History of Insurance code

American occupation
Marcos copied Insurance act of California and New York
Amended again to codify insurance laws
SC recognizes that Insurance code has foreign origin

Prudential Guarantee & Assurance Inc. v. Trans-Asia Shipping Lines, Inc

Facts: Trans asia insured its vessel and suffered damage. Accident
happened while undergoing repairs. By way of compromise they entered
into another agreement treated as not as insurance contract -- “loan and
trust receipt”

Transasia wanted to claim remainder of benefits of the policy. Prudential

was denying the claim.
Issue: WON loan and trust receipt would be an advance payment on the
policy
Held: The real transaction is insurance in nature

Constantino v. Asia Life Inc.,

Constantino availed of the insurance premium, after payment of only one,
no other payment was made. Premium was not paid because it was close
due to the war
Issue: are they entitled to receive premium?
Held:Premium was insufficiently paid. Contract not suspended but
abrogated due to war. Payment must be returned since abrogated and not
forfeited.

Doing an Insurance Business (Principle of Subrogation)

White Gold Marine Services Inc. Vs Pioneer Insurance and Surety
Corporation

G.R. No. 154514. July 28, 2005

Facts: White Gold Marine Services, Inc. (White Gold) procured a protection
and indemnity coverage for its vessels from The Steamship Mutual
Underwriting Association (Bermuda) Limited (Steamship Mutual) through
Pioneer Insurance and Surety Corporation (Pioneer). Subsequently, White
Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued
receipts evidencing payments for the coverage. When White Gold failed to
fully pay its accounts, Steamship Mutual refused to renew the
coverage.Steamship Mutual thereafter filed a case against White Gold for
collection of sum of money to recover the latter’s unpaid balance. White
Gold on the other hand, filed a complaint before the Insurance
Commission claiming that Steamship Mutual violated Sections 186[4] and
187[5] of the Insurance Code, for not having a license while Pioneer
violated Sections 299 300 and 301 in relation to Sections 302 and 303,
thereof, obtain another license as insurance agent and/or a broker for
Steamship Mutual because Steamship Mutual.

The Insurance Commission dismissed the complaint. It said that there was
no need for Steamship Mutual to secure a license because it was not
engaged in the insurance business. It explained that Steamship Mutual
was a Protection and Indemnity Club (P & I Club). Likewise, Pioneer need not
obtain another license as insurance agent and/or a broker for Steamship
Mutual because Steamship Mutual was not engaged in the insurance
business. Moreover, Pioneer was already licensed, hence, a separate
license solely as agent/broker of Steamship Mutual was already
superfluous.

Issues: Whether or not the contract entered into by the parties is an

insurance contract.

Whether or not Pioneer is required to obtain a separate license as an

insurance agent.

Held: Yes. The test to determine if a contract is an insurance contract or

not, 1. depends on the nature of the promise, 2. the act required to be
performed, and the 3. exact nature of the agreement in the light of the
occurrence, contingency, or circumstances under which the performance
becomes requisite. It is not by what it is called.
Basically, an insurance contract is a contract of indemnity. In it, one
undertakes for a consideration to indemnify another against loss, damage
or liability arising from an unknown or contingent event.

In particular, a marine insurance undertakes to indemnify the assured

against marine losses, such as the losses incident to a marine adventure.
Section 99 of the Insurance Code enumerates the coverage of marine
insurance.

Relatedly, a mutual insurance company is a cooperative enterprise where

the members are both the insurer and insured. In it, the members all
contribute, by a system of premiums or assessments, to the creation of a
fund from which all losses and liabilities are paid, and where the profits are
divided among themselves, in proportion to their interest. Additionally,
mutual insurance associations, or clubs, provide three types of coverage,
namely, protection and indemnity, war risks, and defense costs.

A P & I Club is a form of insurance against third party liability, where the
third party is anyone other than the P & I Club and the members. By
definition then, Steamship Mutual as a P & I Club is a mutual insurance
association engaged in the marine insurance business.

Since a contract of insurance involves public interest, regulation by the

State is necessary. Thus, no insurer or insurance company is allowed to
engage in the insurance business without a license or a certificate of
authority from the Insurance Commission.

Yes. Pioneer is the resident agent of Steamship Mutual as evidenced by the

certificate of registration[22] issued by the Insurance Commission. It has
been licensed to do or transact insurance business by virtue of the
certificate of authority issued by the same agency. However, a Certification
from the Commission states that Pioneer does not have a separate license
to be an agent/broker of Steamship Mutual.
Although Pioneer is already licensed as an insurance company, it needs a
separate license to act as insurance agent for Steamship Mutual. Section
299 of the Insurance Code clearly states:

No person shall act as an insurance agent or as an insurance broker in

the solicitation or procurement of applications for insurance, or receive
for services in obtaining insurance, any commission or other
compensation from any insurance company doing business in the
Philippines or any agent thereof, without first procuring a license so to act
from the Commissioner, which must be renewed annually on the first day of
January, or within six months thereafter.

Public interest in the Insurance Business

Republic of the Philippines vs Del Motors Inc.
G.R. No. 156956 October 9, 2006

Facts: Vilfran Liner lost in a case against Del Monte Motors. They were
made to pay 11 million pesos for service contracts with Del Monte, and
such was sourced from the counterbond posted by Vilfran. CISCO issued
the counterbond. CISCO opposed but was rebuffed. The RTC released a
motion for execution commanding the sheriff to levy the amount on the
property of CISCO. To completely satisfy the amount, the Insurance
Commissioner was also commanded to withdraw the security deposit filed
by CISCO with the Commission according to Sec 203 of the Insurance
Code.

Insurance Commissioner Malinis was ordered by the RTC to withdraw the

security bond of CISCO for the payment of the insurance indemnity won by
Del Monte Motor against Vilfran Liner, the insured.

iNSURANCE COMMISSIONER Malinis didn’t obey the order, so the

respondent moved to cite him in contempt of Court. The RTC ruled against
Malinis because he didn’t have legal basis.
Issue: Whether or not the security deposit held by the Insurance
Commissioner pursuant to Section 203 of the Insurance Code may be
levied or garnished in favor of only one insured.

Held: No. Section 203 of the Insurance Code provides as follows:

Sec. 203. Every domestic insurance company shall, to the extent of an

amount equal in value to twenty-five per centum of the minimum paid-up
capital required under section one hundred eighty-eight, invest its funds
only in securities, satisfactory to the Commissioner, consisting of bonds or
other evidences of debt of the Government of the Philippines or its
political subdivisions or instrumentalities, or of government-owned or
controlled corporations and entities, including the Central Bank of the
Philippines: Provided, That such investments shall at all times be
maintained free from any lien or encumbrance; and Provided, further, That
such securities shall be deposited with and held by the Commissioner for
the faithful performance by the depositing insurer of all its obligations
under its insurance contracts. The provisions of section one hundred
ninety-two shall, so far as practicable, apply to the securities deposited
under this section.

Except as otherwise provided in this Code, no judgment creditor or other

claimant shall have the right to levy upon any of the securities of the
insurer held on deposit pursuant to the requirement of the Commissioner.

Our Insurance Code is patterned after that of California. Thus, the ruling
of the states Supreme Court on a similar concept as that of the security
deposit is instructive. Engwicht v. Pacific States Life Assurance Co. held
that the money required to be deposited by a mutual assessment
insurance company with the state treasurer was a trust fund to be ratably
distributed amongst all the claimants entitled to share in it. Such a
distribution cannot be had except in an action in the nature of a creditors
bill, upon the hearing of which, and with all the parties interested in the
fund before it, the court may make equitable distribution of the fund, and
appoint a receiver to carry that distribution into effect.
Basic is the statutory construction rule that provisions of a statute should
be construed in accordance with the purpose for which it was enacted.
That is, the securities are held as a contingency fund to answer for the
claims against the insurance company by all its policy holders and their
beneficiaries. This step is taken in the event that the company becomes
insolvent or otherwise unable to satisfy the claims against it. Thus, a single
claimant may not lay stake on the securities to the exclusion of all others.
The other parties may have their own claims against the insurance
company under other insurance contracts it has entered into.

The Insurance Code has vested the Office of the Insurance Commission
with both regulatory and adjudicatory authority over insurance matters.
The general regulatory authority of the insurance commissioner is
described in Section 414 of the Code.

Pursuant to these regulatory powers, the commissioner is authorized to (1)

issue (or to refuse to issue) certificates of authority to persons or entities
desiring to engage in insurance business in the Philippines; (2) revoke or
suspend these certificates of authority upon finding grounds for the
revocation or suspension; (3) impose upon insurance companies, their
directors and/or officers and/or agents appropriate penalties — fines,
suspension or removal from office — for failing to comply with the Code or
with any of the commissioners orders, instructions, regulations or rulings,
or for otherwise conducting business in an unsafe or unsound manner.

As the officer vested with custody of the security deposit, the insurance
commissioner is in the best position to determine if and when it may be
released without prejudicing the rights of other policy holders. Before
allowing the withdrawal or the release of the deposit, the commissioner
must be satisfied that the conditions contemplated by the law are met and
all policy holders protected.
Insurance versus Health Maintenance Organizations (HMOs)

Philippine Health Care Providers, Inc. v. Commissioner of Internal

Revenue, G.R. No. 167330, September 18, 2009

FACTS:

Petitioner Philippine Health Care Providers, Inc. is a domestic

corporation engaged in providing the medical services
enumerated below to individuals who enter into health care
agreements with it:

On January 27, 2000, respondent Commissioner of Internal Revenue

(CIR) sent petitioner a formal demand letter and the corresponding
assessment notices demanding the payment of deficiency taxes,
including surcharges and interest, for the taxable years 1996 and
1997 in the total amount of P224,702,641.18.

The deficiency [documentary stamp tax (DST)] assessment was

imposed on petitioner’s health care agreement with the members
of its health care program pursuant to Section 185 of the 1997 Tax
Code

Petitioner protested the assessment in a letter dated February 23,

2000. As respondent did not act on the protest, petitioner filed a
petition for review in the Court of Tax Appeals (CTA) seeking the
cancellation of the deficiency VAT and DST assessments.

CTA’s decision: Cancelled the DST assessment. Ordered the

payment of VAT deficiency.

CIR appealed the decision to the CA contending that petitioner’s

health care agreement was a contract of insurance subject to DST
under Section 185 of the 1997 Tax Code.
CA’s decision: The health care agreement was in the nature of a
non-life insurance contract subject to DST.

SC’s decision on Petition for Review: Denied on the ground that

citing Blue Cross Healthcare, Inc. v. Olivares and Philamcare Health
Systems, Inc. v. CA. It ruled that petitioner’s contention that it is a
health maintenance organization (HMO) and not an insurance
company is irrelevant because contracts between companies like
petitioner and the beneficiaries under their plans are treated as
insurance contracts. Moreover, DST is not a tax on the business
transacted but an excise on the privilege, opportunity or facility
offered at exchanges for the transaction of the business.

Petitioner filed a motion for reconsideration and supplemental

motion for reconsideration.

ISSUES:

1. Whether or not petitioner as an HMO is engaged in an insurance

business.

RULING:

1. No. Health Maintenance Organizations are not engaged in the

insurance business. Under RA 7875 (or “The National Health
Insurance Act of 1995”), an HMO is an entity that provides, offers or
arranges for coverage of designated health services needed by
plan members for a fixed prepaid premium. To determine whether
an HMO is an insurance business or not, one test – principal object
and purpose test – may be applied, that is to determine whether
the assumption of risk and indemnification of loss (which are
elements of an insurance business) are the principal object and
purpose of the organization or whether they are merely incidental
to its business. If these are the principal objectives, the business is
that of insurance. But if they are merely incidental and service is
the principal purpose, then the business is not insurance. HMO’s
principal object and purpose is service rather than indemnity.
Additionally, petitioner is not supervised by the Insurance
Commission but by the Department of Health.

Philippine health care providers, inc., vs.CIR, g.r. No. 167330, june 12,
2008

SAME FACTS

Contrary to petitioner's claim, its health care agreement is not a

contract for the provision of medical services. Petitioner does not
actually provide medical or hospital services but merely arranges
for the same17 and pays for them up to the stipulated maximum
amount of coverage. It is also incorrect to say that the health care
agreement is not based on loss or damage because, under the
said agreement, petitioner assumes the liability and indemnifies its
member for hospital, medical and related expenses (such as
professional fees of physicians). The term "loss or damage" is broad
enough to cover the monetary expense or liability a member will
incur in case of illness or injury.

Under the health care agreement, the rendition of hospital,

medical and professional services to the member in case of
sickness, injury or emergency or his availment of so-called
"out-patient services" (including physical examination, x-ray and
laboratory tests, medical consultations, vaccine administration
and family planning counseling) is the contingent event which
gives rise to liability on the part of the member. In case of exposure
of the member to liability, he would be entitled to indemnification
by petitioner.

Furthermore, the fact that petitioner must relieve its member from
liability by paying for expenses arising from the stipulated
contingencies belies its claim that its services are prepaid. The
 expenses to be incurred by each member cannot be predicted
beforehand, if they can be predicted at all. Petitioner assumes the
risk of paying for the costs of the services even if they are
significantly and substantially more than what the member has
"prepaid." Petitioner does not bear the costs alone but distributes
or spreads them out among a large group of persons bearing a
similar risk, that is, among all the other members of the health care
program. This is insurance.

Fortune Medicare, Inc. v. Amorin, G.R. No. 195872, March 12, 2014

David Robert U. Amorin was a cardholder/member of Fortune Medicare,

Inc., a corporation engaged in providing health maintenance services to
its members. The terms of Amorin’s medical coverage were provided in a
Corporate Health Program Contract.

