Insurance Basics and Key Concepts

I.
General Concepts
A. Insurance
1. Definition [Secs. 2(1) I.C.]
Insurance Code
Sec. 2(1)
contract of insurance
an agreement whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an unknown or
contingent event
contract of suretyship
shall be deemed to be an insurance contract, within the meaning of this
Code, only if made by a surety who or which, as such, is doing an insurance
business as hereinafter provided
2. Elements (aside from the elements of a contract)

a. The insured has an insurable interest [Secs. 12-14, I.C.]
b. The insured is subject to a risk of loss by the happening of the
designated peril [Sec. 3, par. 1, I.C.]
Insurance Code
Sec. 3(par. 1)
Sec. 3. Any contingent or unknown event, whether past or future, which may
damnify a person having an insurable interest, or create a liability against
him, may be insured against, subject to the provisions of this chapter.
c. The insurer assumes the risk [Sec. 2, I.C.]
d. 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
e. In consideration of the insurer's promise, the insured pays a
premium [Sec 77, I.C]
Insurance Code
Sec. 77
Sec. 77. 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.
Philamcare Health Systems, Inc. v. CA (2002)
Summary: Julita Trinos, not the legal wife of Ernani Trinos who
was hospitalized at Manila Medical Center due to a heart attack, claim
against Philamcare Health Systems, Inc. who rejected her claim. Soon, he
was Ernani was transferred to Chinese General Hospital (CGH) but soon
went home due to financial difficulties. When he had a fever and felt
weak, he was again sent to CGH where he died. SC favored Julita.
Laws:
Insurance Code
Sec. 2 (1)
(1) 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.
Sec. 3
The consent of the husband is not necessary for the validity of an insurance
policy taken out by a married woman on her life or that of her children.
Any minor of the age of eighteen years or more, may, notwithstanding such
minority, contract for life, health and accident insurance, with any insurance
company duly authorized to do business in the Philippines, provided the
insurance is taken on his own life and the beneficiary appointed is the
minor's estate or the minor's father, mother, husband, wife, child, brother or
sister.
The married woman or the minor herein allowed to take out an insurance
policy may exercise all the rights and privileges of an owner under a policy.
All rights, title and interest in the policy of insurance taken out by an original
owner on the life or health of a minor shall automatically vest in the minor
upon the death of the original owner, unless otherwise provided for in the
policy.
Sec. 10
Sec. 10. Every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in part for education or
support, or in whom he has a pecuniary interest;
(3) of any person under a legal obligation to him for the payment of money,
respecting property or service, of which death or illness might delay or
prevent the performance; and
(4) of any person upon whose life any estate or interest vested in him
depends.
Sec. 27
Sec. 27. A concealment whether intentional or unintentional entitles the
injured party to rescind a contract of insurance.
o Concealment as a defense for the health care provider or insurer
to avoid liability is an affirmative defense and the duty to establish such
defense by satisfactory and convincing evidence rests upon the provider
or insurer.
o Where matters of opinion or judgment are called for, answers
made in good faith and without intent to deceive will not avoid a policy
even though they are untrue.
o cancellation of health care agreements as in insurance
policies require the concurrence of the following conditions:
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the policy
of one or more of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown
in the policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance
Code and upon request of insured, to furnish facts on which cancellation is
based.
o health care agreement is in the nature of a contract of indemnity

o payment should be made to the party who incurred the expenses
Philippine Health Care Providers, Inc. v. CIR (2009)
summary: CIR sent a formal demand letter for deficiency of tax
to Phil. Health Care Providers Inc. [Health Maintenance Org. (HMO)]
contending that it is doing an insurance business and that the health care
agreement it enters is a non-life insurance contract thus making it subject
both to VAT and DST under the 1997 Tax Code. SC held that it was subject
to VAT and not DST.
laws:
Insurance Code
Sec. 2 (2)
(2) The term "doing an insurance business" or "transacting an insurance
business", within the meaning of this Code, shall include:
(a) making or proposing to make, as insurer, any insurance contract;

(b) making or proposing to make, as surety, any contract of suretyship as a
vocation and not as merely incidental to any other legitimate business or
activity of the surety;
(c) doing any kind of business, including a reinsurance business, specifically

recognized as constituting the doing of an insurance business within the
meaning of this Code;
(d) doing or proposing to do any business in substance equivalent to any of

the foregoing in a manner designed to evade the provisions of this Code.
In the application of the provisions of this Code the fact that no profit is
derived from the making of insurance contracts, agreements or transactions
or that no separate or direct consideration is received therefor, shall not be
deemed conclusive to show that the making thereof does not constitute the
doing or transacting of an insurance business.
o doctrines:
basic distinction between medical service corporations and
ordinary health and accident insurers:
medical service corp. - undertake to provide prepaid
medical services through participating physicians, thus relieving
subscribers of any further financial burden
ordinary health and accident insurers - only
undertake to indemnify an insured for medical expenses up to, but not
beyond, the schedule of rates contained in the policy
health care services (HMO)
one who agrees in writing to render health care
services to or for persons covered by a contract issued by health service
corporation in return for which the health service corporation agrees to
make payment directly to the participating provider
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.
obligation to maintain the good health of its
members (NOT to indemnify its members against any loss or damage
arising from a medical condition)
undertakes a business risk when it offers to provide
health services (NOT insurance risk or actuarial risk - risk that the cost of
insurance claims might be higher than the premiums paid)
"insurance-like" aspect of petitioners business is miniscule
compared to its non-insurance activities
o principal purpose test
purpose of determining what "doing an insurance business"
means, we have to scrutinize the operations of the business as a whole
and not its mere components
no profit is derived - NOT be deemed conclusive evidence
that it does not constitute the doing or transacting of an insurance
business
3. Characteristics (AIPUC)
a. Aleatory (but NOT wagering) [Art. 2010, Civil Code; Sec. 25 I.C.]
Civil Code
Art. 2010
Art. 2010. By an aleatory contract, one of the parties or both reciprocally
bind themselves to give or to do something in consideration of what the
other shall give or do upon the happening of an event which is uncertain, or
which is to occur at an indeterminate time.
Insurance Code
Sec. 25
Sec. 25. Every stipulation in a policy of insurance for the payment of loss
whether the person insured has or has not any interest in the property
insured, or that the policy shall be received as proof of such interest, and
every policy executed by way of gaming or wagering, is void.
b. Indemnity (EXCEPT life and accident insurance where the result is
death, and valued policies)
Insurance Code
Sec. 17
Sec. 17. The measure of an insurable interest in property is the extent to
which the insured might be damnified by loss or injury thereof.
c. Personal
d. Unilateral
executed as to insured and executory as to insurer upon
payment of premiums
e. Conditional
distinguish between property insurance, where loss may or
may not occur and may be total or partial, and life insurance, where death
will occur so that the time of happening is the contingent element
4. Perfection - [Arts. 1318-1319, Civil Code; Secs. 77 and 226, I.C.]
Civil Code
Art. 1318
Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.
Art. 1319
Art. 1319. Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from
the time it came to his knowledge. The contract, in such a case, is presumed
to have been entered into in the place where the offer was made.
P.D. 612 Insurance Code
Sec. 77
Sec.226
Sec. 226. No policy, certificate or contract of insurance shall be issued or
delivered within the Philippines unless in the form previously approved by
the Commissioner, and no application form shall be used with, and no rider,
clause, warranty or endorsement shall be attached to, printed or stamped
upon such policy, certificate or contract unless the form of such application,
rider, clause, warranty or endorsement has been approved by the
Commissioner.
Enriquez v. Sun Life Assurance Co. of Canada (1920)
Summary: Joaquin Herrer applied and paid to Sun Life Insurance
Manila Office and it was approved by its main branch in Montreal Canada.
Subsequently, through attorney Aurelio A. Torres, Herrer notified Sun Life
Manila that he wished to withdraw his application. Mr. Herrer died on Dec.
20, 1917. The next morning, Atty. Torres the notification of November 26,
1917 which stated the approval of its main office. Rafael Rodriguez,
administrator of Herrara's estate, filed a claim against Sun Life for the
6,000 php paid by Mr. Herrera for his application. In ruling whether there
was a perfected insurance contract, CA held there was none because it
didn't come to Mr. Herrera's knowledge thereby reversing the RTC
judgment.
Laws:
Civil Code
Art. 1319 (formerly Art.1262)
Art. 1319. Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from
the time it came to his knowledge. The contract, in such a case, is presumed
to have been entered into in the place where the offer was made.
o Doctrines:
Cognition Theory: not perfected because it has not been
proved satisfactorily that the acceptance of the application ever came to
the knowledge of the applicant
BUT SEE: Eternal Gardens Memorial Park Corp. v. Philippine American
Life Insurance Corp. (2008)
Summary: Philam Life and Eternal entered into an agreement
wherein its lot purchasers in installments will be insured for a maximum of
100,000 php subject to Philam's approval. Eternal sent a claim for the
death of Chuang but it was unheeded so after a year, it sent a demand
but it was rejected since Philam alleges that it is sent only after the death
of Chuang and that it was not approved. Moreover, acceptance of the
premium only meant it was entrust for.
Doctrines:
construed in favor of the insured and in favor of the
effectivity of the insurance contract
Upon a partys purchase on installment, an insurance
contract is created,effective, valid, and binding until terminated by Philam
Life's disapproval
mere inaction of the insurer on the insurance application
must not work to prejudice the insured
The termination of the insurance contract by the insurer
must be explicit and unambiguous
??? So what circumstance in Eternal Gardens is different from Enrique

that made the court change its decision?
5. Kinds of Insurance
a. Life Insurance
i. Individual Life [Secs. 179-183, 227]
Insurance on human lives and insurance appertaining

thereto or connected therewith
ii. Group Life [Secs. 50 (last par),228]
A blanket policy covering a number of individuals
iii. Industrial Life [Secs. 229-331]

A form of life insurance under which premiums are payable
either monthly or oftener, if the face amount of insurance provided in any
policy is not more than 500 times that of the current statutory minimum
daily wage in the City of Manila and if the words industrial policy are
printed upon the policy as part of the descriptive matter.
b. Non-life Insurance
i. Marine [Secs. 99-166]
ii. Fire [Secs. 167-173]
iii. Casualty [Sec. 174]
Note:
Health and accident insurance - either covered under life or
casualty insurance
Marine, fire and the property aspect of casualty insurance are
also referred to as property insurance
c. Contracts of Surety of bonding [Secs. 175-178]
B. Insurance Distinguished from Other Contracts

1. Suretyship [Art. 2047, Civil Code; Sec. 2(1), par. 2 I.C.]
Civil Code
Art. 2047
Art. 2047. By guaranty a person, called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal debtor in case the latter
should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of
Section 4, Chapter 3, Title I of this Book shall be observed. In such case the
contract is called a suretyship.
Insurance Code
Sec. 2(1), par. 2
A contract of suretyship shall be deemed to be an insurance contract, within
the meaning of this Code, only if made by a surety who or which, as such, is
doing an insurance business as hereinafter provided.
2. Pre-Need Plans [Sec. 3.9, SRC]
Securities Regulation Code

Sec. 3.9
Pre-Need Plans
contracts which provide for the performance of future services or the
payment of future monetary considerations at the time of actual need, for
which plan holders pay in cash or installment at stated prices, with or
without interest or insurance coverage and includes life, pension, education,
interment, and other plans which the Commission may from time to time
approve.
3. Variable Contracts [Sec. 232 I.C.]
Insurance Code
Sec. 232
Sec. 232. (1) No insurance company authorized to transact business in the
Philippines shall issue, deliver, sell or use any variable contract in the
Philippines, unless and until such company shall have satisfied the
Commissioner that its financial and general condition and its methods of
operations, including the issue and sale of variable contracts, are not and will
not be hazardous to the public or to its policy and contract owners. No
foreign insurance company shall be authorized to issue, deliver or sell any
variable contract in the Philippines, unless it is likewise authorized to do so
by the laws of its domicile.
(2) The term "variable contract" shall mean any policy or contract on either a
group or on an individual basis issued by an insurance company providing for
benefits or other contractual payments or values thereunder to vary so as to
reflect investment results of any segregated portfolio of investments or of a
designated separate account in which amounts received in connection with
such contracts shall have been placed and accounted for separately and
apart from other investments and accounts. This contract may also provide
benefits or values incidental thereto payable in fixed or variable amounts, or
both. It shall not be deemed to be a "security" or "securities" as defined in
The Securities Act, as amended, or in the The Investment Company Act, as
amended, nor subject to regulation under said Acts.
(3) In determining the qualifications of a company requesting authority to

issue, deliver, sell or use variable contracts, the Commissioner shall always
consider the following: (a) the history, financial and general condition of the
company: Provided, That such company, if a foreign company, must have
deposited with the Commissioner for the benefit and security of its variable
contract owners in the Philippines, securities satisfactory to the
Commissioner consisting of bonds of the Government of the Philippines or its
instrumentalities with an actual market value of two million pesos; (b) the
character, responsibility and fitness of the officers and directors of the
company; and (c) the law and regulation under which the company is
authorized in the state of domicile to issue such contracts.
(4) If after notice and hearing, the Commissioner shall find that the company
is qualified to issue, deliver, sell or use variable contracts in accordance with
this Code and the regulations and rules issued thereunder, the corresponding
order of authorization shall be issued. Any decision or order denying
authority to issue, deliver, sell or use variable contracts shall clearly and
distinctly state the reasons and grounds on which it is based.
C. Insurance Business
1. Doing an Insurance Business [Sec. 2(2) I.C.]
Insurance Code
Sec. 2(2)
(2) The term "doing an insurance business" or "transacting an insurance
business", within the meaning of this Code, shall include:



Phil. American Life Insurance Company v. Ansaldo (1994)
Summary: Ramon M. Paterno, Jr. filed a complaint against the
insurance commissioner about illegality in agency contracts of Philam
Life. Philam Life contends that the Insurance Commissioner does not
have the power to decide the case. CA: favored Philam Life.
Laws:
Insurance Code
Sec. 414
Sec. 414. The Insurance Commissioner shall have the duty to see that all
laws relating to insurance, insurance companies and other insurance
matters, mutual benefit associations, and trusts for charitable uses are
faithfully executed and to perform the duties imposed upon him by this
Code, and shall, notwithstanding any existing laws to the contrary, have sole
and exclusive authority to regulate the issuance and sale of variable
contracts as defined in section two hundred thirty-two and to provide for the
licensing of persons selling such contracts, and to issue such reasonable
rules and regulations governing the same.
The Commissioner may issue such rulings, instructions, circulars, orders and
decision as he may deem necessary to secure the enforcement of the
provisions of this Code, subject to the approval of the Secretary of Finance.
Except as otherwise specified, decisions made by the Commissioner shall be
appealable to the Secretary of Finance.
Sec. 415
Sec. 415. In addition to the administrative sanctions provided elsewhere in
this Code, the Insurance Commissioner is hereby authorized, at his
discretion, to impose upon the insurance companies, their directors and/or
officers and/or agents, for any willful failure or refusal to comply with, or
violation of any provision of this Code, or any order, instruction, regulation,
or ruling of the Insurance Commissioner, or any commission or irregularities,
and/or conducting business in an unsafe or unsound manner as may be
determined by theInsurance Commissioner, the following:
(a) fines not in excess of five hundred pesos a day; and

(b) suspension, or after due hearing, removal of directors and/or officers
and/or agents.
o Doctrines:
Insurance Commissioner has the authority to regulate the
business of insurance
power does not cover the relationship affecting the

insurance company and its agents but is limited to adjudicating claims
and complaints filed by the insured against the insurance company
Chapter IV, Title I of the Insurance Code, speaks only
of the licensing requirements and limitations imposed on insurance
agents and brokers.
2. Mutual Insurance Companies
White Gold Marine Services, Inc. v. Pioneer Insurance Surety Corp.
(2005)
Summary: Steamship Mutual through its agent, Pioneer filed for
collection from White Gold on the protection and indemnity coverage for
its vessels. In return, White Gold filed with the Insurance Commissioner
stating that Steamship Mutual and Pioneer have violated the Insurance
Code because it had no license. SC: Steamship Mutual as a P & I Club is a
mutual insurance association engaged in the marine insurance business
so ordered both Steamship and Pioneer to obtain a license.
Laws:
Insurance Code
Sec. 2(2)
(2) The term "doing an insurance business" or "transacting an
insurance business", within the meaning of this Code, shall include:



Sec. 299
Sec. 299. No insurance company doing business in the Philippines, nor any
agent thereof, shall pay any commission or other compensation to any
person for services in obtaining insurance, unless such person shall have first
procured from the Commissioner a license to act as an insurance agent of
such company or as an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the

solicitation or procurement of applications for insurance, or receive for
services in obtaining insurance, any commission or other compensation from
any insurance company doing business in the Philippines, or any agent
thereof, without first procuring a license to act from the Commissioner, which
must be renewed annually on the first day of January, or within six months
thereafter. Such license shall be issued by the Commissioner only upon the
written application of the person desiring it, such application if for a license
to act as insurance agent, being approved and countersigned by the
company such person desires to represent, and shall be upon a form
prescribed by the Commissioner giving such information as he may require,
and upon payment of the corresponding fee hereinafter prescribed. The
Commissioner shall satisfy himself as to competence and trustworthiness of
the applicant and shall have the right to refuse to issue or renew and to
suspend or revoke any such license in his discretion. No such license shall be
valid after the thirtieth day of June of the year following its issuance unless it
is renewed.
o Doctrines:
marine insurance - undertakes to indemnify the assured
against marine losses, such as the losses incident to a marine adventure
mutual insurance company
cooperative enterprise where the members are both
the insurer and insured
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 to their interest
provide 3 types of coverage:
protection and indemnity
war risks
defense costs
P & I Club
a form of insurance against third party liability,
where the third party is anyone other than the P & I Club and the
members
D. Laws Governing Insurance
1. I.C. of 1978 [See. Sec. 5 I.C.]
Insurance Code
Sec. 5
Sec. 5. All kinds of insurance are subject to the provisions of this chapter so
far as the provisions can apply.
2. Civil Code [Art. 2011, Civil Code]
Civil Code
Art. 2011
Art. 2011. The contract of insurance is governed by special laws. Matters not
expressly provided for in such special laws shall be regulated by this Code.
The Insular Life Assurance Co. Ltd. v. Ebrado (1977)
Summary: Buenaventura Cristor Ebrado designated his common
law wife Carponia T. Ebrado as revocable beneficiary then his widowed
legal wife filed a claim so Insular Life Assurance filed an interpleader.
Laws:
Civil Code
Art. 2011
Art. 2011. The contract of insurance is governed by special laws. Matters not
expressly provided for in such special laws shall be regulated by this Code.
Art. 2012
Art. 2012. 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 any donation to him, according to said article.
Art. 739
Art. 739. The following donations shall be void:
(1) Those made between persons who were guilty of adultery or concubinage
at the time of the donation;
(2) Those made between persons found guilty of the same criminal offense,
in consideration thereof;
(3) Those made to a public officer or his wife, descedants and ascendants, by
reason of his office.
In the case referred to in No. 1, the action for declaration of nullity may be
brought by the spouse of the donor or donee; and the guilt of the donor and
donee may be proved by preponderance of evidence in the same action.
o Doctrines:
SC affirmed CA and RTC: Carponia is disqualified because
of adultery under Art. 739 of the Civil Code although the Insurance Code
is silent.
a. Revocation of irrevocable beneficiaries in terminated marriages
[Arts. 43(4), 50 and 64, Family Code]
b. Void Donations [Arts. 739, 2012 Civil Code] (see above)
c. Life Annuity Contracts [Arts. 2021-2027 Civil Code]
d. Compulsory motor vehicle liability insurance [Art.2186, Civil
Code]
e. Insurer's right of subrogration [Art. 2207, Civil Code]
Civil Code
Art. 2207
Art. 2207. If the plaintiff's 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 wrongdoer 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.
Aboitiz Shipping Corp. v. Insurance Co. of North America (2008)
Summary: MSAS procured an "all-risk" marine insurance from
ICNA for wooden work tools and workbenches for consignee Science
Teaching Improvement Project (STIP). The goods were damage because it
was left outside during heavy rains by Aboitiz so ICNA paid STIP and it was
issued a right to subrogation against Aboitiz. Aboitiz didn't reply so a
case for collection was filed with the RTC who dismissed the case. SC
affirmed CA's reversal.
Laws:
Insurance Code
Sec. 57
Sec. 57. A policy may be so framed that it will inure to the benefit of
whomsoever, during the continuance of the risk, may become the owner of
the interest insured.
Civil Code
Art. 366
Article 366. Within twenty four hours following the receipt of the
merchandise, the claim against the carrier for damages or average which
may be found therein upon opening the packages, may be made, provided
that the indications of the damage or average which give rise to the claim
cannot be ascertained from the outside part of such packages, in which case
the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation charges
have been paid, no claim shall be admitted against the carrier with regard to
the condition in which the goods transported were delivered.
Art. 2207
Art. 2207. If the plaintiff's 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 wrongdoer 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.
Art. 1735
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of
the preceding article, if the goods are lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as
required in Article 1733.
o Doctrines:
Only when that foreign corporation is "transacting" or
"doing business" (NOT isolated cases) in the country will a license be
necessary before it can institute suits
right of subrogation accrues simply upon payment by the
insurance company of the insurance claim even assuming that it is an
unlicensed foreign corporation
right of subrogation, however, has its limitations.
First, both the insurer and the consignee are bound
by the contractual stipulations under the bill of lading
Second, the insurer can be subrogated only to the
rights as the insured may have against the wrongdoer. If by its own acts
after receiving payment from the insurer, the insured releases the
wrongdoer who caused the loss from liability, the insurer loses its claim
against the latter.
3. General Principles on Insurance
Constantino v. Asia Life Insurance Co. (1950)
Summary: 2 cases were filed on insurance claim but refused by
Asia Life, an American Corp. which closed its office in Manila during the
Japanese Occupation, for non-payment of premiums. CA and lower court
absolved Asia Life adopting the United States Rule that payment of
premium is the essence of an insurance contract.
Doctrines:
United States Rule
contract is not merely suspended, but is abrogated
by reason of non-payments is peculiarly of the essence of the contract
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
The business of insurance is founded on the law of
average; that of life insurance eminently so
contract of insurance is sui generis
Whether the insured will continue it or not is optional
with him. There being no obligation to pay for the premium, they did not
constitute a debt.
It should be noted that the parties contracted not only for
peacetime conditions but also for times of war, because the policies
contained provisions applicable expressly to wartime days. The logical
inference, therefore, is that the parties contemplated uninterrupted
operation of the contract even if armed conflict should ensue.
4. Special Laws
a. Revised Government Service Insurance Act of 1977 - covers
insurance
of government employees
b. Social Security Act of 1954 - covers insurance of employees in
private
employment
c. Property Insurance Law - covers insurance of government property
d. R.A. No. 4898 - provides life, disability and accidental insurance
coverage to barangay officials
e. E.O No. 250 - provides increased insurance benefits or barangay
officials under R.A. No. 4898, as well as members of Sangguniang
Panalalawigan, Panglungsod, and Bayan; and
f. PDIC Charter - insures deposits of all banks entitled to benefits of
insurance thereunder
5. Corporation Code - for insurance corp. [Sec. 185 par. 2 I.C.]
Insurance Code
Sec. 185
Sec. 185. Corporations formed or organized to save any person or persons or
other corporations harmless from loss, damage, or liability arising from any
unknown or future or contingent event, or to indemnify or to compensate any
person or persons or other corporations for any such loss, damage, or
liability, or to guarantee the performance of or compliance with contractual
obligations or the payment of debt of others shall be known as "insurance
corporations".
The provisions of the Corporation Law shall apply to all insurance

corporations now or hereafter engaged in business in the Philippines insofar
as they do not conflict with the provisions of this chapter.
E. Interpretation of Insurance Contracts

1. Clear Provision Given Ordinary Meaning
Union Manufacturing Co. Inc. v. Phil Guaranty Co. (1972)
Ty v. First National Surety & Assurance Co., Inc. (1961)
Summary: Ty insured himself with 18 local insurance companies
with his employer Broadway Cotton Factory as beneficiary. When fire
broke out at the Broadway Cotton Factory, Ty fractured his index, middle
and the fourth fingers on his left hand so he filed for a claim on temporary
total disability on his left hand against the insurance companies but it was
rejected since the policy expressly states that an amputation is required.
Both RTC and CA: absolved the insurance companies.
Doctrines:
can not go beyond the clear and express conditions of the
insurance policies
agreement contained in the insurance policies is the law
between the parties
2. Ambiguous Provisions Interpreted Against Insurer

Qua Chee Gan v. Law Union and Rock Insurance Co., Ltd. (1955)
Summary: Qua Chee Gan insured his 4 bodegas with Law Union.
Bodegas 1, 2 and 4 was bruned in a fire that lasted almost for a week.
Law Union refused the claim because it was against the memo warranty
of supposely having 11 hydrants instead of 2 and that bodega 2 stored
gasoline which under its hemp warranty is classified under the prohibited
oils. CA and RTC: favored Ty because Law Union is barred to claim against
the hydrants and that the oil stated is ambiguous to include gasoline.
Doctrines:
It is a well settled rule of law that an insurer which with
knowledge of facts entitling it to treat a policy as no longer in force,
receives and accepts a preium on the policy, estopped to take advantage
of the forfeiture
by reason of the exclusive control of the
insurance company over the terms and phraseology of the contract, the
ambiguity must be held strictly against the insurer and liberraly in favor of
the insured, specially to avoid a forfeiture
Del Rosario v. Equitable Ins. and Casualty Co., Inc. (1963)
Summary: Simeon del Rosario, father of the insured who died
from drowning filed a claim for payment with Equitable Ins. and Casualty
Co., Inc. but it refused to pay more than P1,000 php so a case was filed
with the RTC for the P2,000 balance stating that under the policy they are
entitled to P1,000 to P3,000 as indemnity. RTC and CA: favored Simeon
Doctrines:
terms in an insurance policy, which are ambiguous,
equivocal or uncertain are to be construed strictly against, the insurer,
and liberally in favor of the insured so as to effect the dominant purpose
of indemnity or payment to the insured, especially where a forfeiture is
involved
reason: insured usually has no voice in the selection
or arrangement of the words employed and that the language of the
contract is selected with great care and deliberation by expert and legal
advisers employed by, and acting exclusively in the interest of, the
insurance company
BUT SEE: Verendia v. CA (1993)
Summary: Verendia was claiming against Fidelity and Surety
Insurance for his residential building that was destroyed by fire. Fidelity
refused his claim on the ground that it was against Sec. 13 of the policy
that states the false declaration forfeits his claim. CA and RTC: absolved
Fidelity since the terms in Sec. 13 are clear and unambiguous and
by presenting a false lease contract, Verendia, reprehensibly disregarded
the principle that insurance contracts are uberrimae fidae and
demand the most abundant good faith
Doctrines:
clear and unambiguous terms must be enforced.
3. Stipulations Cannot Be Segregated
Gulf Resorts Inc. v. Philippine Charter Insurance Corp. (2005)
Summary: Gulf Resorts insurred with American Home Assurance
Company its resort porperty in Agoo, La Union which was subsequently
damaged by an earthquake. American Home contends that only the two
swimming pools are covered as stated in the rider. On the other hand,
Gulf contends that the rider contains no scope so it covers all. RTC and
CA: favored American Home since the rider should be interpreted with the
other parts as a whole and that no premium where paid aside for the
other parts.
Laws:
Insurance Code
Section 2(1)
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
o Doctrines:
It is basic that all the provisions of the insurance policy
should be examined and interpreted in consonance with each other.
An insurance is the consideration paid an insurer for
undertaking to indemnify the insured against a specified peril.
4. Judicial Construction Cannot Alter Terms
Misamis Lumber Corp. v. Capital Ins. & Surety Co., Inc. (1966)
Summary: Misamis insured its Ford car with Capital. When the
car broke and it was repaired for P302.27, Misamis filed a report to Cpaita
who paid admits a limited liability of P150 as clearly stated in its policy.
RTC and CA: favored Capital
Doctrines:
insurance contract may be rather onerous (one-sided) but
that in itself does not justify the abrogation of its express terms, terms
which the insured accepted or adhered to and which is the law between
the contracting parties
Fortune Insurance and Surety Co., Inc. v. CA (1995)
Summary: Producers insured with Fortune P725,000 which was
lost when its armor vehicle was robbed in transit by its driver and security
guard among others. SC reversed RTC and CA: stating that the driver and
security guard although contractual workers are among the
representatives stated under the general exceptions to the policy.
Doctrines:
A "representative" is defined as one who represents or
stands in the place of another; one who represents others or another in a
special capacity, as an agent, and is interchangeable with "agent."
It is clear to us that insofar as Fortune is concerned, it was
its intention to exclude and exempt from protection and coverage losses
arising from dishonest, fraudulent, or criminal acts of persons granted or
having unrestricted access to Producers' money or payroll. When it used
then the term "employee," it must have had in mind any person who
qualifies as such as generally and universally understood, or
jurisprudentially established in the light of the four standards in the
determination of the employer-employee relationship, or as statutorily
declared even in a limited sense as in the case of Article 106 of the Labor
Code which considers the employees under a "labor-only" contract as
employees of the party employing them and not of the party who
supplied them to the employer
NOTE: here intention of the terms was followed
II. Parties
A. Insured
1. Definition - the person to be indemnified; the person who applied for
and to whom an insurance policy is issued
2. Capacity [Art. 1390, Civil Code]
Civil Code
Art. 1390
Art. 1390. The following contracts are voidable or annullable, even though
there may have been no damage to the contracting parties:
(1) Those where one of the parties is incapable of giving consent to a
contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation,
undue influence or fraud.
These contracts are binding, unless they are annulled by a proper action in
court. They are susceptible of ratification.
a. Married women [Sec. 3, par. 2 and 4, I.C.; Art. 73 Family Code]
Insurance Code
Sec. 3, par. 2 and 4
Sec. 3.
Family Code
Art. 73
Art. 73. Either spouse may exercise any legitimate profession, occupation,
business or activity without the consent of the other. The latter may object
only on valid, serious, and moral grounds.
In case of disagreement, the court shall decide whether or not:
(1) The objection is proper; and

(2) Benefit has occurred to the family prior to the objection or thereafter. If
the benefit accrued prior to the objection, the resulting obligation shall be
enforced against the separate property of the spouse who has not obtained
consent.
The foregoing provisions shall not prejudice the rights of creditors who acted
in good faith
b. Minors [Sec. 3, pars. 3-5, I.C.; Art. 38 Civil Code, R.A. No. 6809]
Insurance Code
Sec. 3, pars. 3-5
minority, contract for life, health and accident insurance, with
any insurance company duly authorized to do business in the Philippines,
provided the insurance is taken on his own life and the beneficiary appointed
is the minor's estate or the minor's father, mother, husband, wife, child,
brother or sister.
policy.
Civil Code
Art. 38
Art. 38. Minority, insanity or imbecility, the state of being a deaf-mute,
prodigality and civil interdiction are mere restrictions on capacity to act, and
do not exempt the incapacitated person from certain obligations, as when
the latter arise from his acts or from property relations, such as easements.
3. Disqualification: Public Enemy [Sec. 7 Insurance Code]
Insurance Code
Sec. 7
Sec. 7. Anyone except a public enemy may be insured.
Filipinas Compania de Seguros v. Christern Henefeld & Co. (1951)

Summary: Christern is a German Company while Filipinas is
organized under Philippine laws but under American jurisdiction so when
the U.S. declared war against Germany, Filipinas refused to pay the claim
for the building that was burned during the Japanese Occupation. SC
reversed CFI and CA decision stating that a public enemy may not be
insured but he is entitled the recovery for the unused period (from the
declaration of the war)
Doctrines:
public enemy may be insured
when the parties become alien enemies, the contractual tie
is broken and the contractual rights of the parties, so far as not vested
elementary rules of justice that premium paid for unused
period should be returned
4. Trustee or Agent[Sec.54 I.C.]
Insurance Code
Sec. 54
Sec. 54. When an insurance contract is executed with an agent or trustee as
the insured, the fact that his principal or beneficiary is the real party in
interest may be indicated by describing the insured as agent or trustee, or by
other general words in the policy.
5. Partner[Sec.55 I.C.]
Insurance Code
Sec. 55
Sec. 55. To render an insurance effected by one partner or part-owner,
applicable to the interest of his co-partners or other part-owners, it is
necessary that the terms of the policy should be such as are applicable to
the joint or common interest.
B. Insurer
1. Definition - the person who undertakes to indemnify another by a
contract of insurance [Sec. 184 I.C.]
Insurance Code
Sec. 184
Sec. 184. For purposes of this Code, the term "insurer" or "insurance
company" shall include all individuals, partnerships, associations, or
corporations, including government-owned or controlled corporations or
entities, engaged as principals in the insurance business, excepting mutual
benefit associations. Unless the context otherwise requires, the terms shall
also include professional reinsurers defined in section two hundred eighty.
"Domestic company" shall include companies formed, organized or existing
under the laws of the Philippines. "Foreign company" when used without
limitation shall include companies formed, organized, or existing under any
laws other than those of the Philippines.
a. Insurance Corporations [Sec. 185 par. 1 I.C.]
Corporations formed or organized to save any person or personsor

other corporations harmless from loss, damage, orliability from any
unknown or future or contingentevent, or to indemnify or to compensate
any personor persons or other corporations for any such loss,damage, or
liability, or to guarantee the performanceof or compliance with
contractual obligations or thepayment of debt of others. [Sec. 185 par. 1
I.C.]
It must have:
(1) sufficient capital and assets required under the Insurance
Code and pertinent regulations issued by the Commission, and
(2) a certificate of authority to operate issued by the Insurance
Commission which should be renewed every year.
b. Mutual Insurance Companies [Sec. 262 I.C.]

c. Professional Reinsurers [Sec. 280 I.C.]
d. Mutual Benefit Associations (excluded from definition, but still
subject to I.C. regulation)[Sec. 390 I.C.]
2. Capitalization/Certificate of Authority [Secs. 6, 186-187 I.C.]
3. Prohibited Acts [Secs. 361-362 I.C.]
Insurance Code
Sec. 361
Sec. 361. No insurance company doing business in the Philippines or any
agent thereof, no insurance broker, and no employee or other representative
of any such insurance company, agent, or broker, shall make, procure or
negotiate any contract of insurance or agreement as to policy contract, other
than is plainly expressed in the policy or other written contract issued or to
be issued as evidence thereof, or shall directly or indirectly, by giving or
sharing a commission or in any manner whatsoever, pay or allow or offer to
pay or allow to the insured or to any employee of such insured, either as an
inducement to the making of such insurance or after such insurance has
been effected, any rebate from the premium which is specified in the policy,
or any special favor or advantage in the dividends or other benefits to accrue
thereon, or shall give or offer to give any valuable consideration or
inducement of any kind, directly or indirectly, which is not specified in such
policy or contract of insurance; nor shall any such company, or any agent
thereof, as to any policy or contract of insurance issued, make any
discrimination against any Filipino in the sense that he is given less
advantageous rates, dividends or other policy conditions or privileges than
are accorded to other nationals because of his race.
Sec. 362
Sec. 362. No insurance company doing business in the Philippines, and no
officer, director, or agent thereof, and no insurance broker or any other
person, partnership or corporation shall issue or circulate or cause or permit
to be issued or circulated any literature, illustration, circular or statement of
any sort misrepresenting the terms of any policy issued by any insurance
company of the benefits or advantages promised thereby, or any misleading
estimate of the dividends or share of surplus to be received thereon, or shall
use any name or title of any policy or class of policies misrepresenting the
true nature thereof; nor shall any such company or agent thereof, or any
other person, partnership or corporation make any misleading representation
or incomplete comparison of policies to any person insured in such company
for the purpose of inducing or tending to induce such person to lapse, forfeit,
or surrender his said insurance.
C. Beneficiary
1. Definition - the person who receives a benefit or advantage, or who
is entitled to the benefit of the contract i.e. the one to whom the insurance is
payable or who is entitled to the proceeds is of the policy on the occurrence
of the event designated
2. To whom insurance proceeds payable [Secs. 53 and 56 I.C.]
Insurance Code
Sec. 53
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.
Sec. 56
Sec. 56. When the description of the insured in a policy is so general that it
may comprehend any person or any class of persons, only he who can show
that it was intended to include him can claim the benefit of the policy.
Heirs of Loreto C. Maramag v Maramag (2009)
Summary: Loreto Maramag named his concubine Eva as his
beenficiary but his wife Vicenta filed alleging that she is disqualified under
the civil code on prohibition of donation. SC affirmed RTC: Eva can claim
being the designated beneficiary which will inure to the benefit of the
illegitimate children
Doctrines:
Any person who is forbidden from receiving
any donation under Article 739 cannot be named beneficiary of a life
insurance policy of the person who cannot make any donation to him
If a concubine is made the beneficiary, it is believed
that the insurance contract will still remain valid, but the indemnity must
go to the legal heirs and not to the concubine, for evidently, what is
prohibited under Art. 2012 is the naming of the improper beneficiary.
GR: 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.
EX: 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 party may
directly sue and claim from the insurer
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
a. Stipulation Pour Autrui [Art. 1311 Civil Code]
Civil Code
Art. 1311
Art. 1311. Contracts take effect only between the parties, their assigns and
heirs, except in case where the rights and obligations arising from the
contract are not transmissible by their nature, or by stipulation or by
provision of law. The heir is not liable beyond the value of the property he
received from the decedent.
If a contract should contain some stipulation in favor of a third person, he

may demand its fulfillment provided he communicated his acceptance to the
obligor before its revocation. A mere incidental benefit or interest of a person
is not sufficient. The contracting parties must have clearly and deliberately
conferred a favor upon a third person
o Bonifacio Bros. Inc. v. Mora (1967)
Summary: Enrique Mora, a sedan-owner, mortgage his
sedan complying with its condition to name the mortgagor H.S. Reyes,
Inc. as the beneficiary. When the sedan met an accident, it was repaired
by the Bonifacio Bros. and the parts was supplied by Ayala Auto Parts.
The insurance proceeds was held in trust for the appraiser Bayne
Adjustment Co. Though unpaid the car was already delivered to Enrique
so Bonifacio Bros. and Ayala Auto parts filed with the MTC on the theory
that it should be paid to them directly. MTC, CFI and CA: it should not
since there is no stipulation pour autrui
Doctrines:
GR: contracts take effect only between the parties
thereto
EX: some specific instances provided by law where
the contract contains some stipulation in favor of a third person
- stipulation pour autrui
stipulation pour autrui must be clearly expressed
loss" in insurance law embraces injury or damage
o Coquia v. Fieldmen's Insurance Co., Inc. (1968)

