Insurance Case Digest v7 PDF

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY.
E SALAO
GELO. JACOB. MONETTE.
(a)
Heirs of Loreto C. Maramag v. Eva Verna De Guzman Maramag, et. al., G.R.
No. 181132, June 5 20009 ...................................................................................3
Topic: Insurable interest; Beneficiaries ...............................................................3
(b)
Asian Terminals, Inc. v. First Lepanto-Taisho Corp., G.R. No. 185964, June
16, 2014 .............................................................................................................4
(c)
2014
H.H. Hollero Construction, Inc. v. GSIS, G.R. No. 152334, September 24,
5
(d)
2014
Sun Life Canada (Phil.), Inc. v. Sandra Tan Kit, G.R. No. 183272, October 15,
6
(e)
Alpha Insurance and Surety Co. v. Arsenia Sonia Castor, G.R. No. 198174,
September 2, 2013 ..............................................................................................7
(f) The Insular Life v Feliciano, GR 47593, 29 Dec 1943 ..........................................8
(g) Constantino v Asia Life, GR 1669, 31 Aug 1950 .................................................8
(h) FILIPINAS COMPAIA DE SEGUROS, petitioner, v CHRISTERN, HUENEFELD and
CO., INC., respondent (25 May 1951) ....................................................................9
Topic: Termination of policy of public enemy; Return of premiums upon termination
of policy by reason of war .................................................................................9
(i) IGNACIO SATURNINO, in his own behalf and as the JUDICIAL GUARDIAN OF
CARLOS SATURNINO, minor, plaintiffs-appellants, v THE PHILIPPINE AMERICAN LIFE
INSURANCE COMPANY, defendant-appellee. (28 Feb 1963) .................................. 10
Topic: Non-medical insurance; Concealment, whether intentional or unintentional;
Concealment of previous operation .................................................................. 10
(j) The Insular Life v Ebrado, GR L-44059, 28 Oct 1977 ........................................ 10
(k) Edillon v Manila Bankers, GR 34200, 30 Sep 1982 ........................................... 11
Topic: Concealment of age, not a case of; Waiver ............................................. 11
(l) NG GAN ZEE, plaintiff-appellee, v ASIAN CRUSADER LIFE ASSURANCE
CORPORATION, defendant-appellant (30 May 1983)............................................. 12
(m) THELMA VDA. DE CANILANG, petitioner, v HON. COURT OF APPEALS and GREAT
PACIFIC LIFE ASSURANCE CORPORATION, respondents. (17 June 1993) ............... 13
Topic: Concealment ........................................................................................ 13
(n) Sunlife Assurance v CA, GR 105135, 22 Jun 1995 ............................................ 14
Topic: Concealment; Materiality ....................................................................... 14
(o) Travellers Insurance v Hon. CA, GR 82036, 22 May 1997 ................................. 15
(p) GREAT PACIFIC LIFE ASSURANCE CORP., petitioner vs. COURT OF APPEALS AND
MEDARDA V. LEUTERIO, respondent. (13 Oct 1999) ............................................. 15
Topic: Mortgages; Mortgage Redemption; Real party in interest; Mortgage

Redemption Insurance; Concealment ............................................................... 15
(q) UCPB GENERAL INSURANCE CO., INC., petitioner, v MASAGANA TELAMART, INC.,
respondent. (15 June 1999; 4 Apr 2001) ............................................................. 17
Topic: Payment of Premiums, exceptions to the rule in Sec 77; Estoppel;
Synallagmatic characteristic of insurance .......................................................... 17
(r) Philamcare v CA, GR 125678, 18 Mar 2002 ...................................................... 18
(s) White Gold Marine Services v Pioneer Insurance, GR 154514, 28 Jul 2005 ......... 18
(t) GULF RESORTS, INC., petitioner, v PHILIPPINE CHARTER INSURANCE
CORPORATION, respondent (16 May 2005) ......................................................... 19
Topic: Interpretation of provisions of insurance policy; Elements of insurance;
Premium; Contracts of Adhesion ...................................................................... 19
(u) REPUBLIC OF THE PHILIPPINES, by EDUARDO T. MALINIS, in His Capacity as
Insurance Commissioner, petitioner, v DEL MONTE MOTORS, INC., respondent (9
Oct 2006) ......................................................................................................... 20
Topic: Insurance Commissioner, regulation of insurance industry; Exemption of
security deposit from levy or garnishment ........................................................ 20
(v) GAISANO CAGAYAN v. INSURANCE COMPANY OF NORTHERN AMERICA ........... 21
(v) Sing v. Feb Leasing & Finance Corp., G.R. No. 168115, June 8, 2007 ................ 22
(x) Eternal Gardens Memorial Park Corp. v. The Philippine American Life Insurance
Company, G.R. No. 166245, April 9, 2008 ............................................................ 23
(y) VIOLETA LALICAN v. THE INSULAR LIFE ASSURANCE CO., G.R. No. 166245, April
9, 2008 ............................................................................................................. 23
(z) PHILIPPINE HEALTH CARE PROVIDERS, INC., Petitioner, v COMMISSIONER OF
INTERNAL REVENUE, Respondent (18 Sept 2009) ................................................ 25
Topic: Health Maintenance Organizations (HMOs); Doing insurance business;
Contract of insurance; Risk as an element of insurance contract ......................... 25
(aa) New World International Dev. v. NYK-FilJapan Shipping Co., G.R. No. 171468,
August 24, 2011 ................................................................................................ 27
(bb) Ma. Lourdes S. Florendo v. Philam Plans, Inc., Perla Abcede and Ma. Celeste
Abcede, G.R. No. 186983, February 22, 2012 ....................................................... 30
(cc)United Merchants Corp. v. Country Bankers Insurance Corp., G.R. No. 198588,
July 11, 2012 .................................................................................................... 30
(dd) Paramount Insurance Corp. v. Spouses Yves and Ma. Theresa Remondeulaz,
G.R. No. 173773, November 28, 2012 ................................................................. 30
TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

(ee) MALAYAN INSURANCE CO., INC., Petitioner, v PHILIPPINES FIRST INSURANCE
CO., INC. and REPUTABLE FORWARDER SERVICES, INC., Respondents (11 Jul 2012)
....................................................................................................................... 31
Topic: Other insurance vis--vis over insurance; Elements of double insurance;
Solidary liability in insurance contract ............................................................... 31
(ff) MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION
(MMPSEU), Petitioner, v MITSUBISHI MOTORS PHILIPPINES
CORPORATION, Respondent (17 June 2013) ........................................................ 33
Topic: Collateral source rule ............................................................................ 33
(gg) MANILA BANKERS LIFE INSURANCE CORPORATION, Petitioner v CRESENCIA P.
ABAN, Respondent (29 Jul 2013)......................................................................... 35
Topic: Contract of adhesion; Incontestability clause .......................................... 35

(a) Heirs of Loreto C. Maramag v. Eva Verna De Guzman Maramag, et. al.,
G.R. No. 181132, June 5 20009
Topic: Insurable interest; Beneficiaries
Sec. 53 of the Insurance Code
GR: The only persons entitled to claim the insurance proceeds are either the insured,
if still alive; or the beneficiary, if the insured is already deceased, upon the
maturation of the policy.
XPN: Where the insurance contract was intended to benefit third persons who are not
parties to the same in the form of favorable stipulations or indemnity. In such a case,
third parties may directly sue and claim from the insurer.
Facts:
1.
A petition was filed by Heirs of Loreto (petitioner, also legitimate family)
against Respondents (illegitimate family) with the RTC for revocation and/or
reduction of insurance proceeds for being void and/or inofficious, with prayer for a
TRO and a writ of preliminary injunction alleging that Eva (respondent) was the
concubine of Loreto hence disqualified from receiving the proceeds from Respondents
Insular and Grepalife
2.
It was also alleged that being a suspect, to the killing of Loreto, Eva was
disqualified and that the illegitimate children (respondents) were only entitled to of
the share of the legitimate children.
3.
Respondent Insular, in its Answer, stated that Loreto misrepresented Eva as
his legitimate wife and it immediately disqualified her upon learning of such
misrepresentation. Further, it also alleged that petition failed to state a cause of
action insofar as it sought to declare as void the designation of Eva as beneficiary.
Insular further claimed that it was bound to honor the insurance policies designating
the children of Loreto with Eva as beneficiaries pursuant to Sec. 53 of the Insurance
Code.
4.
Respondent Grepalife, for its part, alleged that Eva was not designated as
beneficiary and it disqualified the illegitimate children upon learning of the
misrepresentation.
5.
The Respondents failed to file their answer.
6.
In its comment, it stated that designation of a beneficiary is an act of
liberality or a donation and, therefore, subject to the provisions of Articles 752 and
772 of the Civil Code.
7.
In reply, both Insular and Grepalife countered that the insurance proceeds
belong exclusively to the designated beneficiaries in the policies, not to the estate or
to the heirs of the insured. Grepalife also reiterated that it had disqualified Eva as a
beneficiary when it ascertained that Loreto was legally married to Vicenta Pangilinan
Maramag.
8.
The RTC dismissed the case insofar as the illegitimate children but ordered
the action to proceed with respect to the other defendants Eva, Insular and Grepalife.
9.
MR was filed by Insular and Grepalife and it was granted. Its ruling was
based on Sec. 53
10.
On appeal, the CA dismissed the appeal for lack of jurisdiction.
Issue: WON the members of the legitimate family is entitled to the
proceeds of the insurance for the concubine since she was disqualified
Held:
1.
It is evident from the face of the complaint that petitioners are not entitled
to a favorable judgment in light of Art. 2011 of the Civil Code which expressly
provides that insurance contracts shall be governed by special laws, i.e., the
Insurance Code. Sec. 53 of the Insurance Code states
Sec. 53. The insurance proceeds shall be applied exclusively to the proper
interest of the person in whose name or for whose benefit it is made unless
otherwise specified in the policy.
2.
Pursuant to Sec. 53, it is obvious that the only persons entitled to claim the
insurance proceeds are either the insured, if still alive; or the beneficiary, if the
insured is already deceased, upon the maturation of the policy.
3.
The exception to this rule is a situation where the insurance contract was
intended to benefit third persons who are not parties to the same in the form of
favorable stipulations or indemnity. In such a case, third parties may directly sue and
claim from the insurer.
4.
Petitioners are third parties to the insurance contracts with Insular and
Grepalife and, thus, are not entitled to the proceeds thereof.
5.
Accordingly, respondents Insular and Grepalife have no legal obligation to
turn over the insurance proceeds to petitioners.
6.
The revocation of Eva as a beneficiary in one policy and her disqualification
as such in another are of no moment considering that the designation of the
illegitimate children as beneficiaries in Loretos insurance policies remains valid.
Because no legal proscription exists in naming as beneficiaries the children of illicit
relationships by the insured, the shares of Eva in the insurance proceeds, whether
forfeited by the court in view of the prohibition on donations under Article 739 of the
Civil Code or by the insurers themselves for reasons based on the insurance
contracts, must be awarded to the said illegitimate children, the designated
beneficiaries, to the exclusion of petitioners.
7.
It is only in cases where the insured has not designated any beneficiary, or
when the designated beneficiary is disqualified by law to receive the proceeds, that
the insurance policy proceeds shall redound to the benefit of the estate of the
insured.
8.
WHEREFORE, the petition is DENIED for lack of merit.

(b) Asian Terminals, Inc. v. First Lepanto-Taisho Corp., G.R. No. 185964,
June 16, 2014
Doctrine: Subrogation
Facts:
1.
On July 6, 1996, 3,000 bags of sodium tripolyphosphate contained in 100 plain

jumbo bags complete and in good condition were loaded and received on board
M/V "Da Feng" owned by China Ocean Shipping Co. (COSCO) in favor of
consignee, Grand Asian Sales, Inc. (GASI).
2. Based on a Certificate of Insurance dated August 24, 1995, it appears that the
shipment was insured against all risks by GASI with FIRST LEPANTO for
P7,959,550.50 under Marine Open Policy No. 0123.
3. The shipment arrived in Manila on July 18, 1996 and was discharged into the
possession and custody of ATI, a domestic corporation engaged in arrastre
business.
4. The shipment remained for quite some time at ATIs storage area until it was
withdrawn by broker, Proven Customs Brokerage Corporation (PROVEN), on
August 8 and 9, 1996 for delivery to the consignee.
5. Upon receipt of the shipment, GASI subjected the same to inspection and found
that the delivered goods incurred shortages of 8,600 kilograms and spillage of
3,315 kg for a total of11,915 kg of loss/damage valued at P166,772.41.
6. GASI sought recompense from COSCO and PROVEN but was denied. Hence it
pursued indemnification from the shipments insurer.
7. Respondent First Lepanto as insurer paid GASI and the latter executed a release
of claim in favor of First Lepanto.
8. First Lepano, as subrogee, demanded from COSCO, PROVEN and ATI for the
payment it made in favor of GASI. When the demand was not heeded, it filed a
complaint for sum of money with the MeTC.
9. The MeTC absolved ATI and PROVEN and subjected COSCO. But since COSCO is
a foreign corporation, hence, it has no jurisdiction
10. On appeal, the RTC reversed the findings of the MeTC. In so ruling, it absolved
COSCO, SMITH BELL and PROVEN but held ATI liable since
11. On appeal, the CA dismissed the appeal
12. Hence, this petition
2.
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be subrogated to the rights of
the insured against the wrong-doer or the person who has violated the contract. If
the amount paid by the insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from the person causing
the loss or injury.
3.
4.
5.
6.
7.
Issue: WON First Lepanto was validly subrogated to the rights of GASI
Held:
1. Subrogation is the substitution of one person in the place of another
with reference to a lawful claim or right, so that he who is substituted
succeeds to the rights of the other in relation to a debt or claim,
including its remedies or securities.
The right of subrogation springs from Article 2207 of the Civil Code which states:
8.
As a general rule, the marine insurance policy needs to be presented in evidence

before the insurer may recover the insured value of the lost/damaged cargo in
the exercise of its subrogatory right. In Malayan Insurance Co., Inc. v. Regis
Brokerage Corp., the Court stated that the presentation of the contract
constitutive of the insurance relationship between the consignee and
insurer is critical because it is the legal basis of the latters right to
subrogation.
In Home Insurance Corporation v. CA, the Court also held that the insurance
contract was necessary to prove that it covered the hauling portion of
the shipment and was not limited to the transport of the cargo while at
sea. The shipment in that case passed through six stages with different parties
involved in each stage until it reached the consignee. The insurance contract,
which was not presented in evidence, was necessary to determine the scope of
the insurers liability, if any, since no evidence was adduced indicating at what
stage in the handling process the damage to the cargo was sustained.
An analogous disposition was arrived at in the Wallem case cited by ATI wherein
the Court held that the insurance contract must be presented in evidence in
order to determine the extent of its coverage. It was further ruled therein that
the liability of the carrier from whom reimbursement was demanded was not
established with certainty because the alleged shortage incurred by the cargoes
was not definitively determined.
Nevertheless, the rule is not inflexible. In certain instances, the Court has
admitted exceptions by declaring that a marine insurance policy is dispensable
evidence in reimbursement claims instituted by the insurer.
In Delsan Transport Lines, Inc. v. CA, the Court ruled that the right of
subrogation accrues simply upon payment by the insurance company
of the insurance claim. Hence, presentation in evidence of the marine
insurance policy is not indispensable before the insurer may recover from the
common carrier the insured value of the lost cargo in the exercise of its
subrogatory right.
The subrogation receipt, by itself, was held sufficient to establish not only the
relationship between the insurer and consignee, but also the amount paid to
settle the insurance claim. The presentation of the insurance contract was
deemed not fatal to the insurers cause of action because the loss of the cargo
undoubtedly occurred while on board the petitioners vessel.
4

9. The same rationale was the basis of the judgment in International Container
Terminal Services, Inc. v. FGU Insurance Corporation, wherein the arrastre
operator was found liable for the lost shipment despite the failure of the
insurance company to offer in evidence the insurance contract or policy. As in
Delsan, it was certain that the loss of the cargo occurred while in the petitioners
custody.
10. Based on the attendant facts of the instant case, the application of the
exception is warranted. As discussed above, it is already settled that
the loss/damage to the GASIs shipment occurred while they were in
ATIs custody, possession and control as arrastre operator. Verily, the
Certificate of Insurance and the Release of Claim presented as
evidence sufficiently established FIRST LEPANTOs right to collect
reimbursement as the subrogee of the consignee, GASI.
11. With ATIs liability having been positively established, to strictly require the
presentation of the insurance contract will run counter to the principle of equity
upon which the doctrine of subrogation is premised. Subrogation is designed to
promote and to accomplish justice and is the mode which equity adopts to
compel the ultimate payment of a debt by one who in justice, equity and good
conscience ought to pay.
12. The payment by the insurer to the insured operates as an equitable assignment
to the insurer of all the remedies which the insured may have against the third
party whose negligence or wrongful act caused the loss. The right of subrogation
is not dependent upon, nor does it grow out of any privity of contract or upon
payment by the insurance company of the insurance claim. It accrues simply
upon payment by the insurance company of the insurance claim.
(c) H.H. Hollero Construction, Inc. v. GSIS, G.R. No. 152334, September
24, 2014
Doctrine: Construction of Insurance Contract
Facts:
1.
2.
Petitioner HHH and GSIS entered into a Project Agreement whereby the latter
undertook the development of a GSIS housing project known as Modesta Village
Section B (Project) while the former obligated itself to insure the Project,
including all its improvement under a Contractors All Risk Insurance (CAR)
Pursuant to the said Agreement, Petitioner HHH took two CAR. Both policies
include the following:
(a) there must be prior notice of claim for loss, damage or liability within fourteen
(14) days from the occurrence of the loss or damage;
(b) all benefits thereunder shall be forfeited if no action is instituted within
twelve(12) months after the rejection of the claim for loss, damage or liability;
and
(c) if the sum insured is found to be less than the amount required to be insured,
the amount recoverable shall be reduced tosuch proportion before taking into
account the deductibles stated in the schedule (average clause provision).
3.
4.
5.
6.
7.
8.
During the construction, three (3) typhoons hit the country which caused
considerable damage to the Project. Thus, Petitioner HHH filed several claims for
indemnity with GSIS
GSIS rejected the claims for damages because no amount is recoverable
pursuant to the average clause provision under the policies and that "no loss"
basis, appearing from its records that the policies were not renewed before the
onset of the said typhoon.
Petitioner HHH then filed a complaint for sum of money and damages before the
RTC
GSIS opposed the motion since it was barred by the 12-month limit provided
under the policy.
The RTC held in favor of HHH
On appeal, the CA affirmed the decision of the RTC
Issue: WON the letters of GSIS amounts to a final rejection of the claim of
HHH
Held:
1. A perusal of the letter43 dated April 26, 1990 shows that the GSIS denied
petitioners indemnity claims wrought by Typhoons Biring and Huaning, it
appearing that no amount was recoverable under the policies.
2. While the GSIS gave petitioner the opportunity to dispute its findings, neither of
the parties pursued any further action on the matter; this logically shows that
they deemed the said letter as a rejection of the claims.
3. Lest it cause any confusion, the statement in that letter pertaining to any queries
petitioner may have on the denial should be construed, at best, as a form of
notice to the former that it had the opportunity to seek reconsideration of the
GSISs rejection. Surely, petitioner cannot construe the said letter to be a mere
"tentative resolution." In fact, despite its disavowals, petitioner admitted in its
pleadings that the GSIS indeed denied its claim through the aforementioned
letter, buttarried in commencing the necessary action in court.
4. The same conclusion obtains for the letter dated June 21, 1990 denying
petitioners indemnity claim caused by Typhoon Saling on a "no loss" basis due
to the non-renewal of the policies therefor before the onset of the said typhoon.
The fact that petitioner filed a letter of reconsideration therefrom dated April 18,
1991, considering too the inaction of the GSIS on the same similarly shows that
the June 21, 1990 letter was also a final rejection of petitioners indemnity claim.
5. The "final rejection" simply means denial by the insurer of the claims of the
insured and not the rejection or denial by the insurer of the insureds motion or
request for reconsideration. The rejection referred to should be construed as the
rejection in the first instance, as in the two instances above-discussed.
5

