Mayor Steel Pipe vs Court of Appeals

(Contract of Insurance)

Facts:

Hongkong Government Supplies Department (HGSD) contracted Mayer Steel Pipe (MSP) to manufacture
and supply various steel pipes and fittings. Prior to shipping the pipe, Mayer insured the pipes and fittings,
with South Sea Surety and Insurance Co. and Charter Insurance Corp. When the goods reached Hongkong
it was discovered that substantial portion thereof was damaged. MSP filed claim against private
respondents for indemnity under the insurance contract. MSP further demanded payment for balance
representing cost of repair of damaged pipes. Private respondents refused to pay on the ground that the
insurance surveyor reported that the damage was a factory defect and not covered by the insurance
policy.

Trial Court ruled in favor of MSP. It found that the damage is not due to manufacturing defects. That
insurance contracts are “all risks” policies which insure against all causes of conceivable loss or damage.

CA affirmed Trial Court’s decision.

Issues:

Whether or not the damages were covered by the insurance contract.

Ruling:

Yes.

An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees
to indemnify another for loss or damage which he may suffer from a specified peril. An “all risks” insurance
policy covers all kinds of loss other than those due to willful and fraudulent act of the insured.

When private respondents issued the “all risks” policies to petitioner MSP, they bound themselves to
indemnify the latter in case of loss or damage to the goods to the goods insured.

Phil Health Care Providers vs Commissioner of Internal Revenue

(Doing or transacting an insurance business)

Facts:

CIR sent petitioner PHCP a demand letter for payment of deficiency taxes. The deficiency assessment was
imposed on PHCP’s health care agreement with the members of its health care program. PHCP protested
the assessment and filed for review in Court of Tax Appeals for cancellation of the deficiency assessments.
CTA partially granted the petition. CIR appealed claiming that PHCP’s health care agreement was a
contract of insurance subject to the Tax Code. CA held that PHCP’s health care agreement as in the nature
of a non-life insurance contract.
Issues:

Whether or not PHCP is engaged in business of insurance.

Ruling:

No.

Section 2(2) of PD 1460 (Insurance Code) doing an insurance business or transacting an insurance business
constitutes:

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.

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 therefore, shall not be deemed conclusive to show
that the making thereof does not constitute the doing or transacting of an insurance business.

Section 2 (1) of the Insurance Code defines a contract of Insurance as an agreement whereby one
undertakes for a consideration to indemnify another against loss, damage, or liability arising from an
unknown or contingent event. An insurance contract exists where the following concur:

1. The insured has an insurable interest;

2. The insured is subject to a risk of loss by the happening of the designed peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group
of persons bearing a similar risk; and
5. In consideration of the insurer’s promise, the insured pays a premium.

The agreements between petitioner and its members do not possess the aforementioned elements.

Further, even if a contract contains all the elements of an insurance contract, if its primary purpose is the
rendering of service, it is not a contract of insurance.

There is nothing in petitioner’s agreements that gives rise to a monetary liability on the part of the
member to any third party-provider of medical services which might in turn of necessitate indemnification
from petitioner. The terms “indemnify” of “indemnity” presupposes that a liability or claims has already
been incurred. There is no indemnity precisely because the member merely avails of medical services to
be paid or already paid in advance at a pre-agreed price under the agreements.

Although risk is a primary element of an insurance contract, it is not necessarily true that risk alone is
sufficient to establish it. Almost anyone who undertakes a contractual obligation always bears a certain
degree of financial risk. There is a need to distinguish prepaid service contracts from the usual insurance
contracts.
Petitioner undertakes a business risk when it offers to provide health services; the risk that it might fail to
earn a reasonable return on tis investment. But it is not the risk of type peculiar only to insurance
companies. Insurance risk (actuarial risk) is the risk that the cost of insurance claims might be higher than
the premiums paid. The amount of premium is calculated on the basis of assumptions made relative to
the insured. Petitioner does not qualify as insurance contract because petitioner’s objective is to provide
medical services at reduced cost and not to distribute risk like an insurer.