Summary: The Taxi Driver of Manila Yellow Taxicab Co., Inc.
insured with Fieldmen's Insurance Company, Inc. died from an accident so
his parents claimed on his behalf. RTC and CA: there is a stipulation pour
autrui and ordered Fieldman to pay his parents since it was stated that
the company will "indemnify his personal representatives"
Doctrines:
typical of contracts pour autrui, this character being
made more manifest by the fact that the deceased driver paid 50% of the
corresponding premiums, which were deducted from his weekly
commissions
both parties from the inception of their dispute
proceeded in entire disregard of the provisions of the contract relating to
arbitration - waived
o Guingon v. Del Monte (1967)
Summary: Julio Aguilar owner and operator of several
jeepneys insured them with Capital Insurance & Surety Co., Inc. Its
driver Iluminado del Monte and Gervacio Guingon bumped and Guingon
died so Iluminado del Monte was charged with homicide thru reckless
imprudence and was penalized 4 months imprisonment. The heirs filed
against del Monte, Guingon and Capital CFI: del Monte and
Guingon P8,572.95 plus P1,000 attorney's fees and cost and Capital
jointly liable by paying P5,000 damage and P500 attorney's fees. Capital
filed alleging its "no action clause" that it can only be held liable upon
finality of judgment CA: affirmed
TEST:
Where the contract provides for indemnity
against liability to third persons, then third persons to whom the insured
is liable, CAN sue the insurer.
Where the contract is for indemnity against actual
loss or payment, then third persons CANNOT proceed against the insurer,
the contract being solely to reimburse the insured for liability actually
discharged by him thru payment to third persons, said third persons'
recourse being thus limited to the insured alone.
"no action" clause in the policy of insurance cannot
prevail over the Rules of Court provision aimed at avoiding multiplicity of
suits
b. Estate
Del Val v. Del Val (1915)
Summary: Gregorio Nacianceno del Val died leaving his brother
Andres as the sole beneficiary of his life insurance. Andres claimed the
insurance and use it to repurchase his estate and kept the balance along
with personal properties in his possession. Francisco et. al, his brothers
and sisters, filed in the CFI alleging that the insurance claim as well as the
personal property should belong to the estate. CFI: dismissed holding the
issue partition of coheirs and case as to the personal property is closed.
CA: remanded back to CFI to ascertain facts and presentation of evidence
whether it was intended to be a gift or donation to the estate
Doctrines:
insurance claim is an exclusive property of the beneficiary
The contract of life insurance is a special contract and the
destination of the proceeds thereof is determined by special laws which
deal exclusively with that subject. The Civil Code has no provisions which
relate directly and specifically to life- insurance contracts or to the
destination of life insurance proceeds
c. Assignee
Rizal Commercial Banking Corporation v. CA (1998)
GOYU in exchange for credit facilities and accommodations with
RCBC endorsed without signature 9 MICO. After favoring GOYU against
MICO. In another case, RCBC seeks to intervene between Sebastian and
RCBC. RTC and CA: endorsements do not bear the signature of any officer
of GOYU concluded that the endorsements favoring RCBC as defective.
SC: intentions of the parties as shown by their contemporaneous acts,
must be given due consideration in order to better serve the interest of
justice and equity.
Doctrine: mortgagor and a mortgagee have separate and distinct
insurable interests in the same mortgaged property, such that each one
of them may insure the same property for his own sole benefit. RCBC has
the right to claim the insurance proceeds, in substitution of the property
lost in the fire. Having assigned its rights, GOYU lost its standing as the
beneficiary of the said insurance policies.
3. Designation of Beneficiary
a. No Designation
In Re: Mario v. Chanliongco (1977)
Summary: Atty. Chanliongco died leaving his heirs widow, Dra.
Fidel B. Chanliongco (4/16) Mario II Legitimate 17 years old (8/16) Ma.
Angelina C. Illegitimate (2/16) and Mario Jr., Illegitimate (2/16). No
designation so law of succession is followed.
Doctrine: Heirs shall be the beneficiaries according to their

legitime
Vda. Dde Consuegra v. Governments Service Insurance System (1971)
Summary: Jose Consuegra contracted 2 marriages. First
with Rosario Dia with 2 children who predeceased their father: Jose
Consuegra, Jr. and Pedro Consuegra and Second with Basilia Berdin while
marriage is still subsisting with 7 children: Juliana, Pacita, Maria Lourdes,
Jose, Rodrigo, Lenida and Luz, all surnamed Consuegra. He died without
designating the beneficiary of his retirement insurance benefit. GSIS:
legal heirs were Rosario Diaz (1/2 or 8/16), Basilia Berdin and their
seven children (1/2 or 8/16) (1/16 each) RTC: dismissed the case CA:
affirmed
Doctrine:
If the employee failed or overlooked to state the
beneficiary of his retirement insurance, the retirement benefits will accrue
to his estate and will be given to his legal heirs in accordance with law, as
in the case of a life insurance if no beneficiary is named in
the insurance policy.
b. Invalid Designation [Art. 2012 in relation to Art. 739, Civil Code]
Insurance Code
Art. 2012
Art. 2012. 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 any donation to him, according to said article
Civil Code
Art. 739
Art. 739. The following donations shall be void:
(1) Those made between persons who were guilty of adultery or concubinage
at the time of the donation;
(2) Those made between persons found guilty of the same criminal offense,
in consideration thereof;
(3) Those made to a public officer or his wife, descedants and ascendants, by
reason of his office.
In the case referred to in No. 1, the action for declaration of nullity may be
brought by the spouse of the donor or donee; and the guilt of the donor and
donee may be proved by preponderance of evidence in the same action.
The Insular Life Assurance Company, Ltd. v. Ebrado (1977) (see above)
Doctrine:
Common-law spouses are, definitely, barred from receiving
donations from each other. 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
We do not think that a conviction for adultery or
concubinage is exacted before the disabilities mentioned in Article 739
may effectuate.
Southern Luzon Employees' Ass. v. Golpeo, et al. (1954)
Summary: Roman A. Concepcion listed as his beneficiaries his
common-law wife Aquilina Maloles together with his illegitimate children:
Roman, Estela, Rolando and Robin M. Concepcion for the death benefit.
RTC: confirmed in their favor but his legal wife Juanita Golpeo and her
minor children appealed. SC: favored Aquilina.
Doctrines:
Juanita Golpeo, by her silence and actions, had acquiesced
in the illicit relations between her husband and appellee Aquilina Maloles
new Civil Code recognized certain successional rights of
illegitimate children
Separate Opinions:
Reyes: I concur in the result for the reason that the
contract here involved was perfected before the new Civil Code took
effect, and hence its provisions cannot be made to apply retroactively
Social Security System v. Davac (1966)
Summary: Petronilo Davac, a former employee of Lianga Bay
Logging Co., Inc. became a member of the Social Security System
(SSS) he designated Candelaria Davac as his beneficiary and indicated his
relationship to her as that of "wife". His legal wife and legitimate children
filed their claims. Social Security Commission: favored Candelaria Davac
SC: Affirmed Social Security Commission
Doctrines:
Candelaria Davac was not guilty of concubinage, there
being no proof that she had knowledge of the previous marriage of her
husband Petronilo
It is only when there is no designated beneficiaries or when
the designation is void, that the laws of succession are applicable. And we
have already held that the Social Security Act is not a law of succession.
NOTE: There is no confusion as the rule is simple:
Common Law Wife
Before NCC: allowed as beneficiary (Southern Luzon Employees'
Ass. v. Golpeo, et al. (1954))
After NCC:
GR: prohibited under Art. 739 whether convicted or not
since it is same as donation (The Insular Life Assurance Company, Ltd. v.
Ebrado (1977))
EX: allowed if no knowledge of the of the previous
marriage since not guilty of concubinage (Social Security System v. Davac
(1966))
Illegitimate children are allowed as beneficiaries before and after NCC
c. Revocable Designation [Sec. 11 I.C.]
Insurance Code
Sec. 11
Sec. 11. The insured shall have the right to change the beneficiary he
designated in the policy, unless he has expressly waived this right in said
policy.
Gercio v. Sun Life Assurance Co. of Canada (1925) (see above)
Summary: Sun Life Assurance Co. of Canada issued a 20-year
endowment insurance policy on the life of Hilario Gercio who agreed to
insure his life to be paid him in 20 years or if the insured should die before
said date,to his wife, Mrs. Andrea Zialcita, should she survive him;
otherwise to the executors, administrators, or assigns of the insured.
His policy did not include any provision reserving to the insured the right
to change the beneficiary. Subsequently, his wife was convicted of
adultery and a divorce decree was issued. Gercio wanted to revoke his
wife as beneficiary. RTC: favored Gercio.
Doctrines:
If the husband wishes to retain to himself the control and
ownership of the policy he may so provide in the policy.
d. Irrevocable Designation
Nario v. Philippine American Life Ins. Co (1967)
Summary: Philippine American Life Insurance Co. issued a life
insurance to Mrs. Alejandra Santos-Mario a life insurance policy under a
20-year endowment plan, designating her husband Delfin Nario and their
unemancipation son Ernesto Nario, as her irrevocable beneficiaries.
Subsequently, she applied for a loan and her husband signed as
guardian. RTC, CA and SC: favored the insurance company
Doctrines:
SEC. 7. Parents as guardians. When the property of the
child under parental authority is worth two thousand pesos or less, the
father or the mother, without the necessity of court appointment, shall be
his legal guardian. When the property of the child is worth more than two
thousand pesos, the father or the mother shall be considered guardian of
the child's property, with the duties and obligations of guardians under
these rules, and shall file the petition required by Section 2 hereof. For
good reasons the court may, however, appoint another suitable person.
even if worth less than P2,000 parent's authority over the
estate of the ward as a legal-guardian would not extend to acts of
encumbrance or disposition, as distinguished from acts of management or
administration.
Philippine American Life Insurance Co. v. Pineda (1989)
Summary: Rodolfo c. Dimayuga acquired a life
insurance from Philippine American Insurance Company and designated
his wife and six minor children as irrevocable beneficiaries. Subsequently,
he wanted to change it to revocable. RTC: favor him CA: set aside.
Doctrines:
inasmuch as the designation of the primary/contingent
beneficiary/beneficiaries in this Policy has been made without reserving
the right to change said beneficiary/ beneficiaries, such designation may
not be surrendered to the Company, released or assigned; and no right or
privilege under the Policy may be exercised, or agreement made with the
Company to any change in or amendment to the Policy, without the
consent of the said beneficiary/beneficiaries
it is only with the consent of all the beneficiaries that any
change or amendment in the policy concerning the irrevocable
beneficiaries may be legally and validly effected
parent-insured cannot exercise rights and/or privileges
pertaining to the insurance contract, for otherwise, the vested rights of
the irrevocable beneficiaries would be rendered inconsequential
e. Exceptions to Irrevocable Designation [Art. 43(4), 50, 64 Family
Code]
Family Code
Art. 43(4)
Art. 43. The termination of the subsequent marriage referred to in the
preceding Article shall produce the following effects:
(4) The innocent spouse may revoke the designation of the other spouse who
acted in bad faith as beneficiary in any insurance policy, even if such
designation be stipulated as irrevocable; and
Art. 50
Art. 50. The effects provided for by paragraphs (2), (3), (4) and (5) of Article
43 and by Article 44 shall also apply in the proper cases to marriages which
are declared ab initio or annulled by final judgment under Articles 40 and 45.
The final judgment in such cases shall provide for the liquidation, partition
and distribution of the properties of the spouses, the custody and support of
the common children, and the delivery of third presumptive legitimes, unless
such matters had been adjudicated in previous judicial proceedings.
All creditors of the spouses as well as of the absolute community or the

conjugal partnership shall be notified of the proceedings for liquidation.
In the partition, the conjugal dwelling and the lot on which it is situated, shall
be adjudicated in accordance with the provisions of Articles 102 and 129.
Art. 64
Art. 64. After the finality of the decree of legal separation, the innocent
spouse may revoke the donations made by him or by her in favor of the
offending spouse, as well as the designation of the latter as beneficiary in
any insurance policy, even if such designation be stipulated as irrevocable.
The revocation of the donations shall be recorded in the registries of property
in the places where the properties are located. Alienations, liens and
encumbrances registered in good faith before the recording of the complaint
for revocation in the registries of property shall be respected. The revocation
of or change in the designation of the insurance beneficiary shall take effect
upon written notification thereof to the insured.
The action to revoke the donation under this Article must be brought within
five years from the time the decree of legal separation become final.
6. Insured Outlives Policy [Sec. 180 I.C.]

Insurance Code
Sec. 180
Sec. 180. An insurance upon life may be made payable on the death of the
person, or on his surviving a specified period, or otherwise contingently on
the continuance or cessation of life.
Every contract or pledge for the payment of endowments or annuities shall

be considered a life insurance contract for purpose of this Code.
In the absence of a judicial guardian, the father, or in the latter's absence or

incapacity, the mother, or any minor, who is an insured or a beneficiary
under a contract of life, health or accident insurance, may exercise, in behalf
of said minor, any right under the policy, without necessity of court authority
or the giving of a bond, where the interest of the minor in the particular act
involved does not exceed twenty thousand pesos. Such right may include,
but shall not be limited to, obtaining a policy loan, surrendering the policy,
receiving the proceeds of the policy, and giving the minor's consent to any
transaction on the policy.
Villanueva v. Oro (1948)
Summary: West Coast Life Insurance Company issued 2 policies
of insurance on the life of Esperanza J. Villanueva. If she survived the
policy, it will be payable to her and if not to her father who was
subsequently substituted by her brother. She outlives the policy but was
not able to claim so the brother and the her estate both claimed. RTC and
CA: estate of the insured Esperanza.
Doctrines:
To sustain the beneficiary's claim would be altogether
eliminate from the policies the condition that the insurer "agrees to pay . .
. to the insured hereunder, if living
Upon the insured's death, within the period, the beneficiary
will take, as against the personal representative or the assignee of the
insured. Upon the other hand, if the insured survives the endowment
period, the benefits are payable to him or to his assignee,
notwithstanding a beneficiary is designated in the policy
D. Insurance Agent and Insurance Broker
1. Insurance Agent [Sec. 300 I.C.]
Insurance Code
Sec. 300
Sec. 300. Any person who for compensation solicits or obtains insurance on
behalf of any insurance company or transmits for a person other than
himself an application for a policy or contract of insurance to or from such
company or offers or assumes to act in the negotiating of such insurance
shall be an insurance agent within the intent of this section and shall thereby
become liable to all the duties, requirements, liabilities and penalties to
which an insurance agent is subject.
Aisporna v. CA (1982)
Summary: Eugenio S. Isidro was issued a Personal Accident
Policy by Perla thru its author representative, Rodolfo for 12 months with
beneficiary as Ana M. Isidro for P5,000. He called to renew it where the
wife of Rodoldo Mapalad Aisporna answered his call. A case was file
against Mapalad for not having the proper certification. RTC and CA:
guilty as charged SC: reversed. No Compensation was received.
Laws: Sec. 189 of the Insurance Act (old law)
Doctrines:
To be an insurance agent, it must be for compensation
2. Insurance Broker [ Sec. 301 I.C.]
Insurance Code
Sec. 301
Sec. 301. Any person who for any compensation, commission or other thing
of value acts or aids in any manner in soliciting, negotiating or procuring the
making of any insurance contract or in placing risk or taking out insurance,
on behalf of an insured other than himself, shall be an insurance broker
within the intent of this Code, and shall thereby become liable to all the
duties, requirements, liabilities and penalties to which an insurance broker is
subject.
Philippine Health-Care Providers, Inc. v. Estrada (2008)
Summary: Philippine Health-Care Providers, Inc.
(Maxicare) formally appointed Estrada as its General Agent evidenced by
a letter-agreement dated February 16, 1991 granting him a commission.
Estrada initiated the proposal and presentations with Meralco. But,
Meralco directly negotiated with Maxicare. Estrada through counsel
demanded his commission but Maxicare denied. RTC, CA and SC: favored
Estrada. Maxicare successfully landed the Meralco account for the sale of
healthcare plans only by virtue of Estradas involvement and participation
in the negotiations
Doctrines:
Agent vs. Broker:
agent
receives a commission upon the successful
conclusion of a sale
broker
earns his pay merely by bringing the buyer and
the seller together, even if no sale is eventually made
"procuring cause" in describing a brokers activity
cause originating a series of events which, without
break in their continuity, result in the accomplishment
efforts must have been the foundation on which the
negotiations resulting in a sale began
She was entitled to commission even after renewal
3. Authority to Receive Payment/Effect of Payment [Sec. 306 I.C. ]
Insurance Code
Sec. 306
Sec. 306. The premium, or any portion thereof, which an insurance agent or
insurance broker collects from an insured and which is to be paid to an
insurance company because of the assumption of liability through the
issuance of policies or contracts of insurance, shall be held by the agent or
broker in a fiduciary capacity and shall not be misappropriated or converted
to his own use or illegally withheld by the agent or broker.
Any insurance company which delivers to an insurance agent or insurance

broker a policy or contract of insurance shall be deemed to have authorized
such agent or broker to receive on its behalf payment of any premium which
is due on such policy or contract of insurance at the time of its issuance or
delivery or which becomes due thereon.
Malayan Insurance Co., Inc. v. Arnaldo (1987)
Summary: Pinca paid MICO on December 24, 1981 for its fire
insurance property effective July 22, 1981 through its agent Adora.
On January 15, 1982, Adora remitted the payment to MICO. On January
18, 1982, Pinca's property was completely burned. On February 5, 1982,
MICO returned her payment stating that they sent her a notice for
cancellation due to non-payment on October 15, 1981 but there was no
proof other than its employee's testimony that it was sent through their
mailing section. Pinca refused it and instead filed her claim. Insurance
Commission and CA: favored Pinca since Insurance Agent was authorize
to receive for its principal MICO
Laws: Article 64, Article 65, Section 77, Section 306 of the
Insurance Code (See Above)
Doctrines:
A valid cancellation must, therefore, require concurrence of
the following conditions:
(1) There must be prior notice of cancellation to the insured;
(2) The notice must be based on the occurrence, after the effective date of
the policy, of one or more of the grounds mentioned;
(3) The notice must be (a) in writing, (b) mailed, or delivered to the named
insured, (c) at the address shown in the policy;
(4) It must state (a) which of the grounds mentioned in Section 64 is relied
upon and (b) that upon written request of the insured, the insurer will furnish
the facts on which the cancellation is based.
Payment to an agent having authority to receive or
collect payment is equivalent to payment to the principal himself;
such payment is complete when the money delivered is into the agent's
hands and is a discharge of the indebtedness owing to the principal.
South Sea Surety and Insurance Co., Inc. v. CA (1995)
Summary: Valenzuela Hardwood and Industrial Supply, Inc.
shipped with Seven Brothers' vessel M/V Seven Ambassador lauan round
logs numbering 940 at the port of Maconacon, Isabela for shipment to
Manila. The logs were insured with South Sea Surety and Insurance Co.
under a Marine Cargo Insurance Policy. January 24 1984: It paid a check
to Mr. Victorio Chua, the one who delivered the policy to them. January
25 1984: The vessel sank January 30 1984: The check was tendered to
South Sea but it refused and cancelled the policy for non-payment
RTC,CA, SC: favored Valenzuela and held South Sea liable (the shipper
was stipulated to be exempted)
Doctrines:
Since the policy was delivered to Chua to be delivered to
Valenzuela, he was deemed authorized to receive the premium
III. Insurable Interest
A. Concept
1. Definition
In general, a person has an insurable interest in the subject matter
insured where he has such a relation or connection with, or concern in,
such subject matter that he derive pecuniary benefit or advantage from
its preservation or will suffer pecuniary loss or damage from its
destruction, termination or injury by the happening of the event insured
against
2. Necessity of Insurable Interest
o Consequence of Lack of [Secs. 3, 4, 18 and 25, I.C.]
Insurance Code
Sec. 3
minority, contract for life, health and accident insurance, with any insurance
company duly authorized to do business in the Philippines, provided the
insurance is taken on his own life and the beneficiary appointed is the
minor's estate or the minor's father, mother, husband, wife, child, brother or
sister.
policy.
Sec. 4
Sec. 4. The preceding section does not authorize an insurance for or against
the drawing of any lottery, or for or against any chance or ticket in a lottery
drawing a prize.
Sec. 18
Sec. 18. No contract or policy of insurance on property shall be enforceable
except for the benefit of some person having an insurable interest in the
property insured.
Sec. 25
Sec. 25. Every stipulation in a policy of insurance for the payment of loss
whether the person insured has or has not any interest in the property
insured, or that the policy shall be received as proof of such interest, and
every policy executed by way of gaming or wagering, is void.
B. In life and health insurance