6. The insured' s cause of action or his right to file a claim either in the
Insurance Commission or in a court of competent jurisdiction [as in
this case] commences from the time of the denial of his claim by the
Insurer, either expressly or impliedly.
7. But as pointed out by the petitioner insurance company, the rejection referred to
should be construed as the rejection, in the first instance, for if what is being
referred to is a reiterated rejection conveyed in a resolution of a yetition for
reconsideration, such should have been expressly stipulated.52
8. In light of the foregoing, it is thus clear that petitioner's causes of
action for indemnity respectively accrued from its receipt of the letters
dated April 26, 1990 and June 21, 1990, or the date the GSIS rejected
its claims in the first instance.
9. Consequently, given that it allowed more than twelve (12) months to
lapse before filing the necessary complaint before the R TC on
September 27, 1991, its causes of action had already prescribed.
10. WHEREFORE, the petition is DENIED.
8.
9.
Issue: WON petitioner is liable to pay interest on the premium to be

refunded to the respondents
1.
2.
3.
(d) Sun Life Canada (Phil.), Inc. v. Sandra Tan Kit, G.R. No. 183272,
October 15, 2014
Doctrine: Concealment
4.
Facts:
1.
2.
3.
4.
5.
6.
7.
Respondent Tan Kit is the widow and designated beneficiary of Norberto Tan Kit
(Norberto), whose application for a life insurance policy, with face value of
P300,000.00, was granted by petitioner on October 28, 1999.
On February 19, 2001, or within the two-year contestability period, Norberto died
of disseminated gastric carcinoma. Consequently, respondent Tan Kit filed a
claim under the subject policy.
In a letter Petitioner Sun Life denied the claim of Respondent Tan Kit on account
of Norbertos failure to fully and faithfully disclose in his insurance application
certain material and relevant information about his health and smoking history
According to petitioner, its underwriters would not have approved Norbertos
application for life insurance had they been given the correct information.
Believing that the policy is null and void, petitioner opined that its liability is
limited to the refund of all the premiums paid
Sun Life enclosed in the said letter a check for P13,080.93 representing the
premium refund. Tan Kit refused the check and insist on the payment of the
insurance proceeds
Petitioner then filed a Complaint for Rescission of Insurance Contract before the
RTC
The RTC held in favor of Tan Kit. The RTC concluded that petitioner, through the
above-mentioned circumstances, had already cleared Norberto of any
misrepresentation that he may have committed.
On appeal, the CA reversed the decision of the RTC. It held that Norberto is
guilty of concealment which misled petitioner in forming its estimates of the risks
of the insurance policy. This gave petitioner the right to rescind the insurance
contract which it properly exercised in this case.
Hence, this appeal
5.
6.
7.
8.
9.
Petitioner avers that Tio Khe Chio, albeit pertaining to marine insurance, is
instructive on the issue of payment of interest.
There, the Court pointed to Sections 243 and 244 of the Insurance Code which
explicitly provide for payment of interest when there is unjustified refusal or
withholding of payment of the claim by the insurer, and to Article 220924 of the
New Civil Code which likewise provides for payment of interest when the debtor
is in delay.
The Court finds, however, that Tio Khe Chio is not applicable here as it deals
with payment of interest on the insurance proceeds in which the claim therefor
was either unreasonably denied or withheld or the insurer incurred delay in the
payment thereof.
In this case, what is involved is an order for petitioner to refund to respondents
the insurance premium paid by Norberto as a consequence of the rescission of
the insurance contract on account of the latters concealment of material
information in his insurance application. Moreover, petitioner did not
unreasonably deny or withhold the insurance proceeds as it was satisfactorily
established that Norberto was guilty of concealment.
It is undisputed that simultaneous to its giving of notice to respondents that it
was rescinding the policy due to concealment, petitioner tendered the refund of
premium by attaching to the said notice a check representing the amount of
refund.
However, respondents refused to accept the same since they were seeking for
the release of the proceeds of the policy. Because of this discord, petitioner filed
for judicial rescission of the contract. Petitioner, after receiving an adverse
judgment from the RTC, appealed to the CA.
And as may be recalled, the appellate court found Norberto guilty of concealment
and thus upheld the rescission of the insurance contract and consequently
decreed the obligation of petitioner to return to respondents the premium paid
by Norberto. Moreover, we find that petitioner did not incur delay or unjustifiably
deny the claim.
Based on the foregoing, we find that petitioner properly complied with its
obligation under the law and contract. Hence, it should not be made liable to pay
compensatory interest.
Considering the prevailing circumstances of the case, we hereby direct petitioner
to reimburse the premium paid within 15 days from date of finality of this
Decision. If petitioner fails to pay within the said period, then the amount shall
6

be deemed equivalent to a forbearance of credit. In such a case, the rate of
interest shall be 6% per annum.
10. Wherefore, Sun Life is ordered to pay the interest on the premium
(e) Alpha Insurance and Surety Co. v. Arsenia Sonia Castor, G.R. No.
198174, September 2, 2013
Doctrine: Construction of Insurance Contract
Facts:
1.
On February 21, 2007, respondent Castor entered into a contract of insurance,

Motor Car Policy, with petitioner, involving her motor vehicle, a Toyota Revo DLX
DSL.
2. The contract of insurance obligates the petitioner to pay the respondent the
amount of Six Hundred Thirty Thousand Pesos (P630,000.00) in case of loss or
damage to said vehicle during the period covered, which is from February 26,
2007 to February 26, 2008.
3. On April 16, 2007, at about 9:00 a.m., respondent instructed her driver, Jose
Joel Salazar Lanuza (Lanuza), to bring the above-described vehicle to a nearby
auto-shop for a tune-up.
4. However, Lanuza no longer returned the motor vehicle to respondent and
despite diligent efforts to locate the same, said efforts proved futile.
5. Resultantly, respondent promptly reported the incident to the police and
concomitantly notified petitioner of the said loss and demanded payment of the
insurance proceeds in the total sum of P630,000.00.
6. In a letter, petitioner denied the claim of Respondent Castor on the ground that
the policy contains a clause that the Company shall not be liable for any
malicious damage caused by a person in the insureds service
7. Respondent then filed a complaint for sum of money with damages with the
RTC.
8. The RTC held in favor of Respondent Castor
9. On appeal, the CA affirmed in toto the decision of the RTC. MR was denied.
10. Hence, this petition
Theft perpetrated by a driver of the insured is not an exception to the coverage from
the insurance policy subject of this case. This is evident from the very provision of
Section III "Loss or Damage." The insurance company, subject to the limits of
liability, is obligated to indemnify the insured against theft. Said provision does not
qualify as to who would commit the theft. Thus, even if the same is committed by the
driver of the insured, there being no categorical declaration of exception, the same
must be covered. As correctly pointed out by the plaintiff, "(A)n insurance contract
should be interpreted as to carry out the purpose for which the parties entered into
the contract which is to insure against risks of loss or damage to the goods. Such
interpretation should result from the natural and reasonable meaning of language in
the policy. Where restrictive provisions are open to two interpretations, that which is
most favorable to the insured is adopted." The defendant would argue that if the
person employed by the insured would commit the theft and the insurer would be
held liable, then this would result to an absurd situation where the insurer would also
be held liable if the insured would commit the theft. This argument is certainly
flawed. Of course, if the theft would be committed by the insured himself, the same
would be an exception to the coverage since in that case there would be fraud on the
part of the insured or breach of material warranty under Section 69 of the Insurance
Code.
2.
3.
4.
5.
Issue: WON Petitioner Alpha Insurance may be held liable on the policy
Held:
1.
Yes. Ruling in favor of respondent, the RTC of Quezon City scrupulously

elaborated that theft perpetrated by the driver of the insured is not an exception
to the coverage from the insurance policy, since Section III thereof did not
qualify as to who would commit the theft. Thus:
6.
7.
Moreover, 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.
Accordingly, in interpreting the exclusions in an insurance contract, the
terms used specifying the excluded classes therein are to be given their
meaning as understood in common speech.
Adverse to petitioners claim, the words "loss" and "damage" mean different
things in common ordinary usage. The word "loss" refers to the act or fact of
losing, or failure to keep possession, while the word "damage" means
deterioration or injury to property.
Therefore, petitioner cannot exclude the loss of respondents vehicle under the
insurance policy under paragraph 4 of "Exceptions to Section III," since the same
refers only to "malicious damage," or more specifically, "injury" to the motor
vehicle caused by a person under the insureds service. Paragraph 4 clearly does
not contemplate "loss of property," as what happened in the instant case.
The CA aptly ruled that "malicious damage," as provided for in the subject policy
as one of the exceptions from coverage, is the damage that is the direct result
from the deliberate or willful act of the insured, members of his family, and any
person in the insureds service, whose clear plan or purpose was to cause
damage to the insured vehicle for purposes of defrauding the insurer
True, it is a basic rule in the interpretation of contracts that the terms of a
contract are to be construed according to the sense and meaning of the terms
which the parties thereto have used. In the case of property insurance policies,
7

the evident intention of the contracting parties, i.e., the insurer and the assured,
determine the import of the various terms and provisions embodied in the policy.
However, when the terms of the insurance policy are ambiguous, equivocal or
uncertain, such that the parties themselves disagree about the meaning of
particular provisions, the policy will be construed by the courts liberally in favor
of the assured and strictly against the insurer.
8. Lastly, a contract of insurance is a contract of adhesion. So, when the
terms of the insurance contract contain limitations on liability, courts
should construe them in such a way as to preclude the insurer from
non-compliance with his obligation. Thus, in Eternal Gardens Memorial
Park Corporation v. Philippine American Life Insurance Company, this
Court ruled
It must be remembered that an insurance contract is a contract of adhesion which
must be construed liberally in favor of the insured and strictly against the insurer in
order to safeguard the latters interest. Thus, in Malayan Insurance Corporation v.
Court of Appeals, this Court held that:
Indemnity and liability insurance policies are construed in accordance with the
general rule of resolving any ambiguity therein in favor of the insured, where the
contract or policy is prepared by the insurer. A contract of insurance, being a contract
of adhesion, par excellence, any ambiguity therein should be resolved against the
insurer; in other words, it should be construed liberally in favor of the insured and
strictly against the insurer. Limitations of liability should be regarded with extreme
jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations.
9.
In the more recent case of Philamcare Health Systems, Inc. v. Court of Appeals,
we reiterated the above ruling, stating that:
When the terms of insurance contract contain limitations on liability, courts should
construe them in such a way as to preclude the insurer from non-compliance with his
obligation. Being a contract of adhesion, the terms of an insurance contract are to be
construed strictly against the party which prepared the contract, the insurer. By
reason of the exclusive control of the insurance company over the terms and
phraseology of the insurance contract, ambiguity must be strictly interpreted against
the insurer and liberally in favor of the insured, especially to avoid forfeiture.
10. WHEREFORE, the petition is DENIED
(f) The Insular Life v Feliciano, GR 47593, 29 Dec 1943
FACTS: Evaristo Feliciano, who died, was suffering with advanced pulmonary
tuberculosis when he signed his application for insurance with Insular Life. X-ray
pictures were taken and informed the medical examiner for Insular Life of such
circumstance. However, the policy was still approved due to the connivance with the
soliciting agent and the medical examiner.
Also, the question contained in the application"Have you ever suffered from any
ailment or disease of the lungs, pleurisy, pneumonia or asthma?" appears to have
been answered, "No." and the signature of the applicant Evaristo Feliciano.
The petitioner Insular Life insist that upon the facts of the case the policies in
question are null and void ab initio and that all that the respondents are entitled to is
the refund of the premiums paid thereon.
ISSUE: Whether such policies are void ab initio.
HELD: Yes.
The policies were issued on the basis of the statement subscribed by the applicant to
the effect that he was and had been in good health, when as a matter of fact he was
then suffering from advanced pulmonary tuberculosis. Although the agent and the
medical examiner knew that statement to be false, no valid contract of insurance was
entered into because there was no real meeting of the minds of the parties.
In connivance with soliciting Agent and medical examiner, the insured was a coparticipant, and co-responsible with Agent David and Medical Examiner Valdez, in the
fraudulent procurement of the policies in question and that by reason thereof said
policies are void ab initio.
(g) Constantino v Asia Life, GR 1669, 31 Aug 1950
FACTS: These two cases, appealed from the Court of First Instance of Manila, call for
decision of the question whether the beneficiary in a life insurance policy may recover
the amount thereof although the insured died after repeatedly failing to pay the
stipulated premiums, such failure having been caused by the last war in the Pacific.
ISSUE: Whether the beneficiary in a life insurance policy may recover the amount
thereof even non-payment of premiums due to war.
HELD: No.
When the life insurance policy provides that non-payment of premiums will cause its
forfeiture, war does not excuse non-payment, and does not avoid forfeiture.
Rejecting the Connecticut Rule, and the New York Rule, the court adopts the United
States Rule about the effects of war upon non-payment of premiums.

Professor Vance of Yale, in his standard treatise on Insurance, says that in
determining the effect of non-payment of premiums occasioned by war, the American
cases may be divided into three groups, according as they support the so-called
Connecticut Rule, the New York Rule, or the United States Rule.
However, petitioner paid to respondent the sum of P92,650 pursuant to an order of

the Director of Bureau of Financing, Philippine Executive Commission.
The first holds the view that "there are two elements in the consideration for which
the annual premium is paidFirst, the mere protection for the year, and, second, 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, the
payment of premiums is a condition precedent, the nonperformance of which, even
when performance would be illegal, necessarily defeats the right to renew the
contract."
The trial court dismissed petitioners action, affirmed by CA.
The second rule, apparently followed by the greater number of decisions, holds that
"war between states in which the parties reside merely suspends the contracts of life
insurance, and that, upon tender of all premiums due by the insured or his
representative after the war has terminated, the contract revives and becomes fully
operative."
The United States rule declares that the contract is not merely suspended, but is
abrogated by reason of nonpayment of premiums, since the time of the payments is
peculiarly of the essence of the contract. It additionally holds that it would be unjust
to allow the insurer to retain the reserve value of the policy, which is the excess of
the premiums paid over the actual risk carried during the years when the policy had
been in force.
(h) FILIPINAS COMPAIA DE SEGUROS, petitioner, v CHRISTERN,
HUENEFELD and CO., INC., respondent (25 May 1951)
Topic: Termination of policy of public enemy; Return of premiums upon termination
of policy by reason of war
FACTS: In 1941, respondent-corporation obtained from petitioner-insurance
company a fire policy covering its merchandise contained in a building at Binondo,
Manila.
During the Japanese military occupation (1942) the building and insured merchandise
were burned. Respondent submitted to petitioner its claim under the insurance policy.
Petitioner refused to pay the claim on the ground that the policy in favor of the
respondent had ceased to be in force on the date the United States declared war
against Germany, the respondent Corporation (though organized under and by virtue
of the laws of the Philippines) being controlled by the German subjects and the
petitioner being a company under American jurisdiction when said policy was issued
on October 1, 1941.
Petitioner filed action to recover the sum it paid to respondent on the ground that the
insurance policy it issued in favor of respondent ceased to be effective because of the
outbreak of war between the US and Germany and that the payment it made was
under pressure.
Issue: Whether petitioner-insurance company can recover payment.

Held: Yes, petitioner is entitled to recover what it paid to the respondent under the
circumstances on this case.
There is no question that majority of the stockholders of the respondent corporation
were German subjects. This being so, we have to rule that said respondent became
an enemy corporation upon the outbreak of the war between the United States and
Germany.
The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that
"anyone except a public enemy may be insured." It stands to reason that an
insurance policy ceases to be allowable as soon as an insured becomes a public
enemy.
Effect of war, generally. All intercourse between citizens of belligerent powers
which is inconsistent with a state of war is prohibited by the law of nations. Such
prohibition includes all negotiations, commerce, or trading with the enemy; all acts
which will increase, or tend to increase, its income or resources; all acts of voluntary
submission to it; or receiving its protection; also all acts concerning the transmission
of money or goods; and all contracts relating thereto are thereby nullified. It further
prohibits insurance upon trade with or by the enemy, upon the life or lives of aliens
engaged in service with the enemy; this for the reason that the subjects of one
country cannot be permitted to lend their assistance to protect by insurance the
commerce or property of belligerent, alien subjects, or to do anything detrimental to
their country's interest. The purpose of war is to cripple the power and exhaust the
resources of the enemy, and it is inconsistent that one country should destroy its
enemy's property and repay in insurance the value of what has been so destroyed, or
that it should in such manner increase the resources of the enemy, or render it aid,
and the commencement of war determines, for like reasons, all trading intercourse
with the enemy, which prior thereto may have been lawful. All individuals therefore,
who compose the belligerent powers, exist, as to each other, in a state of utter
exclusion, and are public enemies. (6 Couch, Cyc. of Ins. Law, pp. 5352-5353.)
In the case of an ordinary fire policy, which grants insurance only from year, or for
some other specified term it is plain that when the parties become alien enemies, the
contractual tie is broken and the contractual rights of the parties, so far as not vested,
lost. (Vance, the Law on Insurance, Sec. 44, p. 112.)

