Insurance Digests (Philomatheia)

7/13/2019 Insurance Digests (Philomatheia)

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Anbochi, Atillo, WeigandTaken from Rhys Alexeis reviewer. Digests from upperbatch.

Sections 1-25

Constantino v Asialife

This case involves a consolidation of 2 cases:

Case No. 1: For the sum of 175.04 as annual premium duly paid to ALIC, itissued Policy No. 93912 whereby it insured the life of Arcadio Constantino for20 years for P3T with Paz Constantino as beneficiary. First premium coveredthe period up to Sept. 26, 1942. No further premiums were paid after the firstpremium and Arcadio died on Sept. 22, 1944. Due to Jap occupation, ALICclosed its branch office in Manila from Jan. 2 1942-1945.

Case No. 2: For the sum of P3T for 20 years. The annual premium stipulatedwas 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 toquarterly and such quarterly premiums were paid until Nov. 18, 1941. Lastpayment 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 becameimpossible and illegal for the insured to deal with ALIC. Aside from this theinsured borrowed from the policy P234.00 such that the cash surrender value ofthe policy was sufficient to maintain the policy in force only up to Sept. 7, 1942.

Both policies contained this provision: All premiums are due in advance and anyunpunctuality in making such payment shall cause this policy to lapse unlessand except as kept in force by the grace period condition.Paz Constantino and Agustina Peralta claim as beneficiaries, that they areentitled to receive the proceeds of the policies less all sums due for premiums inarrears. They also allege that non-payment of the premiums were caused bythe closing of ALICs offices during the war and the impossible circumstancesby the war, therefore, they should be excused and the policies should not beforfeited.Lower court ruled in favor of ALIC.

Issue: May a beneficiary in a life insurance policy recover the amount thereofalthough the insured died after repeatedly failing to pay the stipulatedpremiums, such failure being caused by war?

Held: NO. Due to the express terms of the policy, non-payment of the premiumproduces its avoidance. In Glaraga v. Sun Life, it was held that a life policy wasavoided 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 31day

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 avoidforfeiture. Essentially, the reason why punctual payments are important is that

the insurer calculates on the basis of the prompt payments. Otherwise,malulugi sila.

It should be noted that the parties contracted not only as to peace timeconditions but also as to war-time conditions since the policies containedprovisions applicable expressly to wartime days. The logical inference thereforeis that the parties contemplated the uninterrupted operation of the contract evenif armed conflict should ensue.

Insular Life v Ebrado

Buenaventura Ebrado was issued by Insular Life Assurance Co. a whole lifeplan for P5,882.00 with a rider for Accidental Death Benefits for the sameamount.

Ebrado designated Carponia Ebrado as the revocable beneficiary in his policy,referring to her as his wife.Ebrado died when he was accidentally hit by a falling branch of tree.Insurer by virtue of the contract was liable for 11,745.73, and Carponia filed herclaim, although she admitted that she and the insured were merely living ashusband and wife without the benefit of marriage.Pascuala Ebrado also filed her claim as the widow of the deceased insured.Insular life filed an interpleader case and the lower court found in favor ofPascuala.

Issue: Between Carponia and Pascuala, who is entitled to the proceeds?

Held: The proceeds should go to the estate of the deceased insured.It isquite unfortunate that the Insurance Act or our own Insurance Code does notcontain a specific provision grossly resolutory of the prime question at hand.

Rather, the general rules of civil law should be applied to resolve this void in theinsurance law. Art. 2011 of the NCC states: The contract of insurance isgoverned by special laws. Matters not expressly provided for in such speciallaws shall be regulated by this Code. When not otherwise specifically providedfor in the insurance law, the contract of life insurance is governed by the generalrules of civil law regulating contracts.


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Under Art. 2012, NCC: Any person who is forbidden from receiving anydonation under Art. 739 cannot be named beneficiary of a life insurance policyby a person who cannot make any donation to him, according to said article .Under Art. 739, donations between persons who were guilty of adultery orconcubinage at the time of the donation shall be void.

In essence, a life insurance policy is no different from civil donations insofaras the beneficiary is concerned. Both are founded on the same consideration ofliberality. A beneficiary is like a donee because from the premiums of the policywhich the insured pays, the beneficiary will receive the proceeds or profits ofsaid insurance. As a consequence, the proscription in Art. 739 should equallyoperate in life insurance contracts.

Therefore, since common-law spouses are barred from receiving donations,they are likewise barred from receiving proceeds of a life insurance contract.However, the wife also cannot receive the proceeds, as if the beneficiary isdisqualified from being one, the proceeds of the policy shall go to the estate ofthe deceased insured contracting party.

Qua Chee Can v Law Union & Rock Co.

Qua Chee Gan owned 4 warehouses/bodegas in Albay, used for the storage ofstock of copra, hemp, bale and loose, which he dealt extensively. Thesewarehouses & their contents were insured by the defendant insurancecompany, Law Union & Rock Insurance.

Fire of undertermined origin completely destroyed Bodegas 1, 3, and 4, with themerchandise stored in them (fire lasted for almost 1 week). Qua Chee informedthe company but the latter resisted payment, claiming violation of warranties &conditions, filing of fraudulent claims, and that the fire had been deliberatelycaused by the insured or by other persons in connivance with him.

Qua Chee Gan, et al. were tried for the crime of arson, it being claimed thatthey had set fire to destroy warehouses to collect insurance. They wereacquitted by the CFI. Hence, the civil suit to collect the insurance money. The

CFI ordered the Law Union to pay Qua Chee Gan.

Law Union appealed to the SC, alleging that the policies were avoided forbreach of warranty. Qua Chee Gan should have had 11 fire hydrants asstipulated, but he only had 2. He also breached the Hemp Warranty provisionsagainst storage of gasoline, since he admitted that there were 36 cans ofgasoline in Bodega 2.

Issue: W/N the insurance policies were avoided for breach of warranty NO

Ratio:RE: Hydrant WarrantyThe SC agreed with the CFIs ruling that the insurance company is barred bywaiver or estoppel to claim violation of the hydrant warranty. The they knew

very well that there were only 2 installed, but nevertheless issues the policiesand received the corresponding premiums. American jurisprudence holds thatwhere the insurer, at the time of the issuance of a policy of insurance, has

knowledge of existing facts which, if insisted on, would invalidate the contractfrom its very inception, such knowledge constitutes a waiver of conditions in thecontractand the insurer is stopped from asserting the breach of suchconditions. The reason for the rule is human justice. To hold otherwise wouldallow the company to treat the policy as valid and receive premiums on it, andleave it at liberty to repudiate it the next moment.

RE: Hemp Warranty (Related to our topic)Qua Chee Gan did not violate the Hemp Warranty as well. Gasoline is notspecifically mentioned in the prohibited articles listed. The policy actually spokeof oils (having a flashpoint below 300 degrees F), which is ambiguous anduncertain, for in ordinary parlance, this would mean lubricants, not kerosene orgasoline. And it is a wonder how many insured could understand or determineflashpoint below 300 degrees.

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

terms & and phraseology of the contract, the ambiguity must be heldstrictly against the insurer and liberally in favor of the insured.

Insurance is, in its nature, complex & difficult for the layman to understand.Policies are prepared by experts who know and can anticipate the bearing andpossible complications of every contingency. So long as insurance companiesinsist upon the use of ambiguous, intricate & technical provisions which concealtheir own intentions, the courts must, in fairness to those who purchaseinsurance, construe every ambiguity in favor of the insured (Algoe v. Pacific

Mut. L. Ins. Co.).

The court sees no reason why the prohibition of keeping gasoline could not beexpressed clearly and unmistakably. The contract of insurance is one of perfectgood faith, not for the insured alone, but equally so for the insurer.

Furthermore, the gasoline kept was incidental to the insureds business. It is awell-settled rule that keeping of inflammable oils (weird, SC already ruled thatgasoline isnt considered an oil) on the premises, though prohibited by the


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policy, does not void it if such keeping is incidental to the business. Also, thehemp warranty forbade storage only in the building to which the insuranceapplies. In this case, no gasoline was stored in the burned bodegas, andBodega 2 was isolated from them.

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______Ty v Filipinas Cia. De Seguros

Petitioner was a mechanic operator for a cotton factory. He obtained a PersonalAccident Insurance Policies from various companies including herein defendant.The factory caught fire. While he was aiding in the extinguishment of the fire, aheavy object fell on petitioners left hand causing injuries. Petitioners orthopedicsurgeon certified that his left hand had suffered from temporary total disability.Petitioner sued defendant over the policy. He contends that it is sufficient thatthe injury would result to incapacity to discharge the duties of his workDefendant contends that, upon the clear terms of the policy, in order for theinjury to be compensable, the hand must be amputated.