Eternal Garden Memorial vs. Phil. American Life Insurance

(Contract of Adhesion or Fine Print Rule)

Facts:

Respondent Philamlife entered into agreement with petitioner Eternal Garden. Under the agreement, the
clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife.
The amount of insurance coverage depended upon the existing balance of the purchased burial lots. The
policy was to be effective for 1 year and renewable yearly. JHon Chuang was included as new business
with balance payments of 100K. Eternal sent an insurance claim for Chuang’s death. Philamlife denied
Eternal’s claim on the ground that there was no declaration of good health shall be required for all lot
purchased as party of application, that no application by Chuang has been submitted by the
Insured/Assured prior to death, and that acceptance premiums do not connote their approval per se of
the insurance coverage but are held by then in trust for the payor until the prerequisites for insurance
coverage have been met.

RTC held that there was already acceptance of Chuang’s application thus there was already a contract of
insurance.

CA held that there was no application form for Chuang, thus he was not covered by Philamlife’s insurance.

Issues:

Was there a contract of insurance?

Ruling:

Philamlife assumed the risk of loss without approving Chuang’s application.

An insurance contract is a contract of adhesion which must be construed liberally in favor of the insured
and strictly against the insurer in order to safeguard the latter’s interest. When the terms of insurance
contract contain limitations on liability, courts should construe them in such a way as to preclude the
insurer from non-compliance with his obligation. By reason of the exclusive control of insurance company
over the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against
the insurer and liberally in favor of the insured, especially to avoid forfeiture.

As contract of adhesions they contain technical terms and conditions of the industry, confusing if at all
understandable to laypersons, that are imposed on those who wish to avail of insurance. As such,
insurance contracts are imbued with public interest that must be considered whenever the rights and
obligations of the insurer and the insured at the delineated. Hence, in order to protect the interest of
insurance applicants, insurance companies must be obligated to act with haste upon insurance
applications, to either deny or approve the same, or otherwise be bound to honor the application as valid,
binding, and effective insurance contract.

Western Guaranty Corporation vs CA

(Contract of Adhesion or Fine Print Rule)

Facts:

Priscilla Rodriguez was struck by a passenger bus owned by respondent De Dios Transportation Co. driven
by Aspero. The bus driver disregarder a stop signal given by a traffic policeman to allow pedestrians to
cross the road. DDTC was insured by Western Guaranty for protection against third party liability.
Respondent Rodriguez filed a complaint for damages before the RTC against DDTC. DDTC filed a third
party complaint against Western Guaranty.

RTC rendered a decision in favor of Respondent Rodriguez.

CA affirmed RTC’s decision.

Western alleged that it cannot be held liable for loss of earnings, moral damages and attorney’s fees
because these items are not among those included in the Schedule indemnities set forth in the insurance
policy.

Issues:

Whether or not the liabilities asked for are covered under the insurance policy.

Ruling:

Yes, the liability asked for are covered by the insurance policy.

Contractual limitations of liability found in insurance contracts should be regarded by courts with
jaundiced eye and extreme care and should be so construed as to preclude the insurer from evading
compliance with its just obligations.

An insurance contract is a contract of adhesion. The rule is that such contract are to be construed strictly
against the party which prepared the contract.

Great Pacific Life vs CA

(Parties in Insurance Contract)

Facts:

A contract of group liise insurance was executed between petitioner Great Pacific Life Assurance
Corporation (Grepalife) and DBP. Grepalife agreed to insure the lives of eligible housing loan mortgagors
of DBP. Dr. Lauterio applied for membership in the group life insurance plan. Grepalife issued insurance
coverage of Dr. Lauterio to the extent of his DBP mortgage indebtedness. Dr. Leuterio died and DBP
submitted a death claim to Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was not
physically healthy and that he did not disclose that he had been suffering from hypertension which caused
his death. It alleged that the non-disclosure constituted concealment that justified the denial of the claim.
The widow of Dr. Leuterio also filed a complaint with RTC for specific performance with Damages.

RTC decided in favor of the widow.

CA sustained trial court’s decision.

Issues:

Whether or not Grepalife is liable to the widow.

Whether the non-disclosure of Dr. Leutreio vitiated the insurance contract.

Whether or not there is a need of outstanding indebtedness by Dr. Leuterio to DBP for the insurance to
effect.

Ruling:

Grepalife is liable to the widow and not to DBP. There was not vitiation on consent of Grepalife. And there
is no need of outstanding indebtedness in insurance contract.

