1. G.R. No.
115278 May 23, 1995
FORTUNE INSURANCE AND SURETY CO.,
INC., petitioner, vs. COURT OF APPEALS and
PRODUCERS BANK OF THE PHILIPPINES, respondents.
Facts: Producers Bank of the Philippines (Producers) was
insured by Fortune Insurance and Surety Co., Inc. (Fortune).
An armored car of Producers in the process of transferring
cash (P725,000.00) under the custody of its teller, Alampay,
from its Pasay Branch to its Head Office at Makati, Metro
Manila on June 29, 1987, was robbed of the said cash. The
robbery took place while the armored car was travelling along
Taft Avenue in Pasay City.
The said armored car was driven by Magalong, escorted by
Security Guard Atiga. Magalong was assigned by PRC
Management Systems with Producers by virtue of an
Agreement. Atiga was assigned by Unicorn Security Services,
Inc. with Producers by virtue of a contract of Security Service.
After an investigation conducted by the Pasay police
authorities, Magalong and Atiga were charged, together with
several others with violation of P.D. 532 (Anti-Highway
Robbery Law).
Producers demanded Fortune to pay the amount of the loss,
but the latter refused to pay as the said loss is excluded from
the coverage of the insurance policy under its “General
Exceptions” clause. Under the said clause, Fortune will not be
held liable under the policy in case of “loss caused by any
dishonest, fraudulent or criminal act of the insured or any
officer, employee, partner, director, trustee or authorized
representative of the Insured whether acting alone or in
conjunction with others. . . .”
According to Producers, Atiga and Magalong were Fortune’s
"officer, employee . . . trustee or authorized representative” at
the time of the robbery.
Issue: WON Fortune is liable under the policy it issued to
Producers
Ruling: No.
It should be noted that the insurance policy entered into by
the parties is a theft or robbery insurance policy which is a
form of casualty insurance. Except with respect to compulsory
motor vehicle liability insurance, the Insurance Code contains
no other provisions applicable to casualty insurance or to
robbery insurance in particular.
In burglary, robbery, and theft insurance, the opportunity to
defraud the insurer is so great that insurers have found it
necessary to fill up their policies with countless restrictions in
order to reduce this hazard. The insurer seldom assumes the
risk of all losses due to the hazards insured against. Persons
frequently excluded under such provisions are those in the
insured's service and employment.
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.
A contract of insurance is a contract of adhesion, thus any
ambiguity therein should be resolved against the insurer, or it
should be construed liberally in favor of the insured and strictly
against the insurer. However, if the terms of the contract are
clear and unambiguous, there is no room for construction and
such terms cannot be enlarged or diminished by judicial
construction.
In the absence of statutory prohibition to the contrary,
insurance companies have the same rights as individuals to
limit their liability and to impose whatever conditions they
deem best upon their obligations not inconsistent with public
policy.
The SC declared Magalong and Atiga were Producers’
“authorized representatives”. Thus, Fortune is not liable under
the general exception clause of the insurance policy.
2. G.R. No. L-32986 November 11, 1930
FRANCISCO JARQUE, plaintiff-appellee, vs SMITH, BELL
& CO., LTD., ET AL., defendants.
UNION FIRE INSURANCE CO., appellant.
Facts: The plaintiff was the owner of the motorboat Pandan
and held a marine insurance policy for the sum of P45,000 on
the boat, the policy being issued by the National Union Fire
Insurance Company and according to the provisions of a
typewritten "rider" attached to the policy, the insurance was
against the absolute total loss of the vessel only.
During its voyage, the ship ran into a very heavy sea off the
Islands of Ticlin, and it became necessary to jettison a portion
of the cargo. As a result thereof, the Union Fire Insurance
Company was assessed in the sum of P2,610.86 as its
contribution to the general average which it refused to give
invoking the rider.
Issue: WON Union Fire is liable to pay the said contribution?
Held: Yes. ART. 859. The underwriters of the vessel, of the
freight, and of the cargo shall be obliged to pay for the
indemnity of the gross average in so far as is required of each
one of these objects respectively.
