Enriquez v Sunlife November 29, 1920 G.R. No.

L-15895
Malcolm, J.:
Facts:
This is an action brought by the plaintiff ad administrator of the estate of the late Joaquin Ma.
Herrer to recover from the defendant life insurance company the sum of pesos 6,000 paid by the
deceased for a life annuity. The trial court gave judgment for the defendant. Plaintiff appeals.
Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its
office in Manila for a life annuity. Two days later he paid the sum of P6,000 to the manager of
the companys Manila office and was given a receipt. The application was given to the head
office in Canada. The oofice gave acceptance by cable on November 26, 1917. The policy was
issued on December 4.
The attorney, Mr. Torres then wrote to the Manila office of the company stating that Herrer
desired to withdraw his application. The following day the local office replied to Mr. Torres,
stating that the policy had been issued, and called attention to the notification. This letter was
received by Mr. Torres on the morning of December 21, 1917 and Mr. Herrer died on December
20, 1917.
(Whether on the same day the cable was received notice was sent by the Manila office of Herrer
that the application had been accepted, is a disputed point, which will be discussed later.)
Issue: WON Herrer received notice of acceptance of his application.
Held: No. Judgment reversed.
Ratio:
Sunlife averred that that they prepared the letter on November 26, 1917, and handed it to the
local manager for signature. The manager said that he received the application November 26,
1917. He said that on the same day he signed a letter notifying Mr. Herrer of this acceptance.
They said that these letters, after being signed, were sent to the chief clerk and placed on the
mailing desk for transmission. The witness could not tell if the letter had every actually been
placed in the mails.
The plaintiffs attorney testified to having prepared Herrers will, and his client mentioned his
application for a life annuity. He said that the only document relating to the transaction in his
possession was the provisional receipt. Rafael Enriquez, the administrator of the estate, testified
that he had gone through the effects of the deceased and had found no letter of notification from
the insurance company to Mr. Herrer.
Our deduction from the evidence on this issue must be that the letter of November 26, 1917,
notifying Mr. Herrer that his application had been accepted, prepared, and signed in the local
office of the insurance company and was placed in the ordinary channels for transmission. But
this was never actually mailed and thus was never received by the applicant.
The law that applies here is the Civil Code Art 1802, because the Insurance Act is silent as to the
methods followed to create a contract of insurance. Article 1802, not only describes a contact of
life annuity, but but in two other articles, also gives strong clues as to the proper disposition of
the case.

For instance, article 16 of the Civil Code provides that In matters which are governed by special
laws, any deficiency of the latter shall be supplied by the provisions of this Code. The special
law on the subject of insurance is deficient in enunciating the principles governing acceptance,
the subject-matter of the Civil code, if there be any, would be controlling. In the Civil Code is
found article 1262 providing that Consent is shown by the concurrence of offer and acceptance
with respect to the thing and the consideration which are to constitute the contract. An
acceptance made by letter shall not bind the person making the offer except from the time it
came to his knowledge. The contract, in such case, is presumed to have been entered into at the
place where the offer was made.
The Civil Code rule, that an acceptance made by letter shall bind the person making the offer
only from the date it came to his knowledge avoids uncertainty and tends to security.
Also, U.S. jurisprudence states that the courts who take this view have expressly held that an
acceptance of an offer of insurance not actually or constructively communicated to the proposer
does not make a contract. Only the mailing of acceptance, it has been said, completes the
contract of insurance.
The law applicable to the case is found to be the second paragraph of article 1262 of the Civil
Code providing that an acceptance made by letter shall not bind the person making the offer
except from the time it came to his knowledge. Also, that according to the provisional receipt,
three things had to be accomplished by the insurance company before there was a contract: (1)
There had to be a medical examination of the applicant; (2) there had to be approval of the
application by the head office of the company; and (3) this approval had in some way to be
communicated by the company to the applicant. The further admitted facts are that the head
office in Montreal did accept the application, did cable the Manila office to that effect, did
actually issue the policy and did actually write the letter of notification and place it in the usual
channels for transmission to the addressee.
The fact as to the letter of notification thus fails to concur with the essential elements of the
general rule pertaining to the mailing and delivery of mail matter as announced by the American
courts, namely, when a letter or other mail matter is addressed and mailed with postage prepaid
there is a rebuttable presumption of fact that it was received by the addressee as soon as it could
have been transmitted to him in the ordinary course of the mails. But if any one of these
elemental facts fails to appear, it is fatal to the presumption. For instance, a letter will not be
presumed to have been received by the addressee unless it is shown that it was deposited in the
post-office, properly addressed and stamped.
The contract for a life annuity was not perfected because it has not been proved satisfactorily that
the acceptance of the application ever came to the knowledge of the applicant.