A group insurance policy is a devise for the protection of both the mortgagee and the mortgagor. On the
part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected
demise of the mortgagor during the subsistence of the mortgagee contract, the proceeds from such
insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the
mortgagor from paying the obligation. Ample protection is also given to the mortgagor under such a
concept so that in the event of death, the mortgage obligation will be extinguished by the application of
the insurance proceeds to the mortgage indebtedness. Where the mortgagor pays the insurance premium
under the group insurance poly, making the loss payable to the mortgagee, the insurance is on the
mortgagor’s interest and the mortgagor continues to be a party of the contract. In this type of policy
insurance, the mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not
make the mortgagee a party to the contract.

Section 8 of the Insurance Code provides that unless the policy provides 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.
A policy of insurance upon life or health may pass by transfer, will or succession to any person, whether
he has an insurable interest or not, and such person may recover it whatever the insured might have
recovered. The widow may recover.

As to the non-disclosure, the fraudulent intent on the part of the insured must be established to entitle
the insurer to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an
affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rest
upon the insurer. In the case at bar, the petitioner failed to clearly and satisfactorily establish its defense
and is therefore liable to pay thee proceeds of the insurance.

Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of
indemnity under a policy of insurance upon life or health is the sum fixed in the policy.

Rizal Surety vs CA

(Interpretation of Insurance Contracts)

Facts:

Rizal Surety issued a Fire Insurance Policy in favor of Transworld Knitting Mills. The same pieces of
property insured with Rizal Surety were also insured with New India Assurance Company. A fire brokeout
in the compound of Transworld, burning the middle portion of its four-span building and also a two-storey
building behind the four-span building. Transworld brought an action for collection of sum of money and
damages against Rizal Surety and New India. Rizal Surety countered that its fire insurance policy covered
only the contents of the four-san building, which was partly burned, and not the damage cause by the fire
on the two-storey annexed building. New India also alleged that Transword cannot be compensated for
the loss of the fun and amusement machines and spare parts stored at the two-storey building because it
had no insurable interest in said goods or items.

Issues:

Whether or not the two-storey annexed building is covered by the insurance policy.

Ruling:

The insurance policy did not limit its coverage to what were stored in the four-span building. The so called
annex was not an annex building but an integral and inseparable part of the four-span building, the
machines and spare parts stored therein were covered by the fire insurance in dispute.

The doubt in the interpretation of the contract herein should be resolved against Rizal Surety.
Interpretation of obscure words or stipulations in a contract shall not favor the party who cause the
obscurity.
American Home Assurance vs Tantuco

(Interpretation of Insurance Contracts)

Facts:

Respondent Tantuco insured against fire its two oil mills with the petitioner. The first oil mill was covered
from March 1, 1991 to 1992, while the second or new oil mill was covered by a different policy for the
same term. On September 30, 1991 the new oil mill was destroyed by the fire. Respondent claimed for
the insurance proceeds from the petitioner but was rejected for the reason that the burned oil mill was
not covered by any insurance policy. According to the petitioner, the oil mill gutted by the fire was not
the one described by the specific boundaries in the contested policy. Respondent filed a complaint for
specific performance.

RTC rendered judgment in favor of respondent.

CA upheld RTC decision.

Issues:

Whether or not the building was covered by insurance policy.

Ruling:

Yes.

In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts
in giving effect to the insurance. In view of the custom of insurance agents to examine buildings before
writing policies upon them, and since a mistake as to the identity and character of the building is extremely
unlikely, the courts are inclined to consider that the policy of insurance covers any building which the
party manifestly intended to insure, however inaccurate the description may be.

Notwithstanding therefore, the misdescription in the policy in the present case, what the parties
manifestly intended to insure as the new oil mill. If the parties really intended to protect the first oil mill,
then there is no need to specify it as new.

Pan Malayan Insurance vs CA

(Interpretation of Insurance Contracts)

Facts:

PANMALAY filed a complaint for damages with RTC against private respondents. PANMALAY argued that
it insured Mitsubishi Colt Lancer Car and registered in the name of Canlubang Automotive Resources
Corporation. Further, that due to the carelessness, recklessness, and imprudence of the unknown driver
of a pick-up, the insured car was hit and suffered damages, and that PANMALAY defrayed the cost of
repair of the insured car and therefore was subrogated to the rights of Canlubang against the driver of
the pick-up and his employer, Erlinda Fabie, that despite repeated demands, defendants failed and
refused to pay the claim of PANMALAY.