The article is mandatory in its terms, and the insurers, whether
for the vessel or for the freight or for the cargo, are bound to
contribute to the indemnity of the general average. And there
is nothing unfair in that provisions; it simply places the insurer
on the same footing as other persons who have an interest in
the vessel, or the cargo therein at the time of the occurrence
of the general average and who are compelled to contribute.
In the present case it is not disputed that the ship was in
grave peril and that the jettison of part of the cargo was
necessary. If the cargo was in peril to the extent of call for
general average, the ship must also have been in great
danger, possibly sufficient to cause its absolute loss. The
jettison was therefore as much to the benefit of the
underwriter as to the owner of the cargo. The latter was
compelled to contribute to the indemnity; why should not the
insurer be required to do likewise? If no jettison had take place
and if the ship by reason thereof had foundered, the
underwriter's loss would have been many times as large as the
contribution now demanded.
3. DEVELOPMENT BANK OF THE PHILIPPINES
vs. COURT OF APPEALS and the ESTATE OF THE LATE
JUAN B. DANS, represented by CANDIDA G. DANS, and
the DBP MORTGAGE REDEMPTION INSURANCE POOL
FACTS:
Juan B. Dans, together with his wife Candida, his son and
daughter-in-law, applied for a loan of P500,000.00 with the
DBP. As the principal mortgagor, Dans, then 76 years of age,
was advised by DBP to obtain a mortgage redemption
insurance (MRI) with the DBP Mortgage Redemption Insurance
Pool (DBP MRI Pool).
A loan, in the reduced amount of P300,000.00, was
approved and released by DBP. From the proceeds of the loan,
DBP deducted the amount of P1,476.00 as payment for the
MRI premium. Then Dans accomplished and submitted the
"MRI Application for Insurance" and the "Health Statement for
DBP MRI Pool."
Then Dans died of cardiac arrest. The DBP, upon notice,
relayed this information to the DBP MRI Pool. The latter
notified DBP that Dans was not eligible for MRI coverage,
being over the acceptance age limit of 60 years at the time of
application.
DBP apprised Candida of the disapproval. Then offered to
refund the premium which the deceased had paid, but Candida
refused to accept the same, demanding payment of the face
value of the MRI or an amount equivalent to the loan. She,
likewise, refused to accept a settlement of P30,000.00, which
the DBP offered.
Later respondent Estate, through Candida as
administratrix, filed a complaint with the Court against DBP
and the insurance pool for "Collection of Sum of Money with
Damages."
Respondent alleged that Dans became insured by the
DBP MRI Pool when DBP, with full knowledge of Dans' age at
the time of application, required him to apply for MRI, and
later collected the insurance premium thereon.
The trial court rendered a decision in favor of respondent
and against DBP. The DBP MRI Pool, however, was absolved
from liability, after the court found no privity of contract
between it and the deceased. It declared DBP in estoppel for
having led Dans into applying for MRI and actually collecting
the premium and the service fee, despite knowledge of his age
ineligibility.
ISSUE/S: (1) W/N there is a perfected contract of
insurance and in consequence DBP MRI Pool is liable to
respondent.
(2) W/N DBP is an agent who exceeded its
authority and hence liable. (in case of emergency
lang ni nga issue)
HELD:
1) NO. When Dans applied for MRI, he filled up and
personally signed a "Health Statement for DBP MRI Pool". It
provides in there that the MRI coverage shall take effect: (1)
when the application shall be approved by the insurance pool;
and (2) when the full premium is paid during the continued
good health of the applicant. These two conditions, being
joined conjunctively, must concur.
Undisputably, the power to approve MRI applications is
lodged with the DBP MRI Pool. The latter, however, did not
approve the application of Dans. There is also no showing that
it accepted the sum of P1,476.00, which DBP credited to its
account with full knowledge that it was payment for Dan's
premium. There was, as a result, no perfected contract of
insurance; hence, the DBP MRI Pool cannot be held liable on a
contract that does not exist.
2) YES. The liability of DBP is another matter.
