Insurance Angel Aguinaldo Notes

INSURANCE(ATTY.
QUIMSON)
Sec.1.ThisDecreeshallbeknownas"TheInsuranceCode". LAWSGOVERNINGINSURANCE 1. PD1460 2. Articles2011and2012,CC 3. Articles2021to2027,CC 4. Article2186CC 5. Article43,par.4,50,64FC 6. LawsandrelatedactscreatingandgoverningtheSSSandGSIS CONSTANTINOV.ASIALIFE 87PHIL248 FACTS: Two cases are involved in this case. Asia Life is an American insurance company which issued two different insurance policies. On the first policy, after the first payment,nofurtherpaymentwasmadebytheinsured.Hediedlateron.Onthe second policy, premiums were paid, nonetheless, at a certain period, he wasn't abletocontinuepayment.Bothinsurancepolicytransactionswereaffectedbythe Japanese occupation wherein the American company was forced to leave. Now, the beneficiaries are seeking the payment of proceeds minus all sums due for premiumsinarrears. HELD: Americancasesmaybedividedintothreegroups,accordingastheysupporttheso calledConnecticutRule,theNewYorkRule,ortheUnitedStatesRule. Thefirstholdstheviewthat"therearetwoelementsintheconsiderationforwhich theannualpremiumispaid First,themereprotectionfortheyear,andsecond, the privilege of renewing the contract for each succeeding year by paying the premium for that year at the time agreed upon. According to this view of the contract,thepaymentofpremiumsisaconditionprecedent,thenonperformance wouldbeillegalnecessarilydefeatstherighttorenewthecontract." Thesecondrule,apparentlyfollowedbythegreaternumberofdecisions,holdthat "warbetweenstatesinwhichthepartiesresidemerelysuspendsthecontractsof thelifeinsurance,andthat,upontenderofallpremiumsduebytheinsuredorhis
representatives after the war has terminated, the contract revives and becomes fullyoperative." The United States rule declares that the contract is not merely suspended, but is abrogatedbyreasonofnonpaymentsispeculiarlyoftheessenceofthecontract.It additionallyholdsthatitwouldbeunjusttoallowtheinsurertoretainthereserve valueofthepolicy,whichistheexcessofthepremiumspaidovertheactualrisk carried during the years when the policy had been in force. This rule was announced in the wellknown Statham case which, in the opinion of Professor Vance,isthecorrectrule. AfterperusingtheInsuranceAct,wearefirmlypersuadedthatthenonpaymentof premiums is such a vital defense of insurance companies that since the very beginning, said Act no. 2427 expressly preserved it, by providing that after the policyshallhavebeeninforcefortwoyears,itshallbecomeincontestable(i.e.the insurer shall have no defense) except for fraud, nonpayment of premiums, and military or naval service in time of war (sec. 184 [b], Insurance Act). And when Congress recently amended this section (Rep. Act No. 171), the defense of fraud was eliminated, while the defense of nonpayment of premiums was preserved. Thusthefundamentalcharacteroftheundertakingtopaypremiumsandthehigh importanceofthedefenseofnonpaymentthereof,wasspecificallyrecognized. In keeping with such legislative policy, we feel no hesitation to adopt the United States Rule, which is in effect a variation of the Connecticut rule for the sake of equity.Inthisconnection,itappearsthatthefirstpolicyhadnoreservevalue,and that the equitable values of the second had been practically returned to the insuredintheformofloanandadvanceforpremium. INSULARLIFEV.EBRADO 80SCRA181 FACTS: Buenaventurasecuredforhimselfalifeinsurancepolicy,namingthereinCarponia as his revocable beneficiary. Thereafter, he met his death through an accident. Carponia moved to receive the proceeds and admitting therein that she was the commonlawwifeofinsured.Thetruewidowalsofiledfortheproceeds. HELD:
MA.ANGELAAGUINALDO ATENEOLAW2010
INSURANCE(ATTY.QUIMSON)
Inessence,alifeinsurancepolicyisnodifferentfromacivildonationinsofarasthe beneficiaryisconcerned.Botharefoundeduponthesameconsideration:liberality. Abeneficiaryislikeadonee,becausefromthepremiumsofthepolicywhichthe insuredpaysoutofliberality,thebeneficiarywillreceivetheproceedsorprofitsof said insurance. As a consequence, the proscription in Article 739 of the new Civil Code should equally operate in life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of the person who cannot make thedonation. Policy considerations and dictates of morality rightly justify the institution of a barrierbetweencommonlawspousesinrecordtoPropertyrelationssincesuchhip ultimately encroaches upon the nuptial and filial rights of the legitimate family Thereiseveryreasontoholdthatthebarindonationsbetweenlegitimatespouses and those between illegitimate ones should be enforced in life insurance policies since the same are based on similar consideration As above pointed out, a beneficiary in a fife insurance policy is no different from a donee. Both are recipientsofpurebeneficence.Solongasmanageremainsthethresholdoffamily laws, reason and morality dictate that the impediments imposed upon married couple should likewise be imposed upon extramarital relationship. If legitimate relationshipiscircumscribedbytheselegaldisabilities,withmorereasonshouldan illicitrelationshipberestrictedbythesedisabilities. INTERPRETATIONOFINSURANCECONTRACTS Ambiguitiesandobscuritiesshouldbestrictlyconstruedagainsttheparty whocausedthem QUACHEEGANV.LAWUNION 52OG1982 FACTS: Plaintiffsoughttheproceedsofitsfireinsurancewiththecompany.theinsurance company denies payment due to many reasonsone, the violation of certain provisionsofthepolicy.Itallegedthattheclaimantwasguiltyofarsonalso. HELD: Taking into account the well known rule that ambiguities or obscurities must be strictlyinterpretedagaInstthepartythatcausedthem,1the"memoofwarranty"
invoked by appellant bars the latter from questioning the existence of the appliances called for in the insured premises, since its initial expression, "the undernotedappliancesfortheextinctionoffirebeingkeptonthepremisesinsured hereby,...itisherebywarranted...",admistsofinterpretationasanadmissionof theexistenceofsuchapplianceswhichappellantcannotnowcontradict,shouldthe parolevidenceruleapply. This rigid application of the rule on ambiguities has become necessary in view of current business practices. The courts cannot ignore that nowadays monopolies, cartels and concentrations of capital, endowed with overwhelming economic power, manage to impose upon parties dealing with them cunningly prepared "agreements"thattheweakerpartymaynotchangeonewhit,hisparticipationin the "agreement" being reduced to the alternative to take it or leave it" labelled since Raymond Baloilles" contracts by adherence" (con tracts d'adhesion), in contrast to these entered into by parties bargaining on an equal footing, such contracts(ofwhichpoliciesofinsuranceandinternationalbillsofladingareprime examples)obviouslycallforgreaterstrictnessandvigilanceonthepartofcourtsof justicewithaviewtoprotectingtheweakerpartyfromabusesandimposition,and preventtheirbecomingtrapsfortheunwary. TYV.FILIPINASCIA.DESEGUROS 17SCRA364 FACTS: Tyfiledaclaimagainstseveralinsurancecompaniesforcompensationduetothe injuryheincurredtohislefthand.Hewasamachineoperatorinacompanyand hetookapersonalaccidentinsurancefromseveralcompanies.Inthesaidpolicies, for it to be considered disability, there must be severance or amputation of the affected member from the body of the insured. What happened in his case was thatduringafire,aheavyobjectcausedhishandtobefractured. HELD: Tycannotclaimtohavebeenmisledbythetermsofthecontract.Theprovisionis clear enough to inform the party entering into the contract that the loss to be considered a disability entitled to indemnity must be severance or amputation fromthebodyoftheinsured. GULFRESORTSV.PHIL.CHARTERINSURANCECORP.
458SCRA550 FACTS: GulfResortspropertieswaspreviouslyinsuredwithAmericanHomeAssurance.In the said earthquake insurance, what were covered only were the companys two swimmingpools.Thiswasincludedintheearthquakeendorsementclause.When thecompanydecidedtobeinsuredinsteadbyPCIC,itorderedthatthesamepolicy withAHACbecopied.Thereafter,anearthquakebrokeout,causingmagnanimous damage to the properties. After assessment by PCIC, it denied claims of Gulf Resorts except to those pertaining to the swimming pools as it was allegedly not coveredbytheearthquakeinsuranceclause. HELD: It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with each other. All its parts are reflective of the true intent of the parties. The policy cannot be construed piecemeal. Certain stipulationscannotbesegregatedandthenmadetocontrol;neitherdoparticular words or phrases necessarily determine its character. Petitioner cannot focus on theearthquakeshockendorsementtotheexclusionoftheotherprovisions.Allthe provisions and riders, taken and interpreted together, indubitably show the intentionofthepartiestoextendearthquakeshockcoveragetothetwoswimming poolsonly. A careful examination of the premium recapitulation will show that it is the clear intent of the parties to extend earthquake shock coverage only to the two swimmingpools.Section2(1)oftheInsuranceCodedefinesacontractofinsurance asanagreementwherebyoneundertakesforaconsiderationtoindemnifyanother againstloss,damageorliabilityarisingfromanunknownorcontingentevent.Thus, aninsurancecontractexistswherethefollowingelementsconcur: 1.Theinsuredhasaninsurableinterest; 2.Theinsuredissubjecttoariskoflossbythehappeningofthedesignatedperil; 3.Theinsurerassumestherisk; 4.Suchassumptionofriskispartofageneralschemetodistributeactuallosses amongalargegroupofpersonsbearingasimilarrisk;and
5.Inconsiderationoftheinsurer'spromise,theinsuredpaysapremium. An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. In fire, casualty, and marine insurance,thepremiumpayablebecomesadebtassoonastheriskattaches.Inthe subjectpolicy,nopremiumpaymentsweremadewithregardtoearthquakeshock coverage,exceptonthetwoswimmingpools.Thereisnomentionofanypremium payable for the other resort properties with regard to earthquake shock. This is consistent with the history of petitioners previous insurance policies from AHAC AIU. Thereisnoambiguityinthetermsofthecontractanditsriders.Thegeneralrule that insurance contracts are contracts of adhesion which should be liberally construedinfavoroftheinsuredandstrictlyagainsttheinsurercompanycannot beapplied. Sec.2.WheneverusedinthisCode,thefollowingtermsshallhavetherespective meanings hereinafter set forth or indicated, unless the context otherwise requires: (1) A "contract of insurance" is an agreement whereby one undertakes for a considerationtoindemnifyanotheragainstloss,damageorliabilityarisingfrom anunknownorcontingentevent. Acontractofsuretyshipshallbedeemedtobeaninsurancecontract,withinthe meaningofthisCode,onlyifmadebyasuretywhoorwhich,assuch,isdoingan insurancebusinessashereinafterprovided. (2) The term "doing an insurance business" or "transacting an insurance business",withinthemeaningofthisCode,shallinclude: (a)makingorproposingtomake,asinsurer,anyinsurancecontract; (b) making or proposing to make, as surety, any contract of suretyship as a vocationandnotasmerelyincidentaltoanyotherlegitimatebusinessoractivity ofthesurety;
(c) doing any kind of business, including a reinsurance business, specifically recognizedasconstitutingthedoingofaninsurancebusinesswithinthemeaning ofthisCode; (d)doingorproposingtodoanybusinessinsubstanceequivalenttoanyofthe foregoinginamannerdesignedtoevadetheprovisionsofthisCode. IntheapplicationoftheprovisionsofthisCodethefactthatnoprofitisderived from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefore, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transactingofaninsurancebusiness. (3) As used in this code, the term "Commissioner" means the "Insurance Commissioner". INSURANCECONTRACT Agreement whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from a an unknown or contingentevent ELEMENTSOFANINSURANCECONTRACT 1. The insurer possesses an interest of some kind susceptible of pecuniary estimationinsurableinterest 2. The insurer is subject to the risk of loss through the destruction or impairmentofthatinterestbythehappeningofdesignatedperils 3. Theinsurerassumestheriskofloss 4. Such assumption is part of a general scheme to distribute actual losses amongalargegroupofpersonsbearingsomewhatsimilarrisks 5. As consideration for the insurers promise, the insured makes a ratable contributioncalledapremiumtoaninsurancefund NATUREANDCHARACTERISTICSOFANINSURANCECONTRACT 1. Itisaleatory 2. Contractofindemnityfornonlifeinsuranceandacontractofinvestment forlifeinsurance 3. Itisapersonalcontract 4. Itisexecutoryandconditionalonthepartoftheinsurer 5. Itisoneofperfectgoodfaith
6. Itisacontractofadhesion DOINGANINSURANCEBUSINESS/TRANSACTINGANINSURANCEBUSINESS 1. Makingorproposingtomake,asinsurer,anyinsurancecontract 2. Makingorproposingtomake,assurety,anycontractofsuretyshipasa vocationandnotasincidentaltoanylegitimatebusinessoractivityofthe surety 3. Doing any kind of business including a reinsurance business, specifically recognizedasconstitutingthedoingofaninsurancebusiness 4. Doingorproposingtodoanybusinessinsubstanceequivalenttoanyof theforegoinginamannerdesignedtoevadetheprovisionsofthisCode *The fact that no profit is derived from the contract or transaction or that no separateanddistinctconsiderationisreceivedforsuchcontractortransactionshall notbedeemedconclusivetoshowthatnoinsurancebusinesswastransacted. PHILAMLIFEV.ANSALDO 234SCRA509 FACTS: Paterno together with other complainants, wrote a lettercomplaint to the Insurance Commissioner with respect to the problems they were undergoing as agents,supervisors,consumersofPhilamlife.Specifyingtheirdemands,theystated that Philamlifes provisions on fees and charges stated in the contract of agency, etc.bedeclarednullandvoid. HELD: Theinsurancecommissionerhastheauthoritytoregulatetheinsurancebusiness. Nonetheless,thecruxofthecontroversyisacontractofagencyandisnotwithin themeaningofwhatisdoinganinsurancebusiness,Section2oftheInsurance CodecannotbeinvokedtogivejurisdictiontotheInsuranceCommissioner. It also doesn't help to say that Section 416 is applicable to plaintiffs case. A reading of the section shows that the quasijudicial power is limited by law to complaints involving loss, damage or liability for which an insurer may be answerable under any kind of policy or contract of insurance. Hence, this power doesn'tcovertherelationshipaffectingtheinsurancecompanyanditsagentsbutis limited to adjudicating claims and compliants filed by the insured against the insurancecompany.
THECONTRACTOFINSURANCE Sec. 3. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, maybeinsuredagainst,subjecttotheprovisionsofthischapter. Theconsentofthehusbandisnotnecessaryforthevalidityofaninsurancepolicy takenoutbyamarriedwomanonherlifeorthatofherchildren. [Any minor of the age of eighteen years or more, may, notwithstanding such minority, contract for life, health and accident insurance, with any insurance company duly authorized to do business in the Philippines, provided the insurance is taken on his own life and the beneficiary appointed is the minor's estateortheminor'sfather,mother,husband,wife,child,brotherorsister.] Themarriedwomanortheminorhereinallowedtotakeoutaninsurancepolicy mayexercisealltherightsandprivilegesofanownerunderapolicy. All rights, title and interest in the policy of insurance taken out by an original owneronthelifeorhealthofaminorshallautomaticallyvestintheminorupon thedeathoftheoriginalowner,unlessotherwiseprovidedforinthepolicy. WHATMAYBEINSUREDAGAINST 1. Any contingent or unknown event, past or future, which may cause damagetoapersonhavinganinsurableinterest 2. Any contingent or unknown event, past or future, which may cause a liabilityagainstapersoninsured VALIDITYOFINSURANCEPOLICYTAKENOUTBYAMARRIEDWOMANORMINOR 1. Consentofhusbandnotnecessaryforvalidityoflifeinsuranceonwifes lifeorthatofherchildren 2. Insured married woman or minor may exercise rights and privileges of ownerunderalifepolicy 3. All rights, title, interest in the insurance policy taken out by an original owner on the life of the minor automatically vests in the minor upon deathoforiginalownerunlessotherwiseprovidedforinthepolicy
TWOSCENARIOSCONTEMPLATEDINPAR.2 1. The married woman takes a life insurance on her own life. When she dies,theproceedswillgotoherdesignatedbeneficiary. 2. Themarriedwomantakesalifeinsuranceonthelifeofherminorchild. When she dies, as the original owner, all rights and privileges shall be vestedontheminor RELATEDLAWS 1. Article234FC 2. Article1174CC 3. Article110FC 4. Article1327CC 5. Article1390CC PHILAMCAREV.CA 379SCRA356(2002) FACTS: Ernani Trinos applied for a health care coverage with petitioner and was duly issuedone.Oneofthequestionsaskedintheapplicationformwaswhetherornot he had history of heart disease, diabetes, cancer, etc.? To this question, he answered no. Months later after the issuance of the policy, he suffered from a heart attack and was confined in the hospital. His wife tried to claim from the health care policy but she was denied relief. The MMC allegedly found out that long before he applied for health care policy, he had history already of hypertension, diabetes, etc. After the discharge from the hospital, he was taken careofbyaphysicaltherapist.Lateron,hewasconfinedagainbutduetofinancial difficulties,hewastakenhome.Afewdaysafter,hedied.Thispromptedthewife tofileacomplaintagainsttheinsurancecompany. HELD: Section2(1)oftheInsuranceCodedefinesacontractofinsuranceasanagreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. An insurance contractexistswherethefollowingelementsconcur: 1.Theinsuredhasaninsurableinterest;
2.Theinsuredissubjecttoariskoflossbythehappeningofthedesignatedperil; 3.Theinsurerassumestherisk; 4. Such assumption of risk is part of a general scheme to distribute actual losses amongalargegroupofpersonsbearingasimilarrisk;and 5.Inconsiderationoftheinsurerspromise,theinsuredpaysapremium.8 Section 3 of the Insurance Code states that any contingent or unknown event, whetherpastorfuture,whichmaydamnifyapersonhavinganinsurableinterest againsthim,maybeinsuredagainst.Everypersonhasaninsurableinterestinthe lifeandhealthofhimself.Section10provides: Everypersonhasaninsurableinterestinthelifeandhealth: (1)ofhimself,ofhisspouseandofhischildren; (2)ofanypersononwhomhedependswhollyorinpartforeducationorsupport, orinwhomhehasapecuniaryinterest; (3) of any person under a legal obligation to him for the payment of money, respectingpropertyorservice,ofwhichdeathorillnessmightdelayorpreventthe performance;and (4)ofanypersonuponwhoselifeanyestateorinterestvestedinhimdepends. Inthecaseatbar,theinsurableinterestofrespondentshusbandinobtainingthe healthcareagreementwashisownhealth.Thehealthcareagreementwasinthe nature of nonlife insurance, which is primarily a contract of indemnity. Once the memberincurshospital,medicaloranyotherexpensearisingfromsickness,injury orotherstipulatedcontingent,thehealthcareprovidermustpayforthesameto theextentagreeduponunderthecontract. Withrespecttothecontentionofpetitionerthatinsuredconcealedamaterialfact, theanswerassailedwasinresponsetoaquestionrelatingtothemedicalhistoryof the applicant. This relies largely on opinion rather than fact, especially that the applicantwasnotadoctor.Wheremattersofopinionorjudgmentarecalledfor,
answers in good faith and without intent to deceive will not avoid a policy even thoughtheywereuntrue. Sec.4.Theprecedingsectiondoesnotauthorizeaninsurancefororagainstthe drawingofanylottery,orfororagainstanychanceorticketinalotterydrawing aprize. INSURANCEFORORAGAINSTLOTTERYISVOID A person who purchases an instant sweepstake cannot insure himself againstthefailureofhistickettowinaprize Acontractofinsuranceisacontractofindemnityandnotofsuretyship In a gambling contract, the parties contemplate gain through mere chance, while in a contract for insurance, the parties seek to distribute possiblelawbyreasonofmischance Sec.5.Allkindsofinsurancearesubjecttotheprovisionsofthischaptersofaras theprovisionscanapply. APPLICABILITYOFTHISCHAPTER 1. Marineinsurance 2. Fire 3. Casualty 4. Suretyship 5. Life 6. Otherkindsofinsurance PARTIESTOTHECONTRACT Sec.6.Everyperson,partnership,association,orcorporationdulyauthorizedto transact insurance business as elsewhere provided in this code, may be an insurer. PARTIESTOANINSURANCECONTRACT 1. Theinsurerheisthepartywhoagreestoindemnifyanotheruponthe happeningofaspecifiedcontingency 2. Theinsuredheispartytobeindemnifiedincaseofloss 3. The beneficiaryhe is the person who receives the benefits of an insurancepolicyuponitsmaturity
WHOMAYBEANINSURER Everyperson,partnership,association,orcorporationdulyauthorizedto transactbusinessasprovidedinthiscode This shall include all individuals, partnerships, associations, or corporations including governmentowned or controlled corporations and entities engaged as principals in the insurance business excepting mutualbenefitassociations INSURANCECORPORATION Thoseformedandorganized o Tosaveanypersonorpersonsorothercorporationsfromloss, damage, liability, arising from any unknown or future or contingentevent,or o Toindemnifyortocompensateanypersonorpersonsorother corporationsforanysuchloss,damage,orliability,or o To guarantee the performance of or compliance with contractualobligationsorthepaymentofdebtsofothers Sec.7.Anyoneexceptapublicenemymaybeinsured. WHOMAYBEINSURED 1. Anyone 2. Exceptapublicenemy FILIPINASCIADESEGUROSV.HUENEFIELDANDCO. 89PHIL54 FACTS: The respondent corporation was operated by Germans and majority of its stock was owned by the same. They secured a fire policy after paying the appropriate premium. During the Japanese military occupation, the warehouse was burned and destroyed. Whatever was salvaged from the premises were sold in public auction and the proceeds were deducted from the total loss. The insurance companydidnotindemnifythecorporation,allegingtherewiththattheAmericans haddeclaredwaragainsttheGermansandthatthecorporationwasbeingrunby thesame.
HELD: The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except a public enemy may be insured." It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy. Inthiscase,therespondentcorporationwasindeedanenemycorporation. Sec. 8. Unless the policy otherwise provides, where a mortgagor of property effectsinsuranceinhisownnameprovidingthatthelossshallbepayabletothe mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwiseavoidtheinsurance,willhavethesameeffect,althoughthepropertyis in the hands of the mortgagee, but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by themortgagor. THREECONTRACTSCONTEMPLATEDINTHEAFOREMENTIONEDPROVISION 1. Loan:creditoranddebtor 2. Mortgage: the debtor will be the one to mortgage the property (mortgagor),infavorofthecreditor(mortgagee) 3. Insurance:mortgagorbecomestheinsuredandtheinsurancecompanyis the insurer (the bank shall be the first to receive the proceeds of the insurancetotheextentoftheloan) a. Loss payable clause which in effect says that there is a loss payabletothebankasitsinterestmayappear WHOMAYINSUREMORTGAGEDPROPERTY Both the mortgagor and mortgagee have each a separate and distinct insurable interest in the mortgaged property and that they may take separatepolicieswiththesameordifferentinsurancecompanies EXTENTOFMORTGAGORSANDMORTGAGEESINSURABLEINTEREST 1. Themortgagormayinsurethemortgagedpropertytoitsfullvaluewhile themortgageecanonlyinsureittotheextentofthedebtsecured 2. Separate insurance covering different insurable interests may be obtainedbythemortgagorandthemortgagee
INSURANCETAKENBYTHEMORTGAGOR Amortgagormaytakeaninsurancepayable o Tohimself o Tothemortgagee Ifthemortgagortakesinsurancepayabletothemortgagee,orwherethe mortgagorassignsthepolicytakenbyhimtothemortgagee,andunless thepolicyotherwiseprovides,thelegaleffectsare: o The insurance is still deemed to be upon the interest of the mortgagor o The mortgagor doesn't cease to be a party to the original contract o Any act of the mortgagor, prior to the loss, which would otherwiserendertheinsurancenullandvoidstillrendersitnull and void although the property is in the hands of the mortgageeandtheproceedsarepayabletothemortgagee o Any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgageewiththesamelegaleffect o Incaseofloss,themortgageeisentitledtotheproceedsinthe extent of the debt secured while the excess will go to the mortgagor o Upontherecoveryofthemortgageetotheextentofhiscredit, hisdebtisextinguishedandthemortgagorisreleasedfromhis indebtedness INSURANCETAKENBYTHEMORTGAGEE If the mortgagee insures his own interest in the mortgaged property withoutreferencetotherightofthemortgagor,thelegaleffectsare: o Themortgageeisentitledtotheproceedsofthepolicyincase oflosstotheextentofhiscredit o If the proceeds are more than the total amount of the credit, themortgagorhasnorighttocollectthebalance o Iftheproceedsareequaltothetotalamountofthecredit,the mortgagee can no longer recover the mortgagors indebtedness, since the insurer is subrogated to the mortgageesrights o Iftheproceedsarelessthanthetotalamountofthecredit,the mortgageemaystillrecoverfromthemortgagorthedeficiency
Upon payment, the insurer is subrogated to the rights of the mortgageeagainstthemortgagortotheextentoftheamount paid.
SANMIGUELV.LAWUNIONROCKINSURANCE 40PHIL674 FACTS: San Miguel sought to recover from two insurance policies. It is maintained however that San Miguels only interest in the property insured is that it is a mortgagecreditor.ThepropertywasreallyownedbyHardingwhowasincludedas adefendant.Theinsurancecompaniesdon'tdenyliabilitybuttheymaintainthat San Miguel is only entitled to the amount of the mortgage credit. They also maintain that Harding is not entitled to any proceeds in excess of the mortgage creditbecausehewasn'tprivytotheinsurancecontract. HELD: There is no cause of action in Henry Harding against the insurance companies is show.Heisnotapartytothecontractsofinsuranceandcannotdirectlymaintain an action thereon. His claim is merely of an equitable and subsidiary nature and mustbemadeeffective,ifatall,throughtheSanMiguelBreweryinwhosename thecontractsarewritten.NowtheBrewery,asmortgageeoftheinsuredproperty, undoubtedly had an insurable interest therein; but it could not, in any event, recover upon these policies an amount in excess of its mortgage credit. In this connectionitwillberememberedthatAntonioBrias,uponmakingapplicationfor theinsurance,informedthecompanywithwhichtheinsurancewasplacedthatthe Brewerywasinterestedonlyasamortgagee.Itwould,therefore,beimpossiblefor theBrewerymortgageontheinsuredproperty. This conclusion is not only deducible from the principles governing the operation andeffectofinsurancecontractsingeneralbutthepointisclearlycoveredbythe expressprovisionsofsections16and50oftheInsuranceAct(ActNo.2427).Inthe firstofthesectionscited,itisdeclaredthat"themeasureofaninsurableinterestin property is the extent to which the insured might be damnified by loss or injury thereof"(sec.16);whileintheotheritisstatedthat"theinsuranceshallbeapplied exclusively to the proper interest of the person in whose name it is made unless otherwisespecifiedinthepolicy"(sec.50).
These provisions would have been fatal to any attempt at recovery even by D. P. Dunn,iftheownershipofthepropertyhadcontinuedinhimuptothetimeofthe loss;andasregardsHarding,anadditionalinsuperableobstacleisfoundinthefact thattheownershipofthepropertyhadbeencharged,priortotheloss,withoutany correspondingchangehavingbeeneffectedinthepolicyofinsurance.Insection19 of the Insurance Act we find it stated that "a change of interest in any part of a thing insured unaccompanied by a corresponding change of interest in the insurance,suspendstheinsurancetoanequivalentextent,untiltheinterestinthe thing and the interest in the insurance are vested in the same person." Again in section55itisdeclaredthat"themeretransferofathinginsureddoesnottransfer thepolicy,butsuspendsituntilthesamepersonbecomestheownerofboththe policyandthethinginsured." Undoubtedly these policies of insurance might have been so framed as to have been"payabletotheSaneMiguelBrewery,mortgagee,asitsinterestmayappear, remainder to whomsoever, during the continuance of the risk, may become the owner of the interest insured." (Sec 54, Act No. 2427.) Such a clause would have proved an intention to insure the entire interest in the property, not merely the insurable interest of the San Miguel Brewery, and would have shown exactly to whom the money, in case of loss, should be paid. But the policies are not so written. GREPALIFEV.CA 316SCRA677 FACTS: 1.