Private respondents filed a motion to dismiss alleging that PANMALAY had no cause of action against
them. They argued that payment under the own damage clause of the insurance policy precluded
subrogation under Art. 2207 of the Civil Code, since indemnification thereunder was made on the
assumption that there was no wrongdoer or no third party at fault.

RTC denied PANMALAY’s complaint.

CA upheld the RTC.

Issues:

Whether or not the insurer PANMALAY may institute an action to recover the amount it had paid is
assured in.

Ruling:

Yes.

If the insured property is destroyed or damaged through the fault or negligence of a party other than the
assured, then the insurer, upon payment to the assured, will be subrogated too the rights of the assure
to recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the
insurer to the assured operates as an equitable assignment to the former of all remedies which the latter
may have against the third party whose negligence or wrongful act caused of the loss. The right of
subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written
assignment of claim. Exceptions to this rule are: if the assured by his own act released the wrongdoer or
third party liable for the loss or damage, from liability, the insured’s right of subrogation is defeated;
where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby affecting
voluntary payment, the former has no right of subrogation against the third party liable for the loss.

None of the exceptions are availing in the present case.

In the interpretation of contracts that the terms of a contract are to be construed according to the sense
and meaning of the terms which the parties thereto have used. In the case of property insurance policies,
the evident intention of the contracting parties, the insurer and the assured, determine the import of the
various terms and provisions embodied in the policy. It is only when the terms of the policy are ambiguous,
equivocal or uncertain, such that the parties themselves disagree about the meaning of particular
provisions that the courts will intervene. In such event, the policy will be construed by the courts liberally
in favor of the assured and strictly against the insurer.

Considering that the parties to the policy were not shown to be in disagreement regarding the meaning
and coverage of the provision at issue. Therefore, it was improper for the appellate court to indulge in
contract to the clear intention and understanding of the parties. PANMALAY has cause of action.
Malayan Insurance vs Arnaldo

(Characteristic of Insurance Contract: Aleatory)

Facts:

Petitioner Malayan Insurance issued to the private respondent Pinca, an insurance policy on her property
for the amount of 100K. Malayan Insurance allegedly cancelled the policy for non-payment, of the
premium and sent notice to Pinca. Payment of the premium for Pinca was received by Adora, agent of
Malayan insurance. Adora remitted the payment to Malayan. Later Pinca’s property was burned. A month
after, Pinca’s payment was returned by Malayan to Adora on the ground that her policy had been
cancelled earlier but Adora refused to accept it

Issues:

Whether or not there was an insurance policy.

Ruling:

There was an insurance policy.

Payment was made rendering the policy operative. Thus the policy could be cancelled on any of the
supervening grounds enumerated in Section 64, except non-payment of premium, provided the
cancellation was made in accordance therewith and with Section 65.

Under Section 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:

1. Non-payment of premium;
2. Conviction of a crime arising out of acts increasing the hazard insured against;
3. Discovery of fraud or material misrepresentation;
4. Discovery of willful or reckless acts or commissions increasing the hazard insured against;
5. Physical changes in the property insured which result in the property becoming uninsurable; or
6. A determination by the Commissioner that the continuation of the policy would violate or would
place the insurer in violation of this Code.

Section 65 provides further that 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 64 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.

A valid cancellation must require that:

1. There must be prior notice of cancellation to the insure;

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 in writing, mailed, or delivered to the named insure at the address shown in
the policy;
 4. It must state which of the grounds mentioned in Section 64 is relied upon and that upon written
request of the insured, the insurer will furnish the facts on which the cancellation is based.

There was no cancellation of the insurance policy.

Tibay vs CA

(Characteristic of Insurance Contract: A risk distributing device)

Facts:

FORTUNE issued fire insurance policy in favor of Tibayy and/or Roraldo on their two-storey residential
building, together with all their personal effects therein. The insurance was for 600k covering the oeriod
from January 23 1987 to 1988. Of the total premium of 2, 983, Tibay only paid 600 thus leaving a
considerable balance unpaid. The building was destroyed by fire. Two days later TObay paid the balance
of the premium. On the same day, she filed with Fortune a claim on the fire insurance policy. Fortune
denied the claim for violation of the Insurance Code.

RTC ruled for petitioners.

CA reversed the RTC and declared Fortune not to be liable to plaintiff.