It was DBP, as a matter of policy and practice, that
required Dans, the borrower, to secure MRI coverage. Instead
of allowing Dans to look for his own insurance carrier or some
other form of insurance policy, DBP compelled him to apply
with the DBP MRI Pool for MRI coverage. When Dan's loan was
released, DBP already deducted from the proceeds thereof the
MRI premium. Then DBP made Dans fill up and sign his
application for MRI and his health statement. The DBP later
submitted both the application form and health statement to
the DBP MRI Pool and as service fee, DBP deducted 10 percent
of the premium collected by it from Dans.
In dealing with Dans, DBP was wearing two legal hats:
the first as a lender, and the second as an insurance agent.
As an insurance agent, DBP made Dans go through the
motion of applying for said insurance, thereby leading him and
his family to believe that they had already fulfilled all the
requirements for the MRI and that the issuance of their policy
was forthcoming. Apparently, DBP had full knowledge that
Dan's application was never going to be approved. The
maximum age for MRI acceptance is 60 years as clearly and
specifically provided in Article 1 of the Group Mortgage
Redemption Insurance Policy signed in 1984 by all the
insurance companies concerned.
Under Article 1987 of the CC, "the agent who acts as
such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the
limits of his authority without giving such party sufficient notice
of his powers."
The DBP is not authorized to accept applications for MRI
when its clients are more than 60 years of age. Knowing all the
while that Dans was ineligible for MRI coverage because of his
advanced age, DBP exceeded the scope of its authority when it
accepted Dan's application for MRI by collecting the insurance
premium, and deducting its agent's commission and service
fee.
The liability of an agent who exceeds the scope of his
authority depends upon whether the third person is aware of
the limits of the agent's powers. There is no showing that Dans
knew of the limitation on DBP's authority to solicit applications
for MRI.
If the third person dealing with an agent is unaware of
the limits of the authority conferred by the principal on the
agent and he has been deceived by the non-disclosure thereof
by the agent, then the latter is liable for damages to him. The
rule is founded that there has been some wrong or omission
on his part either in misrepresenting, or in affirming, or
concealing the authority under which he assumes to act.
The DBP's liability, however, cannot be for the entire
value of the insurance policy. To assume that were it not for
DBP's concealment of the limits of its authority, Dans would
have secured an MRI from another insurance company, and
therefore would have been fully insured by the time he died, is
highly speculative. Considering his advanced age, there is no
absolute certainty that Dans could obtain an insurance
coverage from another company. It must also be noted that
Dans died almost immediately after applying for the MRI, and
from the date of release of his loan.
Petitioner DBP is ORDERED: (1) to REIMBURSE
respondent Estate of Juan B. Dans the amount of P1,476.00
with legal interest from the date of the filing of the complaint
until fully paid; and (2) to PAY said Estate the amount of Fifty
Thousand Pesos (P50,000.00) as moral damages and the
amount of Ten Thousand Pesos (P10,000.00) as attorney's
fees.
4. G.R. No. L-31845 April 30, 1979
GREAT PACIFIC LIFE ASSURANCE COMPANY vs.
HONORABLE COURT OF APPEALS
G.R. No. L-31878 April 30, 1979
LAPULAPU D. MONDRAGON vs. HON. COURT OF
APPEALS and NGO HING, respondents.
APPLICANT: Ngo Hing
INSURED: Helen Go, Ngo Hing’s Daughter
INSURANCE: Great Pacific Insurance Company
FACTS: Respondent Ngo Hing filed an application with the
Great Pacific Life Assurance Company (hereinafter referred to
as Pacific Life) for a twenty-year endowment policy in the
amount of P50,000.00 on the life of his one-year old daughter
Helen Go. Said respondent supplied the essential data which
he later signed. It should be noted that in the application, Ngo
Hing did not disclose that her daughter was a mongoloid child.
However, Pacific Insurance disapproved such application but
the Branch Manager, Mr. Mondragon, withheld the disapproval
of the insurance application to Ngo Hing.
Later, Helen Go died of influenza with complication of
bronchopneumonia. Thereupon, private respondent sought the
payment of the proceeds of the insurance, but having failed in
his effort, he filed the action for the recovery of the same
before the Court of First Instance of Cebu.
