ordered Sun to pay. No concealment or misrepresentation

Facts:
● Dec 1, 2003, Sun issued a Participating Life Insurance Policy
(PLIP) to petitioner, covering the life of her mother Erlinda (the
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found. Insured’s affirmative declaration in all conditions and
procedures done to her negates the existence of concealment.
CA: Reversed. Insured concealed chest pain, lateral wall ischemia,

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insured), with a face value of 500k payable upon death of and stable angina.
insured.
● Since the insured was suffering from high blood pressure, she Issue: W/N Sun is liable for the insurance claim?

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was classified as high-risk, which required petitioner to pay a
higher premium. Ruling: No. There is concealment. Concealment is a neglect to

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● April 27, 2005, the insured passed away. communicate that which a party knows and ought to communicate.
● April 29, 2005, Sun sent petitioner a letter requiring the

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submission of documents to facilitate her claim under the policy, Section 27. A concealment whether intentional or unintentional
one of which was an authorization of any physician, medical entitles the injured party to rescind a contract of insurance.
practitioner, hospital, other medical or medically-related facility
who has attended to the insured, to give Sun, details on the A party to an insurance contract is obliged to communicate all facts
prior medical history of insured. within his knowledge which are material to the same, to be
A,
● Sept 13, 2005, after discovering several medical conditions
which pre-dated the application for the policy, Sun sent
determined by the probable and reasonable influence of the facts
upon the party to whom the communication is due, in forming his
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petitioner another letter, declaring the policy void and denying estimate of the disadvantages of the proposed contract, or in making
petitioner’s claim. his inquiries.
● Sun discovered that in 2003, the insured sought consultations
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with the following: In this case, prior to the approval of insured’s policy and during the
1. UST Hospital - Found her to be suffering from stable stage of her application, she did not disclose the fact that she
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angina, atherosclerosis, and lateral wall ischemia. consulted with the UST Hospital and AIM which diagnosed her to be
2. AIM Imaging Medical Services - Found her to be suffering from stable angina, atherosclerosis, and lateral wall
suffering from lateral wall ischemia. ischemia. Such fact is material to the contract in view of its effect on
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● Sun explained that had it been informed of the medical history Sun in forming its estimate of whether to deny or approve the
at the time of the application for the policy, it would have issued application and prescribing the amount of premium.
it with a higher rating. Sun stated, however, that they will be
refunding the premiums paid by the petitioner.
 INSURANCE CASE TICKLER AND DIGEST

Given the materiality of UST and AIM’s findings, the insured was
necessarily obliged to disclose them to Sun. She failed to do so.

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All her affirmative declarations, found by the RTC to negate the
existence of concealment, does not relieve her from the obligation to

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disclose the diagnoses of UST and AIM. While she admitted in her
application that she had consulted with a doctor within the past 5
years, she only disclosed her general check-up in Makati Med in
2003 which showed normal results except for a slight increase in her

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cholesterol. If she was able to provide information thereon, there is
no reason why she was unable to disclose her consultations with
UST and AIM, which were all made in the same year of 2003.

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Without any explanation being given by the petitioner, this
concealment entitles Sun to rescind the policy.

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Lastly, Sun is not barred from rescinding the contract on the ground

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of concealment in light of the 2 year incontestability clause in
accordance with Section 48. The insured died on April 27, 2005
white the policy was issued on Dec 1, 2003. Hence, the
incontestability period of 2 years had not yet set in

ADDITIONAL NOTES:
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Section 28. Each party to a contract of insurance must 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
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which the other has not the means of ascertaining.

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Section 31. Materiality is to be determined not by the event, but

solely by the probable and reasonable influence of the facts upon the
party to whom the communication is due, in forming his estimate of
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the disadvantages of the proposed contract, or in making his