Issues:

Whether or not Fortune is liable.

Ruling:

No.

Insurance is a contract whereby one undertakes for a consideration to indemnify another against loss,
damage, or liability arising from an unknown or contingent event. The consideration is the premium,
which must be paid at the time and in the way and manner specified in the policy and if not so paid, the
policy will lapse and be forfeited by its own terms. ‘

In the present case, parties, by express agreement of the parties, no vinculum juris or bond of law was to
be established until full payment was effected prior to the occurrence of the risk insured against. And
under Section 77, until the premium is paid, and the law has not expressly excepted partial payments,
there is no valid and binding contract. Hence, in the absence of clear waiver of prepayment in full by the
insurer, the insured cannot collect on the proceeds of the policy.

The contract of insurance is primarily a risk-distributing device, a mechanism by which all members of a
group exposed to a particular risk contribute premiums to an insurer. From these contributory funds are
paid whatever losses occur due to exposure to the peril insured against. Each party takes a risk; the
insurer, that of being compelled upon the happening of the contingency to pay the entire sum agreed
upon and the insured, that of parting with the amount required as premium, without receiving anything
therefore in case the contingency does not happen.
Fieldmen’s Insurance vs CA

(Characteristic of Insurance Contract: Uberima Fides/Perfect Good Faith)

Facts:

Songco owned a private jeepney. He was induced by Fieldmen’s agent Sambat to apply for a common
carriers liability insurance policy covering his motor vehicle. Upon paying an annual premium, defendant
FIeldmen’s issued the insurance policy. Later, the insured vehicle collided with a car which killed Songco
and his sons. Respondents claimed the insurance policy but Fieldmens refused as the vehicle was not a
common carrier.

Issues:

Whether or not Fieldmen’s is liable under the common carriers insurance policy regardless that Songco
was a private carrier.

Ruling:

FIeldmen’s is liable.

The contract of insurance is one of perfect good faith (uberrima fides) not for the insured alone, but
equally so for the insurer. Fieldmen’s was in bad faith in offering the insurance policy to Songco.

White Gold Marine vs Pioneer Insurance

(Characteristic of Insurance Contract: Contract of Indemnity)

Facts:

White Gold procured a protection and indemnity coverage for its vessels from the Steamship Mutual
Underwriting Association Limited through Pioneer Insurance and Surety Corporation. When Wite Gold
failed to fully pay its account, Steamship Mutual refused to renew the coverage. Steamship Mutual
thereafter filed a case against White Gold for collection of sum of money to recover the latter’s unpaid
balance. White Gold on the other hand, filed a complaint claiming that Steamship Mutual violated sections
of Insurance Code, that it does not have license to do business in the Philippines.

Issues:

Is Steamship Mutual engaged in the insurance business in the Philippines?

Ruling:
Section 2(2) provides that what constitutes doing an insurance business or transacting an insurance
business are the following:

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.

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 therefore, shall not preclude the existence of an
insurance business. The test to determine if a contract is an insurance contract or not, depends on the
nature of the promise, the act required to be performed, and the exact nature of the agreement in the
light of the occurrence, contingency, or circumstances under which the performance becomes a requisite.

Insurance contract is a contract of indemnity. One undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event.

Insular Life vs Ebrado

(Characteristic of Insurance Contract: Personal Contract)

Facts:

Ebrado was issued by Insular Life with insurance policy on a whole-life plan with a rider for accidental
death benefits for the same amount. Ebrado designated Carponia Ebrado as the revocable beneficiary in
his policy. He referred to her as his wife. When Ebrado died, Carponia filed with Insular Life a claim for the
proceeds of the policy as the designated beneficiary therein, although she admits that she and the insured
were living as husband and wife without the benefit of marriage. Pascuala Vda. De Ebrado also filed her
claim as the widow of the insured. She asserts that she is the one entitled to the insurance proceeds, and
not Carponia.

Issues:

To whom shall the insurance proceeds be paid to?

Ruling:

The proceeds of the policy area payable to the estate of the deceased insured.