ISSUE: Whether or not the private respondent Ngo Hing
concealed the state of health and physical condition of Helen
Go, which rendered the insurance void
RULING: Yes private respondent had deliberately concealed
the state of health and physical condition of his daughter
Helen Go. Where private respondent supplied the required
essential data for the insurance application form, he was fully
aware that his one-year old daughter is typically a mongoloid
child. Such a congenital physical defect could never be
ensconced nor disguised. Nonetheless, private respondent, in
apparent bad faith, withheld the fact material to the risk to be
assumed by the insurance company. As an insurance agent of
Pacific Life, he ought to know, as he surely must have known
his duty and responsibility to such a material fact. Had he
diamond said significant fact in the insurance application form
Pacific Life would have verified the same and would have had
no choice but to disapprove the application outright.
Concealment is a neglect to communicate that which a party
knows and ought to communicate (Section 25, Act No. 2427).
Whether intentional or unintentional the concealment entitles
the insurer to rescind the contract of insurance (Section 26,
Id.: Yu Pang Cheng vs. Court of Appeals, et al, 105 Phil 930;
Satumino vs. Philippine American Life Insurance Company, 7
SCRA 316). Private respondent appears guilty thereof.
We are thus constrained to hold that no insurance contract
was perfected between the parties with the noncompliance of
the conditions provided in the binding receipt, and
concealment, as legally defined, having been comraitted by
herein private respondent.
5. MELECIO COQUIA, MARIA ESPANUEVA and MANILA
YELLOW TAXICAB CO., INC., , vs. FIELDMEN'S
INSURANCE CO., INC., (G.R. No. L-23276 November
29, 1968)
FACTS:
On December 1, 1961, Fieldmen's Insurance Company, Inc.
issued, in favor of the Manila Yellow Taxicab Co., Inc.
(Insured) a common carrier accident insurance policy,
covering the period from December 1, 1961 to December 1,
1962. It was stipulated in said policy that:
The Company will, subject to the Limits of Liability and under
the Terms of this Policy, indemnify the Insured in the event of
accident caused by or arising out of the use of Motor Vehicle
against all sums which the Insured will become legally liable to
pay in respect of: Death or bodily injury to any fare-paying
passenger including the Driver, Conductor and/or Inspector
who is riding in the Motor Vehicle insured at the time of
accident or injury. 1
While the policy was in force, a taxicab of the Insured, driven
by Carlito Coquia, met a vehicular accident, in consequence of
which Carlito died. The Insured filed therefor a claim for
P5,000.00 to which the Company replied with an offer to pay
P2,000.00, by way of compromise. The Insured rejected the
same and made a counter-offer for P4,000.00, but the
Company did not accept it. Hence, the Insured and Carlito's
parents filed a complaint against the Company to collect the
proceeds of the aforementioned policy. In its answer, the
Company admitted the existence thereof, but pleaded lack of
cause of action on the part of the plaintiffs.
ISSUE: WON the heirs of carlito can claim under the
insurance policy although they are not parties to the
contract.
RULING: YES
In general, only parties to a contract may bring an action
based thereon, this rule is subject to exceptions, one of which
is found in the second paragraph of Article 1311 of the Civil
Code of the Philippines, reading:
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.
This is but the restatement of a well-known principle
concerning contracts pour autrui, the enforcement of which
may be demanded by a third party for whose benefit it was
made, although not a party to the contract, before the
stipulation in his favor has been revoked by the contracting
parties.
Does the policy in question belong to such class of contracts
pour autrui? In this connection, said policy provides, inter alia:
8. The Company may, at its option, make indemnity payable
directly to the claimants or heirs of claimants, with or without
securing the consent of or prior notification to the Insured, it
being the true intention of this Policy to protect, to the extent
herein specified and subject always to the Terms Of this Policy,
the liabilities of the Insured towards the passengers of the
Motor Vehicle and the Public.
Pursuant to these stipulations, the Company "will indemnify
any authorized Driver who is driving the Motor Vehicle" of the
Insured and, in the event of death of said driver, the Company
shall, likewise, "indemnify his personal representatives." In
fact, the Company "may, at its option, make indemnity payable
directly to the claimants or heirs of claimants ... it being the
true intention of this Policy to protect ... the liabilities of the
Insured towards the passengers of the Motor Vehicle and the
Public" — in other words, third parties.