1. Who has insurable interest [Sec. 10, I.C.]
Insurance Code
Sec. 10
Sec. 10. Every person has an insurable interest in the life and health:
(a) Of himself, of his spouse and of his children;

(b) Of any person on whom he depends wholly or in part for education or
support, or in whom he has a pecuniary interest;
(c) Of any person under a legal obligation to him for the payment of money,
or respecting property or services, of which death or illness might delay or
prevent the performance; and
(d) Of any person upon whose life any estate or interest vested in him
depends.
a. Blood relationship [Sec. 10(a), I.C.] (see above)

Philamcare Health Systems, Inc. v. CA (2002) (see above)
Summary: not the legal wife (deceased was previously married to
another woman who was still alive)
Doctrines:
health care agreement is in the nature of a contract of
indemnity.
payment should be made to the party who incurred
the expenses
Gercio v. Sun Life Assurance Co. of Canada (1925) (see above)
Doctrines:
The beneficiary has an absolute vested interest in the
policy from the date of its issuance and delivery.
So when a policy of life insurance is taken out by the
husband in which the wife is named as beneficiary, she has a subsisting
interest in the policy
applies to a policy to which there are attached the
incidents of a loan value, cash surrender value, an automatic extension by
premiums paid, and to anendowment policy, as well as to an ordinary life
insurance policy
b. Education or support [Sec. 10(b), I.C. (see above); Art. 195 Family
Code]
Family Code
Art. 195
Art. 195. Subject to the provisions of the succeeding articles, the following
are obliged to support each other to the whole extent set forth in the
preceding article:
(1) The spouses;
(2) Legitimate ascendants and descendants;
(3) Parents and their legitimate children and the legitimate and illegitimate
children of the latter;
(4) Parents and their illegitimate children and the legitimate and illegitimate
children of the latter; and
(5) Legitimate brothers and sisters, whether of full or half-blood
c. Creditor [Sec. 10(c) IC] (see above)

Great Pacific Life Assurance Corp. v. CA (1999)
Summary:
Group life insurance was executed between Great Pacific
Life Assurance and Development Bank of the Philippines ensuring the
lives of its eligible housing loan mortgagors which includes Dr. Wilfredo
Leuterio who answered in the survey that he didn't have any heart
condition. He died of massive cerebral hemorrhage. Grepalife denied the
claim alleging that Dr. Leuterio was not physically healthy when he
applied. RTC, CA, SC: favored widow of Dr. Leuterio.
Doctrines:
DBP has insurable interest as creditor
mortgagee is simply an appointee of the insurance
fund, such loss-payable clause does not make the mortgagee a party to
the contract
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
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
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
d. Pecuniary Interest [Sec. 10(d) IC] (see above)
El Oriente, Fabrica de Tabacos, Inc., v. Posadas (1931)
Summary:
El Oriente, Fabrica de Tabacos, Inc. in order to protect itself
against the loss that it might suffer by reason of the death of its manager,
A. Velhagen, who had more than 35 years of experience in the
manufacture of cigars in the Philippine Islands, and whose death would be
a serious loss procured from the Manufacturers Life Insurance Co., of
Toronto, Canada, thru its local agent E.E. Elser, an insurance policy on the
life of A. Velhagen for $50,000. When Velhagen died, El Oriente received
its proceeds.
Doctrines:
proceeds of life insurance policies paid to
corporate beneficiaries upon the death of the insured are also exempted
in the nature of an indemnity for the loss which it actually
suffered because of the death and not taxable income
2. When Insurable Interest Must Exist [Sec. 19 IC]
Insurance Code
Sec. 19
Sec. 19. An interest in property insured must exist when the insurance takes
effect, and when the loss occurs, but not exist in the meantime; and 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.
When Insurable Interest Must Exist

Property Life or health of a person
Interest in the
insured insured
When insurance takes effect YES YES
In the meantime NO NO
When the Loss occurs YES NO
3. Transfer by Will or Succession Upon Death of Insured [Sec. 181 IC]
Insurance Code
Sec. 181
Sec. 181. 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 upon it whatever the insured might have
recovered.
C. In Proper Insurance
1. Who has insurable interest [Secs. 13 and 14 IC]
Insurance Code
Sec. 13
Sec. 13. Every interest in property, whether real or personal, or any relation
thereto, or liability in respect thereof, of such nature that a contemplated
peril might directly damnify the insured, is an insurable interest.
Sec. 14
Sec. 14. An insurable interest in property may consist in:
(a) An existing interest;
(b) An inchoate interest founded on an existing interest; or
(c) An expectancy, coupled with an existing interest in that out of which the
expectancy arises.
a. Existing Interest [Sec 14 (a) IC] (see above)

Traders Insurance & Surety Co. v. Golangco, et al (1954)
Summary:
The Archbishop leased a parcel of landowned by church
to Lianco who erected a building which he transferred to Kaw Eng Si who
transferred it to Golangco. The Archbishop filed an ejectment case
against Lianco. The right of Golangco to receive rent on the building was
judicially recognized in a case decided between Lianco and
others occupying the premises pursuant to a compromise agreement
which the Archbishop didn't question. Golanco applied for fire insurance
with Traders Insurance and Surety Co. which includes rent. The the
building premises was burned so Golangco requested Traders Insurance
to pay the insurance but it was declined stating the Golangco didn't have
an insurable interest.
Laws: Sec. 13 of the Insurance Code
Doctrines:
Both at the time of the issuance of the policy and at the
time of the fire, Golangco was in legal possession of the premises,
collecting rentals from its occupant.
NOTE: 2 Points if Property: When insurance takes effect and
When the loss occured
The argument of Traders Insurance that a policy
of insurance must specify the interest of the insured in the
property insured, if he is not the absolute owner thereof, is not
meritorious because it was the Traders, not Golangco, who prepared that
policy, and it cannot take advantage of its own acts to plaintiff's
detriment; and, in any case, this provision was substantially complied with
by Golangco when he made a full and clear statement of his interests to
Trader's manager.
NOTE: Insurable Interest is NOT exclusive to the owner
Filipino Merchants Insurance Co. v. CA (1989)
Summary: Choa Tiek Seng, consignee of the shipment of
fishmeal loaded, insured in "all risks policy" 600 metric tons of fishmeal in
new gunny bags of 90 kilos each from Bangkok, Thailand to Manila
against all risks under warehouse to warehouse terms but only 59.940
metric tons was imported. When it was unloaded 105 bags were in bad
condition and when it was delivered by the arrastre contractor E. Razon,
Inc. 227 bags were in bad condition so Chao claimed against Filipino
Merchants who denied the claim. RTC favored Chao but Filipino Merchants
appealed on the ground that Chao didn't have insurable interest. CA, SC:
favored Chao against Filipino Merchants absolving the vessel and E.
Razon.
Law: Section 13 if IC, Article 1523 of the Civil Code
Doctrines:
GR: the burden of proof is upon the insured to show that a
loss arose from a covered peril, but under an "all risks" policy the burden
is not on the insured to prove the precise cause of loss or damage for
which it seeks compensation. The insured under an "all risks insurance
policy" has the initial burden of proving that the cargo was in good
condition when the policy attached and that the cargo was damaged
when unloaded from the vessel; thereafter, the burden then shifts to the
insurer to show the exception to the coverage. - none was shown = liable
As vendee/consignee of the goods in transit has such
existing interest. His interest over the goods is based on the perfected
contract of sale. The perfected contract of sale between him and the
shipper of the goods operates to vest in him an equitable title even before
delivery or before be performed the conditions of the sale. The contract
of shipment, whether under F.O.B., C.I.F., or C. & F. as in this case, is
immaterial in the determination of whether the vendee has an insurable
interest or not in the goods in transit.
C & F contracts are shipment contracts. The term means
that the price fixed includes in a lump sum the cost of the goods and
freight to the named destination. It simply means that the seller must pay
the costs and freight necessary to bring the goods to the named
destination but the risk of loss or damage to the goods is transferred from
the seller to the buyer when the goods pass the ship's rail in the port of
shipment.
Gaisano Cagayan, Inc. v. Insurance Company of North America (2006)
Summary: Both Intercapitol Marketing Corporation and Levi
Strauss (Phils.) Inc. obtained from Insurance Company of North America
fire insurance policies for their book debt endorsements related to their
ready-made clothing materials which have been sold or delivered to
various customers and dealers of the Insured anywhere in the Philippines
which are unpaid 45 days after the time of the loss. When the fire
burned Gaisano Superstore Complex, their were able to claim against
Insurance Co. of North America who filed against Gaisano Cagayan Inc. as
subrogration to IMC and LSPI. But they were denied contending that it
had no insurable interest and that fire being a fortuitous event does not
hold them liable. RTC: favored Gaisano under res perit domino. CA:
reversed-sales invoices are exemption to res perit domino SC: affirmed
with modification deleting the order to pay the amount for LPSI because
no subrogation receipt was presented. Not exempted by fortuitous event
because not delivery of determinate thing but pecuniary in nature.
Laws: Article 1504,Article 1263, Article 2207 of the Civil
Code, Section 13 of Insurance Code
Doctrines:
Anyone has an insurable interest in property who derives a
benefit from its existence or would suffer loss from its destruction.
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
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
Ong Lim Sing v. FEB Leasing & Finance Corp. (2007)
Summary: FEB Leasing and Finance Corporation (FEB) leased
equipment and motor vehicles to JVL Food Products with a monthly rental
of P170,494. Ong Lim Sing executed an Individual Guaranty Agreement
with FEB to guarantee the prompt and faithful performance of the terms
and conditions of the lease agreement. When JVL didn't refused to pay its
arrears amounting to P3,414,468.75, FEB filed a complaint for damages
and replevin against JVL and Lim. RTC: Sale on installment so only
unreturned units and equipment should be paid. CA: reversed. Financial
lease so JVL and Lim are jointly and severally liable for P3,414,468.75. SC:
affirmed
Doctrines:
Lim, as a lessee, has an insurable interest in the equipment

and motor vehicles leased. (NOT exactly the lessor but guarrantor of the
lessor)
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. 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. 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. We find nothing contra
legem or contrary to public policy in such a contractual arrangement
Lampano v. Jose (1915)
Summary: Baretto constructed a house for Jose who sold it to
Lampano. Then, the house burned during which Lampano still owes Jose
P2,000 and Jose owes Baretto P2,000. Lampano filed against Jose and
Barretto alleging that Jose and her berbally had an agreement that the
insurance policy taken by Barretto before the house was burned was to be
delivered to her. RTC: favored Jose ordering Barretto to pay
Jose P1,298.50 and offsetting the P2,000 SC: reversed and absolved
Barretto. Barretto had an insurable interest in the house since he
constructed the building and insured it after it had been completed
Doctrines:
Where different persons have different interests in the
same property, the insurance taken by one in his own right and in his own
interest does not in any way insure to the benefit of another
A contract of insurance made for the insurer's indemnity
only, as where there is no agreement, express or implied, that it shall be
for the benefit of a third person, does not attach to or run with the title to
the insured property on a transfer thereof personal as between the
insurer and the insured.
b. Inchoate Interest [Sec. 14(b) IC] (see above)
Example: Rights in corporation as stock holder
c. Expectancy [Sec.14(c) (see above) and 16 IC]
Insurance Code
Sec. 16
Sec. 16. A mere contingent or expectant interest in anything, not founded on
an actual right to the thing, nor upon any valid contract for it, is not
insurable.
Example: Future crops
d. Mortgagor [Sec. 8 and 9 IC; Art. 2127 Civil Code]
Insurance Code
Sec. 8
Sec. 8. Unless the policy otherwise 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 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.
Sec. 9
Sec. 9. If an insurer assents to the transfer of an insurance from a mortgagor
to a mortgagee, and, at the time of his assent, imposes further obligation on
the assignee, making a new contract with him, the act of the mortgagor
cannot affect the rights of said assignee.
Civil Code
Art. 2127
Art. 2127. The mortgage extends to the natural accessions, to the
improvements, growing fruits, and the rents or income not yet received when
the obligation becomes due, and to the amount of the indemnity granted or
owing to the proprietor from the insurers of the property mortgaged, or in
virtue of expropriation for public use, with the declarations, amplifications
and limitations established by law, whether the estate remains in the
possession of the mortgagor, or it passes into the hands of a third person
San Miguel Brewery v. Law Union and Rock Insurance Co. (1920)
Summary: In the mortgage agreement, property owner P.D. Dunn
agreed to insure at his own expense, the mortgaged property for its full
value and to indorse the policies in such manner as to authorize the
Brewery Company to receive the proceeds in case of loss and to retain
such part thereof as might be necessary to satisfy the remainder then due
upon the mortgage debt. However, San Miguel only insured itself as
mortgagee and did not express the policy to cover the risk of the owner.
Dunn sold the property to Harding without the assignment of the
insurance. Harding is claiming for the different between the mortgage
debt and the fave value of the property. RTC: absolved the two insurance
companies. SC: affirmed
Laws: sec. 16,sec. 19,sec. 50,sec.55 of the Insurance Code
section 19 of the Insurance Act:
a change of interest in any part of a thing insured
unaccompanied by a corresponding change of interest in the insurance,
suspends the insurance to an equivalent extent, until the interest in the
thing and the interest in the insurance are vested in the same person
section 55:
the mere transfer of a thing insured does not transfer
the policy, but suspends it until the same person becomes the owner of
both the policy and the thing insured
Doctrines:
Undoubtedly these policies of insurance might have been
so framed as to have been "payable to the San Miguel Brewery,
mortgagee, as its interest may appear, remainder to whomsoever, during
the continuance of the risk, may become the owner of the interest
insured." (Sec 54, Act No. 2427.) Such a clause would have proved an
intention to insure the entire interest in the property, not merely the
insurable interest of the San Miguel Brewery, and would have shown
exactly to whom the money, in case of loss, should be paid. But the
policies are not so written.
The blame for the situation thus created rests, however,
with the Brewery rather than with the insurance companies
If by inadvertence, accident, or mistake the terms of the
contract were not fully set forth in the policy, the parties are entitled to
have it reformed. But to justify the reformation of a contract, the proof
must be of the most satisfactory character, and it must clearly appear
that the contract failed to express the real agreement between the parties
- none was shown
Saura Import & Export Co., Inc. v. Philippine International Surety Co.,
Inc. (1963)
Summary: Saura Import & Export Co Inc., mortgaged to the Phil.
National Bank, a parcel of land. The land had a building which was
insured with Philippine International Surety even before the mortgage
contract so it was required to be assigned to PNB. October 15, 1954: 13
days after the issuance of the policy, Philippine Int'l Surety cancelled the
fire policy and notifying only PNB and not Saura. April 6, 1955: Fire
ensued and burned the building and all its contents so Saura filed a claim
against PNB and Philippine Int'l Surety. RTC: Dismissed. SC: reversed
ordering Phil. Int'l Surety to pay to Saura since It was the primary duty of
Philippine International Surety to notify the insured, but it did not.
Doctrines:
If a mortgage or lien exists against the property insured,
and the policy contains a clause stating that loss, if any, shall be payable
to such mortgagee or the holder of such lien as interest may appear,
notice of cancellation to the mortgagee or lienholder alone is ineffective
as a cancellation of the policy to the owner of the property
Palileo v. Cosio (1955)
Summary: Cherie Palileo (debtor-mortgagor) filed a complaint
against Beatriz Cosio (creditor-mortgagee) praying that their transaction
be one of a loan with an equitable mortgage to secure the payment of the
loan. It is a loan of P12,000 secured by a "Conditional Sale of Residential
Building" with right to repurchase. After the execution of the contract,
Cosio insured in her name the building with Associated Insurance &
Surety Co. against fire. The building was partly destroyed by fire so she
claimed an indemnity of P13,107. Palileo demanded that the amount of
insurance proceeds be credited to her loan. RTC: Insurance Proceeds was
credited to the loan but refund the balance. SC: affirmed.
Doctrines:
When the the mortgagee may insure his interest in the
property independently of the mortgagor , upon the destruction of the
property the insurance money paid to the mortgagee will not inure to the
benefit of the mortgagor, and the amount due under the mortgage debt
remains unchanged. The mortgagee, however, is not allowed to retain his
claim against the mortgagor, but it passes by subrogation to the insurer,
to the extent of the insurance money paid
It is true that there are authorities which hold that "If a
mortgagee procures insurance on his separate interest at his own
expense and for his own benefit, without any agreement with the
mortgagor with respect thereto, the mortgagor has no interest in the
policy, and is not entitled to have the insurance proceeds applied in
reduction of the mortgage debt" But these authorities merely represent
the minority view
Great Pacific Life Assurance Corp. v. CA (1999) (see above)
Laws: Sec. 8 of the Insurance Code
NOTE: mortgage redemption insurance - limited to the mortgage
amount
e. Carrier or Depositary [Sec. 15 IC; Sec. 6 General Bonded Warehouse Act
(cannot find)]
Insurance Code
Sec. 15
Sec. 15. A carrier or depository of any kind has an insurable interest in a
thing held by him as such, to the extent of his liability but not to exceed the
value thereof.
General Bonded Warehouse Act
Sec. 6
Lopez v. Del Rosario and Quiogue (1922)