inquiries.
 INSURANCE CASE TICKLER AND DIGEST
7. H.H. HOLLERO CONSTRUCTION v. GSIS
Tickler: Prescription; 12 months; Rejection; Final Rejection; Accrual
of Cause of Action.
Facts:
● April 26, 1988, GSIS and HH entered into a Project Agreement
(PA) whereby HH undertook the development of a GSIS
housing project (HP) known as Modesta Village Section B.
● HH obligated itself to insure the HP under a Contractors’ All
Risks (CAR) Insurance with GSIS General Insurance
Department (GSIS-GID).
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● HH secured CAR Policy No. 88/085 (CP85) in the amount of 1m
for the land development, which was later increased to 10m,
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effective from May 2, 1988 to May 2, 1989
● HH likewise secured CAR Policy No. 88/086 (CP86) in the
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amount of 1m for the construction of 20 housing units, which
was later increased to 17.750m to cover the construction of
another 355 new uniters, effective from May 2, 1988 to June 1,
1989.
● GSIS reinsured with Pool of Machinery Insurers (Pool).
A,
● Under both policies, it provided:
a. There must be prior notice of claim for loss, damage
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or liability within 14 days from the occurrence of the
loss or damage;
b. All benefits thereunder shall be forfeited if no action
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is instituted within 12 months after the rejection of
the claim for loss, damage, or liability; and
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c. If the sum insured is found to be less than the
amount required to be insured, the amount
recoverable shall be reduced to such proportion
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before taking into account the deductibles stated in
the schedule (average clause provision).
● During the construction, 3 typhoons hit the PH, namely Typhoon
Biring, Huaning, and Saling, which caused considerable
damage to the HP.
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● HH filed several claims with GSIS on June 30 and August 25
1988, and October 18, 1989.
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● April 26, 1990, GSIS rejected HH’s claims for the damages
brought by Biring and Huaning, finding that no amount is
recoverable pursuant to the average clause provision.
● June 21, 1990, GSIS also rejected the claim for damages by
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Saling on a “no loss” basis because the policies were not
renewed before the onset of said typhoon.
● April 18, 1991, HH reiterated its demand.
● Sept 27, 1991, HH filed a complaint for sum of money and
damages.
● GSIS opposed through a motion to dismiss on the ground that
the cause of action is barred by the 12 month limitation.
● RTC denied the motion to dismiss. GSIS filed a 3rd party
complaint against Pool.
RTC: GSIS is liable.
● The average clause provision cannot limit GSIS’ liability for
being inefficacious and contrary to public policy;
● The damages sustained were due to the peril insured against;
and
● CP86 was deemed renewed when GSIS withheld the amount of
P35,8855 corresponding to the premium payable.
CA: Reversed. Dismissed HH’s complaint for being barred by
prescription (12 month limitation) reckoned from the final rejection on
April 26, 1990 and June 21, 1990.
HH’s Contention: that GSIS’ letters dated April 26 and June 21
1990 are not “final rejections.” According to HH, they were mere
tentative resolutions pending further action on HH’s part to submit
proof in refutation of the reasons for rejection.
 INSURANCE CASE TICKLER AND DIGEST

Issue: W/N HH’s cause of action has prescribed? ADDITIONAL NOTES REGARDING CAUSE OF ACTION:

Ruling: Yes. When does cause of action accrue?

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The right of the insured to the payment of his loss accrues from the
Under Section 10 of the CAR Policies, “x x x if a claim is made and happening of the loss.

rejected and no action or suit is commenced within 12 months after
such rejection x x x, all benefit under this Policy shall be forfeited.”
Thus, the prescriptive period for the insured’s action for indemnity
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HOWEVER, the cause of action in an insurance contract does not
accrue until the insured’s claim is finally rejected by the insurer. This
is because, before such final rejection, there is no real necessity for

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should be reckoned from the “final rejection” of the claim. bringing suit.

The April 26, 1990 letter shows that GSIS denied HH’s indemnity Cause of action requires not only a legal right and a correlated

N
claims since no amount was recoverable under the policies. While obligation in violation of the legal right. The cause of action does not
GSIS gave HH the opportunity to dispute its findings, neither of the accrue until the party obligated refuses, expressly or impliedly, to

VI
parties pursued any further action on the matter. This logically shows comply with its duty.
that they deemed the said letter as a rejection of the claims. The

AR
statement in that letter pertaining to any queries HH may have, The insured’s cause of action or his right to file a claim either in the
should be construed as a form of notice to HH that it had the Insurance Commission or in a court of competent jurisdiction,
opportunity to seek reconsideration of GSIS’ rejection. HH cannot commences from the time of the denial of his claim by the insurer,
construe said letter to be a mere “tentative resolution.” In fact, HH either expressly or impliedly.
admitted in its pleadings that GSIS indeed denied its claim through
the said letter.
A,
G
The June 21, 1990 letter begs the same conclusion. The fact that HH
filed a letter of reconsideration therefrom dated April 18, 1991 shows
that it was also a final rejection of its indemnity claim.
N

“Final rejection” simply means denial by the insurer of the claims of

LO

the insured and not the rejection or denial by the insurer of the
insured’s motion or request for reconsideration.
SA
 INSURANCE CASE TICKLER AND DIGEST

8. ETERNAL GARDENS MEMORIAL PARK v. THE PHILIPPINE 3.) Application for Insurance accomplished and sign by
AMERICAN LIFE INSURANCE COMPANY Chang when he was alive; and
4.) Statement of Account showing the unpaid balance of

L
Tickler: Inaction of insurer on application is considered as an Chuance before his death.
approval. ● November 14, 1984, Eternal transmitted the required

AR
documents.
Facts: ● November 15, 1984, Philamlife received the documents.
● Dec 10, 1980, Philamlife entered into a Creditor Group Life ● After more than a year, Philamlife had not furnished Eternal any
Policy (CGLP) with Eternal. reply. This prompted Eternal to demand the payment of the

C
● Under the policy, clients of Eternal who purchased burial lots claim for 100k on April 25, 1986.
from it on installment would be insured by Philamlife. ● Philamlife denied the claim alleging that there was no
● The amount of insurance coverage depended upon the existing application submitted by Chuang, prior to his death, for

N
balance of the purchased burial lots. approval. Instead an application was submitted only on Nov 15,
● The policy was to be effective for 1 year, renewable yearly. 1984, after his death. Hence Chuance was not covered under

VI
● Eternal was required, under the policy, to submit to Philamlife, a the Policy
list of all new lot purchasers together with a copy of the ● Eternal filed a complaint for sum of money against Philamlife.