3. 4.
5.
6.
2.
AcontractofgrouplifeinsurancewasexecutedbetweenpetitionerGreat Pacific Life Assurance Corporation (hereinafter Grepalife) and DevelopmentBankofthePhilippines(hereinafterDBP).Grepalifeagreed toinsurethelivesofeligiblehousingloanmortgagorsofDBP. Leuterio, a physician and a housing debtor of DBP applied for membershipinthegrouplifeinsuranceplan.Inanapplicationform,Dr. Leuterioansweredquestionsconcerninghishealthconditionasfollows: 7.Haveyoueverhad,orconsulted,aphysicianforaheartcondition,high bloodpressure,cancer,diabetes,lung;kidneyorstomachdisorderorany otherphysicalimpairment?
HELD: The rationale of a group insurance policy of mortgagors, otherwise known as the "mortgage redemption insurance," is a device for the protection of both the mortgageeandthemortgagor.Onthepartofthemortgagee,ithastoenterinto such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relievingtheheirsofthemortgagorfrompayingtheobligation.7Inasimilarvein, ample protection is given to the mortgagor under such a concept so that in the eventofdeath;themortgageobligationwillbeextinguishedbytheapplicationof the insurance proceeds to the mortgage indebtedness. Consequently, where the mortgagorpaystheinsurancepremiumunderthegroupinsurancepolicy,making the loss payable to the mortgagee, the insurance is on the mortgagor's interest,
Answer:No.Ifsogivedetails_____________. 8.Areyounow,tothebestofyourknowledge,ingoodhealth? Answer:[x]Yes[]NO.4 Grepalife issued Certificate No. B18558, as insurance coverage of Dr. Leuterio,totheextentofhisDBPmortgageindebtednessamountingto eightysixthousand,twohundred(P86,200.00)pesos. Dr. Leuterio died due to "massive cerebral hemorrhage." Consequently, DBP submitted a death claim to Grepalife. Grepalife denied the claim allegingthatDr.Leuteriowasnotphysicallyhealthywhenheappliedfor an insurance coverage. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such nondisclosure constituted concealment that justifiedthedenialoftheclaim. ThewidowofthelateDr.Leuterio,respondentMedardaV.Leuterio,filed a complaint During the trial, Dr. Hernando Mejia, who issued the death certificate, was called to testify. Dr. Mejia's findings, based partly from theinformationgivenbytherespondentwidow,statedthatDr.Leuterio complained of headaches presumably due to high blood pressure. The inference was not conclusive because Dr. Leuterio was not autopsied, hence,othercauseswerenotruledout. The trial court rendered a decision in favor of respondent widow and againstGrepalife.
10
and the mortgagor continues to be a party to the contract. In this type of policy insurance,themortgageeissimplyanappointeeoftheinsurancefund,suchloss payableclausedoesnotmakethemortgageeapartytothecontract. Sec.8oftheInsuranceCodeprovides: Unlessthepolicyprovides,whereamortgagorofpropertyeffectsinsuranceinhis ownnameprovidingthatthelossshallbepayabletothemortgagee,orassignsa policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance,willhavethesameeffect,althoughthepropertyisinthehandsofthe mortgagee,butanyactwhich,underthecontractofinsurance,istobeperformed by the mortgagor, may be performed by the mortgagee therein named, with the sameeffectasifithadbeenperformedbythemortgagor. The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance, the policy stating that: "In the event of the debtor's death before his indebtedness with the Creditor [DBP] shall have been fully paid, anamounttopaytheoutstandingindebtednessshallfirstbepaidtothecreditor and the balance of sum assured, if there is any, shall then be paid to the beneficiary/ies designated by the debtor." When DBP submitted the insurance claim against petitioner, the latter denied payment thereof, interposing the defense of concealment committed by the insured. Thereafter, DBP collected the debt from the mortgagor and took the necessary action of foreclosure on the residentiallotofprivaterespondent. And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of thedecedentDr.Leuteriomayfilethesuitagainsttheinsurer,Grepalife. Sec.9.Ifaninsurerassentstothetransferofaninsurancefromamortgagortoa mortgagee, and, at the time of his assent, imposes further obligation on the assignee,makinganewcontractwithhim,theactofthemortgagorcannotaffect therightsofsaidassignee. TRANSFEROFINSURANCEWITHAPPROVALOFINSURER
Generally, where the mortgagor effects insurance in his own name payable to the mortgagee, or assigns in his policy to a mortgagee, the mortgagordoesn'tceasetobeapartytotheinsurancecontractandhis actsstillaffectthepolicy Under this provision, where an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee, and at the time of his assent, imposes new obligations to the assignee, a new and distinct consideration passes from the mortgagee to the insurer and a new contract is created between them. In this scenario, the mortgagor cannotanymoreaffecttherightsoftheassigneemortgagee. INSURABLEINTEREST
Sec.10.Everypersonhasaninsurableinterestinthelifeandhealth: (a)Ofhimself,ofhisspouseandofhischildren; (b) Of any person on whom he depends wholly or in part for education or support,orinwhomhehasapecuniaryinterest; (c)Ofanypersonunderalegalobligationtohimforthepaymentofmoney,or respectingpropertyorservices,ofwhichdeathorillnessmightdelayorprevent theperformance;and (d)Ofanypersonuponwhoselifeanyestateorinterestvestedinhimdepends.i INSURABLEINTEREST A person has insurable interest in the subject matter insured where he hassucharelationorconnectionwith,orconcernin,itthathewillderive pecuniary benefit or advantage from its preservation and will suffer pecuniary loss or damage from its destruction, termination, or injury by thehappeningoftheeventinsuredagainst NECESSARYTOVALIDITYOFINSURANCECONTRACT Insurable interest essential to the validity and enforceability of the insurancecontract A policy issued to a person without interest in the subject matter is a merewagerpolicyorcontract
11
INLIFEINSURANCE Insurable interest exists when there is reasonable ground, founded on therelationsoftheparties,eitherpecuniaryorcontractualorbybloodor affinity, to expect some kind of benefit or advantage from the continuanceofthelifeoftheinsured INONESOWNLIFE A person has an unlimited interest in his own life which will support a policytakenbyhiminfavorofhimself,hisestate,orinfavorofanother person,regardlessofwhetherornotthelatterhasaninsurableinterest provided,incasethebeneficiaryiswithoutinsurableinterest,thatthere isnobadfaithorfraud INONESSPOUSESANDCHILDREN Thelawpresumesthatapersonhasaninsurableinterestinthelifeofhis spouseandhischildren Thelawmakesnoqualification BASEDONPECUNIARYINTEREST Merebloodrelationshipdoesn'tcreateaninsurableinterestinthelifeof another The existence of relationship by affinity doesn't constitute insurable interest Theabovementionedpersonsmayhaveinsurableinterestifthereexists pecuniaryinterestbetweenthem Apersoncanhaveaninsurableinterestwithanyotherpersonorstranger aslongashehascomepecuniaryinterestinthelatterslife BASEDONSOMELEGALOBLIGATION A person has an insurable interest in the life of another who is under a legalobligationtohimforthepaymentofmoney,orrespectingproperty or services an whose death or illness might delay or prevent the performanceoftheobligation Apersonwhohasacommercialorcontractualrelationshipwithanother hasaninsurableinterestinthelatterifhisdeathwilldelayorpreventthe performancebythelatterofsomelegalobligationinfavoroftheformer WHEREESTATEORINTERESTISDEPENDENTONTHELIFEOFTHEINSURED
WHENDOESINSURABLEINTERESTMUSTEXIST Whentheinsurancetakeseffectbutneednotexistafterorwhentheloss occurs or at the time of the death of the insuredthis is because life insurance is not a contract of indemnity but is meant to give financial securityeithertotheinsuredhimselforhisbeneficiaries COL.C.CASTROV.INSURANCECOMMISSIONER GR55836,FEBRUARY16,1981 FACTS: Col.Castrowastheemployerofthedeceased.Whilethedeceasedwasstillliving, he worked as the family driver of Castro. Castro took a life insurance policy on behalfofthedeceasedandwhenthelatterdied,Castrotriedtoclaimtheproceeds fromtheinsurancecompany.Thecompanydeniedtheclaim,maintainingthatthe policytakenwasnullandvoidandthus,Castroisnotentitledtoanyproceeds.This positionwassustainedbythecourtandthus,Castroscomplaintwasdismissed. POINTSRAISEDBYPETITIONER: 1. Anemployerhasaninsurableinterestinthelifeofhisemployee 2. Insurancecompanycannotdenyliabilityunderthepolicy 3. There is no legal effect on the act of the insurance company to remit a refundcheck POSITION TAKEN BY INSURANCE COMPANY: Castro doesn't have any insurable interestonthelifeofTerrenal. AlifeinsurancepolicywastakenforTerrenalbyCastroforaperiodof20 years who was only his driver. Castro failed to establish that he had a legalclaimoverTerrenalforservicesduringtheperiodof20years. Mere existence of employeremployee relationship is not enough to establish insurable interest. The employer should show that he would suffereconomiclossincasetheemployeedies. AN EXAMPLE WHEREIN THERE IS ECONOMIC LOSS TO THE EMPLOYER IF AN EMPLOYEEISPLACEDINHARMSWAYORDIES
Everypersonhasaninsurableinterestinthelifeandhealthofanyperson upon whose life any estate or interest vested in the person taking the policydepends
12
Employersendshisemployeeabroadtotakepostgraduatestudies.Togetherwith paying his tuition, the employer pays for the transportation, board and lodging, whilestillcontinuingtopaytheemployeessalary. LINCOLNNATIONALLIFEV.SANJUAN CAGRNO.3458688,MAY27,1971 FACTS: Plaintiffsseektherescissionoffiveinsurancepoliciesofdefendantsontheground that there was concealment of material facts and false representations. Lack of insurable interest was also cited as a ground for rescission by the plaintiffs. The defendantsdeniedtheseallegationshowever.Thetrialcourtadjudgedthecasein favoroftheplaintiffs,declaringthepoliciesnullandvoid. HELD: Thefiveinsurancepolicieswereineffectwageringorhighlyspeculativecontracts ofinsurance,whicharevoidforreasonsofpublicpolicyandnotbeingbasedonthe existenceofinsurableinterestonthepartofappellantLuisParcoonthelifeofSan Juan, the insurance having been brought about and procured through false affirmationsorrepresentationsandconcealmentofmaterialpoints. Thespousesdidn'thaveanyinsurableinterestonthelifeofMysteriosoSanJuan, who was just a farm laborer of the spouses. There is no evidence showing that therewaseconomiclosstobeincurredbythespousesincaseofdeathofSanJuan. ThebeneficiariesnamedinthepolicieswerenoteventhechildrenofSanJuan. *Note: Insurance companies rescind extrajudicially. They just write a letter and thenissueacheck,toaccompanythesame.Theycanonlydothisthoughbeforea claimisfiled. Sec.11.Theinsuredshallhavetherighttochangethebeneficiaryhedesignated inthepolicy,unlesshehasexpresslywaivedthisrightinsaidpolicy. BENEFICIARY,DEFINED Person,whethernaturalorjuridical,forwhosebenefitthepolicyisissued andistherecipientoftheproceedsoftheinsurance LIMITATIONSANDDISQUALIFICATIONS
Apersonmaytakealifeinsuranceonhislifepayabletoanypersoncalled a beneficiary even though said beneficiary is a stranger and has no insurableinterestintheinsuredslife However,anypersonwhoisforbiddenfromrecevinganydonationunder Article739CCcannotbenamedasbeneficiaryofalifeinsurancepolicy bythepersonwhocannotmakeanydonationtohim
WHENNOBENEFICIARYDESIGNATED Incaseoffailuretodesignateabeneficiaryorwheresuchdesignationis void,theproceedsoftheinsurancewillgotheestateoftheinsured INSULARLIFEV.EBRADO Supra NARIOV.PHILAMLIFE 20SCRA434 FACTS: AlejandraNariotookalifeinsurancepolicyonherlife,designatedherhusbandand son as the irrevocable beneficiaries. She then applied for a loan on said policy whichshewasentitledtoafterthepolicyhasbeeninforceforthreeyears,forthe purpose of using the proceeds to defray the school expenses of her son. The applicationboretwicethesignatureofherhusband,oneforbeinganirrevocable beneficiaryandtwo,forbeingthelegaladministratorofthesonsproperties.The applicationwashoweverdeniedasitmaintainedthatitmustalsobeauthorizedby thecourtincompetentguardianshipproceedings. HELD: Theproposedtransactionsinquestionconstituteactsofdispositionoralienationof property rights and not merely of management or administration because they involvetheincurringorterminationofthecontractualobligations. It appearing that the minors beneficiarys vested interest or right on the policy exceedsP2000andastherewasnocourtpetitionandbond,theconsentgivenby the father for and in behalf of the minor son, without court authorization, to the policy loan application and the surrender of such policy, was insufficient and
13
ineffective,andPhilamlifewasjustifiedindisapprovingtheproposedtransactions inquestion. Sec. 12. The interest of a beneficiary in a life insurance policy shall be forfeited whenthebeneficiaryistheprincipal,accomplice,oraccessoryinwillfullybringing aboutthedeathoftheinsured;inwhichevent,thenearestrelativeoftheinsured shallreceivetheproceedsofsaidinsuranceifnototherwisedisqualified. WHENBENEFICIARYFORFEITSINSURANCEPROCEEDS Whenthebeneficiaryistheprincipal,accompliceoraccessoryinwillfully bringingaboutthedeathoftheinsured,suchbeneficiaryforfeitstheright toreceivetheproceedsofthelifeinsurancepolicy Sec. 13. Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril mightdirectlydamnifytheinsured,isaninsurableinterest. INSURABLEINTERESTINPROPERTY Existsaslongassuchinterest,whetherrealorpersonal,oranyrelation theretoorliabilitythereof,isofsuchanaturethatacontemplatedperil mightdirectlydamnifytheinsured Where the interest of the insured in, or his relation to, the property is suchthat,hewillbebenefitedbythecontinuedexistenceorwillsuffera directpecuniarylossbyitsdestruction,thecontractofinsurancewillbe upheld HARVARDIANCOLLEGEV.COUNTRYBANKERS 1CARA1;83OG(NO.31) FACTS: Harvardian College is a family corporation owned by spouses Yap and their children. They insured the school building, per advice of an insurance agent. During the effectivity of the policy, the school building was totally burned. They tried to claim from the insurance company but they were denied on the ground thatthebuildingandlanditwasconstructedonwasownedbyIldefonsoYapand notbyHarvadianColleges. HELD:
Anytitleto,orinterestinproperty,legalorequitable,willsupportacontractoffire insurance,andevenwhentheinsuredhadnotitlethecontractwillbeupheldifhis interest,orhisrelationto,thepropertyissuchthathewill,ormaybebenefitedby its continued existence or suffer a direct pecuniary loss from its destruction or injury. Theplaintiffinthiscasehaslongbeenusingandpossessingthebuildingforseveral years with both the consent and knowledge of Ildefonso Yap. As such, it is reasonabletoassumethathadthebuildingnotbeenburned,plaintiffwouldhave been allowed the continued use of the same in its operations of an educational institution. FILIPINOMERCHANTSV.CA 179SCRA638 FACTS: A consignee of goods aboard a vessel insured the goods. Due to the damage incurredbythegoodsduringthevoyage,consigneenowseeksproceedsfromthe insurance company. This led to litigation as the company failed to pay him indemnity. HELD: Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. The agreement has the force of law between the parties. The terms of the policy constitute the measure of the insurers liability. If such terms are clear and unambiguous, they must be taken and understood in their plain,ordinaryandpopularsense. Anent the issue of insurable interest, the consignee had an insurable interest in insuringthegoods.Inprinciple,anyonehasaninsurableinterestinpropertywho derives a benefit from its existence or would suffer loss from its destruction whether he has or has not any title in, lien upon or possession of the property. insurable interest in property may consist in an existing interest, an inchoate interestfoundedonanexistinginterest,oranexpectancy,coupledwithanexisting interestinthatoutofwhichtheexpentancyarises.
14
Herein,theconsigneehasanexistinginterestinthegoodsinsured.Thisinsurable interestwasgroundedonavalidcontractofsale.Thiscontractvestedanequitable interestonthepropertybeingshipped. Sec.14.Aninsurableinterestinpropertymayconsistin: (a)Anexistinginterest; (b)Aninchoateinterestfoundedonanexistinginterest;or (c) An expectancy, coupled with an existing interest in that out of which the expectancyarises. LAMPANOV.JOSE 30PHIL537 FACTS: Barreto constructed a house for Jose. During the construction of the house and Joses disposition of the same, Barreto took an insurance policy on the house. Subsequently, Jose sold the house to Lampano and there was still a remaining balance from the latter. On an unfortunate date however, the house was destroyedbyfire. LampanofiledacomplaintagainstBarretoandJose.Sheassertedthattherewasa verbal agreement between her and Jose that upon sale of the house, the latter would deliver the insurance policy to her. She maintained that Barreto and Jose don'thaveanyrighttotheinsurancepolicyanymore. ThetrialcourtruledinfavorofJosecollectively.First,itruledthatBarretoowed Jose the balance between the proceeds of the insurance policy and the premium paidbyhim.Second,itruledthatLampanopaytheremainingbalanceforthesale ofthehousetoJose. HELD: IfBarretohadaninsurableinterestinthehouse,hecouldinsurethisinterestfor hissoleprotection.Thepolicywasinhisnamealone.Itwas,therefore,apersonal contract between him and the company and not a contract which ran with the property.Accordingtothispersonalcontract,theinsurancepolicywaspayableto
theinsuredwithoutregardtotheextentandnatureofhisinterestintheproperty, provided that he had an insurable interest at the time of the making of the contract,andalsoatthetimeofthefire.Wheredifferentpersonshavedifferent interestsinthesameproperty,theinsurancetakenbyoneinhisknownrightandin his own interest doesn't in any way inure to the benefit of another. This is the generalruleprevailingintheUS,andthisisnodifferentfromourownjurisdiction. Acontractofinsurancemadeforinsurersindemnityonly,aswheretherewasno agreement, express or implied, that it shall be for the benefit of a third person, doesn'tattachtoorrunwiththetitletotheinsuredpropertyonatransferthereof personal as between the insurer and insured. In such case, strangers to the contract cannot acquire in their own right any interest in the insurance money, exceptthroughanassignmentorsomecontractwithwhichtheyareconnected. In the case at bar, Barreto assumed the responsibility for the insurance. The premiumswerepaidbyhimwithoutanyagreementorrighttorecouptheamount paidthereforeshouldnolossresulttotheproperty.Itwouldnot,therefore,bein accordancewithlawandhiscontractualobligationstocompelhimtoaccountfor the insurance money, or any part thereof, to the plaintiff, who assumed no risk whatsoever. That he had insurable interest in the house, there is no question. Barreto constructedthehouse,furnishedallmaterialsandsupplies,andinsureditafterit hadbeencompleted. Sec. 15. A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not to exceed the value thereof. LOPEZV.DELROSARIO 44PHIL98 FACTS: Del Rosario was engaged in the business of warehouse keeping. She owned a bondedwarehouse,whereinshestoredcopraandothermerchandise.Oneofthe peoplewhostoredcoprainherwarehousewasLopez.DelRosarioprocuredmany insurancepolicies,coveringthewarehouseandthemerchandiseitstored.Onan unfortunate date however, the warehouse together with majority of the
15
merchandise stored in it, was destroyed by fire. Del Rosario was able to collect fromtheinsurancecompaniestheproceedsoftheinsurancepolicies.Shewasable to satisfy obligations to her clients except Lopez who was running after also to somemoreproceedsfromthepolicies. HELD: Underanyaspect,DelRosariowouldbeliable.Thelawisthatapolicyeffectedby a bailee and covering by its terms his own property and property held in trust, insures,inaneventofaloss,equallyandproportionatelytothebenefitofallthe owners of the property insured. Even if one secured insurance covering his own goodsandgoodsstoredwithhim,andeveniftheownerofthestoredgoodsdidn't requestorknowoftheinsurance,anddidnotratifyitbeforethepaymentofthe loss, yet it has been held that the warehouseman is liable to the owner of such storedgoodsforhisshare. Lopezs right was not forfeited by his failure to pay the interest indicated in the warehousereceipts.Apreponderanceoftheproofdoesn'tdemonstratethatthe plaintiffeverorderedthecancellationoftheinsurancewiththedefendant.Noris itshownthebillswerepresentedtohim,andthatnoticeofanintentiontocancel theinsurancewasevergiventotheplaintiff. The remaining contention that Lopez cannot claim the benefits of the agency withoutsharingintheexpensesiswelltaken.DelRosariowasactingashisagent in securing insurance, while he benefits from the amicable adjustment of the insuranceclaims. Sec.16.Amerecontingentorexpectantinterestinanything,notfoundedonan actualrighttothething,noruponanyvalidcontractforit,isnotinsurable. Sec.17.Themeasureofaninsurableinterestinpropertyistheextenttowhich theinsuredmightbedamnifiedbylossorinjurythereof. SANMIGUELV.LAWUNIONROCKINSURANCE Supra HELD: Thatthebrewerycompanyhadaninsurableinterestbutcouldonlyrecoveronthe policyonlytotheextentofthecreditsecuredbythemortgage.
Sec. 18. No contract or policy of insurance on property shall be enforceable exceptforthebenefitofsomepersonhavinganinsurableinterestintheproperty insured. INSURANCE IS UNENFORCEABLE IF TAKEN FOR THE BENEFIT OF SOME PERSON WITHOUTINSURABLEINTEREST Aninsurancepolicyonpropertyforthebenefitofsomepersonwithout insurableinterestinthepropertyinsuredisunenforceable GARCIAV.HONGKONGFIREANDMARINEINSURANCE 45PHIL122 FACTS: Garcia was a merchant who owned a bazaar. His friend assisted him in taking a fireinsurancepolicyforhismerchandise.However,itwasindicatedinthepolicy thatwhatwasinsuredwasthebuildingwhereitwasstoredinwhichdidn'tshow the true intent of the parties. It was found out that the insurance policy was in English,whichisinalanguagethatGarciawasignorantof. Later, he decided to mortgage the insured merchandise to the bank. He wrote a lettertotheinsurancecompany,askingforanindorsementsothathecanproperly mortgage his merchandise. In his letter, he wrote therein that what was insured wasthemerchandiseandnotthebuilding. Onarelevantdate,afirebrokeoutandthemerchandisewasdestroyed. HELD: Although the policy was in possession of the bank, the insurance company had amongitsownrecordsallofthedataandinformationuponwhichthepolicywas issued, as a matter of fact, its agents knew or should have known the kind of propertyinsured. In the final analysis, Garcia wanted insurance upon a stock of goods, which he owned,andhereceivedandpaidforapolicyonabuilding,whichhedidn'town, and while the policy was in force and effect, both the building and the stock of merchandise,werecompletelydestroyedbyfire.Garciasmerchandisewasinthe buildingdescribedinthepolicy.
16
Sec. 19. An interest in property insured must exist when the insurance takes effect,andwhenthelossoccurs,butnotexistinthemeantime;andinterestin thelifeorhealthofapersoninsuredmustexistwhentheinsurancetakeseffect, butneednotexistthereafterorwhenthelossoccurs. TIMEWHENINSURABLEINTERESTMUSTEXIST 1. Property insuranceat time insurance takes place and at time of loss, neednotexistinthemeantime 2. Life insuranceonly at time insurance takes effect, need not exist thereafterorwhenlossoccurs INSURABLEINTERESTINLIFE INSURABLEINTERESTINPROPERTY Unlimited Limited to the actual value of the Exceptonetakenbycreditoronthelife interestontheproperty ofthedebtor It is sufficient that insurable interest Must exist both at the time the exists at the time the insurance takes insurance takes effect and at the time effectbutnotwhenthelossoccurs ofloss Expectancyofbenefitmaybesufficient The expentancy must be coupled with evenifthereisnolegalbasis anexistinglegalbasistobeasufficient insurableinterest TAITONGCHUACHEV.INSURANCECOMMISSION 158SCRA366 FACTS: Complainantsacquiredacertainbuildingandland.Hethenobtainedaloanfrom petitioner.Hesecuredthisthroughamortgage.Themortgageetheninsuredthe landandbuilding.Thereafter,Palomosecuredtwofireinsurancepoliciesfromtwo differentcompaniesZenithInsuranceandPhilippineBritishAssuranceCompany. Thebuildingthenonalaterdatewasdestroyedbyfire. Basedonastandardassessmentprogram,theinsurancecompanieswereassessed forthelosstheyshouldpayfor.Only1ofthemdidn'twanttopay.Thisprompted thecomplainanttodemandpaymentfromthemthebalanceoftheclaim.TaiTong thensoughttointervenebutwasdeniedasitdidn'tallegedlyhavecauseofaction asameremortgagee.
HELD: Respondentcompanyisboundbythepolicyitissuedtopetitionerthatwasstillin legalforceandeffectwhenthefiretranspired. When the fire happened, the petitioner still had an insurable interest in the land and building subject of the insurance. He wasn't paid yet for the loan obtained fromhim.Heremainedamortgagee.Andfurthermore,itispresumedthathestill holds credit as he presented the document of credit evincing the loan obtained fromhim. Sec.20.Exceptinthecasesspecifiedinthenextfoursections,andinthecasesof life, accident, and health insurance, a change of interest in any part of a thing insured unaccompanied by a corresponding change in interest in the insurance, suspendstheinsurancetoanequivalentextent,untiltheinterestinthethingand theinterestintheinsurancearevestedinthesameperson. EFFECTOFCHANGEOFINTERESTINSUREDONCONTRACTOFINSURANCE GeneralruleifnotaccompaniedBYcorrespondingchangeofinterestin insurance, insurance coverage suspended until interest in thing insured andinterestintheinsurancecontractarevestedinthesameperson Exceptions o Life,accident,andhealthinsurance o Changeofinterestinthinginsuredafteroccurrenceofloss o Changeofinterestinthingsseparatelyinsured o Transferofinterestbywillorsuccessionupondeathofinsured o Transfer of interest by one of the partners joint owners, or commonownersjointlyinsured,totheothers o An insurance policy framed to inure to the benefit of whomsoeverbecomestheownerofthethinginsured BACHRACHV.BRITISHAMERICANASSURANCECO. 17PHIL555 FACTS: Bachrach sought to recover the proceeds of an earlier taken fire insurance policy from defendant. As a matter of defense, the defendant raised that first, complainantmaintainedapaintandvarnishshopinthebuilding.Second,thathe
17
hadtransferredhisinsurableinterestbyconveyingtheinsurancepolicytoanother to secure certain debts due. Third, preceding immediately the fire, he willfully storedthegasolinebarrelinsidethebuilding.Plaintiffdeniedthis.Hemaintained thathehasbeenacquittedofthechargesofarsonearlieronandthathewasable toprovelossduetothefire. HELD: With reference to the second assigned error, defendant contended that the execution of the chattel mortgage without the knowledge and consent of the insurance company annulled the insurance policy. However, upon reading the policy, there was no provision prohibiting the plaintiff from placing a mortgage overthepropertyinsurance.Andeveniftherewasanintendedalienationclause, it is to be noted that mere execution of a chattel mortgage and that alienation within the meaning of the insurance law until the mortgagee acquires a right to takepossessionbydefaultunderthetermsofthemortgager.Norightisclaimed tohaveaccruedinthiscase. Sec.21.Achangeininterestinathinginsured,aftertheoccurrenceofaninjury whichresultsinaloss,doesnotaffecttherightoftheinsuredtoindemnityfor theloss. Sec. 22. A change of interest in one or more several distinct things, separately insuredbyonepolicy,doesnotavoidtheinsuranceastotheothers. Sec.23.Achangeoninterest,bywillorsuccession,onthedeathoftheinsured, does not avoid an insurance; and his interest in the insurance passes to the persontakinghisinterestinthethinginsured. DEATHOFINSUREDDOESN'TAVOIDTHEINSURANCEONPROPERTY An insurance policy on property taken by the insured who dies doesn't affect the property except that his interest passes to his heir or legal representative Theheirorlegalrepresentativemaycontinuetheinsurancepolicyonthe property of the decedent by paying the premiums thereof and will receivetheproceedsoftheinsuranceincaselossoccurs Sec.24.Atransferofinterestbyoneofseveralpartners,jointowners,orowners incommon,whoarejointlyinsured,totheothers,doesnotavoidaninsurance
