237727101 Part 2 Insurance Digested Cases

8/10/2019 237727101 Part 2 Insurance Digested Cases

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Gallardo vs. Morales

G.R. No. L-12189 April 29, 1960

Lessons Applicable: Definition and Coverage of Life

Insurance (Insurance)

Laws Applicable: Rule 39, section 12, subdivision (k) of the Rules of

Court (old law)

FACTS:

CFI: Hermenegilda S. Morales to pay P7,000 to a creditor

Francisca Gallardo

writ of execution was issued and delivered to the Sheriff

who garnished and levied execution on the sum of P7,000 out

of the P30,000 due from the CapitalInsurance & Surety Co. Inc.,

to Morales as beneficiary whose husband Luis Morales died

by assassination.

Morales asked the sheriff to quash and lift said garnishment or

levy on execution invoking Rule 39, section 12, subdivision (k)

of the Rules of Court but it was denied.

All moneys, benefits, privileges, or annuities accruing or in any

manner growing out of any life insurance, if the annual

premiums paid do not exceedfive hundred pesos, and if they

exceed that sum a like exemption shall exist which shall bear

the same proportion to the moneys, benefits, privileges, and

annuities so accruing or growing out of such insurance that

said five hundredpesos bears to the whole annual premiums

paid.

Morales appealed maintaining that it was a life insurance for it

insured her husband for injuries and/or death as a result of

murder or assault or attempt thereat

ISSUE: W/N the insurance is a life insurance and not an

accident insurance

HELD: NO. order appealed from is reversed, and the garnishment in

dispute hereby set aside and quashed

the annual premium was for P15

If it were an ordinary life insurance policy, taking into account

that the insured, Luis G. Morales, was 38 years of age and the

amount of the policy was for P50,000.00 the annual premium

would have been around P1,206 the period for the policy was stipulated for one year, and

considerations as to age, health, occupation and other personal

circumstances were not taken into account in an accident

insurance policy

Annex "1" of the opposition, shows that the

Capital Insurance and Surety Company Inc. is a non-life

insurance company and that the only authority granted to it to

transact business covers fire, marine, surety, fidelity, accident,

motor car, and miscellaneous insurance, except life insurance Accident vs Life Insurance Policy

accident policy - merely insures the person from injury and or

death resulting from murder, assault, or an attempt thereat

Accident insurance

indemnity or casualty contract

life insurance policy - what is insured is the life of the subject for

a definite number of years
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life insurance

investment contract

contract by which the insurer, for a stipulated sum, engages to

pay a certain amount of money if another dies within the time

limited by the policy contract for insurance for one year in consideration of an

advanced premium, with the right of assured to continue it

from year to year upon payment of a premium as stipulated

includes accident insurance, since life is insured under either

contract

includes all policies of insurance in which payment

of insurance money is contingent upon loss of life

"any life insurance"

applies to ordinary life insurance contracts, as well as to thosewhich, although intended primarily to indemnify for risks arising

from accident, likewise, insure against loss of life due, either to

accidental causes, or to the willful and criminal act of another,

which, as such, is not strictly accidental in nature

1. statutes of this nature seek to enable the head of the family to

secure his widow and children from becoming a burden upon the

community and, accordingly, should merit a liberal interpretation

1.

throw or drop (something) from an aircraft or ship."six aircraft jettisoned their loads in the sea"

o

noun

Calanoc vs. CA (98 PHIL 79)

Facts: Basilio was a watchmanof the Manila Auto Supply located at

the corner of Avenida Rizal and Zurbaran. He secured a life

insurance policy from the Philippine American Life Insurance

Company in the amount of P2,000 to which was attached a

supplementary contract covering death by accident.

On January 25, 1951, he died of a gunshot wound on the occasion

of a robbery committed in the house of Atty. Ojeda at the corner of

Oroquieta and Zurbaran streets.

Calanoc, the widow, was paid the sum of P2,000, face value of the

policy, but when she demanded the payment of the additional sum

of P2,000 representing the value of the supplemental policy, the

company refused alleging, as main defense, that the deceased died

because he was murdered by a person who took part in the

commission of the robberyand while making an arrest as an officer

of the law which contingencies were expressly excluded in the

contract and have the effect of exempting the company from

liability.

It is contended in behalf of the company that Basilio was killed

which "making an arrest as an officer of the law" or as a result of an

"assault or murder" committed in the place and therefore his death

was caused by one of the risks excluded by the supplementary

contractwhich exempts the company from liability. This contention

was upheld by the Court of Appeals. Hence, this petition.
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Issue: Whether or not the death of the victim comes within the

purview of the exception clause of the supplementarypolicy and,

hence, exempts the company from liability.

Held: NO. Basilio was a watchman of the Manila Auto Supply which was a block away from the house of Atty. Ojeda where

something suspicious was happening which caused the latter to ask

for help. While at first he declined the invitation of Atty. Ojeda to go

with him to his residence to inquire into what was going on because

he was not a regular policeman, he later agreed to come along

when prompted by the traffic policeman, and upon approaching the

gate of the residence he was shot and died.

The circumstance that he was a mere watchman and had no duty toheed the call of Atty. Ojeda should not be taken as a capricious

desire on his part to expose his life to danger considering the fact

that the place he was in duty-bound to guard was only a block away.

In volunteering to extend help under the situation, he might have

thought, rightly or wrongly, that to know the truth was in the

interest of his employer it being a matter that affects the security

of the neighborhood. No doubt there was some risk coming to him

in pursuing that errand, but that risk always existed it beinginherent in the position he was holding. He cannot therefore be

blamed solely for doing what he believed was in keeping with his

duty as a watchman and as a citizen. And he cannot be considered

as making an arrest as an officer of the law, as contended, simply

because he went with the traffic policeman, for certainly he did

not go there for that purpose nor was he asked to do so by the

policeman.

Much less can it be pretended that Basilio died in the course of an

assault or murder considering the very nature of these crimes. In

the first place, there is no proof that the death of Basilio is the

result of either crime for the record is barren of any circumstanceshowing how the fatal shot was fired. Perhaps this may be clarified

in the criminal case now pending in court as regards the incident

but before that is done anything that might be said on the point

would be a mere conjecture. Nor can it be said that the killing was

intentional for there is the possibility that the malefactor had fired

the shot merely to scare away the people around for his own

protection and not necessarily to kill or hit the victim. In any event,

while the act may not exempt the triggerman from liability for the

damage done, the fact remains that the happening was a pureaccident on the part of the victim.

The victim could have been either the policeman or Atty. Ojeda for

it cannot be pretended that the malefactor aimed at the deceased

precisely because he wanted to take his life.

Biagtan vs. The Insular Life Assurance Company,

LTD|

Makalintal, J. March 29, 1972|

FACTS

- Juan Biagtan was insured with Insular for P5k and a

supplementary contract Accidental Death Benefit clause for

another P5k if "the death of the Insured resulted directly from


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bodily injury effected solely through external and violent means

sustained in an accident . . . and independently of all other causes."

The clause, however, expressly provided that it would not apply

where death resulted from an injury "intentionally inflicted by a

third party."

- One night, a band of robbers entered their house. Juan went out

of his room and he was met with 9 knife stabs. He died. The robbers

were convicted of robbery with homicide.

- The family was claiming the additional P5k from Insular under the

Accidental Death Benefit clause. Insular refused on the ground that

the death resulted from injuries intentionally inflicted by 3rd

parties

and was therefore not covered.

- Biagtans filed against Insular. CFI ruled in favor of Biagtans.

ISSUES & ARGUMENTS

WON the injuries were intentionally inflicted by a third party?

Yes

RATIONALE

- Whether the robbers had the intent to kill or merely to scare the

victim or to ward off any defense he might offer, it cannot be

denied that the act itself of inflicting the injuries was intentional.

- The exception in the accidental benefit clause invoked by the

appellant does not speak of the purpose whether homicidal or

not of a third party in causing the injuries, but only of the fact

that such injuries have been "intentionally" inflicted this

obviously to distinguish them from injuries which, although received

at the hands of a third party, are purely accidental.

- Examples of unintentional:

>> A gun which discharges while being cleaned and kills a

bystander;

>> a hunter who shoots at his prey and hits a person instead;

>> an athlete in a competitive game involving physical effort who

collides with an opponent and fatally injures him as a result.