Summary: Benita Quiogue de V. del Rosario (Mrs. del Rosario),
owner of a bonded warehouse where Froilan Lopez, holder or 14
waehouse receipts and Elias Zamora had their copra deposited. The
warehouse was burned. During that time, Froilan is still liable for the
storage and insurance of P315.90. Upon arbitration, all of the other were
satisfied except Froilan who appealed. SC: favored Froilan entitled to
P88,595.43 minus P7,185.88, his share of the expenses, minus P315.90,
due for insurance and storage.
2. Measure of Insurable Interest [Secs. 17 and 14(a) IC (see above)]
Insurance Code
Sec. 17
Sec. 17. The measure of an insurable interest in property is the extent to
which the insured might be damnified by loss or injury thereof.
San Miguel Brewery v. Law Union and Rock Insurance Co. (1920) (see
above)
Doctrine: insurable interest as mortgagee is only to extent of
mortgage credit
Ong Lim Sing v. FEB Leasing & Finance Corp. (2007) (see above)
Doctrine: insurable interest as lessor is the amount of the
financial lease in arrears
3. Effect of Lack of Insurable Interest [Sec. 18 IC]
Insurance Code
Sec. 18
Sec. 18. No contract or policy of insurance on property shall be enforceable
except for the benefit of some person having an insurable interest in the
property insured.
Sharuff & Co. v. Baloise Fire Insurance Co. (1937)
Summary: Salomon Sharruf and Elias Eskenazi were doing
business under the firm name of Sharruf & Co. They insured their stocks
with aloise Fire Insurance Co., Sun Insurance Office Ltd., and Springfield
Insurance Co. raising it to P40,000. Elias Eskenazi having paid the
corresponding premiums. Soon they changed the name of their
partnership to Sharruf & Eskenazi. A fire ensued at their building at Muelle
de la Industria street where petroleum was spilt lasting 27 minutes. There
was no evidence that they changed their named to defraud or they
initiated the fire. They filed their claim for 40 cases but only 10 or 11
partly burned and scorched cases were found. RTC: ordered Baloise Fire
Insurance Co., Sun Insurance Office Ltd., and Springfield Insurance Co., to
pay SC: reversed Insurance companies are absolved.
Doctrines:
So great is the difference between the amount of articles
insured, which the plaintiffs claim to have been in the building before the
fire, and the amount thereof shown by the vestige of the fire to have been
therein, that the most liberal human judgment can not attribute such
difference to a mere innocent error in estimate or counting but to a
deliberate intent to demand of the insurance companies payment of an
indemnity for goods not existing at the time of the fire, thereby
constituting the so-called "fraudulent claim" which, by express agreement
between the insurers and the insured, is a ground for exemption of the
insurers from civil liability
acted in bad faith in presenting a fraudulent claim, they are
not entitled to the indemnity claimed
when the partners of a general partnership doing business
under the firm name of "Sharruf & Co." obtain insurance policies issued to
said firm and the latter is afterwards changed to "Sharruf & Eskenazi",
which are the names of the same and only partners of said firm "Sharruf
& Co.", continuing the same business, the new firm acquires the rights of
the former under the same policies
Garcia v. Hongkong Fire & Marine Insurance Co. (1923)
Summary: Garcia thought he had his merchandise insured
with Hongkong Fire & Marine Insurance Co. so when he mortgaged the
same to PNB, he endorsed it to PNB. PNB informed Hongkong Fire
through exchange of letters. Hongkong failed to notify PNB or Garcia that
it was for the building not owned by Garcia and not the merchandise.
When fire took place and destroyed the merchandise. PNB tried to claim
but it was refused. SC affirms RTC: favored Garcia
Doctrine: As a matter of fair dealing, it should have notified the
Bank that the policy was on the building. It will be noted that the letters in
question were all written several months before the fire.
Cha v. CA (1997)
Summary: Spouses Nilo Cha and Stella Uy-Cha and CKS
Development Corporation entered a 1 year lease contract with a
stipulation not to insure against fire their merchandise but they insured it
with United Insurance Co. When fire destroyed they merchandise and
CKS discovered the insurance, it claimed against United. RTC: United to
pay CKS the amount of P335,063.11 and Spouses Cha to pay P50,000 as
exemplary damages, P20,000 as attorneys fees and costs of suit CA:
deleted exemplary and attorney's fees. SC: reversed and ordered
proceeds to be paid to spouses Cha.
Laws:
Sec. 17. Sec. 18, Sec. 25 of the Insurance Code
Doctrines:
A non-life insurance policy such as the fire insurance policy
taken by petitioner-spouses over their merchandise is primarily a contract
of indemnity. Insurable interest in the property insured must exist a t the
time the insurance takes effect and at the time the loss occurs. The basis
of such requirement of insurable interest in property insured is based on
sound public policy: to prevent a person from taking out an insurance
policy on property upon which he has no insurable interest and collecting
the proceeds of said policy in case of loss of the property. In such a case,
the contract of insurance is a mere wager which is void under Section 25
of the Insurance Code.
The automatic assignment of the policy to CKS under the
provision of the lease contract previously quoted is void for being contrary
to law and/or public policy.
The liability of the Cha spouses to CKS for violating their
lease contract in that Cha spouses obtained a fire insurance policy over
their own merchandise, without the consent of CKS, is a separate and
distinct issue which we do not resolve in this case.
4. When Insurable Interest Must Exist [Sec. 19 IC]
Insurance Code
Sec. 19
Sec. 19. An interest in property insured must exist when the insurance takes
effect, and when the loss occurs, but not exist in the meantime; and 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.
Tai Tong Chuache & Co. v. Insurance Commission (1988)
Summary: Azucena Palomo bought a parcel of land and building
from Rolando Gonzales and assumed a mortgage of the building in favor
of S.S.S. which was insured with S.S.S. Accredited Group of Insurers. He
also obtained a loan from Tai Tong Chuache Inc. in the amount of
P100,000 and to secure it, the land and building was mortgaged. He
insured the building with Philippine British Assurance Co., Zenith
Insurance Corporation and Travellers Multi-Indemnity. When the building
burned, Palomo was able to claim P41,546.79 from Philippine British
Assurance Co., P11,877.14 from Zenith Insurance Corporation and
P5,936.57 from S.S.S. Group of Accredited Insurers but Travellers Multi-
Indemnity refused so it demanded the balance from the other three but
they refused so they filed against them. Insurance Commission and CFI:
dismissed since Arsenio Chua was claiming and NOT Tai Tong Chuache.
SC: favored Tai Tong Chuache & Co. against travellers
Doctrines:
Tai Tong Chuache is still a creditor at the time of the
occurence of loss
when the creditor is in possession of the document of
credit, he need not prove non-payment for it is presumed - not proven
otherwise
Chua being a partner of petitioner Tai Tong Chuache
& Company is an agent of the partnership. Being an agent, it is
understood that he acted for and in behalf of the firm
5. Effect of Change of Interest in Thing Insured
a.GR: suspended [Sec. 20 IC]
Insurance Code
Sec. 20
Sec. 20. Except in the cases specified in the next four sections, and in the
cases of life, accident, and health insurance, a change of interest in any part
of a thing insured unaccompanied by a corresponding change in interest in
the insurance, suspends the insurance to an equivalent extent, until the
interest in the thing and the interest in the insurance are vested in the same
person.
above)
Laws: Sec. 20 (sec. 19 in the case old law)
Doctrines:
a change of interest in any part of a
thing insured unaccompanied by a corresponding change of interest
in the insurance, suspends the insurance to an equivalent extent, until the
interest in the thing and the interest in the insurance are vested in the
same person
the mere transfer of a thing insured does not transfer the
policy, but suspends it until the same person becomes the owner of both
the policy and the thing insured
Bachrach v. British American Assurance Co. (1910)

Summary: E. M. Bachrach insured goods belonging to a general
furniture store, such as iron and brass bedsteads, toilet tables, chairs, ice
boxes, bureaus, washstands, mirrors, and sea-grass furniture stored in the
ground floor and first story of house and dwelling with an authorized
agent of the British American Assurance Company.
British American Assurance Company denied alleging that
property covered by the policy to H. W. Peabody &
Co. to secure certain indebtedness due and owing to said company
interest in certain of the goods covered by the said
policy is trasnferred to Macke to secure certain obligations assumed by
Macke and on behalf of Bachrach
willfully placed a gasoline can containing 10 gallons
of gasoline close to the insured goods
made no proof of the loss with the time required by
the condition
SC affirmed RTC: favored Bachrach
Doctrines:
keeping of inflammable oils on the premises, though
prohibited by the policy, does not void it if such keeping is incidental to
the business
It may be added that there was no provision in the
policy prohibiting the keeping of paints and varnishes upon the premises
where the insured property was stored. If the company intended to rely
upon a condition of that character, it ought to have been plainly
expressed in the policy.
alienation clause - forfeiture if the interest in the property
pass from the insured
there is no alienation within the meaning of the insurance
law until the mortgage acquires a right to take possession by default
under the terms of the mortgage. No such right is claimed to have
accrued in the case at bar, and the alienation clause is therefore
inapplicable.
we can not find that there is a preponderance of evidence
showing that the plaintiff did actually set fire or cause fire to be set to the
goods in question
b. Exceptions
i. Life, accident and health insurance [Sec. 20 IC] (see above)
ii. Change of interest after occurence of loss [Sec. 21 IC]

Insurance Code
Sec. 21
Sec. 21. A change in interest in a thing insured, after the occurrence of an
injury which results in a loss, does not affect the right of the insured to
indemnity for the loss.
iii. Change of interest in things separately insured [Sec. 22 IC]
Insurance Code
Sec. 22
Sec. 22. A change of interest in one or more several distinct things,
separately insured by one policy, does not avoid the insurance as to the
others.
iv. Transfer of interest by will or succession upon death of insured [Sec.
23 IC]
Insurance Code
Sec. 23
Sec. 23. A change on interest, by will or succession, on the death of the
insured, does not avoid an insurance; and his interest in the insurance
passes to the person taking his interest in the thing insured.
v. Transfer of interest by one of partners, joint owners, or common
owners jointly insured,
to the others [Sec. 24 IC]
Insurance Code
Sec. 24
Sec. 24. A transfer of interest by one of several partners, joint owners, or
owners in common, who are jointly insured, to the others, does not avoid an
insurance even though it has been agreed that the insurance shall cease
upon an alienation of the thing insured.
vi. Insurance policy framed to insured to benefit of whomsoever
becomes owner of thing
insured [Sec. 57 IC]
Insurance Code
Sec. 57
6. Effect of transfer of thing insured [Sec. 58 IC]
Insurance Code
Sec. 58
Sec. 58. The mere transfer of a thing insured does not transfer the policy, but
suspends it until the same person becomes the owner of both the policy and
the thing insured.
above)
IV. Premium
A. Payment Required
1. Binding Effect of Payment [Sec. 77 and 306. par. 2 IC]
Insurance Code
Sec. 77
Sec. 306 par. 2
Sec. 306. xxx
Any insurance company which delivers to an insurance agent or insurance
broker a policy or contract of insurance shall be deemed to have authorized
such agent or broker to receive on its behalf payment of any premium which
is due on such policy or contract of insurance at the time of its issuance or
delivery or which becomes due thereon.
South Sea Surety and Insurance Co., Inc. v. CA (1995) (see above)
Doctrines:
payment of the premium is a condition precedent to, and
essential for, the efficaciousness of the contract.
The only two statutorily provided exceptions are
(a) in case the insurance coverage relates to
life or industrial life (health) insurance when a grace period applies and
NOTE: Grace period is only applicable for life/health insurance
(b) when the insurer makes a written
acknowledgment of the receipt of premium, this acknowledgment being
declared by law to be then conclusive evidence of the premium payment
Areola v. CA (1994)
Summary: Areola's policy was cancelled by mistake
because Prudential Guarantee And Assurance, Inc. branch manager
Malapit failed to remit the premium payment. Although Prudential offered
rectification by extend its lifetime to December 17, 1985. The Areola's
have already filed for damages before they received the letter. RTC:
favored Areola Prudential being in bad Faith CA: reversed since
cancellation is not motivated by negligence, malice or bad faith SC: RTC
reinstated
Laws: Art. 1910,Article 1191
Doctrines:
Subsequent reinstatement could not possibly
absolve Prudential there being an obvious breach of contract (from the
time of payment)
2. Effect of Non-Payment [Sec. 64(a) IC]
Insurance Code
Sec. 64 (a)
Sec. 64. No policy of insurance other than life shall be cancelled by the
insurer except upon prior notice thereof to the insured, and no notice of
cancellation shall be effective unless it is based on the occurrence, after the
effective date of the policy, of one or more of the following:
(a) non-payment of premium; XXX
National Leather Co. Inc v. U.S. Life Insurance Co. (1950) (cannot find)
Sales de Gonzaga v. Crown Life Insurance Co. (1952)
Summary: Gonzaga was insured with a 20-year endowment with
Crown Life based in Toronto company. Being an enemy during the
Japanese Occupation, it was forced closed but continued to receive
payments as a privilege to its members at the house of its employee. It
reopened on May 1, 1945 in Manila. During which
the reinstatement clause could have revived the policy but Gozaga did
not pay. June 27, 1945: Gonzaga died from an accident and his widow
was claiming from Crown Life alleging that they were not notified of the
change in office during the war so they were not able to pay. RTC, SC:
Against Gonzaga.
Doctrines:
Non-payment at the day involves absolute forfeiture is
such be the terms of the contract
failure to notify the postal address during the war is not an
excuse
opening of an interim office partook of the nature of the
privilege to the policy holders to keep their policies operative rather than
a duty to them under the contract
Valenzuela v. CA (1990)
Summary: As a general agent, Valenzuela was able to
solicit Delta Motors, Inc. for an insurance worth P4.4M entitling him to a
commission of P1.6M. But, Philamgen officers wanted 50% of it but he
refused so they reversed his commission, placed agency transactions on a
cash and carry basis thus removing the 60-day credit for premiums due,
threatened to cancel policies issued by his agency and leaked out the
news that he has substantial accounts with Philamgen. RTC: favored him
CA: modified to make him solidarily liable for the premiums unpaid SC:
reinstated RTC since non-payment rendered the policy invalid
Laws: Art. 19,Art. 20,Art. 21, Art. 2200 of the new Civil
Code;Section 77 of the Insurance Code
Doctrines:
If a principal violates a contractual or quasi-contractual
duty which he owes his agent, the agent may as a rule bring an
appropriate action for the breach of that duty. The agent may in a proper
case maintain an action at law for compensation or damages
unless premium is paid, an insurance contract does not
take effect
to sue Valenzuela for the unpaid premiums would be the
height of injustice and unfair dealing
3. Statutory Exceptions
a. Grace Period [Sec. 77 IC]
Insurance Code
Sec. 77
i. For individual life or endownment insurance [Sec. 227(a) IC]
Insurance Code
Sec. 227 (a)
Sec. 227. In the case of individual life or endowment insurance, the policy
shall contain in substance the following conditions:
(a) A provision that the policyholder is entitled to a grace period either of