While on vacation in Honolulu, Hawaii, Amorin underwent an emergency

surgery, specifically appendectomy, at the St. Francis Medical Center,
causing him to incur professional and hospitalization expenses of
US$7,242.35 and US$1,777.79, respectively. He attempted to recover from
Fortune Care the full amount thereof upon his return to Manila, but the
company merely approved a reimbursement of P12,151.36, an amount that
was based on the average cost of appendectomy, net of medicare
deduction, if the procedure were performed in an accredited hospital in
Metro Manila.Amorin received under protest the approved amount, but
asked for its adjustment to cover the total amount of professional fees
which he had paid, and eighty percent (80%) of the approved standard
charges based on “American standard”, considering that the emergency
procedure occurred in the U.S.A.

To support his claim, Amorin cited Section 3, Article V on Benefits and

Coverages of the Health Care Contract, part of it states:
“Whether as an in-patient or out-patient, FortuneCare shall reimburse the
total hospitalization cost including the professional fee (based on the total
approved charges) to a member who receives emergency care in a
non-accredited hospital. The above coverage applies only to Emergency
confinement within Philippine Territory. However, if the emergency
confinement occurs in a foreign territory, Fortune Care will be obligated to
reimburse or pay eighty (80%) percent of the approved standard charges
which shall cover the hospitalization costs and professional fees.”

ISSUE:

Whether or not Fortune Care is liable to pay the total amount of

professional fees which Amorin had paid, and eighty percent (80%) of the
approved standard charges based on “American standard”

RULING:

Yes, Fortune Care is liable to the total amount of professional fees which
Amorin had paid, and eighty percent (80%) of the approved standard
charges based on “American standard”.

The Supreme Court emphasized that for purposes of determining the

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

To aid in the interpretation of health care agreements, the Court laid down
the following guidelines in Philamcare Health Systems v. CA:

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.
In this case, the Court agrees with the CA that as may be gleaned from the
Health Care Contract, the parties thereto contemplated the possibility of
emergency care in a foreign country. As the contract recognized Fortune
Care’s liability for emergency treatments even in foreign territories, it
expressly limited its liability only insofar as the percentage of
hospitalization and professional fees that must be paid or reimbursed was
concerned, pegged at a mere 80% of the approved standard charges.

The word “standard” as used in the cited stipulation was vague and
ambiguous, as it could be susceptible of different meanings. Settled is the
rule that ambiguities in a contract are interpreted against the party that
caused the ambiguity.
What may be insured - • Sec. 3 – 5 of the Insurance Code

"Section 3. Any contingent or unknown event, whether past or future, which

may damnify a person having an insurable interest, or create a liability
against him, may be insured against, subject to the provisions of this chapter.

"The consent of the spouse is not necessary for the validity of an insurance
policy taken out by a married person on his or her life or that of his or her
children.

"All rights, title and interest in the policy of insurance taken out by an original
owner on the life or health of the person insured shall automatically vest in
the latter upon the death of the original owner, unless otherwise provided for
in the policy.

"Section 5. All kinds of insurance are subject to the provisions of this chapter
so far as the provisions can apply.

a. Contingent or Unknown Event

Art. 1174 of the Civil Code

Except in cases expressly specified by the law, or when it is otherwise declared

by stipulation, or when the nature of the obligation requires the assumption
of risk, no person shall be responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable

b. Past or Future Events

Philamcare Health Systems Inc. v. Court of Appeals, G.R. No. 125678, March 18,
2002

Facts: Ernani Trinos applied for a health care coverage with Philam. He
answered no to a question asking if he or his family members were treated to
heart trouble, asthma, diabetes, etc.

The application was approved for 1 year. He was also given hospitalization
benefits and out-patient benefits. After the period expired, he was given an
expanded coverage for Php 75,000. During the period, he suffered from heart
attack and was confined at MMC. The wife tried to claim the benefits but the
petitioner denied it saying that he concealed his medical history by answering
no to the aforementioned question. She had to pay for the hospital bills
amounting to 76,000. Her husband subsequently passed away. She filed a case
in the trial court for the collection of the amount plus damages. She was
awarded 76,000 for the bills and 40,000 for damages. The CA affirmed but
deleted awards for damages. Hence, this appeal.

Issue: WON a health care agreement is not an insurance contract; hence the
“incontestability clause” under the Insurance Code does not apply.

Held: No. Petition dismissed.

Ratio: In the case at bar, the insurable interest of respondent’s husband in

obtaining the health care agreement was his own health. The health care
agreement was in the nature of non-life insurance, which is primarily a
contract of indemnity.9 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.

Petitioner argues that respondent’s husband concealed a material fact in his

application. It appears that in the application for health coverage, petitioners
required respondent’s husband to sign an express authorization for any
person, organization or entity that has any record or knowledge of his health
to furnish any and all information relative to any hospitalization, consultation,
treatment or any other medical advice or examination.

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
c. Fortuitous Event Not a Defense - The nature of the obligation in an
insurance contract requires the assumption of risk

Art. 1174 of the Civil Code

Except in cases expressly specified by the law, or when it is otherwise declared

by stipulation, or when the nature of the obligation requires the assumption
of risk, no person shall be responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable

d. Gambling

"Section 4. The preceding section does not authorize an insurance for or

against the drawing of any lottery, or for or against any chance or ticket in a
lottery drawing a prize.
Parties to the Contract - Sec. 6-9 of the Insurance Code

Section 6. Every corporation, partnership, or association, duly authorized to

transact insurance business as elsewhere provided in this Code, may be an
insurer.

"Section 7. Anyone except a public enemy may be insured.

"Section 8. Unless the policy otherwise 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.

"Section 9. If an insurer assents to the transfer of an insurance from a

mortgagor to a mortgagee, and, at the time of his assent, imposes further
obligations on the assignee, making a new contract with him, the acts of the
mortgagor cannot affect the rights of said assignee.

Control Test on Corporations - Filipinas Compaña De Seguros vs. Christern,

Huenefeld And Co., Inc., G.R.No. L-2294, May 25, 1951

FACTS: Christern, Huenefeld and Company, a German company, obtained a

fire insurance policy from Filipinas Compañia for the merchandise
contained in a building located in Binondo, Manila in the sum of P100,000.
Filipinas Compañia is an American controlled company. The building and
the insured merchandise were burned during the Japanese occupation.
Christern filed its claim amounting to P92,650.00 but Filipinas Compañia
refused to pay alleging that Christern is a corporation whose majority
stockholders are Germans and that during the Japanese occupation,
America declared war against Germany hence the insurance policy ceased
to be effective because the insured has become an enemy. Filipinas
Compañia was eventually ordered to pay Christern as ordered by the
Japanese government.

ISSUE: WON THE VALIDITY OF INSURANCE CONTRACT CEASED UPON THE

DECLARATION OF WAR.

HELD: Yes. The nationality of a private corporation is determined by the

character or citizenship of its controlling stockholders.

There is no question that majority of the stockholders of Christern were

German subjects. This being so, Christern became an enemy corporation
upon the outbreak of the war between the United States and Germany. The
Philippine Insurance Law (Act No. 2427, as amended,) in Section 8, provides
that “anyone except a public enemy may be insured.” It stands to reason that
an insurance policy ceases to be allowable as soon as an insured becomes a
public enemy.

As the Philippine Insurance Law (Act No. 2427, as amended), in its section 8,
provides that “anyone except a public enemy may be insured,” an insurance
policy ceases to be allowable as soon as an insured becomes a public
enemy.

The respondent having become an enemy corporation on December 10, 1941,

the insurance policy issued in its favor on October 1, 1941, by the petitioner
had ceased to be valid and enforceable, and since the insured goods were
burned after December 10, 1941, and during the war, the respondent was not
entitled to any indemnity under said policy from the petitioner. However,
elementary rules of justice (in the absence of specific provision in the
Insurance Law) require that the premium paid by the respondent for the
period covered by its policy from December 11, 1941, should be returned by
the petitioner

Proper party to file action - Philippine Health Care Providers, Inc. v.

Commissioner of Internal Revenue, G.R. No. 167330, September 18, 2009
Types of Mortgage Clauses

Taurus Taxi co., inc. vs. The Capital Insurance & Surety Co., INC. G.R.
No. L-23491 July 31, 1968

Facts:
Monje, according to the complaint, was employed a taxi driver by
the Plaintiff Taurus Taxi... the taxi he was... driving collided with a
Transport taxicab... resulting in his death.
At the time of the accident, there was subsisting and in force
Commercial Vehicle
Comprehensive Policy No. 101,737 * * * issued by the defend­ant to the
Taurus Taxi Co., Inc. The amount for which each passenger,
including the driver, is insured is P5, 000. 00.
plaintiff Taurus Taxi Co., Inc. made... representations "for the
payment of the insurance of the insurance benefit corresponding
to her and her children since it was issued in its name, benefit
corresponding to her and her children, * * but despite demands * * *
the defendant refused and... still refuses to pay them.
Defendant-appellant Capital Insurance & Surety Co., Inc. alleged as
the first error of the lower court its failure to hold "that in view of the
fact that the deceased Alfredo Monje was entitled to indemnity...
under another insurance policy issued by Ed. A. Keller Co., Ltd., the
heirs of the said deceased are not entitled to indemnity under the
insurance policy issued by appellant for the reason that the latter
policy contains a stipulation... that 'the company will indemnify any
authorized driver provided that such authorized driver is not
entitled to indemnity under any other policy.'
Monje, as authorized driver and employees of plaintiff Taurus Taxi
Co., was entitled to indemnity under another insurance policy, then
subsisting, which was Policy No. 50PH-1605 issued by Ed. A. Keller
Co., Ltd. To plaintiff Taurus Taxi Co., Inc. As a matter of fact,... the
indemnity to which the deceased Alfredo Monje was entitled under
the said Policy No. 50PH-1605 was paid by Ed A. Keller Co. Ltd. to the
heirs of Alfredo Monje
Issues:
whether or not a provision in the insurance contract that
defendant-appellant will indemnify any authorized driver pro­vided
that [he] is not entitled to any indemnity under any other policy, it
being shown that the deceased was paid his... workman's
compensation from another insurance policy, should defeat such a
right to recover under the insurance contract subject of this suit.
Ruling:
The, above defense, based on a fact which was not disputed, was
raised and rightfully rejected by the lower court...
defendant-appellant would seek to escape liability on the plea that
the workman's compensation to which the deceased... driver was
rightfully entitled was settled by the employer through a policy
issued by another insurance firm. What was paid therefore was not
indemnity but compensation.
what is prohibited by the insurance policy in question is that any
"authorized driver of plaintiff Taurus Taxi Co., Inc." should not be
"entitled to any indemnity under any policy", it would appear
indisputable that the obligation of defendant-appellant under the
policy... had not in any wise been extinguished.
Work­men's Compensation Act explicitly requires that an employee
suffering any injury... or death arising out of or in the course of
employment be compensated. The fulfillment of such statutory
obligation cannot be the basis for evading the clear, explicit and
mandatory terms of a policy.
Assuming however that there is a doubt concerning the liability of
defendant-appellant insurance firm, nonetheless, it should be
resolved against its pretense and in favor of the insured.
courts are to regard "with extreme jealousy" limitations of liability
found in insurance policies and to construe them in such a way as
to preclude the insurer from non-compliance with his obligation.
a contract of insurance couched in language chosen, by the
insurer is, if open to the construction contended for by the insured,
to be construed most strongly, or strictly, against the insurer and...
liberally in favor of the contention of the insured, which means in
accordance with the rule contra proferentem.
Eternal Gardens Memorial Park Corp. v. The Philippine American
Life Insurance Company, G.R. NO. 166245, April 9, 2008

FACTS: On December 10, 1980, respondent Philippine American Life

Insurance Company (Philamlife) entered into an agreement
denominated as Creditor Group Life Policy No. P-1920 with
petitioner Eternal Gardens Memorial Park Corporation (Eternal).
Under the policy, the clients of Eternal who purchased burial lots
from it on installment basis would be insured by Philamlife. The
amount of insurance coverage depended upon the existing
balance of the purchased burial lots. The policy was to be effective
for a period of one year, renewable on a yearly basis.

The relevant provisions of the policy are:

ELIGIBILITY.

Any Lot Purchaser of the Assured who is at least 18 but not more
than 65 years of age, is indebted to the Assured for the unpaid
balance of his loan with the Assured, and is accepted for Life
Insurance coverage by the Company on its effective date is eligible
for insurance under the Policy.

EVIDENCE OF INSURABILITY.

No medical examination shall be required for amounts of insurance

up to P50,000.00. However, a declaration of good health shall be
required for all Lot Purchasers as part of the application. The
Company reserves the right to require further evidence of
insurability satisfactory to the Company in respect of the following:

1. Any amount of insurance in excess of P50,000.00.

2. Any lot purchaser who is more than 55 years of age.

LIFE INSURANCE BENEFIT.

The Life Insurance coverage of any Lot Purchaser at any time shall
be the amount of the unpaid balance of his loan (including arrears
up to but not exceeding 2 months) as reported by the Assured to
the Company or the sum of P100,000.00, whichever is smaller. Such
benefit shall be paid to the Assured if the Lot Purchaser dies while
insured under the Policy.

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the

date he contracts a loan with the Assured. However, there shall be
no insurance if the application of the Lot Purchaser is not
approved by the Company.