HELD: Ty cannot recover on the insurance policies.The provision in the indemnity agreement is clear and leaves no room for otherconstruction. To be compensable, the hand must be amputated and not merelyfractured as was the case of petitioner. The insurance policy is the law betweenthe parties._____________________________________________________________________Philam Life v. Ansaldo

Private respondent Paterno wrote a letter to herein respondent Ansaldo, then

Insurance Commissioner, to complain about problems encountered by agents,supervisors, managers and public consumers of Philippine American LifeInsurance (Philam Life) as a result of certain practices of the latter. Paternocaims that there were provisions of the Contract of Agency executed betweenPhilam Life and its agents that are illegal. Ansaldo requested Delos Reyes,Philam Lifes President, to comment on Paternos letter. Delos Reyes however

requested for some sort of bill of particulars in order that he can prepare anintelligent reply. Paterno requested instead that a hearing be conducted.

Paterno wanted that the contracts provisions on charges and fees be declarednull and void, and that charges and fees already collected by Philam Life bereimbursed to the agents. Delos Reyes on the other hand, submitted an answerstating that since the Commissions quasi-judicial power was being invoked,

Paterno should file a verified formal complaint before any further proceedingmay take place.

The Commissioner then notified both parties of the hearing of the case. PhilamLifes Senior AVP filed a motion to quash subpoena/notice, one of the groundsbeing that the Insurance Commission has no jurisdiction over both the action

and the parties. The Commissioner denied the motion to quash, ruling that thecase is cognizable by the Commission. Hence this.

Issue: w/n the case (the resolution of the legality/validity of the agency contract)falls within the jurisdiction of the Commissioner

Ruling: The insurance commissioner does not have jurisdiction over the case.The general regulatory authority of the Insurance Commissioner is stated inSec.414 of the Insurance Code (Commissioner has the duty to see that all lawsrelating to insurance... are faithfully executed) and under Sec415(Commissioner is authorized to impose upon insurance companies fines andsuspensions for violations of the Code). Simply, all this means that theCommissioner has the authority to regulate the business of insurance,which is defined to include (a) making or proposing to make as insurerany insurance contract; (b) making or proposing to make as surety anycontract of suretyship as a vocation and not merely incidental to anyother legitimate business or activity of the surety, (c) doing any kind ofbusiness, including a reinsurance business, specifically recognized asconstituting the doing of an insurance business within the meaning of this

Code, (d) doing or proposing to do any business in substance equivalentto any of the foregoing in a manner designed to evade the provisions ofthis Code.

Since the contract of agency between Philamlife and its agents is not includedwithin the meaning of an insurance business, then Sec 2 cannot be invoked togive jurisdiction over the same to the Commissioner. Expressio unius estexclusion alterius.

Even the quasi-judicial power of the Commissioner as stated in Sec.416 cannot

be invoked because it only refers to claims involving loss, damage or liability forwhich an insurer may be answerable. This power does not cover therelationship affecting the insurance company and its agents. The Code does nothave provisions governing this kind of relationship. Commissioner has nojurisdiction.

Philamcare vs CA


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Ernani Trinos (deceased) was the husband of private respondent Julita. DuringErnanis lifetime, he applied for a healthcare coverage with Philamcare. In theapplication form he was asked, Have you or any of your family members everconsulted or been treated for high blood sugar, heart trouble, diabetes, cancer,liver disease, asthma or peptic ulcer? He answered no.

The application was approved for a period of one year. Under the coverage, hewas entitled to hospitalization benefits, out patient benefit (like physicalexaminationsetc.). The agreement was extended for another year after its

termination. During this period, Ernani suffered a heart attack and was confinedat the Manila Medical Center. Julita tried to claim from the benefits under theagreement but Philamcare refused.Philamcare alleges that the agreement was void because there wasconcealment of Ernanis medical history. The Doctors at MMC found that Ernaniwas hypertensive, diabetic and asthmatic which was contrary to what heanswered in the application.Ernani was brought home due to financial difficulties but was later admitted tothe Chinese General Hospital after he felt very weak. He died there. Julita filedan action for damages against Philamcare. The lower court and the CAsustained Julita. Philamcare avers that the healthcare agreement is not aninsurance contract, hence the incontestability clause does not apply.

Philamcares basis for saying that the agreement is not an insurance contractare: 1) the living benefits may only be enjoyed as long as he is alive uponeffectivity of the agreement and its expiration; 2) the benefits are given without

any indemnification unlike in an insurance contract; and 3) the incontestabilityclause requires an effectivity period of at least 2yrs.

Issue: Whether or not the healthcare agreement is an insurance contractconsidering the interest that was insured?

Held: A health care agreement is an insurance contract.

Ratio: (only important part is on what may be insured)

The IC (Insurance Code) defines a contract of insurance as an agreement

whereby one undertakes for a consideration to indemnify another against loss,damage or liability arising from an unknown or contingent event. The followingare the requisites: 1) the insured has an insurable interest;2) insured is subject to a risk of loss;3) insurer assumes the risk;4) assumption of risk is part of a scheme to distribute actual losses among alarge group of persons bearing a similar risk; and5) insured pays a premium.

Section 3 of the Insurance Code states that any contingent or unknown event,whether past or future, which may damnify (I guess this means affectnegatively) a person having an insurable interest against him, may be insuredagainst. Every person has an insurable interest in the life and health of himself.Hence, the healthcare agreement was an insurance contract.

Every person has an insurable interest in the life and health: 1) of himself, of hisspouse and of his children; 2) of any person on whom he depends wholly or in

part for education or support, or in whom he has a pecuniary interest; 3) of anyperson under a legal obligation to him for the payment of money, respectingproperty or service, of which death or illness might delay or prevent theperformance; and 4) of any person upon whose life any estate or interestvested in him depends.

In the case at bar, the insurable interest of respondents husband in obtainingthe health care agreement was his own health. The health care agreement wasin the nature of non-life insurance, which is primarily a contract of indemnity.Once the member incurs hospital, medical or any other expense arising fromsickness, injury or other stipulated contingent, the health care provider must payfor the same to the extent agreed upon under the contract.

(Other doctrines: To warrant recission, the fraudulent intent of the insuredmust be proven. In this case, the alleged misrepresentation was to his answerof No regarding his medical history. The Court sees the answer to this

question to be based largely on opinion. Ernani, not being a medical doctor,could not have factually known his medical condition.)

Filipinas Cia. De Seguros v Christern Huenfeld & Co.

Respondent company Christern obtained a fire policy from Filipinas Ciacovering merchandise contained in a building in Binondo (premium of P100kalready paid). During the Japanese occupation, the building and insuredmerchandise were burned. Christern submitted to the insurer Filipinas Cia itsclaim under the policy. The salvage goods were sold at public auction and afterdeducting their value, the total loss suffered was fixed at P92,650.

Filipinas Cia refused to pay on the ground that the policy had ceased to be inforce on the date the US declared war against Germany, Christern being

controlled by German subjects and Filipinas Cia being a company underAmerican jurisdiction when the policy was issued in 1941. Nevertheless,Filipinas paid Christern pursuant to the order of the Dir. of the Bureau ofFinance.


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Filipinas Cia filed the present action to recover the sum it paid. Its theory is thatthe insured merchandise were burned after the policy had ceased to beeffective because of the war between US & Germany, and that payment wasmade under pressure. The CFI dismissed the case, CA affirmed.

The CA overruled the contention that Christern became an enemy when the US

declared war against Germany, relying on English and American cases whichheld that a corporation is a citizen of the country or state by and under the lawof which it was created or organized. It rejected the theory that the nationality of

a private corporation is determined by the character or citizenship of itscontrolling stockholders.

Issues:W/N Christern became an enemy corporation YESW/N the insurance policies ceased to take effect YES

Ratio:The English and American cases relied upon by the CA have lost their force inview of the latest decision of the US SC in Clark v. Ueber-see FinanzKorporation, in which the control test has been adopted. A corporation wassubject to enemy legislation when it was controlled by enemies, namelymanaged under the influence of individuals or corporations themselvesconsidered as enemies (piercing the corporate veil).

In Haw Pia v. China Bank, the SC held that the latter came within the meaning

of the word enemy as used in the Trading with the Enemy Acts of civilizedcountries not only because it was incorporated under the laws of an enemycountry, but because it was controlled by enemies.

The Philippine Insurance Law, sec. 8, provides that anyone except a publicenemy may be insured. It stands to reason that an insurance policy ceases tobe allowable as soon as an insured becomes a public enemy.

Having become a public enemy, the insurance policy issued to Christern had

ceased to be valid and enforceable and was not entitled to any indemnity under

the policy. However, elementary rules of justice require that the premium paidfor the period covered by the policy should be returned to Christern.