Insular v Ebrado G.R. No. L-44059 October 28, 1977

Facts:
J. Martin:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a rider
for Accidental Death. He designated Carponia T. Ebrado as the revocable beneficiary in his
policy. He referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made liable to
pay the coverage in the total amount of P11,745.73, representing the face value of the policy in
the amount of P5,882.00 plus the additional benefits for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the designated beneficiary
therein, although she admited that she and the insured were merely living as husband and wife
without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts
that she is the one entitled to the insurance proceeds.
Insular commenced an action for Interpleader before the trial court as to who should be given the
proceeds. The court declared Carponia as disqualified.
Issue: WON a common-law wife named as beneficiary in the life insurance policy of a legally
married man can claim the proceeds in case of death of the latter?
Held: No. Petition
Ratio:
Section 50 of the Insurance Act which 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 suggests that the provision refers only to the "insured" and not to the
beneficiary, since a contract of insurance is personal in character. Otherwise, the prohibitory laws
against illicit relationships especially on property and descent will be rendered nugatory, as the
same could easily be circumvented by modes of insurance.
When not otherwise specifically provided for by the Insurance Law, the contract of life insurance
is governed by the general rules of the civil law regulating contracts. And under Article 2012 of
the same Code, any person who is forbidden from receiving any donation under Article 739
cannot be named beneficiary of a fife insurance policy by the person who cannot make a
donation to him. Common-law spouses are barred from receiving donations from each other.
Article 739 provides that void donations are those made between persons who were guilty of
adultery or concubinage at the time of donation.
There is every reason to hold that the bar in donations between legitimate spouses and those
between illegitimate ones should be enforced in life insurance policies since the same are based
on similar consideration. So long as marriage remains the threshold of family laws, reason and
morality dictate that the impediments imposed upon married couple should likewise be imposed
upon extra-marital relationship.
A conviction for adultery or concubinage isnt required exacted before the disabilities mentioned
in Article 739 may effectuate. The article says that 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 guilty of the
donee may be proved by preponderance of evidence in the same action.

The underscored clause neatly conveys that no criminal conviction for the offense is a condition
precedent. The law plainly states that the guilt of the party may be proved in the same acting for
declaration of nullity of donation. And, it would be sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was
also living in with his common-law wife with whom he has two children.
Interpretation of insurance contracts
DIOSDADO C. TY vs. FIRST NATIONAL SURETY & ASSURANCE CO. INC.
G.R. NO. L-16138, April 29, 961
1 SCRA 1324
Facts:
Petitioner obtained personal accident policies which stipulated, among others, that for partial disability resulting to the loss of
either hand, the insurer shall be liable for P650.00. It was further stated in the policies that, That loss of a hand shall mean the
loss by amputation through the bones of the wrist. A fire broke out which totally destroyed Broadway Cotton Factory, Tys
employer. Fighting his way out of the factory, Ty was injured on the left hand by a heavy object. As a result, Ty suffered a
temporary total disability of his left hand which prevented hi from performing his work or labor necessary in the pursuance of his
occupation.
Issue:
Whether or not the insurer is liable
Held:
The insurer was not liable. We can not go beyond the clear and express conditions of the insurance policies, all of which defined
partial disability as loss of either hand by amputation through the bones of the wrist. There was no such amputation. All that was
found was that the physical injuries caused temporary total disability of Tys left hand. We might add that the agreement
contained in the insurance policies are clear, express and specific that only amputation of the left hand should be considered as
a loss thereof, an interpretation that would include the mere fracture or other temporary disability not covered by the policies
would certainly be unwarranted.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against the plaintiff-appellant.

Interpretation of insurance contracts

SIMON DE LA CRUZ vs. THE CAPITAL INSURANCE AND SURETY CO., INC.
G.R. No. L-21574, June 30, 1966
17 SCRpA 599
FACTS:
Eduardo de la Cruz, the son of herein petitioner, was the holder of an accident insurance policy. In connection with the
celebration of the New Year, the insured, a non-professional boxer, participated in a boxing contest. In the course of his bout with
another person, likewise a non-professional, of the same height, weight, and size, Eduardo slipped and was hit by his opponent
on the left part of the back of the head, causing Eduardo to fall, with his head hitting the rope of the ring. The insured died with
the cause of death reported as hemorrhage intercranial, left. The insurer refused to pay the proceeds of the policy on the
ground that the death of the insured, caused by his participation in a boxing contest, was not accidental and, therefore, not
covered by insurance.
ISSUE:
Whether or not the death of the insured is covered by the policy

