INSURANCE LAW acts or duties of the kind necessary in the prosecution of his business.

It is argued that what is

compensable is the disability and not the amputation of the hand. The definition of what
constitutes loss of hand, placed in the contract, according to appellant, consequently, makes
Interpretation the provision ambiguous and calls for the interpretation thereof by this Court.

[ G.R. Nos. L-21821-22, L-211824-27. May 31, 1966 ] ISSUE:

TY, VS. FIILIPINAS COMPAÑIA DE SEGUROS, ET AL.
BARRERA, J.:
FACTS:
Plaintiff-appellant was an employee of Broadway Cotton Factory at Grace Park, Caloocan
City, working as mechanic-operator. In the latter part of 1953, he took Personal Accident
Policies from several insurance companies, among which are herein defendants-appellees, on
different dates, effective for 12 months. During the effectivity of these policies, or on
December 24, 1953, a fire broke out in the factory where plaintiff was working". As he was
trying to put out said fire with the help of a fire extinguisher, a heavy object fell upon his left
hand. Plaintiff received treatment at the National Orthopedic Hospital from December 26,
1953 to February 8, 1954, for which injuries, the attending surgeon certified, would cause
temporary total disability of appellant's left hand.
Whether or not Ty should be indemnified under his accident policy.
RULING:
"While we sympathize with the plaintiff or his employer, for whose benefit the policies were
issued, we can not go beyond the clear and express conditions of the insurance policies, all of
which defined partial disability as loss of either hand by amputation through the bones
of the wrist. There was no such amputation in the case at bar. All that was found by the trial
court, which is not disputed on appeal, was that the physical injuries 'caused temporary total
disability of plaintiff's left hand.' Note that the disability of plaintiff's hand was merely
temporary, having been caused by fractures of the index, the middle and the fourth
fingers of the left hand.
"We might add that the agreement contained in the insurance policies is the law between the
parties. As the terms of the policies are clear, express and specific that only amputation of the
left hand should be considered as a loss thereof, an interpretation that would include- the mere
fracture or temporary disability not covered by the policies would certainly be unwarranted.”

As the insurance companies refused to pay his claim for compensation under the policies, by Plaintiff-appellant cannot come to the court and claim that he was misled by the terms of the
reason of the said disability of his left hand, Ty filed actions in the Municipal Courts of contract. The provision is clear enough to inform the party entering into that contract that the
Manila, which rendered favorable decision. On appeal to the Court of First Instance by the loss to be considered a disability entitled to indemnity, must be severance or amputation of
insurance companies, the cases were dismissed on the ground that under the uniform terms of that affected member from the body of the Insured.
the insurance policies, partial disability of the insured caused by loss of either hand to be com
pensable, the loss must result in the amputation of that hand. Hence, these appeals by the
insured.

Plaintiff-appellant is basing his claim for indemnity under the provision of the insurance
contract uniform in all the cases, which reads:

"If the Insured sustains any Bodily Injury which is effected solely through
violent, external, visible and accidental means, and which shall not prove
fatal but shall result, independently of all other causes and within sixty
(60) days from the occurrence there of, in Total or Partial Disability of the
Insured, the Company shall pay, subject to the exceptions as provided for
hereinafter, the amount set opposite such injury:

*******
"PARTIAL DISABILITY
*******
"LOSS OF:
*******
“Either hand

"The loss of a hand shall mean the loss by amputation through the bones of the wrist."

Appellant contends that to be entitled to indemnification under the foregoing provision, it is

enough that the insured is disabled to such an extent that he cannot substantially perform all
 SECOND DIVISION
[ G.R. No. 156167. May 16, 2005 ]
GULF RESORTS, INC., VS. PHILIPPINE CHARTER INSURANCE CORPORATION.
PUNO, J.:
FACTS:
Plaintiff is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in
said resort insured originally with the American Home Assurance Company (AHAC-AIU). In
the first four insurance policies issued by AHAC-AIU from 1984-85; 1985-86; 1986-1987;
and 1987-88, the risk of loss from earthquake shock was extended only to plaintiff’s two
swimming pools; that subsequently AHAC(AIU) issued in plaintiff’s favor Policy covering
the period March 14, 1988 to March 14, 1989 and in said policy the earthquake endorsement
clause as indicated in the first four insurance policies was deleted and the entry under
Endorsements/Warranties at the time of issue read that plaintiff renewed its policy with AHAC
(AIU) for the period of March 14, 1989 to March 14, 1990 under Policy which carried the
entry under “Endorsement/Warranties at Time of Issue”, which read “Endorsement to
Include Earthquake Shock in the amount of P10,700.00 and paid P42,658.14 as premium
thereof, computed as follows:
393,000.00-on the two swimming pools, only (against the peril of
earthquake shock only) @ 0.100%
that plaintiff agreed to insure with defendant the properties covered by AHAC (AIU) Policy
provided that the policy wording and rates in said policy be copied in the policy to be issued
by defendant; that defendant issued Policy No. 31944 to plaintiff covering the period of March
14, 1990 to March 14, 1991 for P10,700,600.00 for a total premium of P45,159.92; that in the
computation of the premium, defendant’s Policy No. 31944, which is the policy in question,
contained on the right-hand upper portion of page 7 thereof, the break-down for premiums;
that thebreak-down of premiums shows that plaintiff paid only P393.00 as premium against
earthquake shock (ES); that in all the six insurance policies, the premium against the
peril of earthquake shock is the same, that is P393.00; issued by AHAC and in Policy No.
31944 issued by defendant. the shock endorsement provide(sic):
In consideration of the payment by the insured to the company of the sum
included additional premium the Company agrees, notwithstanding what
is stated in the printed conditions of this policy due to the contrary, that
this insurance covers loss or damage to shock to any of the property
insured by this Policy occasioned by or through or in consequence of
earthquake;
that in Exhibit “7-C” the word “included” above the underlined portion
was deleted; that on July 16, 1990 an earthquake struck Central Luzon and
Northern Luzon and plaintiff’s properties covered by Policy No. 31944
issued by defendant, including the two swimming pools in its Agoo Playa
Resort were damaged.
After the earthquake, petitioner advised respondent that it would be making a claim under its
Insurance Policy No. 31944 for damages on its properties. Respondent instructed petitioner to
file a formal claim, then assigned the investigation of the claim to an independent claims
adjuster, Bayne Adjusters and Surveyors, Inc. On July 30, 1990, respondent, through its
adjuster, requested petitione r to submit various documents in support of its claim. On August
7, 1990, Bayne Adjusters and Surveyors, Inc., through its Vice-President A.R. de
Leon, rendered a preliminary reportfinding extensive damage caused by the earthquake to the
clubhouse and to the two swimming pools. Mr. de Leon stated that “except for the
swimming pools, all affected items have no coverage for earthquake shocks.” On August
11, 1990, petitioner filed its formal demand for settlement of the damage to all its properties in
the Agoo Playa Resort. On August 23, 1990, respondent denied petitioner’s claim on the
ground that its insurance policy only afforded earthquake shock coverage to the two
swimming pools of the resort. Petitioner and respondent failed to arrive at a settlement. Thus,
on January 24, 1991, petitioner filed a complaint with the regional trial court of Pasig praying
for the payment of the following:
1.) The sum of P5,427,779.00, representing losses sustained by the insured properties,
with interest thereon, as computed under par. 29 of the policy (Annex “B”) until fully
paid;
Respondent filed its Answer with Special and Affirmative Defenses with Compulsory
Counterclaims.
The lower court after trial ruled in favor of the respondent, viz:
The above schedule clearly shows that plaintiff paid only a premium of
P393.00 against the peril of earthquake shock, the same premium it
paid against earthquake shock only on the two swimming pools in all
the policies issued by AHAC(AIU). From this fact the Court must
consequently agree with the position of defendant that the endorsement
rider means that only the two swimming pools were insured against
earthquake shock.
Petitioner’s Motion for Reconsideration was denied. Thus, petitioner filed an appeal with the
Court of Appeals.
On the other hand, respondent filed a partial appeal, assailing the lower court’s failure to
award it attorney’s fees and damages on its compulsory counterclaim.
After review, the appellate court affirmed the decision of the trial court and ruled, thus:
However, after carefully perusing the documentary evidence of both
parties, We are not convinced that the last two (2) insurance contracts,
which the plaintiff-appellant had with AHAC (AIU) and upon which the
subject insurance contract with Philippine Charter Insurance Corporation
is said to have been based and copied, covered an extended earthquake
shock insurance on all the insured properties.
Petitioner filed the present petition.
ISSUE:
Whether or not the policy’s earthquake shock endorsement covers all of the properties insured
and not only the swimming pools.
RULING:
It is basic that all the provisions of the insurance policy should be examined and
interpreted in consonance with each other. All its parts are reflective of the true intent of the
parties. The policy cannot be construed piecemeal. Certain stipulations cannot be segregated
and then made to control; neither do particular words or phrases necessarily determine its
character. Petitioner cannot focus on the earthquake shock endorsement to the exclusion of the
other provisions. All the provisions and riders, taken and interpreted together,
indubitably show the intention of the parties to extend earthquake shock coverage to the
two swimming pools only.
A careful examination of the premium recapitulation will show that it is the clear intent of
the parties to extend earthquake shock coverage only to the two swimming pools. Section
2(1) of the Insurance Code defines a contract of insurance as an agreement whereby one Philippines v. National Merchandising Corporation, et al., the parties, who were acute
undertakes for a consideration to indemnify another against loss, damage or liability arising businessmen of experience, were presumed to have assented to the assailed documents with
from an unknown or contingent event. Thus, an insurance contract exists where the following full knowledge.
elements concur:
1. The insured has an insurable interest; We cannot apply the general rule on contracts of adhesion to the case at bar. Petitioner cannot
2. The insured is subject to a risk of loss by the happening of the designated peril; claim it did not know the provisions of the policy. From the inception of the policy, petitioner
3. The insurer assumes the risk; had required the respondent to copy verbatim the provisions and terms of its latest insurance
4. Such assumption of risk is part of a general scheme to distribute actual losses among policy from AHAC-AIU. The testimony of Mr. Leopoldo Mantohac, a direct participant in
a large group of persons bearing a similar risk; and securing the insurance policy of petitioner, is reflective of petitioner’s knowledge.
5. In consideration of the insurer's promise, the insured pays a premium. Respondent, in compliance with the condition set by the petitioner, copied AIU Policy No.
An insurance premium is the consideration paid an insurer for undertaking to indemnify the 206-4568061-9 in drafting its Insurance Policy No. 31944. It is true that there was variance in
insured against a specified peril. In fire, casualty, and marine insurance, the premium payable some terms, specifically in the replacement cost endorsement, but the principal provisions of
becomes a debt as soon as the risk attaches. In the subject policy, no premium payments the policy remained essentially similar to AHAC-AIU’s policy. Consequently, we cannot
were made with regard to earthquake shock coverage, except on the two swimming apply the "fine print" or "contract of adhesion" rule in this case as the parties’ intent to limit
pools. There is no mention of any premium payable for the other resort properties with regard the coverage of the policy to the two swimming pools only is not ambiguous.
to earthquake shock. This is consistent with the history of petitioner’s previous insurance
policies from AHAC-AIU.
Petitioner also cited and relies on the attachment of the phrase “Subject to: Other Insurance
Clause, Typhoon Endorsement, Earthquake Shock Endorsement, Extended Coverage
Endorsement, FEA Warranty & Annual Payment Agreement on Long Term Policies” to
the insurance policy as proof of the intent of the parties to extend the coverage for earthquake
shock. However, this phrase is merely an enumeration of the descriptive titles of the riders,
clauses, warranties or endorsements to which the policy is subject, as required under Section
50, paragraph 2 of the Insurance Code.