The respondent having become an enemy corporation on December 10, 1941, the
insurance policy issued in its favor on October 1, 1941, by the petitioner (a Philippine
corporation) had ceased to be valid and enforcible, and since the insured goods were
burned after December 10, 1941, and during the war, the respondent was not
entitled to any indemnity under said policy from the petitioner.
However, elementary rules of justice (in the absence of specific provision in the
Insurance Law) require that the premium paid by the respondent for the period
covered by its policy from December 11, 1941, should be returned by the petitioner.
Where an insurance policy ceases to be effective by reason of war, which has made
the insured an enemy, the premiums paid for the period covered by the policy from
the date war is declared, should be returned.
(i) IGNACIO SATURNINO, in his own behalf and as the JUDICIAL
GUARDIAN OF CARLOS SATURNINO, minor, plaintiffs-appellants, v THE
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, defendant-appellee.
(28 Feb 1963)
Topic: Non-medical insurance; Concealment, whether intentional or unintentional;
Concealment of previous operation
Facts: An insurance policy on the life of Estefania Saturnino was issued by defendant
Phil American Life Insurance Co. Upon Estafanias death plaintiff-appellants filed
action to recover the face value of said policy. Defendant-appellee refused payment
on the ground of false representation, thus avoiding the policy.
Two months prior to the issuance of policy, Estefania was operated for cancer
involving the complete removal of her right breast. This operation was not disclosed
in Estefanias application for insurance. On the contrary, she stated therein that she
did not have, nor had she ever had, among other ailments listed in the application,
cancer or other tumors; that she had not consulted any physician, undergone any
operation or suffered any injury within the preceding five years; and that she had
never been treated for nor did she ever have any illness or disease peculiar to her
sex, particularly of the breast, ovaries, uterus, and menstrual disorders. The
application also recites that the foregoing declarations constituted "a further basis for
the issuance of the policy."
The policy sued upon is one for 20-year endowment non-medical insurance. This kind
of policy dispenses with the medical examination of the applicant usually required in
ordinary life policies. However, detailed information is called for in the application
concerning the applicant's health and medical history.
Issues and Ruling:
a. Whether or not the insured made such false representations of
material facts as to avoid the policy.
Yes. 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.
b. Are the facts then falsely represented material?
Yes. The Insurance Law (Section 30) provides that "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
proposed contract, or in making his inquiries."
Appellants contend that the facts subject of the representation were not material in
view of the "non-medical" 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 information required of the applicant concerning previous
condition of health and diseases suffered, for such information necessarily constitutes
an important factor which the insurer takes into consideration in deciding whether to
issue the policy or not. 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 examination in order to determine her insurability.
Appellants also contend there was no fraudulent concealment of the truth inasmuch
as the insured herself did not know, since her doctor never told her, that the disease
for which she had been operated on was cancer. In the first place the concealment of
the fact of the operation itself was fraudulent, as there could not have been any
mistake about it, no matter what the ailment. Secondly, in order to avoid a policy it is
not necessary to show actual fraud on the part of the insured.
In this jurisdiction a concealment, whether intentional or unintentional, entitles the
insurer to rescind the contract of insurance, concealment being defined as
"negligence to communicate that which a party knows and ought to communicate".
"The basis of the rule vitiating the contract in cases of concealment is that it misleads
or deceives the insurer into accepting the risk, or accepting it at the rate of premium
agreed upon. The insurer, relying upon the belief that the assured will disclose every
material fact within his actual or presumed knowledge, is misled into a belief that the
circumstance withheld does not exist, and he is thereby induced to estimate the risk
upon a false basis that it does not exist."
Supreme Court dismissed the plaintiff-appellants complaint but awarded them return
of premiums already paid.
(j) The Insular Life v Ebrado, GR L-44059, 28 Oct 1977
10

This is a novel question in insurance law: Can a common-law wife named as
beneficiary in the life insurance policy of a legally married man claim the proceeds
thereof in case of death of the latter?
FACTS: On September 1, 1968, Buenaventura Cristor Ebrado was issued by The
Insular Life Assurance Co., Ltd., Policy No. 009929 on a whole-life plan for P5,882.00
with a rider for Accidental Death Benefits for the same amount. Buenaventura C.
Ebrado designated Carponia T. Ebrado as the revocable beneficiary in his policy. He
referred to her as his wife, but in reality only a common-law wife.
Carponia T. Ebrado filed with the insurer a claim for the proceeds of the policy as the
designated beneficiary therein, although she admits that she and the insured
Buenaventura C. Ebrado were merely living as husband and wife without the benefit
of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured.
She asserts that she is the one entitled to the insurance proceeds, not the commonlaw wife, Carponia T. Ebrado.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular
Life Assurance Co., Ltd. commenced an action for Interpleader before the Court of
First Instance of Rizal on April 29, 1970.
ISSUE: Can a common-law wife named as beneficiary in the life insurance policy of a
legally married man claim the proceeds thereof in case of death of the latter?
HELD: No.
Word Interest in Sec. 50 of Insurance Act which provides that insurance shall be
applied exclusively to the proper interest of the person in whose name it is made
refers only to the insured and not to the beneficiary; contract of insurance personal in
character
Section 50 of the Insurance Act which provides that "(t)he insurance shall be applied
exclusively to the proper interest of the person in whose name it is made" cannot be
validly seized upon to hold that the same includes the beneficiary. The word
"interest" highly suggests that the provision refers only to the "insured" and not to
the beneficiary, since a contract of insurance is personal in character. Otherwise, the
prohibitory laws against illicit relationships especially on property and descent will be
rendered nugatory, as the same could easily be circumvented by modes of insurance.
Rather, the general rules of civil law should be applied to resolve this void in the
Insurance Law.
In essence, a life insurance policy is no different from a civil donation insofar as the
beneficiary is concerned. Both are founded upon the same consideration: liberality.
A beneficiary is like a donee, because from the premiums of the policy which the
insured pays out of liberality, the beneficiary will receive the proceeds or profits of
said insurance. As a consequence, the proscription in Article 739 of the new Civil
Code should equally operate in life insurance contracts. The mandate of Article 2012
cannot be laid aside: any person who cannot receive a donation cannot be named as
beneficiary in the life insurance policy of the person who cannot make the donation.
Under American law, a policy of life insurance is considered as a testament and in
construing it, the courts will, so far as possible treat it as a will and determine the
effect of a clause designating the beneficiary by rules under which wills are
interpreted.
On matters not otherwise specifically provided for by the Insurance Law, the contract
of life insurance is governed by general rules of civil law. The general rules of civil law
should be applied to resolve this void in the Insurance Law. Article 2011 of the New
Civil Code states: The contract of insurance is governed by special laws. Matters not
expressly provided for in such special laws shall be regulated by this Code.
When not otherwise specifically provided for by the Insurance Law, the contract of
life insurance is governed by the general rules of the civil law regulating contracts.
And under Article 2012 of the same Code, any person who is forbidden from
receiving any donation under Article 739 cannot be named beneficiary of a life
insurance policy by the person who cannot make a donation to him. Common-law
spouses are, definitely, barred from receiving donations from each other.
(k) Edillon v Manila Bankers, GR 34200, 30 Sep 1982
Topic: Concealment of age, not a case of; Waiver
FACTS: Sometime in April 1969, Carmen O, Lapuz applied with respondent insurance
corporation for insurance coverage against accident and injuries. She filled up the
blank application form given to her and filed the same with the respondent insurance
corporation. In the said application form which was dated April 15, 1969, she gave
the date of her birth as 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. Upon the filing of
said application and the payment of the premium on the policy applied for, the
respondent insurance corporation issued to Carmen O. Lapuz its Certificate of
Insurance No. 128866. The policy was to be effective for a period of 90 days.
On May 31, 1969 or during the effectivity of Certificate of Insurance No. 12886,
Carmen O. Lapuz died in a vehicular accident in the North Diversion Road.
On June 7, 1969, petitioner Regina L. Edillon, a sister of the insured and who was the
named beneficiary in the policy, filed her claim for the proceeds of the insurance. Her
claim having been denied, Regina L. Edillon instituted this action in the Court of First
Instance of Rizal on August 27, 1969.
11

In resisting the claim, the respondent relies on a provision contained in the Certificate
of Insurance. It is pointed out that the insured being over sixty (60) years of age
when she applied for the insurance coverage, the policy was null and void, and no
risk on the part of the respondent insurance corporation had arisen therefrom.
ISSUE: Whether or not the acceptance by the private respondent insurance
corporation of the premium and the issuance of the corresponding certificate of
insurance should be deemed a waiver of the exclusionary condition of coverage
stated in the said certificate of insurance.
HELD: Yes.
The age of the insured Carmen O. 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 information
clearly indicated her age at the time of filing the same to be almost 65 years of age.
Despite such information which could hardly be overlooked in the application form,
considering its prominence thereon and its materiality to the coverage applied for,
the respondent insurance corporation received her payment of premium and issued
the corresponding certificate of insurance without question.
The accident which resulted in the death of the insured, a risk covered by the policy,
occurred on May 31, 1969 or FORTY-FIVE (45) DAYS after the insurance coverage
was applied for. There was sufficient time for the private respondent to process the
application and to notice that the application was over 60 years of age 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, the insurance corporation is already deemed in estoppel. Its inaction
to revoke the policy despite a departure from the exclusionary condition contained in
the said policy constituted a waiver of such condition.
Appellee presented claim for the payment of the face value of the policy but Asian
Crusader refused payment on the ground of material concealment/misrepresentation
on the part of the insured.
Appellant alleged that the insured was guilty of misrepresentation when he answered
"No" to the following question appearing in the application for life insuranceHas any life insurance company ever refused your application for insurance
or for reinstatement of a lapsed policy or offered you a policy different from
that applied for? If, so, name company and date.
Asian Crusader insisted that the insured applied for reinstatement of his lapsed life
insurance policy with the Insular Life Insurance Co., Ltd, but this was declined by the
insurance company, although later on approved for reinstatement with a very high
premium as a result of his medical examination.
Trial court, however, ruled that evidence showed that Kwong Nams application with
Insular Life was for reinstatement and amendment of his lapsed insurance policy and
not an application for a new insurance policy hence there was no misrepresentation.
Trial court then ordered Asian Crusader to pay the face value of Kwong Nams
insurance policy.
Asian Crusader also maintains that Kwong Nam gave misleading information when he
told the medical examiner that the tumor for which he had been operated for was
associated with peptic ulcer.
Issue: Whether appellant, because of his husbands (the insured) misrepresentation
misled or deceived Asian Crusader into entering the contract or in accepting the risk
at the rate of premium agreed upon.
Held: No
Section 27 of the Insurance Law [Act 2427] provides:
Sec. 27. Such party a contract of insurance must communicate to the other, in good
faith, all facts within his knowledge which are material to the contract, and which the
other has not the means of ascertaining, and as to which he makes no warranty.
(l) NG GAN ZEE, plaintiff-appellee, v ASIAN CRUSADER LIFE ASSURANCE

CORPORATION, defendant-appellant (30 May 1983)
Topic: Concealment; When concealment exists; Misrepresentation
Thus, "concealment exists where the assured had knowledge of a fact material to the
risk, and honesty, good faith, and fair dealing requires that he should communicate it
to the assurer, but he designedly and intentionally withholds the same."
Facts: Kwong Nam (plaintiff-appellees husband) applied for a 20-year endowment

insurance on his life with his wife, appellee Ng Gan Zee as beneficiary. Asian
Crusader Life Assurance Corp. approved the application and issued the corresponding
policy upon receipt of premium. More than a year after, Kwong Nam died of cancer of
the liver. All premiums had been religiously paid at the time of his death.
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."
Assuming that the aforesaid answer given by the insured is false, as claimed by the
appellant. Sec. 27 of the Insurance Law, above-quoted, nevertheless requires that
fraudulent intent on the part of the insured be established to entitle the insurer to
12

rescind the contract. And as correctly observed by the lower court,
"misrepresentation as a defense of the insurer to avoid liability is an 'affirmative'
defense. The duty to establish such a defense by satisfactory and convincing
evidence rests upon the defendant. The evidence before the Court does not clearly
and satisfactorily establish that defense."
While it may be conceded that, from the viewpoint of a medical expert, the
information communicated was imperfect, the same was nevertheless sufficient to
have induced appellant to make further inquiries about the ailment and operation of
the insured.
Section 32 of Insurance Law [Act No. 24271 provides as follows:
Section 32. The right to information of material facts may be waived either by the
terms of insurance or by neglect to make inquiries as to such facts where they are
distinctly implied in other facts of which information is communicated.
Subsequently, Jaime died of congestive heart failure and chronic anemia. Petitioners
claim on the insurance policy was denied by Great Pacific on the ground that Jaime
(insured) had concealed material information from it.
The medical declaration set out in Jaimes application stated that Jaime has not been
confined in any hospital nor received any medical/surgical advice or attention; and
that he has never been treated nor consulted a physician for heart condition and
other specific diseases.
The Insurance Commissioner ordered Great Pacific to pay but its decision was
reversed by the Court of Appeals.
Issue: Whether Jaime concealed information material to the contract of insurance
from respondent insurance company.
Failure of insurer to undertake a further inquiry on insurance application on the

question of the insureds ailment and operation which is important in determination of
grant of insurance or not, constitutes waiver by insurer of imperfection in the answer
and renders omission to answer more fully immaterial.
Held: Yes
Supreme Court noted that Jaime, in his medical declaration, failed to disclose that he
twice consulted Dr. Claudio, who found him suffering from "sinus tachycardia" and
"acute bronchitis."
It has been held that where, upon the face of the application, a question appears to
be not answered at all or to be imperfectly answered, and the insurers issue a policy
without any further inquiry, they waive the imperfection of the answer and render the
omission to answer more fully immaterial. As aptly noted by the lower court, if the
ailment and operation of Kwong Nam had such an important bearing on the question
of whether the defendant would undertake the insurance or not, the court cannot
understand why the defendant or its medical examiner did not make any further
inquiries on such matters from the Chinese General Hospital or require copies of the
hospital records from the appellant before acting on the application for insurance.
The fact of the matter is that the defendant was too eager to accept the application
and receive the insureds premium. It would be inequitable now to allow the
defendant to avoid liability under the circumstances.
Under the 1978 Insurance Code, the information concealed must be information
which the concealing party knew and "ought to [have] communicate[d]," that is to
say, information which was "material to the contract."
Supreme Court affirmed judgment of the trial court.

(m) THELMA VDA. DE CANILANG, petitioner, v HON. COURT OF APPEALS
and GREAT PACIFIC LIFE ASSURANCE CORPORATION, respondents. (17
June 1993)
Topic: Concealment
Facts: Jaime Canilang, petitioners husband was diagnosed with sinus tachycardia
and acute bronchitis. He thereafter applied for a non-medical insurance policy with
respondent Great Pacific Life Assurance Corp with his wife (petitioner) as the
beneficiary. Respondent insurance company issued an ordinary life insurance in favor
of Canilang.
The test of materiality is contained in Section 31 of the Insurance Code of 1978 which
reads:
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 proposed contract, or in
making his inquiries.
The information which Jaime failed to disclose was material to the ability of Great
Pacific to estimate the probable risk he presented as a subject of life insurance. Had
Canilang disclosed his visits to his doctor, the diagnosis made and medicines
prescribed by such doctor, in the insurance application, it may be reasonably
assumed that Great Pacific would have made further inquiries and would have
probably refused to issue a non-medical insurance policy or, at the very least,
required a higher premium for the same coverage.
The materiality of the information withheld by Great Pacific did not depend upon the
state of mind of Jaime Canilang. A mans state of mind or subjective belief is not
capable of proof in our judicial process, except through proof of external acts or
failure to act from which inferences as to his subjective belief may be reasonably
drawn. Neither does materiality depend upon the actual or physical events which
ensue. Materiality relates rather to the probable and reasonable influence of the
13

facts upon the party to whom the communication should have been made, in
assessing the risk involved in making or omitting to make further inquiries and in
accepting the application for insurance; that probable and reasonable influence of
the facts concealed must, of course, be determined objectively, by the judge
ultimately.
Moreover, under the Insurance Code, a concealment whether intentional or
unintentional entitles the injured party to rescind a contract of insurance. The statute
did not require proof that concealment must be "intentional" in order to authorize
rescission by the injured party.
CA decision affirmed.
(n) Sunlife Assurance v CA, GR 105135, 22 Jun 1995
Topic: Concealment; Materiality
FACTS: On April 15, 1986, Robert John B. Bacani procured a life insurance contract
for himself from petitioner. The designated beneficiary was his mother, respondent
Bernarda Bacani.
On June 26, 1987, the insured died in a plane crash. Respondent Bernarda Bacani
filed a claim with petitioner, seeking the benefits of the insurance policy taken by her
son. Petitioner rejected the claim.
In its letter, petitioner informed respondent Bernarda Bacani, that the insured did not
disclose material facts relevant to the issuance of the policy, thus rendering the
contract of insurance voidable.
Petitioner claimed that the insured gave false statements in his application when he
answered the following questions:
5. Within the past 5 years have you:
a) consulted any doctor or other health practitioner?
The deceased answered question No. 5(a) in the affirmative but limited his answer to
a consultation with a certain Dr. Reinaldo D. Raymundo of the Chinese General
Hospital on February 1986, for cough and flu complications.
Petitioner discovered that two weeks prior to his application for insurance, the
insured was examined and confined at the Lung Center of the Philippines, where he
was diagnosed for renal failure. During his confinement, the deceased was subjected
to urinalysis, ultra-sonography and hematology tests.
The defendant beneficiary argued that such non-disclosure is not material and done
in good faith.
ISSUE: Whether such concealment will render the insurance policy voidable.
HELD: Yes.
A neglect to communicate that which a party knows and ought to communicate is
called concealment.
In weighing the evidence presented, the trial court concluded that indeed there was
concealment and misrepresentation, however, the same was made in good faith
and the facts concealed or misrepresented were irrelevant since the policy was nonmedical. We disagree. Section 26 of The Insurance Code is explicit in requiring a
party to a contract of insurance to communicate to the other, in good faith, all facts
within his knowledge which are material to the contract and as to which he makes no
warranty, and which the other has no means of ascertaining. Said Section provides:
A neglect to communicate that which a party knows and ought to communicate, is
called concealment.
Matters relating to the health of the insured are material and relevant to the approval
and issuance of the life insurance policy as these definitely affect the insurers action
on the application.
The matters concealed would have definitely affected petitioners action on his
application, either by approving it with the corresponding adjustment for a higher
premium or rejecting the same. Moreover, a disclosure may have warranted a
medical examination of the insured by petitioner in order for it to reasonably assess
the risk involved in accepting the application.
Thus, good faith is no defense in concealment. The insureds failure to disclose the
fact that he was hospitalized for two weeks prior to filing his application for
insurance, raises grave doubts about his bona fides. It appears that such
concealment was deliberate on his part.
The waiver of a medical examination in a non-medical insurance contract renders
even more material the information required of the applicant concerning previous
condition of health and diseases suffered.
It is well-settled that the insured need not die of the disease he had failed to disclose
to the insurer, as it is sufficient that his non-disclosure misled the insurer in forming
his estimates of the risks of the proposed insurance policy or in making inquiries.
Petitioner properly exercised its right to rescind the contract of insurance by reason
of the concealment employed by the insured. It must be emphasized that rescission
was exercised within the two-year contestability period as recognized in Section 48 of
The Insurance Code.
14