HELD:
The terms accident and accidental as used in the insurance contract, have not acquired any technical meaning, and are
construed by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which happen
by chance or fortuitously, without intention and design, and which is unexpected, unusual, and unforeseen. An accident is an
event that proceeds from an unknown cause and, therefore, not expected. Without the unintentional slipping of the deceased,
perhaps he would not have received the blow in the head and would not have died. Boxing is attended with some risks of
external injuries, but any injury received in the course of the game could be accidental. In boxing, as in other equally physically
rigorous sports, such as basketball or baseball, death is not ordinarily anticipated to result. If, therefore, it ever does, the injury or
death can only be accidental or produced by some unforeseen happening or event as what occurred in this case. The insurer
was liable.
WHEREFORE, in view of the foregoing, considerations, the decision appealed from is hereby affirmed, with costs against
appellant, so ordered.

Constantino v. Asia Life Insurance Co. (1950)

FACTS:

Case 1:
o The life of Arcadio Constantino was insured with Asia Life
Insurance Company (Asia) for a term of 20 years with Paz Lopez
de Constantino as beneficiary. The first premium covered the
period up to September 26, 1942.
o After the first premium, no further premiums were paid. The
insured died on September 22, 1944.
o Asia Life Insurance Company, being an American Corp., had to
close its branch office in Manila by reason of the Japanese
occupation, i.e. from January 2, 1942, until the year 1945.

Case 2:
o Spouses Tomas Ruiz and Agustina Peralta. Their premium were
initially annually but subsequently changed to quarterly. The last
quarterly premium was delivered on on November 18, 1941 and
it covered the period until January 31, 1942.
o Upon the Japanese occupation, the insurer and insured were not
able to deal with each other
o Because the insured had borrowed on the policy P234.00 in
January, 1941, the cash surrender value of the policy was
sufficient to maintain the policy in force only up to September 7,
1942.

o Tomas Ruiz died on February 16, 1945 with Agustina Peralta as

beneficiary. Her demand for payment was refused on the ground
of non-payment of the premiums.

Plaintiffs: As beneficiaries, they are entitled to receive the proceeds of

the policies minus all sums due for premiums in arrears. The nonpayment of the premiums was caused by the closing of Asia's offices in
Manila during the Japanese occupation and the impossible
circumstances created by war.

lower court: absolved Asia

ISSUE: W/N the insurers still have a right to claim.

HELD: YES. lower court affirmed.

it would seem that pursuant to the express terms of the policy, nonpayment of premium produces its avoidance

Forfeitures of insurance policies are not favored, but courts cannot for
that reason alone refuse to enforce an insurance contract according to
its meaning.

Nevertheless, inasmuch as the non-payment of premium was the

consequence of war, it should be excused and should not cause the
forfeiture of the policy

3 Rules in case of war:

o Connecticut Rule

2 elements in the consideration for which the annual

premium is paid:

mere protection for the year

privilege of renewing the contract for each

succeeding year by paying the premium for that year
at the time agreed upon

payment of premiums is a condition precedent, the nonperformance would be illegal necessarily defeats the right
to renew the contract

o New York Rule - greatly followed by a number of cases

war between states in which the parties reside merely

suspends the contracts of the life insurance, and that,
upon tender of all premiums due by the insured or his
representatives after the war has terminated, the contract
revives and becomes fully operative

o 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

o 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.

the fundamental character of the undertaking to pay premiums and

the high importance of the defense of non-payment thereof, was
specifically recognized

adopt the United States Rule: first policy had no reserve value, and
that the equitable values of the second had been practically returned
to the insured in the form of loan and advance for premium