We also hold that no significance can be placed on the deletion of the qualification limiting the
coverage to the two swimming pools. The earthquake shock endorsement cannot stand
alone. As explained by the testimony of Juan Baranda III, underwriter for AHAC-AIU.
The Court also rejects petitioner's contention that respondent's contemporaneous and
subsequent acts to the issuance policy falsely gave the petitioner assurance that the coverage of
the earthquake shock endorsement included all its properties in the resort. Respondent only
insured the properties as intended by the petitioner. Petitoner's own witness testified to this
agreement.
Finally, petitioner puts much stress on the letter of respondent’s independent claims adjuster,
Bayne Adjusters and Surveyors, Inc. But as testified to by the representative of Bayne
Adjusters and Surveyors, Inc., respondent never meant to lead petitioner to believe that the
endorsement for earthquake shock covered properties other than the two swimming pools.
In sum, there is no ambiguity in the terms of the contract and its riders. Petitioner cannot rely
on the general rule that insurance contracts are contracts of adhesion which should be liberally
construed in favor of the insured and strictly against the insurer company which usually
prepares it. A contract of adhesion is one wherein a party, usually a corporation, prepares the
stipulations in the contract, while the other party merely affixes his signature or his "adhesion"
thereto. Through the years, the courts have held that in these type of contracts, the parties do
not bargain on equal footing, the weaker party's participation being reduced to the alternative
to take it or leave it. Thus, these contracts are viewed as traps for the weaker party whom the
courts of justice must protect. Consequently, any ambiguity therein is resolved against the
insurer, or construed liberally in favor of the insured.

The case law will show that this Court will only rule out blind adherence to terms where facts
and circumstances will show that they are basically one-sided. Thus, we have called on lower
courts to remain careful in scrutinizing the factual circumstances behind each case to
determine the efficacy of the claims of contending parties. In Development Bank of the

[ G. R. No. L-21574. June 30, 1966 ]
SIMON DE LA CRUZ, VS. THE CAPITAL INSURANCE & SURETY CO., INC..
BARRERA, J.:
insured's voluntary act, unaccompanied by anything unforeseen except the death or
injury. There is no accident when a deliberate act is performed unless some additional,
unexpected, independent, and unforeseen happening occurs which produces or brings about
the result of injury or death. In other words, where the death or injury is not the natural or
probable result of the insured' s voluntary act, or if something unforeseen occurs in the
doing of the act which produces the injury, the resulting death is within the protection of
policies insuring against death or injury from accident.

In the present case, while the participation of the insured in the boxing contest is voluntary, the
FACTS:
injury was sustained when he slid, giving occasion to the infliction by his opponent of the
Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc Mines, Inc. in Baguio, was the
blow that threw him to the ropes of the ring. Without this unfortunate incident, that is, the
holder of an accident insurance policy underwritten by the Capital Insurance & Surety Co.,
unintentional slipping of the deceased, perhaps he could not have received that blow in the
Inc., for the period beginning November 13, 1956 to November 12, 1957. On January 1, 1957,
head and would not have died. The fact that boxing is attended with some risks of external
in connection with the celebration of the New Year, the Itogon-Suyoc Mines, Inc. sponsored a
injuries does not make any injuries received in the course of the game not accidental. In
boxing contest for general entertainment wherein the insured Eduardo de la Cruz, a
boxing, as in other equally physically rigorous sports, such as basketball or baseball,
non-professional boxer, participated. In the course of his bout with another person, likewise
death is not ordinarily anticipated to result. If, therefore, it ever does, the injury or death
a non-professional, of the same height, weight, and size, Eduardo slipped and was hit by his
can only be accidental or produced by some unforeseen happening or event as what occurred
opponent on the left part of the back of the head, causing Eduardo to fall, with his head
in this case.
hitting the rope of the ring. He was brought to the Baguio General Hospital unconscious,
where the insured expired on the following day. The cause of death was reported as
Furthermore, the policy involved herein specifically excluded from its coverage—
hemorrhage, intracranial, left.
"(e) Death or disablement consequent upon the Insured engaging in
football, hunting, pigsticking, steeplechasing, polo playing, racing of any
Simon de la Cruz, the father of the insured and who was named beneficiary under the policy,
kind, mountaineering, or motorcycling."
thereupon filed a claim with the insurance company for payment of the indemnity under the
insurance policy. As the claim was denied, De la Cruz instituted the action in the Court of First
Death or disablement resulting from engagement in boxing contests was not declared outside
Instance of Pangasinan for specific performance. Defendant insurer set up the defense that the
of the protection of the insurance contract. Failure of the defendant insurance company to
death of the insured, caused by his participation in a boxing contest, was not accidental
include death resulting from a boxing match or other sports among the prohibitive risks leads
and, therefore, not covered by insurance. After due hearing, the court rendered the decision
inevitably to the conclusion that it did not intend to limit or exempt itself from liability for
in favor of the plaintiff which is the subject of the present appeal.
such death.
Appellant insurer now contends that while the death of the insured was due to head-injury,
said injury was sustained because of his voluntary participation in the contest. It is claimed
that the participation in the boxing contest was the "means" that produced the injury which, in
turn, caused the death of the insured. And, since his inclusion in the boxing card was voluntary
on the part of the insured, he cannot be considered to have met his death by "accidental
means".

ISSUE:
Whether or not the death of the insured, caused by his participation in a boxing contest, was
not accidental and, therefore, not covered by insurance.

RULING:
The terms "accident" and "accidental", as used in insurance contracts, have not acquired
any technical meaning, and are construed by the courts in their ordinary and common
acceptation. Thus, the terms have been taken to mean that which happen by chance or
fortuitously, without intention and design, and which is unexpected, unusual, and unforeseen.
An accident is an event that takes place without one's foresight or expectation - an event that
proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, not
expected.

