Lalican vs The Insular Life Assurance Company Limited matter of the policy of insurance.

of the policy of insurance. Section 10 of the Insurance Code indeed provides that
G.R. No. 183526 August 25, 2009 every person has an insurable interest in his own life. Section 19 of the same code also
states that an interest in the life or health of a person insured must exist when the
insurance takes effect, but need not exist thereafter or when the loss occurs.
Facts: Violeta is the widow of the deceased Eulogio C. Lalican (Eulogio). During his
lifetime, Eulogio applied for an insurance policy with Insular Life. On 24 April 1997,
Insular Life, through Josephine Malaluan (Malaluan), its agent in Gapan City, issued in In the instant case, Eulogios death rendered impossible full compliance with the
favor of Eulogio Policy No. 9011992, which contained a 20-Year Endowment Variable conditions for reinstatement of Policy No. 9011992. True, Eulogio, before his death,
Income Package Flexi Plan worth P500,000.00, with two riders valued at P 500,000.00 managed to file his Application for Reinstatement and deposit the amount for payment of
each. Thus, the value of the policy amounted to P1,500,000.00. Violeta was named as his overdue premiums and interests thereon with Malaluan; but Policy No. 9011992 could
the primary beneficiary. P Under the terms of Policy No. 9011992, Eulogio was to pay the only be considered reinstated after the Application for Reinstatement had been
premiums on a quarterly basis in the amount of 8,062.00, payable every 24 April, 24 July, processed and approved by Insular Life during Eulogios lifetime and good health.
24 October and 24 January of each year, until the end of the 20-year period of the policy.
According to the Policy Contract, there was a grace period of 31 days for the payment of The stipulation in a life insurance policy giving the insured the privilege to reinstate it
each premium subsequent to the first. If any premium was not paid on or before the due upon written application does not give the insured absolute right to such reinstatement by
date, the policy would be in default, and if the premium remained unpaid until the end of the mere filing of an application. The insurer has the right to deny the reinstatement if it is
the grace period, the policy would automatically lapse and become void. Eulogio paid not satisfied as to the insurability of the insured and if the latter does not pay all overdue
the premiums due on 24 July 1997 and 24 October 1997. However, he failed to pay the premium and all other indebtedness to the insurer. After the death of the insured the
premium due on 24 January 1998, even after the lapse of the grace period of 31 days. insurance Company cannot be compelled to entertain an application for reinstatement of
Policy No. 9011992, therefore, lapsed and became void. Eulogio submitted to the the policy because the conditions precedent to reinstatement can no longer be
Cabanatuan District Office of Insular Life, through Malaluan, on 26 May 1998, an determined and satisfied.
Application for Reinstatement of Policy No. 9011992, together with the amount of P
8,062.00 to pay for the premium due on 24 January 1998. In a letter dated 17 July 1998,
Malaluan did not have the authority to approve Eulogios Application for Reinstatement.
Insular Life notified Eulogio that his Application for Reinstatement could not be fully
Malaluan still had to turn over to Insular Life Eulogios Application for Reinstatement and
processed because, although he already deposited P8,062.00 as payment for the 24
accompanying deposits, for processing and approval by the latter.
January 1998 premium, he left unpaid the overdue interest thereon amounting to
P322.48.
Violeta did not adduce any evidence that Eulogio might have failed to fully understand
the import and meaning of the provisions of his Policy Contract and/or Application for
Thus, Insular Life instructed Eulogio to pay the amount of interest and to file another
Reinstatement, both of which he voluntarily signed. While it is a cardinal principle of
application for reinstatement. Eulogio was likewise advised by Malaluan to pay the
insurance law that a policy or contract of insurance is to be construed liberally in favor of
premiums that subsequently became due on 24 April 1998 and 24 July 1998, plus
the insured and strictly as against the insurer company, yet, contracts of insurance, like
interest. On 17 September 1998, Eulogio went to Malaluans house and submitted a
other contracts, are to be construed according to the sense and meaning of the terms,
second Application for Reinstatement of Policy No. 9011992, including the amount of
which the parties themselves have used. If such terms are clear and unambiguous, they
P17,500.00, representing payments for the overdue interest on the premium for 24
must be taken and understood in their plain, ordinary and popular sense.
January 1998, and the premiums which became due on 24 April 1998 and 24 July 1998.
As Malaluan was away on a business errand, her husband received Eulogios second
Application for Reinstatement and issued a receipt for the amount Eulogio deposited. A
while later, on the same day, 17 September 1998, Eulogio died of cardio-respiratory
arrest secondary to electrocution.

Issue: Whether or not Eulogio had an existing insurable interest in his own life until the
day of his death in order to have the insurance policy validly reinstated.