Section 50 of the Insurance Act provides that the insurance shall be applied exclusively to the proper
interest of the person in whose name it is made. The word “interest” highly suggest that the provisions
refers only to the insured and not to the beneficiary, since a contract of insurance is personal in character.
Further, when not otherwise specifically provided for by the Insurance Law, the contract of life insurance
is governed by the general rules of the Civil Law. And under Art. 2012 of the same Code, any person who
is forbidden from receiving any donation under Art. 739 cannot be named beneficiary of a life insurance
policy by the person who cannot make a donation to him. Common law spouses are barred from receiving
donations from each other. This is essential since a life insurance policy is no different from a civil donation
insofar as the beneficiary is concerned. Both are founded on liberality. A conviction of adultery or
concubinage is required for the disqualification to be effective.

Heirs of Loreto Maramag vs Maramag

(Designation of Illegitimate Children)

Facts:

Petitioners filed against respondents a revocation and/or reduction of insurance proceeds for being void
and/or inofficious. Petition alleged that herein petitioners were the legitimate wife and children of Loreto
Maramag, while respondents were Loreto’s illegitimate family; that Eva Maramag was a concubine of
Loreto who was suspected of killing the latter thus she is disqualified to receive any proceeds from the
insurance policy of the deceased; that illegitimate children of Loreto was entitled only to ½ of the egitime
of the legitimate children.

Insular admitted that Loreto misrepresented Eva as his legitimate wife and the illegitimate children as
legitimate. And that when it ascertained that Eva was not the legal wife, it disqualified her as beneficiary
and divided the proceeds among the children.

Issues:

Whether or not petitioners are entitled to claim the insurance proceeds as legitimate children of insured.

Ruling:

No, petitioners are not entitled to the claim.

Section 53 of the Insurance Code states that 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. Pursuant thereto, the only persons entitled to claim the insurance proceeds are either the
insured if he is still alive, or the beneficiary if the insured is deceased and upon the maturation of the
policy. The exception to this rule is a situation where the insurance contract was intended to benefit third
persons who are not parties to the same in the form of favorable stipulations or indemnity. In such a case,
third parties may directly sue and claim from the insurer.

Petitioners are third parties to the insurance and are not entitled to the proceeds thereof. The revocation
of Eva as a beneficiary in one policy and her disqualification are of no moment considering that the
designation of the illegitimate children remains valid because no legal proscription exist in naming as
beneficiaries the children of illicit relationships by the insured. The shares of Eva must be awarded to the
illegitimate children to the exclusion of petitioner. It is only in cases where the insured has not designated
any beneficiary or when the designated beneficiary is disqualified by law to receive that the insurance
policy proceeds shall redound to the benefit of the estate of the insured.

Gaisano Cagayan vs Insurance Company of North America

(Insurable Interest defined)

Facts:

Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi Strauss Phils. Inc. (LSPI)
is the local distributor of products bearing trademarks owned by Levi Strauss and Co. IMC and LSPI
separately obtained from respondent fire insurance policies. The insurance policies provide for coverage
on book debts in connection with ready-made clothing materials which have been sold or delivered to
various customers and dealers of the insured anywhere in the Philippines. Petitioner is a customer and
dealer of products of IMC and LSPI. When the Gaisano in Cagayan was burned, included in the items
destroyed were stocks of ready-made clothing materials sold and delivered by IMC and LSPI.

Respondent filed a complaint for damages against petitioner. It alleged that IMC and LSP filed with
respondent their claims under their respective insurance policies; that respondent paid the claims of IMC
and LSPI and by virtue thereof, res was subrogated to their rights against petitioner.

Petitioner contends that it could not be held liable because the property covered by the insurance policies
were destroyed due to fortuitous events and that respondent has no right to subrogation.

Issues:

Whether or not IMC and LSPI has insurable interests.

Ruling:

IMC and LSPI did not lose complete interest in the goods destroyed. They have an insurable interest until
full payment of the value of the delivered goods. In property insurance, one’s interest is not determined
by concept of title, but whether insured has substantial economic interest in the property.

Section 13 of the Insurance Code defines insurable interest as every interest in property, whether real or
personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril
might directly damnify the insured. Section 14 states that an insurable interest in property may consist in
an existing interest; an inchoate interest founded on existing interest; or on expectancy coupled with an
existing interest in that out of which the expectancy arises. Therefore, an insurable interest in property
does not necessarily imply a property interest in, or a lien upon, or possession of, the subject matter of
the insurance, and neither the title nor a beneficial interest is requisite to the existence of such an interest,
it is sufficient that the insured is so situated with reference to the property that he would be liable to loss
should it be injured or destroyed by the peril against which it is insure.