- In Calanoc vs. CA: Where a shot was fired and it turned out

afterwards that the watchman was hit in the abdomen, the wound

causing his death, the Court held that it could not be said that the

killing was intentional for there was the possibility that the

malefactor had fired the shot to scare the people around for his

own protection and not necessarily to kill or hit the victim. A similar

possibility is clearly ruled out by the facts in this case. For while a

single shot fired from a distance, and by a person who was not even

seen aiming at the victim, could indeed have been fired without

intent to kill or injure, nine wounds inflicted with bladed weapons

at close range cannot conceivably be considered as innocent

insofar as such intent is concerned.

- In Hucthcraft's Ex'r vs. Travelers' Ins. Co. (US case): where the

insured was waylaid and assassinated for the purpose of robbery,

the court rendered judgment for the insurance company and held

that while the assassination of the insured was as to him an

unforeseen event and therefore accidental, "the clause of the


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proviso that excludes the (insurer's) liability, in case death or injury

is intentionally inflicted by any other person, applies to this case."

G.R. No. L-21574 June 30, 1966

Dela Cruz vs. Capital

Lessons Applicable: Liability of Insurer for Suicide and Accidental

Death (Insurance)

Laws Applicable:

FACTS:

Eduardo de la Cruz, employed as a mucker in the Itogon-SuyocMines, Inc. in Baguio, was the holder of an accident insurance

policy "against death or disability caused by accidental means"

January 1, 1957: For the celebration of the New Year, the

Itogon-Suyoc Mines, Inc. sponsored a boxing contest for general

entertainment wherein Eduardo, a non-professional boxer

participated

In the course of his bout with another non-professional boxer of

the same height, weight, and size, Eduardo slipped and was hit

by his opponent on the left part of the back of the head, causingEduardo to fall, with his head hitting the rope of the ring

He was brought to the Baguio General Hospital the following

day. He died due to hemorrhage, intracranial.

Simon de la Cruz, the father of the insured and who was named

beneficiary under the policy, thereupon filed a claim with the

insurance company

The Capital Insurance and Surety co., inc denied stating that

the death caused by his participation in a boxing contest was

not accidental

RTC: favored Simon

ISSUE: W/N the cause of death was accident

HELD:YES.

Eduardo slipped, which was unintentional

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 happen by chance or fortuitously, without intention and design,

and which is unexpected, unusual, and unforeseen

event that takes place without one's foresight or expectation

event that proceeds from an unknown cause, or is an unusual

effect of a known cause and, therefore, not expected

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 ofpoliciesinsuring against death or injury from accident

while the participation of the insured in the boxing contest is

voluntary, the injury was sustained when he slid, giving

occasion to the infliction by his opponent of the blow that

threw him to the ropes of the ring is not
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The fact that boxing is attended with some risks of external

injuries does not make any injuries received in the course of the

game not accidental

In boxing as in other equally physically rigorous sports, such as

basketball or baseball, death is not ordinarily anticipated to

result. If, therefore, it ever does, the injury or death can only

be accidental or produced by some unforeseen happening or

event as what occurred in this case

Furthermore, the policy involved herein specifically excluded

from its coverage

(e) Death or disablement consequent upon the Insured

engaging in football, hunting, pigsticking, steeplechasing, polo-

playing, racing of any kind, mountaineering, or motorcycling.

Death or disablement resulting from engagement in boxingcontests was not declared outside of the protection of

the insurance contract

Sun Insurance Office Ltd. vs. Court of Appeals [GR

92383, 17 July 1992]

Facts: Sun Insurance Office Ltd. issued Personal Accident Policy

05687 to Felix Lim, Jr. with a face value of P200,000.00. Two months

later, he was dead with a bullet wound in his head. As beneficiary,

his wife Nerissa

Lim sought payment on the policy but her claim was rejected. Sun

Insurance agreed that there was no suicide.

It argued, however, that there was no accident either. Pilar Nalagon,

Lim's secretary, was the only eyewitness

Commercial LawInsurance Law, 2006 ( 47 )Narratives (Berne

Guerrero)

to his death. It happened on 6 October 1982, at about 10 p.m., after

his mother's birthday party. According to Nalagon, Lim was in ahappy mood (but not drunk) and was playing with his handgun,

from which he had previously removed the magazine. As she

watched the television, he stood in front of her and pointed the gun

at her. She pushed it aside and said it might be loaded. He assured

her it was not and then pointed it to his temple. The next moment

there was an explosion and Lim slumped to the floor. He was dead

before he fell.

The widow sued Sun Insurance in the Regional Trial Court ofZamboanga City and was sustained. Sun Insurance was sentenced to

pay her P200,000.00, representing the face value of the policy, with

interest at the legal rate; P10,000.00 as moral damages; P5,000.00

as exemplary damages; P50,000.00 as actual and compensatory

damages; and P5,000.00 as attorney's fees, plus the cost of the suit.

This decision was affirmed on appeal, and the motion for

reconsideration was denied. Sun Insurance then came to the

Supreme Court.Issue: Whether the insured willfully exposed himself to needless

peril and thus removed himself from the coverage of the insurance

policy.

Held: NO. An accident is an event which happens without any

human agency or, if happening through human agency, an event

which, under the circumstances, is unusual to and not expected by

the person to whom it


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happens. It has also been defined as an injury which happens by

reason of some violence or casualty to the insured without his

design, consent, or voluntary co-operation. Herein, the incident that

resulted in Lim's

death was indeed an accident. On the other hand, the parties agreethat Lim did not commit suicide.

Nevertheless, Sun Insurance contends that the insured willfully

exposed himself to needless peril and thus removed himself from

the coverage of the insurance policy. It should be noted at the

outset that suicide and

willful exposure to needless peril are in pari materia because they

both signify a disregard for one's life.

The only difference is in degree, as suicide imports a positive act of

ending such life whereas the second act indicates a reckless risking

of it that is almost suicidal in intent. The posture -- that by the mere

act of pointing the gun to his temple, Lim had willfully exposed

himself to needless peril and so came under the exception -- is

arguable. But what is not is that Lim had removed the magazine

from the gun and believed it was no longer dangerous. He

expressed assured her that the gun was not loaded. It is submitted

that Lim did not willfully expose himself to needless peril when hepointed the gun to his temple because the fact is that he

thought it was not unsafe to do so.

The act was precisely intended to assure Nalagon that the gun was

indeed

harmless. Lim was unquestionably negligent and that negligence

cost him his own life. But it should not prevent his widow from

recovering from the insurance policy he obtained precisely against

accident. There is

nothing in the policy that relieves the insurer of the responsibility to

pay the indemnity agreed upon if the insured is shown to have

contributed to his own accident. Indeed, most accidents are causedby negligence.

There are only four exceptions expressly made in the contract to

relieve the insurer from liability, and none of these exceptions is

applicable in the present case. It bears noting that insurance

contracts are as a rule supposed to be interpreted liberally in favor

of the assured. There is no reason to deviate from this rule,

especially in view of the circumstances of the case.

Jarque v Smith G.R. No. L-32986 November 11, 1930

J. Ostrand

Facts:

The plaintiff was the owner of the motorboat Pandan and held a

marine insurance policy for the sum of P45,000 on the boat, the

policy being issued by the National Union Fire Insurance Company

and according to the provisions of a "rider" attached to the policy,

the insurance was against the "absolute total loss of the vessel

only."

The ship ran into very heavy sea off the Islands of Ticlin, and it

became necessary to jettison a portion of the cargo. As a result of

the jettison, the National Union Fire Insurance Company was


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assessed in the sum of P2,610.86 as its contribution to the general

average. The insurance company, insisting that its obligation did not

extend beyond the insurance of the "absolute total loss of the

vessel only, and to pay proportionate salvage of the declared

value," refused to contribute to the settlement of the generalaverage.

The present action was thereupon instituted,and after tr ial the

court below rendered judgment in favor of the plaintiff and ordered

the company to pay the plaintiff the sum of P2,610.86 as its part of

the indemnity The insurance company appealed to this court.

Issues:

1. WON the lower court erred in disregarding the typewritten clauseendorsed upon the policy, Exhibit A, expressly limiting insurer's

liability thereunder of the total loss of the wooden vessel

Pandanand to proportionate salvage charges

2. WON the lower court erred in concluding that defendant and

appellant, National Union Fire Insurance Company is liable to

contribute to the general average resulting from the jettison of a

part of said vessel's cargo.