eventhoughithasbeenagreedthattheinsuranceshallceaseuponanalienation ofthethinginsured. Sec.25.Everystipulationinapolicyofinsuranceforthepaymentoflosswhether thepersoninsuredhasorhasnotanyinterestinthepropertyinsured,orthatthe policy shall be received as proof of such interest, and every policy executed by wayofgamingorwagering,isvoid. VOIDSTIPULATIONSINPROPERTYINSURANCE 1. Thefollowingstipulationsinacontractarevoid a. Stipulationforthepaymentoflosswhetherthepersoninsured hasorhasnointerestinthepropertyinsured b. Stipulation that the policy shall be received as proof of such interest 2. Everypolicyexecutedbywayofgainingorwageringislikewisevoid CHAV.CA 277SCRA690 FACTS: Petitionerspouses Nilo Cha and Stella UyCha, as lessees, entered into a lease contractwithprivaterespondentCKS.Oneoftheconditionsoftheleasewasthat the lessee wouldn't take any insurance policy on any chattels or merchandise placed in the stalls, etc. without first obtaining the consent of the lessor. Notwithstanding this agreement, the spouses insured their merchandise. Days beforetheexpirationofthelease,afirebrokeoutanddestroyedthegoods.CKS uponknowingoftheinsurancepolicy,soughttheproceedsofthesame. HELD: Sec.18oftheInsuranceCodeprovides: Sec.18.Nocontractorpolicyofinsuranceonpropertyshallbeenforceableexcept forthebenefitofsomepersonhavinganinsurableinterestinthepropertyinsured. A nonlife insurance policy such as the fire insurance policy taken by petitioner spouses over their merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs. 4 The basis of such requirement of insurable
18
interest in property insured is based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interestandcollectingtheproceedsofsaidpolicyincaseoflossoftheproperty.In suchacase,thecontractofinsuranceisamerewagerwhichisvoidunderSection 25oftheInsuranceCode,whichprovides: Sec.25.EverystipulationinapolicyofInsuranceforthepaymentofloss,whether thepersoninsuredhasorhasnotanyinterestinthepropertyinsured,orthatthe policyshallbereceivedasproofofsuchinterest,andeverypolicyexecutedbyway ofgamingorwagering,isvoid. In the present case, it cannot be denied that CKS has no insurable interest in the goodsandmerchandiseinsidetheleasedpremisesundertheprovisionsofSection 17oftheInsuranceCodewhichprovide: Sec.17.Themeasureofaninsurableinterestinpropertyistheextenttowhichthe insuredmightbedamnifiedbylossofinjurythereof. Therefore, respondent CKS cannot, under the Insurance Code, a special law, be validly a beneficiary of the fire insurance policy taken by the petitionerspouses overtheirmerchandise.Thisinsurableinterestoversaidmerchandiseremainswith theinsured,theChaspouses.TheautomaticassignmentofthepolicytoCKSunder theprovisionoftheleasecontractpreviouslyquotedisvoidforbeingcontraryto law and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella UyCha (herein copetitioners). The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policytoaperson(CKS)whohasnoinsurableinterestinthepropertyinsured. CONCEALMENT Sec. 26. A neglect to communicate that which a party knows and ought to communicate,iscalledaconcealment. PROVISIONSONCONCEALMENT Theprovisionsonconcealment,representation,andwarrantiesarebased ononeofthefundamentalcharacteristicsofaninsurancecontractthat itbeofperfectgoodfaithonthepartofbothparties
CONCEALMENT Neglect to communicate that which a party knows or ought to communicate,whetherintentionalorunintentional WHENITEXISTS Concealmentexistswheretheassuredhadknowledgeofafactmaterial to the risk, and honesty, good faith, and fair dealing requires that he shouldcommunicateittotheassurer,buthedesignedlyandintentionally withholdsthesame Sec.27.Aconcealmentwhetherintentionalorunintentionalentitlestheinjured partytorescindacontractofinsurance.(AsamendedbyBatasangPambansaBlg. 874) ARGENTEV.WESTCOASTLIFE 51PHIL725 FACTS: BernardoArgentesignedanapplicationforjointinsurancewithhiswifeinthesum of P2,000. The wife, Vicenta de Ocampo, signed a like application for the same policy.Bothapplications,withtheexceptionofthenamesandthesignaturesofthe applicants,werewrittenbyJoseGeronimodelRosario,anagentfortheWestCoast Life Insurance Co. But all the information contained in the applications was furnished the agent by Bernardo Argente. The spouses were then medically examined by the doctor. All information was written by the doctor with some beingfurnishedbyBernardo. Thespousesthenaskedfortheincreaseoftheamountcoveredbythepolicy.They wereissuedatemporaryinsurancepolicyandthepermanentonewasn'tdelivered until the first payment of premium of the spouses. Days after, Vicenta died of cerebralapoplexy.Bernardosoughttheproceedsbutwasdeniedonthegroundof concealment. The court found from the evidence that the representations made by Bernardo Argenteandhiswifeintheirapplicationstothedefendantforlifeinsurancewere falsewithrespecttotheirestateofhealthduringtheperiodoffiveyearspreceding the date of such applications, and that they knew the representations made by them in their applications were false. The court further found from the evidence
19
thattheanswersgivenbyBernardoArgenteandhiswifeatthetimeofthemedical examination by Doctor Sta. Ana were false with respect to the condition of their healthatthattimeandforaperiodofseveralyearspriorthereto.Basedonthese findings which must here be accepted since the stenographic transcript is incomplete,thequestionarisesastotheestateofthelawinrelationthereto. HELD: OnegroundfortherescissionofacontractofinsuranceundertheInsuranceActis "aconcealment,"whichinsection25isdefinedas"Aneglecttocommunicatethat whichapartyknowsandoughttocommunicate." Inanactiononalifeinsurancepolicywheretheevidenceconclusivelyshowsthat the answers to questions concerning diseases were untrue, the truth of falsity of the answers become the determining factor. In the policy was procured by fraudulentrepresentations,thecontractofinsuranceapparentlysetforththerein was never legally existent. It can fairly be assumed that had the true facts been disclosedbytheassured,theinsurancewouldneverhavebeengranted. Concealmentexistswheretheassuredhasknowledgeofafactmaterialtotherisk, andhonesty,goodfaith,andfairdealingrequiresthatheshouldcommunicateitto theassured,buthedesignatedandintentionallywithholdsthesame. Another rule is that if the assured undertakes to state all the circumstances affectingtherisk,afullandfairstatementofallisrequired. Thebasisoftherulevitiatingthecontractincaseofconcealmentisthatitmisleads or deceives the insurer into accepting the risk, or accepting it at the rate of premium agreed upon. The insurer, relying upon the belief that the assured will disclose every material within his actual or presumed knowledge, is misled into a beliefthatthecircumstancewithhelddoesnotexist,andheistherebyinducedto estimate the risk upon a false basis that it does not exist. The principal question, therefore, must be, Was the assurer misled or deceived into entering a contract obligation or in fixing the premium of insurance by a withholding of material informationoffactswithintheassured'sknowledgeorpresumedknowledge? It therefore follows that the assurer in assuming a risk is entitled to know every materialfactofwhichtheassuredhasexclusiveorpeculiarknowledge,aswellas allmaterialfactswhichdirectlytendtoincreasethehazardorriskwhichareknown bytheassured,orwhichoughttobeorarepresumedtobeknownbyhim.Anda
concealmentofsuchfactsvitiatesthepolicy."Itdoesnotseemtobenecessary... that the . . . suppression of the truth should have been willful." If it were but an inadvertent omission, yet if it were material to the risk and such as the plaintiff shouldhaveknowntobeso,itwouldrenderthepolicyvoid.Butitisheldthatif untrue or false answers are given in response to inquiries and they relate to material facts the policy is avoided without regard to the knowledge or fraud of assured,althoughunderthestatutestatementsarerepresentationswhichmustbe fraudulenttoavoidthepolicy.Soundercertaincodestheimportantinquiriesare whethertheconcealmentwaswillfulandrelatedtoamattermaterialtotherisk. SATURNINOV.PHILAMLIFE 7SCRA316 FACTS: Itappearsthattwomonthspriortotheissuanceofthepolicytoher,Saturninowas operated on for cancer, involving complete removal of the right breast, including the pectoral muscles and the glands found in the right armpit. She stayed in the hospital for a period of eight days, after which she was discharged, although according to the surgeon who operated on her she could not be considered definitelycured,herailmentbeingofthemalignanttype. Notwithstanding the fact of her operation Estefania A. Saturnino did not make a disclosure thereof in her application for insurance. On the contrary, she stated thereinthatshedidnothave,norhadsheeverhad,amongotherailmentslistedin theapplication,cancerorothertumors;thatshehadnotconsultedanyphysician, undergone any operation or suffered any injury within the preceding five years; and that she had never been treated for nor did she ever have any illness or disease peculiar to her sex, particularly of the breast, ovaries, uterus, and menstrual disorders. The application also recites that the foregoing declarations constituted"afurtherbasisfortheissuanceofthepolicy." The policy sued upon is one for 20year endowment nonmedical insurance. This kind of policy dispenses with the medical examination of the applicant usually requiredinordinarylifepolicies.However,detailedinformationiscalledforinthe application concerning the applicant's health and medical history. The written application in this case was submitted by Saturnino and the policy was issued on thesameday,uponpaymentofthefirstyear'spremium.Onalaterdate,Saturnino diedofpneumonia,secondarytoinfluenza.Appellantshere,whoarehersurviving
20
husbandandminorchild,respectively,demandedpaymentofthefacevalueofthe policy.Theclaimwasrejectedandthissuitwassubsequentlyinstituted. HELD: The question at issue is whether or not the insured made such false representations of material facts as to avoid the policy. There can be no dispute that the information given by her in her application for insurance was false, namely, that she had never had cancer or tumors, or consulted any physician or undergone any operation within the preceding period of five years. Are the facts then falsely represented material? The Insurance Law (Section 30) provides that "materialityistobedeterminednotbytheevent,butsolelybytheprobableand reasonable influence of the facts upon the party to whom the communication is due,informinghisestimateoftheproposedcontract,orinmakinghisinquiries."It seems to be the contention of appellants that the facts subject of the representation were not material in view of the "nonmedical" nature of the insurance applied for, which does away with the usual requirement of medical examination before the policy is issued. The contention is without merit. If anything, the waiver of medical examination renders even more material the informationrequiredoftheapplicantconcerningpreviousconditionofhealthand diseasessuffered,forsuchinformationnecessarilyconstitutesanimportantfactor whichtheinsurertakesintoconsiderationindecidingwhethertoissuethepolicy or not. It is logical to assume that if appellee had been properly apprised of the insured's medical history she would at least have been made to undergo medical examinationinordertodetermineherinsurability. INSULARLIFEV.FELICIANO 74PHIL468 FACTS: Evaristo Feliciano, was suffering with advanced pulmonary tuberculosis when he signedhisapplicationsforinsurancewiththepetitioner.OnthatsamedateDoctor Trepp, who had taken Xray pictures of his lungs, informed the respondent Dr. Serafin D. Feliciano, brother of Evaristo, that the latter "was already in a very seriousadpracticallyhopelesscondition."Neverthelessthequestioncontainedin the application "Have you ever suffered from any ailment or disease of the lungs,pleurisy,pneumoniaorasthma?" appearstohavebeenanswered,"No" And above the signature of the applicant, following the answers to the various questionspropoundedtohim,isthefollowingprintedstatement:1awphil.net
Ideclareonbehalfofmyselfandofanypersonwhoshallhaveorclaimanyinterest in any policy issued hereunder, that each of the above answers is full, complete andtrue,andthattothebestofmyknowledgeandbeliefIamapropersubjectfor lifeinsurance.(ExhibitK.) The false answer above referred to, as well as the others, was written by the Company's soliciting agent Romulo M. David, in collusion with the medical examinerDr.GregorioValdez,forthepurposeofsecuringtheCompany'sapproval oftheapplicationsothatthepolicytobeissuedthereonmightbecreditedtosaid agentinconnectionwiththeinterprovincialcontestwhichtheCompanywasthen holding among its soliciting agents to boost the sales of its policies. Agent David bribedMedicalExaminerValdezwithmoneywhichtheformerborrowedfromthe applicant'smotherbywayofadvancedpaymentonthepremium,accordingtothe finding of the Court of Appeals. Said court also found that before the insured signedtheapplicationhe,aswellasthemembersofhisfamily,toldtheagentand themedicalexaminerthathehadbeensickandcoughingforsometimeandthat he had gone three times to the Santol Sanatorium and had Xray pictures of his lungs taken; but that in spite of such information the agent and the medical examinertoldthemthattheapplicantwasafitsubjectforinsurance. HELD: WhenEvaristoFeliciano,theapplicantforinsurance,signedtheapplicationinblank and authorized the soliciting agent and/or medical examiner of the Company to writetheanswersforhim,hemadethemhisownagentsforthatpurpose,andhe was responsible for their acts in that connection. If they falsified the answers for him,hecouldnotevadetheresponsibilityforhefalsification.Hewasnotsupposed tosigntheapplicationinblank.Heknewthattheanswerstothequestionstherein contained would be "the basis of the policy," and for that every reason he was requiredwithhissignaturetovouchfortruththereof. Moreover, from the facts of the case we cannot escape the conclusion that the insuredactedinconnivancewiththesolicitingagentandthemedicalexaminerof the Company in accepting the policies in question. Above the signature of the applicantistheprintedstatementorrepresentation:"...Iamapropersubjectfor life insurance." In another sheet of the same application and above another signature of the applicant was also printed this statement: "That the said policy shall not take effect until he first premium has been paid and the policy as been deliveredtoandacceptedbyme,whileIamingoodhealth."Whentheapplicant
21
signedtheapplicationhewas"havingdifficultyinbreathing,...withaveryhigh fever." He had gone three times to the Santol Sanatorium and had Xray pictures taken of his lungs. He therefore knew that he was not "a proper subject for life insurance."Whenheacceptedthepolicy,heknewthathewasnotingoodhealth. Nevertheless,henotonlyacceptedthefirstpolicyofP20,000butthenandthere appliedforandlateracceptedanotherpolicyofP5,000. It is unbelievable that the insured did not take the trouble to read the answers containedinthephotostaticcopyoftheapplicationattachedtoandmadeapartof the policy before he accepted it and paid the premium thereon. He must have notice that the answers to the questions therein asked concerning his clinical historywerefalse,andyetheacceptedthefirstpolicyandappliedforanother. Sec.28.Eachpartytoacontractofinsurancemustcommunicatedtotheother,in goodfaith,allfactswithinhisknowledgewhicharematerialtothecontractand as to which he makes no warranty, and which the other has not the means of ascertaining. FACTSTOBECOMMUNICATED:REQUISITES Each party to an insurance contract must communicate to the other in goodfaith o Whicharewithinhisknowledge o Whicharematerialtothecontract o Whichtheotherpartyhasnotthemeansofascertaining o Astowhichthepartywiththedutytocommunicatemakesno warranty MUSTBEWITHINPARTYSKNOWLEDGE Concealment requires knowledge of the fact concealed by the party chargedwithconcealment Thismustbeprovenbythepartyclaimingtheconcealment MUSTBEMATERIALTOTHECONTRACT Ifthefactconcealedisofsuchnaturethathadtheinsurerknownofit,it wouldn't have accepted the risk or would have demanded a higher premium,orcouldhavelaiddowndifferentterms,oratleastwouldhave madefurtherinquiriesbeforeassumingtherisk NOMEANSOFASCERTAINMENTBYTHEOTHERPARTY
Ifsuchotherpartyhasmeansofascertainingthenondisclosedfactlike publiceventsunderSection32orwhentheinsurerhadeverymeansto ascertain the nondisclosed fact the other facts already communicated butneglectstomakeinquiries,therightofinformationisdeemedwaived underSection33
FIELDMANSINSURANCEV.SONGCO 25SCRA70 FACTS: HELD: Sec. 29. An intentional and fraudulent omission, on the part of one insured, to communicateinformationofmattersprovingortendingtoprovethefalsityofa warranty,entitlestheinsurertorescind. FACTS WHICH PROVE OR TEND TO PROVE FALSITY OF WARRANTY TO BE DISCLOSED Although facts or matters concerning which the insured has made a warrantyneednottobedisclosed,thefactswhichproveortendtoprove afalsityofthewarrantmustbecommunicatedordisclosed Anintentionalandfraudulentomissiontocommunicatesaidfactswhich provesortendstoprovethefalsityofthewarrantyentitlestheinsurerto rescind Sec. 30. Neither party to a contract of insurance is bound to communicate information of the matters following, except in answer to the inquiries of the other: (a)Thosewhichtheotherknows; (b)Thosewhich,intheexerciseofordinarycare,theotheroughttoknow,andof whichtheformerhasnoreasontosupposehimignorant; (c)Thoseofwhichtheotherwaivescommunication;
22
(d) Those which prove or tend to prove the existence of a risk excluded by a warranty,andwhicharenototherwisematerial;and (e) Those which relate to a risk excepted from the policy and which are not otherwisematerial. Sec. 31. Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposedcontract,orinmakinghisinquiries. TESTOFMATERIALITY Materiality is determined not by the event but by the probable or reasonable influence of the facts on the judgment of the parties in enteringintoaninsurancecontract SUNLIFEV.COURTOFAPPEALS 245SCRA268 FACTS: Bacanitookaninsurancepolicyonhislife.HewasissuedPolicyNo.3903766X valued at P100,000.00, with double indemnity in case of accidental death. The designatedbeneficiarywashismother,respondentBernardaBacani. InsuredBacanidiedonaplanecrashandhismothersoughttocollecttheproceeds ofthepolicybutwasdeniedonallegedconcealmentdonebyherson.Petitioner discovered that two weeks prior to insureds application for insurance, he was diagnosedwithrenalfailureandwassubjecttodialysis,etc. HELD: Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurancetocommunicatetotheother,ingoodfaith,allfactswithinhisknowledge which are material to the contract and as to which he makes no warranty, and whichtheotherhasnomeansofascertaining.SaidSectionprovides: Aneglecttocommunicatethatwhichapartyknowsandoughttocommunicate,is calledconcealment.
Materiality is to be determined not by the event, but solely by the probable and reasonableinfluenceofthefactsuponthepartytowhomcommunicationisdue,in forming his estimate of the disadvantages of the proposed contract or in making hisinquiries(TheInsuranceCode,Sec.31). Thetermsofthecontractareclear.Theinsuredisspecificallyrequiredtodisclose totheinsurermattersrelatingtohishealth. Theinformationwhichtheinsuredfailedtodisclosewerematerialandrelevantto the approval and issuance of the insurance policy. The matters concealed would havedefinitelyaffectedpetitioner'sactiononhisapplication,eitherbyapprovingit with the corresponding adjustment for a higher premium or rejecting the same. Moreover,adisclosuremayhavewarrantedamedicalexaminationoftheinsured bypetitionerinorderforittoreasonablyassesstheriskinvolvedinacceptingthe application. Anentthefindingthatthefactsconcealedhadnobearingtothecauseofdeathof the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his nondisclosure misled the insurerinforminghisestimatesoftherisksoftheproposedinsurancepolicyorin makinginquiries. Sec. 32. Each party to a contract of insurance is bound to know all the general causes which are open to his inquiry, equally with that of the other, and which mayaffectthepoliticalormaterialperilscontemplated;andallgeneralusagesof trade. CONSTRUCTIVE NOTICE TO BOTH PARTIES OF ALL GENERAL CAUSES AND GENERALUSAGESOFTRADE 1. Theinsuredneednotdisclosepubliceventssuchasthatofanationisat war,orthelawsandpoliticalconditionsinothercountries 2. He likewise need not communicate the general usages of trade like the customspertainingtomaritimematters Sec.33.Therighttoinformationofmaterialfactsmaybewaived,eitherbythe termsoftheinsuranceorbyneglecttomakeinquiryastosuchfacts,wherethey aredistinctlyimpliedinotherfactsofwhichinformationiscommunicated. WAIVEROFDISCLOSUREOFMATERIALFACTS
23
Apartyisnotboundtodisclosematerialfactsthedisclosureofwhichis waived o Expresslybythetermsofthecontract o Impliedly,byneglecttomakeinquiriesonsuchfactswhichcan bedistinctlyimpliedintheotherfactsalreadycommunicated
NGGANZEEV.ASIANCRUSADER 122SCRA461 FACTS: KwongNamappliedfora20yearendowmentinsuranceonhislifeforthesumof P20,000.00,withhiswife,appelleeNgGanZeeasbeneficiary.Onthesamedate, appellant, upon receipt of the required premium from the insured, approved the application and issued the corresponding policy. After a year or so, Kwong Nam diedofcanceroftheliverwithmetastatis.Hiswifesoughttheproceedsbutwas deniedherclaimonallegedconcealmentofherhusbandofanyknownillness. HELD: Section27oftheInsuranceLaw[Act2427]provides: Sec.27.Suchpartyacontractofinsurancemustcommunicatetotheother,ingood faith,allfactswithinhisknowledgewhicharematerialtothecontract,andwhich the other has not the means of ascertaining, and as to which he makes no warranty. Thus,"concealmentexistswheretheassuredhadknowledgeofafactmaterialto the risk, and honesty, good faith, and fair dealing requires that he should communicate it to the assurer, but he designedly and intentionally withholds the same." It has also been held "that the concealment must, in the absence of inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld." Assumingthattheaforesaidanswergivenbytheinsuredisfalse,asclaimedbythe appellant.Sec.27oftheInsuranceLaw,abovequoted,neverthelessrequiresthat fraudulentintentonthepartoftheinsuredbeestablishedtoentitletheinsurerto rescind the contract. And as correctly observed by the lower court,
"misrepresentation as a defense of the insurer to avoid liability is an 'affirmative' defense. The duty to establish such a defense by satisfactory and convincing evidencerestsuponthedefendant.TheevidencebeforetheCourtdoesnotclearly andsatisfactorilyestablishthatdefense." ItbearsemphasisthatKwongNamhadinformedtheappellant'smedicalexaminer that the tumor for which he was operated on was "associated with ulcer of the stomach." In the absence of evidence that the insured had sufficient medical knowledgeastoenablehimtodistinguishbetween"pepticulcer"and"atumor", hisstatementthatsaidtumorwas"associatedwithulcerofthestomach,"should beconstruedasanexpressionmadeingoodfaithofhisbeliefastothenatureof hisailmentandoperation.Indeed,suchstatementmustbepresumedtohavebeen made by him without knowledge of its incorrectness and without any deliberate intentonhisparttomisleadtheappellant. While it may be conceded that, from the viewpoint of a medical expert, the informationcommunicatedwasimperfect,thesamewasneverthelesssufficientto haveinducedappellanttomakefurtherinquiriesabouttheailmentandoperation oftheinsured. Section32ofInsuranceLaw[ActNo.24271providesasfollows: Section32.Therighttoinformationofmaterialfactsmaybewaivedeitherbythe termsofinsuranceorbyneglecttomakeinquiriesastosuchfactswheretheyare distinctlyimpliedinotherfactsofwhichinformationiscommunicated. Ithasbeenheldthatwhere,uponthefaceoftheapplication,aquestionappearsto be not answered at all or to be imperfectly answered, and the insurers issue a policywithoutanyfurtherinquiry,theywaivetheimperfectionoftheanswerand rendertheomissiontoanswermorefullyimmaterial. Asaptlynotedbythelowercourt,"iftheailmentandoperationofKwongNamhad such an important bearing on the question of whether the defendant would undertaketheinsuranceornot,thecourtcannotunderstandwhythedefendantor itsmedicalexaminerdidnotmakeanyfurtherinquiriesonsuchmattersfromthe Chinese General Hospital or require copies of the hospital records from the appellantbeforeactingontheapplicationforinsurance.Thefactofthematteris that the defendant was too eager to accept the application and receive the
24
insured's premium. It would be inequitable now to allow the defendant to avoid liabilityunderthecircumstances." Sec.34.Informationofthenatureoramountoftheinterestofoneinsuredneed not be communicated unless in answer to an inquiry, except as prescribed by sectionfiftyone. GENERALRULEONCOMMUNICATIONOFINSURABLEINTEREST Insuredisnotrequiredtocommunicatethenatureortheamountofhis insurableinterestinthelifeorpropertyinsuredtotheinsurer EXCEPTIONS 1. When the insurer makes an inquiry from the insured of the nature or amountofthelattersinsurableinterest,whetherinlifeorproperty 2. Under Section 51, the insurance policy must specify, among others the interestoftheinsuredinpropertyinsured,ifheisnottheabsoluteowner thereof Sec.35.Neitherpartytoacontractofinsuranceisboundtocommunicate,even uponinquiry,informationofhisownjudgmentuponthemattersinquestion. REPRESENTATION Sec.36.Arepresentationmaybeoralorwritten. REPRESENTATION Oralorwrittenstatementofafactoraconditionaffectingtheriskmade by the insured to the insurance company, tending to induce the insurer toassumetherisk Positivemanifestation MISREPRESENTATION In insurance, is a statement of a material point or matter which is false and made by the insured to deceive the insurer into entering into an insurancecontract Sec.37.Arepresentationmaybemadeatthetimeof,orbefore,issuanceofthe policy.
Sec.38.Thelanguageofarepresentationistobeinterpretedbythesamerules asthelanguageofcontractsingeneral. CONSTRUCTIONOFREPRESENTATION Representation need not be literally true and accurate in every respect, ratheritissufficientifitissubstantiallyormateriallytrueandincaseof promissory representation, it is sufficient if it is substantially complied with Sec. 39. A representation as to the future is to be deemed a promise, unless it appearsthatitwasmerelyastatementofbelieforexpectation. KINDOFREPRESENTATION 1. Affirmative which is an affirmation of a fact existing when the contract begins 2. Promissory which is a statement by the insured concerning what is to happenduringthetermoftheinsurance Sec. 40. A representation cannot qualify an express provision in a contract of insurance,butitmayqualifyanimpliedwarranty. REPRESENTATION QUALIFIES IMPLIED WARRANTY BUT NOT EXPRESS PROVISIONSINTHECONTRACT Representationisamerecollateralinducementtoacontractanddoesn't formpartofacontract Thus,arepresentationcannotqualifyanexpressprovisioninacontract, butmayqualifyanimpliedwarranty Sec. 41. A representation may be altered or withdrawn before the insurance is effected,butnotafterwards. RULEONALTERATIONORWITHDRAWALOFREPRESENTATION A representation is allowed to be altered and withdrawn so long as the insurance has not been effected because the insurer has not been yet inducedtoissuethepolicy Iftherepresentationhasbeenalteredorwithdrawnbeforetheissuance ofthepolicyandtheinsurerstillissuesthesame,thenthepolicyshallnot berescissibleanymore