AR
application of each purchaser and the amounts of their unpaid
balances. RTC: Ordered Philamlife to pay.
● Dec 29, 1982, Eternal submitted a letter containing a list of
insurable balances of its lot buyers for Oct 1982. One of those CA: Reversed.
in the list as “new business” was John Chuang. His balance
was 100k.
A,
● Aug 2, 1984, Chuang died.
Issue: W/N Philamlife assumed the risk even without approving the
application?
G
● Aug 20, 1984, Eternal sent Philamlife a letter which served as
insurance claim for Chuang. Attached were the following: Ruling: Yes. The vague provision in CGLP must be construed in
1.) Certificate of death; favor of the insured and in favor of the effectivity of the insurance
N

2.) Identification certificate stating that Chuang is a contract. The mere inaction of the insurer on the insurance
naturalized Filipino; application must not work to prejudice the insured; it cannot be
LO

3.) Certificate of claimant; interpreted as a termination of the insurance contract. The

4.) Certificate of attending physician; and termination of the insurance contract by the insurer must be explicit
5.) Assured’s certificate. and unambiguous.
SA

● Nov 12, 1984, Philamlife wrote Eternal a letter, requiring the

latter to submit the following:
1.) Certificate of claimant (with form attached);
2.) Assured’s Certificate (with form attached);
 INSURANCE CASE TICKLER AND DIGEST

The CGLP provides that: ADDITIONAL NOTES:

The insurance of any eligible Lot Purchaser shall be effective to characterize the insurer and the insured as contracting parties on

L
on the date he contracts a loan with the Assured. However, equal footing is inaccurate at best. Insurance contracts are wholly
there shall be no insurance if the application of the Lot prepared by the insurer with vast amounts of experience in the

Purchaser is not approved by the Company.
The abovementioned provision would show ambiguity between its 2
sentences. The first sentence appears to state that the insurance
AR
industry purposefully used to its advantage. More often than not,
insurance contracts are contracts of adhesion containing technical
terms and conditions of the industry, confusing if at all
understandable to laypersons, that are imposed on those who wish

C
coverage already became effective upon contracting a loan with to avail of insurance. As such, insurance contracts are imbued with
Eternal. The second sentence appears to require Philamlife to public interest that must be considered whenever the rights and
approve the insurance contract before it becomes effective. obligations of the insurer and the insured are to be delineated.

N
Hence, in order to protect the interest of insurance applicants,
The seemingly conflicting provisions must be harmonized to mean insurance companies must be obligated to act with haste upon

VI
that upon a party’s purchase of a memorial lot on installment from insurance applications, to either deny or approve the same, or
Eternal, an insurance contract covering the lot purchaser is created otherwise be bound to honor the application as a valid, binding, and

AR
and the same is effective, valid, and binding until terminated by effective insurance contract.
Philamlife by disapproving the insurance application. The second
sentence is in the nature of a resolutory condition which would lead
to the cessation of the insurance contract.

A,
A contract of insurance is a contract of adhesion which must be
construed liberally in favor of the insured and strictly against the
G
insurer in order to safeguard the latter’s interest.