Eternal was required under the policy to submit to Philamlife a list

of all new lot purchasers, together with a copy of the application of
each purchaser, and the amounts of the respective unpaid
balances of all insured lot purchasers. In relation to the instant
petition, Eternal complied by submitting a letter dated December
29, 1982, containing a list of insurable balances of its lot buyers for
October 1982. One of those included in the list as “new business”
was a certain John Chuang. His balance of payments was
PhP100,000. On August 2, 1984, Chuang died. Eternal sent a letter
dated August 20, 1984 to Philamlife, which served as an insurance
claim for Chuang’s death. Attached to the claim were the following
documents: (1) Chuang’s Certificate of Death; (2) Identification
Certificate stating that Chuang is a naturalized Filipino Citizen; (3)
Certificate of Claimant; (4) Certificate of Attending Physician; and (5)
Assured’s Certificate.

In reply, Philamlife wrote Eternal a letter on November 12, 1984,

requiring Eternal to submit the following documents relative to its
insurance claim for Chuang’s death: (1) Certificate of Claimant (with
form attached); (2) Assured’s Certificate (with form attached); (3)
Application for Insurance accomplished and signed by the insured,
Chuang, while still living; and (4) Statement of Account showing the
unpaid balance of Chuang before his death. Eternal transmitted
the required documents through a letter dated November 14, 1984,
which was received by Philamlife on November 15, 1984. After more
than a year, Philamlife had not furnished Eternal with any reply to
the latter’s insurance claim. This prompted Eternal to demand from
Philamlife the payment of the claim for PhP100,000 on April 25, 1986.

ISSUE: WON THE INSURER IS LIABLE.

HELD: YES. As earlier stated, Philamlife and Eternal entered into an

agreement denominated as Creditor Group Life Policy No. P-1920
dated December 10, 1980. In the policy, it is provided that:

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the

date he contracts a loan with the Assured. However, there shall be
no insurance if the application of the Lot Purchaser is not
approved by the Company. IcDESA

An examination of the above provision would show ambiguity

between its two sentences. The first sentence appears to state that
the insurance coverage of the clients of Eternal already became
effective upon contracting a loan with Eternal while the second
sentence appears to require Philamlife to approve the insurance
contract before the same can become effective.

It must be remembered that an insurance contract is a contract of

adhesion which must be construed liberally in favor of the insured
and strictly against the insurer in order to safeguard the latter’s
interest. Thus, in Malayan Insurance Corporation v. Court of
Appeals, this Court held that:

Indemnity and liability insurance policies are construed in

accordance with the general rule of resolving any ambiguity therein
in favor of the insured, where the contract or policy is prepared by
the insurer. A contract of insurance, being a contract of adhesion,
par excellence, any ambiguity therein should be resolved against
the insurer; in other words, it should be construed liberally in favor
of the insured and strictly against the insurer. Limitations of liability
should be regarded with extreme jealousy and must be construed
in such a way as to preclude the insurer from noncompliance with
its obligations. (Emphasis supplied.) TECcHA

In the more recent case of Philamcare Health Systems, Inc. v. Court

of Appeals, we reiterated the above ruling, stating that:

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.

Clearly, the vague contractual provision, in Creditor Group Life

Policy No. P-1920 dated December 10, 1980, must be construed in
favor of the insured and in favor of the effectivity of the insurance
contract.

On the other hand, the seemingly conflicting provisions must be

harmonized to mean that upon a party’s purchase of a memorial
lot on installment from Eternal, an insurance contract covering the
lot purchaser is created and the same is effective, valid, and
binding until terminated by Philamlife by disapproving the
insurance application. The second sentence of Creditor Group Life
Policy No. P-1920 on the Effective Date of Benefit is in the nature of a
resolutory condition which would lead to the cessation of the
insurance contract. Moreover, the mere inaction of the insurer on
the insurance application must not work to prejudice the insured; it
cannot be interpreted as a termination of the insurance contract.
 The termination of the insurance contract by the insurer must be
explicit and unambiguous.

As a final note, to characterize the insurer and the insured as

contracting parties on equal footing is inaccurate at best.
Insurance contracts are wholly prepared by the insurer with vast
amounts of experience in the 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 to avail of insurance. As such,
insurance contracts are imbued with public interest that must be
considered whenever the rights and obligations of the insurer and
the insured are to be delineated. Hence, in order to protect the
interest of insurance applicants, insurance companies must be
obligated to act with haste upon insurance applications, to either
deny or approve the same, or otherwise be bound to honor the
application as a valid, binding, and effective insurance contract.

Great Pacific Life Assurance v. Court of Appeals, G.R. No. 113899, October 13,
1999
FACTS:
■ A contract of group life insurance was executed between Great
Pacific Life Assurance Corporation Grepalife) and Development
Bank of the Philippines (DBP)
■ Grepalife agreed to insure the lives of eligible housing loan
mortgagors of DBP
■ November 11, 1983: Dr. Wilfredo Leuterio, a physician and a housing
debtor of DBP applied for membership in the group life insurance
plan
■ Dr. Leuterio answered questions concerning his health
condition as follows:

“7. Have you ever had, or consulted, a physician for a heart

condition, high blood pressure, cancer, diabetes, lung,
kidney or stomach disorder or any other physical
impairment?
 Answer: No. If so give details ___________.

8. Are you now, to the best of your knowledge, in good

health?

Answer: [ x ] Yes [ ] No.”[4]

■ November 15, 1983: Grepalife issued Certificate No. B-18558, as

insurance coverage of Dr. Leuterio, to the extent of his DBP
mortgage indebtedness amounting to P86,200
■ August 6, 1984: Dr. Leuterio died due to “massive cerebral
hemorrhage.”
■ DBP submitted a death claim to Grepalife
■ Grepalife denied the claim alleging that Dr. Leuterio
was not physically healthy when he applied
■ RTC: Favored Medarda V. Leuterio (widow) and held Grepalife
(insurer) liable to pay DBP (creditor of the insured Dr. Wilfredo
Leuterio)
■ CA sustained
ISSUE:
1. W/N DBP has insurable interest as creditor - YES
2. W/N Grepalife should be held liable - YES

HELD:

1. 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. YES
■ medical findings were not conclusive because Dr. Mejia did not
conduct an autopsy
■ widow who was not even sure if the medicines taken by Dr.
Leuterio were for hypertension
■ Grepalife failed to establish that there was concealment made by
the insured, hence, it cannot refuse payment of the claim
■ 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
■ The policy states that upon receipt of due proof of the Debtor’s
death during the terms of this insurance, a death benefit in the
amount of P86,200.00 shall be paid. In the event of the debtor’s
death before his indebtedness with the creditor shall have been
fully paid, an amount to pay the outstanding indebtedness shall
first be paid to the Creditor and the balance of the Sum Assured,
if there is any shall then be paid to the beneficiary/ies designated
by the debtor.
■ DBP foreclosed in 1995 their residential lot, in satisfaction of
mortgagor’s outstanding loan
■ insurance proceeds shall inure to the benefit of the heirs of
the deceased person or his beneficiaries
■ Equity dictates that DBP should not unjustly enrich itself at
the expense of another (Nemo cum alterius detrimenio
protest). Hence, it cannot collect the insurance proceeds,
after it already foreclosed on the mortgage
HEIRS OF LORETO C. MARAMAG, represented by surviving spouse
VICENTA PANGILINAN MARAMAG, petitioners,
v.
EVA VERNA DE GUZMAN MARAMAG, ODESSA DE GUZMAN MARAMAG,
KARL BRIAN DE GUZMAN MARAMAG, TRISHA ANGELIE MARAMAG, THE
INSULAR LIFE ASSURANCE COMPANY, LTD., and GREAT PACIFIC LIFE
ASSURANCE CORPORATION, respondents.

Facts: The petitioners were the legitimate children of Loreto Maramag who
was represented by their mother, herein the legitimate wife of the
deceased, Vicenta Maramag. Respondent Eva de Guzman Maramag was a
concubine of Loreto and a suspect in the killing of the latter, while the
other respondents, Odessa, Karl Brian and Trisha Angellie were the
illegitimate children of Loreto with Eva.
Vicenta alleged that Eva is disqualified from claiming any proceeds from
the insurance of Loreto for killing the latter, and that the children of Eva
and Loreto are only entitled one-half of the legitime and that it should be
reduced.
The Insular Life Assurance Company, Ltd. admitted that Loreto
misrepresented Eva as his legitimate wife and Odessa, Karl Brian, and
Trisha Angelie as his legitimate children, and that they filed their claims for
the insurance proceeds of the insurance policies. They also ascertained
that Eva was not the legal wife of Loreto, it disqualified her as a beneficiary
and divided the proceeds among Odessa, Karl Brian, and Trisha Angelie,
as the remaining designated beneficiaries.
Grepalife alleged that Eva was not designated as an insurance policy
beneficiary; that the claims filed by Odessa, Karl Brian, and Trisha Angelie
were denied because Loreto was ineligible for insurance due to a
misrepresentation in his application form.

Issue: Are the members of the legitimate family entitled to the proceeds of
the insurance for the concubine?[

Ruling: In this case, it is clear from the petition filed before the trial court
that, although petitioners are the legitimate heirs of Loreto, they were not
named as beneficiaries in the insurance policies issued by Insular and
Grepalife. The basis of petitioners' claim is that
Eva, being a concubine of Loreto and a suspect in his murder, is
disqualified from being designated as beneficiary of the insurance
policies, and that Eva's children with Loreto, being illegitimate children, are
entitled to a lesser share of the proceeds of the policies.
They also argued that pursuant to Section 12 of the Insurance Code,[19]
Eva's share in the proceeds should be forfeited in their favor, the former
having brought about the death of Loreto. Thus, they prayed that the
share of Eva and portions of the shares... of Loreto's illegitimate children
should be awarded to them, being the legitimate heirs of Loreto entitled to
their respective legitimes.
It is evident from the face of the complaint that petitioners are not entitled
to a favorable judgment in light of Article 2011 of the Civil Code which
expressly provides that insurance contracts shall be governed by special
laws, i.e., the Insurance Code. Section
53 of the Insurance Code states
SECTION 53. The insurance proceeds shall be applied exclusively to the
proper interest of the person in whose name or for whose benefit it is
made unless otherwise specified in the policy.
Pursuant thereto, it is obvious that the only persons entitled to claim the
insurance proceeds are either the insured, if still alive; or the beneficiary, if
the insured is already deceased, upon the maturation of the policy.[20]
The exception to this... rule is a situation where the insurance contract was
intended to benefit third persons who are not parties to the same in the
form of favorable stipulations or indemnity. In such a case, third parties
may directly sue and claim from the insurer.[21]
Petitioners are third parties to the insurance contracts with Insular and
Grepalife and, thus, are not entitled to the proceeds thereof. Accordingly,
respondents Insular and Grepalife have no legal obligation to turn over
the insurance proceeds to petitioners. The... revocation of Eva as a
beneficiary in one policy and her disqualification as such in another are of
no moment considering that the designation of the illegitimate children as
beneficiaries in Loreto's insurance policies remains valid. Because no legal
proscription exists... in naming as beneficiaries the children of illicit
relationships by the insured,[22] the shares of Eva in the insurance
proceeds, whether forfeited by the court in view of the prohibition on
donations under Article 739 of the Civil Code or by the... insurers
themselves for reasons based on the insurance contracts, must be
awarded to the said illegitimate children, the designated beneficiaries, to
the exclusion of petitioners. It is only in cases where the insured has not
designated any beneficiary,[23] or when the designated beneficiary is
disqualified by law to receive the proceeds,[24] that the insurance policy
proceeds shall redound to the benefit of the estate of the insured.

· Lalican vs The Insular Life Assurance Company Limited

G.R. No. 183526 August 25, 2009

Facts: Violeta is the widow of the deceased Eulogio C. Lalican

(Eulogio). During his lifetime, Eulogio applied for an insurance
policy with Insular Life. On 24 April 1997, Insular Life, through
Josephine Malaluan (Malaluan), its agent in Gapan City,
issued in favor of Eulogio Policy No. 9011992, which contained
a 20-Year Endowment Variable Income Package Flexi Plan
worth P500,000.00, with two riders valued at P 500,000.00 each.
Thus, the value of the policy amounted to P1,500,000.00. Violeta
was named as the primary beneficiary. P Under the terms of
Policy No. 9011992, Eulogio was to pay the premiums on a
quarterly basis in the amount of 8,062.00, payable every 24
April, 24 July, 24 October and 24 January of each year, until
the end of the 20-year period of the policy. According to the
Policy Contract, there was a grace period of 31 days for the
payment of each premium subsequent to the first. If any
premium was not paid on or before the due date, the policy
would be in default, and if the premium remained unpaid until
the end of the grace period, the policy would automatically
lapse and become void. Eulogio paid the premiums due on
24 July 1997 and 24 October 1997. However, he failed to pay the
premium due on 24 January 1998, even after the lapse of the
grace period of 31 days. Policy No. 9011992, therefore, lapsed
and became void. Eulogio submitted to the Cabanatuan
District Office of Insular Life, through Malaluan, on 26 May
1998, an Application for Reinstatement of Policy No. 9011992,
together with the amount of P 8,062.00 to pay for the premium
due on 24 January 1998. In a letter dated 17 July 1998, Insular
Life notified Eulogio that his Application for Reinstatement
could not be fully processed because, although he already
deposited P8,062.00 as payment for the 24 January 1998
 premium, he left unpaid the overdue interest thereon
amounting to P322.48. Thus, Insular Life instructed Eulogio to
pay the amount of interest and to file another application for
reinstatement. Eulogio was likewise advised by Malaluan to
pay the premiums that subsequently became due on 24 April
1998 and 24 July 1998, plus interest. On 17 September 1998,
Eulogio went to Malaluans house and submitted a second
Application for Reinstatement of Policy No. 9011992, including
the amount of P17,500.00, representing payments for the
overdue interest on the premium for 24 January 1998, and the
premiums which became due on 24 April 1998 and 24 July
1998. As Malaluan was away on a business errand, her
husband received Eulogios second Application for
Reinstatement and issued a receipt for the amount Eulogio
deposited. A while later, on the same day, 17 September 1998,
Eulogio died of cardio-respiratory arrest secondary to
electrocution.