Thus, the policy under consideration is typical of
contracts pour autrui, this character being made more
manifest by the fact that the deceased driver paid fifty percent
(50%) of the corresponding premiums, which were deducted
from his weekly commissions. Under these conditions, it is
clear that the Coquias — who, admittedly, are the sole heirs of
the deceased — have a direct cause of action against the
Company, and, since they could have maintained this action by
themselves, without the assistance of the Insured, it goes
without saying that they could and did properly join the latter
in filing the complaint herein.
6. G.R. No. L-15862 July 31, 1961
PAULO ANG and SALLY C. ANG vs. FULTON FIRE
INSURANCE CO
FACTS: Defendant Fulton Fire Insurance Company issued a
policy No. F-4730340, in favor of P. & S Department Store
(Sally C. Ang) over stocks of general merchandise, consisting
principally of dry goods, contained in a building occupied by
the plaintiffs. On December 17, 1954, the store containing the
goods insured was destroyed by fire. On December 30,
following, plaintiffs executed the first claim form. the Fulton
Fire Insurance Company wrote the plaintiffs that their claim
was denied.
However, the defendant Fulton Fire Insurance Company claims
that under paragraph 13 of the policy, if the loss or damage is
occasioned by the willful act of the insured, or if the claim is
made and rejected but no action is commenced within 12
months after such rejection, all benefits under the policy would
be forfeited, and that since the claim of the plaintiffs was
denied and plaintiffs received notice of denial on April 18,
1956, and they brought the action only on May 5, 1958, all the
benefits under the policy have been forfeited.
Plaintiffs filed a reply to the above answer of Defendant,
alleging that on May 11, 1956, Plaintiffs had instituted a case
in CFI, to assert the claim, however, the case was dismissed
without prejudice on September 3, 1957 and that deducting
the period within which said action was pending, the present
action was still within the 12 month period from April 12, 1956.
The court below held that the bringing of the action in the CFI
on May 11, 1956, tolled the running of the 12 month period
within which the action must be filed.
ISSUE: Whether or not the filing of the previous suit tolled or
suspended the running of the prescriptive period.
RULING: No, the condition contained in the insurance policy,
that claims must be presented within one year after rejection,
is an important matter essential to a prompt settlement of
claims against insurance companies, as it demands that
insurance suits be brought by the insured while the evidence
as to the origin and cause of destruction have not yet
disappeared. It is in the nature of a condition precedent to the
liability of the insurer, or in other terms, a resolutory cause,
the purpose of which is to terminate all liabilities in case the
action is not filed by the insured within the period stipulated.
The bringing of the action against the Paramount Surety &
Insurance Company, the agent of the defendant Company
cannot have any legal effect except that of notifying the agent
of the claim. Beyond such notification, the filing of the action
can serve no other purpose. There is no law giving any effect
to such action upon the principal. Besides, there is no
condition in the policy that the action must be filed against the
agent, and this Court can not by interpretation, extend the
clear scope of the agreement beyond what is agreed upon by
the parties.
7. Saura Import Export Co. v. Philippine International
Surety - Cancellation of Policy
118 PHIL 150
Facts:
1. On Dec. 26, 1952, Saura mortgaged to PNB its
registered parcel of land in Davao to secure the
payment of a promissory note of P27T.
2. A building of strong materials which was also owned
by Saura, was erected on the parcel of land and the
building had always been covered by insurance even
before the execution of the mortgage contract.
3. Pursuant to the mortgage agreement which required
Saura to insure the building and its contents, it
obtained a fire insurance for P29T from PISC for a
period of 1 year starting Oct. 2, 1954.
4. The mortgage also required Saura to endorse the
insurance policy to PNB. The memo stated: Loss if
any, payable to PNG as their interest may appear,
subject to the terms, conditions and warranties of this
policy.