(o) Travellers Insurance v Hon. CA, GR 82036, 22 May 1997
FACTS: Petitioner, Travellers Insurance mainly contends that it did not issue an
insurance policy as compulsory insurer of the Lady Love Taxi and that, assuming
arguendo that it had indeed covered said taxi-cab for third-party liability insurance,
private respondent, Vicente Mendoza (nabangga) failed to file a written notice of
claim with petitioner as required by Section 384 of P.D. No. 612, otherwise known as
the Insurance Code.
ISSUE:
1. Whether such failure to file a written claim with the insurance company
amounts to no cause of action
2. When the prescriptive period to bring a suit in court does begins to run?
HELD:
1) Yes. Absent such written claim filed by the person suing under an insurance
contract, no cause of action accrues under such insurance contract,
considering that it is the rejection of that claim that triggers the running of
the one-year prescriptive period to bring suit in court, and there can be no
opportunity for the insurer to even reject a claim if none has been filed in
the first place, as in the instant case.
2)
Prescriptive period to bring suit in court under an insurance policy, begins to

run from the date of the insurers rejection of the claim filed by the insured,
the beneficiary or any person claiming under an insurance contract. This
ruling is premised upon the compliance by the persons suing under an
insurance contract, with the indispensable requirement of having filed the
written claim mandated by Section 384 of the Insurance Code before and
after its amendment.
(p) GREAT PACIFIC LIFE ASSURANCE CORP., petitioner vs. COURT OF

APPEALS AND MEDARDA V. LEUTERIO, respondent. (13 Oct 1999)
Topic: Mortgages; Mortgage Redemption; Real party in interest; Mortgage
Redemption Insurance; Concealment
Facts: A contract of group life insurance was executed between petitioner Grepalife
and Development Bank of the Philippines (DBP). Grepalife agreed to insure the lives
of eligible housing loan mortgagors of DBP.
Dr. Wilfredo Leuterio (respondents husband), a physician and a housing debtor of
DBP applied for membership in the group life insurance plan. In an application form,
Dr. Leuterio indicated that he has not consulted a physician for a heart condition,
high blood pressure and other indicated diseases and that to the best of his
knowledge, he is in good health.
Grepalife issued an insurance coverage of Dr Leuterio to the extent of his DBP

mortgage indebtedness.
Dr. Leuterio died due to massive cerebral hemorrhage. DBP submitted a death claim
to Grepalife but petitioner denied the claim alleging that Dr. Leuterio was not
physically healthy when he applied for an insurance coverage and that his nondisclosure that he has been suffering from hypertension constituted concealment that
justified the denial of the claim.
Respondent (widow of Dr. Leuterio) filed complaint with the RTC against petitioner
for specific performance. Trial court ruled in favor of respondent widow, affirmed by
the CA.
ISSUES AND RULING:
1. Whether respondent widow is the real party in interest.
Yes, respondent widow is the real party in interest.
Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not
the real party in interest, hence the trial court acquired no jurisdiction over the case.
It argues that when the Court of Appeals affirmed the trial courts judgment, Grepalife
was held liable to pay the proceeds of insurance contract in favor of DBP, the
indispensable party who was not joined in the suit.
To resolve the issue, we must consider the insurable interest in mortgaged properties
and the parties to this type of contract. 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 mortgagee and the mortgagor.
On the part of the mortgagee, it has to enter into 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 relieving the heirs of the mortgagor from paying the
obligation. In a similar vein, ample protection is given to the mortgagor under such a
concept so that in the event of death; the mortgage obligation will be extinguished by
the application of the insurance proceeds to the mortgage indebtedness.
Consequently, where the mortgagor pays the insurance premium under the group
insurance policy, making the loss payable to the mortgagee, the insurance is on the
mortgagors interest, and the mortgagor continues to be a party to the contract. In
this type of policy insurance, the mortgagee is simply an appointee of the insurance
fund, such loss-payable clause does not make the mortgagee a party to the contract.
Section 8 of the Insurance Code provides:
Unless the policy provides, where a mortgagor of property effects insurance in his
own name providing that the loss shall be payable to the mortgagee, or assigns a
15

policy of insurance to a mortgagee, the insurance is deemed to be upon the interest
of the mortgagor, who does not cease to be a party to the original contract, and any
act of his, prior to the loss, which would otherwise avoid the insurance, will have the
same effect, although the property is in the hands of the mortgagee, but any act
which, under the contract of insurance, is to be performed by the mortgagor, may be
performed by the mortgagee therein named, with the same effect as if it had been
performed by the mortgagor.
The insured 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 debtors death
before his indebtedness with the Creditor [DBP] shall have been fully paid, an amount
to pay the outstanding indebtedness shall first be paid to the creditor 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 residential lot of private respondent.
requires that he should communicate it to the assured, but he designedly and

intentionally withholds the same.
Grepalife failed to establish that there was concealment made by the insured, hence,
it cannot refuse payment of the claim.
The fraudulent intent on the part of the insured must be established to entitle the
insurer to rescind the contract. Misrepresentation as a defense of the insurer to avoid
liability is an affirmative defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon the insurer. In the case at bar, the
petitioner failed to clearly and satisfactorily establish its defense, and is therefore
liable to pay the proceeds of the insurance.
3.
Whether the lower court erred in ordering Grepalife to pay DBP the
amount of P86,200 in the absence of evidence showing how much
was the actual amount payable to DBP in accordance with the
group insurance contract.
No.
In Gonzales La O vs. Yek Tong Lin Fire & Marine Ins. Co. we held:
Insured, being the person with whom the contract was made, is primarily the proper
person to bring suit thereon. * * * Subject to some exceptions, insured may thus
sue, although the policy is taken wholly or in part for the benefit of another person
named or unnamed, and although it is expressly made payable to another as his
interest may appear or otherwise. * * * Although a policy issued to a mortgagor is
taken out for the benefit of the mortgagee and is made payable to him, yet the
mortgagor may sue thereon in his own name, especially where the mortgagees
interest is less than the full amount recoverable under the policy, * * *.
And in volume 33, page 82, of the same work, we read the following:
Insured may be regarded as the real party in interest, although he has assigned the
policy for the purpose of collection, or has assigned as collateral security any
judgment he may obtain.
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 the
decedent Dr. Leuterio may file the suit against the insurer, Grepalife.
2. Whether there is concealment as to justify denial of the claim.
No, there is no concealment.
Petitioner contends that Dr. Leuterio failed to disclose that he had hypertension,
which might have caused his death. Concealment exists where the assured had
knowledge of a fact material to the risk, and honesty, good faith, and fair dealing
Petitioner claims that there was no evidence as to the amount of Dr. Leuterios
outstanding indebtedness to DBP at the time of the mortgagors death. Hence, for
private respondents failure to establish the same, the action for specific performance
should be dismissed. Petitioners claim is without merit. A life insurance policy is a
valued policy. Unless the interest of a person insured is susceptible of exact
pecuniary measurement, the measure of indemnity under a policy of
insurance upon life or health is the sum fixed in the policy.
The mortgagor paid the premium according to the coverage of his insurance, which
states that:
The policy states that upon receipt of due proof of the Debtors death during the
terms of this insurance, a death benefit in the amount of P86,200.00 shall be paid.
In the event of the debtors death before his indebtedness with the creditor shall have
been fully paid, an amount to pay the outstanding indebtedness shall first be paid to
the Creditor and the balance of the Sum Assured, if there is any shall then be paid to
the beneficiary/ies designated by the debtor.
Where the mortgagee under a mortgage redemption insurance has already foreclosed on the
mortgage, it cannot collect the insurance proceeds
In private respondents memorandum, she states that DBP foreclosed in 1995 their
residential lot, in satisfaction of mortgagors outstanding loan. Considering this
supervening event, the insurance proceeds shall inure to the benefit of the heirs of
the deceased person or his beneficiaries. Equity dictates that DBP should not unjustly
enrich itself at the expense of another. Hence, it cannot collect the insurance
proceeds, after it already foreclosed on the mortgage. The proceeds now rightly
belong to Dr. Leuterios heirs represented by his widow, herein private respondent.
16

(q) UCPB GENERAL INSURANCE CO., INC., petitioner, v MASAGANA
TELAMART, INC., respondent. (15 June 1999; 4 Apr 2001)
Topic: Payment of Premiums, exceptions to the rule in Sec 77; Estoppel;
Synallagmatic characteristic of insurance
Facts: Petitioner UCPB issued 5 insurance policies covering respondents various
properties against fire. Upon expiration of the terms of the insurance, petitioner
decided not to renew the policies and advised Zuellig (respondents broker) of its
intention of non-renewal. Petitioner also gave respondent written notice of the nonrenewal of policies.
Held: No. SC granted Respondent Masaganas motion for reconsideration and denied
UCPBs petition.
Section 77 of the Insurance Code of 1978 provides:
An insurer is entitled to payment of the premium as soon as the thing insured is

exposed to the peril insured against. Notwithstanding any agreement 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 paid, except in the case of a life or an
industrial life policy whenever the grace period provision applies.
Sec 77 has its source in Sec 72 of Insurance Act, as amended approved in 1963
which provides that:
An insurer is entitled to payment of premium as soon as the thing insured is exposed

to the peril insured against, unless there is clear agreement to grant the insured credit
extension of the premium due. No policy issued by an insurance company is valid and
binding unless and until the premium thereof has been paid. (Italic supplied)
Subsequently, fire damaged respondents property, covered by 3 of the insurance

policies issued by petitioner. Respondent then tendered to petitioner premium for the
renewal of policies and filed its formal claim for indemnification.
Petitioner rejected the claim on the ground that the policies had expired and were not
renewed and that the fire occurred (3 months after expiration of the policy) before
respondents tender of premium payment.
Respondent filed complaint for the recovery of the face value of the policies covering
the properties razed by fire.
Both CA and the trial court found that sufficient proof exists that Respondent, which
had procured insurance coverage from Petitioner for a number of years, had been
granted a 60 to 90-day credit term for the renewal of the policies. Hence, CA allowed
Respondent to consign P225,753.95 as full payment of premiums for the renewal of 5
insurance policies and ordered petitioner UCPB to pay Respondent indemnity for the
burned properties covered by the renewal-replacement policies.
It can be seen at once that Section 77 does not restate the portion of Section 72
expressly permitting an agreement to extend the period to pay the premium. But are
there exceptions to Section 77?
The answer is in the affirmative.
Exceptions to the rule in Section 77 of the Insurance Code of 1978 that there be
prepayment of premiums as a condition to the validity of the insurance contract:
1.
In case of a life or industrial life policy whenever the grace period provision
applies. (provided in Sec 77 itself)
2.
Covered by Section 78 of the Insurance Code, which provides:
3.
A third exception was laid down in Makati Tuscany Condominium Corporation vs.
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
has been made at the time of loss, x x x
4.
That the insurer may grant credit extension for the payment of the premium.
This simply means that if the insurer has granted the insured a credit term for
the payment of the premium and loss occurs before the expiration of the term,
recovery on the policy should be allowed even though the premium is paid after
the loss but within the credit term. (as held also in Tuscany)
SC reversed and set aside CA decision holding that:
An insurance policy, other than life, issued originally or on renewal, is not valid and
binding until actual payment of the premium. Any agreement to the contrary is void.
The parties may not agree expressly or impliedly on the extension of creditor time to
pay the premium and consider the policy binding before actual payment.
Here, the payment of the premium for renewal of the policies was tendered on July
13, 1992, a month after the fire occurred on June 13, 1992. The assured did not even
give the insurer a notice of loss within a reasonable time after occurrence of the fire.
Respondent filed motion for reconsideration of SCs decision (2011 case).

Issue: Whether Section 77 of the Insurance Code of 1978 (P.D. No. 1460) must be
strictly applied to Petitioner's advantage despite its practice of granting a 60- to 90day credit term for the payment of premiums.
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 policy binding,
notwithstanding any stipulation therein that it shall not be binding until premium is
actually paid.
Moreover, there is nothing in Section 77 which prohibits the parties in an

insurance contract to provide a credit term within which to pay the premiums.
17

That agreement is not against the law, morals, good customs, public order or
public policy. The agreement binds the parties under Art 1306 of the Civil Code.
(The contracting parties may establish such stipulations clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.)
5.
Estoppel: Where an insurer had consistently granted a 60- to 90-day credit term
for the payment of premiums despite its full awareness of Section 77, and the
assured had relied in good faith on such practice, estoppel bars it from taking
refuge under said Section
Finally in the instant case, it would be unjust and inequitable if recovery on the
policy would not be permitted against Petitioner, which had consistently panted a
60- to 90-day credit term for the payment of premiums despite its full awareness
of Section 77. Estoppel bars it from taking refuge under said Section, since
Respondent relied in good faith on such practice. Estoppel then is the fifth
exception to Section 77.
Extra: Wala na ito sa SC decision, nasa separate opinion ni J Vitug
Synallagmatic Characteristic of Insurance

An essential characteristic of an insurance is its being synallagmatic, a highly
reciprocal contract where the rights and obligations of the parties correlate and
mutually correspond. The insurer assumes the risk of loss which an insured might
suffer in consideration of premium payments under a risk distributing device. Such
assumption of risk is a component of a general scheme to distribute actual losses
among a group of persons, bearing similar risks, who make ratable contributions to a
fund from which the losses incurred due to exposures to the peril insured against are
assured and compensated.
(r) Philamcare v CA, GR 125678, 18 Mar 2002
Topic: Effects of concealment
Sec. 27. A concealment whether intentional or unintentional entitles the injured
party to rescind a contract of insurance.
Sec. 29. An intentional and fraudulent omission, on the part of one insured, to
communicate information of matters proving or tending to prove the falsity of a
warranty, entitles the insurer to rescind.
FACTS:
1.
2.
Ernani Trinos applied for a health coverage with Philamcare.

In the standard application form, he answered No to the following question:
Have you or any of your family members ever consulted or has been treated for
3.
4.
high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or
peptic ulcer?. If yes, give details
The application was approved but Ernani later suffered a heart attack. He was
denied recovery for claim benefits on the ground that the doctors at the hospital
discovered that Ernani was hypertensive, diabetic and asthmatic, contrary to his
answer in the application form.
He later died.
ISSUE: WON there was concealment.

HELD: None.
1. As the answer assailed was in response to a question relating to the medical
history of the applicant.
2. This largely depends on opinion rather than fact, especially coming from the
insured who was not a medical doctor.
3. Where matters of opinion of judgment are called for answers made in good faith
and without intent to deceive will not avoid a policy even though they are
untrue.
NOTE: Philamcare v. CA (2002) must be distinguished from Grepalife (1999). In the
latter, Dr. Lueterio took a life insurance with Grepalife. He died of cerebral
hemorrhage, linked to hypertension. The insurance company however failed to prove
concealment, as no one was able to attest to the medical history of Dr. Leuterio. The
physician who issued the post-mortem report did not even examine the body of Dr.
Leuterio. The wife of Dr. Lueterio was also not aware whether his husband is taking
hypertensive medicine.
Misrepresentation as a defense of the insurer to avoid liability is an affirmative
defense and the duty to establish such defense by satisfactory and convincing
evidence rests upon the insurer. It is humbly submitted that had the insured in the
Philamcare case been a doctor, a different ruling could have been arrived at in
Philamcare.
(s) White Gold Marine Services v Pioneer Insurance, GR 154514, 28 Jul
2005
Topic: Nature and Characteristics of Insurance
1.
2.
3.
4.
5.
6.
7.
Aleatory;
Contract of Indemnity for Property Insurance;
Contract of Investment for Life Insurance;
Personal;
Executory and Conditional on the Part of the Insurer But Executed on the
Part of the Insured;
Contract of Good Faith; and
Contract of Adhesion.
18

FACTS:
1.
2.
3.
4.
5.
6.
White Gold Marine Services, Inc. (White Gold) procured a protection and
indemnity coverage for its vessels from The Steamship Mutual Underwriting
Association (Bermuda) Limited (Steamship Mutual) through Pioneer
Insurance and Surety Corporation (Pioneer)
When White Gold failed to fully pay its accounts, Steamship Mutual refused
to renew the coverage
Steamship Mutual thereafter filed a case against White Gold for collection of
sum of money to recover the latters unpaid balance
White Gold filed a complaint before the Insurance Commission
a.
Steamship Mutual violated Sections 186[4] and 187[5] of the
Insurance Code
b.
Pioneer violated Sections 299,[6] 300[7] and 301[8] in relation
to Sections 302 and 303, thereof
Insurance Commission: dismissed the complaint
a. no need for Steamship Mutual to secure a license because it
was a Protection and Indemnity Club (P & I Club) (NOT engaged in
the insurance business)
b. Pioneer need not obtain another license as insurance agent and/or
a broker for Steamship Mutual because Steamship Mutual was not
engaged in the insurance business. Moreover, Pioneer was already
licensed
CA: affirmed Insurance Commission
(t) GULF RESORTS, INC., petitioner, v PHILIPPINE CHARTER INSURANCE

CORPORATION, respondent (16 May 2005)
Topic: Interpretation of provisions of insurance policy; Elements of insurance;
Premium; Contracts of Adhesion
Facts: Petitioner Gulf Resorts originally insured its resort properties with American
Home Assurance Company (AHAC-AIU). In the policies issued by AHAC-AIU the risk
of loss from earthquake shock was extended only to Gulf Resorts two swimming
pools. Later on, AHAC-AIU issued another policy which stated that the earthquake
endorsement clause was deleted and the entry under Endorsements/Warranties at
the time of issue reads: "Endorsement to Include Earthquake Shock.
Subsequently, Gulf Resorts agreed to insure with Respondent Philippine Charter
Insurance Corp (PCIC) the properties covered by AHAC-AIU Policy provided that the
policy wording and rates in said policy be copied in the policy to be issued by PCIC.
Earthquake struck and Gulf Resorts properties insured with PCIC including the 2
swimming pools were damaged.
Petitioner then filed formal demand/claim to PCIC for the settlement of the damage
to all its properties, which PCIC denied on the ground that its insurance policy only
afforded earthquake shock coverage to the two swimming pools of the resort.
Petitioner then filed with the RTC a complaint for the payment of losses for its
damaged properties and damages.
ISSUE: Is Steamship Mutual, a P & I Club, engaged in the insurance business in the
Philippines?
Trial court held that only the 2 swimming pools were covered by the insurance policy.
Affirmed by CA.
HELD: Yes.
Issue: Whether only the 2 swimming pools, rather than all the properties, are
insured against the risk of earthquake shock.
A Protection and Indemnity (P&1) Club is a form of insurance against third party
liability, where the third party is anyone other than the P&I Club and the members.
Here, White Gold Marine Services procured a protection and indemnity coverage for
its vessels from Steamship Mutual through Pioneer Insurance. By definition then,
Steamship Mutual as a P&I Club is a mutual insurance association engaged in the
marine insurance business.
A mutual insurance company is a cooperative enterprise where the members are both
the insurer and the insured. In it, the members all contribute, by a system of
premiums or assessments, to the creation of a fund from which all losses and
liabilities are paid, and where the profits are divided among themselves, in proportion
of their interest
Held: Yes, only the 2 swimming pools. SC affirmed CA judgment.