The generally accepted rule is that, death or injury does not result from accident or
accidental means within the terms of an accident-policy if it is the natural result of the
 [ G.R. No. 195872. March 12, 2014 ]
FORTUNE MEDICARE, INC. VS. DAVID ROBERT U. AMORIN.
REYES, J.:
FACTS:
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 which was executed
on January 6, 2000 by Fortune Care and the House of Representatives, where Amorin was
a permanent employee.
While on vacation in Honolulu, Hawaii, United States of America (U.S.A.) in May 1999,
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. to
wit:
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. x x x
Still, Fortune Care denied Amorin’s request, prompting the latter to file a complaint for breach
of contract with damages with the Regional Trial Court (RTC) of Makati City.
For its part, Fortune Care argued that the Health Care Contract did not cover hospitalization
costs and professional fees incurred in foreign countries, as the contract’s operation was
confined to Philippine territory. Further, it argued that its liability to Amorin was extinguished
upon the latter’s acceptance from the company of the amount of P12,151.36.
The RTC of Makati, Branch 66 rendered its Decision dismissing Amorin’s complaint. Citing
Section 3, Article V of the Health Care Contract, the RTC explained:
Taking the contract as a whole, the Court is convinced that the parties
intended to use the Philippine standard as basis.
In the absence of evidence to the contrary, the trial court considered the amount of P12,151.36
already paid by Fortune Care to Amorin as equivalent to 80% of the hospitalization and
professional fees payable to the latter had he been treated in an affiliated hospital. Dissatisfied,
Amorin appealed the RTC decision to the CA.
The CA rendered its Decision granting the appeal. In so ruling, the appellate court pointed out
that, first, health care agreements such as the subject Health Care Contract, being like
insurance contracts, must be liberally construed in favor of the subscriber. In case its
provisions are doubtful or reasonably susceptible of two interpretations, the construction
conferring coverage is to be adopted and exclusionary clauses of doubtful import should be
strictly construed against the provider. Second, the CA explained that there was nothing under
Article V of the Health Care Contract which provided that the Philippine standard should be
used even in the event of an emergency confinement in a foreign territory.
Fortune Care’s motion for reconsideration was denied in a Resolution dated February 24,
2011. Hence, the filing of the present petition for review on certiorari.
ISSUE:
Whether or not the phrase “approved standard charges” is subject to interpretation, and that it
did not automatically mean “Philippine Standard”.
RULING:
Fortune Care’s liability to Amorin under the subject Health Care Contract should be based on
the expenses for hospital and professional fees which he actually incurred, and should not be
limited by the amount that he would have incurred had his emergency treatment been
performed in an accredited hospital in the Philippines.
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. By reason of the
exclusive control of the insurance company over the terms and
phraseology of the insurance contract, ambiguity must be strictly
interpreted against the insurer and liberally in favor of the insured,
especially to avoid forfeiture. This is equally applicable to Health Care
Agreements. The phraseology used in medical or hospital service
contracts, such as the one at bar, must be liberally construed in favor of the
subscriber, and if doubtful or reasonably susceptible of two interpretations
the construction conferring coverage is to be adopted, and exclusionary
clauses of doubtful import should be strictly construed against the
provider.
Consistent with the foregoing, we reiterated in Blue Cross Health Care, Inc. v. Spouses
Olivares:
 In Philamcare Health Systems, Inc. v. CA, we ruled that a health care
agreement is in the nature of a non-life insurance. It is an established
rule in insurance contracts that when their terms contain limitations on
liability, they should be construed strictly against the insurer. These are
contracts of adhesion the terms of which must be interpreted and enforced
stringently against the insurer which prepared the contract. This doctrine
is equally applicable to health care agreements.
In the instant case, the extent of Fortune Care’s liability to Amorin under the attendant
circumstances was governed by Section 3(B), Article V of the subject Health Care Contract,
considering that the appendectomy which the member had to undergo qualified as an
emergency care, but the treatment was performed at St. Francis Medical Center in Honolulu,
Hawaii, U.S.A., a non-accredited hospital.
The point of dispute now concerns the proper interpretation of the phrase “approved standard
charges”, which shall be the base for the allowable 80% benefit.
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. Plainly, the term “standard charges” could be read as
referring to the “hospitalization costs and professional fees” which were specifically cited as
compensable even when incurred in a foreign country. Contrary to Fortune Care’s argument,
from nowhere in the Health Care Contract could it be reasonably deduced that these “standard
charges” referred to the “Philippine standard”, or that cost which would have been incurred if
the medical services were performed in an accredited hospital situated in the Philippines. The
RTC ruling that the use of the “Philippine standard” could be inferred from the provisions of
Section 3(A), which covered emergency care in an accredited hospital, was misplaced.
Evidently, the parties to the Health Care Contract made a clear distinction between emergency
care in an accredited hospital, and that obtained from a non-accredited hospital. The limitation
on payment based on “Philippine standard” for services of accredited physicians was expressly
made applicable only in the case of an emergency care in an accredited hospital.
The proper interpretation of the phrase “standard charges” could instead be correlated with and
reasonably inferred from the other provisions of Section 3(B), considering that Amorin’s case
fell under the second case, i.e., emergency care in a non-accredited hospital. Rather than a
determination of Philippine or American standards, the first part of the provision speaks of the
full reimbursement of “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” within the Philippines. Thus, for emergency care in non-accredited hospitals, this
cited clause declared the standard in the determination of the amount to be paid, without any
reference to and regardless of the amounts that would have been payable if the treatment was
done by an affiliated physician or in an affiliated hospital. For treatments in foreign territories,
the only qualification was only as to the percentage, or 80% of that payable for treatments
performed in non-accredited hospital.
All told, in the absence of any qualifying word that clearly limited Fortune Care’s liability to
costs that are applicable in the Philippines, the amount payable by Fortune Care should not be
limited to the cost of treatment in the Philippines, as to do so would result in the clear
disadvantage of its member. If, as Fortune Care argued, the premium and other charges in the
Health Care Contract were merely computed on assumption and risk under Philippine cost
and, that the American cost standard or any foreign country’s cost was never considered, such
limitations should have been distinctly specified and clearly reflected in the extent of coverage
which the company voluntarily assumed. This was what Fortune Care found appropriate when
in its new health care agreement with the House of Representatives, particularly in their 2006
agreement, the provision on emergency care in non-accredited hospitals was modified to read
as follows:
However, if the emergency confinement occurs in a foreign territory,
Fortunecare will be obligated to reimburse or pay one hundred (100%)
percent under approved Philippine Standard covered charges for
hospitalization costs and professional fees but not to exceed maximum
allowable coverage, payable in pesos at prevailing currency exchange rate
at the time of availment in said territory where he/she is confined. x x x
Settled is the rule that ambiguities in a contract are interpreted against the party that caused the
ambiguity. “[A]ny ambiguity in a contract whose terms are susceptible of different
interpretations must be read against the party who drafted it.
[ G.R. No. 195176. April 18, 2016 ]
THE INSULAR LIFE ASSURANCE COMPANY, LTD., VS. PAZ Y. KHU, FELIPE Y.
KHU, JR., AND FREDERICK Y. KHU.
DEL CASTILLO, J.
FACTS:
Felipe N. Khu, Sr. applied for a life insurance policy with Insular Life under the latter's
Diamond Jubilee Insurance Plan. Felipe accomplished the required medical questionnaire
wherein he did not declare any illness or adverse medical condition. Insular Life thereafter
issued him Policy with a face value of P 1 million. This took effect on June 22, 1997.
Felipe's policy lapsed due to non-payment of the premium covering the period from June 22,
1999 to June 23, 2000.
Felipe applied for the reinstatement of his policy and paid P25,020.00 as premium. Except for
the change in his occupation of being self-employed to being the Municipal Mayor of
Binuangan, Misamis Oriental, all the other information submitted by Felipe in his application
for reinstatement was virtually identical to those mentioned in his original policy.
Insular Life advised Felipe that his application for reinstatement may only be considered if he
agreed to certain conditions such as payment of additional premium and the cancellation of the
riders pertaining to premium waiver and accidental death benefits. Felipe agreed to these
conditions and paid the agreed additional premium of P3,054.50.
On January 7, 2000, Insular Life issued Endorsement, which reads:
This certifies that as agreed by the Insured, the reinstatement of this policy
has been approved by the Company on the understanding that the
following changes are made on the policy effective June 22, 1999:
 1. The EXTRA PREMIUM is imposed; and
2. The ACCIDENTAL DEATH BENEFIT (ADB) and WAIVER OF
PREMIUM DISABILITY (WPD) rider originally attached to and forming
parts of this policy [are] deleted.
In consequence thereof, the premium rates on this policy are adjusted to
P28,000.00 annually, P14,843.00 semi-annually and P7,557.00 quarterly,
Philippine currency.
Felipe paid the annual premium in the amount of P28,000.00 covering the period from June
22, 2000 to June 22, 2001. And on July 2, 2001, he also paid the same amount as annual
premium covering the period from June 22,2001 to June 21, 2002.
On September 22, 2001, Felipe died. His Certificate of Death enumerated the following
as causes of death:
Immediate cause: a. End stage renal failure, Hepatic failure
Antecedent cause: b. Congestive heart failure, Diffuse myocardial
ischemia.
Underlying cause: c. Diabetes Neuropathy, Alcoholism, and Pneumonia.
Paz Y. Khu, Felipe Y. Khu, Jr. .and Frederick Y. Khu (collectively, Felipe's beneficiaries or
respondents) filed with Insular Life a claim for benefit under the reinstated policy. This claim
was denied. Instead, Insular Life advised Felipe's beneficiaries that it had decided to rescind
the reinstated policy on the grounds of concealment and misrepresentation by Felipe.
Hence, respondents instituted a complaint for specific performance with damages.
Respondents prayed that the reinstated life insurance policy be declared valid, enforceable and
binding on Insular Life; and that the latter be ordered to pay unto Felipe's beneficiaries the
proceeeds of this policy, among others.
In its Answer, Insular Life countered that Felipe did not disclose the ailments (viz., Type 2
Diabetes Mellitus, Diabetes Nephropathy and Alcoholic Liver Cirrhosis with Ascites) that he
already had prior to his application for reinstatement of his insurance policy; and that it would
not have reinstated the insurance policy had Felipe disclosed the material information on his
adverse health condition. It contended that when Felipe died, the policy was still contestable.
The RTC, Branch 39 of Cagayan de Oro City found for Felipe's beneficiaries, thus ordering
Insular to pay jointly and severally the sum of One Million (P1,000,000.00) Pesos with legal
rate of interest from the date of demand until it is fully paid representing the face value of Plan
Diamond Jubilee issued to insured the late Felipe N. Khu[,] Sr; the sum of P20.000.00 as
moral damages; P30,000.00 as attorney's fees; P10,000.00 as litigation expenses.
In ordering Insular Life to pay Felipe's beneficiaries, the RTC agreed with the latter's claim
that the insurance policy was reinstated on June 22, 1999. The RTC cited the ruling
in Malayan Insurance Corporation v. Court of Appeals that any ambiguity in a contract of
insurance should be resolved strictly against the insurer upon the principle that an
insurance contract is a contract of adhesion. The RTC noted that' since it was Insular Life
itself that supplied all the pertinent forms relative to the reinstated policy, then it is barred
from taking advantage of any ambiguity/obscurity perceived therein particularly as regards the
date when the reinstated insurance policy became effective.
The CA issued the assailed Decision which affirmed with the modification the assailed
judgement of the lower court.
The CA upheld the RTC's ruling. It declared that contrary to Insular Life's contention, there in
fact exists a genuine ambiguity or obscurity in the language of the two documents prepared by
Insular Life itself, viz., Felipe's Letter of Acceptance and Insular Life's Endorsement; that
given the obscurity/ambiguity in the language of these two documents, the
construction/interpretation that favors the insured's right to recover should be adopted; and that
in keeping with this principle, the insurance policy in dispute must be deemed reinstated as of
June 22, 1999.
Insular Life moved for partial reconsideration but this was denied by the CA in its Resolution
of December 13, 2010. Hence, the present Petition.
ISSUE:
Whether or not the phrase "effective June 22, 1999" found in both the Letter of Acceptance
and in the Endorsement is unclear whether it refers to the subject of the sentence, i.e., the
"reinstatement of this policy" or to the subsequent phrase "changes are made on the policy".
RULING:
The Letter of Acceptance wherein Felipe affixed his signature was actually drafted and
prepared by Insular Life. After Felipe accomplished this form, Insular Life, through its
Regional Administrative Manager, Jesse James R. Toyhorada.
The subject insurance policy be considered as reinstated on June 22, 1999. This finding
must be upheld not only because it accords with the evidence, but also because this is
favorable to the insured who was not responsible for causing the ambiguity or obscurity in the
insurance contract.
The CA expounded on this point thus -
The Court discerns a genuine ambiguity or obscurity in the language of the
two documents.
In the Letter of Acceptance, Khu declared that he was accepting "the
imposition of an extra/additional x x x premium of P5.00 a year per
thousand of insurance; effective June 22, 1999". It is true that the phrase
as used in this particular paragraph does not refer explicitly to the
effectivity of the reinstatement. But the Court notes that the reinstatement
was conditioned upon the payment of additional premium not only
prospectively, that is, to cover the remainder of the annual period of
coverage, but also retroactively, that is for the period starting June 22,
1999. Hence, by paying the amount of P3,054.50 on December 27, 1999
in addition to the P25,020.00 he had earlier paid on September 7, 1999,
Khu had paid for the insurance coverage starting June 22, 1999. At the
very least, this circumstance has engendered a true lacuna.
 hi the Endorsement, the obscurity is patent. In the first sentence of the
Endorsement, it is not entirely clear whether the phrase "effective June 22,
1999" refers to the subject of the sentence, namely "the reinstatement of
this policy," or to the subsequent phrase "changes are made on the policy."