Held: No. An insurable interest is one of the most basic and essential requirements in an
insurance contract. In general, an insurable interest is that interest which a person is
deemed to have in the subject matter insured, where he has a relation or connection with
or concern in it, such that the person will derive pecuniary benefit or advantage from the
preservation of the subject matter insured and will suffer pecuniary loss or damage from
its destruction, termination, or injury by the happening of the event insured against. The
existence of an insurable interest gives a person the legal right to insure the subject
El Oriente v. Posadas - Taxability of Insurance Proceeds exempt. It is not so certain that the proceeds of life insurance policies paid to corporate
beneficiaries upon the death of the insured are likewise exempt. But at least, it may be
56 PHIL 147 (1931) said that the law is indefinite in phraseology and does not permit us unequivocally to hold
that the proceeds of life insurance policies received by corporations constitute income
which is taxable
Facts:

> El Oriente in order to protect itself against the loss that it might suffer by reason of the
It will be recalled that El Oriente, took out the insurance on the life of its manager, who
death of its manager, A. Velhagen, who had had more than thirty-five (35) years of
had had more than thirty-five years' experience in the manufacture of cigars in the
experience in the manufacture of cigars in the Philippines, procured from the
Philippines, to protect itself against the loss it might suffer by reason of the death of its
Manufacturers Life Insurance Co., of Toronto, Canada, thru its local agent E. E. Elser, an
manager. We do not believe that this fact signifies that when the plaintiff received
insurance policy on the life of the said A. Velhagen for the sum of $50,000, United States
P104,957.88 from the insurance on the life of its manager, it thereby realized a net profit
currency designating itself as the beneficiary.
in this amount. It is true that the Income Tax Law, in exempting individual beneficiaries,
> El Oriente paid for the premiums due thereon and charged as expenses of its business speaks of the proceeds of life insurance policies as income, but this is a very slight
all the said premiums and deducted the same from its gross incomes as reported in its indication of legislative intention. In reality, what the plaintiff received was in the nature of
annual income tax returns, which deductions were allowed upon a showing that such an indemnity for the loss which it actually suffered because of the death of its manager.
premiums were legitimate expenses of its business.

> Upon the death of A. Velhagen in 1929, the El Oriente received all the proceeds of the
said life insurance policy, together with the interests and the dividends accruing thereon,
aggregating P104,957.88

> CIR assessed El Oriente for deficiency taxes because El Oriente did not include as
income the proceeds received from the insurance.

Issue:

Whether or not the proceeds of insurance taken by a corporation on the life of an

important official to indemnify it against loss in case of his death, are taxable as income
under the Philippine Income Tax Law

Held:

NOT TAXABLE.

In Chapter I of the Tax Code, is to be found section 4 which provides that, "The following
incomes shall be exempt from the provisions of this law: (a) The proceeds of life
insurance policies paid to beneficiaries upon the death of the insured . . ." Section 10, as
amended, in Chapter II On Corporations, provides that, "There shall be levied, assessed,
collected, and paid annually upon the total net income received in the preceding calendar
year from all sources by every corporation . . .a tax of three per centum upon such
income . . ." Section 11 in the same chapter, provides the exemptions under the law, but
neither here nor in any other section is reference made to the provisions of section 4 in
Chapter I.

Under the view we take of the case, it is sufficient for our purposes to direct attention to
the anomalous and vague condition of the law. It is certain that the proceeds of life
insurance policies paid to individual beneficiaries upon the death of the insured are
Villanueva v. Oro - Insurance Proceeds
81 PHIL 464  upon death during the continuance of this policy - to the beneficiary Bartolome
Villanueva, father of the insured, with right on the part of the insured to change the

Facts: beneficiary
> West Coast Life Insurance Company issued two policies of insurance on the life of  1940: Bartolome Villanueva died, Mariano J. Villanueva duly substituted as
Esperanza Villanueva, one for 2T, maturing April 1, 1943; and other for 3T maturing Mar.
31, 1943. beneficiary, a brother of the insured
> In both policies, West agreed to pay 2T either to Esperanza if still living on Apr 1,
 3,000 php - maturing on March 31, 1943
1943; or to beneficiary Bartolome Villanueva, or the father of the insured immediately
upon receipt of the proof of death of Esperanza.  Esperanza J. Villanueva survived the insurance period, for she died only on October
> The policy also gave her the right to change the beneficiary.
> In 1940, Bartolome died, and he was substituted as beneficiary under the policies by 15, 1944, without, however, collecting the insurance proceeds.
Mariano, Esparanza’s brother.  CFI: estate of the insured Esperanza is entitled to the insurance proceeds
> Esperanza died in 1944 without having collected the insurance proceeds. Adverse
claims for the proceeds were presented by the estate of Esperanza on one hand and by ISSUE: W/N the estate of insured Esperanza should be entitled to the insurance
Mariano on the other.
proceeds since she outlived the insurance policy
> CFI held that the estate of Esperanza was entitled to the proceeds to the exclusion of
the beneficiary.