Petitioner contends that:
-
that the policys earthquake shock endorsement clearly covers all of the
properties insured and not only the swimming pools. It used the words "any
property insured by this policy," and it should be interpreted as all inclusive;
that the qualification referring to the two swimming pools had already been
deleted in the earthquake shock endorsement;
that the earthquake shock endorsement rider should be given precedence over
the wording of the insurance policy, because the rider is the more deliberate
expression of the agreement of the contracting parties;
that in their previous insurance policies, limits were placed on the
endorsements/warranties enumerated at the time of issue;
19

any ambiguity in the earthquake shock endorsement should be resolved in favor
of petitioner and against respondent. It was respondent which caused the
ambiguity when it made the policy in issue;
the parties contemporaneous and subsequent acts show that they intended to
extend earthquake shock coverage to all insured properties. When it secured an
insurance policy from respondent, petitioner told respondent that it wanted an
exact replica of its latest insurance policy from American Home Assurance
Company (AHAC-AIU), which covered all the resorts properties for earthquake
shock damage and respondent agreed. After the July 16, 1990 earthquake,
respondent assured petitioner that it was covered for earthquake shock.
Respondents insurance adjuster, Bayne Adjusters and Surveyors, Inc., likewise
requested petitioner to submit the necessary documents for its building claims
and other repair costs. Thus, under the doctrine of equitable estoppel, it cannot
deny that the insurance policy it issued to petitioner covered all of the properties
within the resort.
It is basic that all the provisions of the insurance policy should be examined and
interpreted in consonance with each other.
It is basic that all the provisions of the insurance policy should be examined and
interpreted in consonance with each other. All its parts are reflective of the true
intent of the parties. The policy cannot be construed piecemeal. Certain stipulations
cannot be segregated and then made to control; neither do particular words or
phrases necessarily determine its character. Petitioner cannot focus on the
earthquake shock endorsement to the exclusion of the other provisions. All the
provisions and riders, taken and interpreted together, indubitably show the intention
of the parties to extend earthquake shock coverage to the two swimming pools only.
A contract of insurance is an agreement whereby one undertakes for a consideration
to indemnify another against loss, damage or liability arising from an unknown or
contingent event.
A careful examination of the premium recapitulation will show that it is the clear
intent of the parties to extend earthquake shock coverage only to the two swimming
pools.
Section 2(1) of the Insurance Code defines a contract of insurance as an agreement
whereby one undertakes for a consideration to indemnify another against loss,
damage or liability arising from an unknown or contingent event.
Thus, an insurance contract exists where the following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designated
peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual
losses among a large group of persons bearing a similar risk; and
5.
In consideration of the insurers promise, the insured pays a premium.
An insurance premium is the consideration paid an insurer for undertaking to

indemnify the insured against a specified peril.
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, the premium payable becomes a debt as soon as the risk attaches. In the
subject policy, no premium payments were made with regard to earthquake shock
coverage, except on the two swimming pools. There is no mention of any premium
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.
A contract of adhesion is one wherein a party, usually a corporation, prepares the
stipulations in the contract, while the other party merely affixes his signature or his
adhesion thereto; The Supreme Court will only rule out blind adherence to terms
where facts and circumstances will show that they are basically one-sided.
In sum, there is no ambiguity in the terms of the contract and its riders. Petitioner
cannot rely on the general rule that insurance contracts are contracts of adhesion
which should be liberally construed in favor of the insured and strictly against the
insurer company which usually prepares it.
A contract of adhesion is one wherein a party, usually a corporation, prepares the
stipulations in the contract, while the other party merely affixes his signature or his
adhesion thereto.
Through the years, the courts have held that in these type of contracts, the parties
do not bargain on equal footing, the weaker partys participation being reduced to the
alternative to take it or leave it. Thus, these contracts are viewed as traps for the
weaker party whom the courts of justice must protect. Consequently, any ambiguity
therein is resolved against the insurer, or construed liberally in favor of the insured.
The case law will show that this Court will only rule out blind adherence to terms
where facts and circumstances will show that they are basically one-sided. Thus, we
have called on lower courts to remain careful in scrutinizing the factual circumstances
behind each case to determine the efficacy of the claims of contending parties. In
Development Bank of the Philippines v. National Merchandising Corporation, et al.,
the parties, who were acute businessmen of experience, were presumed to have
assented to the assailed documents with full knowledge.
(u) REPUBLIC OF THE PHILIPPINES, by EDUARDO T. MALINIS, in His
Capacity as Insurance Commissioner, petitioner,
v DEL MONTE MOTORS, INC., respondent (9 Oct 2006)
Topic: Insurance Commissioner, regulation of insurance industry; Exemption of
security deposit from levy or garnishment
20

Facts: In a civil case, RTC rendered a decision holding defendants Vilfran Liner and
the Villegases liable to pay Respondent Del Monte Motors. The trial court ordered
execution of the decision against Vilfran Liners counterbond, which is issued by
Capital Insurance and Surety Co., Inc. (CISCO).
CISCO opposed the motion for execution filed by respondent but RTC granted the
motion and issued the corresponding writ. The sheriff then proceeded to levy on the
properties of CISCO. The sheriff also issued a Notice of Garnishment on several
depository banks of the insurance company. Moreover, he served a similar notice on
the Insurance Commission, so as to enforce the Writ on the security deposit filed by
CISCO with the Commission in accordance with Section 203 of the Insurance Code.
RTC ruled that that the notice of garnishment served by the sheriff on the Insurance
Commission was valid. Respondent moved to cite the Insurance Commissioner
(Eduardo Malinis) for his refusal to obey resolution of the RTC.
The RTC held Insurance Commissioner Malinis in contempt for his refusal to
implement its Order. It explained that the commissioner had no legal justification for
his refusal to allow the withdrawal of CISCO's security deposit.
Issue: Whether the security deposit held by the Insurance Commissioner pursuant to
Section 203 of the Insurance Code may be levied or garnished in favor of only one
insured.
Held: No. The trial court erred in issuing the Writ of Garnishment against the security
deposit of CISCO. It follows that without the issuance of a valid order, the insurance
commissioner could not have been in contempt of court.
The securities required by the Insurance Code to be deposited with the Insurance
Commissioner are intended to answer for the claims of all policy holders in the event
that the depositing insurance company becomes insolvent or otherwise unable to
satisfy their claims. The security deposit must be ratably distributed among all the
insured who are entitled to their respective shares; it cannot be garnished or levied
upon by a single claimant, to the detriment of the others.
Basic is the statutory construction rule that provisions of a statute should be
construed in accordance with the purpose for which it was enacted. That is, the
securities are held as a contingency fund to answer for the claims against the
insurance company by all its policy holders and their beneficiaries. This step is taken
in the event that the company becomes insolvent or otherwise unable to satisfy the
claims against it. Thus, a single claimant may not lay stake on the securities to the
exclusion of all others. The other parties may have their own claims against the
insurance company under other insurance contracts it has entered into.
The insurance commissioner has been given a wide latitude of discretion to regulate
the insurance industry so as to protect the insuring public. The law specifically
confers custody over the securities upon the commissioner, with whom these
investments are required to be deposited. An implied trust is created by the law for
the benefit of all claimants under subsisting insurance contracts issued by the
insurance company.
(v) GAISANO CAGAYAN v. INSURANCE COMPANY OF NORTHERN AMERICA
G.R. No. 147839, June 8, 2006
Main Topic: Insurable Interest
Subtopic: Insurable Interest
Facts:
1.
2.
3.
IMC (maker of Wrangler jeans) and LSPI (distributor of Levis), obtained fire
insurance policies on book debts in connection with ready-made clothing
materials which have been sold or delivered to various customers and dealers.
Book debts refer to the unpaid account still appearing in the Book of Account of
the insured 45 days after the time of the loss.
The jeans which were delivered to Gaisano were however burned.
Issue: WON the unpaid seller still possess insurable interest over it
Held:
1. Petitioner claims that the CA erred in construing a fire insurance policy on book
debts as one covering the unpaid accounts of IMC and LSPI since such insurance
applies to loss of the ready-made clothing materials sold and delivered to
petitioner.
2. The Court disagrees with petitioner's stand.
3. It is well-settled that when the words of a contract are plain and readily
understood, there is no room for construction.
4. In this case, the questioned insurance policies provide coverage for "book debts
in connection with ready-made clothing materials which have been sold or
delivered to various customers and dealers of the Insured anywhere in the
Philippines."; and defined book debts as the "unpaid account still appearing in
the Book of Account of the Insured 45 days after the time of the loss covered
under this Policy."
5. Nowhere is it provided in the questioned insurance policies that the subject of
the insurance is the goods sold and delivered to the customers and dealers of
the insured.
6. Indeed, when the terms of the agreement are clear and explicit that they do not
justify an attempt to read into it any alleged intention of the parties, the terms
are to be understood literally just as they appear on the face of the contract.
7. Thus, what were insured against were the accounts of IMC and LSPI with
petitioner which remained unpaid 45 days after the loss through fire, and not the
loss or destruction of the goods delivered.
21

8. Petitioner argues that IMC bears the risk of loss because it expressly reserved
ownership of the goods by stipulating in the sales invoices that "[i]t is further
agreed that merely for purpose of securing the payment of the purchase price
the above described merchandise remains the property of the vendor until the
purchase price thereof is fully paid."
9. The Court is not persuaded.
10. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is
transferred to the buyer the goods are at the buyer's risk whether actual delivery has
been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the ownership in the goods has been
retained by the seller merely to secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk from the time of such delivery;
11. Thus, when the seller retains ownership only to insure that the buyer will pay its
debt, the risk of loss is borne by the buyer. Accordingly, petitioner bears the risk
of loss of the goods delivered.
12. IMC and LSPI did not lose complete interest over the goods. They have an
insurable interest until full payment of the value of the delivered goods. Unlike
the civil law concept of res perit domino, where ownership is the basis for
consideration of who bears the risk of loss, in property insurance, one's interest
is not determined by concept of title, but whether insured has substantial
economic interest in the property.
13. Section 13 of our Insurance Code defines insurable interest as "every
interest in property, whether real or personal, or any relation thereto,
or liability in respect thereof, of such nature that a contemplated peril
might directly damnify the insured."
14. Parenthetically, under Section 14 of the same Code, an insurable
interest in property may consist in: (a) an existing interest; (b) an
inchoate interest founded on existing interest; or (c) an expectancy,
coupled with an existing interest in that out of which the expectancy
arises.
15. Therefore, an insurable interest in property does not necessarily imply a property
interest in, or a lien upon, or possession of, the subject matter of the insurance,
and neither the title nor a beneficial interest is requisite to the existence of such
an interest, it is sufficient that the insured is so situated with reference to the
property that he would be liable to loss should it be injured or destroyed by the
peril against which it is insured.
16. Anyone has an insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction.
17. Indeed, a vendor or seller retains an insurable interest in the property sold so
long as he has any interest therein, in other words, so long as he would suffer by
its destruction, as where he has a vendor's lien.
18. In this case, the insurable interest of IMC and LSPI pertain to the unpaid
accounts appearing in their Books of Account 45 days after the time of the loss
covered by the policies.
(v) Sing v. Feb Leasing & Finance Corp., G.R. No. 168115, June 8, 2007
Subtopic: Insurable Interest in Property
Facts:
1. Respondent FEB entered into a lease of equipment and motor vehicle with JVL
Food Products (JVL).
2. Petitioner Vicente executed an Individual Guaranty Agreement with FEB to
guarantee the prompt and faithful performance of the terms and conditions of
the aforesaid lease agreement.
3. Under the contract, JVL was obliged to pay FEB an aggregate gross monthly
rental of approximately P170k.
4. JVL defaulted in the payment. As of July 31, 2000, the amount in arrears,
including penalty charges and insurance premiums, amounted P3.4M
5. Despite demand, JVL failed to pay
6. FEB filed a complaint with the RTC for sum of money against JVL, Petitioner
Vicente and John Doe.
7. For its defense, JVL and Vicente admitted that there was a lease agreement but
this was in reality a sale of equipment on installment basis, with FEB as financier
8. The RTC held in favor of JVL and Vicente holding that:
In an adhesion contract which is drafted and printed in advance and parties are not
given a real arms length opportunity to transact, the Courts treat this kind of
contract strictly against their architects for the reason that the party entering into this
kind of contract has no choice but to accept the terms and conditions found therein
even if he is not in accord therewith and for that matter may not have understood all
the terms and stipulations prescribed thereat. Contracts of this character are
prepared unilaterally by the stronger party with the best legal talents at its disposal.
It is upon that thought that the Courts are called upon to analyze closely said
contracts so that the weaker party could be fully protected.
Another instance is when the alleged lessee was required to insure the thing against
loss, damage or destruction.
In property insurance against loss or other accidental causes, the assured must have
an insurable interest, 32 Corpus Juris 1059.
22

It has also been held that the test of insurable interest in property is whether the
assured has a right, title or interest therein that he will be benefited by its
preservation and continued existence or suffer a direct pecuniary loss from its
destruction or injury by the peril insured against. If the defendants were to be
regarded as only a lessee, logically the lessor who asserts ownership will be the one
directly benefited or injured and therefore the lessee is not supposed to be the
assured as he has no insurable interest.
There is also an observation from the records that the actual value of each object of
the contract would be the result after computing the monthly rentals by multiplying
the said rentals by the number of months specified when the rentals ought to be
paid.
9. On appeal, the CA reversed the decision of the RTC
10. Hence, this petition for review on certiorari
Issue: WON JVL has insurable interest in the property
1.
2.
3.
4.
5.
6.
7.
8.
The validity of Lease No. 27:95:20 between FEB and JVL should be upheld. JVL
entered into the lease contract with full knowledge of its terms and conditions.
The contract was in force for more than four years.
Since its inception on March 9, 1995, JVL and Lim never questioned its
provisions. They only attacked the validity of the contract after they were
judicially made to answer for their default in the payment of the agreed rentals.
It is settled that the parties are free to agree to such stipulations, clauses, terms,
and conditions as they may want to include in a contract. As long as such
agreements are not contrary to law, morals, good customs, public policy, or
public order, they shall have the force of law between the parties.
Contracting parties may stipulate on terms and conditions as they may see fit
and these have the force of law between them.
The stipulation in Section 14 of the lease contract, that the equipment shall be
insured at the cost and expense of the lessee against loss, damage, or
destruction from fire, theft, accident, or other insurable risk for the full term of
the lease, is a binding and valid stipulation.
Petitioner, as a lessee, has an insurable interest in the equipment and
motor vehicles leased. Section 17 of the Insurance Code provides that
the measure of an insurable interest in property is the extent to which
the insured might be damnified by loss or injury thereof. It cannot be
denied that JVL will be directly damnified in case of loss, damage, or
destruction of any of the properties leased
In the financial lease agreement, FEB did not assume responsibility as to the
quality, merchantability, or capacity of the equipment.
This stipulation provides that, in case of defect of any kind that will be found by
the lessee in any of the equipment, recourse should be made to the
manufacturer.
9.
"The financial lessor, being a financing company, i.e., an extender of credit

rather than an ordinary equipment rental company, does not extend a warranty
of the fitness of the equipment for any particular use.
10. Thus, the financial lessee was precisely in a position to enforce such warranty
directly against the supplier of the equipment and not against the financial
lessor.
11. We find nothing contra legem or contrary to public policy in such a contractual
arrangement."
12. Wherefore, the petition is DENIED
(x) Eternal Gardens Memorial Park Corp. v. The Philippine American Life
Insurance Company, G.R. No. 166245, April 9, 2008
Topic: Ambiguity
Art. 1377, Civil Code. The interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the obscurity.
FACTS:
1. Under the policy, the clients of Eternal who purchased burial lots from it on
installment basis would be insured by Philamlife.
2. The insurance of any eligible Lot Purchaser shall be effective on the date he
contracts a loan with the Assured. However, there shall be no insurance if the
application of the Lot Purchaser is not approved by the Company.
ISSUE: Whether said provision is ambiguous
HELD:
1.
2.
The said provision would show ambiguity as the first sentence appears to state
that the insurance coverage of the clients of Eternal already became effective
upon contracting a loan with Eternal with the second sentence appears to require
Philamlife to approve the insurance contract before the same can be effective
An insurance contract is a contract of adhesion which must be construed liberally
in favor of the insured and strictly against the insurer in order to safeguard the
latters interest.
(y) VIOLETA LALICAN v. THE INSULAR LIFE ASSURANCE CO., G.R. No.
166245, April 9, 2008
Subtopic: Reinstatement of Policy
Facts:
1. Violeta is the widow of the deceased Eulogio C. Lalican (Eulogio).
23

2. During his lifetime, Eulogio applied for an insurance policy with Insular Life. On
24 April 1997, Insular Life, through Josephine Malaluan (Malaluan), its agent in
Gapan City, issued in favor of Eulogio Policy which contained a 20-Year
Endowment Variable Income Package Flexi Plan worth P500,000.00, with two
riders valued at P500,000.00 each. Thus, the value of the policy amounted to
P1.5M. Violeta was named as the primary beneficiary.
3. Under the terms of Policy, Eulogio was to pay the premiums on a
quarterly basis in the amount of P8,062.00, payable until the end of the
20-year period of the policy. According to the Policy Contract, there
was a grace period of 31 days for the payment of each premium
subsequent to the first.
4. If any premium was not paid on or before the due date, the policy
would be in default, and if the premium remained unpaid until the end
of the grace period, the policy would automatically lapse and become
void.
5. He failed to pay the premium due on 24 January 1998, even after the lapse of
the grace period of 31 days. Policy, therefore, lapsed and became void.
6. Eulogio submitted to the Cabanatuan District Office of Insular Life, through
Malaluan, on 26 May 1998, an Application for Reinstatement of Policy, together
with the amount of P8,062.00 to pay for the premium due on 24 January 1998.
7. The application was not processed because despite deposit of the premium,
Eulogio did not pay the interest. He was instructed to pay the interest first then
reapply.
8. Eulogio went to Malaluans house. But since the latter was in a hurry, Eulogios
second application was received by Malaluans husband
9. Eulogio died of cardio-respitatory arrest secondary to electrocution
10. Without knowing the death of Eulogio, Malaluan forwarded the
application to Insular Life. However, Insular Life did not act on the
application since it knows that Eulogio passed away
11. On 28 September 1998, Violeta filed with Insular Life a claim for payment of the
full proceeds of Policy.
12. Insular denied the claim since the Policy already lapsed. It paid the refund of the
premiums paid by Eulogio. MR was denied.
13. Violeta then filed a complaint for death claim benefit with the RTC. The RTC
rendered a Decision in favor of Insular Life ruling that the policy had indeed
lapsed. MR of Violeta was denied
14. Notice of Appeal was denied by the RTC.
15. Hence, this petition.
Issue: WON the Policy of Eulogio had lapsed
Held:
1.
The petition is bereft of merit
2.
An insurable interest is one of the most basic and essential requirements in an

insurance contract. In general, an insurable interest is that interest which
a person is deemed to have in the subject matter insured, where he has
a relation or connection with or concern in it, such that the person will
derive pecuniary benefit or advantage from the preservation of the
subject matter insured and will suffer pecuniary loss or damage from
its destruction, termination, or injury by the happening of the event
insured against.
3. The existence of an insurable interest gives a person the legal right to
insure the subject matter of the policy of insurance.
4. Section 10 of the Insurance Code indeed provides that every person
has an insurable interest in his own life.
5. Section 19 of the same code also states that an interest in the life or
health of a person insured must exist when the insurance takes effect,
but need not exist thereafter or when the loss occurs.
6. Upon more extensive study of the Petition, it becomes evident that the matter of
insurable interest is entirely irrelevant in the case at bar. It is actually beyond
question that while Eulogio was still alive, he had an insurable interest in his own
life, which he did insure under Policy. The real point of contention herein is
whether Eulogio was able to reinstate the lapsed insurance policy on his life
before his death on 17 September 1998.
7. The Court rules in the negative.
8. Before proceeding, the Court must correct the erroneous declaration of the RTC
in its 30 August 2007 Decision that Policy lapsed because of Eulogios nonpayment of the premiums which became due on 24 April 1998 and 24 July 1998.
9. Policy had lapsed and become void earlier, on 24 February 1998, upon
the expiration of the 31-day grace period for payment of the premium,
which fell due on 24 January 1998, without any payment having been
made.
10. That Policy had already lapsed is a fact beyond dispute. Eulogios filing
of his first Application for Reinstatement with Insular Life, through
Malaluan, on 26 May 1998, constitutes an admission that Policy had
lapsed by then.
11. Insular Life did not act on Eulogios first Application for Reinstatement, since the
amount Eulogio simultaneously deposited was sufficient to cover only the
P8,062.00 overdue premium for 24 January 1998, but not the P322.48 overdue
interests thereon. On 17 September 1998, Eulogio submitted a second
Application for Reinstatement to Insular Life, again through Malaluan, depositing
at the same time P17,500.00, to cover payment for the overdue interest on the
premium for 24 January 1998, and the premiums that had also become due on
24 April 1998 and 24 July 1998. On the very same day, Eulogio passed away.
12. To reinstate a policy means to restore the same to premium-paying
status after it has been permitted to lapse. Both the Policy Contract and
the Application for Reinstatement provide for specific conditions for the
reinstatement of a lapsed policy.
24