Held: No to both. Petition dismissed.

Ratio:

1. One of the clauses of the document originally read as follows:

Touching the Adventures and Perils which the said National Union

Fire Insurance Company is content to bear, and to take upon them

in this Voyage; they are of the Seas, Men-of-War, Fire, Pirates,

Rovers, Thieves, Jettison, Letters of Mart and Countermart,

Surprisals, and Takings at Sea. Arrest, Restraint and Detainments, of

all Kings Princes and People of what Nation, Condition or Quality so

ever; Barratry of the Master and Marines, and of all other Perils,

Losses and Misfortunes, that have or shall come to the Hurt,Detriment, or Damage of the said Vessel or any part thereof; and in

case of any Loss or Misfortunes, it shall be lawful for the Assured,

his or their Factors, Servants, or assigns, to sue, labor and travel for,

in and about the Defense. Safeguard, and recovery of the said

Vessel or any Charges whereof the said Company, will contribute,

according to the rate and quantity of the sum herein assured shall

be of as much force and Virtue as the surest Writing or Policy of

Insurance made in LONDON. Attached to the policy over and above

the said clause is a "rider" containing typewritten provisions, amongwhich appears in capitalized type the following

clause:

AGAINST THE ABSOLUTE TOTAL LOSS OF THE VESSEL ONLY, AND TO

PAY PROPORTIONATE SALVAGE CHARGES OF THE DECLARED VALUE.

At the bottom of the same rider following the type written

provisions therein set forth are the following words: "Attaching to

and forming part of the National Union Fire Insurance Co., HullPolicy No. 1055."

It is a well settled rule that in case repugnance exists between

written and printed portions of a policy, the written portion

prevails, and there can be no question that as far as any

inconsistency exists, the above-mentioned typed "rider" prevails

over the printed clause it covers. Section 291 of the Code of Civil


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Procedure provides that "when an instrument consists partly of

written words and partly of a printed form and the two are

inconsistent, the former controls the latter.

2. In the absence of positive legislation to the contrary, the liabilityof the defendant insurance company on its policy would, perhaps,

be limited to "absolute loss of the vessel only, and to pay

proportionate salvage of the declared value."

But the policy was executed in this jurisdiction and "warranted to

trade within the waters of the Philippine Archipelago only." Here

the liability for contribution in general average is not based on the

express terms of the policy, but rest upon the theory that from the

relation of the parties and for their benefit, a quasi contract is

implied by law. Article 859 of the Code of Commerce is still in forceand reads as follows:

ART. 859. The underwriters of the vessel, of the freight, and of the

cargo shall be obliged to pay for the indemnity of the gross average

in so far as is required of each one of these objects respectively. The

article is mandatory in its terms, and the insurers, whether for the

vessel or for the freight or for the cargo, is bound to contribute to

the indemnity of the general average. It simply places the insurer on

the same footing as other persons who have an interest in thevessel, or the cargo therein at the time of the occurrence of the

general average and who are compelled to contribute.

In the present case it is not disputed that the ship was in grave peril

and that the jettison of part of the cargo was necessary. If the cargo

was in peril to the extent of call for general average, the ship must

also have been in great danger, possibly sufficient to cause its

absolute loss. The jettison was therefore as much to the benefit of

the underwriter as to the owner of the cargo. If no jettison had take

place and if the ship by reason thereof had foundered, the

underwriter's loss would have been many times as large as the

contribution now demanded.

Fortune Insurance and Surety Co., Inc., vs. CA [G.R. No.

115278, May 23, 1995]

Facts: On June 29, 19878, Producers Bank of the

Philippinesarmored vehicle was robbed, in transit, of seven

hundred twenty-five thousand pesos (Php 725,000.00) that it wastransferring from its branch in Pasay to its main branch in Makati.

To mitigate their loss, they claim the amount from their insurer,

namely Fortune Insurance and Surety Co..

Fortune Insurance, however, assails that the

general exemptionclause in the Casualty Insurance coverage had a

general exemptionclause, to wit:

GENERAL EXCEPTIONS

The company shall not be liable under this policy in respect of

xxx xxx xxx

(b) any loss caused by any dishonest, fraudulent or criminal act of

the insured or any officer, employee, partner, director, trustee or

authorized representative of the Insured whether acting alone or in

conjunction with others. . . .
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The contract of insurance was not consummated by the parties.

The above quoted agreement clearly stated that the agreement

should NOT go into effect until the home office of the Company

shall confirm it by issuing a policy. It was nothing but an

acknowledgment by the Company that it has received a sum ofmoney agreed upon as the first years premium upon a policy to be

issued upon the application if it is accepted by the Company.

When an agreement is made between the applicant and the agent

whether by signing an application containing such condition or

otherwise, that no liability shall attach until the principal approves

the risk and a receipt is given by the agent, such acceptance is

merely conditional and is subordinated to the companys act in

approving or rejecting; so in life insurance a binding slip or receiptdoes not insure itself.

January 23, 1907

G.R. No. 3069

VIOLA BADGER,plaintiff-appellant,

vs.

THE NEW YORK LIFE INSURANCE COMPANY,defendant-appellee.Condert Brothers for appellant.

Hartigan, Rohde & Gutierrez for appellee.

WILLARD,J.:

On July 5, 1902, William H. Badger made out a written application

for a policy of insurance upon his life for $5,000 in favor of his wife,

Harriet Viola Badger. The first premium on this policy amounted to

$312.50. Badger sent the application and $297.60 to R. E. Herdman,

who received the application and the money on the 9th of July,

1902.

Herdman sent the papers on July 24 to the office of the defendant

company in Shanghai, where they were received on August 11.Badger executed a promissory note for $14.90, the balance of the

first premium, which was sent to Herdman on July 17, 1902. On the

31st of July, Mrs. Badger, acting for her husband, sent to Herdman

$14.90, cash, in payment of said note. Badger died on the 1st day of

August, 1902, of cholera. No policy was ever issued upon his

application.

The plaintiff brought this action to recover the sum of $5,000,

alleging that a contract of insurance had been made by the

company with Badger. Judgment was rendered in the court below in

favor of the defendant to the effect that no such contract was ever

made, from which judgment the plaintiff appealed.

The only person who acted in any way for the company in this

transaction was Herdman. The only evidence in the case to show

what his powers were is found in an admission in the answer which

states that he was "a special agent and cashier of the defendant

company in Manila," and in his evidence, testifying as a witness, he

said that at the time of the trial on September 6, 1905, he was the

agency director of the defendant company in the city of Manila.

The action can not be maintained unless the plaintiff proves a

contract between the company and Badger, made by a person

authorized to act for the company. The authority of this person

must, of course, be proven. There is no evidence in the case to show


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that Herdman had any authority to make any contract, either parol

or in writing, that would bind the company. There is no evidence to

show that he had any policies in his possession.

Nor is there any evidence that Herdman ever undertook to makeany parol contract with Badger for this insurance. There had been

some correspondence between the parties prior to the making of

the application on July 5. On that day Herdman, writing to Badger in

regard to the medical examination, said:

I will send you an official receipt when your remittance

reaches the office, and then a new examination will not be

necessary when the policies are delivered; otherwise this

would be necessary.

After Badger had received the receipt of Herdman for the money

sent to him and on July 11, he wrote to Herdman, saying:

Yours of the 9th instant received. Is the receipt you sent

official or not? I do not wish to take another examination,

and so desire an official receipt.

xxx xxx xxx

Shall I be obliged to wait until you receive an answer from

the office in New York, or do you have authority to issue

policies at the Manila office?

xxx xxx xxx

If my application is accepted does insurance begin July 5,

1902?

In reply to this letter, Herdman, on July 15, wrote, saying:

The receipt I sent you is official, being signed by me as

cashier and not personally, and of course there will not be

another examination required.

xxx xxx xxx

We issue an interim policy from our Shanghai office, which

stands until the definite policy comes from New York. We

hope soon to have an advisory board here in Manila, so that

we will be entirely free from Shanghai, all our other

business being transacted directly with the home officer at

New York.

If your examination is acceptable, your policy will date from

July 5, the date of your application.