The court below is correct. Given the obscurity of the language, the
construction favorable to the insured will be adopted by the courts.

Accordingly, the subject policy is deemed reinstated as of June 22, 1999.

Thus, the period of contestability has lapsed.

In Eternal Gardens Memorial Park Corporation v. The Philippine American Life Insurance
Company, we ruled in favor of the insured and in favor of the effectivity of the insurance
contract in the midst of ambiguity in the insurance contract provisions. We held that:

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.

x x x x

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.
Perfection of Insurance Contract
[ G.R. No. 201116. March 04, 2019 ]
PHILAM INSURANCE CO., INC., NOW CHARTIS PHILIPPINES INSURANCE, INC.,
VS. PARC CHATEAU CONDOMINIUM UNIT OWNERS’ ASSOCIATION, INC.,
AND/OR EDUARDO B. COLET.
REYES, J. JR., J.
FACTS:
Petitioner Philam Insurance Co., Inc. [now Chartis Philippines Insurance, Inc.] submitted a
proposal to respondent Parc Chateau Condominium Unit Owners Association, Inc. to cover
fire and comprehensive general liability insurance of its condominium building, Parc Chateau
Condominium.
Respondent Eduardo B. Colet, as Parc Association's president, informed Philam, through a
letter that Parc Association's board of directors selected it, among various insurance
companies, to provide the insurance requirements of the condominium.
After Philam appraised the condominium, it issued Fire and Lightning Insurance Policy for
P900 million and Comprehensive General Liability Insurance Policy for P1 Million, both
covering the period from November 30, 2003 to November 30, 2004. The parties negotiated
for a 90-day payment term of the insurance premium, worth P791,427.50 including taxes.
This payment term was embodied in a Jumbo Risk Provision, which further provided that the
premium installment payments were due on November 30, 2003, December 30, 2003, and
January 30, 2004. The Jumbo Risk Provision also stated that if any of the scheduled
payments are not received in full on or before said dates, the insurance shall be deemed
to have ceased at 4 p.m. of such date, and the policy shall automatically become void and
ineffective.
CA denied in its March 14, 2012 Resolution. Undeterred, Philam filed a Petition for Review
on Certiorari under Rule 45 of the Rules of Court, as amended, before the Court.
ISSUE:
Whether or not the fourth exception provided for under Section 77 of the Insurance Code of
the Philippines applies in the instant case.
“If the insurer has granted the insured a credit term for the payment of the premium, it is an
exception to the general rule that premium must be first paid before the effectivity of an
insurance contract.”
RULING:
Philam argues that the 90-day payment term is a credit extension and should be considered as
an exception to the general rule.
However, the Jumbo Risk Provision clearly indicates that failure to pay in full any of the
scheduled installments on or before the due date shall render the insurance policy void and
ineffective as of 4 p.m. of such date. Parc Association's failure to pay on the first due date
(November 30, 2003), resulted in a void and ineffective policy as of 4 p.m. of November 30,
2003. Hence, there is no credit extension to consider as the Jumbo Risk Provision itself
expressly cuts off the inception of the insurance policy in case of default.
Both trial courts and the appellate court are consistent in its findings of fact that there is no
perfected insurance contract, because of the absence of one of the elements, that is,
payment of premium. As a consequence, Philam cannot collect P363,215.21 unpaid
premiums of void insurance policies.

Parc Association's board of directors found the terms unacceptable and did not pursue the
transaction. Parc Association verbally informed Philam, through its insurance agent, of the
board's decision. Since no premiums were paid, Philam made oral and written demands
upon Parc Association, who refused to do so alleging that the insurance agent had been
informed of its decision not to take up the insurance coverage. Philam sent demand letters
with statement of account claiming P363,215.21 unpaid premium based on Short Scale Rate
Period. Philam also cancelled the policies.

Philam filed a complaint against Parc Association and Colet for recovery of P363,215.21
unpaid premium, plus attorney's fees and costs of suit in the Metropolitan Trial Court (MeTC)
of Makati, Branch 65.

The MeTC dismissed the case. Philam appealed to the Regional Trial Court (RTC) of Makati,
Branch 137, which partly affirmed the MeTC decision, except as to attorney's fees. Philam
moved for reconsideration, which the RTC denied in a Resolution.
Unconvinced, Philam elevated the case before the Court of Appeals (CA) through a petition
for review under Rule 42 of the Rules of Court, as amended.

The CA rendered a Decision denying Philam's petition and affirming the June 3, 2008 RTC
Decision and September 17, 2009 Resolution. Philam moved for reconsideration, which the
 [ G.R. No. 228402. August 26, 2020 ]
LOYOLA LIFE PLANS INCORPORATED (NOW LOYOLA PLANS CONSOLIDATED
INC.) AND ANGELITA D. LUMIQUED, VS. ATR PROFESSIONAL LIFE ASSURANCE
CORPORATION (NOW ASIAN LIFE AND GENERAL ASSURANCE CORPORATION).
CARANDANG, J.:
FACTS:
Loyola Life Plans, Inc. is a pre-need company engaged in the business of insuring the lives of
its plan holders through its Timeplans (pension contracts) and Lifeplans (memorial service
contracts), which are covered by insurance benefits provided by several insurance companies
including GE Life Insurance Company, Incorporated (GE Life), later known as ATR
Professional Life Assurance Corporation (ATR). Loyola applied with ATR for a Group
Creditors Life Insurance plan, with Group Yearly Renewable Term Life and Accidental Death
Benefit as supplementary benefits. They entered into a Group Creditors Life Insurance
Agreement, effective on June 15, 1999, under Master Policy.
Dwight L. Lumiqued, husband of Angelita Lumiqued, purchased a Timeplan from Loyola
payable in 120 monthly installments in the amount of P5,040.00 per month. To pay for the
first monthly premium, Dwight issued two Metrobank checks in the amounts of P2,824.75
and P600.00. He also paid in cash P1,615.25. Simultaneous with the payment of the first
monthly premium, Dwight executed Timeplan Application for which Timeplan Contract was
issued. He was then issued an Official Receipt, which expressly states that the Receipt is valid
for downpayment only. Checks and other similar forms shall be valid only when cleared
by the Bank.
escape paying the proceeds under the Group Creditors Life Insurance in the amount of
P599,760.00, Group Yearly Renewable Term Life in the amount of P604,800,00, and the
Accidental Death Benefit in the amount of P604,800.00 by insisting that Dwight was
murdered. Loyola pointed out that ATR failed to give any evidence to support its claim that
Dwight was murdered and not a victim of homicide. Thus, Loyola and Angelita prayed that
ATR be directed to comply with its obligations under the Group Creditors Life Insurance
Agreement by paying P1,809,360.00 in actual damages. In addition, Loyola and Angelita
prayed that judgment be rendered ordering ATR to pay moral damages, and exemplary
damages. Attorney's fees, litigation expenses, and costs of suit were also prayed for.
The RTC rendered its decision, dismissing the Complaint of ATR and holding ATR
Professional Life Insurance Corporation, now the Asian Life and General Assurance
Corporation, liable for defendants' counterclaim. The CA rendered its Decision, denying the
instant Appeal.
ATR filed its petition for review on certiorari, claiming that it is not liable to pay the heirs of
Dwight because: (1) Dwight did not complete the monthly premium payment prior to his death
because the cash payment of P1,615.25 was only deposited on May 2, 2000; (2) the Timeplan
application of Dwight is forged; and (3) murder is not among the risks covered by the Group
Creditors Life Insurance Agreement.
ISSUE:
Whether or not an insurance contract was perfected between Dwight and ATR on April 28,
2000 when Dwight paid Loyola's agent, Gumiran, cash in the amount of P1,615.25 and two
checks amounting to P2,824.75, and P600.00, thus entitling his heirs to the proceeds of the
policy following his death on May 1, 2000.