San Miguel v Law Union and Rock Insurance and Henry Harding

This action was instituted by petitioner, as mortgagee-creditor of Henry Harding,to recover the face value of the insurance policies covering properties [notmentioned what kind] which were destroyed by fire. The total face value of the

policies was 15,000 chargeable against respondent insurance company andFilipinas Compania De Seguros.The balance Harding owed to San Miguel was 4K +++. Respondent insurancecompanies agreed to pay petitioner 4k+++ representing the balance of themortgage debt. However, the insurance companies refused to pay Harding, thetrue and real owner, of the insured properties the difference between the

balance of the mortgage debt and the face value of the policies [ie. 15,000 4,000+++]The contention of respondent insurance companies was that their liability was

limited to the insurable interest of the plaintiff over the properties.The issue is whether Harding could recover the deficiency [between petitionersmortgage credit and the face value of the policies]

HELD: Insurance companies win.Harding cannot recover. This is because the interest that was insured was onlythe mortgage interest of petitioner as creditor-mortgagee ie. which was only upto 4k+++. This meant that the insurance companies cannot absolutely be madeto pay more than 4k+++. The properties were originally owned by Dunn (beforehe assigned it to Harding). Dunn obtained a loan of 10,000 from petitioner andmortgaged the properties. Thereafter, Dunn asked petitioner to insure ALL theinterests in the properties and charge the premium paid to Dunn. Petitioner thusobtained the insurance of herein respondent companies. HOWEVER, during thenegotiations for the insurance, petitioner represented to the companies that itsinterest over the properties was only that of a mortgagee to the extent of thebalance of the mortgage debt. Thus only such portion of the entire interest was

insured. It follows therefore that the owners interest is not insured.Furthermore, since Harding only stepped into the shoes of Dunn as assignee ofthe properties, he cannot have better rights than Dunn. He too cannot collectfrom defendant companies.

Grepalife v CA and Luterio

A contract of group life insurance was executed between Great Pacific LifeAssurance Corp (Grepa Life) and Devt Bank of the Phils (DBP), where GrepaLife agreed to insure the lives of eligible housing loan mortgagors of DBP.

Dr. Leuterio, a housing debtor of DBP, applied for membership in the group lifeinsurance plan and in the application form, he stated that he is in good health,never having consulted a physician for a heart condition, high blood pressure,

cancer, diabetes, etc. Thus, Grepa Life issued him an insurance coverage tothe extent of his DBP mortgage indebtedness amounting to 86K.

Less than a year later, Dr. Leuterio died due to massive cerebral hemorrhage,and DBP submitted a death claim to Grepa Life. Grepa Life denied the claim,


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alleging that Dr. Leuterio was not healthy when he applied for an insurancecoverage. Grepa Life said that such concealment justified the denial of DBPsclaim.

Dr. Leuterios widow filed a complaint for specific perf. with damages. RTC ruledfor her, ordering Grepa Life to pay DBP 86k, and the CA sustained this

decision, hence this. Grepa Life argues that because the complaint wasinstituted by the widow, who is not the real party in interest, the RTC had nojurisdiction over the case. DBP was the indispensable party who wasnt joined

in the suit.

Issue: w/n Grepa Life can be made liable to DBP as a beneficiary in a group lifeinsurance contract based on a complaint filed by the widow of the decedent-mortgagor

Ruling: yes.The rationale of a group insurance policy of mortgagors, otherwise known asthe mortgage redemption insurance, is a device for the protection of both themortgagee and the mortgagor. On the part of the mortgagee, it has to enter intosuch form of contract so that in the event of the unexpected demise of themortgagor during the subsistence of the mortgage contract, the proceeds fromsuch insurance will be applied to the payment of the mortgage debt, therebyrelieving the heirs of the mortgagor from paying the obligation. Ample protectionis also given to the mortgagor so that in the event of death, the mortgageobligation will be extinguished by the application of the insurance proceeds to

the mortgage indebtedness. Where the mortgagor pays the insurance premiumunder the group insurance policy, making the loss payable to the mortgagee,the insurance is on the mortgagors interest, and the mortgagor continues to bea party to the contract. In this type of policy insurance, the mortgagee is simplyan appointee of the insurance fund, such loss-payable clause does not makethe mortgagee a party to the contract. (this explains Sec 8 of the Code).

And since a policy of insurance may pass by transfer, will or succession to anyperson, the Leuterio widow may filey the suit against Grepa Life.

HOWEVER, after the CA ruling and before the disposition of this case, it turnsout, DBP already foreclosed on the mortgage. Thus, the insurance proceedsshall now inure to the benefit of the heirs of the deceased or his beneficiaries.DBP should not unjustly enrich itself.

On the concealment issue: Grepa Life was not able to substantiate this claim,no autopsy was conducted, the real cause of Luterios death is still unknown.

Col. Castro v Insurance CommissionerCastro applied for an insurance policy on the life of his driver, Johnny Terrenal.Insular Life issued the policy. The policy provided for a double indemnity in caseof accidental death. 3months after the issuance of the policy, Terrenal wasallegedly shot to death by unknown persons. Castro claimed for the benefits butInsular Life refused on the ground that the insurance policy issued was void.

Issue: Whether the insurance policy was void?

Held: Yes! Castro cannot claim the benefits.

Ratio: Authorities have held, public policy does not permit one having noinsurable interest to procure a policy of insurance upon the life of [another] andpay the premium as speculation or on a chance of collecting money wherethe required relationship is lacking, the person to be benefited by the policy isinterested instead on the death of the of the insured rather than on his life. Inshort, the person to be benefited has no business making sure that insureds lifecontinued (meaning, wala naman siya mapapala kung mabuhay ng matagalyung insured so bakit niya ikukuha ng insurance yung tao? Dubious yungpurpose diba?)

In this case, it is obvious that Castro has no insurable interst over thelife of his driver. Noticeable is the fact that the policy covers 20yrs of Terrenalslife which is weird considering that drivers come and go. He also was not able to

establish any pecuniary loss on the death of his driver, instead, he had more togain.

Even their relationship as employer and employee is not sufficient to

give Castro an interest over the life of his driver. It would be fine had theemployee taken the insurance policy himself and just named his employer hisbeneficiary. However, if the employer procures the policy on his own account onthe life of an employee, he has no insurable interest and the policy isconsidered void.

It is required that the person taking out insurance as beneficiary has a

legal claim from the insured for services or that he has a reasonable right toexpect some pecuniary advantage from the continuance of the life of theinsured or to fear the loss of his death.

Even if we assume that Castro had an insurable interest, as claimant,he still failed to prove that his driver died because of an accident.

Lincoln National Life v San Juan


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Lincoln Insurance Co. is seeking the rescission of 5 life insurance policies takenon the life of Misterioso San Juan, with his wife and Luis Parco as beneficiaries,on the basis of false representations and concealment of material facts made bythe defendants San Juan and Parco in their applications. It was alleged that theinsured contracting party lacked insurable interest on the life of the personinsured. Another ground alleged was the lack of insurable interest of defendant

Luis Parco on the life of San Juan.

Defendants San Juan and Parco aver that Lincoln had conducted investigationsbefore acting on their application and was aware of these false representationsbut nevertheless, issued the policies (which amounts to a waiver). They allegethat Lincoln filed these complaints in order to avoid liabilities in their policiesafter their rights as beneficiaries have accrued (as a result of San Juans death).The RTC declared the policies to be null and void.

Issue: W/N the policies are null and void YES

Ratio: There is not a shred of evidence adduced by appellants Mrs. San Juanand Parco that Lincoln had previous knowledge of said false representations(appellants have the burden of proving this).

The CA considers the 5 insurance policies as wagering or highly speculativecontracts of insurance, which are void for reasons of public policy, and notbeing based on the existence of insurable interests on the part of Parco on the

life of San Juan, the issuance having been brought about and procured throughfalse affirmations, representations, and concealment:

1. That San Juan was a proprietor and fish merchant for 10 years, when in facthe had no real estate property nor was it shown that he really was a merchant;

2. That San Juan had no employer but himself, when in fact he is employed asa tenant in Parcos coconut farm;

3. That his income exceeded P5k when he yearly earnings are barely that of afarm laborer; and

4. That there was no pending application for life insurance nor was any issuedat the time of application, when in fact there were several already issued byother companies.

Lack of Insurable Interest

The policies lack the element of insurable interest. San Juan could not haveafforded the insurance policies, whereas there is abundant evidence to showthat the real party in interest in these policies was Parco, and that San Juanwas a mere nominal party, since Parco paid for them.