25
Sec. 42. A representation must be presumed to refer to the date on which the contractgoesintoeffect. DATETHEREPRESENTATIONREFERS Representation must be presumed to refer to the date on which the contractgoesintoeffect Even though a representation that no other insurance exists on the propertyinsuredistrueatthetimeitismade,yetitisuntrueatthetime the application is accepted and the policy issued the insured is guilty of misrepresentationthatvitiatesthepolicy Sec. 43. When a person insured has no personal knowledge of a fact, he may nevertheless repeat information which he has upon the subject, and which he believes to be true, with the explanation that he does so on the information of others;orhemaysubmittheinformation,initswholeextent,totheinsurer;and inneithercaseisheresponsibleforitstruth,unlessitproceedsfromanagentof theinsured,whosedutyitistogivetheinformation. WHEN IS THE INSURED BOUND TO DISCLOSE INFORMATION RECEIVED FROM ANOTHERPERSON 1. When the information material to the transaction was acquired by an agent of the insured since knowledge of the agent is also knowledge of theprincipal 2. In marine insurance, the information of the belief or expectation of a third person, in reference to material fact, is material and must be communicatedbytheinsured HARDINGV.COMMERCIALUNION 38PHIL469 FACTS: HardinginsuredherStudebakercarandonalaterdate,thecarwasdestroyedby fire. She sought the proceeds of the car insurance but was denied on alleged groundsmisrepresentationonthevalueofthecar.
It is a different story when the representation has been altered or withdrawn after the policy has been issued. It cannot anymore be withdrawnoraltered.Thecontractwillremainrescissible.
HELD: Defendantcontendsthatthestatementregardingthecostoftheautomobilewasa warranty, that the statement was false, and that, therefore, the policy never attached to the risk. We are of the opinion that it has not been shown by the evidencethatthestatementwasfalse onthecontrarywebelievethatitshows thattheautomobilehadinfactcostmorethantheamountmentioned.Thecourt below found, and the evidence shows, that the automobile was bought by plaintiff'shusbandafewweeksbeforetheissuanceofthepolicyinquestionforthe sum of P2,800, and that between that time and the issuance of the policy some P900 was spent upon it in repairs and repainting. The witness Server, an expert automobilemechanic,testifiedthattheautomobilewaspracticallyasgoodasnew atthetimetheinsurancewaseffected.Theformofproposaluponwhichthepolicy wasissueddoesnotcallforastatementregardingthevalueoftheautomobileat the time of its acquisition by the applicant for the insurance, but merely a statementofitscost.Theamountstatedwaslessthantheactualoutlaywhichthe automobile represented to Mr. Harding, including repairs, when the insurance policywasissued.Itistruethattheprintedformcallsforastatementofthe"price paidbytheproposer,"butweareoftheopinionthatitwouldbeunfairtoholdthe policyvoidsimplybecausetheoutlayrepresentedbytheautomobilewasmadeby theplaintiff'shusbandandnotbyhiswife,towhomhehadgiventheautomobile. It cannot be assumed that defendant should not have issued the policy unless it werestrictlytruethatthepricerepresentingthecostofthemachinehadbeenpaid by the insured and by no other person that it would no event insure an automobileacquiredbygift,inheritance,exchange,oranyothertitlenotrequiring theownertomakeaspecificcashoutlayforitsacquisition. Furthermore,thecourtbelowfoundandtheevidenceshows,withoutdispute,that the proposal upon which the policy in question was issued was made out by defendant'sagentbywhomtheinsurancewassolicited,andthatappelleesimply signed the same. It also appears that an examiner employed by the defendant madeaninspectionoftheautomobilebeforetheacceptanceoftherisk,andthat thesumafterthisexamination.ThetrialcourtfoundthatMrs.Harding,infixingthe value of the automobile at P3,000, acted upon information given her by her husbandandbyMr.Server,themanageroftheLunetaGarage.TheLunetaGarage, it will be remembered, was the agent of the defendant corporation in the solicitationoftheinsurance.Mrs.Hardingdidnotstateofherownknowledgethat theautomobileoriginallycostP3,000,orthatitsvalueatthetimeoftheinsurance wasP3,000.Shemerelyrepeatedtheinformationwhichhadbeengivenherbyher
26
husband, and at the same time disclosed to defendant's agent the source of her information. There is no evidence to sustain the contention that this communication was made in bad faith. It appears that the statements in the proposalastothepricepaidfortheautomobileandastoitsvaluewerewrittenby Mr.Quimbywhosolicitedtheinsuranceonbehalfofdefendant,inhiscapacityas anemployeeoftheLunetaGarage,andwroteouttheproposalforMrs.Hardingto sign. Under these circumstances, we do not think that the facts stated in the proposal can be held as a warranty of the insured, even if it should have been shownthattheywereincorrectintheabsenceofproofofwillfulmisstatement. Sec.44.Arepresentationistobedeemedfalsewhenthefactsfailtocorrespond withitsassertionsorstipulations. Sec. 45. If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time whentherepresentationbecomesfalse.TherighttorescindgrantedbythisCode to the insurer is waived by the acceptance of premium payments despite knowledgeofthegroundforrescission.(AsamendedbyBatasangPambansaBlg. 874). EFFECTOFMISREPRESENTATIONONAMATERIALPOINT Ifarepresentationisfalseastoamaterialpoint,whetheraffirmativeor promissory,theinjuredpartyisentitledtorescindthecontractfromthe timetherepesentationbecomesfalse The right to rescind however granted to the insurer is waived by the acceptance of premium payments despite knowledge of the ground of rescission EDILLONV.MANILABANKERSLIFE 117SCRA766 FACTS: Lapuz applied with respondent insurance corporation for insurance coverage againstaccidentandinjuries.Shefilleduptheblankapplicationformgiventoher and filed the same with the respondent insurance corporation. In the said applicationformwhichwasdatedApril15,1969,shegavethedateofherbirthas July 11, 1904. On the same date, she paid the sum of P20.00 representing the premium for which she was issued the corresponding receipt signed by an
authorized agent of the respondent insurance corporation. During the effectivity ofherinsurancepolicy,shediedfromavehicularaccident. Her sister, Edillon sought the proceeds of the policy but she was denied by the insurancecompanyongroundsofmisrepresentationbyhersisterastothedateof birth. HELD: The age of the insured Carmen 0. Lapuz was not concealed to the insurance company. Her application for insurance coverage which was on a printed form furnished by private respondent and which contained very few items of informationclearlyindicatedherageofthetimeoffilingthesametobealmost65 years of age. Despite such information which could hardly be overlooked in the application form, considering its prominence thereon and its materiality to the coverageappliedfor,therespondentinsurancecorporationreceivedherpayment of premium and issued the corresponding certificate of insurance without question.Theaccidentwhichresultedinthedeathoftheinsured,ariskcoveredby thepolicy,occurredonMay31,1969orFORTYFIVE(45)DAYSaftertheinsurance coveragewasappliedfor.Therewassufficienttimefortheprivaterespondentto processtheapplicationandtonoticethattheapplicantwasover60yearsofage and thereby cancel the policy on that ground if it was minded to do so. If the private respondent failed to act, it is either because it was willing to waive such disqualification; or, through the negligence or incompetence of its employees for which it has only itself to blame, it simply overlooked such fact. Under the circumstances,theinsurancecorporationisalreadydeemedinestoppel. QUACHEEGANV.LAWUNIONROCKINSURANCE 98PHIL85 FACTS: This is a claim on an insurance policy which contained a provision as to the installation of fire hydrants the number of which depended on the height of the externalwanperimeterofthebodegathatwasinsured.Whenitwasdetermined thatthebodegashouldhaveeleven(11)firehydrantsinthecompoundasrequired bythetermsofthepolicy,insteadofonlytwo(2)thatithad,theclaimunderthe policywasresistedonthatground. HELD:
27
The insurance company was aware, even before the policies were issued, that in thepremisesinsuredtherewereonlytwofirehydrantsinstalledbyQueCheeGan and two others nearby, owned by the municipality of Tabaco, contrary to the requirements of the warranty in question. Such fact appears from positive testimonyfortheinsuredthatappellant'sagentsinspectedthepremises;andthe simple denials of appellant's representative (Jamiczon) can not overcome that proof.Thatsuchinspectionwasmadeitmoreoverrenderedprobablebyitsbeinga prerequisiteforthefixingofthediscountonthepremiumtowhichtheinsuredwas entitled, since the discount depended on the number of hydrants, and the fire fightingequipmentavailable. Itisusuallyheldthatwheretheinsurer,atthetimeoftheissuanceofapolicyof insurance, has knowledge of existing facts which, if insisted on, would invalidate the contract from its very inception, such knowledge constitutes a waiver of conditions in the contract inconsistent with the known facts, and the insurer is stopped thereafter from asserting the breach of such conditions. The law is charitableenoughtoassume,intheabsenceofanyshowingtothecontrary,that an insurance company intends to execute a valid contract in return for the premium received; and when the policy contains a condition which renders it voidableatitsinception,andthisresultisknowntotheinsurer,itwillbepresumed tohaveintendedtowaivetheconditionsandtoexecuteabindingcontract,rather thantohavedeceivedtheinsuredintothinkingheisinsuredwheninfactheisnot, andtohavetakenismoneywithoutconsideration.' Theplain,humanjusticeofthisdoctrineisperfectlyapparent.Toallowacompany toacceptone'smoneyforapolicyofinsurancewhichitthenknowstobevoidand ofnoeffect,thoughitknowsasitmust,thattheassuredbelievesittobevalidand binding, is so contrary to the dictates of honesty and fair dealing, and so closely relatedtopositivefraud,astobeabhorenttofairmindedmen.Itwouldbetoallow thecompanytotreatthepolicyasvalidlongenoughtogetthepremiumonit,and leave it at liberty to repudiate it the next moment. This cannot be deemed to be the real intention of the parties. To hold that a literal construction of the policy expressed the true intention of the company would be to indict it, for fraudulent purposesanddesignswhichwecannotbelieveittobeguiltyof. Sec. 46. The materiality of a representation is determined by the same rules as thematerialityofaconcealment. DETERMINATIONOFMATERIALITY
Determinedbythesamerulesastothematerialityofconcealment
Concealment Representation Neglectofonepartytocommunicateto Theinformationhegivesincompliance theothermaterialfacts withhisdutytorevealinformation Passive form of the same act of bad Activeformofbadfaith faith CONCEALMENTORREPRESENTATIONMADEAFTEREFFECTIVITYOFCONTRACT Thegeneralruleisthatconcealmentorrepresentationmaybemadeonly beforetheeffectivityofthecontract However where the parties are modifying or amending their contract, thenconcealmentorpresentationmaybemadeevenafteritseffectivity Sec. 47. The provisions of this chapter apply as well to a modification of a contractofinsuranceastoitsoriginalformation. Sec.48.Wheneverarighttorescindacontractofinsuranceisgiventotheinsurer by any provision of this chapter, such right must be exercised previous to the commencementofanactiononthecontract. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealmentormisrepresentationoftheinsuredorhisagent. TIMEOFRESCISSIONOFCONTRACT Wheneverarighttorescindacontractofinsuranceisgiventotheinsurer byanyprovisionofthischapter,suchrightmustbeexercisedpreviousto thecommencementofanactiononthecontract POLICYBECOMESINCONTESTABLE Afterapolicyoflifeinsurancemadepayableonthedeathoftheinsured shallhavebeeninforceduringthelifetimeoftheinsuredforaperiodof two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by
28
reason of the fraudulent concealment or misrepresentations of the insuredorhisagent REQUISITESOFINCONTESTABILITY 1. Lifeinsurancepolicy 2. Payableonthedeathoftheinsured 3. Itmusthavebeeninforceduringthelifetimeof theinsuredforaperiodoftwoyearsfromdateof issueorofitslastreinstatement EFFECTSOFINCONTESTABILITY Whenever all the requisites of incontestability are present, the insurer can no longer escape liability under the policy nor be allowed to prove thatthepolicyisvoidabinitioorrescindiblebyreasonofconcealmentor misrepresentationofftheinsuredorhisagent Theinsurerisprecludedfromcontestingthepolicyonanyground SOLIMANV.USLIFE 104PHIL1046
subsequent lapse of the policy. The spouses updated payment which caused the reinstatement of the policy. They also submitted accordingly health certificate forms.Onarelevantdate,Rosariodiedofaheartattack.Thehusbandsoughtto claimtheproceedsfromtheinsurancecompanybutwasdeniedonthegroundthat the wife falsely completed the application form by concealing that she had been sufferingfrombronchialasthma. HELD: First, it is true that after the approval of the application for reinstatement the company accepted without any reservation the sum due from the spouses. However, this acceptance cannot be considered as a waiver on the partr of the companyofitsrightstoinvalidatethereinstatedpolicy,.Forevidenceshowsthat thefraudwasdiscoveredonlythereafter.Infact,whenafterproperinvestigation, thecompanyimmediatelyrefundedthepremiumspaidbythespouses. TANV.CA 174SCRA403 FACTS: Tan the father applied for life insurance with American Life Insurance. The beneficiaries were his children. He was duly issued a policy. On a later date, he died of hepatoma. Petitioners sought the proceeds but was denied by the insurance company on the ground of alleged concealment and misrepresentation madebythefatherinhisinsuranceapplication.Thepremiumsearlieronpaidby the deceased father was returned and the policy was rescinded. This of course prompted the petitioners to file a case against the insurance company on the groundthatitcouldn'tlongerrescindthecontract. HELD: The socalled "incontestability clause" precludes the insurer from raising the defensesoffalserepresentationsorconcealmentofmaterialfactsinsofarashealth andpreviousdiseasesareconcernediftheinsurancehasbeeninforceforatleast two years during the insured's lifetime. The phrase "during the lifetime" found in Section48simplymeansthatthepolicyisnolongerconsideredinforceafterthe insured has died. The key phrase in the second paragraph of Section 48 is "for a periodoftwoyears."
Tooka policy
?Operated on?
Dateof issueof policy (2000)
Forgotto pay premium: willcause lapseof insurance policy
Reinstatem ent:new questions (avenuefor concealme ntand misreprese ntation)
FACTS: US LIFE sought the rescission of the life insurance policy of Soliman. Soliman maintainedontheotherhandthatUSLifeisestoppedfromrescindingthepolicy,it beinginforceformorethan2yearsandthus,itisalreadyincontestable.Thelower court reinstated the policy. The facts showed that when Soliman and his wife secured the insurance policy, there were unpaid premiums which caused the
29
ThepolicywasissuedonNovember6,1973andtheinsureddiedonApril26,1975. The policy was thus in force for a period of only one year and five months. Considering that the insured died before the twoyear period had lapsed, respondentcompanyisnot,therefore,barredfromprovingthatthepolicyisvoid abinitiobyreasonoftheinsured'sfraudulentconcealmentormisrepresentation. Moreover,respondentcompanyrescindedthecontractofinsuranceandrefunded thepremiumspaidonSeptember11,1975,previoustothecommencementofthis actiononNovember27,1975. Theinsurerhastwoyearsfromthedateofissuanceoftheinsurancecontractorof its last reinstatement within which to contest the policy, whether or not, the insuredstillliveswithinsuchperiod.Aftertwoyears,thedefensesofconcealment or misrepresentation, no matter how patent or well founded, no longer lie. Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. The petitioners' interpretation would give rise to the incongruous situation where the beneficiaries of an insured who dies right after taking out and paying for a life insurance policy, would be allowed to collectonthepolicyeveniftheinsuredfraudulentlyconcealedmaterialfacts. THEPOLICY Sec. 49. The written instrument in which a contract of insurance is set forth, is calledapolicyofinsurance. INSURANCEPOLICY,DEFINED Apolicyofinsuranceisdefinedunderthissectionasawritteninstrument inwhichacontractofinsuranceissetforth Itistobeconstruedinfavoroftheinsuredandagainsttheinsurer,who causedit FORMOFINSURANCECONTRACT Aninsurancecontractmaybeverbalorinwriting,orpartlyinwritingor verbal ItmustbeinaformpreviouslyapprovedbytheInsuranceCommissioner but failure to obtain prior approval doesn't affect the validityu of the termsofthecontract ENRIQUEZV.SUNLIFE
62PHIL9 FACTS: Herrer applied for life insurance with the Sun Life Assurance Company. He submittedtheapplicationformtogetherwithhispayment. OnDecember4,1917,thepolicywasissuedatMontreal.OnDecember18,1917, attorneyAurelioA.TorreswrotetotheManilaofficeofthecompanystatingthat Herrer desired to withdraw his application. The following day the local office repliedtoMr.Torres,statingthatthepolicyhadbeenissued,andcalledattention tothenotificationofNovember26,1917.ThisletterwasreceivedbyMr.Torreson themorningofDecember21,1917.Mr.HerrerdiedonDecember20,1917. HELD: ThedeductionfromtheevidenceonthisissuemustbethattheletterofNovember 26, 1917, notifying Mr. Herrer that his application had been accepted, was preparedandsignedinthelocalofficeoftheinsurancecompany,wasplacedinthe ordinary channels for transmission, but as far as we know, was never actually mailedandthuswasneverreceivedbytheapplicant. With respect to the law applicable to the case, the second paragraph of article 1262oftheCivilCodeappliesbyprovidingthatanacceptancemadebylettershall not bind the person making the offer except from the time it came to his knowledge. The pertinent fact is, that according to the provisional receipt, three things had to be accomplished by the insurance company before there was a contract:(1)Therehadtobeamedicalexaminationoftheapplicant;(2)therehad to be approval of the application by the head office of the company; and (3) this approvalhadinsomewaytobecommunicatedbythecompanytotheapplicant. The further admitted facts are that the head office in Montreal did accept the application,didcabletheManilaofficetothateffect,didactuallyissuethepolicy and did, through its agent in Manila, actually write the letter of notification and placeitintheusualchannelsfortransmissiontotheaddressee.Thefactastothe letterofnotificationthusfailstoconcurwiththeessentialelementsofthegeneral rule pertaining to the mailing and delivery of mail matter as announced by the American courts, namely, when a letter or other mail matter is addressed and mailedwithpostageprepaidthereisarebuttablepresumptionoffactthatitwas receivedbytheaddresseeassoonasitcouldhavebeentransmittedtohiminthe ordinarycourseofthemails.Butifanyoneoftheseelementalfactsfailstoappear,
30
it is fatal to the presumption. For instance, a letter will not be presumed to have beenreceivedbytheaddresseeunlessitisshownthatitwasdepositedinthepost office,properlyaddressedandstamped. Thecontractforalifeannuityinthecaseatbarwasnotperfectedbecauseithas notbeenprovedsatisfactorilythattheacceptanceoftheapplicationevercameto theknowledgeoftheapplicant.lawph!l.net PEREZV.CA 323SCRA613 FACTS: Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation since 1980 for P20,000.00. Sometime later, he was convinced to apply for additional insurance coverage of P50,000.00, to avail of the ongoing promotional discount of P400.00 if the premium were paid annually. He was convinced and accomplishedtheneededapplicationform.Hiswifepaidaccordinglythepremium totheagent.Unfortunately,theapplicationformwaslostandtheapplicantwas made to accomplish a new one. He took subsequently a medical examination to whichhepassed.Theapplicationwasforwardedtothecompany.supervening approval however, the applicant died in an accident. Not knowing he died, the insurancecompanyissueditsapproval. HELD: Insurance is a contract whereby, for a stipulated consideration, one party undertakes to compensate the other for loss on a specified subject by specified perils A contract, on the other hand, is a meeting of the minds between two personswherebyonebindshimself,withrespecttotheothertogivesomethingor to render some service Under Article 1318 of the Civil Code, there is no contract unlessthefollowingrequisitesconcur: (1)Consentofthecontractingparties; (2)Objectcertainwhichisthesubjectmatterofthecontract; (3)Causeoftheobligationwhichisestablished.
Consentmustbemanifestedbythemeetingoftheofferandtheacceptanceupon the thing and the cause which are to constitute the contract. The offer must be certainandtheacceptanceabsolute. When Primitivo filed an application for insurance, paid P2,075.00 and submitted the results of his medical examination, his application was subject to the acceptance of private respondent BF Lifeman Insurance Corporation. The perfection of the contract of insurance between the deceased and respondent corporationwasfurtherconditioneduponcompliancewiththefollowingrequisites statedintheapplicationform: thereshallbenocontractofinsuranceunlessanduntilapolicyisissued onthisapplicationandthatthesaidpolicyshallnottakeeffectuntilthe premium has been paid and the policy delivered to and accepted by me/usinpersonwhileI/We,am/areingoodhealth. TheassentofprivaterespondentBFLifemanInsuranceCorporationthereforewas not given when it merely received the application form and all the requisite supporting papers of the applicant. Its assent was given when it issues a corresponding policy to the applicant. Under the abovementioned provision, it is only when the applicant pays the premium and receives and accepts the policy whileheisingoodhealththatthecontractofinsuranceisdeemedtohavebeen perfected. Sec.50.Thepolicyshallbeinprintedformwhichmaycontainblankspaces;and any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blank spacesprovidedtherein. Anyrider,clause,warrantyorendorsementpurportingtobepartofthecontract ofinsuranceandwhichispastedorattachedtosaidpolicyisnotbindingonthe insured, unless the descriptive title or name of the rider, clause, warranty or endorsementisalsomentionedandwrittenontheblankspacesprovidedinthe policy. Unless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the
31
insuredorowner,whichcountersignatureshallbetakenashisagreementtothe contentsofsuchrider,clause,warrantyorendorsement. Group insurance and group annuity policies, however, may be typewritten and neednotbeinprintedform. FORMALREQUIREMENTSFORAPOLICY 1. Policyshallbeinprintedformwhichmaycontainblankspacesonwhich thenecessarydatamaybewritten 2. However, group insurance and group annuity policies may be merely typewritten 3. Nopolicy,certificate,orcontractofinsuranceshallbeissuedordelivered within the Philippines unless in the form approved by the Insurance Commissioner 4. A policy issued without its form being approved doesn't invalidate an otherwise valid insurance contract. However, the insurer may be prosecutedforusinganinvalidform MUSTARIDERINAPOLICYBESIGNEDBYTHEINSURED? In case the rider, clause warranty, or endorsement was issued after the original policy, said rider must be countersigned by the insured unless appliedforbythelatter Wheretheriderwaspastedorattachedtotheoriginalpolicyatthetime thepolicywasissued,thesignatureisnotnecessarybutthedescriptive titleornameoftheridermustbewrittenontheblackspacesprovided forinthepolicy RULESONRIDERS,CLAUSES,WARRANTIESANDENDORSEMENTS 1. Arider,clause,warrantyorendorsementtobebinding a. Mustbepastedorattachedtothepolicy b. Itsdescriptivetitle 2. Iftherider,etc.ispastedorattachedtotheoriginalpolicyatthetimeit was issued, the signature of the insured is not necessary to make it binding 3. If the rider, etc. is executed after the issuance of the policy, it must be countersignedbytheinsuredtobebindingunlesssaidrider,wasapplied forbytheinsuredhimself
4. 5.
No application form, rider, clause, warranty, or endorsement shall be attached to, printed or stamped upon such policy unless the form has beenapprovedbytheInsuranceCommissioner 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 canbenoquestionthatasfarasanyinconsistencyexists,thetyperider prevailsovertheprintedclauseitcovers.
COMMISIONEROFINTERNALREVENUEV.LINCOLNLIFE 379SCRA423 FACTS: Private respondent issued a special kind of life insurance policy known as the "Junior Estate Builder Policy," the distinguishing feature of which is a clause providingforanautomaticincreaseintheamountoflifeinsurancecoverageupon attainmentofacertainagebytheinsuredwithouttheneedofissuinganewpolicy. Theclausewastotakeeffectintheyear1984.Documentarystamptaxesdueon thepolicywerepaidbypetitioneronlyontheinitialsumassured. Consequently,privaterespondentalsoissued50,000sharesofstockdividendswith aparvalueofP100.00pershareoratotalparvalueofP5,000,000.00.Theactual value of said shares, represented by its book value, was P19,307,500.00. DocumentarystamptaxeswerepaidbasedonlyontheparvalueofP5,000,000.00 andnotonthebookvalue. Subsequently,petitionerissueddeficiencydocumentarystampstaxassessmentfor theyear1984intheamountsof(a)P464,898.75,correspondingtotheamountof automaticincreaseofthesumassuredonthepolicyissuedbyrespondent,and(b) P78,991.25correspondingtothebookvalueinexcessoftheparvalueofthestock dividends. Petitioner claims that the "automatic increase clause" in the subject insurance policy is separate and distinct from the main agreement and involves another transaction; and that, while no new policy was issued, the original policy was essentially reissued when the additional obligation was assumed upon the effectivity of this "automatic increase clause" in 1984; hence, a deficiency assessmentbasedontheadditionalinsurancenotcoveredinthemainpolicyisin order.
32
The Court of Appeals sustained the CTAs ruling that there was only one transactioninvolvedintheissuanceoftheinsurancepolicyandthatthe"automatic increaseclause"isanintegralpartofthatpolicy. HELD: Section49,TitleVIoftheInsuranceCodedefinesaninsurancepolicyasthewritten 5 instrument in which a contract of insurance is set forth. Section 50 of the same Codeprovidesthatthepolicy,whichisrequiredtobeinprintedform,maycontain anyword,phrase,clause,mark,sign,symbol,signature,number,orwordnecessary 6 to complete the contract of insurance. It is thus clear that any rider, clause, warranty or endorsement pasted or attached to the policy is considered part of suchpolicyorcontractofinsurance. The subject insurance policy at the time it was issued contained an "automatic increaseclause."Althoughtheclausewastotakeeffectonlyin1984,itwaswritten into the policy at the time of its issuance. The distinctive feature of the "junior estate builder policy" called the "automatic increase clause" already formed part andparceloftheinsurancecontract,hence,therewasnoneedforanexecutionof a separate agreement for the increase in the coverage that took effect in 1984 whentheassuredreachedacertainage. ItisclearfromSection173thatthepaymentofdocumentarystamptaxesisdone atthetimetheactisdoneortransactionhadandthetaxbaseforthecomputation of documentary stamp taxes on life insurance policies under Section 183 is the amount fixed in policy, unless the interest of a person insured is susceptible of 7 exact pecuniary measurement. What then is the amount fixed in the policy? Logically,webelievethattheamountfixedinthepolicyisthefigurewrittenonits face and whatever increases will take effect in the future by reason of the "automatic increase clause" embodied in the policy without the need of another contract. Here, although the automatic increase in the amount of life insurance coverage wastotakeeffectlateron,thedateofitseffectivity,aswellastheamountofthe increase, was already definite at the time of the issuance of the policy. Thus, the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinableatthetimethetransactionwasenteredintoandformedpartofthe policy.