This evidence shows conclusively that there was no parol

agreement between the parties that the insurance had commenced

on July 5, 1902. In fact, the claim of the appellant reduced to its

lowest terms is that the mere signing of an application for life

insurance and the payment of a first premium, without any parol

agreement as to when the insurance shall commence, constitutes a

contract between the parties binding from that date. Such a

contention as this can not be sustained.


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Moreover, there is evidence in the case in addition to that already

referred to, showing that the company expressly refused to be

bound until the application had been accepted either by its office in

Shanghai or its office in New York. In the application which Badger

signed on the 5th day of July it is said:

I agree, on behalf of myself and of any person who shall

have or claim any interest in any policy issued under this

application, as follows: That inasmuch as only the officers at

the home office of the company in the city of New York

have authority to determine whether or nor a policy shall

issue on any application, no statements, etc., shall be

binding on the company.

In the report of the medical examiner there is found this printed

statement:

The examiner is requested to send direct to the company in

New York City any information which, for any reason, he

prefers not to embody in this report. He can also mail this

report direct to the company if he prefers.

Herdman testifies that when he sent to Badger a receipt for the

money paid, it was on one of two printed blanks, which one he

could not say. The court below found that the receipt was sent upon

the blank which contained a reference to the Shanghai office.

Whether it was upon this form of receipt or upon the other one is of

no consequence. In one of them it is stated "that the company shall

incur no liability under the application until it has been received,

approved by the resident board of the company at Shanghai, and a

policy issued thereon by the resident board, and the full premium

has actually been paid to and accepted by the company or its

authorized agent during the lifetime and good health of the person

upon whose life the insurance is applied for. The company reserves

the absolute right of disapproval of such application."

The other form contains the statement that "the company shall

incur no liability under the application until it has been received,

approved at the house office of the company, and a policy issued

thereon." This is then followed by the words of the first form. Upon

both of these forms are printed the words "conditional receipt."

It seems very clear that no liability was incurred by the company in

this case. The judgment of the court below is accordingly affirmed,with the costs of this instance against the appellant.

After expiration of twenty days let judgment be entered in

accordance herewith and ten days thereafter the record remanded

to the court below for proper action. So ordered.

Arellano, C.J., Torres, Mapa, Carson and Tracey, JJ., concur.


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14

ENRIQUEZ V. SUNLIFE- INSURANCE POLICY

41 PHIL 269

Facts:

> On Sept. 24 1917, Herrer made an application to SunLife through

its office in Manila for life annuity.

> 2 days later, he paid the sum of 6T to the companys anager in its

Manila office and was given a receipt.

> On Nov. 26, 1917, the head office gave notice of acceptance by

cable to Manila. On the same date, the Manila office prepared a

letter notifying Herrer that his application has been accepted and

this was placed in the ordinary channels of transmission, but as far

as known was never actually mailed and never receivedby Herrer.

> Herrer died on Dec. 20, 1917. The plaintiff as administrator of

Herrers estate brought this action to recover the 6T paid by the

deceased.

Issue:

Whether or not the insurance contract was perfected.

Held:

NO.

The contract for life annuity was NOT perfected because it had NOT

been proved satisfactorily that the acceptance of the application

ever came to the knowledge of the applicant. An acceptance of an

offer of insurance NOT actually or constructively communicated to

the proposer does NOT make a contract of insurane, as the locus

poenitentiaeis ended when an acceptance has passed beyond the

control of the party.

NOTE: Life annuity is the opposite of a life insurance. In life annuity,

a big amount is given to the insurance company, and if after acertain period of time the insured is stil living, he is entitled to

regular smaller amounts for the rest of his life. Examples of Life

annuity are pensions. Life Insurance on the other hand, the insured

during the period of the coverage makes small regular payments

and upon his death, the insurer pays a big amount to his

beneficiaries.

Vda de Sindayen v Insular September 4, 1935

G.R. No. 41702

J. Butte

Facts:

Sindayen, employed in the Bureau of Printing at Manila went to

Tarlac, to spend theChristmas vacation with his aunt. There he

applied for forlife insurance in the sum of P1,000 and paid to the

agent P15 cash as part of the first premium. It was agreed with theagent that the policy, when and if issued, should be delivered to his

aunt with whom he left sum of P26.06 to complete the payment of

the first annual premium of P40.06. Sindayen returned to Manila

and resumed his work a linotype operator. The company accepted

the risk after examining Sindayen and issued a policy and to the

same agent for delivery to the insured. Sindayen abruptly passed

away.


15/31

15

The policy which the company issued was received by its agent in

Tarlac. The agent delivered the policy to Felicidad Estrada upon her

payment of the balance of the first yearsannual premium. The

agent asked Felicidad Estrada if her nephew was in good health and

she replied that she believed so. He gave her the policy. The agentlearned of the death of Arturo Sindayen and the aunt to return the

policy. He did not return or offer to return the premium paid. The

aunt gave him the policy.

The company obtained from the beneficiary, the widow of Arturo

Sindayen, her signature to alegal document entitled ACCORD,

SATISFACTION AND RELEASE In consideration of the sum of P40.06

paid to her by acheck of the company, she discharged the company

for all claims . The said check for P40.06 was never cashed but

returned to the company. The widow brought action to enforce

payment of the policy. The first premium was already paid by the

insured covering the period from December 1, 1932. It is to

December 1, 1933. Hence, this appeal.

Issue: WON the said policy never took effect because of paragraph 3

of the application for at the time of its delivery by the agent the

insured was not in good health.

Held: No. Petition granted.

Ratio:

The application which the insured signed in Tarlac, contained

among others the following provisions:

3. That the said policy shall not take effect until the first premium

has been paid and the policy has been delivered to and accepted by

me, while Iam in good health.

There is one line of cases which holds that the stipulation contained

in paragraph 3 is in the nature of a condition precedent, that is to

say, that there can be no valid delivery to the insured unless he is in

good health at the time. A number of these cases, on the other

hand, go to the of holding that the delivery of the policy by the

agent to the insured consummates the contract even though the

agentknew that the insured was not in good health at the time, the

theory being that his knowledge is the companys knowledge and

his delivery of the policy is the companys delivery.

We are inclined to the view that it is more consonant with the well

known practice oflife insurancecompanies and the evidence in the

present case to rest our decision on the proposition that Mendoza

was authorized by the company to make the delivery of the policy

when he received the payment of the first premium and he was

satisfied that the insured was in good health.

In the case of MeLaurin vs.Mutual Life Insurance Co. -It is plain,

therefore, that upon the facts it is not necessarily a case of waiver

or of estoppel, but a case where the local agents, in the exercise ofthe powers lodged in them, accepted the premium and delivered

the policy. That act binds their principal, the defendant.

The evidence in the record shows that Mendoza had the authority,

given him by the company, to withhold the delivery of the policy to

the insured until the first premium has been paid and the policy

has been delivered to and accepted by me (the insured) while


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16

Iam in good health. Mendozas decision that the condition had

been met by the insured and that it was proper to make a delivery

of the policy to him is just as binding on the company as if the

decision had been made by its board of directors.

It is the interest not only the applicant but of all insurance

companies as well that there should be some act which gives the

applicant the definiteassurance that the contract has been

consummated. A cloud will be thrown over the entire insurance

business if the condition of health of the insured at the time of

delivery of the policy may be required into years afterwards with

the view to avoiding the policy on the ground that it never took

effect because of an alleged lack of good health, at the time of

delivery.

When the policy is issued and delivered it is plainly not within the

intention of the parties that there should be any questions held in

abeyance or reserved for future determination. It would be a most

serious handicap to business if the very existence of the contract

remains in doubt even though the policy has been issued and

delivered with all the formalities required by the law. The delivery

of the policy to the insured by an agent is the final act which binds

the company and insured in the absence of fraud or other legal

ground for rescission. The fact that the agent to whom it has

entrusted this duty is derelict or negligent or even dishonest in

the performance of the duty which has been entrusted to him

would create a liability of the agent to the company but does not

resolve the companys obligation based upon the authorized acts of

the agent toward a third party who was not in collusion with the

agent.

4. That the agent taking this application has no authority to make,

modify or discharge contracts, or to waive any of the Companys

right or requirements.