thirty days or of one month within which the payment of any premium after
the first may be made, subject at the option of the insurer to an interest
charge not in excess of six per centum per annum for the number of days of
grace elapsing before the payment of the premium, during which period of
grace the policy shall continue in full force, but in case the policy becomes a
claim during the said period of grace before the overdue premium is paid,
the amount of such premium with interest may de deducted from the
amount payable under the policy in settlement; xxx
ii. For group life insurance [Sec. 228(a) IC]
Insurance Code
Sec. 228 (a)
Sec. 228. No policy of group life insurance shall be issued and delivered in
the Philippines unless it contains in substance the following provisions, or
provisions which in the opinion of the Commissioner are more favorable to
the persons insured, or at least as favorable to the persons insured and more
favorable to the policy-holders:
(a) A provision that the policyholder is entitled to a grace period of either
thirty days or of one month for the payment of any premium due after the
first, during which grace period the death benefit coverage shall continue in
force, unless the policyholder shall have given the insurer written notice of
discontinuance in advance of the date of discontinuance and in accordance
with the terms of the policy. The policy may provide that the policyholder
shall be liable for the payment of a pro rata premium for the time the policy
is in force during such grace period; xxx
iii. For industrial life insurance [Sec. 230 (a) IC]
Insurance Code
Sec. 230 (a)
Sec. 230. In the case of industrial life insurance, the policy shall contain in
substance the following provisions:
(a) A provision that the insured is entitled to a grace period of four weeks
within which the payment of any premium after the first may be made,
except that where premiums are payable monthly, the period of grace shall
be either one month or thirty days; and that during the period of grace, the
policy shall continue in full force, but if during such grace period the policy
becomes a claim, then any overdue and unpaid premiums may be deducted
from any amount payable under the policy in settlement; xxx
b. Acknowledgement receipt [Sec. 78 IC]
Insurance Code
Sec. 78
Sec. 78. An acknowledgment in a policy or contract of insurance or 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 the premium is actually paid.
American Home Assurance Co. v. Chua (1999)
Summary: April 5, 1990: Antonio Chua renewed the fire insurance
for its stock-in-trade of his business, Moonlight Enterprises with American
Home Assurance Companyby issuing a check of P2,983.50 to its agent
James Uy who delivered the Renewal Certificate to him. April 6, 1990:
Moonlight Enterprises was completely razed by fire with an est. loss of
P4,000,000 to P5,000,000. April 10, 1990: An official receipt was issued
and subsequently, a policy was issued covering March 25 1990 to March
25 1991. Chua filed an insurance claim with American Home and 4 other
co-insurers. American Home refused alleging the no premium was paid.
RTC: favored Antonio Chua for paying by way of check a day before the
fire occurred. CA: Affirmed SC: partially granted deleting the awards for
profit or loss, moral damages and reducing the attorney's fees.
Laws: Section 29, Section 66,Section 75, Section 77 (see
above) , Section 78 (see above), Section 306 of the Insurance Code
Doctrines:
renewal certificate issued contained the acknowledgment
that premium had been paid
best evidence of such authority is the fact that petitioner
accepted the check and issued the official receipt for the payment. It is,
as well, bound by its agents acknowledgment of receipt of payment
Section 78 establishes a legal fiction of payment and
should be interpreted as an exception to Section 77
c. Acceptance by obligee by surety bond [Sec. 177 IC]
Insurance Code
Sec. 177
Sec. 177. The surety is entitled to payment of the premium as soon as the
contract of suretyship or bond is perfected and delivered to the obligor. No
contract of suretyship or bonding shall be valid and binding unless and until
the premium therefor has been paid, except where the obligee has accepted
the bond, in which case the bond becomes valid and enforceable irrespective
of whether or not the premium has been paid by the obligor to the surety:
Provided, That if the contract of suretyship or bond is not accepted by, or
filed with the obligee, the surety shall collect only reasonable amount, not
exceeding fifty per centum of the premium due thereon as service fee plus
the cost of stamps or other taxes imposed for the issuance of the contract or
bond: Provided, however, That if the non-acceptance of the bond be due to
the fault or negligence of the surety, no such service fee, stamps or taxes
shall be collected.
In the case of a continuing bond, the obligor shall pay the subsequent annual
premium as it falls due until the contract of suretyship is cancelled by the
obligee or by the Commissioner or by a court of competent jurisdiction, as
the case may be.
Philippine Pryce Assurance Corp. v. CA (1994)
Summary: Gegroco, Inc filed for a collection of the issued surety
bond for P500K and P1M by Interworld Assurance Corporation (now
Philippine Pryce Assurance Corporation) in behalf of its principal Sagum
General Merchandise. Interworld: checks issued by its principal which
were supposed to pay for the premiums bounced and it was not yet
authorized by the Insurance Commission to issue surety bonds. RTC, CA,
SC: favored Gegroco, Inc
Laws: Sec. 177 of the Insurance Code (see above)
Doctrines:
Interworld's defense that it did not have authority to issue
a Surety Bond when it did is an admission of fraud committed against
Gegroco. No person can claim benefit from the wrong he himself
committed. A representation made is rendered conclusive upon the
person making it and cannot be denied or disproved as against the person
relying thereon.
d. Rules on cover notes (if premium CANNOT yet be computed) [Sec.
52 IC]
Insurance Code
Sec. 52
Sec. 52. Cover notes may be issued to bind insurance temporarily pending
the issuance of the policy. Within sixty days after the issue of the cover note,
a policy shall be issued in lieu thereof, including within its terms the identical
insurance bound under the cover note and the premium therefor.
Cover notes may be extended or renewed beyond such sixty days with the
written approval of the Commissioner if he determines that such extension is
not contrary to and is not for the purpose of violating any provisions of this
Code. The Commissioner may promulgate rules and regulations governing
such extensions for the purpose of preventing such violations and may by
such rules and regulations dispense with the requirement of written approval
by him in the case of extension in compliance with such rules and
regulations.
Pacific Timber v. CA (1982)
Summary: March 19, l963: Pacific Timber secured temporary
insurance from Workmen's Insurance Company, Inc. for its exportation of
1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped
from the Diapitan Bay, Quezon Province to Tokyo, Japan. Workmen's
issued Cover Note. April 2, 1963: regular marine cargo policies were
issued for a total of 1,195.498 bd. ft. Due to the bad weather some of the
logs were lost during loading operations. 45 pieces of logs were salvaged,
but 30 pieces were lost. Pacific informed Workmen's who refused stating
that the logs covered in the 2 marine policies were received in good order
at the point of destination and that the cover note was null and void upon
the issuance of the Marine Policies CFI: cover note is valid CA: reversed
Laws: Section 84 of the Insurance Code
Doctrines:
it was not necessary to ask for payment of the premium on
the Cover Note , for the loss insured against having already occurred, the
more practical procedure is simply to deduct the premium from the
amount due on the Cover Note
cover note as a "binder"
supported by the doctrine that where a policy is
delivered without requiring payment of the premium, the presumption is
that a credit was intended and policy is valid
e. Non-lapse of individual life or endowment insurance
i. Automatic policy loan [Sec. 227(g) IC]
Insurance Code
Sec. 227 (g)
(g) A provision that at anytime after a cash surrender value is available
under the policy and while the policy is in force, the company will advance,
on proper assignment or pledge of the policy and on sole security thereof, a
sum equal to, or at the option of the owner of the policy, less than the cash
surrender value on the policy, at a specified rate of interest, not more than
the maximum allowed by law, to be determined by the company from time
to time, but not more often than once a year, subject to the approval of the
Commissioner; and that the company will deduct from such loan value any
existing indebtedness on the policy and any unpaid balance of the premium
for the current policy year, and may collect interest in advance on the loan to
the end of the current policy year, which provision may further provide that
such loan may be deferred for not exceeding six months after the application
therefor is made;
ii. Application of dividend [Sec. 227 (e) IC]
Insurance Code
Sec. 227 e)
(e) If the policy is participating, a provision that the company shall
periodically ascertain and apportion any divisible surplus accruing on the
policy under conditions specified therein;
iii. Restatement clause [Sec. 227(j) IC]
Insurance Code
Sec. 227 (j)
(j) A provision that the policyholder shall be entitled to have the policy
reinstated at any time within three years from the date of default of premium
payment unless the cash surrender value has been duly paid, or the
extension period has expired, upon production of evidence of insurability
satisfactory to the company and upon payment of all overdue premiums and
any indebtedness to the company upon said policy, with interest rate not
exceeding that which would have been applicable to said premiums and
indebtedness in the policy years prior to reinstatement.
Any of the foregoing provisions or portions thereof not applicable to single

premium or term policies shall to that extent not be incorporated therein;
and any such policy may be issued and delivered in the Philippines which in
the opinion of the Commissioner contains provisions on any one or more of
the foregoing requirements more favorable to the policyholder than
hereinbefore required.
This section shall not apply to policies of group life or industrial life
insurance.
Lalican v. Insular Life Assurance Company Limited (2009)
Summary: Eulogio applied for an insurance policy with Insular
Life through its agent Josephine Malaluan who issued him a 20-Year
Endowment Variable Income Package Flexi Plan worth P500,000 with 2
riders at P500,000 each with Violeta as the primary beneficiary. However,
he failed to pay and allowed the policy to be void after the lapse of the
31-day grace period. Just when he was to pay the default amount with
interest, he died before Malaluan was able to submit his application for
reinstatement to Insular life for approval. Violeta filed a case with the RTC
and was not able to appeal due to the negligence of her lawyer so he filed
a petition for Certiorari. RTC, SC: denied.
Laws: Section. 19 of the Insurance Code
Doctrines:
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.
3. Jurisprudential Exceptions
a. Estoppel and credit extension
Philippine Phoenix Surety & Insurance Co. v. Woodworks Inc (1979)
Summary: Woodworks, Inc. was issued a fire policy for its
building machinery and equipment by Philippine Phoenix Surety &
Insurance Co. for P500K covering July 21, 1960 to July 21, 1961.
Woodworks did not pay the premium totalling to P10,593.36. It was
alleged that Woodworks notified Philippine Phoenix the cancellation of the
Policy so Philippine Phoenix credited P3,110.25 for the unexpired period of
94 days and demanded in writing the payment of P7,483.11 Woodworks
does not want to pay since it contends that by not paying the premium ,
the insurance policy has lapsed. CFI: favored Philippine Phoenix SC:
reversed.
Laws: Section 77 of the Insurance Code
Doctrines:
To constitute an extension of credit there must be a clear
and express agreement therefor and there nust be acceptance of the
extension
Since the premium had not been paid, the policy must be
deemed to have lapsed.
Compliance by the insured with the terms of the contract is
a condition precedent to the right of recovery.
The burden is on an insured to keep a policy in force by the
payment of premiums, rather than on the insurer to exert every effort to
prevent the insured from allowing a policy to elapse through a failure to
make premium payments.
Capital Insurance & Surety Co. Inc. v. Plastic Era Co. Inc (1975)
Arce v. Capital Insurance & Surety Co. Inc
Malayan Insurance Co. Inc v. Arnaldo (1987)
UCPB General Insurance Co. Inc. v. Masagana Telmart Inc (2001)
b. Installments and partial payment
Philippine Phoenix Surety & Insurance Co. v. Woodworks Inc (1967)
Tibay v. CA (1996)
Makati Tuscany v. CA (1992)
B. Return of Premium
1. Grounds
a. Not exposed to peril insured against [Secs. 79(a) and 80 IC]
Makati Tuscany v. CA (1992)
b. Time policy surrendered before expiration [Sec. 79(b) IC]
Insurance Code
Sec. 79 (b)
Sec. 79. A person insured is entitled to a return of premium, as follows:
(b) Where the insurance is made for a definite period of time and the insured
surrenders his policy, to such portion of the premium as corresponds with the
unexpired time, at a pro rata rate, unless a short period rate has been
agreed upon and appears on the face of the policy, after deducting from the
whole premium any claim for loss or damage under the policy which has
previously accrued; Provided, That no holder of a life insurance policy may
avail himself of the privileges of this paragraph without sufficient cause as
otherwise provided by law.
c. Voidable Policy [Sec. 81 IC]
Insurance Code
Sec. 81
Sec. 81. A person insured is entitled to return of the premium when the
contract is voidable, on account of fraud or misrepresentation of the insurer,
or of his agent, or on account of facts, the existence of which the insured was
ignorant without his fault; or when by any default of the insured other than
actual fraud, the insurer never incurred any liability under the policy.
d. When by default of insured (other than fraud), insurer never incurred
liability under the policy [Sec. 81 IC] (see above)
Great Pacific Life Insurance Corporation v. CA (1990)
e. Over-insurance by several insurers [Sec. 82 IC]
Insurance Code
Sec. 82
Sec. 82. In case of an over-insurance by several insurers, the insured is
entitled to a ratable return of the premium, proportioned to the amount by
which the aggregate sum insured in all the policies exceeds the insurable
value of the thing at risk.
2. Rebate of Premium [Sec. 361 IC]
Insurance Code
Sec. 361
Sec. 361. No insurance company doing business in the Philippines or any
agent thereof, no insurance broker, and no employee or other representative
of any such insurance company, agent, or broker, shall make, procure or
negotiate any contract of insurance or agreement as to policy contract, other
than is plainly expressed in the policy or other written contract issued or to
be issued as evidence thereof, or shall directly or indirectly, by giving or
sharing a commission or in any manner whatsoever, pay or allow or offer to
pay or allow to the insured or to any employee of such insured, either as an
inducement to the making of such insurance or after such insurance has
been effected, any rebate from the premium which is specified in the policy,
or any special favor or advantage in the dividends or other benefits to accrue
thereon, or shall give or offer to give any valuable consideration or
inducement of any kind, directly or indirectly, which is not specified in such
policy or contract of insurance; nor shall any such company, or any agent
thereof, as to any policy or contract of insurance issued, make any
discrimination against any Filipino in the sense that he is given less
advantageous rates, dividends or other policy conditions or privileges than
are accorded to other nationals because of his race.
V. Policy
A. Policy of Insurance
1. Definition; Coverage of Insurance [Sec. 49 IC]
Insurance Code
Sec. 49
Sec. 49. The written instrument in which a contract of insurance is set forth,
is called a policy of insurance.
Enriquez v. Sun life Assurance Co. of Canada (1920)
Perez v. CA (2000)
Lucero Vda. de Singayen v. Insular Life Assurance Co. (1935)
Tang v. CA (1979)
Eastern Shipping Lines, Inc. v. Prudential Guarantee and Assurance,
Inc. (2009)
2. Form [Sec. 50 IC]
Insurance Code
Sec. 50
Sec. 50. The policy shall be in printed form which may contain blank spaces;
and any word, phrase, clause, mark, sign, symbol, signature, number, or
word necessary to complete the contract of insurance shall be written on the
blank spaces provided therein.
Any rider, clause, warranty or endorsement purporting to be part of the

contract of insurance and which is pasted or attached to said policy is not
binding on the insured, unless the descriptive title or name of the rider,
clause, warranty or endorsement is also mentioned and written on the blank
spaces provided in the policy.
Unless applied for by the insured or owner, any rider, clause, warranty or
endorsement issued after the original policy shall be countersigned by the
insured or owner, which countersignature shall be taken as his agreement to
the contents of such rider, clause, warranty or endorsement.
Group insurance and group annuity policies, however, may be typewritten

and need not be in printed form.
3. Necessity of Approval of Form [Sec. 226 IC]
Insurance Code
Sec. 226
Sec. 226. No policy, certificate or contract of insurance shall be issued or
delivered within the Philippines unless in the form previously approved by
the Commissioner, and no application form shall be used with, and no rider,
clause, warranty or endorsement shall be attached to, printed or stamped
upon such policy, certificate or contract unless the form of such application,
rider, clause, warranty or endorsement has been approved by the
Commissioner.
4. Basic Provisions [Sec. 51 IC]
Insurance Code
Sec. 51
Sec. 51. A policy of insurance must specify:
(a)The parties between whom the contract is made;
(b) The amount to be insured except in the cases of open or running policies;
(c) The premium, or if the insurance is of a character where the exact

premium is only determinable upon the termination of the contract, a
statement of the basis and rates upon which the final premium is to be
determined;
(d) The property or life insured;
(e) The interest of the insured in property insured, if he is not the absolute
owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to continue.

a. Parties to the contract
b. Amount of insurance (EXCEPT in open or running policies)
c. Premium
d. Property or life insured
e. Interest of insured in property insured if he is NOT the owner
f. Risks insured against; and
g. Period of insurance
5. Additional Matters [Secs. 227, 228, 230 IC]
Insurance Code
Sec. 227
(a) A provision that the policyholder is entitled to a grace period either of
thirty days or of one month within which the payment of any premium after
the first may be made, subject at the option of the insurer to an interest
charge not in excess of six per centum per annum for the number of days of
grace elapsing before the payment of the premium, during which period of
grace the policy shall continue in full force, but in case the policy becomes a
claim during the said period of grace before the overdue premium is paid,
the amount of such premium with interest may de deducted from the
amount payable under the policy in settlement;
(b) A provision that the policy shall be incontestable after it shall have been
in force during the lifetime of the insured for a period of two years from its
date of issue as shown in the policy, or date of approval of last
reinstatement, except for non-payment of premium and except for violation
of the conditions of the policy relating to military or naval service in time of
war;
(c) A provision that the policy shall constitute the entire contract between
the parties, but if the company desires to make the application a part of the
contract it may do so provided a copy of such application shall be indorsed
upon or attached to the policy when issued, and in such case the policy shall
contain a provision that the policy and the application therefor shall
constitute the entire contract between the parties;
(d) A provision that if the age of the insured is considered in determining the
premium and the benefits accruing under the policy, and the age of the
insured has been misstated, the amount payable under the policy shall be
such as the premium would have purchased at the correct age;
(e) If the policy is participating, a provision that the company shall

policy under conditions specified therein;
(f) A provision specifying the options to which the policyholder is entitled to

in the event of default in a premium payment after three full annual
premiums shall have been paid. Such option shall consist of:
(1) A cash surrender value payable upon surrender of the policy which shall
not be less than the reserve on the policy, the basis of which shall be
indicated, for the then current policy year and any dividend additions
thereto, reduced by a surrender charge which shall not be more than one-
fifth of the entire reserve or two and one-half per centum of the amount
insured and any dividend additions thereto;
(2) One or more paid-up benefits on a plan or plans specified in the policy of
such value as may be purchased by the cash surrender value;
(g) A provision that at anytime after a cash surrender value is available

under the policy and while the policy is in force, the company will advance,
on proper assignment or pledge of the policy and on sole security thereof, a
sum equal to, or at the option of the owner of the policy, less than the cash
surrender value on the policy, at a specified rate of interest, not more than
the maximum allowed by law, to be determined by the company from time
to time, but not more often than once a year, subject to the approval of the
Commissioner; and that the company will deduct from such loan value any
existing indebtedness on the policy and any unpaid balance of the premium
for the current policy year, and may collect interest in advance on the loan to
the end of the current policy year, which provision may further provide that
such loan may be deferred for not exceeding six months after the application
therefor is made;
(h) A table showing in figures cash surrender values and paid-up options
available under the policy each year upon default in premium payments,
during at least twenty years of the policy beginning with the year in which
the values and options first become available, together with a provision that
in the event of the failure of the policyholder to elect one of the said options
within the time specified in the policy, one of said options shall
automatically take effect and no policyholder shall ever forfeit his right to
same by reason of his failure to so elect;
(i) In case the proceeds of a policy are payable in installments or as an

annuity, a table showing the minimum amounts of the installments or
annuity payments;
(j) A provision that the policyholder shall be entitled to have the policy
reinstated at any time within three years from the date of default of premium
payment unless the cash surrender value has been duly paid, or the
extension period has expired, upon production of evidence of insurability
satisfactory to the company and upon payment of all overdue premiums and
any indebtedness to the company upon said policy, with interest rate not
exceeding that which would have been applicable to said premiums and
indebtedness in the policy years prior to reinstatement.
Any of the foregoing provisions or portions thereof not applicable to single
premium or term policies shall to that extent not be incorporated therein;
and any such policy may be issued and delivered in the Philippines which in
the opinion of the Commissioner contains provisions on any one or more of
the foregoing requirements more favorable to the policyholder than
hereinbefore required.
This section shall not apply to policies of group life or industrial life
insurance.
Sec. 228
(a) A provision that the policyholder is entitled to a grace period of either

thirty days or of one month for the payment of any premium due after the
first, during which grace period the death benefit coverage shall continue in
force, unless the policyholder shall have given the insurer written notice of
discontinuance in advance of the date of discontinuance and in accordance
with the terms of the policy. The policy may provide that the policyholder
shall be liable for the payment of a pro rata premium for the time the policy
is in force during such grace period;
(b) A provision that the validity of the policy shall not be contested, except
for non-payment of premiums after it has been in force for two years from its
date of issue; and that no statement made by any insured under the policy
relating to his insurability shall be used in contesting the validity of the
insurance with respect to which such statement was made after such
insurance has been in force prior to the contest for a period of two years
during such person's lifetime nor unless contained in written instrument
signed by him;
(c) A provision that a copy of the application, if any, of the policyholder shall
be attached to the policy when issued, that all statements made by the
policyholder or by persons insured shall be deemed representations and not
warranties, and that no statement made by any insured shall be used in any
contest unless a copy of the instrument containing the statement is or has
been furnished to such person or to his beneficiary;
(d) A provision setting forth the conditions, if any, under which the insurer
reserves the right to require a person eligible for insurance to furnish
evidence of individual insurability satisfactory to the insurer as a condition to
part or all of his coverage;
(e) A provision specifying an equitable adjustment of premiums or of benefits
or of both to be made in the event that the age of a person insured has been
misstated, such provision to contain a clear statement of the method of
adjustment to be used;
(f) A provision that any sum becoming due by reason of death of the person
insured shall be payable to the beneficiary designated by the insured,
subject to the provisions of the policy in the event that there is no
designated beneficiary, as to all or any part of such sum, living at the death
of the insured, and subject to any right reserved by the insurer in the policy
and set forth in the certificate to pay at its option a part of such sum not
exceeding five hundred pesos to any person appearing to the insurer to be
equitably entitled thereto by reason of having incurred funeral or other
expenses incident to the last illness or death of the person insured;
(g) A provision that the insurer will issue to the policyholder for delivery to
each person insured an individual certificate setting forth a statement as to
the insurance protection to which he is entitled, to whom the insurance
benefits are payable, and the rights set forth in paragraphs (h), (i) and (j)
following;
(h) A provision that if the insurance, or any portion of it, on a person covered
under the policy ceases because of termination of employment or of
membership in the class or classes eligible for coverage under the policy,
such person shall be entitled to have issued to him by the insurer, without
evidence of insurability, an individual policy of life insurance without
disability or other supplementary benefits, provided application for the
individual policy and payment of the first premium to the insurer shall be
made within thirty days after such termination and provided further that:
(1) the individual policy shall be on any one of the forms, except term
insurance, then customarily issued by the insurer at the age and for an
amount not in excess of the coverage under the group policy; and
(2) the premium on the individual policy shall be at the insurer's then
customary rate applicable to the form and amount of the individual policy, to
the class of risk to which such person then belongs, and to his age attained
on the effective date of the individual policy.
(i) A provision that if the group policy terminates or is amended so as to
terminate the insurance of any class of insured persons, every person
insured thereunder at the date of such termination whose insurance
terminates and who has been so insured for five years prior to such
termination date shall be entitled to have issued to him by the insurer an
individual policy of life insurance subject to the same limitations as set forth
in paragraph (h), except that the group policy may provide that the amount
of such individual policy shall not exceed the smaller of (a) the amount of the
person's life insurance protection ceasing less the amount of any life
insurance for what he is or becomes eligible under any group policy issued or
reinstated by the same or another reinsurer within thirty days after such
termination, and (b) two thousand pesos;
(j) A provision that if a person insured under the group policy dies during the
thirty-day period within which he would have been entitled to an individual
policy issued to him in accordance with (h) and (i) above and before such
individual policy shall have become effective, the amount of life insurance
which he would have been entitled to have issued to him as an individual
policy shall be payable as a claim under the group policy whether or not
application for the individual policy or the payment of the first premium has
been made;
(k) In the case of a policy issued to a creditor to insure debtors of such