5. The policy was delivered to PNB by Saura.
6. On Oct. 15, 1954, barely 13 days after the issuance of
the fire insurance, PISC canceled the same, effective
as of the date of issue. Notice of the cancellation was
sent to PNB in writing and was received by the bank
on Nov. 8, 1954. But Saura (insured) was not
informed.
7. On Apr. 6, 1955, the building and its contents worth
P4,685 were burned. On April 11, 1985, Saura filed a
claim with PISC and mortgagee bank.
8. Upon presentation of notice of loss with PNB, Saura
learned for the first time that the policy had been
previously canceled by PISC, when Saura’s folder in
the bank’s file was opened and the notice of the
cancellation by PISC was found.
Issue: Whether or not there was proper cancellation of the
policy?
Held: NO, the purpose of provisions or stipulations for notice
to the insured, is to prevent the cancellation of the policy,
without allowing the insured ample opportunity to negotiate
for other insurance in its stead. The form and sufficiency of a
notice of cancellation is determined by policy provisions. In
order to form the basis for the cancellation of a policy, notice
to the insured n not be in any particular form, in the absence
of a statute or policy provision prescribing such form, and it is
sufficient, so long as it positively and unequivocally indicates to
the insured, that it is the intention of the company that the
policy shall cease to be binding.
The policy in question does NOT provide for the notice of
cancellation, its form or period. The Insurance Law does not
likewise provide for such notice. This being the case, it
devolves upon the Court to apply the generally accepted
principles of insurance, regarding cancellation of the insurance
policy by the insurer.
Actual notice of cancellation in a clear and unequivocal
manner, preferably in writing should be given by the insurer to
the insured so that the latter might be given an opportunity
to obtain other insurance for his own protection. The notice
should be personal to the insurer and not to and/or through
any unauthorized person by the policy. Both the PSIC and the
PNB failed, wittingly or unwittingly to notify Saura of the
cancellation made.
The insurer contends that it gave notice to PNB as mortgagee
of the property and that was already substantial compliance
with its duty to notify the insured of the cancellation of the
policy. But notice to the bank, as far as Saura herein is
concerned, is not effective notice. PISC is then ordered to pay
Saura P29T, the amount involved in the policy subject matter
of this case.
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.
liability attached principally the insurance company, for its
failure to give notice of the cancellation of the policy to Saura.
8. G.R. No. L-67835 October 12, 1987
MALAYAN INSURANCE CO., INC. (MICO) vs.
GREGORIA CRUZ ARNALDO, in her capacity as the
INSURANCE COMMISSIONER, and CORONACION
PINCA
Facts: On June 7, 1981, the petitioner (hereinafter called
(MICO) issued to the private respondent, Coronacion Pinca,
Fire Insurance Policy No. F-001-17212 on her property for the
amount of P14,000.00 effective July 22, 1981, until July 22,
1982. 2
On October 15,1981, MICO allegedly cancelled the policy for
non-payment, of the premium and sent the corresponding
notice to Pinca. 3
On December 24, 1981, payment of the premium for Pinca
was received by Domingo Adora, agent of MICO. 4
On January 15, 1982, Adora remitted this payment to MICO,
together with other payments. 5
On January 18, 1982, Pinca's property was completely
burned. 6
On February 5, 1982, Pinca's payment was returned by MICO
to Adora on the ground that her policy had been cancelled
earlier. But Adora refused to accept it. 7
In due time, Pinca made the requisite demands for payment,
which MICO rejected. She then went to the Insurance
Commission. It is because she was ultimately sustained by the
public respondent that the petitioner has come to court for
relief.
Issue: Whether there was prior notice of cancellation to the
insured.
Ruling: NO. We do not share MICO's view that there was no
existing insurance at the time of the loss sustained by Pinca
because her policy never became effective for non-payment of
premium. Payment was in fact made, rendering the policy
operative as of June 22, 1981, and removing it from the
provisions of Article 77, Thereafter, the policy could be
cancelled on any of the supervening grounds enumerated in
Article 64 (except "non-payment of premium") provided the
cancellation was made in accordance therewith and with Article
65.
Section 64 reads as follows:
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 commissions
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.
As for the method of cancellation, Section 65 provides as
follows:
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.
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.