Issue: Whether or not Eulogio had an existing insurable interest

in his own life until the day of his death in order to have the
insurance policy validly reinstated.

Ruling: An insurable interest is one of the most basic and

essential requirements in an insurance contract. In general,
an insurable interest is that interest which a person is
deemed to have in the subject matter insured, where he has a
relation or connection with or concern in it, such that the
person will derive pecuniary benefit or advantage from the
preservation of the subject matter insured and will suffer
pecuniary loss or damage from its destruction, termination,
or injury by the happening of the event insured against.35 The
existence of an insurable interest gives a person the legal
right to insure the subject matter of the policy of insurance.36
Section 10 of the Insurance Code indeed provides that every
person has an insurable interest in his own life.37 Section 19 of
the same code also states that an interest in the life or health
 of a person insured must exist when the insurance takes
effect, but need not exist thereafter or when the loss occurs.38

Upon more extensive study of the Petition, it becomes evident that

the matter of insurable interest is entirely irrelevant in the case at
bar. It is actually beyond question that while Eulogio was still alive,
he had an insurable interest in his own life, which he did insure
under Policy No. 9011992. The real point of contention herein is
whether Eulogio was able to reinstate the lapsed insurance policy
on his life before his death on 17 September 1998.

GAISANO CAGAYAN, INC. V. INSURANCE COMPANY OF NORTH AMERICA,

G.R. NO. 147839, [JUNE 8, 2006], 523 PHIL 677-694

FACTS: Intercapitol Marketing Corporation (IMC) is the maker of Wrangler

Blue Jeans. Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of
products bearing trademarks owned by Levi Strauss & Co.. IMC and LSPI
separately obtained from respondent fire insurance policies with book
debt endorsements. The insurance policies provide for coverage on “book
debts in connection with ready-made clothing materials which have been
sold or delivered to various customers and dealers of the Insured
anywhere in the Philippines.” The policies defined book debts as the
“unpaid account still appearing in the Book of Account of the Insured 45
days after the time of the loss covered under this Policy.” The policies also
provide for the following conditions:

1. Warranted that the Company shall not be liable for any unpaid account
in respect of the merchandise sold and delivered by the Insured which are
outstanding at the date of loss for a period in excess of six (6) months from
the date of the covering invoice or actual delivery of the merchandise
whichever shall first occur.
2. Warranted that the Insured shall submit to the Company within twelve (12)
days after the close of every calendar month all amount shown in their
books of accounts as unpaid and thus become receivable item from their
customers and dealers. . . .

Petitioner is a customer and dealer of the products of IMC and LSPI. On

February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City,
owned by petitioner, was consumed by fire. Included in the items lost or
destroyed in the fire were stocks of ready-made clothing materials sold
and delivered by IMC and LSPI.

On February 4, 1992, respondent filed a complaint for damages against

petitioner. It alleges that IMC and LSPI filed with respondent their claims
under their respective fire insurance policies with book debt
endorsements; that as of February 25, 1991, the unpaid accounts of
petitioner on the sale and delivery of ready-made clothing materials with
IMC was P2,119,205.00 while with LSPI it was P535,613.00; that respondent paid
the claims of IMC and LSPI and, by virtue thereof, respondent was
subrogated to their rights against petitioner; that respondent made
several demands for payment upon petitioner but these went unheeded.

In its Answer with Counter Claim dated July 4, 1995, petitioner contends
that it could not be held liable because the property covered by the
insurance policies were destroyed due to fortuities event or force majeure;
that respondent’s right of subrogation has no basis inasmuch as there
was no breach of contract committed by it since the loss was due to fire
which it could not prevent or foresee; that IMC and LSPI never
communicated to it that they insured their properties; that it never
consented to paying the claim of the insured.

ISSUE: WON IMC AND LSPI HAVE INSURABLE INTEREST AND WON THE
PETITIONER IS LIABLE TO THE INSURER.
HELD: YES. It is well-settled that when the words of a contract are plain
and readily understood, there is no room for construction. In this case, the
questioned insurance policies provide coverage for “book debts in
connection with ready-made clothing materials which have been sold or
delivered to various customers and dealers of the Insured anywhere in the
Philippines.” ; and defined book debts as the “unpaid account still
appearing in the Book of Account of the Insured 45 days after the time of
the loss covered under this Policy.” Nowhere is it provided in the
questioned insurance policies that the subject of the insurance is the
goods sold and delivered to the customers and dealers of the insured.

Indeed, when the terms of the agreement are clear and explicit that they
do not justify an attempt to read into it any alleged intention of the
parties, the terms are to be understood literally just as they appear on the
face of the contract. Thus, what were insured against were the accounts of
IMC and LSPI with petitioner which remained unpaid 45 days after the loss
through fire, and not the loss or destruction of the goods delivered.

IMC and LSPI did not lose complete interest over the goods. They have an
insurable interest until full payment of the value of the delivered goods.
Unlike the civil law concept of res perit domino, where ownership is the
basis for consideration of who bears the risk of loss, in property insurance,
one’s interest is not determined by concept of title, but whether insured
has substantial economic interest in the property.

Section 13 of our Insurance Code defines insurable interest as “every

interest in property, whether real or personal, or any relation thereto, or
liability in respect thereof, of such nature that a contemplated peril might
directly damnify the insured.” Parenthetically, under Section 14 of the same
Code, an insurable interest in property may consist in: (a) an existing
interest; (b) an inchoate interest founded on existing interest; or (c) an
expectancy, coupled with an existing interest in that out of which the
expectancy arises.
Therefore, an insurable interest in property does not necessarily imply a
property interest in, or a lien upon, or possession of, the subject matter of
the insurance, and neither the title nor a beneficial interest is requisite to
the existence of such an interest, it is sufficient that the insured is so
situated with reference to the property that he would be liable to loss
should it be injured or destroyed by the peril against which it is insured.
Anyone has an insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction. Indeed, a vendor or
seller retains an insurable interest in the property sold so long as he has
any interest therein, in other words, so long as he would suffer by its
destruction, as where he has a vendor’s lien. In this case, the insurable
interest of IMC and LSPI pertain to the unpaid accounts appearing in their
Books of Account 45 days after the time of the loss covered by the policies.

Moreover, it must be stressed that the insurance in this case is not for loss
of goods by fire but for petitioner's accounts with IMC and LSPI that
remained unpaid 45 days after the fire. Accordingly, petitioner's obligation
is for the payment of money. As correctly stated by the CA, where the
obligation consists in the payment of money, the failure of the debtor to
make the payment even by reason of a fortuitous event shall not relieve
him of his liability.33 The rationale for this is that the rule that an obligor
should be held exempt from liability when the loss occurs thru a fortuitous
event only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in
case of fortuitous event. It does not apply when the obligation is pecuniary
in nature

Under Article 1263 of the Civil Code, “[i]n an obligation to deliver a generic
thing, the loss or destruction of anything of the same kind does not
extinguish the obligation.” If the obligation is generic in the sense that the
object thereof is designated merely by its class or genus without any
particular designation or physical segregation from all others of the same
class, the loss or destruction of anything of the same kind even without the
debtor’s fault and before he has incurred in delay will not have the effect
of extinguishing the obligation. This rule is based on the principle that the
genus of a thing can never perish. Genus nunquan perit. An obligation to
pay money is generic; therefore, it is not excused by fortuitous loss of any
specific property of the debtor.
Thus, whether fire is a fortuitous event or petitioner was negligent are
matters immaterial to this case. What is relevant here is whether it has
been established that petitioner has outstanding accounts with IMC and
LSPI.

With respect to IMC, the respondent has adequately established its claim.
Exhibits “C” to “C-22” show that petitioner has an outstanding account with
IMC in the amount of P2,119,205.00. Exhibit “E” is the check voucher
evidencing payment to IMC. Exhibit “F” is the subrogation receipt executed
by IMC in favor of respondent upon receipt of the insurance proceeds. All
these documents have been properly identified, presented and marked as
exhibits in court. The subrogation receipt, by itself, is sufficient to establish
not only the relationship of respondent as insurer and IMC as the insured,
but also the amount paid to settle the insurance claim. The right of
subrogation accrues simply upon payment by the insurance company of
the insurance claim. Respondent’s action against petitioner is squarely
sanctioned by Article 2207 of the Civil Code which provides:

Art. 2207. If the plaintiff’s property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of
the wrong or breach of contract complained of, the insurance company
shall be subrogated to the rights of the insured against the wrongdoer or
the person who has violated the contract. . . .

Petitioner failed to refute respondent’s evidence.

Insular v Ebrado G.R. No. L-44059 October 28,
1977
Facts:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a rider for
Accidental Death. He designated Carponia T. Ebrado as the revocable beneficiary in his policy. He
referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made liable to pay
the coverage in the total amount of P11,745.73, representing the face value of the policy in the
amount of P5,882.00 plus the additional benefits for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the designated beneficiary
therein, although she admited that she and the insured were merely living as husband and wife
without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts
that she is the one entitled to the insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who should be given the
proceeds. The court declared Carponia as disqualified.

Issue: WON a common-law wife named as beneficiary in the life insurance policy of a legally married
man can claim the proceeds in case of death of the latter?

Held: No. Petition

Ratio:
Section 50 of the Insurance Act which provides that "the insurance shall be applied exclusively to the
proper interest of the person in whose name it is made"
The word "interest" highly suggests that the provision refers only to the "insured" and not to the
beneficiary, since a contract of insurance is personal in character. Otherwise, the prohibitory laws
against illicit relationships especially on property and descent will be rendered nugatory, as the same
could easily be circumvented by modes of insurance.
When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is
governed by the general rules of the civil law regulating contracts. And under Article 2012 of the
same Code, any person who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a fife insurance policy by the person who cannot make a donation to him.
Common-law spouses are barred from receiving donations from each other.
Article 739 provides that void donations are those made between persons who were guilty of
adultery or concubinage at the time of donation.
There is every reason to hold that the bar in donations between legitimate spouses and those
between illegitimate ones should be enforced in life insurance policies since the same are based on
similar consideration. So long as marriage remains the threshold of family laws, reason and morality
dictate that the impediments imposed upon married couple should likewise be imposed upon
extra-marital relationship.
A conviction for adultery or concubinage isn’t required exacted before the disabilities mentioned in
Article 739 may effectuate. The article says that in the case referred to in No. 1, the action for
declaration of nullity may be brought by the spouse of the donor or donee; and the guilty of the
donee may be proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition
precedent. The law plainly states that the guilt of the party may be proved “in the same acting for
declaration of nullity of donation.” And, it would be sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was
also living in with his common-law wife with whom he has two children.

ONG LIM SING VS FEB LEASING (G.R. NO. 168115 JUNE 8,

2007)
Ong Lim Sing Jr. FEB Leasing & Finance Corporation

G.R. No. 168115 June 8, 2007

Facts: On March 9, 1995, FEB Leasing and Finance Corporation (FEB) entered into a lease of
equipment and motor vehicles with JVL Food Products (JVL). On the same date, Vicente Ong Lim
Sing, Jr. (Lim) executed an Individual Guaranty Agreement with FEB to guarantee the prompt and
faithful performance of the terms and conditions of the aforesaid lease agreement. Corresponding
Lease Schedules with Delivery and Acceptance Certificates over the equipment and motor vehicles
formed part of the agreement. Under the contract, JVL was obliged to pay FEB an aggregate gross
monthly rental of One Hundred Seventy Thousand Four Hundred Ninety-Four Pesos (P 170,494.00).
JVL defaulted in the payment of the monthly rentals. As of July 31, 2000, the amount in arrears,
including penalty charges and insurance premiums, amounted to Three Million Four Hundred
Fourteen Thousand Four Hundred Sixty Eight and 75/100 Pesos (P3,414,468.75). On August 23, 2000,
FEB sent a letter to JVL demanding payment of the said amount. However, JVL failed to pay.
Issue: Whether or not JVL as the lessee have an insurable interest over the leased items.

Held: Yes. The stipulation in Section 14 of the lease contract, that the equipment shall be insured at
the cost and expense of the lessee against loss, damage, or destruction from fire, theft, accident, or
other insurable risk for the full term of the lease, is a binding and valid stipulation. Petitioner, as a
lessee, has an insurable interest in the equipment and motor vehicles leased. Section 17 of the
Insurance Code provides that the measure of an insurable interest in property is the extent to which
the insured might be damnified by loss or injury thereof. It cannot be denied that JVL will be directly
damnified in case of loss, damage, or destruction of any of the properties leased.

It has also been held that the test of insurable interest in property is whether the assured has a right,
title or interest therein that he will be benefited by its preservation and continued existence or
suffer a direct pecuniary loss from its destruction or injury by the peril insured against.

"Section 1. This Decree shall be known as ‘The Insurance Code’.