Evidence also shows that the policies were procured as part of a general plan to

defraud Lincoln and other companies. The discovery of a severed human headin an advance state of decomposition left intentionally in a jeepney and beingpointed out as San Juan erases any doubt that the insurance policies belong tothe class designed to perpetrate a massive fraud against the companies.

The lower court refused to return the paid premiums to Parco on the ground thathe appears to have strongly engineered the killing of a person. This is meresuspicion, hence, the CA ordered their return.

Insular Life v Ebrado

Buenaventura Ebrado was married to Pascuala with whom he had 6 legitimatechildren. However, during this marriage he was living with his mistress CarponiaEbrado with whom he had 2 children. Buenaventura was issued a whole lifepolicy insurance by Insular Life in which he named Carponia (mistress) as his

beneficiary.

Buenaventura was hit by a falling branch of a tree and died. Carponiafiled her claim for the proceeds of the insurance policy with Insular Life who wasconstested by Pascuala (real wife). Insular life filed an interpleader as to whomit should pay the insurance proceeds.

Issue: Who between the wife and the mistress has the right to receive theinsurance proceeds?

Held: The proceeds must go to the estate of the deceased.

Ratio: The Insurance Act, later superseded by the Insurance Code does notexplicitly answer the question posed. However, Art. 2011 of the NCC providesthat The contract of insurance is governed by special laws. Matters not

expressly provided for shall be regulated by this Code. Under Art.2012 ofNCC, a person forbidden from being a donee cannot be made a beneficiary of alife insurance by the person who cannot donate to him/her. And under Art. 739,a donation between persons who where guilty of adultery or concubinage at thetime of donation is considered void (also those made between persons foundguilty of the same criminal offense).A life insurance policy and a donation are similar in that they both founded onliberality. A beneficiary is like a donee because from the premiums the insured


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has paid out of liberality, the beneficiary receives the proceeds. Hence, Art.739applies to insurance contracts. Policy considerations and dictates of moralityrightly justify the institution of a barrier between common law spouses in recordto Property relations since it encroaches upon the rights of the legitimate family.So long as marriage remains the cornerstone of our family law, reason andmorality alike demand that the disabilities attached to marriage should likewise

attach to concubinage (recall sales that husband and wife are prohibited fromdonating/selling to one another because of the influence one exerts over theother). Conviction for adultery or concubinage is also not needed before the

prohibition under Art.739 may apply.If the beneficiary is disqualified, the proceeds shall be paid to the estate of thedeceased.

Philamlife v Pineda

On Jan. 15 1963, Dimayuga processed an ordinary life insurance policy fromPhilamlife and designated his wife and children as irrevocable beneficiaries.On Feb. 22, 1980, Dimayuga filed a petition in court to amend the designationof the beneficiaries in his policy from irrevocable to revocable.Lower Court granted the petition.

Issue: WON the court erred in granting Dimayugas petition.

Held: YES.

Under the Insurance Act, the beneficiary designated in a life insurancecontract cannot be changed without the consent of the beneficiary because hehas a vested interest in the policy. The policy contract states that thedesignation of the beneficiaries is irrevocable. Therefore, based on the saidprovision of the contract, not to mention the law then applicable, it is only withthe consent of all the beneficiaries that any change or amendment in the policymay be legally and validly effected. The contract between the parties is the lawbinding on them.

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Harvardian Colleges v County Bankers Insurance Corp.

Harvardian is a family corporation, the stockholders of which are Ildefonso Yap,Virginia King Yap and their children.Prior to Aug. 9, 1979, an agent of Country Bankers proposed to Harvardian toinsure its school building. Although at first reluctant, Harvardian agreed.

Country Banks sent an inspector to inspect the school building and agreed toinsure the same for P500,000 for which Harvardian paid an annual premium ofP2,500.On Aug. 9, 1979, Country Bankers issued to Harvardian a fire insurance policy.On March 12, 1980, (39 days before I was born hehehehe )during theeffectivity of said insurance policy, the insured property was totally burned

rendering it a total loss.A claim was made by plaintiff upon defendant but defendant denied itcontending that plaintiff had no insurable interest over the building constructed

on the piece of land in the name of the late Ildefonso Yap as owner.It was contended that both the lot and the building were owned by IldefonsoYap and NOT by the Harvardian Colleges.

Issue: WON Harvardian colleges has a right to the proceeds.

Held: Harvardian has a right to the proceeds.

Regardless of the nature of the title of the insured or even if he did not havetitle to the property insured, the contract of fire insurance should still be upheld ifhis interest in or his relation to the property is such that he will be benefited in itscontinued existence or suffer a direct pecuniary loss from its destruction or

injury. The test in determining insurable interest in property is whether one willderive pecuniary benefit or advantage from its preservation, or will sufferpecuniary loss or damage from its destruction, termination or injury by thehappening of the event insured against.

Here Harvardian was not only in possession of the building but was in factusing the same for several years with the knowledge and consent of Ildefonso

Yap. It is reasonably fair to assume that had the building not been burned,Harvardian would have been allowed the continued use of the same as the siteof its operation as an educational institution. Harvardian therefore would havebeen directly benefited by the preservation of the property, and certainlysuffered a pecuniary loss by its being burned.

______________________________________________________

Ong Ling Sing v FEB Leasing

A lease agreement was executed between FEB and JVL Food Products for thelease of motor vehicles and equipment. Petitioner executed an individualguaranty agreement, with FEB to guarantee the prompt and faithfulperformance of the terms and conditions of the aforesaid lease agreement.Corresponding Lease Schedules with Delivery and Acceptance Certificates[5]over the equipment and motor vehicles formed part of the agreement. Under


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the contract, JVL was obliged to pay FEB an aggregate gross monthly rental ofP170,494.00. JVL defaulted, and despite demand letters sent by FEB, JVLfailed to pay. A complaint for sum of money was filed in the RTC againstpetitioner, JVL, and a John Doe. JVL and Lim claimed that they were made tobelieve that when full payment was effected, a Deed of Sale will be executed byFEB as vendor in favor of JVL and Lim as vendees. FEB purportedly assured

them that documenting the transaction as a lease agreement is just an industrypractice and that the proper documentation would be effected as soon as fullpayment for every item was made. They also contended that the lease

agreement is a contract of adhesion and should, therefore, be construedagainst the party who prepared it, i.e., FEB. The Court ruled that the plaintiff canonly recover the unpaid balance of the price of the returned vehicles, becauseof the previous payments made by the defendants for the reasonable use of theunits, specially so, as it appears, these returned vehicles were sold at auctionand that the plaintiff can apply the proceeds to the balance. However, withrespect to the unreturned units and machineries still in the possession of thedefendants, it is this Courts view and so hold that the defendants are liabletherefore and accordingly are ordered jointly and severally to pay the pricethereof to the plaintiff together with attorneys fee and the costs of suit in thesum of Php25,000.00. Notice of appeal was filed by FEB.

The CA reversed the lower court judgment and ordered JVL Food Products andVicente Ong Lim, Jr. to solidarily pay FEB Leasing and Finance Corporationthe amount of Php3,414,468.75, with interest at the rate of twelve percent(12%) per annum starting from the date of judicial demand on 06 December2000, until full payment thereof.

Issue: (relevant to insurance) W/N Lessee JVL has an insurable interest in theleased property.

Held: Yes. The stipulation in Section 14 of the lease contract, that theequipment shall be insured at the cost and expense of the lessee against loss,damage, or destruction from fire, theft, accident, or other insurable risk for thefull term of the lease, is a binding and valid stipulation. Petitioner, as a lessee,has an insurable interest in the equipment and motor vehicles leased. Section

17 of the Insurance Code provides that the measure of an insurable interest inproperty is the extent to which the insured might be damnified by loss or injurythereof. It cannot be denied that JVL will be directly damnified in case of loss,damage, or destruction of any of the properties leased.

In the financial lease agreement, FEB did not assume responsibility as to thequality, merchantability, or capacity of the equipment. This stipulation providesthat, in case of defect of any kind that will be found by the lessee in any of the

equipment, recourse should be made to the manufacturer. The financiallessor, being a financing company, i.e., an extender of credit rather than anordinary equipment rental company, does not extend a warranty of the fitness ofthe equipment for any particular use. Thus, the financial lessee was precisely ina position to enforce such warranty directly against the supplier of theequipment and not against the financial lessor. We find nothing contra legem or

contrary to public policy in such a contractual arrangement. Petition thusdenied, and CA decision affirmed.

____________________________________________________Lampano v Barretto

Mariano Barretto constructed a house for Placida Jose. After its completion,Mariano took out an insurance policy upon it in his own name with Placidasconsent. Later, Placida sold the house to Antonina Lampano. However, thehouse was destroyed by a fire. At this time, Antonina still owed Placida P2K,while Placida still owed Mariano P2K. Mariano was able to collect P3.6K fromthe insurance company.