The "automatic increase clause" in the policy is in the nature of a conditional 8 obligation under Article 1181, by which the increase of the insurance coverage shalldependuponthehappeningoftheeventwhichconstitutestheobligation.In theinstantcase,theadditionalinsurancethattookeffectin1984wasanobligation 9 subject to a suspensive obligation, but still a part of the insurance sold to which privaterespondentwasliableforthepaymentofthedocumentarystamptax. The deficiency of documentary stamp tax imposed on private respondent is definitely not on the amount of the original insurance coverage, but on the increase of the amount insured upon the effectivity of the "Junior Estate Builder Policy." Sec.51.Apolicyofinsurancemustspecify: (a)Thepartiesbetweenwhomthecontractismade; (b)Theamounttobeinsuredexceptinthecasesofopenorrunningpolicies; (c)Thepremium,oriftheinsuranceisofacharacterwheretheexactpremiumis onlydeterminableupontheterminationofthecontract,astatementofthebasis andratesuponwhichthefinalpremiumistobedetermined; (d)Thepropertyorlifeinsured; (e)Theinterestoftheinsuredinpropertyinsured,ifheisnottheabsoluteowner thereof; (f)Therisksinsuredagainst;and (g)Theperiodduringwhichtheinsuranceistocontinue. MATTERSTOBECONTAINEDINANINSURANCEPOLICY 1. Incorrectspellingofthenamesofthepartiesdon'taffectthepolicy.An error in the desgination of the name of the insured in the absence of frauddoesn'tinvalidatethepolicy 2. The amount of insurance must be specified except in cases of open or runningpolicies 3. Therateofpremiumwhichistheconsiderationofthecontractmustbe specified. Where the premium is only determinable upon the
33
4. 5. 6.
7.
termination of the contract, a statement of the basis and rates upon whichthefinalpremiumisdeterminedmustbespecified Thepolicymuststatethepropertyorlifeinsured In property insurance, if the insured is not the absolute owner thereof, hisinsurableinterestinthepropertymustbespecified Thepolicymustsetforththerisksinsuredagainst.Riskisthechanceof loss. Peril is the contingency which may cause the loss. Hazard is the conditionwhichmaycreate,decreaseorincreasethechanceoflossfrom agivenperil. The period of effectivity must be specified wherein the insurer shall be liableincaseoflossoccurringduringsaidperiod.
GREPALIFEV.CA 89SCRA543 FACTS: NgoHingfiledanapplicationforlifeinsuranceofheroneyearolddaughterHelen. Theapplicationwasdeniedastheinsuranceisnttheappropriatepolicyforminors below the age of 7. This denial wasn't allegedly communicated to the private respondentoutright.Herdaughterdiedofinfluenzawithbronchopneumoniaand shesoughttheproceedsofthepolicy. HELD: At the back of Exhibit E are condition precedents required before a deposit is consideredaBINDINGRECEIPT.Theseconditionsstatethat: A.IftheCompanyoritsagent,shanhavereceivedthepremiumdeposit...andthe insurance application, ON or PRIOR to the date of medical examination ... said insuranceshanbeinforceandineffectfromthedateofsuchmedicalexamination, for such period as is covered by the deposit ..., PROVIDED the company shall be satisfiedthatonsaiddatetheapplicantwasinsurableonstandardratesunderits rule for the amount of insurance and the kind of policy requested in the application. D.IftheCompanydoesnotaccepttheapplicationonstandardratefortheamount of insurance and/or the kind of policy requested in the application but issue, or offers to issue a policy for a different plan and/or amount ..., the insurance shall not be in force and in effect until the applicant shall have accepted the policy as issuedorofferedbytheCompanyandshallhavepaidthefullpremiumthereof.If theapplicantdoesnotacceptthepolicy,thedepositshallberefunded. E.IftheapplicantshallnothavebeeninsurableunderConditionAabove,andthe Company declines to approve the application the insurance applied for shall not havebeeninforceatanytimeandthesumpaidbereturnedtotheapplicantupon thesurrenderofthisreceipt.(EmphasisOurs). The aforequoted provisions printed on Exhibit E show that the binding deposit receiptisintendedtobemerelyaprovisionalortemporaryinsurancecontractand only upon compliance of the following conditions: (1) that the company shall be satisfiedthattheapplicantwasinsurableonstandardrates;(2)thatifthecompany
Sec. 52. Cover notes may be issued to bind insurance temporarily pending the issuanceofthepolicy.Withinsixtydaysaftertheissueofthecovernote,apolicy shall be issued in lieu thereof, including within its terms the identical insurance boundunderthecovernoteandthepremiumtherefore. Cover notes may be extended or renewed beyond such sixty days with the writtenapprovaloftheCommissionerifhedeterminesthatsuchextensionisnot contrary to and is not for the purpose of violating any provisions of this Code. The Commissioner may promulgate rules and regulations governing such extensions for the purpose of preventing such violations and may by such rules andregulationsdispensewiththerequirementofwrittenapprovalbyhiminthe caseofextensionincompliancewithsuchrulesandregulations. COVERNOTEORBINDINGSLIP Merelyawrittenmemorandumoftheimportanttermsofapreliminary contractofinsuranceintendedtogivetemporaryprotectionpendingthe investigation of the risk by the insurer or until the issuance of a formal policy Within 60 days after issue of the cover note, a policy shall be issued in lieuthereof.Suchperiodmaybeextendedorreneweduponapprovalof theInsuranceCommissioner. ILLUSTRATION: X buys a car and applied for motor insurance policy. The policy wasn't issued outright and he really wanted to take out his car for a ride. He couldn't wait any longer and used his car but unfortunately, it got bumped by a truck.Heshouldhavegottenacovernote.
34
doesnotaccepttheapplicationandofferstoissueapolicyforadifferentplan,the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise, the deposit shall be reftmded; and (3) that if the applicant is not ble according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premiumpaidshallbereturnedtotheapplicant. Clearlyimpliedfromtheaforesaidconditionsisthatthebindingdepositreceiptin questionismerelyanacknowledgment,onbehalfofthecompany,thatthelatter's branch office had received from the applicant the insurance premium and had acceptedtheapplicationsubjectforprocessingbytheinsurancecompany;andthat thelatterwilleitherapproveorrejectthesameonthebasisofwhetherornotthe applicantis"insurableonstandardrates."SincepetitionerPacificLifedisapproved the insurance application of respondent Ngo Hing, the binding deposit receipt in questionhadneverbecomeinforceatanytime. Upon this premise, the binding deposit receipt (Exhibit E) is, manifestly, merely conditional and does not insure outright. As held by this Court, 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. The acceptanceismerelyconditionalandissubordinatedtotheactofthecompanyin approving or rejecting the application. Thus, in life insurance, a "binding slip" or "bindingreceipt"doesnotinsurebyitself. Therewasnocontractperfectedbetweenthepartieswhohadnomeetingoftheir minds. Private respondet, being an authorized insurance agent of Pacific Life at Cebubranchoffice,isindubitablyawarethatsaidcompanydoesnotofferthelife insurance applied for. When he filed the insurance application in dispute, private respondentwas,therefore,onlytakingthechancethatPacificLifewillapprovethe recommendationofMondragonfortheacceptanceandapprovaloftheapplication inquestionalongwithhisproposalthattheinsurancecompanystartstoofferthe 20yearendowmentinsuranceplanforchildrenlessthansevenyears.Nonetheless, the record discloses that Pacific Life had rejected the proposal and recommendation.Secondly,havinganinsurableinterestonthelifeofhisoneyear old daughter, aside from being an insurance agent and an offense associate of petitioner Mondragon, private respondent Ngo Hing must have known and followedtheprogressontheprocessingofsuchapplicationandcouldnotpretend ignorance of the Company's rejection of the 20year endowment life insurance application.
PACIFICTIMBERV.CA 112SCRA199 FACTS: Theplaintiffsecuredtemporaryinsurancefromthedefendantforitsexportationof 1,250,000boardfeetofPhilippineLauanandApitonglogstobeshippedfromthe Diapitan. Bay, Quezon Province to Okinawa and Tokyo, Japan. The defendant issued on said date Cover Note No. 1010, insuring the said cargo of the plaintiff "SubjecttotheTermsandConditionsoftheWORKMEN'SINSURANCECOMPANY, INC. printed Marine Policy form as filed with and approved by the Office of the InsuranceCommissioner(ExhibitA). The regular marine cargo policies were issued by the defendant in favor of the plaintiff on April 2, 1963. The two marine policies bore the numbers 53 HO 1032 and53HO1033(ExhibitsBandC,respectively).PolicyNo.53H01033(ExhibitB) wasfor542piecesoflogsequivalentto499,950boardfeet.PolicyNo.53H01033 was for 853 pieces of logs equivalent to 695,548 board feet (Exhibit C). The total cargoinsuredunderthetwomarinepoliciesaccordinglyconsistedof1,395logs,or theequivalentof1,195.498bd.ft. After the issuance of Cover Note No. 1010 (Exhibit A), but before the issuance of the two marine policies Nos. 53 HO 1032 and 53 HO 1033, some of the logs intended to be exported were lost during loading operations in the Diapitan Bay. Thelogsweretobeloadedonthe'SSWoodlock'whichdockedabout500meters fromtheshorelineoftheDiapitanBay.Thelogsweretakenfromthelogpondof theplaintiffandfromwhichtheyweretowedinraftstothevessel.Atabout10:00 o'clock a. m. on March 29, 1963, while the logs were alongside the vessel, bad weather developed resulting in 75 pieces of logs which were rafted together co breakloosefromeachother.45piecesoflogsweresalvaged,but30pieceswere verifiedtohavebeenlostorwashedawayasaresultoftheaccident. HELD: TheCoverNotewasnotwithoutconsiderationforwhichtherespondentcourtheld theCoverNoteasnullandvoid,anddeniedrecoverytherefrom.Thefactthatno separate premium was paid on the Cover Note before the loss insured against occurred, does not militate against the validity of petitioner's contention, for no suchpremiumcouldhavebeenpaid,sincebythenatureoftheCoverNote,itdid
35
not contain, as all Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. As a logical consequence, no separate premiums are intended or required to be paid on a CoverNote.Thisisafactadmittedbyanofficialofrespondentcompany,JuanJose Camacho,inchargeofissuingcovernotesoftherespondentcompany(p.33,tsn, September24,1965). Atanyrate,itisnotdisputedthatpetitionerpaidinfullallthepremiumsascalled for by the statement issued by private respondent after the issuance of the two regularmarineinsurancepolicies,therebyleavingnoaccountunpaidbypetitioner dueontheinsurancecoverage,whichmustbedeemedtoincludetheCoverNote. If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and function of the Cover Note wouldbesetatnaughtorrenderedmeaningless,foritisinarealsenseacontract, notamereapplicationforinsurancewhichisamereoffer. It may be true that the marine insurance policies issued were for logs no longer including those which had been lost during loading operations. This had to be so becausetheriskinsuredagainstisnotforlossduringoperationsanymore,butfor loss during transit, the logs having already been safely placed aboard. This would make no difference, however, insofar as the liability on the cover note is concerned,forthenumberorvolumeoflogslostcanbedeterminedindependently as in fact it had been so ascertained at the instance of private respondent itself whenitsentitsownadjustertoinvestigateandassesstheloss,aftertheissuance ofthemarineinsurancepolicies. Sec.53.Theinsuranceproceedsshallbeappliedexclusivelytotheproperinterest of the person in whose name or for whose benefit it is made unless otherwise specifiedinthepolicy. PROCEEDS,TOWHOMAPPLIED When the policy matures, its proceeds shall be given exclusively to the proper interest of the person in whose name or for whose benefit it is made,unlessotherwisespecifiedinthepolicy BONIFACIOBROS.V.MORA 20SCRA262
FACTS: Mora mortgaged his car to H.G Reyes with the condition that the latter would insure the car with Mora being designated as the beneficiary. Consequently, the latterissuedthecarandthepolicywasissuedtoMora.Thereafterthecarmetan accidentandwithouttheknowledgeofH.GReyes,Morahaditrepaired. HELD: From the undisputed facts and from the pleadings it will be seen that the appellants' alleged cause of action rests exclusively upon the terms of the insurancecontract.Theappellantsseektorecovertheinsuranceproceeds,andfor this purpose, they rely upon paragraph 4 of the insurance contract document executed by and between the State Bonding & Insurance Company, Inc. and EnriqueMora.Theappellantsarenotmentionedinthecontractaspartiesthereto noristhereanyclauseorprovisionthereoffromwhichwecaninferthatthereisan obligationonthepartoftheinsurancecompanytopaythecostofrepairsdirectly to them. It is fundamental that contracts take effect only between the parties thereto, except in some specific instances provided by law where the contract containssomestipulationinfavorofathirdperson. Intheinstantcasetheinsurancecontractdoesnotcontainanywordsorclausesto discloseanintenttogiveanybenefittoanyrepairmenormaterialmenincaseof repair of the car in question. The parties to the insurance contract omitted such stipulation,whichisacircumstancethatsupportsthesaidconclusion.Ontheother hand,the"losspayable"clauseoftheinsurancepolicystipulatesthat"Loss,ifany, ispayabletoH.S.Reyes,Inc."indicatingthatitwasonlytheH.S.Reyes,Inc.which theyintendedtobenefit. As regards paragraph 4 of the insurance contract, a perusal thereof would show that instead of establishing privity between the appellants and the insurance company,suchstipulationmerelyestablishestheprocedurethattheinsuredhasto follow in order to be entitled to indemnity for repair. This paragraph therefore shouldnotbeconstruedasbringingintoexistenceinfavoroftheappellantsaright of action against the insurance company as such intention can never be inferred therefrom. COQUIAV.FIELDMENSINSURANCE 26SCRA172
36
FACTS: TheinsurancecompanyissuedacarrierinsurancepolicyinfavorofManilaTaxicab Company. While the policy was in force, one of their taxicabs met a vehicular accidentwhichcausedthedeathofitsdriverCoquia.Thetaxicabcompanysought theproceedsbutthecompanydidn'twanttopayinfulltheclaim.Thisprompted thecompanytogetherwiththevictimsparentstofileagainstthecompanyacase. HELD: The policy under consideration is typical of contracts pour autrui, this character beingmademoremanifestbythefactthatthedeceaseddriverpaidfiftypercent (50%) of the corresponding premiums, which were deducted from his weekly commissions.Undertheseconditions,itisclearthattheCoquiaswho,admittedly, are the sole heirs of the deceased have a direct cause of action against the Company,3 and, since they could have maintained this action by themselves, without the assistance of the Insured, it goes without saying that they could and didproperlyjointhelatterinfilingthecomplaintherein. DELVALV.DELVAL 29PHIL535 FACTS: GregoriodelValtookaninsurancepolicyonhislifeanddesignatedhissonasthe beneficiary. When he died, the plaintiff wanted the proceeds of the policy to belongtotheestate. HELD: Theproceedsbelongedexclusivelytothedesignatedsonandnottotheestateof thedeceased.Theotherchildrenhavenoshareintheproceeds. Furthermore, insurance is a special contract and the designation of the proceeds thereof is determined by special law and not by the law on donations and/or succession. RCBCV.CA 289SCRA292 FACTS:
Goyu Corporation applied for credit facilities and accommodation with RCBC. It was granted and to guarantee the credit given to them, they mortgaged some of theirpropertiesinfavorofRCBC.After,theyobtained10insurancepoliciesfrom MICO.AfirebrokeoutanddestroyedoneofthefactorybuildingsofGoyu.Itthen soughttheproceedsfromtheinsurancecompanybutthelatterdenieditsclaims onthegroundthatmanywereseekingtheproceeds. HELD: AccordantwiththecreditfacilitiesextendedbyRCBCtoGOYU,thelatterexecuted several mortgage contracts in favor of RCBC. It was expressly stipulated in these mortgagecontractsthatGOYUshallinsurethemortgagedpropertywithanyofthe insurance companies acceptable to RCBC. GOYU indeed insured the mortgaged property with MICO, an insurance company acceptable to RCBC. Bases on their stipulations in the mortgage contracts, GOYU was supposed to endorse these insurance policies in favor of, and deliver them, to RCBC. Alchester Insurance Agency,Inc.,MICO'sunderwriterfromwhomGOYUobtainedthesubjectinsurance policies, prepared the nine endorsements (see Exh. "1Malayan" to "9Malayan"; alsoExh."51RCBC"to"59RCBC"),copiesofwhichweredeliveredtoGOYU,RCBC, andMICO.However,becausetheseendorsementsdonotbearthesignatureofany officerofGOYU,thetrialcourt,aswellastheCourtofAppeals,concludedthatthe endorsementsaredefective. Thelowercourtswerewrong. It is settled that a mortgagor and a mortgagee have separated and distinct insurable interests in the same mortgaged property, such that each one of them mayinsurethesamepropertyforhisownsolebenefit.Thereisnoquestionthat GOYU could insure the mortgaged property for its own exclusive benefit. In the present case, although it appears that GOYU obtained the subject insurance policiesnamingitselfasthesolepayee,theintentionsofthepartiesasshownby their contemporaneous acts, must be given due consideration in order to better servetheinterestofjusticeandequity. ItistobenotedthatnineendorsementdocumentswerepreparedbyAlchesterin favorofRCBC.TheCourtisinaquandaryhowAlchestercouldarriveattheideaof endorsing any specific insurance policy in favor of any particular beneficiary or payee other than the insured had not such named payee or beneficiary been specificallydisclosedbytheinsureditself.ItisalsosignificantthatGOYUvoluntarily and purposely took the insurance policies from MICO, a sister company of RCBC,
37
and not just from any other insurance company. Alchester would not have found out that the subject pieces of property were mortgaged to RCBC had not such information been voluntarily disclosed by GOYU itself. Had it not been for GOYU, Alchester would not have known of GOYU's intention of obtaining insurance coverageincompliancewithitsundertakinginthemortgagecontractswithRCBC, andverily,AlchesterwouldnothaveendorsedthepoliciestoRCBChaditnotbeen sodirectedbyGOYU. On equitable principles, particularly on the ground of estoppel, the Court is constrainedtoruleinfavorofmortgagorRCBC. RCBC,ingoodfaith,reliedupontheendorsementdocumentssenttoitasthiswas only pursuant to the stipulation in the mortgage contracts. GOYU failed to seasonably repudiate the authority of the person or persons who prepared such endorsements. Over and above this, GOYU continued, in the meantime, to enjoy thebenefitsofthecreditfacilitiesextendedtoitbyRCBC.Aftertheoccurrenceof the loss insure against, it was too late for GOYU to disown the endorsements for anyimaginedorcontrivedlackofauthorityofAlchestertoprepareandissuesaid endorsements. If there had not been actually an implied ratification of said endorsementsbyvirtueofGOYU'sinactioninthiscase,GOYUisattheveryleast estoppedfromassailingtheiroperativeeffects.TopermitGOYUtocapitalizeonits nonconfirmation of these endorsements while it continued to enjoy the benefits of the credit facilities of RCBC which believed in good faith that there was due endorsement pursuant to their mortgage contracts, is to countenance grave contraventionofpublicpolicy,fairdealing,goodfaith,andjustice.Suchanunjust situation,theCourtcannotsanction.Underthepeculiarcircumstancesobtainingin this case, the Court is bound to recognize RCBC's right to the proceeds of the insurancepolicesifnotfortheactualendorsementofthepolicies,atleastonthe basisoftheequitableprincipleofestoppel. GOYU cannot seek relief under Section 53 of the Insurance Code which provides thattheproceedsofinsuranceshallexclusivelyapplytotheinterestoftheperson in whose name or for whose benefit it is made. The peculiarity of the circumstances obtaining in the instant case presents a justification to take exception to the strict application of said provision, it having been sufficiently establishedthatitwastheintentionofthepartiestodesignateRCBCastheparty forwhosebenefittheinsurancepoliciesweretakenout. SSSV.DAVAC
17SCRA863 FACTS: PetronillobecameamemberoftheSSSandassignedCandelariaashisbeneficiary. Helaterondied.Itwasfoundoutthattwowomenwereallegingtobethewifeof Petronillo.OnewasLourdesandanotherwasCandelariawhowasthedesignated beneficiary.Astherewascontestingclaims,SSSfiledaninterpleader. HELD: ThebenefitsaccruingfrommembershipintheSocialSecuritySystemdonotform partofthepropertiesoftheconjugalpartnershipofthecoveredmember.Theyare disbursed from a public special fund created by Congress in pursuance to the declaredpolicyoftheRepublic"todevelop,establishgraduallyandperfectasocial securitysystemwhich...shallprovideprotectionagainstthehazardsofdisability, sickness,oldageanddeath." Thesourcesofthisspecialfundarethecoveredemployee'scontribution(equalto 2percentoftheemployee'smonthlycompensation);theemployer'scontribution (equivalentto3percentofthemonthlycompensationofthecoveredemployee); andtheGovernmentcontributionwhichconsistsinyearlyappropriationofpublic fundstoassurethemaintenanceofanadequateworkingbalanceofthefundsof the System. Additionally, Section 21 of the Social Security Act, as amended by RepublicAct1792,provides: SEC. 21. Government Guarantee. The benefits prescribed in this Act shall not be diminishedandtoguaranteesaidbenefitstheGovernmentoftheRepublicofthe PhilippinesacceptsgeneralresponsibilityforthesolvencyoftheSystem. Fromtheforegoingprovisions,itappearsthatthebenefitreceivableundertheAct is in the nature of a special privilege or an arrangement secured by the law, pursuant to the policy of the State to provide social security to the workingmen. Theamountsthatmaythusbereceivedcannotbeconsideredaspropertyearned bythememberduringhislifetime.Hiscontributiontothefund,itmaybenoted, constitutesonlyaninsignificantportionthereof.Then,thebenefitsarespecifically declared not transferable, and exempted from tax legal processes, and lien. Furthermore,inthesettlementofclaimsthereundertheproceduretobeobserved is governed not by the general provisions of law, but by rules and regulations promulgatedbytheCommission.Thus,ifthemoneyispayabletotheestateofa
38
deceased member, it is the Commission, not the probate or regular court that determinesthepersonorpersonstowhomitispayable.8thatthebenefitsunder theSocialSecurityActarenotintendedbythelawmakingbodytoformpartofthe estateofthecoveredmembersmaybegatheredfromthesubsequentamendment madetoSection15thereof,asfollows: SEC.15.Nontransferabilityofbenefit.Thesystemshallpaythebenefitsprovided for in this Act to such persons as may be entitled thereto in accordance with the provisionsofthisAct.Suchbenefitsarenottransferable,andnopowerofattorney or other document executed by those entitled thereto in favor of any agent, attorney,oranyotherindividualforthecollectionthereofintheirbehalfshallbe recognizedexceptwhentheyarephysicallyandlegallyunabletocollectpersonally such benefits: Provided, however, That in the case of death benefits, if no beneficiary has been designated or the designation there of is void, said benefits shallbepaidtothelegalheirsinaccordancewiththelawsofsuccession.(Rep.Act 2658,amendingRep.Act1161.) Inshort,ifthereisanamedbeneficiaryandthedesignationisnotinvalid(asitis notsointhiscase),itisnottheheirsoftheemployeewhoareentitledtoreceive the benefits (unless they are the designated beneficiaries themselves). It is only whenthereisnodesignatedbeneficiariesorwhenthedesignationisvoid,thatthe lawsofsuccessionareapplicable.AndwehavealreadyheldthattheSocialSecurity Actisnotalawofsuccession. INRE:MARIOCHALIONGCO 79SCRA364 FACTS: Thismatterreferstotheclaimsforretirementbenefitsfiledbytheheirsofthelate ATTY.MARIOV.CHANLIONGCOanattorneyinthisCourt,undertheprovisionsof R.A.No.1616,asamendedbyR.A.No.4986,whichwasapprovedbythisCourtin itsresolutionofAugust19,1976,effectiveonJuly12,1976itagfromtherecords thatatthetimeofhisdeathonJuly12,1976,Atty.Chanliongcowasmorethan63 years of age, with more than 38 years of service in the government. He did not have any pending criminal administrative or not case against him, neither did he have any money or property accountability. The highest salary he received was P18,700.00perannum.
Theabovenamedfliedtheappellantsforbenefitswiththeaccruingandwiththe GovernmentServiceSystem. Aside from his widow, Dra. Fidel B. Chanliongco and an only Intimate Mario it appearsthatthereareotherdeceasedtonamely,Mrs.AngelinaC.,Jr.,bothborn outofwedlocktoAngelinaRCrespo,anddulyrecognizedbythedeceased.Except Mario,Jr.,whoisonly17yearsofage,alltheclaimantsareoflegalage. Accordingtolaw,thebenefitsaccruingtothedeceasedconsistof:(1)retirement benefits; (2) money value of terminal leave; (3) life insurance and (4) refund of retirementpremium. HELD: TherecordalsoshowsthatthelateAtty.Chanliongcodiedabintestatoandthathe filed or over to state in his application for membership with the GSIS the beneficiaryorbenefitsofhisretirementbenefits,shouldhediebeforeretirement. Hence, the retirement benefits shall accrue to his estate and will be distributed amonghisLegalheirsinwiththebenefitsonintestates,asinthecawofafifeifno benefitisnamedinthepolicy. VDA.DECONSUEGRAV.GSIS 37SCRA315 FACTS: ThelateJoseConsuegra,atthetimeofhisdeath,wasemployedasashopforeman of the office of the District Engineer in the province of Surigao del Norte. In his lifetime, Consuegra contracted two marriages, the first with herein respondent Rosario Diaz, out of which marriage were born two children, namely, Jose Consuegra, Jr. and Pedro Consuegra, but both predeceased their father; and the second,whichwascontractedingoodfaithwhilethefirstmarriagewassubsisting, with herein petitioner Basilia Berdin, out of which marriage were born seven children,namely,Juliana,Pacita,MariaLourdes,Jose,Rodrigo,LenidaandLuz,all surnamed Consuegra. Being a member of the Government Service Insurance System (GSIS, for short) when Consuegra died on September 26, 1965, the proceeds of his life insurance underpolicyNo.601801werepaidbytheGSIStopetitionerBasiliaBerdinandher childrenwhowerethebeneficiariesnamedinthepolicy.Havingbeenintheservice
39