"Section 2. Whenever used in this Code, the following terms shall have the respective meanings
hereinafter set forth or indicated, unless the context otherwise requires:

"(a) A contract of insurance is an agreement whereby one undertakes for a consideration to

indemnify another against loss, damage or liability arising from an unknown or contingent event.

"A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this
Code, only if made by a surety who or which, as such, is doing an insurance business as hereinafter
provided.

"(b) The term doing an insurance business or transacting an insurance business, within the meaning
of this Code, shall include:

"(1) Making or proposing to make, as insurer, any insurance contract;

"(2) Making or proposing to make, as surety, any contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or activity of the surety;

"(3) Doing any kind of business, including a reinsurance business, specifically recognized as
constituting the doing of an insurance business within the meaning of this Code;

"(4) Doing or proposing to do any business in substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this Code.

"In the application of the provisions of this Code, the fact that no profit is derived from the making of
insurance contracts, agreements or transactions or that no separate or direct consideration is
received therefor, shall not be deemed conclusive to show that the making thereof does not
constitute the doing or transacting of an insurance business.
"(c) As used in this Code, the term Commissioner means the Insurance Commissioner.

"CHAPTER I

"THE CONTRACT OF INSURANCE

"TITLE 1

"WHAT MAY BE INSURED

"Section 3. Any contingent or unknown event, whether past or future, which may damnify a person
having an insurable interest, or create a liability against him, may be insured against, subject to the
provisions of this chapter.

"The consent of the spouse is not necessary for the validity of an insurance policy taken out by a
married person on his or her life or that of his or her children.

"All rights, title and interest in the policy of insurance taken out by an original owner on the life or
health of the person insured shall automatically vest in the latter upon the death of the original
owner, unless otherwise provided for in the policy.

"Section 4. The preceding section does not authorize an insurance for or against the drawing of any
lottery, or for or against any chance or ticket in a lottery drawing a prize.

"Section 5. All kinds of insurance are subject to the provisions of this chapter so far as the provisions
can apply.

"TITLE 2

"PARTIES TO THE CONTRACT

"Section 6. Every corporation, partnership, or association, duly authorized to transact insurance

business as elsewhere provided in this Code, may be an insurer.

"Section 7. Anyone except a public enemy may be insured.

"Section 8. Unless the policy otherwise 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.

"Section 9. If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee,

and, at the time of his assent, imposes further obligations on the assignee, making a new contract
with him, the acts of the mortgagor cannot affect the rights of said assignee.

"TITLE 3
 "INSURABLE INTEREST

"Section 10. 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, or respecting property
or services, 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.

"Section 11. The insured shall have the right to change the beneficiary he designated in the policy,
unless he has expressly waived this right in said policy. Notwithstanding the foregoing, in the event
the insured does not change the beneficiary during his lifetime, the designation shall be deemed
irrevocable.

"Section 12. The interest of a beneficiary in a life insurance policy shall be forfeited when the
beneficiary is the principal, accomplice, or accessory in willfully bringing about the death of the
insured. In such a case, the share forfeited shall pass on to the other beneficiaries, unless otherwise
disqualified. In the absence of other beneficiaries, the proceeds shall be paid in accordance with the
policy contract. If the policy contract is silent, the proceeds shall be paid to the estate of the insured.

"Section 13. Every interest in property, whether real or personal, or any relation thereto, or liability in
respect thereof, of such nature that a contemplated peril might directly damnify the insured, is an
insurable interest.

"Section 14. An insurable interest in property may consist in:

"(a) An existing interest;

"(b) An inchoate interest founded on an existing interest; or

"(c) An expectancy, coupled with an existing interest in that out of which the expectancy arises.

"Section 15. A carrier or depository of any kind has an insurable interest in a thing held by him as
such, to the extent of his liability but not to exceed the value thereof.

"Section 16. A mere contingent or expectant interest in any thing, not founded on an actual right to
the thing, nor upon any valid contract for it, is not insurable.

"Section 17. The measure of an insurable interest in property is the extent to which the insured might
be damnified by loss or injury thereof.

"Section 18. No contract or policy of insurance on property shall be enforceable except for the
benefit of some person having an insurable interest in the property insured.
"Section 19. An interest in property insured must exist when the insurance takes effect, and when
the loss occurs, but need not exist in the meantime; and interest in the life or health of a person
insured must exist when the insurance takes effect, but need not exist thereafter or when the loss
occurs.

"Section 20. Except in the cases specified in the next four sections, and in the cases of life, accident,
and health insurance, a change of interest in any part of a thing insured unaccompanied by a
corresponding change of interest in the insurance, suspends the insurance to an equivalent extent,
until the interest in the thing and the interest in the insurance are vested in the same person.

"Section 21. A change of interest in a thing insured, after the occurrence of an injury which results in
a loss, does not affect the right of the insured to indemnity for the loss.

"Section 22. A change of interest in one or more of several distinct things, separately insured by one
policy, does not avoid the insurance as to the others.

"Section 23. A change of interest, by will or succession, on the death of the insured, does not avoid
an insurance; and his interest in the insurance passes to the person taking his interest in the thing
insured.

"Section 24. A transfer of interest by one of several partners, joint owners, or owners in common,
who are jointly insured, to the others, does not avoid an insurance even though it has been agreed
that the insurance shall cease upon an alienation of the thing insured.

"Section 25. 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.

· Sec. 26 – 35 of the Insurance Code

1. · Vda. De Canilang vs. Court of Appeals, G.R. No. 92492, June
17, 1993 Jaime Canilang
2. · Sunlife Assurance Company of Canada vs. Court of Appeals,
G.R. No. 105135, June 22, 1995 - Robert John Bacani
died in plane crash; but two weeks prior to his application for
insurance was diagnosed for renal failure,
3. · Ng Gan Zee v. Asian Crusader Life Assurance Corp., G.R. No.
30685, May 30, 1983 - 20 year endowment; died cancer of the liver;
statement that tumor is connected with ulcer must be construed in
good faith
 ISSUANCE OF POLICY WITHOUT FURTHER INQUIRY AND
DESPITE IMPERFECTION OF ANSWER TO A MATERIAL
QUESTION; CONSTITUTES WAIVER OF IMPERFECTION.
4. · Saturnino v. The Philippine American Life Insurance Company,
G.R. No. 16163, February 28, 1963
Applied in 1957, 20-year endowment non-medical insurance; requires detailed medical
history
In 1958, died; appears that 2 months prior to appliacation she had undergone breast
removal surgery but she did not diclose it
concealment of the fact of the operation itself was fraudulent
5. · Edillon v. Manila Bankers Life Insurance Corp., G.R. No.
34200, September 30, 1982
Carmen who was already 65 yrs old, applied and was issued
insurance contract, she died from vehicular accident 45 dasy after
issuance; Manila bankers is estopped; there was no material
concealment of her age; it was clear from her application that she is
65 yrs old
6. · Philamcare Health Systems, Inc. v. Court of Appeals, G.R. No.
125678, March 18, 2002
7. · Ma. Lourdes S. Florendo v. Philam Plans, Inc., Perla Abcede
and Ma. Celeste Abcede, G.R. No. 186983, February 22, 2012

Vda. De Canilang vs. Court of Appeals, G.R. No.

92492, June 17, 1993
An information or statement of fact is material when it can
probably and reasonably influence the insurer in, among others,
assessing the risk involved and accepting the application for
insurance. Material concealment is a ground for rescission –
whether made intentionally or unintentionally.
Case Summary

Jaime Canilang had a non-medical (life) insurance contract with

Great Pacific, with his wife Thelma Canilang, as beneficiary. About
a year after its effectivity, Jaime died of “congestive heart failure,”
“anemia,” and “chronic anemia.” Thelma filed a claim with Great
Pacific. The latter denied on ground of material concealment of
information

Thelma filed an action before the Insurance Commission.

The IC ruled in favor of Thelma, ordering Great Pacific to pay her

the insurance proceeds. The CA reversed finding material
concealment on the part of Jaime. The SC affirmed.

Issues resolved —

1. Did Jaime Canilang committed material concealment in his medical declaration for his insurance
application with Great Pacific?

HELD – YES.
Note: Jaime made the following medical declaration in his relation to his insurance application.

(1) I have not been confined in any hospital, sanitarium or

infirmary, nor received any medical or surgical advice/attention within the last five (5) years.
(2) I have never been treated nor consulted a physician for a heart condition, high blood
pressure, cancer, diabetes, lung, kidney, stomach disorder, or any other physical impairment.
(3) I am, to the best of my knowledge, in good health.

Exceptions:

I hereby declare that all the foregoing answers and statements are complete, true and correct. I
hereby agree that if there be any fraud or misrepresentation in the above statements material
 to the risk, the INSURANCE COMPANY upon discovery within two (2) years from the effective
date of insurance shall have the right to declare such insurance null and void. That the
liabilities of the Company under the said Policy/ TA/Certificate shall accrue and begin only
from the date of commencement of risk stated in the Policy/TA/Certificate, provided that the
first premium is paid and the Policy/TA/Certificate is delivered to, and accepted by me in
person, when I am in actual good health.

xxx

The above notwithstanding the fact that he had consulted one Dr.
Wilfredo B. Claudio twice, for which he was diagnosed with “sinus
tachycardia” and “acute bronchitis,”and was prescribed
medication.

This concealment of fact is considered material as it has probable

and reasonable influence upon the insurer Great Pacific’s risk
assessment and decision as to whether to accept the insurance
application or not. Jaime’s diagnosis, as well as the medication
prescribed for its treatment, were linked to heart diseases. As held
by CA, and cited by SC, such information could have been very
material to the insurer in determining the action to be taken on
Canilang’s application for life insurance.

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 ensue. 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.

2. Must the concealment by the insured be made “intentionally” to entitle the insurer to rescind the contract?

HELD – NO.
Note: evolution of the rule on concealment in Philippine Insurance Laws:

Act No. 2427 (1914 – 1974)

Sec. 26. A concealment, whether intentional or unintentional, entitles the injured party to
rescind a contract of insurance.

Insurance Code of 1978 (1975 – 1985; Relevant Law)

Sec. 27. A concealment entitles the injured party to rescind a contract of insurance.

B.P. Blg. 874 (1985; Amendment to the IC of 1978)

Sec. 27. A concealment whether intentional or unintentional entitles the injured party to
rescind a contract of insurance.

The net result of the phrase “whether intentional or unintentional”

is precisely to leave unqualified the term “concealment.” The
deletion of the said phrase in the Insurance Code of 1978 is not
intended to limit the kinds of concealment which generate a right to
rescind on the part of the injured party to “intentional
concealments.” Section 27 of the Insurance Code of 1978 is
properly read as referring to “any concealment” without regard to
whether such concealment is intentional or unintentional.

In any case, in the case at bar, the nature of the facts not conveyed
to the insurer was such that the failure to communicate must have
been intentional rather than merely inadvertent. Jaime could not
have been unaware of his own symptoms related to heart disease,
e.g. heartbeat rising at alarming levels.
The Court also found it difficult to take seriously the argument that
Great Pacific had waived inquiry into the concealment by issuing
the insurance policy notwithstanding Canilang’s failure to set out
answers to some of the questions in the insurance application. The
said failure precisely constituted concealment.

Petition denied. Appealed decision affirmed.

Sunlife Assurance Company of Canada vs. Court of

Appeals, G.R. No. 105135, June 22, 1995

The insured need not die of the disease he had failed to

disclose to the insurer, such failure to disclose, if material to
the insurer in making an assessment of the risk and
determination of whether the application should be accepted or
not, is a ground for rescission.

Case Summary

Robert John B. Bacani had a non-medical insurance with

Sunlife Assurance, with his mother Bernarda Bacani, as
beneficiary. Barely after a year from procuring the policy, he
died on a plane crash. His parents filed a claim with Sunlife.
The latter refused for John’s failure to disclose material facts
relevant to the issuance of the policy, i.e. his examination and
confinement at the Lung Center of the Philippines, where he
was diagnosed for renal failure, two weeks prior to his
application for insurance.
Sps Bacani filed an action for specific performance with the
RTC.

The RTC ruled in favor of Sps Bacani. The CA affirmed. The SC

reversed.

Issues resolved —

1. Were the information which John failed to disclose to Sunlife, material and relevant to the
approval and issuance of the insurance policy?

HELD – YES.

The application for the subject insurance specifically required

the insured to disclose to the insurer matters relating to his
health.

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 communication is due, in forming his estimate
of the disadvantages of the proposed contract or in making his
inquiries. The materiality of the information withheld does not
depend on the state of mind of the insured. Neither does it
depend on the actual or physical events which ensue.

In this case, the information not disclosed by John would

obviously affect his insurance application, as Sunlife would
either approve the same for a higher premium, or reject the
same altogether.

2. Does the waiver of medical examination by Sunlife debunk the materiality of the facts concealed?
 HELD – NO.

The waiver of a medical examination [in a non-medical

insurance contract] renders even more material the information
required of the applicant concerning previous condition of
health and diseases suffered, for such information necessarily
constitutes an important factor which the insurer takes into
consideration in deciding whether to issue the policy or not.
(Saturnino v. Philippine American Life Insurance Company)

This argument would render then Sec. 27 of the Insurance

Code, allowing the injured party to rescind the contract of
insurance in case of concealment, ineffective.

3. Must be cause of death be related to the facts concealed in order for the latter to constitute a
valid defense for the insurer?

HELD – NO.

Ihe insured need not die of the disease he had failed to

disclose to the insurer. It is sufficient that his nondisclosure
misled the insurer in forming his estimates of the risks of the
proposed insurance policy or in making inquiries.