Lampano alleged in her complaint that she had the right to the proceeds of the

insurance policy. According to her, she and Placida had a verbal agreement

that the insurance policy will be delivered to her and it was only after the fireoccurred that she found out the insurance policy was under the name ofMariano. Placida denied the verbal agreement.

Issue: Who has the right to the proceeds of the insurance policy?

Held: Mariano Barretto has the right!

Ratio: If Mariano had an insurable interest in the house, he could insure thisinterest for his sole protection. Under the insurance contract, the insurancepolicy would be payable to the insured regardless of the extent of his interest aslong as he had one at the time of the making of the contract, and he still has aninterest at the time of incident [in this case fire]. If there are different personswho have different interests in the same property, an insurance taken by one

person based on his own interest does not benefit the others.

A contract of insurance made for the insurer's (insured) indemnityonly, as where there is no agreement, express or implied, that it shall be for thebenefit of a third person, does not attach to or run with the title to the insuredproperty on a transfer thereof personal as between the insurer and the insured.In such case strangers to the contract cannot require in their own right any


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interest in the insurance money, except through an assignment or somecontract with which they are connected."

Barretto clearly had an insurable interest in the house. He constructed it andprovided for the materials.

___________________________________________________Lopez v Del Rosario

Mrs. Del Rosario was the owner of a bonded warehouse. She was engaged inthe business of a warehouse keeper and stored copra and other merchandise inthe said building. Lopez was the holder of 14 warehouse receipts, with adeclared value of P107k . The receipts provided for insurance at the rate of 1%per month of the declared value. It was admitted that Lopez paid insurance upto May 1920, but not thereafter.

Del Rosario secured insurance on the warehouse and its contents with 5insurance companies in the amount of P404k. The warehouse and its contentswere destroyed by fire, while some copra was salvaged (amounting to P49k).

Del Rosario and the insurance companies submitted the matter to arbitration.

The arbiters allowed Del Rosario to collect P363k with the addition of the moneyreceived from the salvaged copra. Del Rosario seemed to have satisfied all ofthe persons who had copra stored in warehouse except for Lopez. They failedto compromise on an amount, since Lopez contends that he should receive noless than P88k.

Del Rosario alleges that Lopezs right to the insurance money had beenforfeited when he failed to pay the insurance provided for in the warehousereceipts.

Issue: Whether or not Lopez is entitled to the P88k YES, but with deductions

Ratio: The law is that a policy effected by a bailee and covering by its terms hisown property and property held in trust, inures, in the event of a loss, equally

and proportionately to the benefit of all the owners of the property insured. Thisis true even if the owner of the stored goods did not request or know of theinsurance, and did not ratify it before the payment of the loss. Thewarehouseman is liable to the owner of such stored goods for his share. In

effect, Del Rosario acted as the agent of Lopez in taking out the insurance onthe contents of the warehouse.

Further, Del Rosario acknowledged her responsibility to the owners of thestored merchandise. The award of the arbitrators did not only cover DelRosarios warehouse but also the products stored therein. Insurable interest ofthe depositary in the goods deposited, is the extent of his liability to the owner ofthe goods in his warehouse.

Lopezs right to the insurance has not been forfeited by failure to pay theinsurance provided in the warehouse receipts. There is no proof showing thathe even ordered its cancellation, nor did he refuse to pay the insurance whenthe bills were presented to him.

The SC ruled that Lopez is entitled to the P88k, but minus the amounts for hisshare of the expenses and those due for insurance and storage.

____________________________________________________________Cha v CA

Spouses Cha as lessees entered into a lease contract with private respondentCKS Devt Corp (CKS) as lessor. One of the stipulations in their contract wasthat lessees shall not insure against fire any merchandise or chattels placed atany stall of space in the leased premises without the written consent of the

lessor. Should the lessee obtain the insurance therefor, the policy is deemedassigned and transferred to the lessor (no mention of what was leased andwhat merchandise were involved).

Notwithstanding this stipulation, spouses Cha insured their merchandise insidethe leased premises against fire for 500k with United Insurance without CKSswritten constent..

When contract was about to expire, fire broke out in the leased premises. CKSlearned of the insurance and wrote to United asking that the proceeds of theinsurance be paid to CKS directly. United refused and CKS sued both thespouses Cha and United.

RTC and CA ruled for CKS, ordering United to pay the proceeds of the

insurance to it. Hence this petition.

Issue: W/N Cha spouses can claim from United (w/n the stipulation in thecontract is valid)

Ruling: yes, Cha spouses can claim; contract stipulation is invalid.


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Insurable interest in the property insured must exist at the time the insurancetakes effect and at the time the loss occurs (Sec 18). This rule is based onpublic policy: a person should not take out an insurance policy on property uponwhich he has no insurable interest and collect the proceeds of said policy incase of loss of property. In such a case, the contract of insurance is a merewager and is void under the Insurance Code (Sec 25).

In this case, CKS has no insurable interest in the goods and merchandise insidethe leased premises. Therefore, CKS cannot be validly a beneficiary of the fireinsurance policy taken by the Spouses Cha over their merchandise. Theprovision for the automatic assignment of policy is void for being contrary to lawand public policy. Proceeds of the insurance policy belong to the spouses.Automatic transfer of the insurance contract is not allowed, most especially id

the transferee has no insurable interest in the subject matter, and cannot bringan action to enforce the insurance contract, which is unenforceable as to him.

The liability of the Cha spouses for violating their lease contract with CKS is aseparate issue which cannot be resolved in this case.

___________________________________________Tai Tong Chua Che v Ins. Commissioner

Palomo obtained a loan from Taitong for 100T. To secure this, he mortgaged aparcel of land with a building. Taitong insured the mortgaged property with

Travelers Multi-Indemnity Corp for 100T.The insured property was razed by fire. Taitong claimed the proceeds from theinsurance company.Travelers refused to pay, claiming that Taitong had no more insurable interest inthe property since Palomo had allegedly paid the mortgaged debt already.

Issue: W/N Taitong can collect the proceeds.

Held: Yes. The allegation of the insurance company that the debt had alreadybeen paid was NOT proved. Tai Tong on the other hand presented evidence,namely the contract of mortgage which does not appear to have been canceled

or released.

__________________________________________Bachrach v British American Assurance Co.

A fire insurance policy was issued by British American to Bachrach. The firepolicy provides that Bachrach paid to defendant the sum of PhP2,000 forinsuring against loss or damage by fire, the following properties: goods,

belonging to a general furniture store, such as iron and brass bedsteads, toilettables, chairs, ice boxes, bureaus, washstands, mirrors, and sea-grassfurniture, the property of the assured, in trust, on commission or for which he isresponsible, whilst stored in the ground floor and first story of house anddwelling No. 16 Calle Martinez, district 3, block 70, Manila, built, ground floor ofstone and or brick, first story of hard wood and roofed with galvanized iron. At

the back of the policy, it was stated that a calalac automobile is also includedthereunder.

The goods were destroyed by a fire, but the company refused to pay theproceeds contending that the plaintiff maintained a paint and varnish shop in thesaid building where the goods which were insured were stored, transferred hisinterest in and to the property covered by the policy to H. W. Peabody & Co. to

secure certain indebtedness due and owing to said company, and also that theplaintiff had transferred his interest in certain of the goods covered by the saidpolicy to one Macke, to secure certain obligations assumed by the said Mackefor and on behalf of the insured. That the sanction of the said defendant had notbeen obtained by the plaintiff, as required by the said policy.

It also contends that immediately preceding the outbreak of the alleged fire,willfully placed a gasoline can containing 10 gallons of gasoline in the upper

story of said building in close proximity to a portion of said goods, wares, andmerchandise, which can was so placed by the plaintiff as to permit the gasolineto run on the floor of said second story, and after so placing said gasoline, he,the plaintiff, placed in close proximity to said escaping gasoline a lighted lamp

containing alcohol, thereby greatly increasing the risk of fire, and plaintiff failedto provide for proof of the said loss.

The lower court found that the defendant was liable to the plaintiff and rendereda judgment against the defendant for the sum of P9,841.50, with interest for aperiod of one year at 6 per cent, making a total of P10,431.99, with costs.

Issue: Is the defendant liable to pay the proceeds of the policy to plaintiff?

Held: The policy was NOT forfeited due to the strong paints and varnishes.

There was no express provision pertaining to it and these paints and varnishesare incidental to the business of the insured to keep the furniture in a saleablecondition. The gasoline stored within the premises was in the reservoir of thecar and thus does not violate any provision in the policy. There is no expressprohibition against the execution of a chattel mortgage on the property insured.Lower court judgment should be affirmed.