of the government for 22.5028 years, Consuegra was entitled to retirement insurance benefits in the sum of P6,304.47 pursuant to Section 12(c) of Commonwealth Act 186 as amended by Republic Acts 1616 and 3836. Consuegra did not designate any beneficiary who would receive the retirement insurance benefitsduetohim. HELD: If Consuegra had 22.5028 years of service in the government when he died on September26,1965,itfollowsthathestartedinthegovernmentservicesometime during the early part of 1943, or before 1943. In 1943 Com. Act 186 was not yet amended,andtheonlybenefitsthenprovidedforinsaidCom.Act186werethose that proceed from a life insurance. Upon entering the government service ConsuegrabecameacompulsorymemberoftheGSIS,beingautomaticallyinsured on his life, pursuant to the provisions of Com. Act 186 which was in force at the time.During1943theoperationoftheGovernmentServiceInsuranceSystemwas suspendedbecauseofthewar,andtheoperationwasresumedsometimein1946. WhenConsuegradesignatedhisbeneficiariesinhislifeinsurancehecouldnothave intended those beneficiaries of his life insurance as also the beneficiaries of his retirement insurance because the provisions on retirement insurance under the GSIScameaboutonlywhenCom.Act186wasamendedbyRep.Act660onJune 16,1951.Hence,itcannotbesaidthatbecausehereinappellantsweredesignated beneficiaries in Consuegra's life insurance they automatically became the beneficiariesalsoofhisretirementinsurance. In the case of the proceeds of a life insurance, the same are paid to whoever is namedthebeneficiaryinthelifeinsurancepolicy.Asinthecaseofalifeinsurance providedforintheInsuranceAct(Act2427,asamended),thebeneficiaryinalife insuranceundertheGSISmaynotnecessarilybeaheiroftheinsured.Theinsured inalifeinsurancemaydesignateanypersonasbeneficiaryunlessdisqualifiedtobe so under the provisions of the Civil Code. And in the absence of any beneficiary named in the life insurance policy, the proceeds of the insurance will go to the estateoftheinsured. Retirement insurance is primarily intended for the benefit of the employee to provideforhisoldage,orincapacity,afterrenderingserviceinthegovernmentfor arequirednumberofyears.Iftheemployeereachestheageofretirement,hegets the retirement benefits even to the exclusion of the beneficiary or beneficiaries named in his application for retirement insurance. The beneficiary of the retirementinsurancecanonlyclaimtheproceedsoftheretirementinsuranceifthe
employeediesbeforeretirement.Iftheemployeefailedoroverlookedtostatethe beneficiary of his retirement insurance, the retirement benefits will accrue to his estateandwillbegiventohislegalheirsinaccordancewithlaw,asinthecaseofa lifeinsuranceifnobeneficiaryisnamedintheinsurancepolicy. GSIS had correctly acted when it ruled that the proceeds of the retirement insurance of the late Jose Consuegra should be divided equally between his first livingwifeRosarioDiaz,ontheonehand,andhissecondwifeBasiliaBerdinandhis children by her, on the other; and the lower court did not commit error when it confirmed the action of the GSIS, it being accepted as a fact that the second marriageofJoseConsuegratoBasiliaBerdinwascontractedingoodfaith. Sec.54.Whenaninsurancecontractisexecutedwithanagentortrusteeasthe insured,thefactthathisprincipalorbeneficiaryistherealpartyininterestmay be indicated by describing the insured as agent or trustee, or by other general wordsinthepolicy. INSURANCEEXECUTEDBYAGENTORTRUSTEE In case of an insurance contract secured in the name of an agent or trustee for the principals account, that fact must be indicated in the policybydescribingtheinsuredasagentortrusteeorbygeneralwords If an agent or trustee secures an insurance in his name, without indicatinghisprincipal,theagentortrusteeisdeemedtohavetakenthe insuranceforhisownbenefitandinterestaloneandtheprincipalhasno rightofactionagainsttheinsurer Sec.55.Torenderaninsuranceeffectedbyonepartnerorpartowner,applicable to the interest of his copartners or other partowners, it is necessary that the terms of the policy should be such as are applicable to the joint or common interest. INSURANCEEXECUTEDBYCOPARTNERORCOOWNER Incaseofaninsurancesecuredinthenameofapartnerorcoownerbut tocovertheinterestsofhisothercopartnersorcoowners,thetermsof the policy should state that the insurance is applicable to their joint or commoninterest If the copartner or coowner takes insurance in his own name without indicatingthatsaidinsuranceappliesalsototheinterestoftheotherco
40
partnersorcoowners,theinsuranceisdeemedtobelimitedonlytothe individualshareofthecopartnerorcoowneronly Sec.56.Whenthedescriptionoftheinsuredinapolicyissogeneralthatitmay comprehend any person or any class of persons, only he who can show that it wasintendedtoincludehimcanclaimthebenefitofthepolicy. WHENDESCRIPTIONOFINSUREDISINGENERALTERMS When the description of the insured is so general, the person claiming the proceeds must prove that such description was intended to include him Sec. 57. A policy may be so framed that it will inure to the benefit of whomsoever,duringthecontinuanceoftherisk,maybecometheownerofthe interestinsured. POLICYFRAMEDTOBENEFITFUTUREOWNER When the policy is so framed that it will inure to the benefit of whomsoever,duringthecontinuanceoftherisk,maybecometheowner oftheinterestinsured,thetransferofthepropertywillnotsuspendthe insurance and instead, the insurance is deemed transferred with the property ExceptiontoSection20Exceptinthecasesspecifiedinthenextfour sections,andinthecasesoflife,accident,andhealthinsurance,achange ofinterestinanypartofathinginsuredunaccompaniedbya correspondingchangeininterestintheinsurance,suspendsthe insurancetoanequivalentextent,untiltheinterestinthethingandthe interestintheinsurancearevestedinthesameperson. SANMIGUELV.LAWUNION Supra HELD: If during the negotiations leading up to the writing of a policy of insurance the contracting parties agree that the insurance shall be so written as to protect not onlytheinterestoftheapplicantforthepolicy,asmortgageebutalsotheresiduary interest of the owner, and the policy is, by inadvertence, ignorance, mistake, so writtenastoprotectonlytheinterestoftheapplicant,thecourthasthepowerto
reformthecontractandgiveeffecttoitinthesenseinwhichthepartiesintended tobebound. Sec. 58. The mere transfer of a thing insured does not transfer the policy, but suspendsituntilthesamepersonbecomestheownerofboththepolicyandthe thinginsured. SANMIGUELV.LAWUNION Supra HELD: A purchaser of insured property who doesn't take the precaution to obtain a transfer of the policy of insurance cannot, in case of loss, recover upon such contract,asthetransferofthepropertyhastheeffectofsuspendingtheinsurance untilthepurchaserbecomesownerofthepolicyaswellasofthepropertyinsured. Sec.59.Apolicyiseitheropen,valuedorrunning. Sec. 60. An open policy is one in which the value of the thing insured is not agreedupon,butislefttobeascertainedincaseofloss. OPENPOLICY Theamountstatedinthepolicyisnotthevalueofthepropertyinsured but merely the maximum limit of the insurers liability, in case of total loss Theinsureronlypaystheactualcashvalueofthepropertyascertainedat thetimeofloss DEV.INS.CORPORATIONV.IAC 143SCRA62 FACTS: Afireoccurredinthebuildingoftheprivaterespondentanditsuedforrecoveryof damagesfromthepetitioneronthebasisofaninsurancecontractbetweenthem. HELD: The petitioner argues that since at the time of the fire the building insured was worthP5,800,000.00,theprivaterespondentshouldbeconsidereditsowninsurer
41
forthedifferencebetweenthatamountandthefacevalueofthepolicyandshould shareproratainthelosssustained.Accordingly,theprivaterespondentisentitled to an indemnity of only P67,629.31, the rest of the loss to be shouldered by it alone. However, there is no evidence on record that the building was worth P5,800,000.00 at the time of the loss; only the petitioner says so and it does not back up its selfserving estimate with any independent corroboration. On the contrary,thebuildingwasinsuredatP2,500,000.00,andthismustbeconsidered, by agreement of the insurer and the insured, the actual value of the property insuredonthedaythefireoccurred.Thisvaluationbecomesevenmorebelievable if it is remembered that at the time the building was burned it was still under constructionandnotyetcompleted. Asdefinedintheaforestatedprovision,whichisnowSection60oftheInsurance Code,"anopenpolicyisoneinwhichthevalueofthethinginsuredisnotagreed uponbutislefttobeascertainedincaseofloss."Thismeansthattheactualloss, asdetermined,willrepresentthetotalindemnityduetheinsuredfromtheinsurer exceptonlythatthetotalindemnityshallnotexceedthefacevalueofthepolicy. The actual loss has been ascertained in this case and, to repeat, this Court will respect such factual determination in the absence of proof that it was arrived at arbitrarily. There is no such showing. Hence, applying the open policy clause as expressly agreed upon by the parties in their contract, we hold that the private respondentisentitledtothepaymentofindemnityunderthesaidcontractinthe totalamountofP508,867.00. Sec.61.Avaluedpolicyisonewhichexpressesonitsfaceanagreementthatthe thinginsuredshallbevaluedataspecificsum. VALUEDPOLICY The valuation of the property insured is conclusive between the parties andintheabsenceoffraudormistake,suchvaluewillbepaidincaseof totalloss Partieshaveconclusivelystipulatedthatthepropertyinsuredisvaluedat aspecifiedsum Sec. 62. A running policy is one which contemplates successive insurances, and which provides that the object of the policy may be from time to time defined, especially as to the subjects of insurance, by additional statements or indorsements.
RUNNINGPOLICY Intendedtoprovideindemnityforpropertywhichcannotbecoveredby specificinsurancebecauseofitsfrequentchangeinlocationandquantity Maybeissuedforpropertywhichhasafrequentchangeoflocation Sec.63.Acondition,stipulation,oragreementinanypolicyofinsurance,limiting thetimeforcommencinganactionthereundertoaperiodoflessthanoneyear fromthetimewhenthecauseofactionaccrues,isvoid. AGREEMENTTOLIMITTHETIMETOCOMMENCEACTION;LIMITATION The insurer and insured may validly agree that an action on the policy shouldbebroughtwithaspecifiedperiodoftime,providedsuchperiod isntlessthanoneyearfromthetimethecauseofactionaccrues CAUSEOFACTION,EXPLAINED Accruesfromthetimetheinsuredsclaimisrejectedbytheinsurerand notfromthetimeofloss NEWLIFEENTERPRISESV.CA 207SCRA669 FACTS: Julian Sy and Jose Sy Bang have formed a business partnership named New Life Enterprises and was engaged in the sale of construction materials. One of the partners insured their stocks and was duly issued a fire insurance policy. A fire broke out in the building, destroying therein the stocks insured. The plaintiffs soughttheproceedsoftheinsurancepolicybutwasdeniedontheallegedbreach ofthefollowingcondition 3. The insured shall give notice to the Company of any insurance or insurances already effected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated therein or endorsed on this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not
42
applywhenthetotalinsuranceorinsurancesinforceatthetimeoflossordamage notmorethanP200,000.00. ThetrialcourtdecidedinfavorofNewLifebutwasreversedbytheCA. HELD: The terms of the contract are clear and unambiguous. The insured is specifically requiredtodisclosetotheinsureranyotherinsuranceanditsparticularswhichhe mayhaveeffectedonthesamesubjectmatter.Theknowledgeofsuchinsurance bytheinsurer'sagents,evenassumingtheacquisitionthereofbytheformer,isnot the"notice"thatwouldestoptheinsurersfromdenyingtheclaim.Besides,theso calledtheoryofimputedknowledge,thatis,knowledgeoftheagentisknowledge of the principal, aside from being of dubious applicability here has likewise been roundlyrefutedbyrespondentcourtwhosefactualfindingswefindacceptable. Thus, it points out that while petitioner Julian Sy claimed that he had informed insurance agent Alvarez regarding the coinsurance on the property, he contradictedhimselfbyinexplicablyclaimingthathehadnotreadthetermsofthe policies;thatYapDamChuancouldnotlikewisehaveobtainedsuchknowledgefor thesamereason,asidefromthefactthattheinsurancewithWesternwasobtained before those of Reliance and Equitable; and that the conclusion of the trial court that Reliance and Equitable are "sister companies" is an unfounded conjecture drawnfromthemerefactthatYapKamChuanwasanagentforbothcompanies whichalsohadthesameinsuranceclaimsadjuster.Availmentoftheservicesofthe same agents and adjusters by different companies is a common practice in the insurancebusinessandsuchfactsdonotwarrantthespeculativeconclusionofthe trialcourt. Furthermore, when the words and language of documents are clear and plain or readilyunderstandablebyanordinaryreaderthereof,thereisabsolutelynoroom for interpretation or construction anymore. Courts are not allowed to make contracts for the parties; rather, they will intervene only when the terms of the policyareambiguous,equivocal,oruncertain.Thepartiesmustabidebytheterms ofthecontractbecausesuchtermsconstitutethemeasureoftheinsurer'sliability and compliance therewith is a condition precedent to the insured's right of recoveryfromtheinsurer. Whileitisacardinalprincipleofinsurancelawthatapolicyorcontractofinsurance is to be construed liberally in favor of the insured and strictly against the insurer
company, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense. Moreover, obligations arising from contracts have the force of law between the contracting parties and shouldbecompliedwithingoodfaith. Petitionersshouldbeawareofthefactthatapartyisnotrelievedofthedutyto exercisetheordinarycareandprudencethatwouldbeexactedinrelationtoother contracts.Theconformityoftheinsuredtothetermsofthepolicyisimpliedfrom his failure to express any disagreement with what is provided for. It may be true that the majority rule, as cited by petitioners, is that injured persons may accept policieswithoutreadingthem,andthatthisisnotnegligenceperse.But,thisisnot without any exception. It is and was incumbent upon petitioner Sy to read the insurance contracts, and this can be reasonably expected of him considering that hehasbeenabusinessmansince1965andthecontractconcernsindemnityincase of loss in his moneymaking trade of which important consideration he could not havebeenunawareasitwaspreincaseoflossinhismoneymakingtradeofwhich important consideration he could not have been unaware as it was precisely the reasonforhisprocuringthesame. Sec. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shallbeeffectiveunlessitisbasedontheoccurrence,aftertheeffectivedateof thepolicy,ofoneormoreofthefollowing: (a)nonpaymentofpremium; (b)convictionofacrimearisingoutofactsincreasingthehazardinsuredagainst; (c)discoveryoffraudormaterialmisrepresentation; (d)discoveryofwillfulorrecklessactsoromissionsincreasingthehazardinsured against; (e) physical changes in the property insured which result in the property becominguninsurable;or
43
(f) a determination by the Commissioner that the continuation of the policy wouldviolateorwouldplacetheinsurerinviolationofthisCode. Sec.65.Allnoticesofcancellationmentionedintheprecedingsectionshallbein writing, mailed or delivered to the named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixtyfour is relieduponand(b)that,uponwrittenrequestofthenamedinsured,theinsurer willfurnishthefactsonwhichthecancellationisbased. REQUISITESFORCANCELLATIONOFPOLICY 1. Theremusthavebeenpriornoticethereoftotheinsured 2. SaidnoticemustbebasedonthegroundsasprovidedforbySection64 andshallsostatesaidgrounds 3. Saidnoticemustbeinwriting,mailedordeliveredtothenamedinsured attheaddressshowninthepolicy 4. Ifrequestedinwritingbytheinsured,theinsurermustfurnishthefacts onwhichthecancellationisbased SAURAV.PHIL.INTERNATIONALCO. 8SCRA143 FACTS: Saura Import & Export Co Inc., mortgaged to the Phil. National Bank, a parcel of land covered by T.C.T. No. 40445 of the Registry of Deeds of Davao, issued in its name,tosecurethepaymentofpromissorynoteofP27,000.00. Erected on the land mortgaged, was a building of strong materials owned by the mortgagor Saura Import & Export Co., Inc., which had always been covered by insurance, many years prior to the mortgage contract. Pursuant to the requirement, Saura insured the building and its contents with the Philippine International Surety, an insurance firm acceptable to mortgagee Bank, for P29,000.00 against fire for the period of one year from October 2, 1954. As requiredtherefor,theinsurancepolicywasendorsedtothemortgageePNB. ThepolicywasdeliveredtothemortgageeBankbySaura.Barelythirteen(13)days after the issuance of the fire insurance policy, the insurer cancelled the same, effective as of the date of issue. Notice of the cancellation was given to appellee bank in writing, sent by Registered Mail and personally addressed to the Branch
ManageroftheappelleeBank'sDavaoBranch.Onalaterdate,thebuildingandits contents, were burned. Saura filed a claim with the Insurer and mortgagee Bank. Upon the presentation of notice of loss with the PNB, Saura learned for the first time that the policy had previously been cancelled, by the insurer, when Saura's folder in the Bank's filed was opened and the notice of cancellation (original and duplicate)sentbytheInsurertotheBank,wasfound.UponrefusaloftheInsurer PhilippineInternationalSuretytopaytheamountoftheinsurance,acasewasfiled againsttheInsurer,andthePNBwaslaterincludedaspartydefendant,afterithad refusedtoprosecutethecasejointlywithSauraImport&ExportCo.,Inc. HELD: Fireinsurancepoliciesandothercontractsofinsuranceuponproperty,inaddition tothecommonprovisionforcancellationofthepolicyuponrequestoftheinsured, generally provide for cancellation by the insurer by notice to the insured for a prescribedperiod,whichisusually5days,andthereturnoftheunearnedportion of the premium paid by the insured, such provision for cancellation upon notice being authorized by statutes in some jurisdiction, either specifically or as a provision of an adopted standard form of policy. The purpose of provisions or stipulations for notice to the insured, is to prevent the cancellation of the policy, withoutallowingtheinsuredampleopportunitytonegotiateforotherinsurancein its stead. The form and sufficiency of a notice of cancellation is determined by policyprovisions.Inordertoformthebasisforthecancellationofapolicy,notice totheinsurednnotbeinanyparticularform,intheabsenceofastatuteorpolicy provision prescribing such form, and it is sufficient, so long as it positively and unequivocallyindicatestotheinsured,thatitistheintentionofthecompanythat thepolicyshallceasetobebinding.Wherethepolicycontainsnoprovisionsthata certainnumberofdaysnoticeshallbegiven,areasonablenoticeandopportunity to obtain other insurance must be given. Actual personal notice to the insured is essentialtoacancellationunderaprovisionforcancellationbynotice.Theactual receipt by the insured of a notice of cancellation is universally recognized as a conditionprecedenttoacancellationofthepolicybytheinsurer,andconsequently a letter containing notice of cancellation which is mailed by the insurer but not receivedbytheinsured,isineffectiveascancellation. The policy in question does not provide for the notice, its form or period. The InsuranceLaw,ActNo.2427,doesnotlikewiseprovideforsuchnotice.Thisbeing thecase,itdevolvesupontheCourttoapplythegenerallyacceptedprinciplesof insurance,regardingcancellationoftheinsurancepolicybytheinsurer.Fromwhat hasbeenheretoforestated,actualnoticeofcancellationinaclearandunequivocal
44
manner,preferablyinwriting,inviewoftheimportanceofaninsurancecontract, shouldbegivenbytheinsurertotheinsured,sothatthelattermightbegivenan opportunitytoobtainotherinsuranceforhisownprotection.Thenoticeshouldbe personaltotheinsuredandnottoand/orthroughanyunauthorizedpersonbythe policy.Inthecaseatbar,thedefendantinsurancecompany,musthaverealizedthe paramountimportanceofsendinganoticeofcancellation,whenitsentthenotice ofcancellationofthepolicytothedefendantbank(asmortgagee),butnottothe insured with which it (insurance company) had direct dealing. It was the primary dutyofthedefendantappelleeinsurancecompanytonotifytheinsured,butitdid not. It should be stated that the house and its contents were burned at the time whenthepolicywasenforcedandthatunderthefacts,asfoundbythetrialcourt, it is evident that both the insurance company and the appellee bank failed, wittingly or unwittingly, to notify the insured appellant Saura of the cancellation made. MALAYANINSURANCEV.ARNALDO 154SCRA672 FACTS: MICOissuedafireinsurancepolicytoPincaonherhouse.Onarelevantdate,the fireinsurancepolicywasallegedlycancelledbyMICOduetoPincasnonpayment of premiums. Pinca then paid her deficiency premiums and the company duly received the same. Days after the receipt of the payment, the house was destroyed by fire. Pinca sought the proceeds of the insurance policy but was deniedonthegroundthatallegedly,thepolicywasalreadyearliercancelled. HELD: MICO is taking an inconsistent stand. While contending that acceptance of the premiumpaymentwasprohibitedbythepolicy,itatthesametimeinsiststhatthe policynevercameintoforcebecausethepremiumhadnotbeenpaid.Onesurely, cannothavehiscakeandeatittoo. MICO's view is unacceptable, that there was no existing insurance at the time of the loss sustained by Pinca because her policy never became effective for non paymentofpremium.Paymentwasinfactmade,renderingthepolicyoperativeas ofJune22,1981,andremovingitfromtheprovisionsofArticle77,Thereafter,the policycouldbecancelledonanyofthesuperveninggroundsenumeratedinArticle
64 (except "nonpayment of premium") provided the cancellation was made in accordancetherewithandwithArticle65. Section64readsasfollows: SEC. 64. No policy of insurance other than life shall be cancelled by the insurer exceptuponpriornoticethereoftotheinsured,andnonoticeofcancellationshall be effective unless it is based on the occurrence, after the effective date of the policy,ofoneormoreofthefollowing: (a)nonpaymentofpremium; (b)convictionofacrimearisingoutofactsincreasingthehazardinsuredagainst; (c)discoveryoffraudormaterialmisrepresentation; (d) discovery of willful, or reckless acts or commissions increasing the hazard insuredagainst; (e)physicalchangesinthepropertyinsuredwhichresultinthepropertybecoming uninsurable;or (f)adeterminationbytheCommissionerthatthecontinuationofthepolicywould violateorwouldplacetheinsurerinviolationofthisCode. Asforthemethodofcancellation,Section65providesasfollows: SEC.65.Allnoticesofcancellationmentionedintheprecedingsectionshallbein writing, mailed or delivered to the named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixtyfour is relied upon and (b) that, upon written request of the named insured, the insurer willfurnishthefactsonwhichthecancellationisbased. A valid cancellation must, therefore, require concurrence of the following conditions: (1)Theremustbepriornoticeofcancellationtotheinsured;
45
(2) The notice must be based on the occurrence, after the effective date of the policy,ofoneormoreofthegroundsmentioned; (3)Thenoticemustbe(a)inwriting,(b)mailed,ordeliveredtothenamedinsured, (c)attheaddressshowninthepolicy; (4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and(b)thatuponwrittenrequestoftheinsured,theinsurerwillfurnishthefacts onwhichthecancellationisbased. IfPincahadreallyreceivedthesaidnotice,shewouldnothavemadepaymenton theoriginalpolicyonDecember24,1981.Instead,shewouldhaveaskedforanew insurance,effectiveonthatdateanduntiloneyearlater,andsotakenadvantage of the extended period. The Court finds that if she did pay on that date, it was because she honestly believed that the policy issued on June 7, 1981, was still in effect and she was willing to make her payment retroact to July 22, 1981, its stipulatedcommencementdate.Afterall,agentAdorawasveryaccomodatingand hadearliertoldher"tocallhimupanytime"shewasreadywithherpaymenton the policy earlier issued. She was obviously only reciprocating in kind when she paid her premium for the period beginning July 22, 1981, and not December 24, 1981. MICO's suggests that Pinca knew the policy had already been cancelled and that whenshepaidthepremiumonDecember24,1981,herpurposewas"torenewit." Asthiscouldnotbedonebytheagentaloneunderthetermsoftheoriginalpolicy, therenewalthereofdidnotlegallybindMICO. Pincameanttorenewthepolicyifithadreallybeenalreadycancelledbutnotifit wasstffleffective.Itwasallconditional.Asithasnotbeenshownthattherewasa validcancellationofthepolicy,therewasconsequentlynoneedtorenewitbutto pay the premium thereon. Payment was thus legally made on the original transactionanditcouldbe,andwas,validlyreceivedonbehalfoftheinsurerbyits agentAdora.Adora.incidentally,hadnotbeeninformedofthecancellationeither andsawnoreasonnottoacceptthesaidpayment. Sec.66.Incaseofinsuranceotherthanlife,unlesstheinsureratleastfortyfive days in advance of the end of the policy period mails or delivers to the named insuredattheaddressshowninthepolicynoticeofitsintentionnottorenewthe policy or to condition its renewal upon reduction of limits or elimination of coverages,thenamedinsuredshallbeentitledtorenewthepolicyuponpayment
ofthepremiumdueontheeffectivedateoftherenewal.Anypolicywrittenfora termoflessthanoneyearshallbeconsideredasifwrittenforatermofoneyear. Any policy written for a term longer than one year or any policy with no fixed expirationdateshallbeconsideredasifwrittenforsuccessivepolicyperiodsor termsofoneyear. REQUISITESFORRENEWALOFPOLICY 1. Aninsurancepolicyotherthanlifeisrenewedprovided a. The insurer doesn't mail or deliver to the insured at least 45 daysbeforeitsexpirydateanoticeofintentioneither i. Nottorenewthepolicy ii. Ortoconditionitsrenewaluponreductionoflimitsor eliminationofcoverages b. Paymentofthepremiumdueontheeffectivedateofrenewal WARRANTIES Sec.67.Awarrantyiseitherexpressedorimplied. Sec.68.Awarrantymayrelatetothepast,thepresent,thefuture,ortoanyorall ofthese. WARRANTY,DEFINED. Statement or promise stated in the policy itself or incorporated therein byreference,wherebytheinsuredexpresslycontractsastothepresent or future existence of certain facts, circumstances, or conditions, the literal truth of which is essential to the validity of the contract of insurance KINDSOFWARRANTY 1. Affirmative warrantywhere the insured asserts the existence of a matteratorbeforetheissuanceofthepolicy 2. Promissory warrantywhere the insured promises or undertakes that certainmattersshallexistorwillbedoneoromittedafterthepolicyhas takeneffect 3. Expresswarrantywheretheassertionorpromiseisclearlysetforthin thepolicyorincorporatedthereinbyreference
46
4.
Implied warrantywhere the assertion or promise isnt expressly set forth in the policy but because of the general tenor of the terms of the policy or from the very nature of the insurance contract, a warranty necessarilyinferredorunderstood.
Sec.69.Noparticularformofwordsisnecessarytocreateawarranty. Sec.70.Withoutprejudicetosectionfiftyone,everyexpresswarranty,madeat or before the execution of a policy, must be contained in the policy itself, or in anotherinstrumentsignedbytheinsuredandreferredtointhepolicyasmaking apartofit. EXPRESSWARRANTY,WHENMADE. Itmustbemadeatorbeforetheexecutionofthepolicy WHERETOBECONTAINED Expresswarrantymaybecontainedeither o Inthepolicyitself o In another instrument signed by the insured or referred to in thepolicyasmakingpartofit Itmayalsobecontainedinarider.Itnotbesignedunlesstheriderwas issuedaftertheoriginalpolicytookeffect ANGGIOKCHIPV.SPRINGFIELDFIREANDMARINEINSURANCE 56PHIL375 FACTS: Ang Giok Chip doing business under the name and style of Hua Bee Kong Si was formerlytheownerofawarehouse.Thecontentsofthewarehousewereinsured with the three insurance companies for the total sum of P60,000. One insurance policy,intheamountofP10,000,wastakenoutwiththeSpringfieldFire&Marine Insurance Company. The warehouse was destroyed by fire on January 11, 1928, whilethepolicyissuedbythelattercompanywasinforce.Byvirtueofthepolicy, plaintiffsoughttheproceedsfromdefendantinsurancecompany. HELD: Section65oftheInsuranceActanditscounterpart,section265oftheCivilCodeof California, will bear analysis as tested by reason and authority. The law says that