Paragraph 4 of the application to the effect is not in point. Mendoza

neither waived nor pretended to waive any right or requirement of

the company. In fact, his inquiry as to the state of health of the

insured discloses that he was endeavoring to assure himself that

this requirement of the company had been satisfied. In doing so, he

acted within the authority conferred on him by his agency and his

acts within that authority bind the company. The company

therefore having decided that all the conditions precedent to the

taking effect of the policy had been complied with, it is now

estopped to assert that it never intended that the policy should take

effect.

G.R. No. 105562 September 27, 1993

Lessons Applicable: Who Exercises Rights of Minor Insured or

Beneficiaries (Insurance)

Laws Applicable: Art. 225 Family Code

FACTS:

Prime Marine Services, Inc. (PMSI), a crewing/manning outfit,

procured Group PoIicy

from Insular Life Assurance Co., Ltd. to provide life insurance

coverage to its sea-based employees enrolled under the plan.
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February 17 1986: 6 employees of the PMSI perished at sea

when M/V Nemos, a Greek cargo vessel, sunk somewhere in El

Jadida, Morocco

The beneficiaries asked President and General Manager of

PMSI, Capt. Roberto Nuval and issued him special powers ofattorney authorizing him to "follow up, ask, demand, collect

and receive" for their benefit indemnities. It only

verbally pertained to the sinking of the fatal vessel

Unknown to them, however, the PMSI, in its capacity as

employer and policyholder of the life insurance of its deceased

workers, filed with formal claims with their special power of

attorney

Capt. Nuval, upon receipt of these checks from the treasurer,

who happened to be his son-in-law, endorsed and depositedthem in his account with the Commercial Bank of Manila,

now Boston Bank

Upon learning that they are entitled to the claim, they sought to

recover from Insular Life but it denied on the ground that they

already delivered to PMSI

The fact that there was a verbal agreement between

complainants-appellees and Capt. Nuval limiting the authority

of the latter to claiming specified death benefits cannot

prejudice the insurance company which relied on the terms ofthe powers of attorney which on their face do not disclose such

limitation

Section 180 of the Insurance Code has been amended by the

Family Code 17 which grants the father and mother joint legal

guardianship over the property of their unemancipated

common child without the necessity of a court appointment;

however, when the market value of the property or the annual

income of the child exceeds P50,000.00, the parent concerned

shall be required to put up a bond in such amount as the court

may determine.

Insurance Commission: favored petitioners

The Insular Life Assurance Company appealed stating that (a) had no jurisdiction over the case considering that the claims

exceeded P100,000

(b) erred in holding that the powers of attorney relied upon by

Insular Life were insufficient to convey absolute authority to

Capt. Nuval to demand, receive and take delivery of the

insurance proceeds pertaining to the petitioners

(c) erred in not giving credit to the version of Insular Life that

the power of attorney supposed to have been executed in favor

of the Alarcons was missing, and (d) erred in holding that Insular Life was liable for violating

Section 180 of the Insurance Code for having released to the

surviving mothers the insurance proceeds pertaining to the

beneficiaries who were still minors despite the failure of the

former to obtain a court authorization or to post a bond.

CA: eliminated the award to minor beneficiaries Dina Ayo and

Lucia Lontok

ISSUE:W/N the minor beneficiaries award should be eliminated

HELD:YES. petition is GRANTED. CA Reversed. Insurance

Commission Reinstated.

Being special powers of attorney, they must be strictly

construed. Insular Life knew that a power of attorney in favor


18/31

18

of Capt. Nuval for the collection and receipt of such proceeds

was a deviation from its practice with respect to group policies.

Group Insurance

coverage terms for group insurance are usually stated in a

master agreement or policy that is issued by the insurer to arepresentative of the group or to an administrator of the

insurance program

employer acts as a functionary in the collection and payment of

premiums and in performing related duties

falling within the ambit of administration of a group policy is the

disbursement of insurance payments by the employer to the

employees

employee is in the position of a real party to the master policy

employees is the true source of the benefits, which are a formof additional compensation to them

enables the employees to carry a larger amount of insurance

than they could otherwise, and helps to attract and hold a

permanent class of employees

Even granting for the sake of argument that the special powers

of attorney were in due form, Insular Life was grossly negligent

in delivering the checks, drawn in favor of the petitioners, to a

party who is not the agent mentioned in the special power of

attorney Nor can we agree with the opinion of the public respondent

that since the shares of the minors in the insurance proceeds

are less than P50,000.00, then under Article 225 of the Family

Code their mothers could receive such shares without need of

either court appointments as guardian or the posting of a bond

Art. 225. The father and the mother shall jointly exercise legal

guardianship over the property of their unemancipated

common child without the necessity of a court appointment. In

case of disagreement, the father's decision shall prevail, unless

there is judicial order to the contrary.

Where the market value of the property or the annual income of

the child exceeds P50,000, the parent concerned shall be required

to furnish a bond in such amount as the court may determine, but

not less than ten per centum (10%) of the value of the property or

annual income, to guarantee the performance of the obligations

prescribed for general guardians.

It is clear from the said Article that regardless of the value of the

unemancipated common child's property, the father and mother

ipso jure become the legal guardian of the child's property.

However, if the market value of the property or the annual income

of the child exceeds P50,000.00, a bond has to be posted by the

parents concerned to guarantee the performance of the obligations

of a general guardian.

It must, however, be noted that the second paragraph of Article

225 of the Family Code speaks of the "market value of the

property or the annual income of the child," which means,

therefore, the aggregate of the child's property or annualincome; if this exceeds P50,000.00, a bond is required.

There is no evidence that the share of each of the minors in the

proceeds of the group policy in question is the minor's only

property. Without such evidence, it would not be safe to

conclude that, indeed, that is his only property.


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19

GREPALIFE V. CA

89 SCRA 543

Facts:

> On March 14, 1957, respondent Ngo Hing filed an application

with Grepalife for a 20-yr endowment policy for 50T on the life of

his one year old daughter Helen Go.

> All the essential data regarding Helen was supplied by Ngo to

Lapu-Lapu Mondragon, the branch manager of Grepalife-Cebu.

Mondragon then typed the data on the application form which was

later signed by Ngo.

> Ngo then paid the insurance premium and a binding deposit

receipt was issued to him. The binding receipt contained the

following provision: If the applicant shall not have been insurable

xxx and the Company declines to approve the application, the

insurance applied for shall not have been in force at any time and

the sum paid shall be returned to the applicant upon the surrender

of this receipt.

> Mondragon wrote on the bottom of the application form his

strong recommendation for the approval of the insurance

application.

> On Apr 30, 1957, Mondragon received a letter from Grepalife

Main office disapproving the insurance application of Ngo for the

simple reason that the 20yr endowment plan is not available for

minors below 7 yrs old.

> Mondragon wrote back the main office again strongly

recommending the approval of the endowment plan on the life of

Helen, adding that Grepalife was the only insurance company NOT

selling endowment plans to children.

> On may 1957, Helen died of influenza with complication of

broncho pneumonia. Ngo filed a claim with Gepalife, but the latter

denied liability on the ground that there was no contract betweenthe insurer and the insured and a binding receipt is NOT evidence of

such contract.

Issue:

Whether or not the binding deposit receipt, constituted a

temporary contract of life insurance.

Held:

NO.

The binding receipt in question was merely an acknowledgement on

behalf of the company, that the latters branch office had received

from the applicant, the insurance premium and had accepted the

application subject for processing by the insurance company, and

that the latter will either approve or reject the same on the basis of

whether or not the applicant is insurable on standard rates.

Since Grepalife disapproved the insurance application of Ngo, thebinding deposit receipt had never became on force at any time,

pursuant to par. E of the said receipt. A binding receipt is manifestly

merely conditional and does NOT insure outright. Where an

agreement is made between the applicant and the agent, NO

liability shall attach until the principal approves the risk and a

receipt is given by the agent.


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20

The acceptance is merely conditional, and is subordinated to the act

of the company in approving or rejecting the application. Thus in

life insurance, a binding slip or binding receipt does NOT insure by

itself.

TANG V. CA- INSURANCE FRAUD OR MISTAKE

90 SCRA 236

Facts:

> On Sept. 25, 2965, Lee Su Guat, widow, 61 years old and illiterate

who spoke only Chinese, applied for life insurance for 60T with

Philamlife. The application was in two parts, both in English.