ALPHA INSURANCE AND SURETY CO. vs. ARSENIA SONIA

CASTOR
July 2, 2014 Leave a comment
G.R. No. 198174, September 2, 2013 (PERALTA, J.)
FACTS:
Arsenia Sonia Castor (Castor) obtained a Motor Car Policy for her Toyota Revo DLX DSL with
Alpha Insurance and Surety Co (Alpha). The contract of insurance obligates the petitioner to pay
the respondent the amount of P630,000 in case of loss or damage to said vehicle during the
period covered.
On April 16, 2007, respondent instructed her driver, Jose Joel Salazar Lanuza to bring the vehicle
to nearby auto-shop for a tune up. However, Lanuza no longer returned the motor vehicle and
despite diligent efforts to locate the same, said efforts proved futile. Resultantly, respondent
promptly reported the incident to the police and concomitantly notified petitioner of the said loss
and demanded payment of the insurance proceeds.
Alpha, however, denied the demand of Castor claiming that they are not liable since the culprit
who stole the vehicle is employed with Castor. Under the Exceptions to Section III of the Policy,
the Company shall not be liable for (4) any malicious damage caused by the insured, any
member of his family or by A PERSON IN THE INSUREDS SERVICE.
Castor filed a Complaint for Sum of Money with Damages against Alpha before the Regional
Trial Court of Quezon City. The trial court rendered its decision in favor of Castor which
decision is affirmed in toto by the Court of Appeals. Hence, this Petition for Review on
Certiorari.
ISSUE:
Whether or not the loss of respondents vehicle is excluded under the insurance policy
HELD:
NO. The words loss and damage mean different things in common ordinary usage. The word
loss refers to the act or fact of losing, or failure to keep possession, while the word damage
means deterioration or injury to property. Therefore, petitioner cannot exclude the loss of
Castors vehicle under the insurance policy under paragraph 4 of Exceptions to Section III,
since the same refers only to malicious damage, or more specifically, injury to the motor

vehicle caused by a person under the insureds service. Paragraph 4 clearly does not contemplate
loss of property.
A contract of insurance is a contract of adhesion. So, when the terms of the insurance contract
contain limitations on liability, courts should construe them in such a way as to preclude the
insurer from non-compliance with his obligation. Thus, in Eternal Gardens Memorial Park
Corporation vs. Philippine American Life Insurance Company, this Court ruled that it must be
remembered that an insurance contract is a contract of adhesion which must be construed
liberally in favor of the insured and strictly against the insurer in order to safeguard the latters
interest.
Qua v Law Union. G.R. No. L-4611 December 17, 1955
J. Reyes

Facts:
Qua owned 4 warehouses used for the storage of copra and hemp. They were
insured with the Law Union.
Fire broke out and completely destroyed 3 bodegas. The plaintiff submitted claims
totalling P398,562.81. The Insurance Company resisted payment on the grounds
that the fire had been deliberately caused by the insured or by other persons in
connivance with him.
Que Chee Gan and his brother were tried for arson, but were acquitted by the trial
court. As regards the insurance claim, the trial court ruled in favor of Qua and
entitled him to recover more than Php 300,000 for indemnities from the insurance
company. Hence, the company appealed to the SC.
In its first assignment of error, the insurance company alleged that the trial Court
should have held that the policies were avoided for breach of warranty. The contract
noted that fire hydrants were required in a particular measurement of space (every
150 feet). Hence, they argued that since the bodegas insured had an external wall
perimeter of 500 meters, the appellee should have 11 fire hydrants in the
compound, and that he actually had only 2, with a further pair.

Issues:
1. WON the insurance company can void the policies it had issued
2. WON the insured violated the "Hemp Warranty" provisions of the policy against
the storage of gasoline

3. WON the insured planned the destruction of the bodega

Held: No. No. No.

Ratio:
1. The insurer, who at the time of issuance, has knowledge of existing facts which
would invalidate the contract from the beginning, such constitutes a waiver of
conditions in the contract inconsistent with the facts, and the insurer is stopped
thereafter from asserting the breach of such conditions. Also, an insurance company
intends to executed a valid contract in return for the premium received; and when
the policy contains a condition which renders it voidable at its inception, and this
result is known to the insurer, it will be presumed to have intended to waive the
conditions and to execute a binding contract, rather than to have deceived the
insured into thinking he is insured when in fact he is not.
The appellant is barred estoppel to claim violation of the so-called fire hydrants
warranty, because it knew the number of hydrants demanded therein never existed
from the very beginning and issued the policies.
To allow a company to accept one's money for a policy of insurance which it then
knows to be void and of no effect, though it knows as it must, that the assured
believes it to be valid and binding, is so contrary to the dictates of honesty and fair
dealing, and so closely related to positive fraud, as to the abhorrent to fair-minded
men.
The appellant company so worded the policies that while exacting the greater
number of fire hydrants and appliances, it kept the premium discount at the
minimum of 2 1/2%, thereby giving the insurance company a double benefit. Such
abnormal treatment of the insured strongly points at an abuse of the insurance
company's selection of the words and terms of the contract, over which it had
absolute control.
Receipt of Premiums or Assessments after Cause for Forfeiture Other than
Nonpayment. 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
premium on the policy, estopped to take advantage of the forfeiture. It cannot treat
the policy as void for the purpose of defense to an action to recover for a loss
thereafter occurring and at the same time treat it as valid for the purpose of earning
and collecting further premiums.
Moreover, taking into account the well known rule that ambiguities or obscurities
must be strictly interpreted against the party that caused them, the "memo of