MICO's claims it cancelled the policy in question on October 15,
1981, for non-payment of premium. To support this assertion,
it presented one of its employees, who testified that "the
original of the endorsement and credit memo" — presumably
meaning the alleged cancellation — "were sent the assured by
mail through our mailing section." However, there is no
proof that the notice, assuming it complied with the
other requisites mentioned above, was actually mailed
to and received by Pinca. All MICO's offers to show that
the cancellation was communicated to the insured is its
employee's testimony that the said cancellation was
sent "by mail through our mailing section." without
more. The petitioner then says that its "stand is enervated (sic)
by the legal presumption of regularity and due performance of
duty." (not realizing perhaps that "enervated" means
"debilitated" not "strengthened").
First, the Insurance Law (Section 30) provides that materiality
is to be determined not by the event, but solely by the
probable and reasonable influence of the facts upon the party
to whom the communication is due, in forming his estimate of
the proposed contract, or in making his inquiries.
In this case, it is the contention of appellants that the facts
subject of the representation were not material in view of the
"non-medical" nature of the insurance applied for, which does
away with the usual requirement of medical examination
before the policy is issued. The contention is without merit.
If anything, the waiver of medical examination renders even
more material the information required for such necessarily
constitutes an important factor which the insurer takes into
consideration in deciding whether to issue the policy or not.

On the other hand, there is the flat denial of Pinca, who says
she never received the claimed cancellation and who, of course,
did not have to prove such denial Considering the strict
language of Section 64 that no insurance policy shall be
cancelled except upon prior notice, it behooved MICO's to
make sure that the cancellation was actually sent to and
received by the insured. The presumption cited is unavailing
against the positive duty enjoined by Section 64 upon MICO
and the flat denial made by the private respondent that she
had received notice of the claimed cancellation.
It stands to reason that if Pinca had really received the said
notice, she would not have made payment on the original
policy on December 24, 1981. Instead, she would have asked
for a new insurance, effective on that date and until one year
later, and so taken advantage of the extended period. The
Court finds that if she did pay on that date, it was because she
honestly believed that the policy issued on June 7, 1981, was
still in effect and she was willing to make her payment retroact
to July 22, 1981, its stipulated commencement date. After all,
agent Adora was very accomodating and had earlier told her
"to call him up any time" she was ready with her payment on
the policy earlier issued. She was obviously only reciprocating
in kind when she paid her premium for the period beginning
July 22, 1981, and not December 24, 1981.
Appellants also argue that due information concerning the
insured's previous illness and operation had been given to
PhilAm's agent, Edward A. Santos, who filled the application
form after it was signed in blank by Estefania A. Saturnino.
This contention is without merit as well for in signing the
application form in blank and leaving it to Edward A. Santos to
fill the insured in effect made Santos her agent for that
purpose and consequently was responsible for the errors in the
entries made by him in that capacity.
Second, in order to avoid a policy it is not necessary to show
actual fraud on the part of the insured.
Third, a concealment, whether intentional or unintentional,
entitles the insurer to rescind the contract of insurance,
concealment being defined as "negligence to communicate
that which a party knows and ought to communicate.
"The basis of the rule vitiating the contract in cases of
concealment is that it misleads or deceives the insurer into
accepting the risk, or accepting it at the rate of premium
agreed upon.

9. G.R. No. L-16163 February 28, 1963

IGNACIO SATURNINO, in his own behalf and as the
JUDICIAL GUARDIAN OF CARLOS SATURNINO, minor,
vs THE PHILIPPINE AMERICAN LIFE INSURANCE
COMPANY

Facts: Plaintiffs, now appellants, filed this action to recover

the sum of P5,000.00, corresponding to the face value of an
insurance policy issued by defendant on the life of Estefania A.
Saturnino who died of Pneumonia.

It appears that two months prior to the issuance of the policy,

Saturnino was operated on for cancer. Notwithstanding that
fact, she did not make a disclosure thereof in her application
for insurance. On the contrary, she stated therein that she did
not have, nor had she ever had, among other ailments listed in
the application.

Issue: whether or not the insured made such false

representations of material facts as to avoid the policy?

Held: Yes.