13. In the instant case, Eulogios death rendered impossible full
compliance with the conditions for reinstatement of Policy.
14. True, Eulogio, before his death, managed to file his Application for
Reinstatement and deposit the amount for payment of his overdue
premiums and interests thereon with Malaluan; but Policy could only
be considered reinstated after the Application for Reinstatement had
been processed and approved by Insular Life during Eulogios lifetime
and good health.
15. Relevant herein is the following pronouncement of the Court in Andres v. The
Crown Life Insurance Company, citing McGuire v. The Manufacturer's Life
Insurance Co:
"The stipulation in a life insurance policy giving the insured the privilege to reinstate it
upon written application does not give the insured absolute right to such
reinstatement by the mere filing of an application. The insurer has the right to deny
the reinstatement if it is not satisfied as to the insurability of the insured and if the
latter does not pay all overdue premium and all other indebtedness to the insurer.
After the death of the insured the insurance Company cannot be compelled to
entertain an application for reinstatement of the policy because the conditions
precedent to reinstatement can no longer be determined and satisfied."
16. It does not matter that when he died, Eulogios Application for Reinstatement
and deposits for the overdue premiums and interests were already with
Malaluan. Insular Life, through the Policy Contract, expressly limits the power or
authority of its insurance agents, thus:
Our agents have no authority to make or modify this contract, to extend the time
limit for payment of premiums, to waive any lapsation, forfeiture or any of our rights
or requirements, such powers being limited to our president, vice-president or
persons authorized by the Board of Trustees and only in writing.
17. Malaluan did not have the authority to approve Eulogios Application
for Reinstatement. Malaluan still had to turn over to Insular Life
Eulogios Application for Reinstatement and accompanying deposits,
for processing and approval by the latter.
18. The Court agrees with the RTC that the conditions for reinstatement
under the Policy Contract and Application for Reinstatement were
written in clear and simple language, which could not admit of any
meaning or interpretation other than those that they so obviously
embody.
19. A construction in favor of the insured is not called for, as there is no
ambiguity in the said provisions in the first place. The words thereof
are clear, unequivocal, and simple enough so as to preclude any
mistake in the appreciation of the same.
20. Violeta did not adduce any evidence that Eulogio might have failed to fully
understand the import and meaning of the provisions of his Policy Contract
and/or Application for Reinstatement, both of which he voluntarily signed.
21. While it is a cardinal principle of insurance law that a policy or contract of
insurance is to be construed liberally in favor of the insured and strictly as
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.
22. Eulogios death, just hours after filing his Application for Reinstatement and
depositing his payment for overdue premiums and interests with Malaluan, does
not constitute a special circumstance that can persuade this Court to already
consider Policy reinstated.
23. Said circumstance cannot override the clear and express provisions of the Policy
Contract and Application for Reinstatement, and operate to remove the
prerogative of Insular Life thereunder to approve or disapprove the Application
for Reinstatement. Even though the Court commiserates with Violeta, as the
tragic and fateful turn of events leaves her practically empty-handed, the Court
cannot arbitrarily burden Insular Life with the payment of proceeds on a lapsed
insurance policy. Justice and fairness must equally apply to all parties to a case.
Courts are not permitted to make contracts for the parties. The function and
duty of the courts consist simply in enforcing and carrying out the contracts
actually made.
24. Policy remained lapsed and void, not having been reinstated in
accordance with the Policy Contract and Application for Reinstatement
before Eulogios death. Violeta, therefore, cannot claim any death
benefits from Insular Life on the basis of Policy; but she is entitled to
receive the full refund of the payments made by Eulogio thereon.
25. WHEREFORE, premises considered, the Court DENIES
(z) PHILIPPINE HEALTH CARE PROVIDERS, INC., Petitioner, v
COMMISSIONER OF INTERNAL REVENUE, Respondent (18 Sept 2009)
Topic: Health Maintenance Organizations (HMOs); Doing insurance business; Contract
of insurance; Risk as an element of insurance contract
Facts: Petitioner Philippine Healthcare Providers is a domestic corporation whose
primary purpose is "[t]o establish, maintain, conduct and operate a prepaid group
practice health care delivery system or a health maintenance organization to take
care of the sick and disabled persons enrolled in the health care plan and to provide
for the administrative, legal, and financial responsibilities of the organization."
Individuals enrolled in its health care programs pay an annual membership fee and
are entitled to various preventive, diagnostic and curative medical services provided
by its duly licensed physicians, specialists and other professional technical staff
participating in the group practice health delivery system at a hospital or clinic
owned, operated or accredited by it.
25

Respondent CIR sent petitioner deficiency DST assessment, to which petitioner
protested. Respondent argues that petitioners health care agreement was a contract
of insurance subject to DST under Section 185 of the 1997 Tax Code.
The Supreme Court in affirming CAs decision, initially found that petitioners health
care agreement was in the nature of non-life insurance which is a contract of
indemnity, citing Blue Cross Healthcare, Inc. v. Olivares and Philamcare Health
Systems, Inc. v. CA.
The high court also ruled that petitioners contention that it is a health maintenance
organization (HMO) and not an insurance company is irrelevant because contracts
between companies like petitioner and the beneficiaries under their plans are treated
as insurance contracts. Moreover, DST is not a tax on the business transacted but an
excise on the privilege, opportunity or facility offered at exchanges for the transaction
of the business.
Petitioner sought reconsideration of SCs decision primarily asserting that the DST
under Section 185 of the National Internal Revenue of 1997 is imposed only on a
company engaged in the business of fidelity bonds and other insurance policies.
Petitioner, as an HMO, is a service provider, not an insurance company.
Issue: Whether petitioner is an insurance company as to make its healthcare
agreements subject to DST.
Held: The SC granted petitioners motion for reconsideration.
Various courts in the United States, whose jurisprudence has a persuasive effect on
our decisions, have determined that Health Maintenance Organizations (HMOs) are
not in the insurance business.
Various courts in the United States, whose jurisprudence has a persuasive effect on
our decisions, have determined that HMOs are not in the insurance business. One
test that they have applied is whether the assumption of risk and
indemnification of loss (which are elements of an insurance business) are
the principal object and purpose of the organization or whether they are
merely incidental to its business. If these are the principal objectives, the
business is that of insurance. But if they are merely incidental and service is the
principal purpose, then the business is not insurance. Applying the principal object
and purpose test, there is significant American case law supporting the argument
that a corporation (such as an HMO, whether or not organized for profit), whose
main object is to provide the members of a group with health services, is not
engaged in the insurance business.
Even if petitioner assumes the risk of paying the cost of these services even if
significantly more than what the member has prepaid, it nevertheless cannot be
considered as being engaged in the insurance business.
The mere presence of risk would be insufficient to override the primary purpose of
the business to provide medical services as needed, with payment made directly to
the provider of these services. In short, even if petitioner assumes the risk of paying
the cost of these services even if significantly more than what the member has
prepaid, it nevertheless cannot be considered as being engaged in the insurance
business.
By the same token, any indemnification resulting from the payment for services
rendered in case of emergency by non-participating health providers would still be
incidental to petitioners purpose of providing and arranging for health care services
and does not transform it into an insurer. To fulfill its obligations to its members
under the agreements, petitioner is required to set up a system and the facilities for
the delivery of such medical services. This indubitably shows that indemnification is
not its sole object.
In fact, a substantial portion of petitioners services covers preventive and diagnostic
medical services intended to keep members from developing medical conditions or
diseases. As an HMO, it is its obligation to maintain the good health of its members.
Accordingly, its health care programs are designed to prevent or to minimize the
possibility of any assumption of risk on its part. Thus, its undertaking under its
agreements is not to indemnify its members against any loss or damage arising from
a medical condition but, on the contrary, to provide the health and medical services
needed to prevent such loss or damage.
Overall, petitioner appears to provide insurance-type benefits to its members (with
respect to its curative medical services), but these are incidental to the principal
activity of providing them medical care. The "insurance-like" aspect of petitioners
business is miniscule compared to its noninsurance activities. Therefore, since it
substantially provides health care services rather than insurance services, it cannot be
considered as being in the insurance business.
A Health Care Agreement Is Not An Insurance Contract Contemplated
Under Section 185 Of The NIRC of 1997
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement
whereby one undertakes for a consideration to indemnify another against loss,
damage or liability arising from an unknown or contingent event. An insurance
contract exists where the following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designed peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses
among a large group of persons bearing a similar risk and
26

5. In consideration of the insurers promise, the insured pays a premium.
Do the agreements between petitioner and its members possess all these elements?
They do not.
First. In our jurisdiction, a commentator of our insurance laws has pointed out that,
even if a contract contains all the elements of an insurance contract, if its primary
purpose is the rendering of service, it is not a contract of insurance:
It does not necessarily follow however, that a contract containing all the four
elements mentioned above would be an insurance contract. The primary purpose of
the parties in making the contract may negate the existence of an insurance contract.
For example, a law firm which enters into contracts with clients whereby in
consideration of periodical payments, it promises to represent such clients in all suits
for or against them, is not engaged in the insurance business. Its contracts are simply
for the purpose of rendering personal services. On the other hand, a contract by
which a corporation, in consideration of a stipulated amount, agrees at its own
expense to defend a physician against all suits for damages for malpractice is one of
insurance, and the corporation will be deemed as engaged in the business of
insurance. Unlike the lawyers retainer contract, the essential purpose of such a
contract is not to render personal services, but to indemnify against loss and damage
resulting from the defense of actions for malpractice.
Second. Not all the necessary elements of a contract of insurance are present in
petitioners agreements. To begin with, there is no loss, damage or liability on the
part of the member that should be indemnified by petitioner as an HMO. Under the
agreement, the member pays petitioner a predetermined consideration in exchange
for the hospital, medical and professional services rendered by the petitioners
physician or affiliated physician to him. In case of availment by a member of the
benefits under the agreement, petitioner does not reimburse or indemnify the
member as the latter does not pay any third party. Instead, it is the petitioner who
pays the participating physicians and other health care providers for the services
rendered at pre-agreed rates. The member does not make any such payment.
In other words, there is nothing in petitioner's agreements that gives rise to a
monetary liability on the part of the member to any third party-provider of medical
services which might in turn necessitate indemnification from petitioner. The terms
"indemnify" or "indemnity" presuppose that a liability or claim has already been
incurred. There is no indemnity precisely because the member merely avails of
medical services to be paid or already paid in advance at a pre-agreed price under
the agreements.
Third. According to the agreement, a member can take advantage of the bulk of the
benefits anytime, e.g. laboratory services, x-ray, routine annual physical examination
and consultations, vaccine administration as well as family planning counseling, even
in the absence of any peril, loss or damage on his or her part.
Fourth. In case of emergency, petitioner is obliged to reimburse the member who
receives care from a non-participating physician or hospital. However, this is only a
very minor part of the list of services available. The assumption of the expense by
petitioner is not confined to the happening of a contingency but includes incidents
even in the absence of illness or injury.
Fifth. Although risk is a primary element of an insurance contract, it is not necessarily
true that risk alone is sufficient to establish it. Almost anyone who undertakes a
contractual obligation always bears a certain degree of financial risk. Consequently,
there is a need to distinguish prepaid service contracts (like those of petitioner) from
the usual insurance contracts.
Indeed, petitioner, as an HMO, undertakes a business risk when it offers to provide
health services: the risk that it might fail to earn a reasonable return on its
investment. But it is not the risk of the type peculiar only to insurance companies.
Insurance risk, also known as actuarial risk, is the risk that the cost of insurance
claims might be higher than the premiums paid. The amount of premium is calculated
on the basis of assumptions made relative to the insured.
However, assuming that petitioners commitment to provide medical services to its
members can be construed as an acceptance of the risk that it will shell out more
than the prepaid fees, it still will not qualify as an insurance contract because
petitioners objective is to provide medical services at reduced cost, not to distribute
risk like an insurer.
In sum, an examination of petitioners agreements with its members leads
us to conclude that it is not an insurance contract within the context of our
Insurance Code.
If it had been the intent of the legislature to impose Documentary Stamp Tax (DST)
on health care agreements, it could have done so in clear and categorical terms.
We can clearly see from these two histories (of the DST on the one hand and HMOs
on the other) that when the law imposing the DST was first passed, HMOs were yet
unknown in the Philippines. However, when the various amendments to the DST law
were enacted, they were already in existence in the Philippines and the term had in
fact already been defined by RA 7875. If it had been the intent of the legislature to
impose DST on health care agreements, it could have done so in clear and categorical
terms. It had many opportunities to do so. But it did not. The fact that the NIRC
contained no specific provision on the DST liability of health care agreements of
HMOs at a time they were already known as such, belies any legislative intent to
impose it on them. As a matter of fact, petitioner was assessed its DST liability only
on January 27, 2000, after more than a decade in the business as an HMO.
(aa) New World International Dev. v. NYK-FilJapan Shipping Co., G.R. No.
171468, August 24, 2011
Main Topic: Characteristics of Insurance Contract
27

Subtopic: Sec. 241
Facts:
1. Petitioner New World International Development (Phils.), Inc. (New World)
bought from DMT Corporation (DMT) through its agent, Advatech Industries, Inc.
(Advatech) three emergency generator sets worth US$721,500.00.
2. DMT shipped the generator sets by truck from Wisconsin, U.S., to LEP Profit
International, Inc. (LEP Profit) in Chicago, Illinois. From there, the shipment went
by train to Oakland, California, where it was loaded on S/S California Luna V59,
owned and operated by NYK Fil-Japan Shipping Corporation (NYK) for delivery to
petitioner New World in Manila. NYK issued a bill of lading, declaring that it
received the goods in good condition.
3. NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby
V/72 that it also owned and operated.
4. On its journey to Manila, however, ACX Ruby encountered typhoon
Kadiang whose captain filed a sea protest on arrival at the Manila
South Harbor on October 5, 1993 respecting the loss and damage that
the goods on board his vessel suffered.
5. Marina Port Services, Inc. (Marina), the Manila South Harbor arrastre or cargohandling operator, received the shipment on October 7, 1993.
6. Upon inspection of the three container vans separately carrying the generator
sets, two vans bore signs of external damage while the third van appeared
unscathed.
7. The shipment remained at Pier 3s Container Yard under Marinas care pending
clearance from the Bureau of Customs. Eventually, on October 20, 1993 customs
authorities allowed petitioners customs broker, Serbros Carrier Corporation
(Serbros), to withdraw the shipment and deliver the same to petitioner New
Worlds job site in Makati City.
8. An examination of the three generator sets in the presence of petitioner New
Worlds representatives, Federal Builders (the project contractor) and surveyors
of petitioner New Worlds insurer, SeaboardEastern Insurance Company
(Seaboard), revealed that all three sets suffered extensive damage and could no
longer be repaired. For these reasons, New World demanded recompense for its
loss from respondents NYK, DMT, Advatech, LEP Profit, LEP International
Philippines, Inc. (LEP), Marina, and Serbros. While LEP and NYK acknowledged
receipt of the demand, both denied liability for the loss.
9. Since Seaboard covered the goods with a marine insurance policy,
petitioner New World sent it a formal claim dated November 16, 1993.
10. Replying on February 14, 1994, Seaboard required petitioner New World to
submit to it an itemized list of the damaged units, parts, and accessories, with
corresponding values, for the processing of the claim.
11. But petitioner New World did not submit what was required of it,
insisting that the insurance policy did not include the submission of
such a list in connection with an insurance claim. Reacting to this,
Seaboard refused to process the claim.
12. Petitioner New World filed an action for specific performance and damages
against all the respondents before the RTC of Makati
13. On August 16, 2001 the RTC rendered a decision absolving the various
respondents from liability with the exception of NYK on the ground that the
generator sets were damaged during transit while in the care of NYKs vessel,
ACX Ruby. The latter failed, according to the RTC, to exercise the degree
of diligence required of it in the face of a foretold raging typhoon in its
path.
14. The RTC ruled, however, that petitioner New World filed its claim against the
vessel owner NYK beyond the one year provided under the Carriage of Goods by
Sea Act (COGSA). New World filed its complaint on October 11, 1994 when the
deadline for filing the action (on or before October 7, 1994) had already lapsed.
The RTC held that the one-year period should be counted from the date
the goods were delivered to the arrastre operator and not from the
date they were delivered to petitioners job site
15. As regards petitioner New Worlds claim against Seaboard, its insurer, the RTC
held that the latter cannot be faulted for denying the claim against it since New
World refused to submit the itemized list that Seaboard needed for
assessing the damage to the shipment. Likewise, the belated filing of the
complaint prejudiced Seaboards right to pursue a claim against NYK in the event
of subrogation.
16. On appeal, the CA rendered judgment on January 31, 2006, affirming the RTCs
rulings except with respect to Seaboards liability. The CA held that petitioner
New World can still recoup its loss from Seaboards marine insurance policy,
considering a) that the submission of the itemized listing is an unreasonable
imposition and b) that the one-year prescriptive period under the COGSA did not
affect New Worlds right under the insurance policy since it was the Insurance
Code that governed the relation between the insurer and the insured.
17. Although petitioner New World promptly filed a petition for review of the CA
decision before the Court in G.R. 171468, Seaboard chose to file a motion for
reconsideration of that decision.
18. On August 17, 2006 the CA rendered an amended decision, reversing itself as
regards the claim against Seaboard. The CA held that the submission of the
itemized listing was a reasonable requirement that Seaboard asked of New
World.
19. Further, the CA held that the one-year prescriptive period for maritime claims
applied to Seaboard, as insurer and subrogee of New Worlds right against the
vessel owner. New Worlds failure to comply promptly with what was required of
it prejudiced such right.
20. Instead of filing a MR, petitioner instituted a second petition for review before
the Court in G.R. 174241, assailing the CAs amended decision.
Issue: WON an itemized list is required before the petitioner can recover
from Seaboard
28