every express warranty must be "contained in the policy itself." The word "contained," according to the dictionaries, means "included," inclosed," "embraced," "comprehended," etc. When, therefore, the courts speak of a rider attached to the policy, and thus "embodied" therein, or of a warranty "incorporated"inthepolicy,itisbelievedthatthephrase"containedinthepolicy itself" must necessarily include such rider and warranty. As to the alternative relating to "another instrument," "instrument" as here used could not mean a mere slip of paper like a rider, but something akin to the policy itself, which in section 48 of the Insurance Act is defined as "The written instrument, in which a contract of insurance is set forth." In California, every paper writing is not necessarily an "instrument" within the statutory meaning of the term. The word "instrument has a well defined definition in California, and as used in the Codes invariably means some written paper or instrument signed and delivered by one persontoanother,transferringthetitleto,orgivingalien,onproperty,orgivinga righttodebtorduty. In other words, the rider, warranty F, is contained in the policy itself, because by thecontractofinsuranceagreedtobythepartiesitismadetoformapartofthe same, but is not another instrument signed by the insured and referred to in the policyasformingapartofit. Itisadmittedthatthepolicybeforeuswasacceptedbytheplaintiff.Thereceiptof this policy by the insured without objection binds both the acceptor and the insuredtothetermsthereof.Theinsuredmaynotthereafterbeheardtosaythat hedidnotreadthepolicyorknowitsterms,sinceitishisdutytoreadhispolicy anditwillbeassumedthathedidso. Sec.71.Astatementinapolicyofmatterrelatingtothepersonorthinginsured, ortotherisk,asafact,isanexpresswarrantythereof. EXPRESS WARRANTY RELATING TO PERSON OR THING INSURED TO OR TO THE RISK A statement in the policy of a matter relating to the person or thing insured,ortotherisk,asafact,isanexpresswarranty Statementsintheapplicationormedicalexaminationarerepresentations onlyandnotwarranties,iftheapplicationormedicalexaminationsisnt incorporatedinthepolicyormadepartofitasreference.
47
Sec.72.Astatementinapolicywhichimpartsthatitisintendedtodoornotto do a thing which materially affects the risk, is a warranty that such act or omissionshalltakeplace. PROMISSORYWARRANTY Apromissorywarrantyisastatementinthepolicythatathingwhichis material to the risk is intended to be done or not done after the policy takeseffect Sec.73.When,beforethetimearrivesfortheperformanceofawarrantyrelating tothefuture,alossinsuredagainsthappens,orperformancebecomesunlawful at the place of the contract, or impossible, the omission to fulfill the warranty doesnotavoidthepolicy. EXCEPTIONS TO THE GENERAL RULE: NONPERFORMANCE OF PROMISSORY WARRANTYENTITLESTHEOTHERPARTYTORESCINDTHEINSURANCECONTRACT Loss occurs before the time arrives for the performance of the promissorywarranty Performance becomes unlawful before the time arrives for the performanceofthepromissorywarranty Performance becomes impossible before the time arrives for the performanceofthepromissorywarranty Sec. 74. The violation of a material warranty, or other material provision of a policy,onthepartofeitherpartythereto,entitlestheothertorescind. YOUNGV.MIDLANDTEXTILEINSURANCE 30PHIL617 FACTS: Youngoperatedacandyandfruitstore,forwhichhesecuredaninsurancepolicyto cover such goods against fire. One of the conditions in the policy was the prohibitiontostorehazardousgoodsinthebodegaandstore.Afirebrokeoutin thestoreandbodegaofYoung,andpartiallydestroyedhisgoods.Thiswascaused by the fioreworks he earlier placed therein. The fireworks were given to him by another store owner who intended to use the same for the celebration of the Chinese new year but since tan ordinance of Manila prohibited the use of such, Youngwascompelledtonstoreitinhisbodega.
HELD: Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. The parties have a right to impose such reasonable conditions at the time of the making of the contract as they may deem wise and necessary.Therateofpremiumismeasuredbythecharacteroftheriskassumed. The insurance company, for a comparatively small consideration, undertakes to guarantee the insured against loss or damage, upon the terms and conditions agreedupon,anduponnoother,andwhencalledupontopay,incaseofloss,the insurer,therefore,mayjustlyinsistuponafulfillmentoftheseterms.Iftheinsured cannot bring himself within the conditions of the policy, he is not entitled to recoverfortheloss.Thetermsofthepolicyconstitutethemeasureoftheinsurer's liability,andinordertorecovertheinsuredmustshowhimselfwithinthoseterms; andifitappearsthatthecontracthasbeenterminatedbyaviolation,onthepart of the insured, of its conditions, then there can be no right of recovery. The complianceoftheinsuredwiththetermsofthecontractisaconditionprecedent to the right of recovery. If the insured has violated or failed to perform the conditions of the contract, and such a violation or want of performance has not been waived by the insurer, then the insured cannot recover. Courts are not permitted to make contracts for the parties. The function and duty of the courts consistsimplyinenforcingandcarryingouthecontractsactuallymade.Whileitis true,asageneralrule,thatcontractsofinsuranceareconstruedmostfavorablyto the insured, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous they must be taken and understood in their plain, ordinary and popular sense. (Imperial Fire Ins. Co. vs. County of Coos, 151 U. S., 542; Kyte vs. Commercial Union Assurance Co., 149 Mass.,116,122.)Theconditionsofcontractsofinsurance,whenplainlyexpressed in a policy, are binding upon the parties and should be enforced by the courts, if the evidence brings the case clearly within their meaning and intent. It tends to bringthelawitselfintodisreputewhen,byastuteandsubtledistinctions,aplain case is attempted to be taken without the operation of a clear, reasonable, and materialobligationofthecontract. The appellant argues, however, that in view of the fact that the "storing" of the fireworks on the premises of the insured did not contribute in any way to the damage occasioned by the fire, he should be permitted to recover that the "storing" of the "hazardous goods" in no way caused injury to the defendant company. That argument, however, is beside the question, if the "storing" was a
48
violationofthetermsofthecontract.Theviolationofthetermsofthecontract,by virtue of the provisions of the policy itself, terminated, at the election of either party, he contractual relations. (Kyte vs. Commercial Union Assurance Co., 149 Mass.,116,122.)Theplaintiffpaidapremiumbasedupontheriskatthetimethe policywasissued.Certainlyitcannotbedeniedthattheplacingofthefirecrackers in the building insured increased the risk. The plaintiff had not paid a premium basedupontheincreasedrisk,neitherhadthedefendantissuedapolicyuponthe theory of a different risk. The plaintiff was enjoying, if his contention may be allowed may be allowed, the benefits of an insurance policy upon one risk, whereas, as a matter of fact, it was issued upon an entirely different risk. The defendanthadneitherbeenpaidnorhadissuesapolicytocovertheincreasedrisk. An increase of risk which is substantial and which is continued for a considerable periodoftime,isadirectandcertaininjurytotheinsurer,andchangesthebasis uponwhichthecontractofinsurancerests. Sec.75.Apolicymaydeclarethataviolationofspecifiedprovisionsthereofshall avoid it, otherwise the breach of an immaterial provision does not avoid the policy. GENERALINSURANCEV.NGHUA 106PHIL1117 FACTS: General Insurance and Surety Corporation issued its insurance Policy No. 471, insuringagainstfire,foroneyear,thestockintradeoftheCentralPomadeFactory ownedbyNgHua.Thedayafter,thegoodsweredestroyedbyfire.Itisundenied thatNgHuahadobtainedfireinsuranceonthesamegoods,forthesameperiodof time, in the amount of P20,000.00 from General Indemnity Co. By virtue of this, GeneralInsurancedeniedtheclaimofNgHua. HELD: Coinsuranceexistsundertheconditiondescribedbytheappellatecourt.Butthat is one kind of coinsurance. It is not the only situation where coinsurance exists. Other insurers of the same property against the same hazard are sometimes referred as coinsurers and the ensuing combination as coinsurance.1 And considering the terms of the policy which required the insured to declare other insurances, the statement in question must be deemed to be a statement (warranty)bindingonbothinsurerandinsured,thattherewerenootherinsurance
ontheproperty.Rememberitruns"CoInsurancedeclared";emphasisonthelast word. If "CoInsurance" means that the Court of Appeals says, the annotation servednopurpose.Itwouldevenbecontrarytothepolicyitself,whichinitsclause No. 17 made the insured a coinsurer for the excess of the value of the property overtheamountofthepolicy. Theannotationthen,mustbedeemedtobeawarrantythatthepropertywasnot insuredbyanyotherpolicy.Violationthereofentitlestheinsurertorescind. Furthermore, even if the annotations were overlooked, the defendant insurer wouldstillbefreefromliabilitybecausethereisnoquestionthatthepolicyissued by General Indemnity had not been stated in nor endorsed on Policy No. 471 of defendant. And as stipulated in the abovequoted provisions of such policy "all benefitunderthispolicyshallbeforfeited. To avoid the dissastrous effect of the misrepresentation or concealment of the otherinsurancepolicy,NgHuaalleges"actualknowledge"onthepartofGeneral insurance of the fact that he had taken out additional insurance with General Indemnity. He does not say when such knowledge was acquired or imparted. If GeneralInsuranceknowbeforeissuingitspolicyorbeforethefire,suchknowledge might overcome the insurer's defense.3 However, the Court of Appeals found no evidenceofsuchknowledge. Indeed,thisconcealmentandviolationwasexpresslysetupasaspecialdefensein the answer. Yet plaintiff did not, in avoidance, reply nor assert such knowledge. And it is doubtful whether the evidence on the point would be admissible under thepleadings. Sec. 76. A breach of warranty without fraud merely exonerates an insurer from thetimethatitoccurs,orwhereitisbrokeninitsinception,preventsthepolicy fromattachingtotherisk. PREMIUM Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insuredisexposedtotheperilinsuredagainst.Notwithstandinganyagreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been
49
paid, except in the case of a life or an industrial life policy whenever the grace periodprovisionapplies. PREMIUM,DEFINED Insurance premium is the agreed price or consideration paid by the insuredtotheinsurerforundertakingtoindemnifytheformeragainsta specifiedperil ENTITLEMENTOFINSURERTOIT 1. Insurerisentitledtopaymentassoonasthethinginsuredisexposedto the peril insured against. However, this is qualified. If the premium hasn'tbeenpaid,thecontractisntvalidandbindingevenifthethingis exposedtotheperilinsuredagainst. 2. By express provision of law, an insurance policy requires as one of its requisites the payment of premium for the contract to be valid and binding NOEXCUSEFORNONPAYMENT;EXCEPTIONS 1. Nonpayment of premiums cannot be excused by an act of God, by sickness or incapacity of the insured, or by war, since the time of paymentispeculiarlytheessenceofthecontract 2. However the failure to pay was due to the wrongful conduct of the insurer as the act of the insurer or his agent in refusing the tender of premium properly made, it will necessarily estop the insurer from claimingaforfeitureofpolicyfornonpaymentofpremium. PHIL.PHOENIXV.WOODWORKS 20SCRA1270 FACTS: 1.
3. 4.
adopted plan is hereto attached as Annex "B" and made a part hereof, thedocumentarystampsattachedtothepolicywasP96.42; ThatthedefendantpaidP3,000.00onSeptember22,1960underofficial receiptNo.30245ofplaintiff; Thatplaintiffmadeseveraldemandsondefendanttopaytheamountof P3,522.09.
HELD: There is, consequently, no doubt at all that, as between the insurer and the insured, there was not only a perfected contract of insurance but a partially performed one as far as the payment of the agreed premium was concerned. Thereafter the obligation of the insurer to pay the insured the amount for which thepolicywasissuedincasetheconditionsthereforhadbeencompliedwith,arose and became binding upon it, while the obligation of the insured to pay the remainderofthetotalamountofthepremiumduebecamedemandable. We cannot agree with appellant's theory that nonpayment by it of the premium due, produced the cancellation of the contract of insurance. Such theory would placeexclusivelyinthehandsofoneofthecontractingpartiestherighttodecide whetherthecontractshouldstandornot.Ratherthecorrectviewwouldseemto bethis:asthecontracthadbecomeperfected,thepartiescoulddemandfromeach other the performance of whatever obligations they had assumed. In the case of the insurer, it is obvious that it had the right to demand from the insured the completion of the payment of the premium due or sue for the rescission of the contract.Asitchosetodemandspecificperformanceoftheinsured'sobligationto paythebalanceofthepremium,thelatter'sdutytopayisindeedindubitable. PHIL.PHOENIXV.WOODWORKS 92SCRA419 FACTS: 1. 2. 3.
2.
Plaintiff issued to defendant Fire Policy No. 9652 for the amount of P300,000.00, under the terms and conditions therein set forth in said policy a copy of which is hereto attached and made a part hereof as Annex"A"; That the premiums of said policy as stated in Annex "A" amounted to P6,051.95; the margin fee pursuant to the adopted plan as an implementationofRepublicAct2609amountedtoP363.72,copyofsaid
On or before the expiration of the oneyear term, plaintiff notified defendant,throughitsIndorsementNo.F6963/61,ofthecancellationof thePolicyallegedlyuponrequestofdefendant. Thelatterhasdeniedhavingmadesucharequest. In said Indorsement, plaintiff credited defendant with the amount of P3,110.25fortheunexpiredperiodof94days,andclaimedthebalance ofP7,483.11representing,learnedpremium
50
4.
5.
6.
Plaintiff demanded in writing for the payment of said amount. Defendant, through counsel, disclaimed any liability in its reply letter contending, in essence, that it need not pay premium "because the Insurer did not stand liable for any indemnity during the period the premiumswerenotpaid." Plaintiff commenced action in the Court of First Instance of Manila, BranchIV(CivilCaseNo.49468),torecovertheamountofP7,483.11as "earnedpremium."Defendantcontrovertedbasicallyonthetheorythat itsfailure"topaythepremiumaftertheissuanceofthepolicyputanend totheinsurancecontractandrenderedthepolicyunenforceable." Judgment was rendered in plaintiff's favor "ordering defendant to pay plaintiff the sum of P7,483.11, with interest thereon at the rate of 6%, perannumfromJanuary30,1962,untiltheprincipalshallhavebeenfully paid,plusthesumofP700.00asattorney'sfeesoftheplaintiff,andthe costsofthesuit."FromthisadverseDecision,defendantappealedtothe CourtofAppealswhich,asheretoforestated,certifiedthecasetousona questionoflaw.
In fact, if the peril insured against had occurred, plaintiff, as insurer, would have hadavaliddefenseagainstrecoveryunderthePolicyithadissued.Explicitinthe Policy itself is plaintiff's agreement to indemnify defendant for loss by fire only "afterpaymentofpremium,"supra.Compliancebytheinsuredwiththetermsof thecontractisaconditionprecedenttotherightofrecovery. CAPITALINSURANCEV.PLASTICERACO. 65SCRA134 FACTS: CapitalInsurancedeliveredanopenfirepolicytoPlasticEra.Inthesaidpolicy,the former undertook to insure the latter's building, equipments, raw materials, products and accessories located at Sheridan Street, Mandaluyong, Rizal. The policy expressly provides that if the property insured would be destroyed or damagedbyfireafterthepaymentofthepremiums,atanytimebetweenthe15th day of December 1960 and one o'clock in the afternoon of the 15th day of December1961,theinsurancecompanyshallmakegoodallsuchlossordamagein anamountnotexceedingP100,000.00.Whenthepolicywasdelivered,PlasticEra failed to pay the corresponding insurance premium. However, through its duly authorizedrepresentative,itexecutedthefollowingacknowledgmentreceipt: ThisacknowledgedreceiptofFirePolicy)NO.22760Premium xxxxx)(Ipromisetopay) (P2,220.00)(hasbeenpaid) THIRTYDAYSAFTERoneffectivedate (Date) As partial payment of the premiums due, Plastic Era delivered a posted check, dated on the due date of the premium. This was belatedly deposited by Capital Insurance, wherein on the date of deposit, the check was dishonored for insufficientfunds. In the meantime, 2 days after the due date, a fire broke out and destroyed the materialsandproductsofPlasticEra.PlasticEradulyfiledaclaimbutwasdenied byCapitalInsuranceforfailuretopaythepremiumdue.ThispromptedPlasticEra tofileanactionanditwasdulysustainedandaffirmedbytheappellatecourt. HELD:
HELD: Clearly, the Policy provides for prepayment of premium. Accordingly; "when the policyistenderedtheinsuredmustpaythepremiumunlesscreditisgivenorthere isawaiver,orsomeagreementobviatingthenecessityforprepayment." There is failure to find any clear agreement that a credit extension was accorded defendant. And even if it were to be presumed that plaintiff had extended credit from the circumstances of the unconditional delivery of the Policy without prepaymentofthepremium,yetitisobviousthatdefendanthadnotacceptedthe insurer's offer to extend credit, which is essential for the validity of such agreement. Inthisrespect,theinstantcasediffersfromthatinvolvingthesamepartieswhere recovery of the balance of the unpaid premium was allowed inasmuch as in that case "there was not only a perfected contract of insurance but a partially performedoneasfarasthepaymentoftheagreedpremiumwasconcerned."This isnotthesituationobtainingherewherenopartialpaymentofpremiumshasbeen madewhatsoever. Sincethepremiumhadnotbeenpaid,thepolicymustbedeemedtohavelapsed.
51
Themeredeliveryofabillofexchangeinpaymentofadebtdoesnotimmediately effectpayment.Itsimplysuspendstheactionarisingfromtheoriginalobligationin satisfactionofwhichitwasdelivered,untilpaymentisaccomplishedeitheractually orpresumptively.5Tenderofdraftorcheckinordertoeffectpaymentthatwould extinguish the debtor's liability should be actually cashed. If the delivery of the check of Plastic Era to Capital Insurance were to be viewed in the light of the foregoing,nopaymentofthepremiumhadbeeneffected,foritisonlywhenthe checkiscashedthatitissaidtoeffectpayment. Significantly, Capital Insurance accepted the promise of Plastic Era to pay the insurancepremiumwithinthirty(30)daysfromtheeffectivedateofpolicy.Byso doing, it has implicitly agreed to modify the tenor of the insurance policy and in effect,waivedtheprovisionthereinthatitwouldonlypayforthelossordamagein case the same occurs after the payment of the premium. Considering that the insurancepolicyissilentastothemodeofpayment,CapitalInsuranceisdeemed tohaveacceptedthepromissorynoteinpaymentofthepremium.Thisrendered thepolicyimmediatelyoperativeonthedateitwasdelivered. Byacceptingitspromisetopaytheinsurancepremiumwithinthirty(30)daysfrom theeffectivitydateofthepolicyDecember17,1960CapitalInsurancehadineffect extendedcredittoPlasticEra.Thepaymentofthepremiumontheinsurancepolicy therefore became an independent obligation the nonfulfillment of which would entitle Capital Insurance to recover. It could just deduct the premium due and unpaiduponthesatisfactionofthelossunderthepolicy.Itdidnothavetheright tocancelthepolicyfornonpaymentofthepremiumexceptbyputtingPlasticErain defaultandgivingitpersonalnoticetothateffect.ThisCapitalInsurancefailedto do. VALENZUELAV.CA 191SCRA1 FACTS: ValenzuelawasanauthorizedagentofPHILAMGEN.Partoftheagencyagreement is that at every solicitation of insurance policy, Valenzuela would be entitled to a commission. Later, he was able to solicit marine insurance policy from Delta Motors. He wasn't paid accordingly his commissions. Then, the insurance company became interested in his commissions that they proposed a 5050 split. AsafternumerouseffortsValenzuelawasstillreluctant,theconcernedofficersof
PHILAMGEN deployed harassment tactics against him. This turned to the detrimentofthebusinessofValenzuela. HELD: The principal cause of the termination of Valenzuela as General Agent of PHILAMGEN arose from his refusal to share his Delta commission. The records sustaintheconclusionsofthetrialcourtontheapparentbadfaithoftheprivate respondentsinterminatingtheGeneralAgencyAgreementofpetitioners. As to the issue of whether or not the petitioners are liable to Philamgen for the unpaidanduncollectedpremiumswhichtherespondentcourtorderedValenzuela to pay Philamgen the amount of One Million Nine Hundred ThirtyTwo Thousand Five Hundred ThirtyTwo and 17/100 Pesos (P1,932,532,17) with legal interest thereonuntilfullypaid,thereisnolegalandfactualbasisforthesame. Under Section 77 of the Insurance Code, the remedy for the nonpayment of premiumsistoputanendtoandrendertheinsurancepolicynotbinding. Perforce, since admittedly the premiums have not been paid, the policies issued havelapsed.Theinsurancecoveragedidnotgointoeffectordidnotcontinueand theobligationofPhilamgenasinsurerceased.Hence,forPhilamgenwhichhadno more liability under the lapsed and inexistent policies to demand, much less sue Valenzuela for the unpaid premiums would be the height of injustice and unfair dealing.Inthisinstance,withthelapsingofthepoliciesthroughthenonpaymentof premiumsbytheinsuredtherewerenomoreinsurancecontractstospeakof.As this Court held in the Philippine Phoenix Surety case, supra "the nonpayment of premiumsdoesnotmerelysuspendbutputsanendtoaninsurancecontractsince thetimeofthepaymentispeculiarlyoftheessenceofthecontract." AREOLAV.CA 236SCRA643 FACTS: SevenmonthsaftertheissuanceofpetitionerAreola'sPersonalAccidentInsurance Policy, respondent insurance company unilaterally cancelled the same since company records revealed that petitionerinsured failed to pay his premiums. Monthsafter,itofferedtoreinstatethepolicyaswellasextendtheperiodcovered afterknowingthatAreoladulypaidhispremiumsbutthesamewasn'tremittedby
52
the insurance agent. This notwithstanding, Areola filed an action for damages againsttheinsurancecompany. HELD: Malapit'sfailuretoremitthepremiumshereceivedcannotconstituteadefensefor private respondent insurance company; no exoneration from liability could result therefrom. The fact that private respondent insurance company was itself defraudedduetotheanomaliesthattookplaceinitsBaguiobranchoffice,suchas the nonaccrual of said premiums to its account, does not free the same from its obligationtopetitionerAreola. Consequently,respondentinsurancecompanyisliablebywayofdamagesforthe fraudulent acts committed by Malapit that gave occasion to the erroneous cancellationofsubjectinsurancepolicy.Itsearlieractofreinstatingtheinsurance policy can not obliterate the injury inflicted on petitionerinsured. Respondent company should be reminded that a contract of insurance creates reciprocal obligations for both insurer and insured. Reciprocal obligations are those which arisefromthesamecauseandinwhicheachpartyisbothadebtorandacreditor of the other, such that the obligation of one is dependent upon the obligation of theother. Under the circumstances of instant case, the relationship as creditor and debtor between the parties arose from a common cause: i.e., by reason of their agreement to enter into a contract of insurance under whose terms, respondent insurance company promised to extend protection to petitionerinsured against the risk insured for a consideration in the form of premiums to be paid by the latter. Under the law governing reciprocal obligations, particularly the second paragraphofArticle1191,theinjuredparty,petitionerinsuredinthiscase,isgiven a choice between fulfillment or rescission of the obligation in case one of the obligors, such as respondent insurance company, fails to comply with what is incumbentuponhim.However,saidarticleentitlestheinjuredpartytopaymentof damages, regardless of whether he demands fulfillment or rescission of the obligation. Untenable then is reinstatement insurance company's argument, namely,thatreinstatementbeingequivalenttofulfillmentofitsobligation,divests petitionerinsuredofarightfulclaimforpaymentofdamages.Suchaclaimfindsno supportinourlawsonobligationsandcontracts. TIBAYV.CA
257SCRA126 FACTS: Fortune issued a fire insurance policy in favor of Tibay for her twostorey residentialbuilding.Outofthewholepremiumsdue,shewasonlyabletopaya minimal partial payment. Thereafter, on a relevant date, a fire broke out and destroyed the building. This prompted Tibay to file a claim against Fortune, on whichthelatterdeniedpayment. HELD: Insurance is a contract whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.Theconsiderationisthepremium,whichmustbepaidatthetimeandinthe wayandmannerspecifiedinthepolicy,andifnotsopaid,thepolicywilllapseand beforfeitedbyitsownterms. Clearlythepolicyinthiscaseprovidesforpaymentofpremiuminfull.Accordingly, wherethepremiumhasonlybeenpartiallypaidandthebalancepaidonlyafterthe peril insured against has occurred, the insurance contract did not take effect and theinsuredcannotcollectatallonthepolicy.ThisisfullysupportedbySec.77of theInsuranceCode. Conformably with the aforesaid stipulations explicitly worded and taken in conjunctionwithSec.77oftheInsuranceCodethepaymentofpartialpremiumby the assured in this particular instance should not be considered the payment requiredbythelawandthestipulationoftheparties.Rather,itmustbetakenin theconceptofadeposittobeheldintrustbytheinsureruntilsuchtimethatthe fullamounthasbeentenderedanddulyreceiptedfor.Inotherwords,asexpressly agreeduponinthecontract,fullpaymentmustbemadebeforetheriskoccursfor thepolicytobeconsideredeffectiveandinforce. Thus,novinculumjuriswherebytheinsurerbounditselftoindemnifytheassured according to law ever resulted from the fractional payment of premium. The insurancecontractitselfexpresslyprovidedthatthepolicywouldbeeffectiveonly whenthepremiumwaspaidinfull.Itwouldhavebeenaltogetherdifferentwereit notsostipulated.Ergo,petitionershadabsolutefreedomofchoicewhetherornot to be insured by FORTUNE under the terms of its policy and they freely opted to adherethereto.
53
UCPBV.MASAGANATELEMART 356SCRA307 FACTS: Masaganawasissued5fireinsurancepoliciesbyUCPBGENandtheformerissued managerscheckstopaythesame.Thelatteracceptedthetenderofpaymentand dulyissuedreceipts.Thedayaftertenderofcheckswasmade,Masaganafileda claim for loss due to a fire that transpired. The insurer denied the claim on the grounds that the insurance policies have already expired, that it had previously informedMasaganaofthesame,andthatthelossbeingclaimedtranspiredbefore thetenderofpaymentbyMasagana. HELD: Section77oftheInsuranceCodeof1978provides: SECTION77.Aninsurerisentitledtopaymentofthepremiumassoonasthething insuredisexposedtotheperilinsuredagainst.Notwithstandinganyagreementto thecontrary,nopolicyorcontractofinsuranceissuedbyaninsurancecompanyis validandbindingunlessanduntilthepremiumthereofhasbeenpaid,exceptinthe case of a life or an industrial life policy whenever the grace period provision applies. This Section is a reproduction of Section 77 of P.D. No. 612 (The Insurance Code) promulgatedon18December1974.Inturn,thisSectionhasitssourceinSection 72ofActNo.2427otherwiseknownastheInsuranceActasamendedbyR.A.No. 3540,approvedon21June1963,whichread: SECTION 72. An insurer is entitled to payment of premium as soon as the thing insuredisexposedtotheperilinsuredagainst,unlessthereisclearagreementto grant the insured credit extension of the premium due. No policy issued by an insurancecompanyisvalidandbindingunlessanduntilthepremiumthereofhas beenpaid.(Italicsupplied) It can be seen at once that Section 77doesnotrestatetheportion of Section72 expresslypermittinganagreementtoextendtheperiodtopaythepremium.But arethereexceptionstoSection77?