warranty" invoked by appellant bars the latter from questioning the existence of the
appliances called for in the insured premises
2. The ambiguity must be held strictly against the insurer and liberally in favor of
the insured, specially to avoid a forfeiture. So long as insurance companies insist
upon the use of ambiguous, intricate and technical provisions, which conceal rather
than frankly disclose, their own intentions, the courts must, in fairness to those who
purchase insurance, construe every ambiguity in favor of the insured.
Appellee admitted that there were 36 cans of gasoline in the building designed. It
However, gasoline is not specifically mentioned among the prohibited articles listed
in the so-called "hemp warranty." The cause relied upon by the insurer speaks of
"oils", and is uncertain because, "Oils" usually mean "lubricants" and not gasoline or
kerosene.
If the company intended to rely upon a condition of that character, it ought to have
been plainly expressed in the policy.
The contract of insurance is one of perfect good faith not for the insured alone, but
equally so for the insurer; in fact, it is mere so for the latter, since its dominant
bargaining position carries with it stricter responsibility.
Also, the gasoline kept in Bodega No. 2 was only incidental to his business, being no
more than a customary 2 day's supply for the five or six motor vehicles used for
transporting of the stored merchandise. "It is well settled that the keeping of
inflammable oils on the premises though prohibited by the policy does not void it if
such keeping is incidental to the business."
3. It was unlikely that Qua burned the warehouse to defraud the company because
he had the resources to pay off the National Bank in a short time. Also, no motive
appears for attempt to defraud the insurer. While the acquittal of the insured in the
arson case is not res judicata on the present civil action, the insurer's evidence, to
judge from the decision in the criminal case, is practically identical in both cases
and must lead to the same result, since the proof to establish the defense of
connivance at the fire in order to defraud the insurer "cannot be materially less
convincing than that required in order to convict the insured of the crime of arson."
As to the defense that the burned bodegas could not possibly have contained the
quantities of copra and hemp stated in the fire claims, the insurer relied on its
adjuster investigator who examined the premises during and after the fire. His
testimony, however, was based on inferences from the photographs and traces
found after the fire, and must yield to the contradictory testimony of those who
actually saw the contents of the bodegas shortly before the fire, while inspecting
them for the mortgagee Bank.

Qua Chee Gan v. Law Union and Rock Insurance Co., Ltd. (1955)
G.R. No.L-4611

December 17, 1955

Lessons Applicable: Ambiguous Provisions Interpreted Against Insurer (Insurance)

FACTS:

Qua Chee Gan, a merchant of Albay, owned four bodegas which he insured with
Law Union & Rock Insurance Co., Ltd (Law Union) since 1937 and the lose made
payable to the Philippine National Bank (PNB) as mortgage of the hemp and crops,
to the extent of its interest
July 21, 1940 morning: fire broke out in bodegas 1,2 and 4 which lasted for
almost a week.
Qua Chee Gan informed Law Union by telegram
Law Union rejected alleging that it was a fraudulent claim that the fire had been
deliberately caused by the insured or by other persons in connivance with him
Que Chee Gan, with his brother, Qua Chee Pao, and some employees of his, were
indicted and tried in 1940 for the crime of arson but was subsequently acquitted
During the pendency of the suit, Que Chee Gan paid PNB
Law Union states that ff. assignment of errors:
1. memo of warranty requires 11 hydrants instead of 2
2. violation of hemp warranty against storage of gasoline since it prohibits oils
3. fire was due to fraud
4. burned bodegas could not possibly have contained the quantities of copra
and hemp stated in the fire claims

ISSUE: W/N Qua Chee Gan should be allowed to claim.

HELD: YES. Affirmed.

1. 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
2. oils (animal and/or vegetable and/or mineral and/or their liquid products having
a flash point below 300o Fahrenheit", and is decidedly ambiguous and uncertain; for
in ordinary parlance, "Oils" mean "lubricants" and not gasoline or kerosene
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
3. trial Court found that the discrepancies were a result of the insured's erroneous
interpretation of the provisions of the insurance policies and claim forms, caused by
his imperfect knowledge of English, and that the misstatements were innocently
made and without intent to defraud.
4. Similarly, the 20 per cent overclaim on 70 per cent of the hemo stock, was
explained by the insured as caused by his belief that he was entitled to include in
the claim his expected profit on the 70 per cent of the hemp, because the same was
already contracted for and sold to other parties before the fire occurred