Limitations of liability should be regarded with extreme jealousy and

N

must be construed in such a way as to preclude the insurer from

noncompliance with its obligation.
LO

By reason of the exclusive control of the insurance company over the

terms and phraseology of the insurance contract, ambiguity must be
SA

strictly interpreted against the insurer and liberally in favor of the

insured, especially to avoid forfeiture.
 INSURANCE CASE TICKLER AND DIGEST
9. PHILAMCARE HEALTH SYSTEMS v. COURT OF APPEALS
AND JULITA TRINOS
Tickler: Health Care Agreements are considered insurance
contracts; 3rd persons entitled to indemnity for expenses;
incontestability note applied but the HCA provides 12 and 6 months
to contest the ailments.
Facts:
● Ernani, the deceased husband of Julita, applied for health care
coverage.
● In the standard application form, he answered no to the
N
following question:
Have you or any of your family members ever
VI
consulted or been treated for high blood pressure,
heart trouble, diabetes, cancer, liver disease, asthma
AR
or peptic ulcer?
● The application was approved for a period from March 1, 1988
to March 1, 1989. Ernani was issued a health care agreement
(HCA).
● Under the HCA, Ernani was entitled to hospitalization benefits
A,
and out-patient benefits.
● Upon termination of the agreement, it was extended several
G
times until June 1, 1990. The amount of coverage was
increased to a maximum sum of 75k per disability.
● During the period of coverage, Ernani suffered a heart attack
N
and was confined at Manila Medical Center for one month
beginning March 9, 1990.
LO
● While Ernani was confined, Julita tried to claim the benefits
under the HCA.
● Petitioner denied alleging that the HCA was void due to
SA
concealment regarding Ernani’s medical history. The doctors at
MMC allegedly discovered, during confinement, that he was
hypertensive, diabetic, and asthmatic.
● Julita paid for the 76k hospitalization expenses herself.
● After discharge, Ernani was attended by a physical therapist.
Later, he was admitted at the Chinese General Hospital (CGH).
Due to financial difficulties, Julita took him home again.
L
● April 13, 1990, Ernani suffered a fever and was feeling weak.
Julita brought him back to the CGH where he died on the same
AR
day.
● July 24, 1990, Julita filed an action for damages against the
petitioner and asked for reimbursement of her expenses plus
moral damages.
C
RTC: Ordered petitioner to pay.
CA: Affirmed but deleted the damages.
Petitioners Argument:
● The HCA is not an insurance contract, the incontestability
clause does not apply.
● That the HCA rants “living benefits,” such as medical check-ups
and hospitalization, which a member may enjoy while alive and
during the effectivity of the agreement.
● That only hospitalization benefits are given without any
indemnification, unlike in an insurance.
● Since the HCA only lasts for 1 year, the incontestability clause
does not apply since it requires an effectivity period of at least 2
years.
● That it is not an insurance company and is governed by HMOs
under the authority of DOH.
● That Ernani concealed a material fact in his application.
Issue: W/N the HCA is an insurance contract?
Ruling: Yes. 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.
 INSURANCE CASE TICKLER AND DIGEST
An insurance contract exists where the following elements concur:
1.) The insured has an insurable interest;
2.) The insured is subject to a risk of loss by the happening of
the designated peril;
3.) The insurer assumes the risk;
4.) 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
5.) In consideration of the insurer’s promise, the insured pays a
premium.
Any contingent or unknown event, whether past or future, which may
N
damnify a person having an insurable interest against him, may be
insured against.
VI
Section 10. Every person has an insurable interest in the life and
AR
health:
1.) of himself, of his spouse and of his children;
2.) of any person on whom he depends wholly or in part for
education or support, or in whom he has a pecuniary
interest;
A,
3.) of any person under a legal obligation to him for the payment
of money, respecting property or service, of which death or
G
illness might delay or prevent the performance; and
4.) of any person upon whose life any estate or interest vested
in him depends.
N
In this case, the insurable interest of Ernani in obtaining the HCA
LO
was his own health.
The HCA was in the nature of non-life insurance, which is a contract
SA
of indemnity. Once a 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.
As regards the allegation of concealment by Ernani, the answer
assailed by petitioner was in response to the question relating to the
L
medical history of the applicant. This largely depends on opinion
rather than fact, especially coming Ernani who was not a medical
AR
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.
C
The fraudulent intent on the part of the insured must be established
to warrant rescission of the insurance contract. 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.
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.
In this case, no rescission was made. Besides, the cancellation of
HCA 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;
 INSURANCE CASE TICKLER AND DIGEST

4. Must state the grounds relied upon provided in Section 64 of previously married to another woman. The HCA is in the nature of a
the Insurance Code and upon request of insured, to furnish contract of indemnity. Hence, payment should be made to the party
facts on which cancellation is based. who incurred the expenses.

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

AR
terms of an 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

C
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

N
interpreted against the insurer and liberally in favor of the insured,
especially to avoid forfeiture. This is equally applicable to HCA.

VI
The phraseology used in medical or hospital service contracts, such

AR
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.
A,
Anent the incontestability of the membership of respondent’s
G
husband, we quote with approval the findings of the trial court:

Under the title Claim procedures of expenses, the defendant

N

had 12 months from the date of issuance of the Agreement

within which to contest the membership of the patient if he
LO

had previous ailment of asthma, and 6 months from the

issuance of the agreement if the patient was sick of diabetes
or hypertension. The periods having expired, the defense of
SA

concealment or misrepresentation no longer lie.

Finally, petitioner alleges that respondent was not the legal wife
considering that at the time of their marriage, the deceased was
 INSURANCE CASE TICKLER AND DIGEST
10. SPOUSES CHA and UNITED INSURANCE v. CA and CKS
Tickler: Automatic assignment of policy; Lease; Fire; Merchandise.
Facts:
● Oct. 5, 1988, Sps. Nilo and Stella (Sps), as lessees, entered
into a lease agreement with CKS for 1 year.
● One of the stipulations of the lease contract provides:
“18. x x x. The LESSEE shall not insure against fire the
chattels, merchandise, textiles, goods and effects placed at
any stall or store or space in the leased premises without
N
first obtaining the written consent and approval of the
LESSOR. If the LESSEE obtain(s) the insurance thereof
VI
without the consent of the LESSOR then the policy is
deemed assigned and transferred to the LESSOR for its own
AR
benefit; x x x.”
● Notwithstanding the above stipulation, Sps insured against loss
by fire the merchandise inside the leased premises for 500k
with United, without written consent of CKS.
●
A,
On the day that the lease was to expire, fire broke out inside the
leased premises.
G
● When CKS learned of the insurance procured by Sps, it
demanded from United the proceeds thereof.
● United refused. Hence. CKS filed a complaint against Sps and
N
United.
LO
RTC: Ordered United to pay CKS 335k
CA: affirmed.
SA
Issue: W/N par. 18 under the lease contract is valid?
Ruling: No. Such stipulation is contrary to law and public policy.
Sec. 18 of the Insurance Code provides that “no contract or policy of
insurance on property shall be enforceable except for the benefit of
L
some person having an insurable interest in the property insured.
AR
A fire insurance policy is primarily a contract of indemnity. Insurable
interest in the property insured must exist at the time the insurance
takes effect and at the time the loss occurs. The basis of such
requirement is sound public policy: to prevent a person from taking
C
out an insurance policy on property upon which he has no insurable
interest and collecting the proceeds of said policy in case of loss of
the property. In such a case, the contract would be a mere wager
which is void under Sec. 25 of the Insurance Code.
Sec. 25 provides that “every stipulation in a policy of insurance for
the payment of loss, whether the person insured has or has not any
interest in the property insured, or that the policy shall be received as
proof of such interest, and every policy executed by way of gaming
or wagering, is void.
In this case, CKS has no insurable interest in the goods and
merchandise inside the leased premises.
Sec. 17 provides that “the measure of an insurable interest in
property is the extent to which the insured might be damnified by
loss or injury thereof.
Therefore, CKS cannot be a beneficiary of the fire insurance policy
taken by Sps over their merchandise. The insurable interest over the
merchandise remains with the Sps. The provision on automatic
assignment of the policy to CKS is void for being contrary to law and
public policy.
The liability of Sps to CKS for violating the lease contract is a
separate and distinct issue.
 INSURANCE CASE TICKLER AND DIGEST