Petition granted, assailed judgment reversed and set aside.

Ng Gan Zee v. Asian Crusader Life Assurance

Corp., G.R. No. 30685, May 30, 1983
FACTS: On May 12, 1962, Kwong Nam applied for a 20-year endowment
insurance on his life for the sum of P20,000.00, with his wife, appellee
Ng Gan Zee, as beneficiary. On the same date, appellant, upon receipt of
the required premium from the insured, approved the application and
issued the corresponding policy. On December 6, 1963, Kwong Nam died
of cancer of the liver with metastasis. All premiums had been religiously
paid at the time of his death. prcd

On January 10, 1964, his widow Ng Gan Zee presented a claim in due
form to appellant for payment of the face value of the policy. On the
same date, she submitted the required proof of death of the insured.
Appellant denied the claim on the ground that the answers given by the
insured to the questions appearing in his application for life insurance
were untrue.

Appellee brought the matter to the attention of the Insurance

Commissioner, the Hon. Francisco Y. Mandamos, and the latter, after
conducting an investigation, wrote the appellant that he had found no
material concealment on the part of the insured and that, therefore,
appellee should be paid the full face value of the policy. This opinion of
the Insurance Commissioner notwithstanding, appellant refused to
settle its obligation.

ISSUE: WON THE RESPONDENT IS LIABLE.

HELD: YES. CONCEALMENT; EXISTENCE AND NATURE THEREOF. —

“Concealment exists where the assured had knowledge of a fact
material to the risk, and honesty, good faith, and fair dealing requires
that he should communicate it to the assurer, but he designedly and
intentionally withholds me same.” It has also been held “that the
concealment must, in the absence of inquiries, be not only material, but
fraudulent, or the fact must have been intentionaly withheld.”
INSURANCE CONTRACT; RESCISSION THEREOF; FRAUDULENT
INTENTION REQUIRED; BURDEN OF PROOF RESTS UPON THE
INSURER. — Assuming that the aforesaid answer given by the insured is
false, as claimed by the appellant, Sec. 27 of the Insurance Law,
above-quoted, nevertheless requires that fraudulent intent on the part of
the insured be established to entitle the insurer to rescind the contract.
And as correctly observed by the lower court, “misrepresentation as a
defense of the insurer to avoid liability is an ‘affirmative’ defense. The
duty to establish such a defense by satisfactory and convincing
evidence rests upon the defendant. The evidence before the Court does
not clearly and satisfactorily establish that defense.”

INSURED’S STATEMENT REGARDING HIS AILMENT; CONSTRUED AS

MADE IN GOOD FAITH IN THE ABSENCE OF PROOF THAT HE HAD
SUFFICIENT MEDICAL KNOWLEDGE THEREOF. — It bears emphasis
that Kwong Nam had informed the appellant’s medical examiner that the
tumor for which he was operated on was “associated with ulcer of the
stomach” In the absence of evidence that the insured had sufficient
medical knowledge as to enable him to distinguish between “peptic
ulcer” and “a tumor”, his statement that said tumor was “associated
with ulcer of the stomach,” should be construed as an expression made
in good faith of his belief as to the nature of his ailment and operation.
Indeed, such statement must be presumed to have been made by him
without knowledge of its incorrectness and without any deliberate intent
on his part to mislead the appellant.

ISSUANCE OF POLICY WITHOUT FURTHER INQUIRY AND DESPITE

IMPERFECTION OF ANSWER TO A MATERIAL QUESTION;
CONSTITUTES WAIVER OF IMPERFECTION. — It has been held that
where, “upon the face of the application, a question appears to be not
answered at all or to be imperfectly answered, and the insurers issue a
policy without any further inquiry, they waive the imperfection of the
answer and render the omission to answer more fully immaterial.” As
aptly noted by the lower court, “if the ailment and operation of Kwong
Nam had such an important bearing on the question of whether the
defendant would undertake the insurance or not, the court cannot
understand why the defendant or its medical examiner did not make any
further inquiries on such matters from the Chinese General Hospital or
require copies of the hospital records from the appellant before acting
on the application for insurance. The fact of the matter is that the
defendant was too eager to accept the application and receive the
insured’s premium. It would be inequitable now to allow the defendant to
avoid liability under the circumstances.”

Saturnino v. The Philippine American Life Insurance Company,

G.R. No. 16163, February 28, 1963
Facts: The policy sued upon is one for 20-year endowment non-medical insurance. This kind of
policy dispenses with the medical examination of the applicant usually required in ordinary life
policies. However, detailed information is called for in the application concerning the applicant’s
health and medical history. The written application in this case was submitted by Saturnino to
appellee on November 16, 1957, witnessed by appellee’s agent Edward A. Santos. The policy was
issued on the same day, upon payment of the first year’s premium of P339.25. On September 19,
1958 Saturnino died of pneumonia, secondary to influenza. Appellants here, who are her surviving
husband and minor child, respectively, demanded payment of the face value of the policy. The
claim was rejected and this suit was subsequently instituted. It appears that two months prior to
the issuance of the policy or on September 9, 1957, Saturnino was operated on for cancer,
involving complete removal of the right breast, including the pectoral muscles and the glands
found in the right armpit. She stayed in the hospital for a period of eight days, after which she
was discharged, although according to the surgeon who operated on her she could not be
considered definitely cured, her ailment being of the malignant type. Notwithstanding the fact of
her operation Estefania A. Saturnino did not make a disclosure thereof in her application for
insurance. On the contrary, she stated therein that she did not have, nor had she ever had, among
other ailments listed in the application, cancer or other tumors; that she had not consulted any
physician, undergone any operation or suffered any injury within the preceding five years; and
that she had never been treated for nor did she ever have any illness or disease peculiar to her
sex, particularly of the breast, ovaries, uterus, and menstrual disorders. The application also
recites that the foregoing declarations constituted “a further basis for the issuance of the policy.”

Issue: Whether or not the failure of Saturnino to disclose the severity of his previous illness is
material to the avoidance of the insurance policy.
Held: Yes. In the application for insurance signed by the insured in this case, she agreed to submit
to a medical examination by a duly appointed examiner of appellee if in the latter’s opinion such
examination was necessary as further evidence of insurability. In not asking her to submit to a
medical examination, appellants maintain, appellee was guilty of negligence, which precluded it
from finding about her actual state of health. No such negligence can be imputed to appellee. It
was precisely because the insured had given herself a clean bill of health that appellee no longer
considered an actual medical checkup necessary.

In the first place the concealment of the fact of the operation itself was fraudulent, as there could
not have been any mistake about it, no matter what the ailment. Secondly, in order to avoid a
policy it is not necessary to show actual fraud on the part of the insured.

In this jurisdiction a concealment, whether intentional or unintentional, entitles the insurer to

rescind the contract of insurance, concealment being defined as “negligence to communicate that
which a party knows and ought to communicate” (Sections 24 & 26, Act No. 2427). In the case of
Argente v. West Coast Life Insurance Co., 51 Phil. 725, 732, this Court said, quoting from Joyce, The
Law of Insurance, 2nd ed., Vol. 3:

“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 that it does not exist.”

· Edillon v. Manila Bankers Life

Insurance Corp., G.R. No. 34200,
September 30, 1982
The issuance of an insurance contract that contains a
condition with knowledge (actual or presumptive) of
non-compliance with such condition is deemed waiver of the
same.
Facts: Carmen Lapuz had an insurance policy with Manila
Bankers Life Insurance Corp, with her sister, Regina Edillon, as
beneficiary. Carmen was 65, y.o. at the time of application. She
also paid the premiums and the insurer issued the certificate of
insurance. This notwithstanding that the exclusionary
condition in the policy, i.e. the insurer should not be held liable
to pay claims under the policy in behalf of “persons who are
under the age of sixteen (16) years of age or over the age of
sixty (60) years.” 45 days after said application for insurance,
Carmen died in a vehicular accident. Thus, Regina filed a claim
with Manila Bankers. The latter refused on the ground that
Carmen was already over 60 years old at the time of her
application for insurance.

Regina filed an action before the CFI for the recovery of

proceeds.

The CFI ruled against Edillon, holding that Manila Bankers was
not liable. The CA certified the case to SC. The SC reversed.

Issues resolved —

1. Should the acceptance by Manila Bankers of the premium and the issuance of the corresponding
certificate of insurance be deemed a waiver of the exclusionary condition of overage (over 60 y.o.)
stated in the certificate of insurance?

HELD – YES, MANILA BANKERS IS ESTOPPED.

Carmen did not conceal her real age. It was clearly indicated
that she was 65 y.o. at the time of filing the application for
insurance. Such information was prominent and material to the
application. Yet, Manila Bankers issued the certificate of
insurance without question upon Carmen’s payment of the
premium.

As Carmen died 45 days after her application for insurance,

Manila Bankers had enough time to process the application
and notice that Carmen was over 60 y.o., it could have
cancelled the policy but it did not. If Manila Bankers failed to
act, it is either because it was willing to waive such
disqualification; or, through the negligence or incompetence of
its employees for which it has only itself to blame, it simply
overlooked such fact. Under the circumstances, the insurance
corporation is already deemed in estoppel. Such inaction
constitutes waiver of the exclusionary condition.

The SC cited two cases to support its conclusion:

Que Chee Gan vs. Law Union Insurance Co., Ltd.

This case involves a fire insurance policy, which requires, among

others, that the bodega insured should have 11 fire hydrants. Yet the
insurance policy was issued despite it having only 2. In this case, the
SC ruled that there was a waiver of the requirement as to the number
of the hydrants, since the insurer, at the time of the issuance of the
policy knew of the fact that the bodega in question only had 2
hydrants. It said:

Where the insurer, at the time of the issuance of a policy of insurance,

has knowledge of existing facts which, if insisted on, would invalidate
the contract from its very inception, such knowledge constitutes a
waiver of conditions in the contract inconsistent with the known facts,
and the insurer is stopped thereafter from asserting the breach of
such conditions.

Capital Insurance & Surety Co., Inc. vs. Plastic Era Co., Inc.

This case involves an insurance policy with a condition that it shall

not take effect unless the premium had been paid. The insured
executed a promissory as such payment which the insurer accepted.
The Court held here, that by acceptance of the promissory note, the
insurer is estopped from claiming that the insurance had not yet
taken effect. It said: although one of conditions of an insurance policy
is that ‘it shall not be valid or binding until the first premium is paid’, if
it is silent as to the mode of payment, promissory notes received by
the company must be deemed to have been accepted in payment of
the premium.

Philamcare Health Systems, Inc. v. Court of Appeals, G.R. No.

125678, March 18, 2002
FACTS:

Respondent Julita Trinos’ deceased husband, Ernani Trinos applied for a health care
coverage with petitioner 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 her husband
was in the hospital, respondent tried to claim the benefits under the health care
agreement. However, petitioner 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.

· Ma. Lourdes S. Florendo v. Philam Plans, Inc., Perla Abcede and

Ma. Celeste Abcede, 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:

1. 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.
 · The Insular Life Assurance Company, Ltd. v.
Feliciano, G.R. No. 47593, December 29, 1943
Facts: It appears that during that time, Evaristo was already suffering from tuberculosis.
Such fact appeared during the medical exam, but the examiner and the company’s agent
ignored it.

> After that, Evaristo was made to sign an application form and thereafter the blank
spaces were filled by the medical examiner and the agent making it appear that Evaristo
was a fit subject of insurance. (Evaristo could not read and understand English)

> When Evaristo died, Insular life refused to pay the proceeds because of concealment.

Issue:
Whether or not Insular Life was bound by their agent’s acts.

Held: NO.

LIFE INSURANCE; VALIDITY OF POLICY CONTAINING FALSE

STATEMENTS REGARDING HEALTH OF THE INSURED. — The
policies were issued on the basis of the statement subscribed by
the applicant to the effect that he was and had been in good
health, when as a matter of fact he was then suffering from
advanced pulmonary tuberculosis. Held: Altho the agent and the
medical examiner knew that statement to be false, no valid
contract of insurance was entered into because there was no
real meeting of the minds of the parties.

2. ID.; ID. — When Evaristo Feliciano, the applicant for insurance,

signed the application in blank and authorized the soliciting
agent and/or the medical examiner of the Company to write the
answers for him, he made them his own agents for that purpose,
and he was responsible for their acts in that connection. If they
falsified the answers for him, he could not evade the
responsibility for the falsification. He was not supposed to sign
the application in blank. He knew that the answers to the
questions therein contained would be "the basis of the policy,"
and for that very reason he was required with his signature to
vouch for the truth thereof.
 3. ID.; ID.; CONNIVANCE WITH SOLICITING AGENT AND MEDICAL
EXAMINER. — From all the facts and circumstances of the case,
we are constrained to conclude that the insured was a
coparticipant, and coresponsible with Agent David and Medical
Examiner Valdez, in the fraudulent procurement of the policies in
question and that by reason thereof said policies are void ab
initio.

· Saturnino v. The Philippine American Life Insurance

Company, G.R. No. 16163, February 28, 1963
Facts: The policy sued upon is one for 20-year endowment non-medical insurance. This
kind of policy dispenses with the medical examination of the applicant usually required
in ordinary life policies. However, detailed information is called for in the application
concerning the applicant’s health and medical history.