Belen Edith C. Ganit, Loyola's Sales Operation Assistant, deposited on the same day the two RULING:
Metrobank checks while the cash payment was deposited to the account of Loyola on May 2, Dwight timely paid the initial monthly premium for the Timeplan on April
2000. 28, 2000 to Loyola who is an agent of ATR. Hence, an insurance contract was perfected.

On May 1, 2000, Dwight died due to multiple stab wounds. A contract of insurance is defined as an agreement whereby one undertakes for a consideration
to indemnify another against loss, damage, or liability arising from an unknown or contingent
Thereafter, Angelita filed a claim to recover the proceeds of the insurance benefits through event. An insurance contract exists where the following elements concur:
Loyola's broker, Network Unlimited, Inc. However, in a letter , ATR denied the claim on the (1) the insured has an insurable interest;
ground that the initial installment payment was not completed. Loyola asked for a (2) the insured is subject to a risk of loss by the happening of the designated peril;
reconsideration, insisting that the Timeplan Dwight obtained was already in full force and (3) the insurer assumes the risk;
effect upon payment of the premium on April 28, 2000. (4) such assumption of risk is part of a general scheme to distribute actual losses among
a large group of persons bearing a similar risk; and
ATR, through its Vice President of Legal and Compliance, denied Angelita's claim, reiterating (5) in consideration of the insurer's promise, the insured pays a premium.
its position that payment of the premium had not been completed. ATR also invalidated
Dwight's application as his signature appearing therein was allegedly forged. To bar Angelita In the case of Perez v. Court of Appeals, the Court held that assent is given when the insurer
from further pursuing any claim for the insurance benefits, ATR instituted a complaint to issues a corresponding policy to the applicant. The Court declared that "[i]t is only when the
declare the individual insurance coverage of Dwight under Master Policy void and of no effect applicant pays the premium and receives and accepts the policy while he is in good
at the time of his death on May 1, 2000. ATR also prayed for the payment of attorney's fees, health that the contract of insurance is deemed to have been perfected."
litigation expenses, and costs of suit.
The fact that Dwight was only able to make an initial payment of the insurance premium
In Loyola's Answer with Compulsory Counterclaim, which was adopted in toto by and that Loyola failed to immediately remit cash portion of the initial payment to ATR
Angelita, Loyola argued that: (1) Dwight's signature appearing in his Timeplan application should not affect the validity of the perfected insurance contract.
was not forged; and (2) Dwight paid in full the first installment of the insurance premium in
the amount of P5,040.00 on April 28, 2000, prior to his death. Loyola added that ATR cannot
Furthermore, ATR agreed to insure all present and future planholders of Loyola. The pertinent
provisions in Master Policy on payment of premium and effectivity of policy read:
DATE OF EFFECTIVITY OF INDIVIDUAL
INSURANCE
The insurance coverage of all present and future eligible PLANHOLDER shall become
effective on the latest of the following dates.
1. the date the contract of agreement with the CREDITOR is legally perfected; or
2. the date of the initial payment and/or down payment;
3. the date written application is accomplishment (sic); or
4. the date of approval by the COMPANY of evidence of insurability, if required; or
5. the date the COMPANY received the corresponding premium.
xxxx
EFFECTIVE DATE
The coverage of insurable PLANHOLDER shall take effect on the date of initial payment
and/or down payment on the selected plan (as shown in the Binding Deposit
Receipt). However, the Company reserves the right to require a PLANHOLDER to submit
Evidence of Insurability even the coverage does not exceed the Non-Medical Limit.
REPORTING OF INSURED PLANHOLDERS
xxxx
Applications for insurance must be submitted to GE LIFE within seven (7) working days from
the date of initial/ first payment of the Plan holders together with the list of Certificate
issued. Effective Date shall coincide with the date of first payment if complied
with. However, GE LIFE will not be held liable for Certificates issued not reported for
coverage within the said 7-working day period.
Noticeably, the date of effectivity of individual insurance provision contains conflicting terms
that are susceptible to different interpretations. While the policy states that it shall become
effective on the "latest" of a list of dates, the use of the conjunction "or" suggests that there are
options and that any of the options chosen can give rise to the effectivity of the individual
insurance. Meanwhile, in the clause pertaining to the "EFFECTIVE DATE" of the policy, it
clearly states that "[t]he coverage of insurable PLANHOLDER shall take effect on the date of
initial payment and/or down payment on the selected plan (as shown in the Binding Deposit
Receipt)."
The contract between ATR and Loyola is a contract of adhesion as it was prepared solely by
ATR for Loyola and its planholders to conform to. Any ambiguity in a contract of adhesion is
construed strictly against the party that prepared it. In this case, the obscure provision
pertaining to the date of effectivity of the policy coverage should be resolved in favor of
Angelita. Thus, the happening of any of the instances enumerated should suffice in giving rise
to the effectivity of the individual insurance. This interpretation is more consistent with the
other provisions of the policy such as the clause on the "EFFECTIVE DATE" of the policy.
ATR argues that the date of receipt of payment of premium is the date when the cash was
actually deposited in the bank. The Court finds this proposition contrary to logic and
unreasonable.
Here, it is undisputed that at 10:34 am on April 28, 2000, Loyola's Sales Operation Assistant
deposited the two Metrobank checks at Metrobank Solano, Nueva Viscaya branch. However,
instead of immediately depositing the cash payment of P1,615.25, Loyola used the money and
waited until May 2, 2000, the next banking day which fell on a Tuesday, to deposit the
remainder of the initial payment of Dwight. By then, Dwight had already passed away due to
the multiple stab wounds he sustained on May 1, 2000. Loyola admitted that the delay in the
deposit of the P1,615.25 cash was due to its district office's immediate need for cash.
It is important to clarify that Loyola is an agent of ATR. In a contract of agency, "a person
binds himself to render some service or to do something in representation or on behalf of
another, with the consent or authority of the latter." Therefore, a planholder's payment made to
Loyola has the same legal effect as payment made to ATR, even if Loyola failed to
immediately deposit the cash payment to its account.
In the case of Bank of the Philippine Islands v. Laingo, the Court held that the Bank of the
Philippine Islands (BPI) acted as agent of FGU Insurance with respect to the insurance feature
of its commercial product, a savings account which offered insurance coverage for free for
every deposit account opened. The controversy in Laingo involved the alleged non-
compliance with the requirement of submitting a written notice of insurance claim to FGU
Insurance within three calendar months from the death of the insured. The beneficiary of the
policy contended that BPI did not notify her of the attached insurance policy yet allowed her
to withdraw from the savings account after the death of the insured. In ruling that it was
incumbent upon BPI, as agent of FGU Insurance, to give proper notice of the existence of the
insurance coverage and the stipulation in the insurance contract for filing a claim, the Court
observed that the account holder directly communicated with BPI as the agent of FGU
Insurance. BPI facilitated the processing of the deposit account, collection of necessary
documents, and the endorsement for the approval of the insurance coverage without any other
action on the part of the account holder. FGU Insurance did not interact directly with the
account holder and all communications were coursed through BPI.
While the facts and issue surrounding the case of Laingo is different from the case at bar, the
ruling of the Court still finds applications to the present case. The relationship between BPI
and FGU Insurance in the Laingo case is similar to the arrangement between Loyola and ATR
in the present case. Loyola offered its Timeplan product with a life insurance feature to entice
customers to invest their money. Loyola secured Master Policy No. GCL-878 from ATR to
insure all of its future planholders. Customers who intend to avail the Timeplan of Loyola do
not transact with ATR and merely submit all the requirements, including the payment of
premiums, to Loyola. As such, it is apparent that Loyola acted as agent of ATR with respect to
the insurance feature of its Timeplan product. The collective conduct of Loyola, as an agent of
ATR, in accepting from Dwight the initial payment, issuing the corresponding Official
Receipt, and delivering the pre-signed Timeplan contract reveal that a contract of insurance
was perfected. The acts of Loyola, as an agent of ATR, binds the latter.
The effectivity of the Timeplan cannot be left to the will of Loyola and ATR. This
arrangement will leave Dwight in a helpless position where the implementation of the contract
is put on hold and made dependent upon the will of Loyola and ATR despite having complied
with his contractual obligations. Moreover, the Official Receipt Gumiran issued to Dwight
clearly states:
This Receipt is valid for down payment only. Checks and other similar
forms shall be valid only when cleared by the Bank.
As far as Dwight is concerned, his payment to Gumiran is considered his payment to Loyola
and ATR for the initial monthly installment of the Timeplan even if the cash portion of his
payment was not immediately deposited to Loyola's account.