Sections 26-35


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Argente v West Coast Insurance 51 Phil. 725

Petitioner obtained a joint life insurance for himself and his wife Vicenta DeOcampo with West Coast for Php 2,000. The application forms were written

entirely by the West Coast agent upon information given to him by the spouses.The only physical participation of the spouses with respect to the application

form was their affixation of signature.

Thereafter, spouses underwent a medical examination before Dr. Sta. Ana,West Coasts physician wherein several question were propounded to thespouses. Among these questions was whether each of them had any sort ofbrain ailment. To this question, the spouses answered NO.

Meanwhile spouses filed an amended application increasing the insurance to15,000. A few months after the policy was issued to them, Vicenta died ofCEREBRAL APOPLEXY.

Apparently, before the issuance of the policy Argente was admitted to the PGHwhere he was diagnosed with cerebral congestion and Bells Palsy. Vicenta wasalso admitted to Mary Chilles hospital where she was diagnosed with manic-depressive psychosis and thereafter psycho-neurosis.

Because of Vicentas death, Argente filed a claim against West Coast. WestCoast argues that there was concealment on the part of the spouses. Argenteargues that they (referring to spouses) have been truthful in their disclosuresand that West Coasts agent and Dr. Sta Ana conspired for some reason not toinclude the real answers on the medical report. RTC ruled in favor of WestCoast.

Issue: W/N there was really concealment on the part of the spouses therebybarring them from recovering from the life insurance policy

Held:West Coast wins. The contention of Argente that the misrepresentations were too trivial to

avoid the life policy is untenable. In cases concealment, the concealment

must be (1) of information which is material (2) fraudulent. In this case theanswers to the question regarding the health conditions of the spouseswere relevant. Had the spouses disclosed the real condition of their health,West Coast would not have undertaken the risk of insuring their lives.

The other contention of Argente to the effect that West Coast is precludedfrom rescinding the insurance contract because the Insurance Act says thatrescission must be made prior to the institution of action if untenable. Thisis because the fact is, prior to the institution of the present action, West

Coast had already notified Argente that the policy was avoided because ofconcealment and even offered to return the premium paid in exchange forthe surrender of the policy. This, according to the court, is tantamount torescission of the insurance contract.

Saturnino v. Philam Life 117 Phil. 330

Upon submission of the application form (September 1957), Philam Life issueda non-medical insurance policy with 20-year endowment to the deceased,Estefania Saturnino and the latter paid the first premiuim. This type of policydispenses with the medical examination usually required in life policies.

1 year later (September 1958) the deceased died of pneumonia secondary toinfluenza. It appears that 2 months prior to the issuance of the policy, deceasedwas operated on for cancer, involving the complete removal of her right breast.According to her surgeon, she could not be considered definitely cured becauseher ailment was the malignant type.

Herein petitioners (husband and son of the deceased) tried to claim the facevalue of the policy from Philam Life but it refused, stating that there werematerial misrepresentations. Notwithstanding the fact of her operation, thedeceased did not make a disclosure thereof in her application. She actuallystated therein that she did not have, nor ever had, cancer or other tumors; thatshe had not consulted any physician, undergone any surgery operation orsuffered any injury within the preceding 5 years; and that she had never been

treated nor did she ever have illness or disease peculiar to her sex, particularlyof the breast, uterus, ovaries and menstrual disorders.

Petitioners sued. Trial court dismissed the complaint, hence this appeal.

Issue:WN the insured made false representations of material facts as to avoidthe policy

Ruling:Yes. Case dismissed.

Petitioners contend that there was no fraudulent concealment of the truth sincethe deceased herself did not know that the disease for which she was operatedon was cancer (doctor never told her). In the first place, the concealment of thefact of operation itself was fraudulent. Secondly, to avoid a policy it is notnecessary to show actual fraud on the part of the insured. A

concealment, whether intentional or not, entitles the insurer to rescind thecontract of insurance, concealment being defined as negligence tocommunicate that which a party knows and ought to communicate. As


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was held in Argente, the basis for the rule vitiating the contract in cases ofconcealment is that it misleads or deceives the insurer into accepting the riskupon a false basis that does not exist.

Petitioners also contend negligence on the part of Philam Life, since in theapplication, the deceased agreed to submit herself to a medical examination if

in Philam Lifes opinion such examination was necessary. No such negligencecan be imputed to Philam Life because the insured misrepresented her healththat Philam Life no longer thought a medical examination was necessary.

___________________________________________________________________Fieldmens Insurance vs Songco 25 SCRA 70

Facts: Federico Songco, who was only able to reach 1st grade, owned a

private jeepney. On the other hand, Benjamin Sambat is an agent of FieldmensInsurance. While Sambat was inducing Federico to obtain an insurance policyunder the companys Common Carriers Liability Insurance Policy, AmorSongco (Federicos son) butted in and reminded Sambat that they cannot getthe said insurance because their jeepney was private and not for passenger.

Sambat however answered that whether the vehicle was privately owned or for

passengers, it did not matter because the company was not owned by thegovernment so they can do whatever they want so long as they believe avehicle is insurable. (This testimony of Amor was not rebutted during trial)

The policy was issued and later on renewed. During the renewed period, theinsured jeepney collided with a car. Federico and his son Rodolfo died whileCarlos (another son), his sons wife Angelita and a family friend sustainedinjuries.

These injured parties sought to claim from the insurance company the proceedsof the policy. Fieldmens refused on the ground that the vehicle was private andnot a common carrier. The lower court and CA ruled in favor of plaintiffs.

Issue: W/N Fieldmens Insurance is liable?

Held: Yes!

Ratio: Estoppel applies. Fieldmens agent led Federico to believe that he

could qualify his private jeepney under the common carrier policy hence, itcould not now be permitted to change its stand to the detriment of the heirs ofthe insured. Fieldmens knew that the vehicle was privately owned yet theyinsured the vehicle not once, but twice.

Under the terms of the policy they cannot escape liability. (There is aclause there that provides that the insurer will indemnify the insured in the eventof an accident caused by or from the use of the motor vehicle against all sumswhich the insured may be made liable to pay on account of the death or injury ofits fare paying passengers). The injured parties in this case are passengers ofthe jeepney. Even if they did not pay a fare, their status as beneficiaries under

the policy is recognized.

Besides, even if ambiguous, it is settled that it will be strictly construedagainst the party that caused the ambiguity. The reason for this rigid applicationis the prevalence of contracts of adhesion wherein the weaker party is left to atake it or leave it situation.

The contract of insurance is one of perfect good faith not for theinsured alone but equally so for the insurer; in fact, it is more so for the lattersince its dominant bargaining position carries with it stricter responsibility.

Insular Life v. Feliciano 73 PHIL 201

Facts:

Evaristo Feliciano filed an application with Insular Life upon the solicitation ofone of its agents.It appears that during that time, Evaristo was already suffering fromtuberculosis. Such fact appeared during the medical exam, but the examiner

and the companys agent ignored it.After that, Evaristo was made to sign an application form and thereafter theblank spaces were filled by the medical examiner and the agent making itappear that Evaristo was a fit subject of insurance. (Evaristo could not read andunderstand English)When Evaristo died, Insular life refused to pay the proceeds because ofconcealment.

Issue: W/N Insular Life was bound by their agents acts.

Held: Yes.

The insurance business has grown so vast and lucrative within the past century.Nowadays, even people of modest means enter into insurance contracts.Agents who solicit contracts are paid large commissions on the policies securedby them. They act as general representatives of insurance companies.


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IN the case at bar, the true state of health of the insured was concealed by theagents of the insurer. The insurers medical examiner approved the applicationknowing fully well that the applicant was sick. The situation is one in which oftwo innocent parties must bear a loss for his reliance upon a third person. Inthis case, it is the one who drafted and accepted the policy and consummatedthe contract. It seems reasonable that as between the two of them, the one

who employed and gave character to the third person as its agent should be theone to bear the loss. Hence, Insular is liable to the beneficiaries.

Insular life v. Feliciano 74 PHIL 4681

Facts:

Insular life filed a motion for reconsideration of the decision in the precedingcase.

Issue: W/N Insular Life was bound by their agents acts.

Held: NO. The Court reversed itself.

There was collusion between Evaristo and the agent and the medical examinerin making it appear that Evaristo was a fit subject for insurance. When Evaristo

authorized them to write the answers for him, he made them his own agents forthat purpose and he was responsible for their acts in that connection.

If they falsified the answers for him, he could not evade liability for the

falsification. He was not supposed to sign the application in blank. He knewthat his answers would be the basis for the policy, and was required with hissignature to vouch for their truth. The judgment rendered therefore in thepreceding case is thus reversed, and Insular Life is absolved from liability.