The written application in this case was submitted by Saturnino to appellee on

November 16, 1957, witnessed by appellee’s agent Edward A. Santos. The policy was
issued on the same day, upon payment of the first year’s premium of P339.25. On
September 19, 1958 Saturnino died of pneumonia, secondary to influenza. Appellants
here, who are her surviving husband and minor child, respectively, demanded payment
of the face value of the policy. The claim was rejected and this suit was subsequently
instituted. It appears that two months prior to the issuance of the policy or on
September 9, 1957, Saturnino was operated on for cancer, involving complete removal of
the right breast, including the pectoral muscles and the glands found in the right
armpit. She stayed in the hospital for a period of eight days, after which she was
discharged, although according to the surgeon who operated on her she could not be
considered definitely cured, her ailment being of the malignant type. Notwithstanding
the fact of her operation Estefania A. Saturnino did not make a disclosure thereof in her
application for insurance. On the contrary, she stated therein that she did not have, nor
had she ever had, among other ailments listed in the application, cancer or other
tumors; that she had not consulted any physician, undergone any operation or suffered
any injury within the preceding five years; and that she had never been treated for nor
did she ever have any illness or disease peculiar to her sex, particularly of the breast,
ovaries, uterus, and menstrual disorders. The application also recites that the foregoing
declarations constituted “a further basis for the issuance of the policy.”

Issue: Whether or not the failure of Saturnino to disclose the severity of his previous
illness is material to the avoidance of the insurance policy.

Held: Yes. In the application for insurance signed by the insured in this case, she agreed
to submit to a medical examination by a duly appointed examiner of appellee if in the
latter’s opinion such examination was necessary as further evidence of insurability. In
not asking her to submit to a medical examination, appellants maintain, appellee was
guilty of negligence, which precluded it from finding about her actual state of health. No
such negligence can be imputed to appellee. It was precisely because the insured had
given herself a clean bill of health that appellee no longer considered an actual medical
checkup necessary.

In the first place the concealment of the fact of the operation itself was fraudulent, as
there could not have been any mistake about it, no matter what the ailment. Secondly, in
order to avoid a policy it is not necessary to show actual fraud on the part of the
insured.

In this jurisdiction a concealment, whether intentional or unintentional, entitles the

insurer to rescind the contract of insurance, concealment being defined as “negligence
to communicate that which a party knows and ought to communicate” (Sections 24 & 26,
Act No. 2427). In the case of Argente v. West Coast Life Insurance Co., 51 Phil. 725, 732,
this Court said, quoting from Joyce, The Law of Insurance, 2nd ed., Vol. 3:

“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 that it does not exist.”
 · Edillon v. Manila Bankers Life Insurance Corporation,
G.R. No. 34200, September 30, 1982

Facts: Carmen Lapuz had an insurance policy with

Manila Bankers Life Insurance Corp, with her sister,
Regina Edillon, as beneficiary. Carmen was 65, y.o. at the
time of application. She also paid the premiums and the
insurer issued the certificate of insurance. This
notwithstanding that the exclusionary condition in the
policy, i.e. the insurer should not be held liable to pay
claims under the policy in behalf of “persons who are
under the age of sixteen (16) years of age or over the age
of sixty (60) years.” 45 days after said application for
insurance, Carmen died in a vehicular accident. Thus,
Regina filed a claim with Manila Bankers. The latter
refused on the ground that Carmen was already over 60
years old at the time of her application for insurance.

Regina filed an action before the CFI for the recovery of

proceeds.

The CFI ruled against Edillon, holding that Manila

Bankers was not liable. The CA certified the case to SC.
The SC reversed.

Issues resolved —
1. Should the acceptance by Manila Bankers of the premium and the issuance of the
corresponding certificate of insurance be deemed a waiver of the exclusionary condition of
overage (over 60 y.o.) stated in the certificate of insurance?

HELD – YES, MANILA BANKERS IS ESTOPPED.

Carmen did not conceal her real age. It was clearly

indicated that she was 65 y.o. at the time of filing the
application for insurance. Such information was
prominent and material to the application. Yet, Manila
Bankers issued the certificate of insurance without
question upon Carmen’s payment of the premium.

As Carmen died 45 days after her application for

insurance, Manila Bankers had enough time to process
the application and notice that Carmen was over 60 y.o.,
it could have cancelled the policy but it did not. If Manila
Bankers failed to act, it is either because it was willing to
waive such disqualification; or, through the negligence
or incompetence of its employees for which it has only
itself to blame, it simply overlooked such fact. Under the
circumstances, the insurance corporation is already
deemed in estoppel. Such inaction constitutes waiver of
the exclusionary condition.

The SC cited two cases to support its conclusion:

Que Chee Gan vs. Law Union Insurance Co., Ltd.

This case involves a fire insurance policy, which requires,

among others, that the bodega insured should have 11 fire
hydrants. Yet the insurance policy was issued despite it having
only 2. In this case, the SC ruled that there was a waiver of the
requirement as to the number of the hydrants, since the
insurer, at the time of the issuance of the policy knew of the
fact that the bodega in question only had 2 hydrants. It said:

Where the insurer, at the time of the issuance of a policy of

insurance, has knowledge of existing facts which, if insisted
on, would invalidate the contract from its very inception, such
knowledge constitutes a waiver of conditions in the contract
inconsistent with the known facts, and the insurer is stopped
thereafter from asserting the breach of such conditions.

Capital Insurance & Surety Co., Inc. vs. Plastic Era Co.,
Inc.

This case involves an insurance policy with a condition that it

shall not take effect unless the premium had been paid. The
insured executed a promissory as such payment which the
insurer accepted. The Court held here, that by acceptance of
the promissory note, the insurer is estopped from claiming that
the insurance had not yet taken effect. It said: although one of
conditions of an insurance policy is that ‘it shall not be valid or
binding until the first premium is paid’, if it is silent as to the
mode of payment, promissory notes received by the company
must be deemed to have been accepted in payment of the
premium.
 · Manila Bankers Life Insurance Corporation v.
Aban G.R. No. 175666, July 29, 2013

FACTS:

On July 3, 1993, Delia Sotero took out a life insurance policy

from Manila Bankers Life Insurance, designating respondent
Cresencia P. Aban, her niece, as her beneficiary.

Petitioner issued the Insurance Policy, with a face value of

P100,000.00, in Sotero’s favor on August 30, 1993, after the
requisite medical examination and payment of the insurance
premium.

On April 10, 1996,when the insurance policy had been in

force for more than two years and seven months, Sotero
died. Respondent filed a claim for the insurance proceeds on
July 9, 1996. Petitioner, however, denied the claim and
instead refunded the premiums paid on the policy claiming
that the policy was obtained by fraud, concealment and/or
misrepresentation. Petitioner also filed for rescission.

Respondent filed a Motion to Dismiss claiming that

petitioner’s cause of action was barred by prescription
pursuant to Section 48 of the Insurance Code, which
provides as follows:

“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.”

ISSUE:

Whether or not Manila Bankers Life Insurance

Corporation can still rescind the insurance contract

RULING:

No, Manila Bankers Life Insurance Corporation can no

longer rescind the insurance contract.

Allegations of fraud, which are predicated on respondent’s

alleged posing as Sotero and forgery of her signature in the
insurance application, are at once belied by the trial and
appellate courts’ finding that Sotero herself took out the
insurance for herself. “Fraudulent intent on the part of the
insured must be established to entitle the insurer to rescind
the contract”. In the absence of proof of such fraudulent
intent, no right to rescind arises.

Moreover, Section 48 of the Insurance Code provides that an

insurer is given two years – from the effectivity of a life
insurance contract and while the insured is alive – to
discover or prove that the policy is void ab initio or is
rescindable by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the
two-year period lapses, or when the insured dies within the
period, the insurer must make good on the policy, even
though the policy was obtained by fraud, concealment, or
misrepresentation.

Section 48 regulates both the actions of the insurers and

prospective takers of life insurance. It gives insurers enough
time to inquire whether the policy was obtained by fraud,
concealment, or misrepresentation; on the other hand, it
forewarns scheming individuals that their attempts at
insurance fraud would be timely uncovered – thus deterring
them from venturing into such nefarious enterprise. At the
same time, legitimate policy holders are absolutely protected
from unwarranted denial of their claims or delay in the
collection of insurance proceeds occasioned by allegations
of fraud, concealment, or misrepresentation by insurers,
claims which may no longer be set up after the two-year
period expires as ordained under the law.

In this case, the records show that the insured died after the
two-year period, hence, the petitioner is already barred from
proving that the policy is void ab initio by reason of
fraudulent concealment or misrepresentation.

Sun Life of Canada (Philippines), Inc. vs. Ma. Daisy S. Sibya, et al.
G.R. No. 211212, June 08, 2016
FACTS : On January 10, 2001, Atty. Jesus Sibya, Jr. (Atty. Jesus Jr.) applied for life
insurance with Sun Life. In his Application for Insurance, he indicated that he had
sought advice for kidney problems. On February 5, 2001, Sun Life approved Atty. Jesus
Jr.'s application and issued Insurance Policy No. 031097335. On May 11, 2001, Atty.
Jesus Jr. died as a result of a gunshot wound in San Joaquin, Iloilo. As such, Ma. Daisy
filed a Claimant's Statement with Sun Life to seek the death benefits indicated in his
insurance policy. In a letter dated August 27, 2001, however, Sun Life denied the claim
on the ground that the details on Atty. Jesus Jr.'s medical history were not disclosed in
his application. RTC held that Atty. Jesus Jr. did not commit material concealment and
misrepresentation when he applied for life insurance with Sun Life. Aggrieved, Sun Life
 elevated the case to the CA. The CA affirmed the decision of the RTC. Hence this
petition.

Issue: WON CA erred in affirming RTC decision that there was no concealment or
misrepresentation when Atty. Jesus Jr. submitted his insurance application with Sun
Life.

Held: In the present case, Sun Life issued Atty. Jesus Jr.'s policy on February 5, 2001.
Thus, it has two years from its issuance, to investigate and verify whether the policy
was obtained by fraud, concealment, or misrepresentation. Upon the death of Atty.
Jesus Jr., however, on May 11, 2001, or a mere three months from the issuance of the
policy, Sun Life loses its right to rescind the policy.

In Manila Bankers Life Insurance Corporation v. Aban,22 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. Section 48 serves a noble purpose, as it regulates the actions of
both the insurer and the insured. Under the provision, an insurer is given two years -
from the effectivity of a life insurance contract and while the insured is alive - to
discover or prove that the policy is void ab initio or is rescindible by reason of the
fraudulent concealment or misrepresentation of the insured or his agent. After the
two-year period lapses, or when the insured dies within the period, the insurer must
make good on the policy, even though the policy was obtained by fraud, concealment,
or misrepresentation. This is not to say that insurance fraud must be rewarded, but that
insurers who recklessly and indiscriminately solicit and obtain business must be
penalized, for such recklessness and lack of discrimination ultimately work to the
detriment of bona fide takers of insurance and the public in general.
 INCONTESTABILITY CLAUSE REQUISITES
1.
2. Policy must have been enforced from 2 years from the date of issue or last date of
reinstatement

XPN:
1. Insured lacks insurable interest
2. Cause of death exempted risk
3. premiums were not paid
4. violations of policy apart from concealment and representation
5. vicious fraud; policy take for vicious motive
6. impostor

The Policy
Written instrument containing the contract of insurance
Policy is different from contract of insurance
Policy - broader term containing the contract of insurance
No req of notarization, registration etc

Contents Sec. 51 PAP2IRP

requisites for validity of insurance contract
1. parties
2. amount except in open running policies
3. premium or a statement of the basis and rates upon which final premium is to be determined
4. property or life insured
5. interest of insured in property insured if not absolute owner
6. risks insured against
7. prd which the insurance is to continue

Insurance contract - consensual, both insurer and insured

Beneficiary consent - no longer necessary to perfect the contract of insurance

Problem : agent of insurer facilitates the application of the insured, agent receives the application and
premium payment ====> Insurance contract not yet perfected. Still no consent from Insurer
APPLICATION ONLY. Insurer can still accept or reject it the application
Insured and insurer can send agents to signify consent - through SPA
Insurer - Board resolution, secretary’s certificate, SPA
Consent may be signified : 1. expressly
2. impliedly - insurer accepts by sending the policy
What if there is delay in acting on the insurance contract? Perez V. CA 112329
Even though the insured has already forwarded his first premium with his application, delay in
actin on the application does not constitute acceptance
Acceptance of insurance contract - clear indication of such acceptance
If insured dies on Jan 11 2020, Insurer accepts Jan 12, 2020 = life insurance contract is not valid. no
longer any insurable interest

In written contract there are blank spaces, you can put on

1. rider
2. clause
3. warranty
4. endorsement

4 things must be mentioned in the policy itself to be recognized.

Descriptive title or name must be put into it and that which is attached
What if to follow?

Blank spaces are required by law. There must be countersignature in the policy — Insured must
sign.
It is the insured who is accepting the insurance contract and policy, it being a contract of adhesion.
By way of security to the insured, he has to sign.