Furthermore, upon payment of the premium, Dwight was issued a copy of the Timeplan
contract that was pre-signed by Jesusa Puyat-Concepcion, President and Chief Executive
Officer of Loyola, and Francisco D. Cauilan, Area Manager of Loyola. Dwight's receipt of the
Timeplan contract, while he was in good health, signifies that the contract was perfected. The
delivery of the corresponding Timeplan contract signifies the perfection of the contract
between him and Loyola.

More importantly, it must be clarified that, while the first monthly installment due from
Dwight is P5,040.00, the insurance premium payable to ATR is only a fraction of said
installment payment. The breakdown of the cost allocation of the installment values made on
the plan of Dwight indicates that the insurance premium payable to ATR is only P447.55.
Pursuant to the Certification of Distribution of Monthly Installments as of April 28, 2000
Loyola issued, the breakdown of the initial payment is as follows:

Installment Amount 1st Month 5,040

Filing fee 50.40
Documentary stamp 252.00
10% VAT 403.20
Commission/ Overrides 2,166.66
Collection fee 0.00
Bonuses 140.11
Other expenses (GAE) 504.00
Insurance cost 447.55
Trust fund deposit 1,008.00
Total Expenses 4,971.92
Remainder of Installment 68.08

Here, it is readily apparent that the amount Loyola received from Dwight is more than enough
to cover the P447.55 insurance cost. The cash payment of P1,615.25 alone was more than
sufficient to pay for the insurance cost payable to ATR yet the employees of Loyola opted to
delay depositing it and used it for other purposes not intended by the parties. The insurance
coverage of Dwight should not be adversely affected by Loyola's delay.
Beneficiaries does not apply where the designation of insurance beneficiaries is clear.

[ G.R. No. 181132. June 05, 2009 ] The trial court issued a Resolution, stating that the motion to dismiss incorporated in the
answer of defendants Insular Life and Grepalife is granted with respect to defendants Odessa,
HEIRS OF LORETO C. MARAMAG, REPRESENTED BY SURVIVING SPOUSE Karl Brian and Trisha Maramag. The action shall proceed with respect to the other defendants
VICENTA PANGILINAN MARAMAG, VS. EVA VERNA DE GUZMAN MARAMAG, Eva Verna de Guzman, Insular Life and Grepalife.
ODESSA DE GUZMAN MARAMAG, KARL BRIAN DE GUZMAN MARAMAG,
TRISHA ANGELIE MARAMAG, THE INSULAR LIFE ASSURANCE COMPANY, LTD., Petitioners appealed the June 16, 2005 Resolution to the CA, but it dismissed the appeal for
AND GREAT PACIFIC LIFE ASSURANCE CORPORATION. lack of jurisdiction, holding that the decision of the trial court dismissing the complaint for
failure to state a cause of action involved a pure question of law. The appellate court also
NACHURA, J. noted that petitioners did not file within the reglementary period a motion for reconsideration
of the trial court's Resolution, dated September 21, 2004, dismissing the complaint as against
Odessa, Karl Brian, and Trisha Angelie; thus, the said Resolution had already attained finality.
FACTS:
Petitioners were the legitimate wife and children of Loreto Maramag, while respondents were
ISSUE:
Loreto's illegitimate family. Eva de Guzman Maramag was a concubine of Loreto and a
Whether or not Eva's children with Loreto, being illegitimate children, are entitled to a lesser
suspect in the killing of the latter, thus, she is disqualified to receive any proceeds from his
share of the proceeds of the policies.
insurance policies from Insular Life Assurance Company, Ltd. and Great Pacific Life
Assurance Corporation. The illegitimate children of Loreto—Odessa, Karl Brian, and Trisha
RULING:
Angelie—were entitled only to one-half of the legitime of the legitimate children, thus, the
It is evident from the face of the complaint that petitioners are not entitled to a favorable
proceeds released to Odessa and those to be released to Karl Brian and Trisha Angelie were
judgment in light of Article 2011 of the Civil Code which expressly provides that insurance
inofficious and should be reduced and petitioners could not be deprived of their legitimes,
contracts shall be governed by special laws, i.e., the Insurance Code. Section 53 of the
which should be satisfied first.
Insurance Code states—
In support of the prayer for TRO and writ of preliminary injunction, petitioners alleged,
SECTION 53. The insurance proceeds shall be applied exclusively to the
among others, that part of the insurance proceeds had already been released in favor of
proper interest of the person in whose name or for whose benefit it is
Odessa, while the rest of the proceeds are to be released in favor of Karl Brian and Trisha
made unless otherwise specified in the policy.
Angelie, both minors, upon the appointment of their legal guardian. Petitioners also prayed
for the total amount of P320,000.00 as actual litigation expenses and attorney's fees.
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
In answer, Insular admitted that Loreto misrepresented Eva as his legitimate wife and Odessa,
the maturation of the policy. The exception to this rule is a situation where the insurance
Karl Brian, and Trisha Angelie as his legitimate children, and that they filed their claims for
contract was intended to benefit third persons who are not parties to the same in the form of
the insurance proceeds of the insurance policies; that when it ascertained that Eva was not the
favorable stipulations or indemnity. In such a case, third parties may directly sue and claim
legal wife of Loreto, it disqualified her as a beneficiary and divided the proceeds among
from the insurer.
Odessa, Karl Brian, and Trisha Angelie, as the remaining designated beneficiaries; and that it
released Odessa's share as she was of age, but withheld the release of the shares of minors Karl
Petitioners are third parties to the insurance contracts with Insular and Grepalife and, thus, are
Brian and Trisha Angelie pending submission of letters of guardianship. Insular alleged that
not entitled to the proceeds thereof. Accordingly, respondents Insular and Grepalife have no
the complaint or petition failed to state a cause of action insofar as it sought to declare as void
legal obligation to turn over the insurance proceeds to petitioners. The revocation of Eva as a
the designation of Eva as beneficiary, because Loreto revoked her designation as such in
beneficiary in one policy and her disqualification as such in another are of no moment
Policy and it disqualified her in another Policy and insofar as it sought to declare as inofficious
considering that the designation of the illegitimate children as beneficiaries in Loreto's
the shares of Odessa, Karl Brian, and Trisha Angelie, considering that no settlement of
insurance policies remains valid. Because no legal proscription exists in naming as
Loreto's estate had been filed nor had the respective shares of the heirs been determined.
beneficiaries the children of illicit relationships by the insured, the shares of Eva in the
Insular further claimed that it was bound to honor the insurance policies designating the
insurance proceeds, whether forfeited by the court in view of the prohibition on donations
children of Loreto with Eva as beneficiaries pursuant to Section 53 of the Insurance Code.
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
In its own answer with compulsory counterclaim, Grepalife alleged that Eva was not
beneficiaries, to the exclusion of petitioners. It is only in cases where the insured has not
designated as an insurance policy beneficiary; that the claims filed by Odessa, Karl Brian, and
designated any beneficiary, or when the designated beneficiary is disqualified by law to
Trisha Angelie were denied because Loreto was ineligible for insurance due to a
receive the proceeds, that the insurance policy proceeds shall redound to the benefit of the
misrepresentation in his application form that he was born on December 10, 1936 and, thus,
estate of the insured.
not more than 65 years old when he signed it in September 2001; that the case was premature,
there being no claim filed by the legitimate family of Loreto; and that the law on succession
 [ G.R. No. L-44059. October 28, 1977 ]
THE INSULAR LIFE ASSURANCE COMPANY, LTD., VS. CARPONIA T. EBRADO
AND PASCUALA VDA. DE EBRADO.
MARTIN, J.
FACTS:
Buenaventura Cristor Ebrado was issued by The Insular Life Assurance Co., Ltd., Policy on a
whole-life plan for P5,882.00 with a rider for Accidental Death Benefits for the same
amount. Buenaventura C. Ebrado designated Carponia T. Ebrado as the revocable
beneficiary in his policy. He referred to her as his wife.
Buenaventura C. Ebrado died as a result of an accident when he was hit by a falling branch of
a tree. As the insurance policy was in force, The Insular Life Assurance Co., Ltd. stands 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 also in the amount
of P5,882.00 and the refund of P18.00 paid for the premium due November, 1969, minus the
unpaid premiums and interest thereon due for January and February, 1969, in the sum of
P36.27.
Carponia T. Ebrado filed with the insurer a claim for the proceeds of the policy as the
designated beneficiary therein, although she admits that she and the insured Buenaventura C.
Ebrado 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, not the common-law wife,
Carponia T. Ebrado.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life
Assurance Co., Ltd. commenced an action for Interpleader before the Court of First Instance
of Rizal on April 29, 1970.
The trial court rendered judgment declaring, among others, Carponia T. Ebrado disqualified
from becoming beneficiary of the insured Buenaventura Cristor Ebrado and directing the
payment of the insurance proceeds to the estate of the deceased insured.
From this judgment, Carponia T. Ebrado appealed to the Court of Appeals, but on July 11,
1976, the Appellate Court certified the case to Us as involving only questions of law.
ISSUE:
Can a common-law wife named as beneficiary in the life insurance policy of a legally married
man claim the proceeds thereof in case of death of the latter?
RULING:
The general rules of civil law should be applied to resolve this void in the Insurance
Law. Article 2011 of the New Civil Code states: "The contract of insurance is governed by
special laws. Matters not expressly provided for in such special laws shall be regulated by this
Code." 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 life insurance policy by the
person who cannot make a donation to him." Common-law spouses are, definitely,
barred from receiving donations each other. Article 739 of the new Civil Code provides:
"The following donations shall be void:
1. Those made between persons who were guilty of adultery or
concubinage at the time of donation;
2. Those made between persons found guilty of the same criminal offense,
in consideration thereof;
3. Those made to a public officer or his wife, descendants or ascendants
by reason of his office.
"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 guilt of the
donee may be proved by preponderance of evidence in the same
action."
In essence, a life insurance policy is no different from a civil donation insofar as the
beneficiary is concerned. Both are founded upon the same consideration: liberality. A
beneficiary is like a donee, because from the premiums of the policy which the insured pays
out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As a
consequence, the proscription in Article 739 of the new Civil Code should equally operate in
life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who
cannot receive a donation cannot be named as beneficiary in the life insurance policy of the
person who cannot make the donation. Under American law, a policy of life insurance is
considered as a testament and in construing it, the courts will, so far as possible treat it as a
will and determine the effect of a clause designating the beneficiary by rules under which wills
are interpreted.
Policy considerations and dictates of morality rightly justify the institution of a barrier
between common-law spouses in regard to property relations since such relationship
ultimately encroaches upon the nuptial and filial rights of the legitimate family. 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. As above pointed out, a beneficiary in a life insurance policy is no
different from a donee. Both are recipients of pure beneficence. 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. If legitimate
relationship is circumscribed by these legal disabilities, with more reason should an illicit
relationship be restricted by these disabilities.
We do not think that a conviction for adultery or concubinage is exacted before the disabilities
mentioned in Article 739 may effectuate. More specifically, with regard to the disability on
''persons who were guilty of adultery or concubinage at the time of the donation," Article 739
itself provides:
"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 guilt 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 disqualifying
offense is a condition precedent. In fact, it cannot even be gleaned from the aforequoted
provision that a criminal prosecution is needed. On the contrary, the law plainly states that the
guilt of the party may be proved "in the same action" for declaration of nullity of
donation. And, it would be sufficient if evidence preponderates upon the guilt of the consort
for the offense indicated. The quantum of proof in criminal cases is not demanded.