creditor, a provision that the insurer will furnish to the policyholder for
delivery to each debtor insured under the policy a form which will contain a
statement that the life of the debtor is insured under the policy and that any
death benefit paid thereunder by reason of his death shall be applied to
reduce or extinguish indebtedness.
The provisions of paragraphs (f) to (j) shall not apply to policies issued to a
creditor to insure his debtors. If a group life policy is on a plan of insurance
other than term, it shall contain a non-forfeiture provision or provisions which
in the opinion of the Commissioner is or are equitable to the insured or the
policyholder: Provided, That nothing herein contained shall be so construed
as to require group life policies to contain the same non-forfeiture provisions
as are required of individual life policies.
Sec. 230
substance the following provisions:
(a) A provision that the insured is entitled to a grace period of four weeks
within which the payment of any premium after the first may be made,
except that where premiums are payable monthly, the period of grace shall
be either one month or thirty days; and that during the period of grace, the
policy shall continue in full force, but if during such grace period the policy
becomes a claim, then any overdue and unpaid premiums may be deducted
from any amount payable under the policy in settlement;
(b) A provision that the policy shall be incontestable after it has been in force
during the lifetime of the insured for a specified period, not more than two
years from its date of issue, except for non-payment of premiums and except
for violation of the conditions of the policy relating to naval or military
service, or services auxiliary thereto, and except as to provisions relating to
benefits in the event of disability as defined in the policy, and those granting
additional insurance specifically against death by accident or by accidental
means, or to additional insurance against loss of, or loss of use of, specific
members of the body;
(c) A provision that the policy shall constitute the entire contract between
the parties, or if a copy of the application is endorsed upon and attached to
the policy when issued, a provision that the policy and the application
therefor shall constitute the entire contract between the parties, and in the
latter case, a provision that all statements made by the insured shall, in the
absence of fraud, be deemed representations and not warranties;
(d) A provision that if the age of the person insured, or the age of any
person, considered in determining the premium, or the benefits accruing
under the policy, has been misstated, any amount payable or benefit
accruing under the policy shall be such as the premium paid would have
purchased at the correct age;
(e) A provision that if the policy is a participating policy, the company shall
policy under the conditions specified therein;
(f) A provision that in the event of default in premium payments after three
full years' premiums have been paid, the policy shall be converted into a
stipulated form of insurance, and that in the event of default in premium
payments after five full years' premiums have been paid, a specified cash
surrender value shall be available, in lieu of the stipulated form of insurance,
at the option of the policyholder. The net value of such stipulated form of
insurance and the amount of such cash value shall not be less than the
reserve on the policy and dividend additions thereto, if any, at the end of the
last completed policy year for which premiums shall have been paid (the
policy to specify the mortality table, rate of interest and method of valuation
adopted to compute such reserve), exclusive of any reserve on disability
benefits and accidental death benefits, less an amount not to exceed two
and one-half per centum of the maximum amount insured by the policy and
dividend additions thereto, if any, at the end of the last completed policy
year for which premiums shall have been paid (the policy to specify the
mortality table, rate of interest and method of valuation adopted to compute
such reserve), exclusive of any reserve on disability benefits and accidental
death benefits, less an amount not to exceed two and one-half per centum of
the maximum amount insured by the policy and dividend additions thereto, if
any, when the issue age is under ten years, and less an amount not to
exceed two and one-half per centum of the current amount insured by the
policy and dividend additions thereto, if any, if the issue age is ten years or
older, and less any existing indebtedness to the company on or secured by
the policy;
(g) A provision that the policy may be surrendered to the company at its
home office within a period of not less than sixty days after the due date of a
premium in default for the specified cash value, provided that the insurer
may defer payment for not more than six months after the application
therefor is made;
(h) A table that shows in figures the non-forfeiture benefits available under
the policy every year upon default in payment of premiums during at least
the first twenty years of the policy, such table to begin with the year in which
such values become available, and a provision that the company will furnish
upon request an extension of such table beyond the year shown in the
policy;
(i) A provision that specifies which one of the stipulated forms of insurance
provided for under the provision of paragraph (f) of this section shall take
effect in the event of the insured's failure, within sixty days from the due
date of the premium in default, to notify the insurer in writing as to which
one of such forms he has selected;
(j) A provision that the policy may be reinstated at any time within two years
from the due date of the premium in default unless the cash surrender value
has been paid or the period of extended term insurance expired, upon
production of evidence of insurability satisfactory to the company and
payment of arrears of premiums with interest at a rate not exceeding six per
centum per annum payable annually;
(k) A provision that when a policy shall become a claim by death of the
insured, settlement shall be made upon receipt of due proof of death, or not
later than two months after receipt of such proof;
(l) A title on the face and on the back of the policy correctly describing its
form;
(m) A space on the front or the back of the policy for the name of the
beneficiary designated by the insured with a reservation of the insured's
right to designate or change the beneficiary after the issuance of the policy.
The policy may also provide that no designation or change of beneficiary
shall be binding on the insurer until endorsed on the policy by the insurer,
and that the insurer may refuse to endorse the name of any proposed
beneficiary who does not appear to the insurer to have an insurable interest
in the life of the insured. Such policy may also contain a provision that if the
beneficiary designated in the policy does not surrender the policy with due
proof of death within the period stated in the policy, which shall not be less
than thirty days after the death of the insured, or if the beneficiary is the
estate of the insured, or is a minor, or dies before the insured, or is not
legally competent to give valid release, then the insurer may make any
payment thereunder to the executor or administrator of the insured, or to
any of the insured's relatives by blood or legal adoption or connections by
marriage or to any person appearing to the insurer to be equitably entitled
thereto by reason of having incurred expense for the maintenance, medical
attention or burial of the insured; and
(n) A provision that when an industrial life insurance policy is issued

providing for accidental or health benefits, or both, in addition to life
insurance, the foregoing provisions shall apply only to the life insurance
portion of the policy.
Any of the foregoing provisions or portions thereof not applicable to non-

participating or term policies shall to that extent not be incorporated therein.
The foregoing provisions shall not apply to policies issued or granted
pursuant to the non-forfeiture provisions prescribed in provisions of
paragraphs (f) and (i) of this section, nor shall provisions of paragraphs (f),
(g), (h), and (i) hereof be required in term insurance of twenty years or less
but such term policies shall specify the mortality table, rate of interest, and
method of computing reserves.
6. Designation of Beneficiaries [Secs. 54-57 IC]
Insurance Code
Sec. 54
Sec. 54. When an insurance contract is executed with an agent or trustee as
the insured, the fact that his principal or beneficiary is the real party in
interest may be indicated by describing the insured as agent or trustee, or by
other general words in the policy.
Sec. 55
Sec. 55. To render an insurance effected by one partner or part-owner,
applicable to the interest of his co-partners or other part-owners, it is
necessary that the terms of the policy should be such as are applicable to
the joint or common interest.
Sec. 56
Sec. 56. When the description of the insured in a policy is so general that it
may comprehend any person or any class of persons, only he who can show
that it was intended to include him can claim the benefit of the policy.
Sec. 57
7. Rider, clause, warranty or endorsement [Sec. 50 IC]
Insurance Code
Sec. 50
Sec. 50. The policy shall be in printed form which may contain blank spaces;
and any word, phrase, clause, mark, sign, symbol, signature, number, or
word necessary to complete the contract of insurance shall be written on the
blank spaces provided therein.
Any rider, clause, warranty or endorsement purporting to be part of the

contract of insurance and which is pasted or attached to said policy is not
binding on the insured, unless the descriptive title or name of the rider,
clause, warranty or endorsement is also mentioned and written on the blank
spaces provided in the policy.
Unless applied for by the insured or owner, any rider, clause, warranty or
endorsement issued after the original policy shall be countersigned by the
insured or owner, which countersignature shall be taken as his agreement to
the contents of such rider, clause, warranty or endorsement.
Group insurance and group annuity policies, however, may be typewritten

and need not be in printed form.
Commissioner of Internal Revenue v. Lincoln Philippine Life Insurance
Co., Inc (2002)
8. Interpretation and Proof (Art. 1377, Civil Code)
9. Application of Rules to Modification of Policy [Sec. 47 IC]
Insurance Code
Sec. 47
Sec. 47. The provisions of this chapter apply as well to a modification of a
contract of insurance as to its original formation.
B. Cover Notes
1. Binding Effect [Sec. 52 IC]

Insurance Code
Sec. 52
Sec. 52. Cover notes may be issued to bind insurance temporarily pending
the issuance of the policy. Within sixty days after the issue of the cover note,
a policy shall be issued in lieu thereof, including within its terms the identical
insurance bound under the cover note and the premium therefor.
Cover notes may be extended or renewed beyond such sixty days with the
written approval of the Commissioner if he determines that such extension is
not contrary to and is not for the purpose of violating any provisions of this
Code. The Commissioner may promulgate rules and regulations governing
such extensions for the purpose of preventing such violations and may by
such rules and regulations dispense with the requirement of written approval
by him in the case of extension in compliance with such rules and
regulations.
De Lim v. Sun Life Assurance Co. of Canada (1920)
Great Pacific Life Assurance Co. v. CA (1979)
2. Separate Premium NOT Required
Pacific Timber v. CA(1982)
C. Kinds of property insurance policy
1. Classification [Sec. 59 IC]

Insurance Code
Sec. 59
Sec. 59. A policy is either open, valued or running.
2. Open Policy [Sec. 60, 161 and 171 IC]

Insurance Code
Sec. 60
Sec. 60. An open policy is one in which the value of the thing insured is not
agreed upon, but is left to be ascertained in case of loss.
Sec. 161
Sec. 161. In estimating a loss under an open policy of marine insurance the
following rules are to be observed:
(a) The value of a ship is its value at the beginning of the risk, including all
articles or charges which add to its permanent value or which are necessary
to prepare it for the voyage insured;
(b) The value of the cargo is its actual cost to the insured, when laden on
board, or where the cost cannot be ascertained, its market value at the time
and place of lading, adding the charges incurred in purchasing and placing it
on board, but without reference to any loss incurred in raising money for its
purchase, or to any drawback on its exportation, or to the fluctuation of the
market at the port of destination, or to expenses incurred on the way or on
arrival;
(c) The value of freightage is the gross freightage, exclusive of primage,

without reference to the cost of earning it; and
(d) The cost of insurance is in each case to be added to the value thus
estimated.
Sec. 171
Sec. 171. If there is no valuation in the policy, the measure of indemnity in
an insurance against fire is the expense it would be to the insured at the
time of the commencement of the fire to replace the thing lost or injured in
the condition in which at the time of the injury; but if there is a valuation in a
policy of fire insurance, the effect shall be the same as in a policy of marine
insurance.
Development Insurance Corp. v. IAC (1986)
3. Valued Policy [Sec. 61, 156, 171 IC (see above]
Insurance Code
Sec. 61
Sec. 61. A valued policy is one which expresses on its face an agreement
that the thing insured shall be valued at a specific sum.
Sec. 156
Sec. 156. A valuation in a policy of marine insurance in conclusive between
the parties thereto in the adjustment of either a partial or total loss, if the
insured has some interest at risk, and there is no fraud on his part; except
that when a thing has been hypothecated by bottomry or respondentia,
before its insurance, and without the knowledge of the person actually
procuring the insurance, he may show the real value. But a valuation
fraudulent in fact, entitles the insurer to rescind the contract.
4. Running Policy [Sec. 62 IC]
Insurance Code
Sec. 62
Sec. 62. A running policy is one which contemplates successive insurances,
and which provides that the object of the policy may be from time to time
defined, especially as to the subjects of insurance, by additional statements
or indorsements.
D. Cancellation, renewal and reformation
1. Cancellation
a. By Insurer [Sec. 64 IC]
Insurance Code
Sec. 64
Sec. 64. No policy of insurance other than life shall be cancelled by the
insurer except upon prior notice thereof to the insured, and no notice of
cancellation shall be effective unless it is based on the occurrence, after the
effective date of the policy, of one or more of the following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured
against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful or reckless acts or omissions increasing the hazard

insured against;
(e) physical changes in the property insured which result in the property
becoming uninsurable; or
(f) a determination by the Commissioner that the continuation of the policy

would violate or would place the insurer in violation of this Code.
Philamcare Health Systems Inc. v. CA (2002)
i. non-payment of premiums
ii. conviction of crime increasing hazards insured against

iii. discovery of fraud or material representation
iv. discovery of acts or omissions increasing hazard insured

against
vi. Insurance Commissioner determines policy of insured may

violate
b. By insured [Sec. 79(b) IC]

Insurance Code
Sec. 79 (b)
Sec. 79. A person insured is entitled to a return of premium, as follows:
(b) Where the insurance is made for a definite period of time and the insured
surrenders his policy, to such portion of the premium as corresponds with the
unexpired time, at a pro rata rate, unless a short period rate has been
agreed upon and appears on the face of the policy, after deducting from the
whole premium any claim for loss or damage under the policy which has
previously accrued; Provided, That no holder of a life insurance policy may
avail himself of the privileges of this paragraph without sufficient cause as
otherwise provided by law.
c. For compulsory motor vehicle liability insurance [Secs. 380-381 IC]
Insurance Code
Sec. 380
Sec. 380. No cancellation of the policy shall be valid unless written notice
thereof is given to the land transportation operator or owner of the vehicle
and to the Land Transportation Commission at least fifteen days prior to the
intended effective date thereof.
Upon receipt of such notice, the Land Transportation Commission, unless it
receives evidence of a new valid insurance or guaranty in cash or surety
bond as prescribed in this chapter, or an endorsement of revival of the
cancelled one, shall order the immediate confiscation of the plates of the
motor vehicle covered by such cancelled policy. The same may be re-issued
only upon presentation of a new insurance policy or that a guaranty in cash
or surety band has been made or posted with the Commissioner and which
meets the requirements of this chapter, or an endorsement or revival of the
cancelled one.
Sec. 381
Sec. 381. If the cancellation of the policy or surety bond is contemplated by
the land transportation operator or owner of the vehicle, he shall, before the
policy or surety bond ceases to be effective, secure a similar policy of
insurance or surety bond to replace the policy or surety bond to be cancelled
or make a cash deposit in sufficient amount with the Commissioner and
without any gap, file the required documentation with the Land
Transportation Commission, and notify the insurance company concerned of
the cancellation of its policy or surety bond.
d. Notice - [Sec. 65 IC]
Insurance Code
Sec. 65
Sec. 65. All notices of cancellation mentioned in the preceding section shall
be in writing, mailed or delivered to the named insured at the address shown
in the policy, and shall state (a) which of the grounds set forth in section
sixty-four is relied upon and (b) that, upon written request of the named
insured, the insurer will furnish the facts on which the cancellation is based.
Paulino v. Capital Insurance (1959)
Saura Import & Export Co. Inc v. Philippine International Surety Co. Inc
(1963)
Malayan Insurance Co. Inc. Arnaldo (1987)
2. Renewal [Sec. 66 IC]
3. Reformation
San Miguel Brewery v. Law Union and Rock Insurance Co. (1920)
VI. Ascertaining and controlling risks
A. Concealment
1. Definition [Sec. 26 IC]

Insurance Code
Sec. 26
Sec. 26. A neglect to communicate that which a party knows and ought to
communicate, is called a concealment.
2. What must be communicated; Requisites [Sec. 28 IC]
Insurance Code
Sec. 28
Sec. 28. Each party to a contract of insurance must communicated 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 not
the means of ascertaining.
a. Facts within his knowledge
b. Facts material to the contract [Secs. 31 and 107 IC]

Insurance Code
Sec. 31
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.
Sec. 107
Sec. 107. In marine insurance each party is bound to communicate, in
addition to what is required by section twenty-eight, all the information
which he possesses, material to the risk, except such as is mentioned in
Section thirty, and to state the exact and whole truth in relation to all
matters that he represents, or upon inquiry discloses or assumes to disclose.
Saturnino v. Phil. American Life Ins. Co. (1963)
Sunlife Assurance Company of Canada v. CA (1995)
c. Other party has no means of ascertaining such facts; and
d. He makes no warranty as to such facts; exception [Sec. 29 IC]

Insurance Code
Sec. 29
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.
3. What need no be communicated
Insurance Code
Sec. 30
Sec. 30. Neither party to a contract of insurance is bound to communicate
information of the matters following, except in answer to the inquiries of the
other:
(a) Those which the other knows;
(b) Those which, in the exercise of ordinary care, the other ought to know,
and of which the former has no reason to suppose him ignorant;
(c) Those of which the other waives communication;
(d) Those which prove or tend to prove the existence of a risk excluded by a
warranty, and which are not otherwise material; and
(e) Those which relate to a risk excepted from the policy and which are not
otherwise material.
a. Facts other party knows [Sec. 30(a) IC]
Insular Life Assurance v. Feliciano (1941)
Insular Life Assurance Co. v. Feliciano (1943)
b. Facts other party ought to know [Sec. 30(b) and 32 IC]
Insurance Code
Sec. 32
Sec. 32. Each party to a contract of insurance is bound to know all the
general causes which are open to his inquiry, equally with that of the other,
and which may affect the political or material perils contemplated; and all
general usages of trade.
c. Facts of which other party waives communication [Secs. 30(c) and
33 IC]
Insurance Code
Sec. 33
Sec. 33. The right to information of material facts may be waived, either by
the terms of the insurance or by neglect to make inquiry as to such facts,
where they are distinctly implied in other facts of which information is
communicated.
Ng Gan Zee v. Asian Crusader Life Assurance Corp. (1983)
d. Facts which prove or tend to prove existence of risk excluded by a
warranty, and which
are NOT otherwise material [Sec. 30(d) IC]
e. Facts relating to a risk excepted from the policy and which are
otherwise material [Sec.
30 (e) IC]
f. Nature and amount of interest [Secs. 34 and 51(e) IC]