Held:
1. One. The Court does not regard as substantial the question of reasonableness of
Seaboards additional requirement of an itemized listing of the damage that the
generator sets suffered.
2. The record shows that petitioner New World complied with the
documentary requirements evidencing damage to its generator sets.
3. The marine open policy that Seaboard issued to New World was an allrisk policy. Such a policy insured against all causes of conceivable loss
or damage except when otherwise excluded or when the loss or
damage was due to fraud or intentional misconduct committed by the
insured. The policy covered all losses during the voyage whether or not
arising from a marine peril.
4. Here, the policy enumerated certain exceptions like unsuitable packaging,
inherent vice, delay in voyage, or vessels unseaworthiness, among others. But
Seaboard had been unable to show that petitioner New Worlds loss or damage
fell within some or one of the enumerated exceptions.
5. What is more, Seaboard had been unable to explain how it could not verify the
damage that New Worlds goods suffered going by the documents that it already
submitted. Notably, Seaboards own marine surveyor attended the inspection of
the generator sets.
6. Seaboard cannot pretend that the above documents are inadequate
since they were precisely the documents listed in its insurance policy.
Being a contract of adhesion, an insurance policy is construed strongly
against the insurer who prepared it. The Court cannot read a
requirement in the policy that was not there
7. Further, it appears from the exchanges of communications between Seaboard
and Advatech that submission of the requested itemized listing was incumbent
on the latter as the seller DMTs local agent. Petitioner New World should not be
made to suffer for Advatechs shortcomings.
8. Two. Regarding prescription of claims, Section 3(6) of the COGSA provides that
the carrier and the ship shall be discharged from all liability in case of loss or
damage unless the suit is brought within one year after delivery of the goods or
the date when the goods should have been delivered.
9. But whose fault was it that the suit against NYK, the common carrier, was not
brought to court on time? The last day for filing such a suit fell on October 7,
1994. The record shows that petitioner New World filed its formal claim for its
loss with Seaboard, its insurer, a remedy it had the right to take, as early as
November 16, 1993 or about 11 months before the suit against NYK would have
fallen due.
10. In the ordinary course, if Seaboard had processed that claim and paid the same,
Seaboard would have been subrogated to petitioner New Worlds right to recover
from NYK. And it could have then filed the suit as a subrogee. But, as discussed
above, Seaboard made an unreasonable demand on February 14, 1994 for an
itemized list of the damaged units, parts, and accessories, with corresponding
values when it appeared settled that New Worlds loss was total and when the
11.
12.
13.
14.
15.
16.
17.
18.
19.
insurance policy did not require the production of such a list in the event of a
claim.
Besides, when petitioner New World declined to comply with the
demand for the list, Seaboard against whom a formal claim was
pending should not have remained obstinate in refusing to process that
claim. It should have examined the same, found it unsubstantiated by
documents if that were the case, and formally rejected it. That would
have at least given petitioner New World a clear signal that it needed
to promptly file its suit directly against NYK and the others. Ultimately,
the fault for the delayed court suit could be brought to Seaboards
doorstep.
Section 241 of the Insurance Code provides that no insurance company
doing business in the Philippines shall refuse without just cause to pay
or settle claims arising under coverages provided by its policies.
And, under Section 243, the insurer has 30 days after proof of loss is
received and ascertainment of the loss or damage within which to pay
the claim. If such ascertainment is not had within 60 days from receipt
of evidence of loss, the insurer has 90 days to pay or settle the claim.
And, in case the insurer refuses or fails to pay within the prescribed
time, the insured shall be entitled to interest on the proceeds of the
policy for the duration of delay at the rate of twice the ceiling
prescribed by the Monetary Board.
Notably, Seaboard already incurred delay when it failed to settle petitioner New
Worlds claim as Section 243 required. Under Section 244, a prima facie evidence
of unreasonable delay in payment of the claim is created by the failure of the
insurer to pay the claim within the time fixed in Section 243.
Consequently, Seaboard should pay interest on the proceeds of the policy for the
duration of the delay until the claim is fully satisfied at the rate of twice the
ceiling prescribed by the Monetary Board.
The term "ceiling prescribed by the Monetary Board" means the legal rate of
interest of 12% per annum provided in Central Bank Circular 416, pursuant to
Presidential Decree 116.
Section 244 of the Insurance Code also provides for an award of attorneys fees
and other expenses incurred by the assured due to the unreasonable withholding
of payment of his claim.
In Prudential Guarantee and Assurance, Inc. v. Trans-Asia Shipping Lines, Inc.,
the Court regarded as proper an award of 10% of the insurance proceeds as
attorneys fees. Such amount is fair considering the length of time that has
passed in prosecuting the claim.
Pursuant to the Courts ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,
a 12% interest per annum from the finality of judgment until full satisfaction of
the claim should likewise be imposed, the interim period equivalent to a
forbearance of credit.
29

20. Petitioner New World is entitled to the value stated in the policy which is
commensurate to the value of the three emergency generator sets or
US$721,500.00 with double interest plus attorneys fees as discussed above.
(bb) Ma. Lourdes S. Florendo v. Philam Plans, Inc., Perla Abcede and Ma.
Celeste Abcede, G.R. No. 186983, February 22, 2012
Topic: Concealment
Sec. 26. A neglect to communicate that which a party knows and ought to
communicate, is called a concealment.
FACTS:
1. Florendo took a life insurance policy with Philam Plans.
2. Philam waived medical examination for Manuel and relief largely on his stating
the truth regarding his health in his application.
3. He however had been under treatment for heart condition and diabetes for more
than 5 years preceding his submission of that application.
4. He also did not reveal that he has a pace-maker installed in his body
ISSUE: Whether the acts of Florendo constitute concealment
HELD: Yes
Manuel had been taking medicine for his heart condition and diabetes when he
submitted his pension plan application. These clearly fell within the five-year period.
More, even if Perlas (Philam Agent) knowledge of Manuels pacemaker may be
applied to Philam Plans under the theory of imputed knowledge, it is not claimed that
Perla was aware of his two other afflictions that needed medical treatments. Pursuant
to Section 27 of the Insurance Code, Manuels concealment entitles Philam Plans to
rescind its contract of insurance with him.
(cc)United Merchants Corp. v. Country Bankers Insurance Corp., G.R. No. 198588,
July 11, 2012
Sec. 91. When a preliminary proof of loss is required by a policy, the insured is not
bound to give such proof as would be necessary in a court of justice; but it is
sufficient for him to give the best evidence which he has in his power at the time.
Sec. 94. If the policy requires, by way of preliminary proof of loss, the certificate or
testimony of a person other than the insured, it is sufficient for the insured to use
reasonable diligence to procure it, and in case of the refusal of such person to give it,
then to furnish reasonable evidence to the insurer that such refusal was not induced
by any just grounds of disbelief in the facts necessary to be certified or testified.
FACTS:
1. UMC alleged that it lost P50M worth of stocks in the fire.
2. Supporting it were invoices but these reveal that the stocks in trade purchased
for 1996 amounts to P20M only.
3. There were no prior purchases in the Statement of Inventory.
4. The invoices were moreover spurious as there is no supporting contract and the
supplier appears to be inexistent.
5. The claim is also 25 times the actual loss, if reference is to be made on the
financial statements
ISSUE: Whether there was honest mistake or error
HELD:
1. The most liberal human judgment cannot attribute such difference to mere
innocent error in estimating or counting but to a deliberate intent to demand
from insurance companies payment for indemnity of goods not existing at the
time of the fire.
2. This constitutes the so-called "fraudulent claim" which, by express agreement
between the insurers and the insured, is a ground for the exemption of insurers
from civil liability.
3. A false and material statement made with an intent to deceive or defraud voids
an insurance policy. In Yu Cua v. South British Insurance Co., the claim was
fourteen times bigger than the real loss; in Go Lu v. Yorkshire Insurance Co,
eight times; and in Tuason v. North China Insurance Co., six times. In the
present case, the claim is twenty five times the actual claim proved.
(dd) Paramount Insurance Corp. v. Spouses Yves and Ma. Theresa Remondeulaz,
G.R. No. 173773, November 28, 2012
Topic: Theft, in relation to insurance claim
FACTS:
On May 26, 1994, respondents insured with petitioner their 1994
Toyota Corolla sedan under a comprehensive motor vehicle insurance policy for one
year.
During the effectivity of said insurance, respondents car was unlawfully taken.
Hence, they immediately reported the theft to the Traffic Management Command of
the PNP who made them accomplish a complaint sheet. In said complaint sheet,
30

respondents alleged that a certain Ricardo Sales (Sales) took possession of the
subject vehicle to add accessories and improvements thereon, however, Sales failed
to return the subject vehicle within the agreed three-day period.
As a result, respondents notified petitioner to claim for the reimbursement of their
lost vehicle. However, petitioner refused to pay.
ISSUE: Whether such misappropriation constitutes theft, thus making the insurer
liable for the policy.
HELD: Yes
Records show that respondents entrusted possession of their vehicle only to the
extent that Sales will introduce repairs and improvements thereon, and not to
permanently deprive them of possession thereof. Since, Theft can also be committed
through misappropriation, the fact that Sales failed to return the subject vehicle to
respondents constitutes Qualified Theft. Hence, since respondents car is undeniably
covered by a Comprehensive Motor Vehicle Insurance Policy that allows for recovery
in cases of theft, petitioner is liable under the policy for the loss of respondents
vehicle under the theft clause.
(ee) MALAYAN INSURANCE CO., INC., Petitioner, v PHILIPPINES FIRST
INSURANCE CO., INC. and REPUTABLE FORWARDER SERVICES,
INC., Respondents (11 Jul 2012)
Topic: Other insurance vis--vis over insurance; Elements of double insurance;
Solidary liability in insurance contract
Facts: Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable
Forwarder Services, Inc. (Reputable) had been annually executing a contract of
carriage, whereby the latter undertook to transport and deliver the formers products
to its customers, dealers or salesmen.
Wyeth procured Marine Policy with respondent Phil First Insurance (PFI), which
insured Wyeths products usual or incidental to the insureds business while the same
were being transported or shipped in the Philippines. The policy covers all risks of
direct physical loss or damage from any external cause, if by land.
In 1993, 1993, Wyeth executed its annual contract of carriage with Reputable. Under
said contract, Reputable undertook to answer for "all risks with respect to the goods
and shall be liable to the COMPANY (Wyeth), for the loss, destruction, or damage of
the goods/products due to any and all causes whatsoever, including theft, robbery,
flood, storm, earthquakes, lightning, and other force majeure while the
goods/products are in transit and until actual delivery to the customers, salesmen,
and dealers of the COMPANY".
The contract also required Reputable to secure an insurance policy on Wyeths goods.
Thus, on February 11, 1994, Reputable signed a Special Risk Insurance Policy (SR
Policy) with petitioner Malayan for the amount of P1,000,000.00.
During the effectivity of the Marine Policy and SR Policy, Reputable received from
Wyeth boxes of Promil infant formula to be delivered by Reputable to Mercury Drug
Corporation in Libis, Quezon City. Unfortunately, on the same date, the truck carrying
Wyeths products was hijacked by about 10 armed men. They threatened to kill the
truck driver and two of his helpers should they refuse to turn over the truck and its
contents to the said highway robbers. The hijacked truck was recovered two weeks
later without its cargo.
Pursuant to the Marine Policy, PFI indeminified Wyeth for the lost products. PFI then
demanded reimbursement from Reputable, having been subrogated to the rights of
Wyeth by virtue of the payment. The latter, however, ignored the demand. Hence,
PFI instituted an action for sum of money against Reputable.
Reputable claimed that it cannot be made liable under the contract of carriage with
Wyeth since the contract was not signed by Wyeths representative and that the
cause of the loss was force majeure, i.e., the hijacking incident.
Reputable impleaded Malayan as third-party defendant in an effort to collect the
amount covered in the SR Policy. According to Reputable, "it was validly insured with
Malayan for P1,000,000.00 with respect to the lost products under the latters
Insurance Policy.
Malayan disclaimed liability arguing that under Section 5 of the SR Policy, the
insurance does not cover any loss or damage to property which at the time of the
happening of such loss or damage is insured by any marine policy and that the SR
Policy expressly excluded third-party liability.
RTC ruled that, as affirmed by CA, Reputable is liable to PFI for the amount of
indemnity it paid to Wyeth; and Malayan liable to indemnify PFI.
Issues and Ruling:
a.
Whether the RTC and CA, in holding Malayan liable, erred in rendering
"nugatory" Sections 5 and Section 12 of the SR Policy.
No, the lower courts did not err in holding that Secs 5 & 12 are not applicable in this
case, as said provisions apply only in case there is double insurance.
Section 5. INSURANCE WITH OTHER COMPANIES. The insurance does not cover any
loss or damage to property which at the time of the happening of such loss or
damage is insured by or would but for the existence of this policy, be insured by any
31

Fire or Marine policy or policies except in respect of any excess beyond the amount
which would have been payable under the Fire or Marine policy or policies had this
insurance not been effected.
Sec 12. OTHER INSURANCE CLAUSE. If at the time of any loss or damage happening
to any property hereby insured, there be any other subsisting insurance or
insurances, whether effected by the insured or by any other person or persons,
covering the same property, the company shall not be liable to pay or contribute
more than its ratable proportion of such loss or damage.
(So ang sinasabi ng Malayan dito under Sec 5 hindi sya dapat liable kasi may marine
policy na si Wyeth. Alternatively, pro-rated lang dapat ang liability under Sec 12
naman. So when CA held Malayan liable, parang nawalan daw ng saysay yung Secs 5
& 12 nung SR Policy. Sabi naman ng CA, liable sya for the whole P1m kasi yung Secs
5 & 12 naga-apply lang pag may double insurance e there was no finding of facts
that there was double insurance so inapplicable yung 2 provisions.)
Walang tungkol sa Insurance dun sa file tungkol lang sa common carrier, kaya medyo
mahaba ito
Other insurance vis--vis over insurance
Malayan refers to Section 5 of its SR Policy as an "over insurance clause" and to
Section 12 as a "modified other insurance clause".
In rendering inapplicable said provisions in the SR Policy, the CA ruled in this wise:
Since Sec. 5 calls for Malayans complete absolution in case the other insurance
would be sufficient to cover the entire amount of the loss, it is in direct conflict with
Sec. 12 which provides only for a pro-rated contribution between the two insurers.
Being the later provision, and pursuant to the rules on interpretation of contracts,
Sec. 12 should therefore prevail.
xxxx
x x x The intention of both Reputable and Malayan should be given effect as against
the wordings of Sec. 12 of their contract, as it was intended by the parties to operate
only in case of double insurance, or where the benefits of the policies of both
plaintiff-appellee (PFI) and Malayan should pertain to Reputable alone. But since the
court a quo correctly ruled that there is no double insurance in this case inasmuch as
Reputable was not privy thereto, and therefore did not stand to benefit from the
policy issued by plaintiff-appellee in favor of Wyeth, then Malayans stand should be
rejected.
To rule that Sec. 12 operates even in the absence of double insurance would work
injustice to Reputable which, despite paying premiums for a P1,000,000.00 insurance
coverage, would not be entitled to recover said amount for the simple reason that the
same property is covered by another insurance policy, a policy to which it was not a
party to and much less, from which it did not stand to benefit. Plainly, this unfair
situation could not have been the intention of both Reputable and Malayan in signing
the insurance contract in question.
In questioning said ruling, Malayan posits that Sections 5 and 12 are separate
provisions applicable under distinct circumstances. Malayan argues that "it will not be
completely absolved under Section 5 of its policy if it were the assured itself who
obtained additional insurance coverage on the same property and the loss incurred
by Wyeths cargo was more than that insured by Philippines Firsts marine policy. On
the other hand, Section 12 will not completely absolve Malayan if additional insurance
coverage on the same cargo were obtained by someone besides Reputable, in which
case Malayans SR policy will contribute or share ratable proportion of a covered
cargo loss."
Malayans position cannot be countenanced.
Section 5 is actually the other insurance clause (also called "additional insurance" and
"double insurance"), one akin to Condition No. 3 in issue in Geagonia v. CA, which
validity was upheld by the Court as a warranty that no other insurance exists.
In this case, similar to Condition No. 3 in Geagonia, Section 5 does not provide for
the nullity of the SR Policy but simply limits the liability of Malayan only up to the
excess of the amount that was not covered by the other insurance policy.
In interpreting the "other insurance clause" in Geagonia, the Court ruled that the
prohibition applies only in case of double insurance. The Court ruled that in
order to constitute a violation of the clause, the other insurance must be upon same
subject matter, the same interest therein, and the same risk. Thus, even though the
multiple insurance policies involved were all issued in the name of the same assured,
over the same subject matter and covering the same risk, it was ruled that there was
no violation of the "other insurance clause" since there was no double insurance.
Section 12 of the SR Policy, on the other hand, is the over insurance clause. More
particularly, it covers the situation where there is over insurance due to
double insurance. In such case, Section 15 provides that Malayan shall "not be
liable to pay or contribute more than its ratable proportion of such loss or damage."
This is in accord with the principle of contribution provided under Section 94(e) of the
Insurance Code, which states that "where the insured is over insured by double
insurance, each insurer is bound, as between himself and the other insurers, to
contribute ratably to the loss in proportion to the amount for which he is liable under
his contract."
Clearly, both Sections 5 and 12 presuppose the existence of a double
insurance. The pivotal question that now arises is whether there is double
32