In the case before Us, the requisite proof of common-law relationship between the insured and
the beneficiary has been conveniently supplied by the stipulations between the parties in the
pre-trial conference of the case. It was agreed upon and stipulated therein that the deceased
insured Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she has six
legitimate children; that during his lifetime, the deceased insured was living with his common-
law wife, Carponia Ebrado, with whom he has two children. These stipulations are nothing
less than judicial admissions which, as a consequence, no longer require proof and cannot be
contradicted. A fortiori, on the basis of these admissions, a judgment may be validly rendered
without going through the rigors of a trial for the sole purpose of proving the illicit liaison
between the insured and the beneficiary. In fact, in that pre-trial, the parties even agreed "that
a decision be rendered based on this agreement and stipulation of facts as to who among the
two claimants is entitled to the policy."
 [ G.R. No. 243733. January 12, 2021 ]
EDITA A. DE LEON, LARA BIANCA L. SARTE, AND RENZO EDGAR L. SARTE, VS.
THE MANUFACTURERS LIFE INSURANCE COMPANY (PHILS.) INC., ZENAIDA S.
SARTE, JESSICA SARTE-GUSTILO, VILMA C. CAPARROS, EDGAR ALVIN C.
CAPARROS, AND ROBERTO MORENO.
CARANDANG, J.
FACTS:
During his lifetime, Sarte sired three sets of children: (1) with his legitimate wife Zenaida S.
Sarte (Zenaida), he had Jessica S. Sarte-Gustilo (Jessica) and Edgard Eldon S. Sarte (Eldon);
(2) with Vilma C. Caparros (Vilma), he had Edgar Alvin C. Sarte (Alvin) and Edgar Angelo
C. Sarte (Angelo); and (3) with Edita De Leon (Edita), he had Lara Bianca L. Sarte (Lara) and
Renzo Edgar L. Sarte (Renzo).
Three life insurance policies subject to this case, all with revocable beneficiaries. Sarte
executed Beneficiary Designation Forms (BDFs) modifying the beneficiaries of the subject
policies. The BDFs were all processed by Manulife and the changes were registered in the
company's internal records. However, Sarte executed another set of BDFs, changing the
beneficiaries of the subject policies.
The second set of BDFs were prepared by Sarte's long-time personal and business secretary,
Veneranda Canta Gealogo (Gealogo) who witnessed Sarte signing them. Sarte executed said
BDFs supposedly with the intention that his minor children acquire equal amounts from his
insurance policies. "Nothing Follows" was typewritten beneath the portion where the names of
Lara and Renzo were indicated. Gealogo made photocopies of the said BDFs and the originals
were then delivered by Sarte's messenger, Allan Quiñones, to Betty Alejandro Cepeda
(Cepeda), the Manulife servicing agent in charge of the subject policies.
Before she could adduce evidence on her behalf, Cepeda passed away and has since then been
represented in this case by her son, herein respondent Roberto Alejandro Moreno Jr. In her
pleading, Cepeda admitted to receiving the originals of the said BDFs, but observed that the
designated beneficiaries, Lara and Renzo, were still minors, but no trustee or individual
capacitated to act in their behalf was designated as required by Manulife. The BDFs could
have been easily corrected by the designation of a trustee. However, since "Nothing
Follows" was typewritten on the BDFs, such a correction could not be made. Cepeda
declined to affix her signature on the BDFs and alleged that she returned them to Sarte
through Gealogo. Gealogo denied ever receiving them and testified that Cepeda called her,
inquiring as to who should be designated as the trustees of the minors. Gealogo claimed to
have faxed to Cepeda a tabulation indicating the names of the trustees, but only on January 19,
2004, after Mr. Sarte's death on December 23, 2003. Gealogo said that the fax transmittal slip
of the tabulation was printed on thermal paper, which could be easily erased, so she stamped
the word "faxed" on the same. Other than the said transmittal slip, Gealogo said she had no
other proof that she actually faxed the document to Cepeda's office.
Before Sarte died, he gave to Edita the originals of four insurance policies, two of which
[Policies 1 and 2] are the subject policies of this case. She also received photocopies of the
BDFs dated July 31, 2002. Sometime after Sarte's death, Edita met with Cepeda at the latter's
office to process the insurance claims in behalf of her children. However, in that meeting,
Cepeda initially denied receiving the said BDFs and that she had no record of them. A week
later, they went to Manulife's office to check the records. They were accompanied by Gealogo.
At that meeting, Edita presented the following documents to Manulife's representatives in
support of her claim: 1) an Acknowledgment Receipt of the July 31, 2002 BDFs signed by
Cepeda's secretary, Lynn Gagan; 2) the trip report of Allan Quiñones; 3) a matrix of Sarte's
insurance policies and a copy of the tabulation which were provided to her by Yolanda
Domingo, who was Sarte's executive assistant. Manulife, however, did not release the
proceeds to her.
Edita wrote to Manulife's head office seeking assistance for her claim. Manulife, through their
Claims Manager, Jessie Bell Victoriano (Victoriano), responded by mail on February 2, 2004,
suggesting that Sarte's three families settle their claims amicably to avoid costly litigation.
Zenaida met with Victoriano to inquire into her claims on Sarte's policies that she knew of,
including Policy 2. In that meeting, Victoriano revealed to Zenaida that as per the insurer's
records, she was also named in Policy 1 as co-beneficiary with Renzo. Two months after,
Manulife still did not release the proceeds of the said policies. So, Zenaida set another meeting
with Victoriano, at which point she was informed of Edita's claims on the subject policies.
Victoriano thus asked Zenaida for more time.
Victoriano testified that the subject BDFs dated July 31, 2002, appeared to be valid as they
contained Sarte's signature. It was because of this that Manulife was in doubt as to the rightful
beneficiaries of the subject policies. Thus on August 12, 2004, it filed the complaint for
interpleader against: (1) Zenaida and Jessica; (2) minor Alvin, to be represented by his mother,
Vilma; and (3) minors Lara and Renzo, to be represented by their mother, Edita. The RTC
gave due course to the complaint, summoned the interpleaded parties, and ordered them to file
their respective answers.
From the terms of the subject policies, the RTC found the following provisions on
"Beneficiary Designation" and "Change of Beneficiary," as relevant to the issues of this case:
Beneficiary Designation. Whenever a beneficiary is designated either in
this policy or by a declaration in writing by the Owner, such beneficiary
will be deemed to be beneficially entitled to the proceeds of the policy, if
and when the policy becomes payable upon the life insured's death. x x x
Change of beneficiary. To the extent allowed by law, during the life
insured's lifetime the Owner can change the beneficiary designation from
time to time by written notice in form satisfactory to the Company
[Manulife]. The company assumes no responsibility for the validity of
such written notice.
Based on these provisions, the RTC took the view that in order for the BDFs to be effective,
the same must have been processed, approved, and registered in Manulife's records. The July
31, 2002 BDFs were rejected by Cepeda for non-compliance with Manulife's internal
company policy on the designation of trustees for minor beneficiaries, Lara and Renzo.
As a consequence, it was not registered in Manulife's records. On the other hand, the
March 1, 2002 BDFs were duly filled in, signed by Cepeda, transmitted to Manulife's
office, and registered into their records.
Thus, the RTC renders judgment ordering The Manufacturer's Life Insurance Company
(Phils.), Inc. is hereby DIRECTED to release the insurance proceeds of the following policies
to the beneficiaries as appearing in its records.
On appeal to the CA, the petitioners maintained that the July 31, 2002 BDFs effectively
changed the beneficiaries of the subject policies in favor of Lara and Renzo. They argued that
Sarte had complied with all the requirements of the policy provision on "Change of
Beneficiary" by merely filling up and signing Manulife BDFs designating Lara and Renzo and
transmitting the same to Cepeda, Manulife's agent. They also maintained that Sarte had
complied with the trustee designation requirement when Gealogo faxed to Cepeda a tabulation
with a list of names of trustees, even while maintaining that the BDFs or the policies
themselves do not indicate the necessity of a trustee.
Zenaida, Jessica, Vilma, Alvin, and Betty Cepeda defended the RTC's decision and argued that
since the July 31, 2002 BDFs were not in a form satisfactory to Manulife, owing to the fact
that no trustee was designated, no change in beneficiary designation was effected. They
maintained that the RTC was correct in ordering Manulife to release the proceeds according to
the latter's records. Manulife maintained its neutral stance.
The CA agreed with the RTC as to the result, but clarified that the petitioners were only
able to submit photocopies of the July 31, 2002 BDFs. The RTC had categorically ruled that
Sarte had executed the said BDFs, to wit: "[t]he evidence shows that the insured executed a
Beneficiary Designation Form changing the beneficiaries in the subject policies in favor of
minor defendants Lara Bianca and Renzo Edgar." However, the CA reasoned that according to
the Best Evidence Rule, under Section 3, Rule 129, the due authenticity and execution of said
documents was not established. Moreover, the CA found that there is no positive proof that the
originals existed and that the photocopies cannot be given evidentiary value.
The petitioners moved for reconsideration, but the CA denied it as the arguments raised were
mere reiterations. Hence, this petition.
ISSUES:
Whether the subject insurance policies required Sarte to designate a trustee for minor
beneficiaries.
RULING:
Sarte was not contractually required to designate a trustee for minor beneficiaries.
Upon a careful examination of the subject policies, We find that nothing in their provisions
require the observance of Manulife's internal rules. As such, the policies themselves do not
require either that the insured designate a trustee if his chosen beneficiaries are minors or that
the BDFs be processed and registered into Manulife's records. Neither does the Insurance
Code (or any statute) or its implementing rules and regulations require the same.
In The Wellex Group, Inc. v. U-Land Airlines, Co. Ltd., the Court said:
An obligation is a juridical necessity to give, to do or not to do (Art. 1156,
Civil Code). The obligation is constituted upon the concurrence of the
essential elements thereof, viz: (a) The vinculum juris or juridical tie
which is the efficient cause established by the various sources of
obligations (law, contracts, quasi-contracts, delicts and quasi-delicts).
xxx
The cause is the vinculum juris or juridical tie that essentially binds
the parties to the obligation. This linkage between the parties is a
binding relation that is the result of their bilateral actions, which gave rise
to the existence of the contract.
In this case, the vinculum juris between Sarte and Manulife are the subject policies
themselves. Since the terms of the policies do not mention anything about Manulife's
internal rules, there is no juridical tie that binds Sarte to said internal rules. As such, the
policies do not obligate the insured to designate trustees for minor beneficiaries. Neither
was it legally necessary for the July 31, 2002 BDFs to be registered in Manulife's internal
records so that Lara and Renzo may acquire a vested interest in the subject policies.
Simply put, Manulife's internal rules are not a legal norm that has any relevance in the
resolution of the issues of this case. Such internal rules are merely for the guidance of the
personnel, employees, and officers of Manulife.
Parenthetically, We must clarify to petitioners that life insurance proceeds are not part of
the estate of the insured.
It was made abundantly clear by the testimony of Broñosa, Manulife's Vice President for
Clients Services and Customer Care, that a trustee was not indispensable, rather only
advisable.
Upon clarificatory questioning by the trial judge, Broñosa further testified as follows:
We always require the appointed trustee for minor beneficiaries the
purpose of that is if there is a death claim, we can already know to whom
we can transact the proceeds on the behalf of the minor beneficiaries BUT
OF COURSE WE WILL STILL BE NEEDING COURT APPOINTED
GUARDIAN.
As a general rule, the failure to name a trustee does not invalidate the
beneficiary designation.
As far as Manulife is concerned, we require appointing of trustee.
Assuming the insured did not name, we can accept still the beneficiary
claim unless it is submitted to Manulife for processing and recording. If
the insured does not want to put a trustee or to designate a trustee on
behalf of the minor beneficiaries, we can still effect the change on the
beneficiary provided that the insured put it in writing that he does not want
to put or designate a trustee on behalf of the minor trustee. x x x
Indeed, regardless of whether or not a trustee was designated, Manulife would still have to
comply with requirements under Section 180 of the Insurance Code (P.D. 612), to wit:
Section 180. An insurance upon life may be made payable on the death of
the person, or on his surviving a specified period, or otherwise
contingently on the continuance or cessation of life.
Every contract or pledge for the payment of endowments or annuities shall
be considered a life insurance contract for purpose of this Code
In the absence of a judicial guardian, the father, or in the latter's
absence or incapacity, the mother, or any minor, who is an insured or
a beneficiary under a contract of life, health or accident insurance,
may exercise, in behalf of said minor, any right under the policy,
 without necessity of court authority or the giving of a bond, where the
interest of the minor in the particular act involved does not exceed
twenty thousand pesos. Such right may include, but shall not be limited
to, obtaining a policy loan, surrendering the policy, receiving the proceeds
of the policy, and giving the minor's consent to any transaction on the
policy.
In light of the foregoing, it is clear that Manulife's internal rules are only for its own
operational convenience. There is absolutely no legal reason why they should be the
parameter by which the conflicting claims over Sarte's life insurance policies are judged. The
conflicting claims of the interpleaded parties must be resolved with reference only to the
express provisions of the subject policies.
Receipt. Cepeda, in fact, had confirmed in her Answer that she had received the originals of
the July 31, 2002 BDFs. Furthermore, under the doctrine of imputed knowledge, notice to the
agent is deemed notice to the principal. Thus, upon Cepeda's receipt of the July 31, 2002
BDFs, Manulife is deemed to have been notified of the designations therein.
Sarte had substantially complied with all that was required of him under the subject policies to
designate Lara and Renzo as his beneficiaries. Since Cepeda had received the originals of the
July 31, 2002 BDFs, Manulife is deemed to have been notified in writing of said beneficiary
designations. Such notice was sufficient to vest Lara and Renzo with rights over the proceeds
of the subject policy.