Sun Life v CA 245 SCRA 268

John Bacani obtained a life insurance from Sunlife for PhP 100,000 with double

indemnity. The designated beneficiary was his mother Bernarda Bacani.

In the application form, to the question whether he has consulted a doctor, heanswered yes but only for a minor cough and flu. For the other questions suchas whether he underwent several lab tests, whether he was confined in thehospital and whether he was ever diagnosed with urine, bladder or renaldisorder, he answered NO.Thereafter, John died in a plane crash. Thus Bernarda filed a claim with Sunlife.

Sunlife, in a letter, denied the claim and enclosed therewith a check for thepremium paid by John. Sunlife contended that 2 weeks prior to the applicationJohn was admitted to the Lung Center of the Philippines because of renalfailure.Bernarda sued SunLife. SunLife pleaded concealment.RTC and CA ruled in favor of Bernarda saying that John was in good faith in not

disclosing the true answers on the impression that they were not relevant. CAsaid that the answers to those questions were not relevant to the cause of deathof John and because, after all, the insurance was non-medical

Issue: W/N Bernarda can claim

HELD: Sunlife wins.

Materiality of information does not depend upon the state of mind ofthe insured or the actual physical events that ensue. An information ismaterial if its non-disclosure would lead to the insurance companyeither denying the application or increasing the premium because ofheightened risk. Sunlife, in all probabilities, would have denied theapplication had it been aware of Johns renal problem.

The contention of Bacani that Sunlies waiver of the medicalexamination debunks the materiality of the facts concealed isuntenable. All the more that the information becomes material now thatno medical examination was conducted. Sunlife would have nothing

rely on except the truthfulness of Bacani Anent the finding that the facts concealed had no bearing to the cause

of death of the insured, it is well settled that the insured need not die ofthe disease he had failed to disclose to the insurer. It is sufficient thathis non-disclosure misled the insurer in forming his estimates of therisks of the proposed insurance policy or in making inquiries

Ng Gan Zee v. Asian Crusader Life Assurance Corp. 122 SCRA 461

May 1962, Kwong Nam applied with Asian Crusader for a 20-year endowmentinsurance on his life for 20k, with his wife Ng Gan Zee as beneficiary. The

policy was issued, he paid premiums religiously. In December 1963, Kwongdied of cancer of the liver.

Ng Gan Zee filed a claim with Asian, but it was denied on the ground of

misrepresentation. Ng Gan brought the matter to the Insurance Commissioner,who ordered Asian to pay, but it still refused.


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Asian claims that when the insured was examined, he gave Asians medicalexaminer false and misleading information as to his ailment and previousoperation. He said: operated on for a tumor of the stomach. Claims that tumoris associated with ulcer of the stomach. Tumor taken out was hard and of ahens egg size. Operation was 2 years ago in Chinese Gen. Hospital. Nowclaims he is completely recovered. Asian points to the misrepresentation in

that it interviewed one of the doctors who treated Kwong and said his ailmentwas peptic ulcer and that the specimen removed from the deceaseds body wasa part of his stomach.

Ng Gan sued and CFI ordered Asian Crusader to pay.

Issue: W/N Kwong is guilty of misrepresentation to allow Asian to rescind (mainissue); w/n Asian Crusader waived its right to information of material facts(important to topic)

Ruling: No fraudulent misrepresentation, Asian Crusader must pay Ng Gan;There was a waiver.

According to the Insurance Law (not the present code) the concealment mustbe material and fraudulent the fact must have been intentionally withheld.

The fraudulent intent must be established by the insurer to be able to rescindthe contract. This fraudulent intent was not present. Kwong informed themedical examiner that his tumor was associated with ulcer of the stomach. This

should be construed as an expression made in good faith of his belief as to thenature of his ailment. It was presumed to be made by him without knowledge ofits incorrectness and without intention to mislead Asian.

The Insurance Law states that the right to information of material facts may bewaived by the terms of the insurance or by neglect to make inquiries as to suchfacts. Where upon the face of the application, a question appears to be notanswered at all or to be imperfectly answered, and the insurer still issuesa policy without any further inquiry, they waive the imperfection of theanswer and render the omission to answer fully immaterial.

If the ailment of Kwong had such an important bearing on whether or not Asianwould issue the policy or not, the court cannot understand why Asian or itsmedical examiners did not make further inquiries with Chinese Gen Hospital.Truth was, Asian was too eager to accept the application to receive thepremiums. It would now be inequitable to allow Asian to avoid liability.

Section 36 - 48

Harding v Commercial Union

Facts:

Henry Harding bought a car for 2T in 1915. He then gave the car to his wifeMrs. Harding.While Mrs. Harding was having the car repaired at the Luneta Garage (Lunetawas an agent of Smith Bell and Co., which in turn is Commercial Unions agent),

the latter induced Mrs. Harding to insure the car with Commercial.Mrs. Harding agreed, and Smith Bell sent an agent to Luneta Garage, whotogether with the manager of Luneta, appraised the car and declared that itspresent value was P3T. This amt was written in the proposal form which Mrs.Harding signed.Subsequently, the car was damaged by fire. Commercial refused to paybecause the cars present value was only 2.8T and not 3T.

Issue: W/N Commercial is liable.

Held: Commercial is liable.

Where it appears that the proposal form, while signed by the insured wasmade out by the person authorized to solicit the insurance (Luneta and SmithBell) the facts stated in the proposal, even if incorrect, will not be regarded aswarranted by the insured, in the absence of willful misstatement. Under suchcircumstances, the proposal is to be regarded as the act of the insurer.

Saturnino v. Philam Life Sec. 45

(Material Facts)

Facts:

Upon submission of the application form (September 1957), Philam Life issueda non-medical insurance policy with 20-year endowment to the deceased,Estefania Saturnino and the latter paid the first premiuim. This type of policydispenses with the medical examination usually required in life policies.

1 year later (September 1958) the deceased died of pneumonia secondary toinfluenza. It appears that 2 months prior to the issuance of the policy, deceasedwas operated on for cancer, involving the complete removal of her right breast.


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According to her surgeon, she could not be considered definitely cured becauseher ailment was the malignant type.

Herein petitioners (husband and son of the deceased) tried to claim the face

value of the policy from Philam Life but it refused, stating that there werematerial misrepresentations. Notwithstanding the fact of her operation, thedeceased did not make a disclosure thereof in her application. She actuallystated therein that she did not have, nor ever had, cancer or other tumors; thatshe had not consulted any physician, undergone any surgery operation orsuffered any injury within the preceding 5 years; and that she had never beentreated nor did she ever have illness or disease peculiar to her sex, particularlyof the breast, uterus, ovaries and menstrual disorders.

Petitioners sued. Trial court dismissed the complaint, hence this appeal.

Issue:W/N the insured made false representations of material facts as to avoidthe policy YES

Ratio:

The Insurance Law (sec. 30) provides that Materiality is to be determined not by

the event, but solely by the probable and reasonable influence on the factsupon the party to whom the communication is due, in forming his estimate of theproposed contract, or in making his inquiries. Petitioners contend that the factssubject of the representation were not material in view of the non-medicalnature of the insurance applied for, which does away with the usual requirementof medical examination. This is without merit, since the waiver of the medicalexam renders even more material the information required of the applicant

concerning previous health and dieseases suffered, for such necessarilyconstitutes an important factor which the insurer takes into consideration indeciding whether to issue the policy or not.

Petitioners also contend that there was no fraudulent concealment of the truthsince the deceased herself did not know that the disease for which she wasoperated on was cancer (doctor never told her). In the first place, the

concealment of the fact of operation itself was fraudulent. Secondly, to avoid apolicy it is not necessary to show actual fraud on the part of the insured.A concealment, whether intentional or not, entitles the insurer to rescindthe contract of insurance, concealment being defined as negligence tocommunicate that which a party knows and ought to communicate. Aswas held in Argente, the basis for the rule vitiating the contract in cases ofconcealment is that it misleads or deceives the insurer into accepting the riskupon a false basis that does not exist.

Petitioners also contend negligence on the part of Philam Life, since in theapplication, the deceased agreed to submit herself to a medical examination ifin Philam Lifes opinion such examination was necessary. No such negligencecan be imputed to Philam Life because the insured misrepresented her healththat Philam Life no longer thought a medical examination was necessary.