1. Rider - attachment to the insurance policy that qualifies the condition of the policy, expanding,
restricting benefit or excluding certain conditions from the coverage of the insurance policy
Requisite: 1. attached, 2. descriptive title mentioned
If rider to follow and not simultaneously executed with the insurance policy - it must be countersigned by
insured

2. Clauses - sentences and paragraphs describing various coverages, exclusions, duties of the
insured, locations covered and conditions that suspend or terminates the coverage of the
insurance policy

3. Warranty - promise by the insured party that statements affecting the validity of the contract are
true
Insured is saying ship is seaworthy

4. Endorsement - written documents attached to an insurance policy that notifies the policy
- changes the coverage in the policy
- can add or change

5. covernotes- instead of issuing a policy first, covernote first

- binds the insurer and insured temporarily before the issuance of policy
- answer to the problem of death of insured before the policy is issued
- has a time limit of 60 days, if not enough you can renew or extend it but need approval of
commissioner of insurance - PETITION FOR APPLICATION FOR RENEWAL OR EXTENSION OF
COVERNOTES BEFORE INSURANCE COMMISSION

*SEC 54 How an INSURED is merely agent or a trustee

- need to designate the principal or beneficiary

SEC 56 General description

3 Kinds of Insurance Policies Sec 60, 61, 62

1.Open - Value of the thing insured upon is not agreed upon at the onset of the agreement,
- Amount indicated in the insurance policy would not be the amount which is payable when the
insured risk occurs instead it is just the maximum amount which the insurer can be liable for.
Value of the things is ascertained at the time of the loss and not at the onset of agreement
Actual loss will represent the total indemnity due from the insurer except that the maximum
liability shall not exceed the face value of the policy
Value determined at the time of loss
Usually applied in property, appreciation and depreciation of value

2. Valued - expresses on its face the amount payable, specific sum which the insurer promises to pay
for regardless of the value of the property at the time of loss
- determination of value happens at the execution of the agreement, perfection of the insurance
contract
- Usually applied to life

3. Running - contemplates successive insurances

- provides that the object of the policy may from time to time be defined especially as to the
subjects of insurance
- additional statements and endorsement
- usually applied when there is frequent change in quantity
- contents of a whse, dept store, supermarket, not only the volume but also value of the contents
determining the liability of the insurer

Sec. 63 Prescriptive period in commencing an action for insurance

Insurance claim must be filed within a period of one year from the time when the cause of
action accrues, stipulation limiting the time of commencement of action to a period of less than one
year is VOID

Where to file? Insurance commission or court of competent jurisdiction

insurance commision - value 5M and below
RTC - above 5M
Cause of action to file - arises upon the denial of the insurer to perform his obligation under
insurance contract and not reckoned from the time of loss
MR filed by the insured - you still file with the commissioner upon the denial of first claim AND
NOT upon denial of the MR, it doesn’t toll prescriptive prd

Insured can still claim from the policy but can no longer file a claim in the RTC or Commissioner
instead thru an Action for Sum of Money because period for filing an insurance claim has already
prescribed

Sun Insurance Office v. CA

Insured for fire policy in his building, policy contained usual stipulation that any action or suit
must be filed WITHIN one year after denial of the claim
 After building burned down, filed a claim for loss
Insurer denied the claim of Feb 3, 1994 and on Feb 28 was denied , on April 3 MR by insured
March 20, 1995 when insurer filed a judicial claim - ALREADY PRESCRIBED
Filing for the request of reconsideration did not toll the prescriptive period of one year. Such is expressly
provided in the insurance policy and provided in the insurance law

Sec. 64 Grounds for cancellation of insurance policy

1. Prior notice
2. Proof of occurrence of grounds
a. non-payment of premium - not absolute, has exceptions
b. conviction of crime arising from acts increasing the hazard insured against. Not
necessarily on the thing insured
c. discovery of fraud or material representation === recission
d. discovery of willful or reckless acts or omission increasing the hazard insured against
e. physical changes in the property insured which result in the property becoming
uninsurable - alluvium, natural changes in the property
f. discovery of other insurance coverage that make the total insurance in excess of the
value of the property insured - double insurance
g. determination by the commissioner that the continuation of the policy would violate or
would place the insurer in violation of the code
Sec. 65 Notice must be in writing, mailed or delivered, proof of delivery or receipt
a. state the grounds relied upon including the proof and evidence relied upon

Sec 66. Automatic renewal of insurance policies - terms and conditions of existing of insurance
policy, renewed upon payment of premiums,
Has to notify the insured 45 days in advance before end of policy period that it will not
renew the policy under the same terms and conditions

PREMIUM
- That agreed price between the insurer and the insured for which the insurer assumes
the risk and it is the consideration paid by the insured to insurer, to indemnify the insured against the
perils in the insurance contract
- necessary requisite for the effectivity of a policy
- no premium no insurance
- burden of proving that premium has been paid is on the insured
- insurer not required to make any effort to solicit payment of premium
- continuance of insurance is conditioned upon the payment of the premium
- should premium lapses insurer is released from liability
- insurer’s liability premise on his acceptance of premium
- premium is due and demandable from application for an insurance contract
- period with which the insurer may make use of in order to investigate if he should
approve, grant , execute the insurance contract and issuing the policy
- payment of premium is different from perfection on insurance contract
- perfection is reliant on the CONSENT of both Insurer and insured
- If agent of the insurer accepts at the onset of application, there is still no perfection if
insurer has not given consent
GR: Payment of premium
EXP: 1. Grace period under Sec 77 in life or industrial life policy - Grace period provision 90 day credit
extension
2. Sec 78 - discussing payment of premium by crediting from salaries, wage and income of the
insured - “Automatic deductions” given the power and authority to obtain the premium at certain points in
time and not the responsibility of the insured to make sure that insurer has deducted the payment
negligence of insurer to collect payment
3. Parties have agreed for the payment of premium in installment There is already partial
payment at the time of loss - partial payment recognized by the insurer himself

Can the insurer pay the the insured the insurable amount and deduct the payment of the unpaid
premium therefrom? Yes provided there is an agreement.

Insurer may grant his own credit extension for the payment of premium - Autonomy of contracting
parties. Terms and conditions bind the parties

Estoppel - insured always defaults, if allowed by insurer there is an implied agreement

GR: Insurer must be paid the premium as soon as the thing is exposed to the peril insured against -
CASH AND CARRY RULE

UCPB v MASAGANA TELEMART - case of estoppel

Magana obtained 5 insurance policy from UCPB. After the effectivity of the term, Masagana’s
properties were razed by fire. On the same day, Masagana tendered 5 manager’s check to UCPB for
the renewal of the premium payments.The next day, he made formal demand for the indemnification of
the properties.
UCPB returned the checks on the ground that policies were already terminated and was not
renewed.
CA agreed with Masagana since there was already a tender of payment on the ground that one of
the stipulations is that the insurer must notify within 45 days in advance before expiration to
inform the insured not to renew the policy.

Masagan has been granted 60-90 day term for the renewal of policy - RTC and CA, SC
SC recognized that insurer may grant credit extensions from the premium and loss occurs before
expiration of such term, recovery on the policy may be allowed even though the premium is paid after
the loss but within the credit term

Double insurance - same person is insured by several insurers separately or in

respect to the same subject and interest STRIP
1. Subject matter the same
2. Two or more insurers insure separately
3. Risk or peril insured against is the same
4. Interest insured is the same
5. Person insured is the same

Malayan v Phil First - No double insurance even both policies insure same subject matter, both cover
the same peril insured against, if the two policies were issued to two different entities OR two diff
persons
ex. mortgagee and Mortgagee
 - Double insurance not prohibited by allowed, but maybe prohibited by insurers
themselves in policies issued
- Insurer may treat it as breach of contract

Overinsurance
Always beyond the value of property insured
Only one insurer

Double insurance
Two or more insurers

Loss - In insurance loss is the injury, damage or liability sustained by the insured only as a
consequence of the happening of one or more of the perils which are insured by the insurer in
consideration of the premium.

Loss covered by the insurance contract

Total
Partial
Constructive

SEC 86. proximate cause of the loss was the peril insured against

Sec 87 What if the peril insured against is not the immediate cause of the loss but the proximate cause
for the exposure of the insurer PG 157

When insurer not liable

1. if thing loss due to willful action of insured
2. if insured brought about circumstances which increased the risk of the happening of the
hazard insured against
3. burden of proof is on the insured, insurer must prove that damage was caused by an
accepted risk
Kind of negligence would exonerate the insurer from liability - Gross negligence.
What if an insured was charged with a criminal case of arson and was acquitted.
Can insurer still deny the claim of insured on the ground of probable cause?
Insurance claims as administrative procedures the threshold of evidence is substantial evidence

United merchants corp v Country bankers insurance: If the insurer seeks to defeat the claim because
the loss may have been caused by the insured he should prove it clearly . He must not rely on the
weakness of the defense of the insured. the cause of the loss is an excepted risk and there was willful
misconduct on the part of the insured. even if the acquittal of the insured is not res judicata for action on
the insurance claim, there must be proper evidence from which the fact of willful misconduct would be
established.

ANSWER: IT depends on facts and circumstances of the case.

gr: No acquittal does not bar the insurer from denying the insurance claim

What is necessary to claim benefits

1. insured or entitled to benefit of insurance must give WRITTEN NOTICE TO THE INSURER.
Text already allowed
 2. when required by policy, insured must present a preliminary proof of loss from best evidence
which he can present
3. Period for notice of loss -within the period agreed upon by the parties

What if there is a delay in communication or presentation of proof

Sec 93. deemed waived if sue to act of insurer

Reinsurance
- Nature of insurance which is taken on not by the insured but by the insurer
- Insurer procured a third person to insure him against loss or liability by reason of the happening
of peril in the original contract of insurance
- Contract of indemnity

Marine Insurance
Risk insured against - Perils of the sea
XPN: Insurance is for an all risk insurance and also covers perils of the ship

Perils of the Ship v Perils of the Sea

Perils of the sea Perils of the Ship

unusual violence of the sea, extraordinary winds,
waves and other extraordinary causes related to
navigation
1. occur in the ordinary course of events by
virtue of natural and inevitable actions of
the sea
2. ordinary wear and tear
3. negligent failure of ship owner to provide
the necessary equipment or maintain
seaworthiness of the ship

All risk marine policy

- never cover fraudulent and willful misconduct cases

Extent of insurable interest in marine insurance policy, it depends

1. ship owner - value of the vessel
2. charterers - depends on the kind of charter, if whole ship then entire ship. if part only, insure
part of ship only
3. cargo owners - particular cargo and expected profits
4. creditors/lenders - amount of loan

Implied warranties in marine insurance

1. vessel is seaworthy
2. not engage in illegal venture
3. neutral ship carrying requisite documents showing its nationality and neutrality
4. not deviate from agreed voyage
5. presence of insurable interest
SEAWORTHINESS - Ship is reasonably fit to perform the service which it purports to perform and to
encounter the ordinary
- competent crew and sufficient number of personnel in order to sail the ship
- requisite equipments must be functioning along with other necessary or proper things needed in
the voyage
GR: must be maintained at the time of commencement of risk
XPN: 1. in case of time policy, seaworthy at commencement of EVERY VOYAGE
A. Cargo vessel - each vessel must be seaworthy
2. Voyage policy - seaworthy at the commencement of portion of each voyage

By way of policy the warranty of seaworthiness is taken as already fulfilled but the risk of
unseaworthiness is always assumed by the insurer

If the insurer admits seaworthiness of the ship then the issue of seaworthiness can no longer be raised
at the time of claim.
XPN: Seaworthiness Obtained through concealment or misrepresentation
What if owner of cargo? Should owner assess the seaworthiness of the ship?
NO. has no obligation to prove seaworthiness of the ship. But must take care even if he has no
control over the vessel, he must pick a good vessel
If the ship becomes unseaworthy during the voyage - ship still insured except that cause for
unseaworthiness must be fixed within reasonable time
*unreasonable delay shall exonerate insurer from liability

Deviation - DUC
1. the departure from the course of the voyage insured
2. an unreasonable delay in pursuing the voyage or
3. the commencement of an entirely new voyage

Sec 126 Deviation may be allowed -

1. when master has no control over the circumstance
2. comply with the warranty or avoid peril, won the peril is insured against
3. made in good faith w/ reasonable grounds of belief
4. for purpose of saving human life or relieving another vessel in distress

Deviation not specified in accordance w/ Sec 126 is improper deviation

hence Sec. 128, insurer not liable for any loss happening to the thing insured after improper
deviation

Total Loss Sec 132

1. actual total loss - happens when the subject matter of insurance is
a. fully destroyed
b. so damaged that it can no longer exist in its original character,
c. damage renders it valueless to the owner for the purpose for which it was held
d. any other event which effectively deprives the owner of the possession
right to claim without notice of abandonment
2. constructive total loss -loss not actually total is of a such character which gives a person
insured a right to abandon
need notice of abandonment
Sec 141 - MORE THAN ¾ OF THE VALUE OF THE SHIP
1. more than ¾ of the value of the ship is actually loss
2. injured to such an extent as to reduce its value for more than ¾
3. thing insured is ship and cannot lawfully performed without incurring expense more than ¾ of
the value of the thing abandoned or risk
4. thing insured in freightage or cargo

Sec 140
Abandonment- that act of the insured by which after a constructive total loss, he declares the
relinquishment to the insurer of his interest in the thing insured
transfer of interest of the insured to the insurer
Req: ACABFGNA
1. actual relinquishment
2. constructive total loss
3. abandonment must neither be partial or conditional
4. be made within reasonable time after information of loss and degree of loss
5. factual
6. made by giving notice to the insurer - orally or writing
7. notice explicit and unequivocal
8. Must be accepted by the insurer
What if insurer refuses to accept abandonment - Sec 156, shall be liable for actual total loss

Averages/ JETTISON - any extraordinary /accidental expense incurred during the voyage
for the preservation of the voyage
A. general - damage deliberately caused by master of vessel or upon his
authority in order to save vessel, cargo or both, made at the time of happening
of the risk
Requisites in right to claim - C2PM3
1. common danger to vessel
2. part of vessel sacrificed deliberately
3. for common safety
4. made by master or upon his authority
5. must be successful
6. must be necessary

B. simple/particular - include all damages caused to the vessel