Theanswerisintheaffirmative. ThefirstexceptionisprovidedbySection77itself,andthatis,incaseofalifeor industriallifepolicywheneverthegraceperiodprovisionapplies. ThesecondisthatcoveredbySection78oftheInsuranceCode,whichprovides: SECTION 78. Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policybinding,notwithstandinganystipulationthereinthatitshallnotbebinding untilpremiumisactuallypaid. AthirdexceptionwaslaiddowninMakatiTuscanyCondominiumCorporationvs. Court of Appeals, wherein we ruled that Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment hasbeenmadeatthetimeofloss. Tuscany also has provided a fourth exception to Section 77, namely, that the insurer may grant credit extension for the payment of the premium. This simply meansthatiftheinsurerhasgrantedtheinsuredacredittermforthepaymentof the premium and loss occurs before the expiration of the term, recovery on the policyshouldbeallowedeventhoughthepremiumispaidafterthelossbutwithin thecreditterm. Moreover,thereisnothinginSection77whichprohibitsthepartiesinaninsurance contracttoprovideacredittermwithinwhichtopaythepremiums. Sec.78.Anacknowledgmentinapolicyorcontractofinsuranceorthereceiptof premium is conclusive evidence of its payment, so far as to make the policy binding,notwithstandinganystipulationthereinthatitshallnotbebindinguntil thepremiumisactuallypaid. ACKNOWLEDGMENTOFRECEIPTOFPREMIUMCONCLUSIVE When a policy is used with an acknowledgement of premium,, such acknowledgementisconclusivetomakethepolicybindingalthoughthe same policy contains a stipulation that it shall not be binding until the premiumisactuallypaid Thelawcreatesalegalfictionofpayment
54
AMERICANHOMEINSURANCEV.CHUA G.R.No.130421June28,1999 FACTS: 1. 2. 3.
4. 5. 6.
7. HELD: Thegeneralruleininsurancelawsisthatunlessthepremiumispaidtheinsurance policy is not valid and binding. The only exceptions are life and industrial life insurance.Whetherpaymentwasindeedmadeisaquestionoffactwhichisbest determined by the trial court. The trial court found, as affirmed by the Court of Appeals,thattherewasavalidcheckpaymentbyrespondenttopetitioner. Accordingtothetrialcourttherenewalcertificateissuedtorespondentcontained theacknowledgmentthatpremiumhadbeenpaid.Itisnotdisputedthatthecheck drawnbyrespondentinfavorofpetitioneranddeliveredtoitsagentwashonored when presented and petitioner forthwith issued its official receipt to respondent on 10 April 1990. Section 306 of the Insurance Code provides that any insurance companywhichdeliversapolicyorcontractofinsurancetoaninsuranceagentor insurance broker shall be deemed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy or contractofinsuranceatthetimeofitsissuanceordeliveryorwhichbecomesdue thereon. In the instant case, the best evidence of such authority is the fact that
AmericanHomeInsuranceissuedafireinsurancepolicytoChuaforthe stockingoodsofthelatter Aftertheperiodofeffectivityofthepolicy,Chuarenewedthesame. He paid the premium, through giving of a check, to American Homes insurance agent and consequently, the agent issued to him a renewal certificate, part of which was written acknowledging acceptance of payment. However, the insurance company only received the check 8 days after andthereafterissuedtheofficialreceipt. Unfortunately, the day after the agent was paid for the renewal of the policy,firedestroyedthegoodsinsured. The company didn't want to pay Chua for the insurance and averred amongotherreasonsthattherewasnoinsurancepolicyasthepremium wasn'tpaidyetatthetimethefirebrokeout. BoththetrialcourtandCAadjudgedinfavorofChua.
petitioneracceptedthecheckandissuedtheofficialreceiptforthepayment.Itis, aswell,boundbyitsagent'sacknowledgmentofreceiptofpayment. Sec.78oftheInsuranceCodeexplicitlyprovides: Anacknowledgmentinapolicyorcontractofinsuranceofthereceiptofpremium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premiumisactuallypaid. ThisSectionestablishesalegalfictionofpaymentandshouldbeinterpretedasan exceptiontoSection77. Sec.79.Apersoninsuredisentitledtoareturnofpremium,asfollows: (a) To the whole premium if no part of his interest in the thing insured be exposedtoanyoftheperilsinsuredagainst; (b) Where the insurance is made for a definite period of time and the insured surrenders his policy, to such portion of the premium as corresponds with the unexpired time, at a pro rata rate, unless a short period rate has been agreed upon and appears on the face of the policy, after deducting from the whole premium any claim for loss or damage under the policy which has previously accrued;Provided,Thatnoholderofalifeinsurancepolicymayavailhimselfof theprivilegesofthisparagraphwithoutsufficientcauseasotherwiseprovidedby law. GREPALIFEV.CA 184SCRA501 FACTS: Cortezappliedforalifeinsurancepolicy.Heunderwentmedicalexaminationsand otherrequirements.Hewasdulyissuedthepolicybytheunderwriter.Hewasalso advised that he could pay the first premium, within the 30day grace period of issuanceofpolicy.Hepaidhispremiumsbythreeinstallments.Thereafter,hewas informedthathispolicywasn'tenforceableandifhewantedtoreviveit,hewould need to pay the balance of his unpaid premiums. This repulsed Cortez and
55
informed the company that it was him who was cancelling the policy and demandedthereturnofthepremiumshepaid. HELD: Petitioner should have informed Cortez of the deadline for paying the first premium before or at least upon delivery of the policy to him, so he could have complied with what was needful and would not have been misled into believing thathislifeandhisfamilywereprotectedbythepolicy,whenactuallytheywere not.And,ifthepremiumpaidbyCortezwasunacceptableforbeinglate,itwasthe company's duty to return it. By accepting his premiums without giving him the correspondingprotection,thecompanyactedinbadfaith. Sections79,81and82ofP.D.612oftheInsuranceCodeof1978providewhenthe insuredisentitledtothereturnofpremiumpaid. SECTION79.Apersoninsuredisentitledtoareturnofpremium,asfollows: (a)Tothewholepremium,ifnopartofhisinterestinthethinginsuredbeexposed toanyoftheperilsinsuredagainst. (b) Where the insure is made for a definite period of time and the insured surrenders his policy, to such portion of the premium as corresponds with the unexpiredtime,ataproratarate,unlessashortperiodratehasbeenagreedupon andappearsonthefaceofthepolicy,afterdeductingfromthewholepremiumany claimforlossordamageunderthepolicywhichhaspreviouslyaccrued:Provided, Thatnoholderofalifeinsurancepolicymayavailhimselfoftheprivilegesofthis paragraphwithoutsufficientcausesasotherwiseprovidedbylaw. SECTION 81. A person insured is entitled to a return of the premium when the contractisvoidableonaccountofthefraudormisrepresentationoftheinsureror ofhisagentoronaccountoffactstheexistenceofwhichtheinsuredwasignorant without his fault; or when, by any default of the insured other than actual fraud, theinsurerneverincurredanyliabilityunderthepolicy. SECTION82.Incaseofanoverinsurancebyseveralinsurers,theinsuredisentitled to a ratable return of the premium, proportioned to the amount by which the aggregatesuminsuredinallthepoliciesexceedstheinsurablevalueofthethingat risk.
Since his policy was in fact inoperative or ineffectual from the beginning, the companywasneveratrisk,hence,itisnotentitledtokeepthepremium. The award of moral damages to Cortez was proper for there can hardly be any doubt that he must have suffered moral shock, serious anxiety and wounded feelings upon being informed by the petitioner six (6) months after it issued the policytohimandfour(4)monthsafterreceivingthefullpremium,thathispolicy was in fact worthless for it never took effect, hence, he and his family never receivedtheprotectionthathepaidfor. Sec.80.Ifaperilinsuredagainsthasexisted,andtheinsurerhasbeenliablefor anyperiod,howevershort,theinsuredisnotentitledtoreturnofpremiums,so farasthatparticularriskisconcerned. MAKATITUSCANYV.CA 215SCRA462 FACTS: American Home Assurance issued in favor of Tuscany Condo Corporation a fire insurance policy covering its building and premises. The insured was able to pay thepremiumsbyinstallmentswhichwasdulyacceptedbytheinsurer.Thispolicy wassubsequentlyrenewed.Onthefirstrenewal,thepremiumswerethenagain paid in installments. On the second renewal, the insured was able to pay two installmentsbutonthethirdinstallment,itfailedtopay.Theinsurancecompany sought the payment of the third installment and one of the defenses posed by Tuscanywasthatthepolicywasn'tvalidandbinding. HELD: Thesubjectpoliciesarevalidevenifthepremiumswerepaidoninstallments.The records clearly show that petitioner and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered paymentofthepremiums.Theinitialinsurancecontractenteredintoin1982was renewedin1983,thenin1984.Inthosethree(3)years,theinsureracceptedallthe installmentpayments.Suchacceptanceofpaymentsspeaksloudlyoftheinsurer's intentiontohonorthepoliciesitissuedtopetitioner.Certainly,basicprinciplesof equity and fairness would not allow the insurer to continue collecting and acceptingthepremiums,althoughpaidoninstallments,andlaterdenyliabilityon thelameexcusethatthepremiumswerenotpreparedinfull.
56
WhiletheimportofSection77isthatprepaymentofpremiumsisstrictlyrequired asaconditiontothevalidityofthecontract,Wearenotpreparedtorulethatthe request to make installment payments duly approved by the insurer, would prevent the entire contract of insurance from going into effect despite payment and acceptance of the initial premium or first installment. Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy binding despitethefactthatpremiumisactuallyunpaid.Section77merelyprecludesthe partiesfromstipulatingthatthepolicyisvalidevenifpremiumsarenotpaid,but does not expressly prohibit an agreement granting credit extension, and such an agreementisnotcontrarytomorals,goodcustoms,publicorderorpublicpolicy. So is an understanding to allow insured to pay premiums in installments not so proscribed. At the very least, both parties should be deemed in estoppel to questionthearrangementtheyhavevoluntarilyaccepted. Sec.81.Apersoninsuredisentitledtoreturnofthepremiumwhenthecontract is voidable, on account of fraud or misrepresentation of the insurer, or of his agent, or on account of facts, the existence of which the insured was ignorant withouthisfault;orwhenbyanydefaultoftheinsuredotherthanactualfraud, theinsurerneverincurredanyliabilityunderthepolicy. GREPALIFEV.CA Supra Sec.82.Incaseofanoverinsurancebyseveralinsurers,theinsuredisentitledto a ratable return of the premium, proportioned to the amount by which the aggregatesuminsuredinallthepoliciesexceedstheinsurablevalueofthething atrisk. WHENTHEINSUREDISENTITLEDTOARETURNOFPREMIUM 1. When no part of the interest in the thing insured has been exposed to anyoftheperilsinsuredagainst a. The assumption of risk is one of the essential elements of an insurancecontract
2.
3. 4. 5. 6.
If there is no assumption of risk because the thing insured wasn'texposedtotheperilinsuredagainst,novalidinsurance contractwaseffectedandthepremiummayberecovered c. Where the risk is entire and the contract is indivisible, the insuredisntentitledtoareturnofthepremiumiftheinsurer wasexposedtotheperilforanyperiod,howevershort Where the insurance is made for a definite period of time and the insuredsurrendershispolicybeforetheexpirationoftheperiod a. Where the insurance is for a definite period and the insured surrendersthepolicy,hecanrecoveraportionofthepremium ascorrespondswiththeunexpiredterm b. Thisdoesn'tapplywhen i. Theinsuranceisnotforadefiniteperiod ii. Ashortperiodratehasbeenagreeduponratesthat are usually found in a table of figures in the policy stipulating the amount of premiums for specified short times or premiums at short time basis. When said short period rate is agreed upon, the amount recoverable upon surrender will not be the amount corresponding to the unexpired period but only the balance after deducting the percentage to be retained by the insurer as stated in the short rate table iii. The policy is a life insurance policya life insurance policy is an indivisible insurance contract and hence the insured cannot recover the premiums already paid. Where the contract is voidable on account of the fraud or misrepresentationoftheinsurerorofhisagent Whenthecontractisvoidableonaccountoffacts,theexistenceofwhich theinsuredwasignorantorwithouthisfault Whenbyanydefaultoftheinsuredotherthanactualfraud,theinsurer neverincurredanyliabilityunderthepolicy Incaseofanoverinsurancebyseveralinsurers LOSS
b.
57
Sec.83.Anagreementnottotransfertheclaimoftheinsuredagainsttheinsurer afterthelosshashappened,isvoidifmadebeforethelossexceptasotherwise providedinthecaseoflifeinsurance. TRANSFEROFINSURANCECLAIM A prohibition against the transfer of the claim after the loss is against public policy and therefore void because the rights of the parties are fixedaftertheloss,andtheassignmentismerelyatransferofachoseof actionagainsttheinsurer AnexceptiontothisisfoundinSection173whichprohibitsthetransfer ofafireinsurancepolicytoanypersonorcompanywhoactsasanagent orotherwiserepresentstheissuingcompanyanddeclaressuchtransfer voidinsofarasitmayaffectothercreditorsoftheinsured Anotherexceptioniswhatisprovidedforinlifeinsurance Sec.84.Unlessotherwiseprovidedbythepolicy,aninsurerisliableforalossof which a peril insured against was the proximate cause, although a peril not contemplatedbythecontractmayhavebeenaremotecauseoftheloss;buthe isnotliableforalosswhichtheperilinsuredagainstwasonlyaremotecause.
Peril insured against
Proximate causeof theloss
Insureris liable
CAUSEOFLOSSOFINSURANCE Takenotethatinsurerisnotliableiftheperilinsuredagainstisjustthe remotecause PROXIMATECAUSE In a natural and continuous sequence, unbroken by any efficient interveningcause,producesaninjuryandwithoutwhichtheinjurywould nothaveoccurred
Sec. 85. An insurer is liable where the thing insured is rescued from a peril insuredagainstthatwouldotherwisehavecausedaloss,if,inthecourseofsuch rescue, the thing is exposed to a peril not insured against, which permanently deprives the insured of its possession, in whole or in part; or where a loss is causedbyeffortstorescuethethinginsuredfromaperilinsuredagainst. PRINCIPLEOFPROXIMATECAUSEEXTENDEDTOLOSSINCURREDWHILESAVING THETHINGINSURED Aninsurerisliablewherewhilesavingthepropertyfromtheperilinsured against that would otherwise cause the loss, the thing insured is damaged Howeverwherethelosstookplacenotinthecourseofsuchrescuefrom theperilinsuredagainst,theinsurerisnotliable Sec. 86. Where a peril is especially excepted in a contract of insurance, a loss, whichwouldnothaveoccurredbutforsuchperil,istherebyexceptedalthough theimmediatecauseofthelosswasaperilwhichwasnotexcepted. WHENEXCEPTEDPERILISTHEPROXIMATECAUSE The insurer isnt liable if the proximate cause is an excepted peril althoughtheimmediateperilisaperilnotexcepted An immediate cause is the cause or condition nearest to the time and placeofinjury Proximatecauseisnotequivalenttoimmediatecause Theinsurerhastheburdenofproofisprovingthatcauseisexcepted PARISMANILAPERFUMEV.PHOENIXASSURANCE 45PHIL753 FACTS: Phoenix issued a fire insurance policy covering the properties of insured. On a relevant date, a fire broke out and destroyed the properties of the insured. The insured duly made a claim against Phoenix and was denied. One of the grounds assertedbyPhoenixisthatthepolicywasnotinthenameofthecompanybutin
Itistheefficientcausethatothersintomotion,towhichthelossistobe attributedalthoughotherandincidentalcausesmaybenearerintimeto theresultandoperatemoreimmediatelyinproducingtheloss
58
thenameofonePeterJohnson.Anothergroundraisedisthatthepolicydoesn't coverexplosions.Thetrialcourthoweveroverruleditsdefensesandruledinfavor oftheinsured. HELD: Thefactorywherethefireoccurredwasfiledwithnumerouskindsofessencesand oils used in the manufacture of perfumery and with a quantity of alcohol and manufacturedperfumes,allofwhichwereofahighlyinflammablenature,andthe fire may have started from any one of a number of reasons. But in the final analysis,thefactremainsthattherewasafire,andthattheplaintiffspropertywas destroyed.Itistruethatitmaybethattheexplosionwastheprimarycauseofthe fire, but that is only a matter of conjecture, and upon that point, the burden of proofwasuponthedefendant. Itwillbenotedthatsection5ofthesubjectpolicyexcludesnotonlythedamages which may immediately result from an earthquake, but also any damage which may follow the earthquake, and that section 6 excludes only the damages which are the direct result of the explosion itself, and that it does not except damages which occurred from the fire occuring after the explosion, even though the explosion may have been the primary cause of the fire. But assuming, without deciding, that if it be a fact that the fire resulted from an explosion that fact, if proven,wouldbeacompletedefense,theburdenoftheproofofthatfactisupon the defendant, and upon that point, there is a failure of proof. There is no competentevidenceastowhethertheexplosioncausedthefireorthefirecaused theexplosion. Sec.87.Aninsurerisnotliableforalosscausedbythewillfulactorthroughthe connivance of the insured; but he is not exonerated by the negligence of the insured,oroftheinsuranceagentsorothers. PRATSV.PHOENIXASSURANCE 52PHIL807 FACTS: PratsandCompanypurchasedabuildingonwhichitstoreditsmerchandise.The building and merchandise were covered by several insurance policies and one of them was issued by Phoenix. A fire broke out and destroyed the building. Prats
duly filed its claim but was denied on the ground that the fire was caused by connivanceoftheinsuredwithothersaswellastheclaimwasn'tingoodfaith. HELD: Theinsurancepolicywhichwasthesubjectofactioninthiscasewasheldtohave beenavoidedbytheconnivanceoftheinsuredinsettingfiretotheinsuredgoods andthesubmissionoftheinsuredoffraudulentproofofloss. The finding of the trial court in the effect that the plaintiff had submitted false proofinthesupportofhisclaimisalsowellfounded.Thatconclusionappearsto have been based upon three items of proof. These two facts are, first, that the plaintiffhadsubmittedaclaimforjewelrylostinthefireasofavalueofP12,800 when the true value of said jewelry was about P600; and, secondly, that the plaintiff had sought to recover from the insurance company the value of goods whichhadbeensurreptitiouslywithdrawnbyitfromthebodegapriortothefire. Neitherofthesetwofactsareconsistentwithgoodfaithonthepartoftheplaintiff, and each constituted a breach of the stipulations of the policy against the use of fraudulentdevicesandfalseproofwithrespecttotheloss. Theotherpointreliedupontosupportconclusionthattheplaintiffhadattempted to deceive the defendant with respect to the extent of the loss was at least competent in its general bearing on the good faith of the plaintiff, even if, as is probablytrue,notalonesufficienttoconstituteabreachofthesamestipulations. Thepointisthis:Afterthefiretheplaintiffpresentedtotheadjustercertaincost sheets and copies of supposed invoices in which the prices and expenses of importation of a quantity of goods were stated at double the true amount. The adjuster soon discovered the artificial nature of these documents, and, with his consent,theywerewithdrawnbyPratsandsubsequentlydestroyed.Atthehearing Pratsstatedthatthesedocumentshadbeenfabricatedinorderthattheymightbe exhibitedtointendingpurchasersofthegoods,therebymakingitappeartothem thatthecostofthemerchandisehadbeenmuchgreaterthanitinfactwasaruse which is supposed to have been entirely innocent or at least not directed against the insurer. But a question naturally arises as to the purpose which these documentsmighthavebeenmadetoserveifthefire,asdoubtlessintendedbyits designers, had been so destructive as to remove all vestiges of the stock actually involved.Uponthewholeweareforcedtostatetheconclusion,notonlythatthe plaintiff caused the fire to be set, or connived therein, but also that it submitted fraudulentproofasthetrialjudgefound.
59
NOTICEOFLOSS Sec.88.Incaseoflossuponaninsuranceagainstfire,aninsurerisexonerated,if noticethereofbenotgiventohimbyaninsured,orsomepersonentitledtothe benefitoftheinsurance,withoutunnecessarydelay. NOTICEOFLOSSMUSTBEGIVENWITHOUTUNNECESSARYDELAY Anoticeoflossapprisestheinsureroftheoccurenceoftheloss Purpose is to enable the insurer to make proper investigation and take suchactionasmaybenecessarytoprotectitsinterest Noparticularformisprescribedbylaw There is no unnecessary delay if the notice is given as soon as the circumstances permitted the insured, in the exercise of reasonable diligencetocommunicate BACHRACHV.BRITISHAMERICANASSURANCE Supra HELD: Where the terms of an insurance policy require that notice of loss be given, a denialofliabilitybytheinsurersunderthepolicyoperatesasawaiverofnoticeof loss because if the policy is null and void the furnishing of such notice would be vainanduseless.Immediatenoticemeansreasonabletime. Sec. 89. When a preliminary proof of loss is required by a policy, the insured is notboundtogivesuchproofaswouldbenecessaryinacourtofjustice;butitis sufficientforhimtogivethebestevidencewhichhehasinhispoweratthetime. Sec.90.Alldefectsinanoticeofloss,orinpreliminaryproofthereof,whichthe insured might remedy, and which the insurer omits to specify to him, without unnecessarydelay,asgroundsofobjection,arewaived. MALAYANINSURANCEV.ARNALDO Supra HELD:
The last point raised by the petitioner should not pose much difficulty. The valuation fixed in fire insurance policy is conclusive in case of total loss in the absence of fraud, which is not shown here. Loss and its amount may be determined on the basis of such proof as may be offered by the insured, which neednotbeofsuchpersuasivenessasisrequiredinjudicialproceedings.If,asin thiscase,theinsuredfilesnoticeandpreliminaryproofoflossandtheinsurerfails tospecifytotheformerallthedefectsthereofandwithoutunnecessarydelay,all objectionstonoticeandproofoflossaredeemedwaivedunderSection90ofthe InsuranceCode. ThecertificationissuedbytheIntegratedNationalPolice,Laoang,Samar,astothe extentofPinca'slossshouldbeconsideredsufficient.Notably,MICOsubmittedno evidence to the contrary nor did it even question the extent of the loss in its answer before the Insurance Commission. It is also worth observing that Pinca's property was not the only building bumed in the fire that razed the commercial districtofLaoang,Samar,onJanuary18,1982. ThereisnothingintheInsuranceCodethatmakestheparticipationofanadjuster intheassessmentofthelossimperativeorindespensable,asMICOsuggests. PACIFICBANKV.CA 168SCRA1 FACTS: 1. 2.
3. 4. 5. 6.
Paramount Shirts insured its properties against fire with Oriental Assurance. Paramount was indebted to petitioner for a long time already. It was holding the same properties in trust in favor of petitioner under a trust agreement. Orientalwasdulyfurnishednoticeofthisfact.Itknewthattheinsurance proceedswerepayabletopetitioner. On a relevant date, a fire broke out and destroyed Paramounts properties. Petitioner filed with Oriental Assurance its claim but it was informed to waitasthelatterwaswaitingfortheassessorsreportonthematter. The assessor reported that no claim was filed by Paramount which was allegedlyaclearviolationofthepolicy.
60
HELD: In the case at bar, policy condition No. 11 specifically provides that the insured shallonthehappeningofanylossordamagegivenoticetothecompanyandshall withinfifteen(15)daysaftersuchlossordamagedelivertotheprivaterespondent (a)aclaiminwritinggivingparticularaccountastothearticlesorgoodsdestroyed andtheamountofthelossordamageand(b)particularsofallotherinsurances,if any.Likewise,insuredwasrequired"athisownexpensetoproduce,procureand give to the company all such further particulars, plans, specifications, books, vouchers, invoices, duplicates or copies thereof, documents, proofs and informationwithrespecttotheclaim". The evidence adduced shows that twentyfour (24) days after the fire, petitioner merelywroteletterstoprivaterespondenttoserveasanoticeofloss,thereafter, the former did not furnish the latter whatever pertinent documents were necessary to prove and estimate its loss. Instead, petitioner shifted upon private respondent the burden of fishing out the necessary information to ascertain the particularaccountofthearticlesdestroyedbyfireaswellastheamountofloss.It is noteworthy that private respondent and its adjuster notified petitioner that insuredhadnotyetfiledawrittenclaimnorsubmittedthesupportingdocuments incompliancewiththerequirementssetforthinthepolicy.Despitethenotice,the latterremainedunheedful.Sincetherequiredclaimbyinsured,togetherwiththe preliminary submittal of relevant documents had not been complied with, it follows that private respondent could not be deemed to have finally rejected petitioner's claim and therefore the latter's cause of action had not yet arisen. Compliance with condition No. 11 is a requirement sine qua non to the right to maintain an action as prior thereto no violation of petitioner's right can be attributabletoprivaterespondent.Thisisso,asbeforesuchfinalrejection,there was no real necessity for bringing suit. Petitioner should have endeavored to file the formal claim and procure all the documents, papers, inventory needed by private respondent or its adjuster to ascertain the amount of loss and after compliance await the final rejection of its claim. Indeed, the law does not encourageunnecessarylitigation. ItappearingthatinsuredhasviolatedorfailedtoperformtheconditionsunderNo. 3and11ofthecontract,andsuchviolationorwantofperformancehasnotbeen waivedbytheinsurer,theinsuredcannotrecover,muchlessthehereinpetitioner.
Sec.91.Delayinthepresentationtoaninsurerofnoticeorproofoflossiswaived if caused by any act of him, or if he omits to take objection promptly and specificallyuponthatground. PACIFICTIMBERV.CA Supra HELD: Thedefenseofdelayasraisedbyprivaterespondentinresistingtheclaimcannot besustained.Thelawrequiresthisgroundofdelaytobepromptlyandspecifically assertedwhenaclaimontheinsuranceagreementismade.Theundisputedfacts showthatinsteadofinvokingthegroundofdelayinobjectingtopetitioner'sclaim of recovery on the cover note, it took steps clearly indicative that this particular groundforobjectiontotheclaimwasneverinitsmind.Thenatureofthisspecific groundforresistingaclaimplacestheinsurerondutytoinquirewhenthelosstook place, so that it could determine whether delay would be a valid ground upon whichtoobjecttoaclaimagainstit. In the proceedings that took place later in the Office of the Insurance Commissioner,privaterespondentshouldthenhaveraisedthisgroundofdelayto avoidliability.Itdidnotdoso.Itmustbebecauseitdidnotfindanydelay,asthis Courtfailstofindarealandsubstantialsignthereof.Butevenontheassumption that there was delay, this Court is satisfied and convinced that as expressly providedbylaw,waivercansuccessfullyberaisedagainstprivaterespondent.Thus Section84oftheInsuranceActprovides: Section 84. Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of his or if he omits to take objection promptly and specificallyuponthatground. Sec.92.Ifthepolicyrequires,bywayofpreliminaryproofofloss,thecertificate ortestimonyofapersonotherthantheinsured,itissufficientfortheinsuredto usereasonablediligencetoprocureit,andincaseoftherefusalofsuchpersonto giveit,thentofurnishreasonableevidencetotheinsurerthatsuchrefusalwas notinducedbyanyjustgroundsofdisbeliefinthefactsnecessarytobecertified ortestified.

Insurance Angel Aguinaldo Notes

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Insurance Angel Aguinaldo Notes

Uploaded by

Copyright:

Available Formats

INSURANCE(ATTY.

Apartyisnotboundtodisclosematerialfactsthedisclosureofwhichis waived o Expresslybythetermsofthecontract o Impliedly,byneglecttomakeinquiriesonsuchfactswhichcan bedistinctlyimpliedintheotherfactsalreadycommunicated

Dateof issueof policy (2000)

Forgotto pay premium: willcause lapseof insurance policy

Reinstatem ent:new questions (avenuefor concealme ntand misreprese ntation)

AMERICANHOMEINSURANCEV.CHUA G.R.No.130421June28,1999 FACTS: 1. 2. 3.

Peril insured against

Proximate causeof theloss

Itistheefficientcausethatothersintomotion,towhichthelossistobe attributedalthoughotherandincidentalcausesmaybenearerintimeto theresultandoperatemoreimmediatelyinproducingtheloss

You might also like