> The second part dealt with her state of health. Her answers

having shown that she was health, Philamlife issued her a policy

effective Oct. 23, 1965 with her nephew Vicente Tang as

beneficiary.

> On Nov. 15, 1965, Lee again applied for additional insurance of

her life for 40T. Since it was only recent from the time she first

applied, no further medical exam was made but she accomplished

Part 1 (which certified the truthfulness of statements made in Part.

2)

> The policy was again approved. On Apri 20 1966, Lee Su Guat

died of Lung cancer.

> Tang claimed the amount o 100T but Philamlife refused to pay on

the ground that the insured was guilty of concealment and

misrepresentation.

> Both trial court and CA ruled that Lee was guilty of concealment.

> Tangs position, however, is that because Lee was illiterate and

spoke only Chinese, she could not be held guilty of concealment of

her health history because the application for insurance was

English, and the insurer has not proven that the terms thereof had

been fully explained to her as provided by Art. 1332 of CC.

Issue:

Whether or not Art. 1332 applies.

Held:

NO.

Art. 1332 is NOT applicable. Under said article, the obligation to

show that the terms of the contract had been fully explained to the

party who is unable to read or understand the language of the

contract, when fraud or mistake is alleged, devolves on the partyseeking to enforceit. Here, the insurance company is NOT seeking

to enforce the contract; on the contrary, it is seeking to avoid its

performance.

It is petitioner who is seeking to enforce it, even as fraud or mistake

is NOT alleged. Accordingly, Philamlife was under no obligation to

prove that the terms of the insurance contract were fully explained

to the other party. Even if we were to say that the insurer is the

one seeking the performance of the cont contracts by avoidingpaying the claim, it has to be noted as above stated that there has

been NO imputation of mistake of fraud by the illiterate insured

whose personality is represented by her beneficiary. In sum, Art.

1332 is inapplicable, and considering the findings of both the trial

court and the CA as to the Concealment of Lee, the SC affirms their

decisions.


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21

Concurring: J., Antonio

In a contract of insurance, each party must communicate to the

other, in good faith, all facts within his knowledge which are

material to the contract, and which the other has no means of

ascertaining. As a general rule, the failure by the insured to discloseconditions affecting the risk of which he is aware makes the

contract voidable at the option of the insurer.

The reason for this rule is that insurance policies are traditionally

contracts uberrimae fidei, which means most abundant good

faith, absolute and perfect candor or openness and honesty,

absence of any concealment or deception however slight. Here

the CA found that the insured deliberately concealed material facts

about her physical condition and history and/or concealed withwhoever assisted her in relaying false information to the medical

examiner. Certainly, the petitioner cannot assume inconsistent

positions by attempting to enforce the contract of insurance for the

purpose of collecting the proceeds of the policy and at the same

time nullify the contract by claiming that it was executed through

fraud or mistake.

NOTE: Art. 1332: When one of the parties is unable to read or if the

contract is in a language not understood by him, and mistake orfraud is alleged, the person enforcing the contract must show that

the terms thereof have been fully explained to him.

G.R. No. L-18529

FRANCISCO G. ALEJA, FELICITACION GAMBOA-ALEJA and

DOMINADOR ALEJA, plaintiffs-appellants,

vs.

GOVERNMENT SERVICE INSURANCE SYSTEM, defendant-

appellee.

Restituto L. Joson for plaintiffs-appellants. Bartolome S. Palma for

defendant-appellee.

Barrera, J.:

This is an appeal by Francisco G. Aleja, et al., from the decision of

the Court of First Instance of Nueva Ecija (in Civil Case No. 3335)

dismissing their complaint against the Government Service

Insurance System (GSIS) and denying their claim to the proceeds of

the insurance policy No. 310973 issued to the late Rosauro G. Aleja,

on the ground that the deceased was not yet covered by insurance

at the time of his death.

As found by the lower court, the deceased Rosauro G. Aleja was

appointed as temporary classroom teacher in the Bureau of Public

Schools, Division of Nueva Ecija, on July 8, 1958. Thereafter, a

compulsory term insurance policy, No. 310973, was issued in hisname, said policy to take effect on February 1, 1959. The

corresponding premium therefor was deducted for the first time

from his salary on January 31, 1959. However, two days before that

or on January 29, 1959, while guarding the rice stack in front of their

house, Rosauro Aleja died of a gunshot wound inflicted by his own

gun. Plaintiffs, as beneficiaries named in the policy, filed a claim

with the GSIS to collect the proceeds of the said policy, but the


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22

same was denied allegedly because at the time of Aleja's death, the

policy was not yet effective and the latter was, therefore, not

covered by insurance. Hence, the institution of this case and the

consequent promulgation of the decision by the lower court which

is the subject of the present appeal.

In denying plaintiffs-appellants' claim, the GSIS contends that

although Aleja became a permanent employee and entitled to

membership in the System 6 months after his original appointment,

or on January 8, 1959, yet as specified in the policy issued to him,

the same shall become effective only on February 1, 1959. And this

latter date was fixed in accordance with the provisions

ofCommonwealth Act 186,as amended byRepublic Act 660,which

read:SEC. 4. Scope of application of System.- (a) Membership to the

System shall be compulsory upon all regularly and permanently

appointed employees, including those whose tenure of office is

fixed or limited by law; upon all teachers except only those who are

substitutes; ... .

SEC. 8. (a) Compulsory membership insurance.- An employee whose

membership in the System is compulsory shall be automatically

insured on the first day of the seventh calendar month following the

month he was appointed or on the first day of the sixth calendar

month if the date of his appointment is the first day of the month:

Provided, That his medical examination, if required, has been

approved by the System.

It is not controverted that the deceased had rendered services to

the government for 6 months and 21 days before his death; that he

was insured and in fact a policy was already issued in his favor at

the time of his death; that the death fixed for the effectivity of said

policy was made pursuant to the aforequoted provisions of the GSISCharter. Appellants, however, maintain that section 8

ofCommonwealth Act 186,insofar as it fixes the date of compulsory

membership therein, is absurd and discriminatory, in that, whereas

those whose appointments are dated on the first day of the month

become covered by insurance on the first day of the sixth month

following their appointment, those who were appointed on other

dates become insured only on the first day of the seventh calendar

month from their original appointment. In other words, if an

employee is appointed on January 1, he will be covered byinsurance on June 1, whereas one who gets appointed in January 2

becomes insured only on July 1. This arrangement, appellants claim,

was made only to facilitate office transactions or for office

procedure, and should not be construed to defeat the purpose for

which the System was established, i.e., to promote the welfare of

the employees. It is, therefore, urged that the coverage of

compulsory insurance should commence on the date when the

employee becomes entitled to membership in the System, or upon

completion of six months' service.It may be admitted that as thus worded, the disputed provision

makes a distinction, in the matter of effectivity of their insurance

coverage, between those appointed to the service on the first day

of the month and those who receive their appointments on any

other date. But classification or class legislation, assuming this to be

one, does not ipso factomake a statutory provision invalid.

Classification will not constitute an infringement of the individual's
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right to constitutional guarantees of equality if it is not

unreasonable, arbitrary or capricious. To be reasonable, the

classification must be based on substantial distinctions which make

real differences; must be germane to the purposes of the law; must

not be limited to existing conditions only, and must apply equally toeach member of the class, under similar conditions. 1

In the instant case, it may be true that the disputed provision must

have been incorporated in the law to promote efficiency and

convenience in office procedure of the System. Taking into account

the volume of business that the System handles, the providing of

this measure which ultimately may redound to the benefit of the

members in the form of efficient and prompt service, cannot be

considered capricious or arbitrary.

Furthermore, it appears that the policy issued and accepted by Aleja

during his lifetime specifically provides that the effective date of the

insurance contract is February 1, 1959. Additionally, it is not denied

that the first premium on said insurance contract was deducted

from Aleja's salary only on January 31, 1959 or after his death.

Clearly, at the time of his said death, there was no existing contract

between him and the appellee GSIS, there being no consideration

for the risk sought to be enforced against the insurance system. The

offer of the latter to refund the amount collected after Aleja'sdeath, is proper.

WHEREFORE, the decision of the lower court appealed from is

hereby modified in the sense that the defendant-appellee shall

return to the plaintiffs the amount deducted from the deceased's

salary in the form of premium. No costs. So ordered.