11. MALAYAN INSURANCE v. LIN claim settlement, although its real purpose is to allow Lin to
recover her claim which she also sought in the civil case.
Tickler: Forum shopping; civil case for collection; admin case for

L
suspension or revocation; two different reliefs. RTC: Denied the motion to dismiss. Admin case raised a relief
distinct from that sought in the civil case.

AR
Facts:
● January 4, 2010, Lin filed a complaint for sum of money with CA: Affirmed. The issues raised and reliefs prayed for in the civil
damages against Malayan and extinguishment of her loans case were essentially different from those in the admin case.
from RCBC.

C
● Lin alleged the following: Petitioners’ Argument:
➢ that she obtained various loans from RCBC secured by 6 ● Regardless of nomenclature, Lin filed the admin case. She is
warehouses in Bulacan. not a mere complaining witness therein.

N
➢ The 5 warehouses were insured with Malayan against fire ● Identity of parties is enough for res judicata to apply.
for 56m; 1 warehouse was insured for 2m. ● Sharing of the same interest is enough to constitute identity of

VI
➢ The 5 warehouses were gutted by fire. parties;
➢ BFP issued a Fire Clearance Certification (FCC) after ● The subject of both admin and civil case involve the fire

AR
determining that the cause of fire was accidental. insurance claim;
➢ Despite all these, her demand for insurance claim was ● Identity of cause of action which is to compel Malayan to pay.
denied since the forensic investigators of Malayan claimed
that the cause of fire was arson. Lin’s Argument:
➢ That even the Insurance Commission, after reinvestigation, ● An admin case for unfair claim settlement may proceed
A,
recommended Malayan to pay and accord great weight to
the BFP’s findings. Malayan still refused.
simultaneously with and independently from the civil case for
collection of insurance claim and a judgment in one will not
G
● June 17, 2010, Lin filed, before the IC, an admin case against amount to res judicata to the other, and vice versa.
Malayan for unfair claim settlement under 241 in relation to 247
for unjustified refusal to settle her claim; that as consequence, Issue: W/N Lin committed forum shopping when she filed the admin
N

Malayan’s license to operate as a non-life insurance company case?

should be revoked or suspended.
LO

● Aug 17, 2010, Malayan filed a motion to dismiss the Civil Case Ruling: No. Almendras and Go cases apply. A civil case before the
based on forum shopping. That the admin case was instituted to trial court involving recovery of payment of the insured’s insurance
incite IC into ordering Malayan to pay Lin’s insurance claim; that claim plus damages, can proceed simultaneously with an
SA

elements of forum shopping are present because there exists administrative case before the IC.
identity of the parties, interests, and cause of action in the two
cases. That the admin case is merely disguised as an unfair The findings of the trial court will not necessarily foreclose the admin
case before the IC, or vice versa. While the parties are the same,
 INSURANCE CASE TICKLER AND DIGEST

and both actions are predicated on the same set of facts, and will Under PD 1460, it states that among the regulatory duties of the IC is
require identical evidence, nevertheless, the quantum of evidence the authority to issue, or refuse issuance of, a Certificate of Authority
(preponderance vs. substantial), procedure (ROC vs. IC’s own rules), to a person or entity desirous of engaging in insurance business in

L
and reliefs to be adjudged (collection of insurance claims vs. the PH, and to revoke or suspend such Certificate of Authority upon
revocation or suspension of certificate of authority) by these 2 bodies finding of statutory grounds therefor.