ISSUES:
Whether Sarte effected a change of beneficiary designation by written notice in form
satisfactory to the Company by mere submission of the BDFs dated July 31, 2002 to
Manulife's servicing agent, Cepeda.

RULING:
The provisions of the subject policies relating to designation of beneficiaries have been
substantially complied with by the insured.

Once again, We do not agree with the lower courts' reliance on Manulife's internal rules in
resolving this question for reasons already explained above. Nowhere in the subject policies is
it provided that the beneficiary designation must go through the internal mechanisms of the
insurer and then entered into its records before such designation becomes binding.

To recall, the subject policies provide that "...a beneficiary is designated either in the policy or
by a declaration in writing by the Owner" and that "during the life insured's lifetime the
Owner can change the beneficiary designation from time to time by written notice in form
satisfactory to the Company." Other provisions of the policy make it clear that claims are not
settled on the basis of Manulife's records. For example, the policies provide that a claimant
must provide proof of his/her right to receive payment.

Having said that, We may summarize the positions of the interpleaded parties as follows:
 Zenaida and Jessica's claim rests on the BDFs dated March 1, 2002;
 Alvin's claim rests on the fact that he was the original beneficiary in Policy 3;
 while Lara and Renzo's claim rests on the BDFs dated July 31, 2002.

The case now turns on whether the BDFs dated July 31, 2002 effected a "change [of]
beneficiary designation by written notice x x x in form satisfactory to the Company." The
issue may be dissected as follows: (1) whether the insured had notified the insurer of the
beneficiary designation in writing; and (2) whether notice was in a form satisfactory to the
insurer.

By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. In the case
of Filipinas Life Assurance Company v. Pedroso, We bound the principal, an insurance
company, for an act by its insurance agent done within the scope of authority. As Manulife's
agent, Cepeda was authorized to receive the BDFs. This was confirmed by Broñosa. Receipt
by Cepeda was duly proven by Quinones' testimony and the Acknowledgment