Areola vs. CA

G.R. No. 95641 September 22, 1994

Lessons Applicable: Binding Effect of Payment (Insurance)

Laws Applicable: Art. 1910,Article 1191

FACTS:

December 17, 1984: Prudential Guarantee And Assurance,

Inc. issued collector's provisional receipt amounting

to P1,609.65

June 29, 1985: 7 months after the issuance of petitioner Santos

Areola's Personal Accident Insurance Policy, Prudential

Guarantee And Assurance, Inc. unilaterally cancelled it for

failing to pay his premiums through its manager Teofilo M.

Malapit

Shocked by the cancellation of the policy, Santos

approached Carlito Ang, agent of Prudential and demanded the

issuance of an official receipt. Ang told Santos that it was a

mistake and assured its rectification.

July 15, 1985: Santos demanded the same terms and same rate

increase as when he paid the provincial receipt but Malapit

insisted that the partialpayment he made was exhausted and

that he should pay the balance or his policy will cease to

operate

July 25, 1985 : Assistant Vice-President Mariano M. Ampil III

apologized
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August 6, 1985 had filed a complaint for breach of

contract with damages before the lower court

August 13, 1985: Santos received through Carlito Ang the leeter

of Assistant Vice-President Mariano M. Ampil III finding error

on their part since premiums were notremitted Malapit, proposed to extend its lifetime to December

17, 1985

RTC: favored Santos - Prudential in Bad Faith

CA: Reversed - not motivated by negligence, malice or bad faith

in cancelling subject policy

ISSUE: W/N the Areolas can file against damages despite the effort

to rectify the cancellation

HELD: YES. RTC reinstated

Malapit's fraudulent act of misappropriating the premiums paid

is beyond doubt directly imputable to Prudential

Art. 1910. The principal must comply with all the obligations

which the agent may have contracted within the scope of his

authority.

As for any obligation wherein the agent has exceeded his power,

the principal is not bound except when he ratifies it expressly or

tacitly.

Subsequent reinstatement could not possibly absolve

Prudential there being an obvious breach of contract

a contract of insurance creates reciprocal obligations for both

insurer and insured

Article 1191

choice between fulfillment or rescission of the obligation in

case one of the obligors fails to comply with what is incumbent

upon him

entitles the injured party to payment of damages, regardless of

whether he demands fulfillment or rescission of the obligation Nominal damages are "recoverable where a legal right is

technically violated and must be vindicated against an invasion

that has produced no actual present loss of any kind, or where

there has been a breach of contract and no substantial injury or

actual damages whatsoever have been or can be shown.

CONSTANTINO V. ASIA LIFE- NON-PAYMENT OF

INSURANCE PREMIUMS

87 PHIL 248

Facts:

> Appeal consolidates two cases.

> Asia life insurance Company (ALIC) was incorporated in Delaware.

> For the sum of 175.04 as annual premium duly paid to ALIC, it

issued Policy No. 93912 whereby it insured the life of Arcadio

Constantino for 20 years for P3T with Paz Constantino as

beneficiary.

First premium covered the period up to Sept. 26, 1942. No

further premiums were paid after the first premium and

Arcadio died on Sept. 22, 1944.

> Due to Jap occupation, ALIC closed its branch office in Manila

from Jan. 2 1942-1945.

> On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the lives of

Spouses Tomas Ruiz and Agustina Peralta for the sum of P3T for 20


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years. The annual premium stipulated was regularly paid from Aug.

1, 1938 up to and including Sept. 30, 1940.

Effective Aug. 1, 1941, the mode of payment was changed

from annually to quarterly and such quarterly premiums were

paid until Nov. 18, 1941. Last payment covered the period until Jan. 31, 1942.

Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his

beneficiary.

> Due to Jap occupation, it became impossible and illegal for the

insured to deal with ALIC. Aside from this the insured borrowed

from the policy P234.00 such that the cash surrender value of the

policy was sufficient to maintain the policy in force only up to Sept.

7, 1942.

> Both policies contained this provision:All premiums are due inadvance and any unpunctuality in making such payment shall cause

this policy to lapse unless and except as kept in force by the grace

period condition.

> Paz Constantino and Agustina Peralta claim as beneficiaries, that

they are entitled to receive the proceeds of the policies less all sums

due for premiums in arrears. They also allege that non-payment of

the premiums were caused by the closing of ALICs offices during

the war and the impossible circumstances by the war, therefore,

they should be excused and the policies should not be forfeited.> Lower court ruled in favor of ALIC.

Issue:

May a beneficiary in a life insurance policy recover the amount

thereof although the insured died after repeatedly failing to pay the

stipulated premiums, such failure being caused by war?

Held:

NO.

Due to the express terms of the policy, non-payment of the

premium produces its avoidance. In Glaraga v. Sun Life, it was heldthat a life policy was avoided because the premium had not been

paid within the time fixed; since by its express terms, non-payment

of any premium when due or within the 31 day grace period ipso

fact caused the policy to lapse.

When the life insurance policy provides that non-payment of

premiums will cause its forfeiture, war does NOT excuse non-

payment and does not avoid forfeiture. Essentially, the reason why

punctual payments are important is that the insurer calculates onthe basis of the prompt payments. Otherwise, malulugi sila.

It should be noted that the parties contracted not only as to peace

time conditions but also as to war-time conditions since the policies

contained provisions applicable expressly to wartime days. The

logical inference therefore is that the parties contemplated the

uninterrupted operation of the contract even if armed conflict

should ensue.


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ADELAIDA OCAMPO VDA. DE GOMEZ,demandante-

apelante,

vs.

THE GOVERNMENT INSURANCE BOARD,demandado-apelado.

Sres. Artemio C. Macalino y Rodrigo G. Pagan en representacion de la

apelante.

Abogado Auxiliar de Corporaciones D. Federico C. Alikpala en

representacion del apelado.

BRIONES,J.:

Andres A. Gomez estuvo sirviendo en el gobierno provincial de la

Pampanga como tasador provincial delegado por un periodo continuo de25 aos, desde el 8 de Agosto de 1914 en que fue nombrado por primera

vez, hasta el 28 de Febrero de 1938 en que fallecio. Segun el convenio

dehechos, no cabe duda de que su nombramiento era de empleado

temporero temporaryal tenor de la fraseologia legal. No era elegible

en el servicio civil: esto explica porque durante tan largo tiempo de servicio

no se le habia podido expedir un nombramiento regular y permanente. El

sueldo que percibia al morir era de P90 al mes.

Tampoco hay controversia entre las partes, bajo el convenio, acerca de los

siguientes hechos: (a) que el gobierno provincial de la Pampanga, paraaprovecharse delos beneficios de la ley del Commonwealth No. 186,

aprobo el 8 de Agosto, 1937, por medio de su junta provincial, una

resolucion en que significaba su intencion de afiliarse al Sistema de Seguro

de Vida del Gobierno nacional llamado "Government Service Insurance

System"; (b) que despues de recibir dicha resolucion, la junta que regenta y

administra dicho Sistema de Seguro la aprobo debidamente, haciendo

efectiva la afiliacion desde el 28 de Febrero, 1938; (c) que Andres A.

Gomez, antes de sumuerte, juntamente con otros empleados del gobierno

provincial de la Pampanga habia llenado un formulario del referido Sistema

de Seguro llamado "Information for membership insurance," en el que

nombraba a suesposa Adelaida Ocampo como beneficiaria, enviando luego

el formulario asi llenado al "Government Service Insurance System" que lo

recibio y guardo en su archivo; (d) que el 28 de Febrero, 1938, el tesorero

provincia lde la Pampanga, como pagador oficial, dedujo del sueldode

Gomez correspondiente a la segunda mitad de dichomes la cantidad de

P2.70 como su parte en la primera prima, aportando la provincia una suma

igual como su contribucion; (e) que la prima fue enviada a la oficina del

"Government Service Insurance System" en Manila, y dicha oficina la

recibio el 10 de marzo, 1938, librando el correspondiente recibo al

gobierno provincial de la Pampanga; (f) que el 7 de Marzo, 1938, el

tesorero provincial de la Pampanga envio a la oficina del "Government

Service Insurance System," en nombre de la viuda de Andres Gomez,

Adelaida Ocampo, una reclamacion por el importe dela poliza de seguro en

la suma de P1,052, pero la juntadirectiva del Sistema la rechazo por el

fundamento de queAndres Gomez era solo un empleado temporero

temporarybajo las reglas del Servicio Civil, y, por tanto, no era

asegurable cuando murio el 28 de Febrero, 1938; (g) finalmente, que la

oficina del "Government Service Insurance System" devolvio al gobierno

provincial de la Pampanga el importe de la prima pagada, o sea la cantidad

de P5.40, por medio de la libranza de la Tesoreria No. 58162.