AR
are different.
The grounds for revocation or suspension of insurer’s Certificate of
ADDITIONAL NOTES: Authority are set out in Sec 241 and 247

C
The essence of forum shopping is filing of multiple suits involving the Sec 414 provides that “The Insurance Commissioner shall have the
same parties for the same cause of action, simultaneously or duty to see that all laws relating to insurance, insurance companies
successively, for the purpose of obtaining a favorable judgment. It and other insurance matters, mutual benefit associations, and trusts

N
exists where the elements of litis pendentia are present or where a for charitable uses are faithfully executed and to perform the duties
final judgment in one case will amount to res judicata in another. imposed upon him by this Code x x x ”

VI
Litis pendentia, to be a ground for dismissal, the following requisites The adjudicatory authority of the IC is provided in Sec. 416 which

AR
must concur: provides that “The Commissioner shall have the power to adjudicate
a. Identity of the parties; claims and complaints involving any loss, damage or liability for
b. Identity of rights and relief; which an insurer may be answerable under any kind of policy or
c. Res Judicata. contract of insurance x x x” and “ x x x The authority to adjudicate
granted to the Commissioner under this section shall be concurrent

a. FInal judgment;
A,
Res Judicata has the following requisites: with that of the civil courts x x x”
G
b. Rendered by a court having jurisdiction;
c. Judgment on the merits; and
d. Identity of parties, subject matter, and cause of action.
N

It is settled that criminal and civil cases are altogether different from
LO

administrative matters, such that the disposition in the first two will
not inevitably govern the third and vice versa.
SA