insurance in this case such that either Section 5 or Section 12 of the SR
Policy may be applied.
b.
Whether there is double insurance in this case. NO
By the express provision of Section 93 of the Insurance Code, double insurance exists
where the same person is insured by several insurers separately in respect to the
same subject and interest. The requisites in order for double insurance to arise are as
follows:
1. The person insured is the same;
2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.
While it is true that the Marine Policy and the SR Policy were both issued over the
same subject matter, i.e. goods belonging to Wyeth, and both covered the same peril
insured against, it is, however, beyond cavil that the said policies were issued to two
different persons or entities. It is undisputed that Wyeth is the recognized insured of
Philippines First under its Marine Policy, while Reputable is the recognized insured of
Malayan under the SR Policy. The fact that Reputable procured Malayans SR Policy
over the goods of Wyeth pursuant merely to the stipulated requirement under its
contract of carriage with the latter does not make Reputable a mere agent of Wyeth
in obtaining the said SR Policy.
The interest of Wyeth over the property subject matter of both insurance contracts is
also different and distinct from that of Reputables. The policy issued by Philippines
First was in consideration of the legal and/or equitable interest of Wyeth over its own
goods. On the other hand, what was issued by Malayan to Reputable was over the
latters insurable interest over the safety of the goods, which may become the basis
of the latters liability in case of loss or damage to the property and falls within the
contemplation of Section 15 of the Insurance Code.
Therefore, even though the two concerned insurance policies were issued
over the same goods and cover the same risk, there arises no double
insurance since they were issued to two different persons/entities having
distinct insurable interests. Necessarily, over insurance by double
insurance cannot likewise exist. Hence, as correctly ruled by the RTC and
CA, neither Section 5 nor Section 12 of the SR Policy can be applied.
Apart from the foregoing, the Court is also wont to strictly construe the controversial
provisions of the SR Policy against Malayan. This is in keeping with the rule that:
"Indemnity and liability insurance policies are construed in accordance with the
general rule of resolving any ambiguity therein in favor of the insured, where the
contract or policy is prepared by the insurer. A contract of insurance, being a contract
of adhesion, par excellence, any ambiguity therein should be resolved against the
insurer; in other words, it should be construed liberally in favor of the insured and
strictly against the insurer. Limitations of liability should be regarded with extreme
jealousy and must be construed in such a way as to preclude the insurer from
noncompliance with its obligations."
c.
Whether Reputable is solidarily liable with Malayan. NO
There is solidary liability only when the obligation expressly so states, when the law
so provides or when the nature of the obligation so requires.
Where the insurance contract provides for indemnity against liability to third persons,
the liability of the insurer is direct and such third persons can directly sue the insurer.
The direct liability of the insurer under indemnity contracts against third party-liability
does not mean, however, that the insurer can be held solidarily liable with the
insured and/or the other parties found at fault, since they are being held liable under
different obligations.
The liability of the insured carrier or vehicle owner is based on tort, in accordance
with the provisions of the Civil Code; while that of the insurer arises from contract,
particularly, the insurance policy. Suffice it to say that Malayan's and Reputable's
respective liabilities arose from different obligations- Malayan's is based on the SR
Policy while Reputable's is based on the contract of carriage.
(ff) MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION
(MMPSEU), Petitioner, v MITSUBISHI MOTORS PHILIPPINES
CORPORATION, Respondent (17 June 2013)
Topic: Collateral source rule
Short Facts: Under the CBA, Mitsubishi company will pay for hospitalization expenses
of its employees dependents but subject to limitations and restrictions. Each
employee pays P100 monthly (monthly deduction) as his share in the insurance
premium while the balance is paid by the company. On separate instances, some of
the employees dependents were hospitalized. A portion of the hospitalization
expenses were covered by the members own insurance while the other portion
(balance) were covered by Mitsubishi. Union members, however, insist that they
should get the full amount of the hospital expenses from the company. (So kung 10k
ang expenses, 5k binayaran ng MEDIcard, 5k na lang babayaran ng Mitsubishi
subject dun sa benefits covered ng company group insurance. E ang Unyon, bilang
matapang sila, ang sinasabi yung buong 10k dapat ma-reimburse nila from the
company. Kasi kung hindi daw, parang kumita yung kumpanya dun sa monthly
deduction premiums na binabayaran nila. Sabi naman ng kumpanya hindi pwedeng
buong 10k kasi kung ganon, magkakaron ng double recovery at parang
pinagkakakitaan niyo naman yung dependents loss niyo. So ang isyu talaga, sa
pagkakaintindi ko e, pwede ba ang double recovery? Bawal syempre. Diniscuss lang
33

dito yung collateral source rule kasi yung abogado sa insurance commission e
nagmagaling, humaba tuloy ang kaso na to.)
is permitted, MMPC would be unjustly benefited from the monthly premium

contributed by the employees through salary deduction.
Facts: The CBA between petitioner Union and respondent company (Mitsubishi
Motors) provides that the company shoulder the hospitalization expenses of the
dependents of covered employees subject to certain limitations and restrictions.
Accordingly, covered employees pay part of the hospitalization insurance premium
through monthly salary deduction while the company, upon hospitalization of the
covered employees' dependents, shall pay the hospitalization expenses incurred for
the same.
The dispute was referred to the National Conciliation and Mediation Board.
The conflict arose when a portion of the hospitalization expenses of the covered
employees' dependents were paid/shouldered by the dependent's own health
insurance. While the company refused to pay the portion of the hospital expenses
already shouldered by the dependents' own health insurance, the union insists that
the covered employees are entitled to the whole and undiminished amount of said
hospital expenses.
On separate occasions, 3 Union members filed claims for reimbursement of
hospitalization expenses of their dependents. MMPC paid only a portion of their
hospitalization insurance claims, not the full amount.
{Example: Union member-employees father was admitted at The Medical City from
March 26 to 27, 2000 due to Acid Peptic Disease and incurred medical expenses
amounting to P9,101.30.14 MEDICard paid P8,496.00. Consequently, MMPC only paid
P288.40,16 after deducting from the total medical expenses the amount paid by
MEDICard and the P316.90 discount given by the hospital.}
The parties also separately sought the Insurance Commissions opinion. In its reply to
the Union, Atty Funk (Funk talaga) of the Claims Adjudication Division, opined that in
cases of claims for reimbursement of medical expenses where there are two contracts
providing benefits to that effect, recovery may be had on both simultaneously. In the
absence of an Other Insurance provision in these coverages, the courts have
uniformly held that an insured is entitled to receive the insurance benefits without
regard to the amount of total benefits provided by other insurance. The result is
consistent with the public policy underlying the collateral source rule that is, x x x
the courts have usually concluded that the liability of a health or accident insurer is
not reduced by other possible sources of indemnification or compensation.
The voluntary arbitrator rendered a decision finding MMPC liable to pay or reimburse
the amount of hospitalization expenses already paid by other health insurance
companies. The Voluntary Arbitrator held that the employees may demand
simultaneous payment from both the CBA and their dependents separate health
insurance without resulting to double insurance, since separate premiums were paid
for each contract. He also noted that the CBA does not prohibit reimbursement in
case there are other health insurers.
The CA, however, reversed VAs decision stating that the intention of the parties
under the CBA is to make MMPC liable only for expenses actually incurred by an
employees qualified dependent.
The members claim that under the CBA they are entitled to hospital benefits for the
full amount of hospital expenses, which should not be reduced by the amounts paid
by their own HMO/health care provider (ex. MEDICard). Hence, the Union members
asked for reimbursement from MMPC (respondent company).
Issue: Whether the Union members can recover benefits from different insurance
providers (both from their own insurance and benefits under the CBA)
However, MMPC denied the claims contending that double insurance would result if
the said employees would receive from the company the full amount of
hospitalization expenses despite having already received payment of portions thereof
from other health insurance providers. It claims that this would constitute double
indemnity or double insurance, which is circumscribed under the Insurance Code.
Moreover, a contract of insurance is a contract of indemnity and the employees
cannot be allowed to profit from their dependents loss.
The Voluntary Arbitrator based his ruling on the opinion of Atty. Funk that the
employees may recover benefits from different insurance providers without regard to
the amount of benefits paid by each. According to him, this view is consistent with
the theory of the collateral source rule.
On the other hand, the Union alleged that there is nothing in the CBA which prohibits
an employee from obtaining other insurance or declares that medical expenses can
be reimbursed only upon presentation of original official receipts. Besides, if reduction
Held: No. SC denied the Unions petition and affirmed CAs decision.
Collateral Source Rule; As part of American personal injury law, the collateral source
rule was originally applied to tort cases wherein the defendant is prevented from
benefitting from the plaintiffs receipt of money from other sources. Under this rule, if
an injured person receives compensation for his injuries from a source wholly
independent of the tortfeasor, the payment should not be deducted from the
damages which he would otherwise collect from the tortfeasor.
34

As part of American personal injury law, the collateral source rule was originally
applied to tort cases wherein the defendant is prevented from benefitting from the
plaintiffs receipt of money from other sources. Under this rule, if an injured person
receives compensation for his injuries from a source wholly independent of the
tortfeasor, the payment should not be deducted from the damages which he would
otherwise collect from the tortfeasor.
In a recent Decision by the Illinois Supreme Court, the rule has been described as an
established exception to the general rule that damages in negligence actions must be
compensatory. The Court went on to explain that although the rule appears to allow
a double recovery, the collateral source will have a lien or subrogation right to
prevent such a double recovery.
In Mitchell v. Haldar, 883 A.2d 32, 37-38 (Del. 2005), the collateral source rule was
rationalized by the Supreme Court of Delaware: The collateral source rule is
predicated on the theory that a tortfeasor has no interest in, and therefore no right
to benefit from monies received by the injured person from sources unconnected with
the defendant. According to the collateral source rule, a tortfeasor has no right to
any mitigation of damages because of payments or compensation received by the
injured person from an independent source. The rationale for the collateral source
rule is based upon the quasi-punitive nature of tort law liability.
It has been explained as follows: The collateral source rule is designed to strike a
balance between two competing principles of tort law: (1) a plaintiff is entitled to
compensation sufficient to make him whole, but no more; and (2) a defendant is
liable for all damages that proximately result from his wrong.
A plaintiff who receives a double recovery for a single tort enjoys a windfall; a
defendant who escapes, in whole or in part, liability for his wrong enjoys a windfall.
Because the law must sanction one windfall and deny the other, it favors the victim
of the wrong rather than the wrongdoer. Thus, the tortfeasor is required to bear the
cost for the full value of his or her negligent conduct even if it results in a windfall for
the innocent plaintiff.
As seen, the collateral source rule applies in order to place the responsibility for
losses on the party causing them. Its application is justified so that the wrongdoer
should not benefit from the expenditures made by the injured party or take
advantage of contracts or other relations that may exist between the injured party
and third persons. Thus, it finds no application to cases involving no-fault insurances
under which the insured is indemnified for losses by insurance companies, regardless
of who was at fault in the incident generating the losses.
Here, it is clear that MMPC is a no-fault insurer. Hence, it cannot be obliged to pay
the hospitalization expenses of the dependents of its employees which had already
been paid by separate health insurance providers of said dependents.
To allow reimbursement of amounts paid under other insurance policies

shall constitute double recovery which is not sanctioned by law.
To constitute unjust enrichment, it must be shown that a party was unjustly enriched
in the sense that the term unjustly could mean illegally or unlawfully. A claim for
unjust enrichment fails when the person who will benefit has a valid claim to such
benefit.
The CBA has provided for MMPCs limited liability which extends only up to the
amount to be paid to the hospital and doctor by the employees dependents,
excluding those paid by other insurers. Consequently, the covered employees will not
receive more than what is due them; neither is MMPC under any obligation to give
more than what is due under the CBA.
Moreover, since the subject CBA provision is an insurance contract, the rights and
obligations of the parties must be determined in accordance with the general
principles of insurance law. Being in the nature of a non-life insurance contract and
essentially a contract of indemnity, the CBA provision obligates MMPC to indemnify
the covered employees medical expenses incurred by their dependents but only up
to the extent of the expenses actually incurred.
This is consistent with the principle of indemnity which proscribes the insured from
recovering greater than the loss. Indeed, to profit from a loss will lead to unjust
enrichment and therefore should not be countenanced. As aptly ruled by the CA, to
grant the claims of MMPSEU will permit possible abuse by employees.
(gg) MANILA BANKERS LIFE INSURANCE CORPORATION, Petitioner v
CRESENCIA P. ABAN, Respondent (29 Jul 2013)
Topic: Contract of adhesion; Incontestability clause
Facts: After medical examination and payment of premium, petitioner Manila
Bankers issued an insurance policy in favor of Delia Sotero with respondent Aban
(Soteros niece) as her beneficiary.
More than 2 years from the issuance of the policy, Sotero died; hence, respondent
filed a claim for the insurance proceeds. The claim was denied by petitioner on a
finding that it was respondent who really applied for insurance and not Sotero, that
she (Sotero) was in fact sickly for years, was an illiterate, and was not the one who
signed the application. Moreover, petitioner testified that the it was the cousin of
respondents husband who solicited the insurance (may connivance ibigsabihin).
Petitioner then filed civil case for rescission and/or annulment of the policy.
RTC granted respondents MTD and CA dismissed petitioners appeal based on the
incontestability clause under Sec 48, Insurance Code.
35

Issue: Whether the insurance company is entitled to rescind the insurance contract,
after being in force for more than 2 years, on the ground of fraud.
Held: No. SC denied the petition and affirmed CAs decision.
The SC sustained the lower courts finding that it was Sotero who applied for the
insurance policy and not the respondent, as alleged by petitioner. Allegations of
fraud, which are predicated on respondents alleged posing as Sotero and forgery of
her signature in the insurance application, are at once belied by the trial and
appellate courts finding that Sotero herself took out the insurance for herself.
"Fraudulent intent on the part of the insured must be established to entitle the
insurer to rescind the contract." In the absence of proof of such fraudulent intent, no
right to rescind arises.
Incontestability Clause
Section 48 serves a noble purpose, as it regulates the actions of both the insurer and
the insured. Under the provision, an insurer is given two years from the effectivity
of a life insurance contract and while the insured is alive to discover or prove that
the policy is void ab initio or is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the two-year period lapses, or
when the insured dies within the period, the insurer must make good on the policy,
even though the policy was obtained by fraud, concealment, or misrepresentation.
This is not to say that insurance fraud must be rewarded, but that insurers who
recklessly and indiscriminately solicit and obtain business must be penalized, for such
recklessness and lack of discrimination ultimately work to the detriment of bona fide
takers of insurance and the public in general.
The self-regulating feature of Section 48 lies in the fact that both the insurer and the
insured are given the assurance that any dishonest scheme to obtain life insurance
would be exposed, and attempts at unduly denying a claim would be struck down.
Life insurance policies that pass the statutory two-year period are essentially treated
as legitimate and beyond question, and the individuals who wield them are made
secure by the thought that they will be paid promptly upon claim. In this manner,
Section 48 contributes to the stability of the insurance industry.
Section 48 prevents a situation where the insurer knowingly continues to accept
annual premium payments on life insurance, only to later on deny a claim on the
policy on specious claims of fraudulent concealment and misrepresentation, such as
what obtains in the instant case. Thus, instead of conducting at the first instance an
investigation into the circumstances surrounding the issuance of Insurance Policy No.
747411 which would have timely exposed the supposed flaws and irregularities
attending it as it now professes, petitioner appears to have turned a blind eye and
opted instead to continue collecting the premiums on the policy. For nearly three
years, petitioner collected the premiums and devoted the same to its own profit. It
cannot now deny the claim when it is called to account. Section 48 must be applied
to it with full force and effect.
The so-called "incontestability clause" precludes the insurer from raising the defenses
of false representations or concealment of material facts insofar as health and
previous diseases are concerned if the insurance has been in force for at least two
years during the insureds lifetime. The phrase "during the lifetime" found in Section
48 simply means that the policy is no longer considered in force after the insured has
died. The key phrase in the second paragraph of Section 48 is "for a period of two
years."
As borne by the records, the policy was issued on August 30, 1993, the insured died
on April 10, 1996, and the claim was denied on April 16, 1997. The insurance policy
was thus in force for a period of 3 years, 7 months, and 24 days. Considering that the
insured died after the two-year period, the [petitioner] is, therefore, barred from
proving that the policy is void ab initio by reason of the insureds fraudulent
concealment or misrepresentation or want of insurable interest on the part of the
beneficiary, herein [respondent].
Petitioner claims that its insurance agent, who solicited the Sotero account, happens
to be the cousin of respondents husband, and thus insinuates that both connived to
commit insurance fraud. If this were truly the case, then petitioner would have
discovered the scheme earlier if it had in earnest conducted an investigation into the
circumstances surrounding the Sotero policy. But because it did not and it
investigated the Sotero account only after a claim was filed thereon more than two
years later, naturally it was unable to detect the scheme. For its negligence and
inaction, the Court cannot sympathize with its plight. Instead, its case precisely
provides the strong argument for requiring insurers to diligently conduct
investigations on each policy they issue within the two-year period mandated under
Section 48, and not after claims for insurance proceeds are filed with them.
Insurers may not be allowed to delay the payment of claims by filing frivolous cases
in court, hoping that the inevitable may be put off for years or even decades by
the pendency of these unnecessary court cases. In the meantime, they benefit from
collecting the interest and/or returns on both the premiums previously paid by the
insured and the insurance proceeds which should otherwise go to their beneficiaries.
The business of insurance is a highly regulated commercial activity in the country,
and is imbued with public interest. "An insurance contract is a contract of adhesion
which must be construed liberally in favor of the insured and strictly against the
insurer in order to safeguard the formers interest."
36

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TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY.

Topic: Mortgages; Mortgage Redemption; Real party in interest; Mortgage

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

WHEREFORE, the petition is DENIED for lack of merit.

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

On July 6, 1996, 3,000 bags of sodium tripolyphosphate contained in 100 plain

As a general rule, the marine insurance policy needs to be presented in evidence

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

Issue: WON petitioner is liable to pay interest on the premium to be

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

On February 21, 2007, respondent Castor entered into a contract of insurance,

Yes. Ruling in favor of respondent, the RTC of Quezon City scrupulously

Moreover, contracts of insurance, like other contracts, are to be

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

However, petitioner paid to respondent the sum of P92,650 pursuant to an order of

The trial court dismissed petitioners action, affirmed by CA.

Issue: Whether petitioner-insurance company can recover payment.

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

(l) NG GAN ZEE, plaintiff-appellee, v ASIAN CRUSADER LIFE ASSURANCE

Facts: Kwong Nam (plaintiff-appellees husband) applied for a 20-year endowment

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

Failure of insurer to undertake a further inquiry on insurance application on the

Supreme Court affirmed judgment of the trial court.

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

Prescriptive period to bring suit in court under an insurance policy, begins to

(p) GREAT PACIFIC LIFE ASSURANCE CORP., petitioner vs. COURT OF

Grepalife issued an insurance coverage of Dr Leuterio to the extent of his DBP

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

requires that he should communicate it to the assured, but he designedly and

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

An insurer is entitled to payment of the premium as soon as the thing insured is

An insurer is entitled to payment of premium as soon as the thing insured is exposed

Subsequently, fire damaged respondents property, covered by 3 of the insurance

Covered by Section 78 of the Insurance Code, which provides:

SC reversed and set aside CA decision holding that:

Respondent filed motion for reconsideration of SCs decision (2011 case).

Any acknowledgment in a policy or contract of insurance of the receipt of premium is

Moreover, there is nothing in Section 77 which prohibits the parties in an

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

Extra: Wala na ito sa SC decision, nasa separate opinion ni J Vitug

Synallagmatic Characteristic of Insurance

Ernani Trinos applied for a health coverage with Philamcare.

ISSUE: WON there was concealment.

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

(t) GULF RESORTS, INC., petitioner, v PHILIPPINE CHARTER INSURANCE

Held: Yes, only the 2 swimming pools. SC affirmed CA judgment.

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

In consideration of the insurers promise, the insured pays a premium.

An insurance premium is the consideration paid an insurer for undertaking to

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

"The financial lessor, being a financing company, i.e., an extender of credit

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO

The petition is bereft of merit

An insurable interest is one of the most basic and essential requirements in an

TEAM COMM 2. 2nd Sem, SY 2016-17. ATTY. E SALAO