Edillon v Manila Bankers

Carmen Lapuz applied for insurance against accident and injuries with ManilaBankers. In the application form she represented that she was born on July 11

th

1904. The application was dated April 15th

1969. Take note that the policycontained an overage exclusion clause whereby persons over 60 (and under16) cannot be insured. Thereafter, the policy was issued effective for 90 daysand upon payment of the 20 peso premium. While the contract of insurance wasin force, Lapuz died of a vehicular accident. Herein petitioner Regina Edillon assister and designated beneficiary, filed a claim with Manila Bankers which the

latter has denied by reason of the overage exclusion clause . RTC ruled in favorof Manila Bankers saying that the since the policy was a contract of adhesion, itwas the duty of Lapuz to know the terms and conditions of the contract she isentering. Lapuz should have asked he refund of the premium immediately aftershe should have know that she was not covered by the policy

Held: Edillon wins

Manila Bankers is estopped. Lapuz never concealed anything. It wasapparent from the application form that she was already over 65 years oldwhen she applied. The accident happened 45 days after the issuance ofthe policy, which meant that Manila Bankers had sufficient time to correctthe mistake. In not so doing, Manila Bankers had either willingly acceptedthe risk or negligently failed to make the correction for which it is entirelyto be blamed.

Tan Chay Heng v. West Coast Life Insurance Sec 45 and 48

In April 1925, West Coast accepted and approved a life insurance policy on TanCaeng for 10k and the sole beneficiary was Tan Chay. Tan Caeng died on May1925, and Tan Chay submitted proofs of his death to West Coast with a claimfor the insurance.


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West Coast in its answer made a general denial (to the effect that it neverissued the policy), but in its amended answer raised the special defense of falserepresentation. It alleged that the policy was obtained by Tan Chay thru fraudand deceit in confabulation with others including Dr. Locsin.

In the application, Tan Caeng designated Tan Chay as beneficiary, stating thatthe latter was his nephew, but he really wasnt. Dr. Locsin (medical examiner forWest Coast) made it appear that Tan Caeng was healthy and he never usedmorphine, cocaine or any other drug, when in fact, he had been suffering frompulmonary tuberculosis for about 3 years from that time, and that he wasactually a drug addict, even having been convicted and imprisoned for drug use.After the policy was issued, Tan Caeng shortly died of TB, but Dr. Locsinfalsified that the caused was cerebral hemorrhage.

Tan Chay turned out to be an employee of Go Chulian who is the ringleader ofa gang of malefactors engaged in procuring fraudulent life insurance policiesfrom West Coast (he is actually being sued for it in a different case).

The lower courts ruled for Tan Chay, mainly on the ground that an insurercannot avoid a policy which has been procured by fraud unless he brings an

action to rescind the policy before it is sued thereon Sec 47 of the insurance law

(now Sec 48 of the code)

Issue:W/N West Coasts action is barred by Tan Chays collection suit (in otherwords, w/n Sec 47 applies)

Ruling: No. Lower court ruling is reversed, case is remanded for furtherproceedings.

Rescission is the unmaking of a contract. It presupposes the existence of acontract. Note that in this case, West Coast even denied issuing the policy atfirst. Also, it never asked in its prayer that the contract be rescinded. All it didwas raise the defense that the policy was obtained through false

representations, which is NOT in the nature of an action to rescind, hence, sec47 does not apply.

The nature of West Coasts defense is founded upon the theory that through

fraud in its execution, the policy is void, as if no contract was ever made. If allmatters alleged by defendant in its answer are true, no contract is ever made,then there would be nothing to rescind. (important part for Sec 45) But the SCcannot rule on the allegations, so case is remanded.

Soliman v. US Life 104 PHIL 1046

Facts:

US Life issued a 20 yr endowment life policy on the joint lives of PatricioSoliman and his wife Rosario, each of them being the beneficiary of the other.In March 1949, the spouses were informed that the premium for Jan 1949 wasstill unpaid notwithstanding that the 31-day grace period has already expired,

and they were furnished at the same time long-form health certificates for thereinstatement of the policies.In Apr 1949, they submitted the certificates and paid the premiums.In Jan. 1950, Rosario died of acute dilation of the heart, and thereafter, Patriciofiled a claim for the proceeds of the insurance.US life denied the claim and filed for the rescission of the contract on theground that the certificates failed to disclose that Rosario had been sufferingfrom bronchial asthma for 3 years prior to their submission.

Issue: W/N the contract can still be rescinded.

Held:Yes.

The insurer is once again given two years from the date of reinstatement toinvestigate into the veracity of the facts represented by the insured in theapplication for reinstatement. When US life sought to rescind the contract onthe ground of concealment/misrepresentation, two years had not yet elapsed.Hence, the contract can still be rescinded.

Tan v. CA Sec. 48

(Incontestability Clause)

Facts:

Tan applied for life insurance with Philamlife, designating his children(petitioners) as beneficiaries, in September 1973. After 1 year and 5 months,he died of hepatoma. Petitioners filed their claims with the company butPhilamlife denied these and rescinded the policy by reason of the allegedmisrepresntations and concealment of material facts made by Tan in hisapplication (at that time, he was diabetic and hypertensive and was diagnosedto be suffering from hepatoma). The premiums paid were refunded.


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Petitioners filed a complaint with the Insurance Commissioner, which wasdismissed. CA dismissed. Before the SC, the petitioners contend thatPhilamlife no longer had the right to rescind the contract of insurance asrecission must allegedly be done during the lifetime of the insured within 2 yearand prior to the commencement of an action (Sec. 48, par. 2 of the InsuranceCode).

Issue: W/N Philamlife had the right to rescind the contract of insurance YES

Ratio:

The so-called incontestability clause precludes the insurer from raising thedefense of false representations or concealment of material facts insofar ashealth and previous diseases are concerned if the insurance has been in forcefor at least 2 years during the insureds life time. The phrase during thelifetime simply means that the policy is no longer considered in force after theinsured has died. The key phrase is for a period of 2 years. In this case, thepolicy was only in force for a period of 1 year and 5 months. Considering thatthe insured died before the 2-year period has lapsed, Philamlife is not barredfrom proving that the policy is void by reason of misrepresentation by the

insured. Moreover, they rescinded the contract and refunded the premiums

before the commencement of the action.

Petitioner also contend that their could have been no concealment or

misrepresentation by their father because being a man of means, he did nothave to buy insurance. He was only pressured by the insistent salesman. Theypointed out that the SC had occasions to denounce the pressure and practiceindulged in by agents selling insurance. It would be unjust if, having beensubjected to this pressure, the assured who dies within the 2-year period shouldstand charged of concealment.

The legislative answer to this argument is the incontestability clause added bythe 2

ndparagraph of Sec. 48. The insurer has 2 years from the date of issuance

of the insurance contract or of its last reinstatement within which to contest thepolicy, whether or not the insured still lives within such period. After 2 years,

the defense of concealment or misrepresentation no longer lie. Congress feltthat this was a sufficient answer to the various tactics employed by insurancecompanies to avoid liability. The petitioners interpretation would give rise to theincongruous situation where the beneficiaries of an insured who dies right aftertaking out and paying for the policy, would be allowed to collect on the policyeven if there was concealment of material facts.

Cases 49 66

Enriquez v. SunLIfe 41 PHIL 269

Facts:

On Sept. 24 1917, Herrer made an application to SunLife through its office inManila for life annuity.2 days later, he paid the sum of 6T to the companys anager in its Manila officeand was given a receipt.

On Nov. 26, 1917, the head office gave notice of acceptance by cable toManila. On the same date, the Manila office prepared a letter notifying Herrerthat his application has been accepted and this was placed in the ordinarychannels of transmission, but as far as known was never actually mailed andnever received by Herrer.Herrer died on Dec. 20, 1917. The plaintiff as administrator of Herrers estatebrought this action to recover the 6T paid by the deceased.

Issue:W/N 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 theknowledge of the applicant. An acceptance of an offer of insurance NOTactually or constructively communicated to the proposer does NOT make a

contract of insurane, as the locus poenitentiae is ended when an acceptancehas 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 a certain period of timethe insured is stil living, he is entitled to regular smaller amounts for the rest ofhis life. Examples of Life annuity are pensions. Life Insurance on the otherhand, the insured during the period of the coverage makes small regularpayments and upon his death, the insurer pays a big amount to hisbeneficiaries.

_____________________________________________________________________Perez v. CA 323 SCRA 613 (2000)

Facts:

Primitivo Perez had been insured with the BF Lifeman Insurance Corporationsince 1980 for P20,000.00.


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In October 1987, an agent of Lifeman, Rodolfo Lalog, visited Perez in Quezonand convinced him to apply for additional insurance coverage of P50,000.00, toavail of the ongoing promotional discount of P400.00 if the premium were paidannually.Primitivo B. Perez accomplished an application form for the additional insurancecoverage. Virginia A. Perez, his wife, paid P2,075.00 to Lalog. The receiptissued by Lalog indicated the amount received was a "deposit."Unfortunately, Lalog lost the application form accomplished by Perez and so onOctober 28, 19

Insurance Digests (Philomatheia)

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