Issue:
Whether or not the beneficiary is entitled to the proceeds. HELD: YES. appealed order is, therefore, hereby affirmed

Held:  To sustain the beneficiary's claim would be altogether eliminate from the policies the
NO.
condition that the insurer "agrees to pay . . . to the insured hereunder, if living
Under the policies, the insurer obligated itself to pay the insurance proceeds to: (1) the
insured if the latter lived on the dates of maturity; or (2) the beneficiary if the insured died  Upon the insured's death, within the period, the beneficiary will take, as against the
during the continuance of the policies. The first contingency excludes the second, and
vice versa. In other words, as the insured Esperanza was living on April 1 and March 31, personal representative or the assignee of the insured. Upon the other hand, if the
1943, the proceeds are payable exclusively to her or to her estate unless she had before insured survives the endowment period, the benefits are payable to him or to his
her death otherwise assigned the matured policies.
assignee, notwithstanding a beneficiary is designated in the policy
The beneficiary could be entitled to said proceeds only in default of the first
contingency. To sustain the beneficiary’s claim would be to altogether eliminate from the
policies the condition that the insurer “agrees to pay to the insured if living.”

This conclusion tallies with American Authorities who say that: The interest of the
insured in the proceeds of the insurance depends upon his survival of the expiration of
the endowment period. Upon the insured’s death, within the period, the beneficiary will
take, as against the personal representatives the endowment period, the benefits are
payable to him or to his assignee, notwithstanding a beneficiary is designated in the
policy. (AmJur and Couch Cyclopedia of Insurance Law)

FACTS:
 West Coast Life Insurance Company issued 2 policies of insurance on the life of
Esperanza J. Villanueva:
 2,000 php - maturing on April 1, 1943
 if living, on the 1st day of April 1943 - to insured
Insular v Ebrado G.R. No. L-44059 October 28, 1977 (PREVIOUS CASE) the person who cannot make a donation to him. Common-law spouses are barred from
Facts: receiving donations from each other.

J. Martin: Article 739 provides that void donations are those made between persons who were
guilty of adultery or concubinage at the time of donation.
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 There is every reason to hold that the bar in donations between legitimate spouses and
beneficiary in his policy. He referred to her as his wife. 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
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made
family laws, reason and morality dictate that the impediments imposed upon married
liable to pay the coverage in the total amount of P11,745.73, representing the face
couple should likewise be imposed upon extra-marital relationship.
value of the policy in the amount of P5,882.00 plus the additional benefits
for accidental death. A conviction for adultery or concubinage isn’t required exacted before
the disabilities mentioned in Article 739 may effectuate. The article says that in the
Carponia T. Ebrado filed with the insurer a claim for the proceeds as the designated
case referred to in No. 1, the action for declaration of nullity may be brought by the
beneficiary therein, although she admited that she and the insured were merely living
spouse of the donor or donee; and the guilty of the donee may be proved by
as husband and wife without the benefit of marriage.
preponderance of evidence in the same action.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She
The underscored clause neatly conveys that no criminal conviction for the offense is a
asserts that she is the one entitled to the insurance proceeds.
condition precedent. The law plainly states that the guilt of the party may be proved
Insular commenced an action for Interpleader before the trial court as to who should “in the same acting for declaration of nullity of donation.” And, it would be sufficient if
be given the proceeds. The court declared Carponia as disqualified. evidence preponderates.
Issue: WON a common-law wife named as beneficiary in the life insurance policy of a The insured was married to Pascuala Ebrado with whom she has six legitimate children.
legally married man can claim the proceeds in case of death of the latter? He was also living in with his common-law wife with whom he has two children.
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
Vda. De Consuegra v. GSIS - Retirement Insurance Benefits

37 SCRA 315
Facts:
> Jose Consuegra was employed as a shop foreman of the Office of the District
Engineer in Surigao Del Norte.
> When he was still alive, he contracted two marriages:
o First – Rosario Diaz; 2 children = Jose Consuegra Jr. and Pedro but both
predeceased him
o 2nd – Basilia Berdin; 7 children. (this was contracted in GF while the first marriage
subsisted)
> Being a GSIS member when he died, the proceeds of his life insurance were paid by
the GSIS to Berdin and her children who were the beneficiaries named in the policy.
> Since he was in the gov’t service for 22.5028 years, he was entitled to retirement
insurance benefits, for which no beneficiary was designated.
> Both families filed their claims with the GSIS, which ruled that the legal heirs were Diaz
who is entitled to one-half or 8/16 of the retirement benefits and Berdin and her children
were entitled to the remaining half, each to receive an equal share of 1/16.
> Berdin went to CFI on appeal. CFI affirmed GSIS decision.