Insurance Code
Sec. 34
Sec. 34. Information of the nature or amount of the interest of one insured
need not be communicated unless in answer to an inquiry, except as
prescribed by section fifty-one.
Sec. 51
Sec. 51. A policy of insurance must specify:
(e) The interest of the insured in property insured, if he is not the absolute
owner thereof;
g. Opinion or judgment [Secs. 35 and 108 IC]
Insurance Code
Sec. 108
Sec. 108. In marine insurance, information of the belief or expectation of a
third person, in reference to a material fact, is material.
4. Effect [Secs. 27 and 29 IC]
Insurance Code
Sec. 27
Sec. 27. A concealment whether intentional or unintentional entitles the
injured party to rescind a contract of insurance
Sec. 27
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.
Argente v. West Coast Life Insurance Co. (1928)
Yu Pang Cheng v. CA [1959]
Saturnino v. Philippine American Ins. Co. (1963)
Great Pacific Life Assurance Company v. CA (1979)
Gen. Insurance & Surety Corp. v. Ng Hua (1960)
Vda. de Canilang v. CA (1993)
Sunlife Assurance Company of Canada v. CA (1995)
B. Representation
1. Definition and Characteristics
a. Form [Sec. 36 IC]

Insurance Code
Sec. 36
Sec. 36. A representation may be oral or written.
b. When made [Sec. 37 IC]

Insurance Code
Sec. 37
Sec. 37. A representation may be made at the time of, or before, issuance of
the policy.
i. at time of issuance of policy
ii. before issuance of policy [Secs. 41 and 42 IC]

Insurance Code
Sec. 41
Sec. 41. A representation may be altered or withdrawn before the insurance
is effected, but not afterwards.
Sec. 42
Sec. 42. A representation must be presumed to refer to the date on which
the contract goes into effect.
c. Interpretation [Sec. 38 IC]

Insurance Code
Sec. 38
Sec. 38. The language of a representation is to be interpreted by the same
rules as the language of contracts in general.
d. Promissory representation; statement of belief or expectation [Sec.
39 IC]
Insurance Code
Sec. 39
Sec. 39. A representation as to the future is to be deemed a promise, unless
it appears that it was merely a statement of belief or expectation.
e. Modification of warranty [Sec. 40 IC]
Insurance Code
Sec. 40
Sec. 40. A representation cannot qualify an express provision in a contract of
insurance, but it may qualify an implied warranty.
2. False [Secs. 43 and 44 IC]
Insurance Code
Sec. 43
Sec. 43. When a person insured has no personal knowledge of a fact, he may
nevertheless repeat information which he has upon the subject, and which
he believes to be true, with the explanation that he does so on the
information of others; or he may submit the information, in its whole extent,
to the insurer; and in neither case is he responsible for its truth, unless it
proceeds from an agent of the insured, whose duty it is to give the
information.
Sec. 44
Sec. 44. A representation is to be deemed false when the facts fail to
correspond with its assertions or stipulations.
Harding v. Commercial Union Assurance Co. (1916)
3. Materiality [Sec. 46 in rel. to Sec. 31 IC]
Insurance Code
Sec. 46
Sec. 46. The materiality of a representation is determined by the same rules
as the materiality of a concealment.
Sec. 31
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.
4. Effect of False and Material Representation [Sec. 45 IC]

Insurance Code
Sec. 45
Sec. 45. If a representation is false in a material point, whether affirmative or
promissory, the injured party is entitled to rescind the contract from the time
when the representation becomes false. The right to rescind granted by this
Code to the insurer is waived by the acceptance of premium payments
despite knowledge of the ground for rescission.
Saturnino v. Philippine Armerican Life Ins. Co. (1963)
Musngi v. West Coast Life Insurance Co. (1935)
Edillon v. Manila Bankers Life Insurance Corp. (1982)
Gonzales Lao v. Yek Tong Lin Fire & Marine Insurance Co., Ltd. (1930)
Tan Chay Heng v. West Coast Life Insurance Co. (1927)
Qua Chee Gan v. Law Union and Rock Insurance Co. Ltd. (1955)
C. Warranties
1. Definition and Characteristics
a. Kinds
i. Express or implied [Sec. 67 IC]
ii. Affirmative or Promissory
b. To what warranties relate [Sec. 68 IC]

Insurance Code
Sec. 68
Sec. 68. A warranty may relate to the past, the present, the future, or to any
or all of these.
c. Form [Sec. 69 IC]
Insurance Code
Sec. 69
Sec. 69. No particular form of words is necessary to create a warranty.
2. Express Warranties [Sec. 70 IC]
Insurance Code
Sec. 70
Sec. 70. Without prejudice to section fifty-one, every express warranty, made
at or before the execution of a policy, must be contained in the policy itself,
or in another instrument signed by the insured and referred to in the policy
as making a part of it.
Ang Gloc Chip v. Springfield Fire & Marine Insurance Co. (1931)
3. Affirmative Warranties [Sec. 71 IC]
Insurance Code
Sec. 71
Sec. 71. A statement in a policy of matter relating to the person or thing
insured, or to the risk, as a fact, is an express warranty thereof.
4. Promissory Warranties [Secs. 72 and 73 IC]

Insurance Code
Sec. 72
Sec. 72. A statement in a policy which imparts that it is intended to do or not
to do a thing which materially affects the risk, is a warranty that such act or
omission shall take place.
Sec. 73
Sec. 73. When, before the time arrives for the performance of a warranty
relating to the future, a loss insured against happens, or performance
becomes unlawful at the place of the contract, or impossible, the omission
to fulfill the warranty does not avoid the policy.
5. Effect of Breach
a. Breach of material warranty or provision [Sec. 74 IC]

Insurance Code
Sec. 74
Sec. 74. The violation of a material warranty, or other material provision of a
policy, on the part of either party thereto, entitles the other to rescind.
Young v. Midland Textile Insurance Co. (1915)
Qua Chee Gan v. Law Union and Rock Insurance Co. Ltd. (1955)
b. Breach of immaterial provision [Sec. 75 IC]
Insurance Code
Sec. 75
Sec. 75. A policy may declare that a violation of specified provisions thereof
shall avoid it, otherwise the breach of an immaterial provision does not avoid
the policy.
Gen. Insurance & Surety Corp. v. Ng Hua (1960)
c. Breach of warranty without fraud [Sec. 76 IC]
Insurance Code
Sec. 76
Sec. 76. A breach of warranty without fraud merely exonerates an insurer
from the time that it occurs, or where it is broken in its inception, prevents
the policy from attaching to the risk.
D. Other Devices
1. Conditions
2. Exceptions, Exclusions, or Exemptions
E. Incontestable clause
1. Rescission of Insurance Contract (for Life and Non-life Insurance) [Sec.

48 par. 1 IC]
Insurance Code
Sec. 48 par. 1
Sec. 48. Whenever a right to rescind a contract of insurance is given to the
insurer by any provision of this chapter, such right must be exercised
previous to the commencement of an action on the contract.
a. Time to rescind
Tan Chay Heng v. West Coast Life Insurance Co. (1927)
b. Effect of failure to rescind before commencement of action
c. Waiver of right to rescind
2. Incontestible Clause (for Life insuance only) [Sec. 48 par. 3 and Secs.
227(b), 228(b) and 230(b) IC]
Insurance Code
Sec. 48 par. 3
After a policy of life insurance made payable on the death of the insured
shall have been in force during the lifetime of the insured for a period of two
years from the date of its issue or of its last reinstatement, the insurer
cannot prove that the policy is void ab initio or is rescindible by reason of the
fraudulent concealment or misrepresentation of the insured or his agent.
Sec. 227(b)
shall contain in substance the following conditions: xxx
(b) A provision that the policy shall be incontestable after it shall have been
in force during the lifetime of the insured for a period of two years from its
date of issue as shown in the policy, or date of approval of last
reinstatement, except for non-payment of premium and except for violation
of the conditions of the policy relating to military or naval service in time of
war;
Sec. 228(b)
(b) A provision that the validity of the policy shall not be contested, except
for non-payment of premiums after it has been in force for two years from its
date of issue; and that no statement made by any insured under the policy
relating to his insurability shall be used in contesting the validity of the
insurance with respect to which such statement was made after such
insurance has been in force prior to the contest for a period of two years
during such person's lifetime nor unless contained in written instrument
signed by him;
Sec. 230(b)
substance the following provisions: xxx
(b) A provision that the policy shall be incontestable after it has been in force
during the lifetime of the insured for a specified period, not more than two
years from its date of issue, except for non-payment of premiums and except
for violation of the conditions of the policy relating to naval or military
service, or services auxiliary thereto, and except as to provisions relating to
benefits in the event of disability as defined in the policy, and those granting
additional insurance specifically against death by accident or by accidental
means, or to additional insurance against loss of, or loss of use of, specific
members of the body;
a. Requisites of incontestability
Tan v. CA (1989)
Philamcare Health Systems Inc. v. CA(2002)
b. Effects and purpose of incontestability
c. Defense NOT barred by incontestability
F. Stipulations limiting commencement of action to less than 1 year is

void [Sec. 63 IC]
Insurance Code
Sec. 63
Sec. 63. A condition, stipulation, or agreement in any policy of insurance,
limiting the time for commencing an action thereunder to a period of less
than one year from the time when the cause of action accrues, is void.
Agric. Credit & Cooperative Financing Administration v. Alpha Ins. &
Surety Co. (1968)
Ang v. Fulton Fire Ins. Co. (1961)
Sun Insurance Office Ltd. v. CA (1991)
New Life Enterprises v. CA (1992)
VII. Loss and Notice of Loss
A. Loss
1. Concepts and Definitions
a. Loss
o The injury or damage sustained by the insured in consequence of
the happening of one or more of the accidents or misfortune against
which the insurer, in consideration of the premium, has undertaken to
indemnify the insured(Bonifacio Bros. v. Mora)
b. Proximate Cause
c. Remote Cause
d. Immediate Cause
e. Peril Insured Against
2 Kinds of Losses
Losses for Which Insurer Liable
1. Losses of which a peril insured against was the proximate cause [Sec.
84 IC]
Sec. 84
Sec. 84. Unless otherwise provided by the policy, an insurer is liable for a
loss of which a peril insured against was the proximate cause, although a
peril not contemplated by the contract may have been a remote cause of the
loss; but he is not liable for a loss which the peril insured against was only a
remote cause.
2. Loss caused by a peril not insured against to which the thing insured
was exposed in the course of rescuing the same from the peril insured
against [Sec. 85 IC]
3. Loss caused by efforts to rescue the thing insured from a peril insured
against [Sec. 85 IC]
Sec. 85
Sec. 85. An insurer is liable where the thing insured is rescued from a peril
insured against that would otherwise have caused a loss, if, in the course of
such rescue, the thing is exposed to a peril not insured against, which
permanently deprives the insured of its possession, in whole or in part; or
where a loss is caused by efforts to rescue the thing insured from a peril
insured against.
4. Loss, the immediate cause of which was the peril insured against, if the
proximate cause thereof was NOT excepted in the contract [Sec. 86 IC]
Sec. 86
Sec. 86. Where a peril is especially excepted in a contract of insurance, a
loss, which would not have occurred but for such peril, is thereby excepted
although the immediate cause of the loss was a peril which was not
excepted.
Paris-Manila Perfume Co. v. Phoenix Assurance Co.(1926)
Summary: Paris Manila Perfume Co. insured its perfurmery with Phoenix.
When the perfumery was burned and destroyed with an unknown cause,
Phoenix refused the claim and to appoint an arbitrator contending that it is
under the loss by explosion which is exempted in the policy. RTC and CA:
ordered to pay the P13,000
Doctrine: Phoenix alleging the complete defense is burdened to prove which
it failed to do
5. Loss caused by negligence of the insured [Sec. 87 IC]
Sec. 87
Sec. 87. An insurer is not liable for a loss caused by the willful act or through
the connivance of the insured; but he is not exonerated by the negligence of
the insured, or of the insurance agents or others.
FGU Insurance Corporation v. CA (2005)
Summary: SMC shipped its cases of pale pilsen and Cerveza Negra through
ANCO, by a D/B Lucio barge being dragged by M/T ANCO tugboat. When it
arrived in San Jose Antique, M/T ANCO left D/B Lucio at the wharf despite the
storm, it refused to transfer it to a safer place on the request of SMCs sale
manager. So the remaining cases worth P1,346,197 was sunk along the
barge. SMC claimed against ANCO who claimed against FGU insurance. FGU
insurance claims that it is through a fortuitous event and through the
negligence of ANCO. CA affirmed RTC: ANCO to pay SMC and FGU to pay
ANCO 53% of the lost cargoes. SC: modified dismissing FGU since ANCO was
grossly negligent in leaving the barge without the tugboat at the mercy of
the storm and failure to comply to SMCs request to transfer to a safer place
Doctrine:
Caso fortuito or force majeure
extraordinary events not foreseeable or avoidable, events that could not be
foreseen, or which though foreseen, were inevitable
To be exempted from responsibility, the natural disaster should have
been the proximate and only cause of the loss.
When evidence show that the insureds negligence or recklessness is
so gross as to be sufficient to constitute a willful act, the insurer must be
exonerated.
3. Losses for which insurer NOT liable
a. Loss of which a peril against was the proximate cause [Sec. 84 IC]
Sec. 84
Sec. 84. Unless otherwise provided by the policy, an insurer is liable for a
loss of which a peril insured against was the proximate cause, although a
peril not contemplated by the contract may have been a remote cause of the
loss; but he is not liable for a loss which the peril insured against was only a
remote cause.
b. Loss, the immediate cause of which was the peril insured against, if the
proximate cause thereof was excepted in the contract [Sec. 86 IC]
Sec. 86
Sec. 86. Where a peril is especially excepted in a contract of insurance, a
loss, which would not have occurred but for such peril, is thereby excepted
although the immediate cause of the loss was a peril which was not
excepted.
c. Loss caused by wilful act or through connivance of insured [Sec. 87 IC]
Sec. 87
Sec. 87. An insurer is not liable for a loss caused by the willful act or through
the connivance of the insured; but he is not exonerated by the negligence of
the insured, or of the insurance agents or others.
BUT SEE: Sec. 180-A IC
Sec. 180-A. The insurer in a life insurance contract shall be liable in case of
suicides only when it is committed after the policy has been in force for a
period of two years from the date of its issue or of its last reinstatement,
unless the policy provides a shorter period: Provided, however, That suicide
committed in the state of insanity shall be compensable regardless of the
date of commission. (As amended by Batasang Pambansa Blg. 874).
East Furniture Inc. v. Globe & Rutgers Fire Ins. Co. (1932)
Prats & Co. v. Phoenix Insurance Co. (1929)
4. Void Agreement [Sec. 83 IC]
Sec. 83
Sec. 83. An agreement not to transfer the claim of the insured against the
insurer after the loss has happened, is void if made before the loss except as
otherwise provided in the case of life insurance.
B. Notice and proof
1. Requisites for recovery after loss
a. Give notice of loss without unnecessary delay

b. When required by policy, submit a preliminary proof of loss
2. Notice of Loss [Sec. 88 IC]
Insurance Code
Sec. 88
Sec. 88. In case of loss upon an insurance against fire, an insurer is
exonerated, if notice thereof be not given to him by an insured, or some
person entitled to the benefit of the insurance, without unnecessary delay.
Bachrach v. British American Assurance Co. (1910)

Aboitiz Shipping Corp. v. Insurance Co. of North America (2008)
3. Proof of Loss [Secs. 89 and 92 IC]
Insurance Code
Sec. 89
Sec. 89. 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. 92
Sec. 92. 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.
Fernandez v. National Life Insurance Co. (1959)
Insular Life Assurance Co. Ltd. v. Fernandez (1960)
Malayan Insurance Co., Inc. v. Arnaldo (1987)
Pacific Banking Corp v. CA (1988)
4. Defects [Sec. 90 IC]
Insurance Code
Sec. 90
Sec. 90. All defects in a notice of loss, or in preliminary proof thereof, which
the insured might remedy, and which the insurer omits to specify to him,
without unnecessary delay, as grounds of objection, are waived.
5. Delay [Sec. 91 IC]
Insurance Code
Sec. 91
Sec. 91. Delay in the presentation to an insurer of notice or proof of loss is
waived if caused by any act of him, or if he omits to take objection promptly
and specifically upon that ground.
Pacific Timber v. CA (1982)
Philippine Charter Insurance Corp. v. Chemoil Lighterage Corp. (2005)

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I.

2. Elements (aside from the elements of a contract)

o health care agreement is in the nature of a contract of indemnity

(a) making or proposing to make, as insurer, any insurance contract;

(c) doing any kind of business, including a reinsurance business, specifically

(d) doing or proposing to do any business in substance equivalent to any of

??? So what circumstance in Eternal Gardens is different from Enrique

Insurance on human lives and insurance appertaining

ii. Group Life [Secs. 50 (last par),228]

A blanket policy covering a number of individuals

iii. Industrial Life [Secs. 229-331]

B. Insurance Distinguished from Other Contracts

Securities Regulation Code

(3) In determining the qualifications of a company requesting authority to

(a) making or proposing to make, as insurer, any insurance contract;

(c) doing any kind of business, including a reinsurance business, specifically

(d) doing or proposing to do any business in substance equivalent to any of

(a) fines not in excess of five hundred pesos a day; and

power does not cover the relationship affecting the

(a) making or proposing to make, as insurer, any insurance contract;

(c) doing any kind of business, including a reinsurance business, specifically

(d) doing or proposing to do any business in substance equivalent to any of

No person shall act as an insurance agent or as an insurance broker in the

2. Civil Code [Art. 2011, Civil Code]

The provisions of the Corporation Law shall apply to all insurance

E. Interpretation of Insurance Contracts

2. Ambiguous Provisions Interpreted Against Insurer

In case of disagreement, the court shall decide whether or not:

(1) The objection is proper; and

Filipinas Compania de Seguros v. Christern Henefeld & Co. (1951)

a. Insurance Corporations [Sec. 185 par. 1 I.C.]

Corporations formed or organized to save any person or personsor

b. Mutual Insurance Companies [Sec. 262 I.C.]

If a contract should contain some stipulation in favor of a third person, he

o Coquia v. Fieldmen's Insurance Co., Inc. (1968)

Doctrine: Heirs shall be the beneficiaries according to their

All creditors of the spouses as well as of the absolute community or the

6. Insured Outlives Policy [Sec. 180 I.C.]

Every contract or pledge for the payment of endowments or annuities shall

In the absence of a judicial guardian, the father, or in the latter's absence or

Any insurance company which delivers to an insurance agent or insurance

B. In life and health insurance

(a) Of himself, of his spouse and of his children;

a. Blood relationship [Sec. 10(a), I.C.] (see above)

(1) The spouses;

(2) Legitimate ascendants and descendants;

(5) Legitimate brothers and sisters, whether of full or half-blood

c. Creditor [Sec. 10(c) IC] (see above)

When Insurable Interest Must Exist

3. Transfer by Will or Succession Upon Death of Insured [Sec. 181 IC]

a. Existing Interest [Sec 14 (a) IC] (see above)

Lim, as a lessee, has an insurable interest in the equipment

Lopez v. Del Rosario and Quiogue (1922)

Bachrach v. British American Assurance Co. (1910)

ii. Change of interest after occurence of loss [Sec. 21 IC]

6. Effect of transfer of thing insured [Sec. 58 IC]

(a) non-payment of premium; XXX

(a) A provision that the policyholder is entitled to a grace period either of

Any of the foregoing provisions or portions thereof not applicable to single

Any rider, clause, warranty or endorsement purporting to be part of the

Group insurance and group annuity policies, however, may be typewritten

(a)The parties between whom the contract is made;

(c) The premium, or if the insurance is of a character where the exact