La viuda interpuso la presente accion ante el Juzgado de Primera Instancia

de la Pampanga contra la Junta Directiva del "Government Service

Insurance System," pidiendoel cobro del importe de la poliza. El Juzgado,

estimandola defensa de que Andres Gomez era solo un temporero,

sinhaberse cualificado en el servicio civil mediante el correspondiente

examen para merecer un nombramiento como empleado regular y

permanente, y, por tanto, sin derechoa ser asegurado automaticamente

bajo la ley que rige el Sistema, dicto sentencia contra la demandante,

sobrese y endola demanda. De ahi la presente apelacion.


27/31


28/31

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maslos intereses legales desde la interposicion de la demanda, y las costas

del juicio. Asi se ordena.

Moran, Pres., Paras, Feria, Pablo, Hilado, Bengzon, Padilla, and Tuason ,

MM.,estan conformes.

[G.R. No. 42874. October 22, 1935.]

THE INSULAR LIFE ASSURANCE CO., LTD., Plaintiff-Appellant, v.

MARIA NARCISA SUVA, as administratrix of the intestate estate of

Benito Patrocinio Suva, defendant and appellee. FELICIDAD CRUZ,

intervenor and appellant, MARIA NARCISA SUVA, Intervenor-

Appellee.

Araneta, Zaragoza & Araneta for plaintiff.

Jose Gutierrez David for intervenors.

SYLLABUS

LIFE INSURANCE POLICY; ATTEMPTED CHANGE OF BENEFICIARY.

The conclusion of the trial court is sustained by the decision in the

case of Gercio v. Sun Life Assurance Co. of Canada (48 Phil., 53), andthe American authorities therein cited. The attempted change of

beneficiary made by the insured on August 16, 1933, no right to

change having been reserved, and endorsed by the company on the

back of the policy on August 24, 1933, was due to a mutual mistake.

The application in which the insured, over his personal signature,

renounced the right to change the beneficiary, should prevail over

the printed phrase "WITH RIGHT OF REVOCATION" which occurs in

the policy. It is to be noted that the application itself is made a part

of the contract.

D E C I S I O N

BUTTE, J.:

This is an appeal from a judgment of the Court of First Instance of

Manila in an action brought by the Insular Life Assurance Co., Ltd.,

for the cancellation of two policies of P5,000 each issued and

delivered by it upon the life of Benito Patrocinio Suva, now

deceased. The action was originally brought only against the

administratrix of the estate of the insured, but by leave of court,

Maria Narcisa Suva, in her own right, and Felicidad Cruz filed theirinterventions claiming to be the beneficiaries of the two policies

involved in this action.

The first of the policies, numbered 47726, bears date of December

1, 1932, and names as beneficiary Isabel Simbulan, the wife of the

insured. The second of the said policies, numbered 48819, bears

date of February 1, 1933, and names as beneficiary the appellee,

Maria Narcisa Suva, sister of the insured. The company

acknowledges having received the premium due on said policies forthe first year and tenders the return of the same in its petition. The

intervenors, besides praying for judgment for the amount due on

said policies, also pray for P1,000 each as damages.

The ground alleged by the plaintiff for the cancellation of said

policies is that the insured made false statements as to the past and

present state of his health in his applications which, by the terms of


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29

the policies themselves, are made a part of the contract. The

applicant was examined on October 17, 1932, by Dr. G. Ocampo,

one of the physicians of the company. He was again examined on

December 28, 1932, by Dr. M. Llora, a physician of the company

sent out from the home office for that purpose. In connection withhis first application for pol icy No. 47726, among the numerous

questions with relation to specific diseases, the following questions

and answers appear in the report of Dr. Ocampo (Exhibit

B):jgc:chanrobles.com.ph

" Ha padecido V.2 alguna vez de las siguientes enfermedades . . .

del pulmon, pleuriesia, pulomia, asma? No.

" Ha escupido V. sangre? Por quecausa? No." No doubt israised as to the correctness of any other statements of the

applicant.

The report of Dr. Ocampo is a detailed account of the complete

examination made by him. Item No. 30 of his report is as follows:"

Encuentra V., despues de una cuidadosa interrogacion y

reconocimiento, algn sintoma de padecimiento actual o anterior . .

. de los pulmones? to which the doctor answered "No." Item 33 of

his report is as follows:" Ha revisado V. cuidadosamente todas lascontestaciones de este reconocimiento y esta V. seguro de que son

claras y completas?" to which the doctor answered "Si." Item 34 is

as follows:" Cree V. que los informes dados por le solicitante son

verdaderos y completos en todos los conceptos?" to which the

doctor answered "Si." Item 35 is as follows:" Recomienda V., como

representante fiel de la compaia, que se acepte este riesgo como

excelente, bueno, o que no se acepte?" to which the doctor

answered "Si, que se acepte como excelente."cralaw virtua1aw

library

On December 28, 1932, when the applicant was examined by Dr. M.

Llora, he was asked the same questions as were put to him by Dr.Ocampo. In the questions relating to his clinical history he was

asked: "Have you ever suffered from any ailment or disease of (c)

the lungs, pleurisy, pneumonia or asthma? The applicant answered

"Yes, trancazo 1918" and (h) "Have you ever spat blood? What was

it due to?" to which the applicant answered "No." No other answers

made by him are called in question in this litigation.

In Dr. Lloras detailed report which appears on the back of said

application, Exhibit C, appear the following:jgc:chanrobles.com.ph

"Item 30: Do you find after careful inquiry and physical examination

any evidence of past or present disease . . . (d) of the lungs?

"Answer: No."cralaw virtua1aw library

"Item 34: Do you believe the party has given full and true

information in all respects?

"Answer: Si.

"Item 35: Would you classify appl icant as first class, good, average

or poor risk?

"Answer: Creo que es aceptable." His report concludes with the

following certificate:jgc:chanrobles.com.ph


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"I CERTIFY that I have carefully examined Benito Patrocinio Suva of

Arayat, Pampanga, in private, and not in the presence of any third

person, at Arayat, Pampanga, this 28th day of December, 1932, at

5.15 oclock P. M. for an insurance of P5,000 for 20 C. P. years onthe applicants life; that I have asked each question exactly as set

forth on the other side of this sheet and that the applicants

answers thereto are in my handwriting, and are exactly as made by

the applicant to me and that the applicant signed them in my

presence.

(Sgd.) "M. LLORA, Med. Ex."cralaw virtua1aw library

The insured died of pulmonary tuberculosis in the Chinese GeneralHospital in Manila on September 23, 1933.

The substance of the plaintiffs cause of action is that the

statements made by the insured in his applications as above

quoted, were false and that the applicant was not in good health

either at the time he presented his applications or on the date when

said policies were delivered.

Upon this issue of fact the learned trial judge made a complete andcareful analysis of the evidence. We accept his conclusions as to the

credibility of the witnesses. We have carefully re-examined the

entire record and see no reason to disturb his findings of fact. It

seems to us the companys physicians were entirely warranted in

their conclusion that the insured was an acceptable risk. The

preponderance of the evidence discloses that the applicant, a young

man 27 years of age and recently married, was devoted to vigorous

athletic sports and regularly carried on his business as a farmer and

contractor up to May, 1933.

In reply to the question in the printed application, "Are you in good

health? he replied "Yes." If two qualified physicians, not selected byhim, independently examine a man with critical attention and in the

interest of their employer, the insurance company, and they

pronounce him to be in good health, we should find it difficult to

declare that he knowingly made a false statement when he said he

believed the same thing himself. "Good health" is a relative term. A

person with sound body may honestly believe himself to be in

"good health" although at the moment he may have a terrific

headache,

237727101 Part 2 Insurance Digested Cases

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