In this case, the matters handled by the IC are delineated as either

regulatory or adjudicatory, both of which have distinct characteristics.
 INSURANCE CASE TICKLER AND DIGEST
12. THE INSULAR LIFE ASSURANCE v. HEIRS OF ALVAREZ
Tickler: The Insurance Code dispenses with proof of fraudulent
intent in cases of rescission due to concealment, but not so in cases
of rescission due to false representations. When an abundance of
available documentary evidence can be referenced to demonstrate a
design to defraud, presenting a singular document with an erroneous
entry does not qualify as clear and convincing proof of fraudulent
intent. Neither does belatedly invoking just one other document,
which was not even authored by the alleged miscreant.
Facts:
N
● Alvarez and his wife, Adelina, owned a residential lot covered
by TCT 315023 in Caloocan.
VI
● June 18, 1997, Alvarez applied for and was granted a housing
loan by UB for 648k which was secured by a promissory note,
AR
mortgage on the lot, and a mortgage redemption insurance
taken on the life of Alvarez with UB as beneficiary.
● Alvarez was one of the mortgagors included in the list of
qualified debtors covered by the Group Mortgage Redemption
Insurance (GMRI) that UB had with Insular.
A,
● April 17, 1998, Alvarez died.
● May 1998, UB filed with Insular a death claim under Alvarez’s
G
name pursuant to the GMRI.
● UB was required to submit the following documents:
1. Alvarez’s birth, marriage, and death cert;
N
2. Attending physician’s statement;
3. Claimant’s statement; and
LO
4. Alvarez’s statement of account.
● Insular denied the claim, alleging that Alvarez was ineligible
since he was more than 60 yrs old at the time of his loan’s
SA
approval.
● Because of such denial, the monthly amortizations of the loan
stood unpaid. UB sent the Heirs a demand letter to vacate the
lot within 10 days.
● Oct 4,1999, the lot was foreclosed.
● Feb 14, 2001, the Heirs filed a complaint for declaration of
nullity of contracts against UB and a certain Miranda, who was
L
supposedly benefitted from the loan. This complaint was later
amended into one for specific performance to include a demand
AR
against Insular to fulfill its obligation under the GMRI. The Heirs
denied knowledge of any loan obtained by Alvarez.
● Heirs claimed that after Alvarez died, they found a document
captioned “Letter of Undertaking,” sent by UB to Miranda. In this
C
document, UB bound itself to deliver to Miranda 466k of the
approved 648k housing loan, provided that Miranda would
deliver to it TCT 315023 “free from any liens and/or
encumbrances.”
● UB asserted that the heirs cannot feign ignorance over the loan
and mortgage because of the SPA executed by Adelina in favor
of Alvarez, which authorized the latter to apply for a loan.
RTC: ruled in favor of Alvarez
● No indication of fraudulent intent when he gave UB info about
his age.
● UB initiated the GMRI with Insular, and an ordinary customer
will not know about this unless they are informed by the bank.
● If UB’s personnel were mindful of their duties and if Alvarez
appeared to be disqualified for insurance, they should have
immediately informed him of his disqualification.
● UB had been in possession of materials sufficient to inform itself
of Alvarez’s personal circumstances.
● If insular had doubts on the information that UB provided, it
should have made further inquiry instead of solely relying on the
information readily available to it and immediately refusing to
pay.
CA: Affirmed.
● Insular failed to establish fraudulent misrepresentation.
 INSURANCE CASE TICKLER AND DIGEST
● Insular merely relied on Alvarez’s Health Statement Form (HSF)
where he wrote “1942” as birth year. This form alone was
insufficient to prove his fraudulent intent to misrepresent his
age.
● Aside from the HSF, Alvarez had to fill out an application for
insurance. This application would have supported the
conclusion that he consistently wrote 1942 in all documents he
had to submit to UB. However, records made no reference to
this document.
Defense of Insular:
● As regards the establishment of intent to defraud, it pinpoints
N
concealment, rather than fraudulent misrepresentation.
● Alvarez’s concealment of his age, intentional or not, entitles it to
VI
rescind.
● Proof of fraudulent intent is not necessary.
AR
● It did not rely solely on the HSF but also on Alvarez’s
representations during the background check conducted by UB
where he said he was only 55.
● As an insurance contract is a contract uberrima fides, it has
every right to rely on Alvarez's good faith in dealing with it.
A,
Issue: W/N Insular is entitled to rescind on the ground of
G
concealment?
Ruling: No. Insular erroneously pleads Sec. 27 as the proper anchor
N
of its case.
LO
Fraud is not to be presumed. It is not to be established lightly.
Rather, it must be established by clear and convincing evidence.
Even a preponderance of evidence is not adequate to prove fraud.
SA
The fraudulent intent on the part of the insured must be established
to entitle the insurer to rescind the contract. Misrepresentation as a
defense of the insurer to avoid liability is an affirmative defense and
the duty to establish such defense by satisfactory and convincing
evidence rests upon the insurer.
L
Section 27. A concealment whether intentional or unintentional
entitles the injured party to rescind a contract of insurance.
AR
The law is clear. Proof of fraudulent intent is unnecessary in
concealment. This is because in insurance contracts, concealing
material facts is inherently fraudulent. If a material fact is actually
C
known to the insured, its concealment must of itself necessarily be a
fraud. When one knows a material fact and conceals it, it is difficult to
see how the inference of a fraudulent intent or intentional
concealment can be avoided.
The basis of the rule vitiating the contract in cases of concealment is
that it misleads or deceives the insurer into accepting the risk, or
accepting it at the rate of premium agreed upon. The insurer, relying
upon the belief that the assured will disclose every material fact
within his actual or presumed knowledge, is misled into a belief that
the circumstance withheld does not exist, and he is thereby induced
to estimate the risk upon a false basis.
Concealment is a neglect to communicate that which a party knows
and ought to communicate.
In this case, Alvarez did not withhold information or neglect to state
his age. He made an actual declaration and assertion about it. What
this case involves is an allegedly false representation.
Sec. 44 provides that “a representation is to be deemed false when
the facts fail to correspond with its assertions or stipulations.”
At no point does the chapter of representation replicate Sec 27’s
language negating the distinction between intentional and
unintentional concealment.
 INSURANCE CASE TICKLER AND DIGEST
Sec. 45 provides that “if a representation is false in a material point,
whether affirmative or promissory, the injured party is entitled to
rescind the contract from the time when the representation becomes
false.
Not being similarly qualified as rescission under 27, rescission under
45 remains subject to the basic precept of fraud having to be proven
by clear and convincing evidence.
Concealment applies only with respect to material facts. That is,
those facts which by their nature would clearly, unequivocally, and
N
logically be known by the insured as necessary for the insurer to
calculate the proper risks.
VI
Between the insured and the insurer, it is true that the latter may
AR
have more resources to evaluate risks. However, even with their
tremendous resources, a material fact concealed cannot simply be
considered by the insurance company. The insurance company may
have huge resources, but the law does not require it to be
omniscient.
A,
On the other hand, when the insured makes a representation, it is
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incumbent on them to assure themselves that a representation
on a material fact is not false; and if it is false, that it is not a
fraudulent misrepresentation of a material fact. This returns the
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burden to insurance companies, which, in general, have more
resources than the insured to check the veracity of the insured’s
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beliefs as to a statement of fact.
As to what qualifies as clear and convincing proof, it is more than
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mere preponderance, but not to the extent of such certainty as is
required beyond reasonable doubt.
As to the evidence presented by Insular, A single piece of evidence
hardly qualifies as clear and convincing. Its contents could just as
easily have been an isolated mistake.
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Alvarez must have accomplished and submitted many other
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documents when he applied for the housing loan and executed
supporting instruments like the promissory note, real estate
mortgage, and GMRI. A design to defraud would have demanded his
consistency. He needed to maintain appearances across all
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documents. Otherwise, he would doom his own ruse.
He needed to have been consistent, not only before Insular, but even
before UB. Even as it was only Insular’s approval that was at stake
with the GMRI, Alvarez must have realized that as it was an
accessory agreement to his housing loan with UB. Insular was well in
a position to verify information, whether through simple cross
referencing or through concerted queries with UB.
Despite these circumstances, the best that Insular could come up
was a single document.
The most basic document that Alvarez accomplished in relation to
Insular must have been an insurance application form. Strangely,
Insular failed to adduce even this document — a piece of evidence
that was not only commonsensical, but also one which has always
been in its possession and disposal.
Furthermore, the reliance of Insular to the background check report
is problematic. It was not prepared by Alvarez himself. Rather, it was
accomplished by a UB employee following the conduct of credit
investigation.
 INSURANCE CASE TICKLER AND DIGEST

13. BPI and FGU Insurance v. YOLANDA LAINGO ● Feb 19, 2004, FGU denied, stating that Yolanda should have
filed the claim within 3 calendar months from the death of
Tickler: BPI is an agent of its partner, FGU; Notice to BPI is notice to Rheozel, as required under paragraph 15 of the insurance

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FGU. contract which states:

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Facts: 15. Written notice of claim shall be given to and
● July 20, 1999, Rheozel Laingo, son of Yolanda, opened a filed at FGU Insurance Corporation within three
“Platinum 2 in 1 Savings and Insurance (P21)” account with BPI calendar months of death or disability.
in Davao.