A vendor or seller retains an insurable interest in the property sold so long as he has any interest therein
or so long as he would suffer by its destruction as where he has a vendor’s lien.
In this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books
of Account.

Hilaro Gercio vs Sunlife

(Insurable Interest in Life/Health)

Facts:

Gercio filed complaint to compel defendant to change the beneficiary in the policy issued by Sunlilfe on
the life of Gercio. Gercios previous wife was convicted of adultery. Afterwards, Gercio notified Sunlife that
he had revoked his donation in favor of his previous wife and had designated his present wife as
beneficiary of the policy. Gercia requested Sunlife to eliminate his first wife as beneficiary but Sunlife
refues.

Issues:

Whether the insured has the power to change the beneficiary and to name his actual wife, where the
insured and the beneficiary have been divorced, and where the policy of insurance does not expressly
reserve to the insured the right to change the beneficiary.

Ruling:

No husband has no power to change in this case.

The wife has an insurable interest in the life of her husband. 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.
If the husband wishes to retain to himself the control and ownership of the policy, he may so provide in
the policy, but if the policy contains no provision authorizing a change of beneficiary without the
beneficiary’s consent, the insured cannot make such change. Accordingly, a life insurance policy of a
husband made payable to the wife as beneficiary, is the separate property of the beneficiary and beyond
the control of the husband.

As to the effect of divorce to the insurance policy of a husband where the beneficiary is the wife, there is
no provision in the law permitting the beneficiary in a policy for the benefit of the wife of the husband to
be changed after divorce. In the absence of a statute to the contrary, that if a policy is taken out upon a
husband’s life and the wife is named beneficiary therein, subsequent divorce does not destroy her rights
under the policy.

Filipino Merchants Co. vs Ca

(Insurable Interests in Property)

Facts:

Choa TIek Seng obtained a non-life insurance with an all risk clause over the shipment of fishmeal. When
the goods were unloaded, 105 bags were found in bad condition. When Seng claimed for the insurance,
it was denied by Filipino Merchants alleging that Seng failed to prove that the damage was caused by
some fortuity and that he had no insurable interest at that time.

Issues:

Whether or not Seng had insurable interest and whether Filipino Merchants is liable.

Ruling:

Filipino Merchants was liable. The insured under an all risk insurance policy has the intital burden of
proving that the cargo was damaged when unloaded from the vessel. Thereafter, the burden shifts to the
insurer to show the exception of the coverage. This Seng was able to do and Filipino Merchants was unable
to do.

Seng had insurable interest based on the perfected contract of slae. This is an existing interest over the
goods sufficient to the subject of insurance. A perfected contract of sale is an insurable interest.

The carrier or depositary has incurable interest in things held or in possession to the extent of his liability
but not to exceed the value of the thing held.

No insurable interest in mere contingent or expectant interest in a thing.

There is no insurable interest in a mere contingent or expectant interest on a thing, which is not founded
on an actual right to the thing or upon any valid contract for it.

The measure of insurable interest in property is extent of indemnity over loss or injury,

The measure of an insurable interest in property is the extent to which the insured might be damnified by
the loss or injury thereof.

Rizal Commercial Banking Corp. vs CA

(Insurable Interest of Mortgagor and Mortgagee over mortgaged property)

Facts:

GOYU obtained a credit facility from RCBC. It executed a mortgage contract in favor of the bank wherein
it was expressly stipulated that GOYU will insure all the subject properties with an insurance company
approved by the bank and to endorse and deliver the policies to the bank. GOYU, through Alchester
Insurance took insurance policies from Malayan Insurance and endorsed them in favor of RCBC. When
GOYU’s factory buildings were gutted with fire, GOYU and RCB filed separate claims with Malayan
Insurance but were both denied because the policies were either attached or claimed by other creditors.

Issues:
Whether or not RCBC as mortgagee, has any right over the insurance policies taken by GOYU, the
mortgagor in case of occurrence of loss.

Ruling:

No.

Mortgagor and mortgagee have separate and distinct insurable interests in the mortgaged property and
may insure the same of his own sole benefits. Proceeds of an insurance shall exclusively apply to the
interest of the person in whose name or for whose benefit is made except when otherwise intended by
the parties. Insurance policies transferred by way of endorsement to a mortgagee can no longer be
attached by other creditors.