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● P21 is a savings account where depositors are automatically ● Feb 20, 2004, Yolanda filed a complaint for specific
covered by an insurance policy against disability or death by performance against BPI and FGU.
FGU.

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● BPI issued a passbook to Rheozel for the savings account. RTC: In favor of BPI and FGU. Prescription reckons from time of
● FGU Issued a coverage certificate to Rheozel with Yolanda as death, not from the knowledge of the beneficiary.

VI
beneficiary.
● Sept 25, 2000, Rheozel died due to a car accident. Since she CA: Reversed. Yolanda could not be expected to do something

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came from an affluent family, the Daily Mirror headlined the under an obligation which she did not know existed. She was not a
story in its newspaper the next day. party to the contract, hence, could not be bound by the 3 month rule.
● Sept 27, 2000, Yolanda instructed the family’s secretary, Alice,
to go to BPI to inquire about the savings account of Rheozel. Issue: W/N Yolanda, the beneficiary, may be bound by the 3 month
Yolanda wanted to use the money for er burial and funeral rule for filing a written notice of claim upon the death of the insured?
expenses.
A,
● Alice went to BPI and talked to Jaime, its branch manager. Due Ruling: No.
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to Yolanda’s credit standing and relationship with BPI, the latter
allowed to withdraw 995k from the account of Rheozel. BPI offered a deposit savings account with life and disability
● A certain Laura, an employee of BPI, went to the wake to verify insurance coverage to its customers called the Platinum 2-in-1
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some information from Alice and brought document for Yolanda Savings and Insurance account. This was a marketing strategy
to sign for the withdrawal of the 995k promoted by BPI in order to entice customers to invest their money
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● Jan 21, 2003, Rheozel’s sister, Rhea, while arranging Rheozel’s with the added benefit of an insurance policy. Rheozel was one of
personal things at their residence, found the insurance those who availed of this account, which not only included banking
coverage certificate issued by FGU. Immediately, she told convenience but also the promise of compensation for loss or injury,
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Yolanda. to secure his family’s future.

● Sept 11 and Nov 7, 2003, Yolanda sent to letters to BPI and
FGU requesting them to process her claim as beneficiary of the As the main proponent of the 2-in-1 deposit account, BPI tied up with
policy. its affiliate, FGU, as its partner. Any customer interested to open a
 INSURANCE CASE TICKLER AND DIGEST
deposit account under this 2-in-1 product, will automatically be given
insurance coverage. Thus, BPI acted as agent of FGU Insurance
with respect to the insurance feature of its own marketed product.
Under the law, an agent is one who binds himself to render some
service or to do something in representation of another.
The question of whether an agency has been created is ordinarily a
question which may be established in the same way as any other
fact, either by direct or circumstantial evidence. The question is
ultimately one of intention. Agency may even be implied from the
words and conduct of the parties and the circumstances of the
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particular case.
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For an agency to arise, it is not necessary that the principal
personally encounter the third person with whom the agent interacts.
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The law in fact contemplates impersonal dealings where the principal
need not personally know or meet the third person with whom the
agent transacts: precisely, the purpose of agency is to extend the
personality of the principal through the facility of the agent.
A,
In this case, since the Platinum 2-in-1 Savings and Insurance
account was BPI’s commercial product, offering the insurance
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coverage for free for every deposit account opened, Rheozel directly
communicated with BPI, the agent of FGU Insurance. BPI not only
facilitated the processing of the deposit account and the collection of
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necessary documents but also the necessary endorsement for the
prompt approval of the insurance coverage without any other action
LO
on Rheozel’s part. Rheozel did not interact with FGU directly and
every transaction was coursed through BPI.
SA
BPI, as agent of FGU, had the primary responsibility to ensure that
the 2-in-1 account be reasonably carried out with full disclosure to
the parties concerned, particularly the beneficiaries. Thus, it was
incumbent upon BPI to give proper notice of the existence of the
insurance coverage and the stipulation in the insurance contract for
filing a claim to Laingo, as Rheozel’s beneficiary, upon the latter’s
death.
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BPI had the obligation to carry out the agency by informing the
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beneficiary, who appeared before BPI to withdraw funds of the
insured who was BPI’s depositor, not only of the existence of the
insurance contract but also the accompanying terms and conditions
of the insurance policy in order for the beneficiary to be able to
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properly and timely claim the benefit.
Upon Rheozel’s death, which was properly communicated to BPI by
his mother, BPI, in turn, should have fulfilled its duty, as agent of
FGU, of advising Yolanda that there was an added benefit of
insurance coverage in Rheozel’s savings account. An insurance
company has the duty to communicate with the beneficiary upon
receipt of notice of the death of the insured. This notification is how a
good father of a family should have acted within the scope of its
business dealings with its clients. BPI is expected not only to provide
utmost customer satisfaction in terms of its own products and
services but also to give assurance that its business concerns with
its partner entities are implemented accordingly.
Since BPI is the agent of FGU, then such notice of death to BPI is
considered as notice to FGU as well. FGU cannot now justify the
denial of a beneficiary’s insurance claim for being filed out of time
when notice of death had been communicated to its agent within a
few days after the death of the depositor-insured. In short, there was
timely notice of Rheozel’s death given to FGU within three months
from Rheozel’s death as required by the insurance company.