Issue:
To whom should the retirement insurance benefits be paid?

Held:
Both families are entitled to half of the retirement benefits.
The beneficiary named in the life insurance does NOT automatically become the
beneficiary in the retirement insurance. When Consuegra, during the early part of 1943,
or before 1943, designated his beneficiaries in his life insurance, he could NOT have
intended those beneficiaries of his life insurance as also the beneficiaries of his
retirement insurance because the provisions on retirement insurance under the GSIS
came about only when CA 186 was amended by RA 660 on June 18, 1951.

Sec. 11(b) clearly indicates that there is need for the employee to file an application for
retirement insurance benefits when he becomes a GSIS member and to state his
beneficiary. The life insurance and the retirement insurance are two separate and
distinct systems of benefits paid out from 2 separate and distinct funds.

In case of failure to name a beneficiary in an insurance policy, the proceeds will accrue to
the estate of the insured. And when there exists two marriages, each family will be
entitled to one-half of the estate.
  only GOLPEO and CHILDREN appealed claiming that:
Insurance Case Digest: Southern Luzon Employees' Ass. V. Golpeo, Et Al. (1954)
G.R. No. L-6114 October 30, 1954
Lessons Applicable: Invalid Designation (Insurance)
FACTS:
 Roman A. Concepcion listed as his beneficiaries Aquilina Maloles, Roman M.
Concepcion, Jr., Estela M. Concepcion, Rolando M. Concepcion and Robin M.
Concepcion for the death benefit of an association amounting to P2,505
 Two sets of claimants presented themselves:
 Juanita Golpeo, legal wife and her children, named beneficiaries by the deceased
 Marcelino and Josefina Concepcion intervened in their own right aligning
themselves Juanita Golpeo and her minor children
 Elsie Hicban, another common law wife and her child
 RTC:Aquilina Maloles and her children the sole beneficiaries
 Only the Juanita Golpeo and her minor children and the intervenors Marcelino and
Josefina Concepcion have appealed to this court
ISSUE: W/N Aquilina Molales common-law wife and her illegitimate children can claim
the benefits
HELD: YES.
 Juanita Golpeo, by her silence and actions, had acquiesced in the illicit relations
between her husband and appellee Aquilina Maloles
 new Civil Code recognized certain successional rights of illegitimate children
Separate Opinions:
 REYES, J.B.L., J., concurring
 I concur in the result for the reason that the contract here involved was perfected
before the new Civil Code took effect, and hence its provisions cannot be made to
apply retroactively
FACTS:
 Southern Luzon Employees' Association (SLEA) is composed of laborers and
employees of Tayabas Bus. Company and Batangas transportation Company
-Purpose: mutual aid of its members and their dependents in case of death.
 1949: SLEA adopted a resolution allowing a member to name as his
beneficiaries his common law wife and/or children with her.
 Roman Concepcion was a member of SLEA. He listed as his beneficiaries:
-AQUILINA MALOLES (common law wife)
-ROMAN, JR., ESTELA, ROLANDO, ROBIN (children with Aquilina)
 1950 Roman died.
 SLEA collected contributions from its members amounting to P2,505 for its
member, Roman.
-those who presented to claim
1.) Juanita Golpeo (legal wife)and children;
2.) Aquilina (common law wife) and children ( listed beneficiaries);
3.) Elsie Hicban (another common law wife) and child
 an action for interpleading was instituted by SLEA against the claimants.
 the court rendered the decision declaring Aquilina and her children the sole
beneficiaries of the sum P2,505.
a.) insurance law is not applicable since SLEA is a mutual benefit association
under Revised Administrative Code and not an insurance company.
b.) even if the agreement is a contract of insurance, the stipulation b/w SLEA
and the deceased is void for being contrary to law, moral, or public
policy because according to Art. 739 of NCC, a donation is void when made
b/w persons who are guilty of adultery or concubinage at the time of donation,
considering that AQUILINA is not the legal wife.
ISSUE: W/N the agreement is a contract of insurance
: W/N Aquilina and her children can be validly made as Roman's
beneficiaries.
HELD: The appealed decision was affirmed.
1.) SLEA IS NOT A REGULAR INSURANCE COMPANY BUT THE DEATH
BENEFIT IS ANALOGOUS TO AN INSURANCE. Revised Administrative Code
sec 1628 defines a mutual benefit association as "an association providing for
any method of accident or LIFE INSURANCE among its members out of dues
or assessments collected from the membership", thus, the lower court correctly
held that the agreement b/w SLEA and Roman partook of the nature of a
contract of insurance.
2.) Yes. The lower court invoked the pronouncements in the case of del val vs.
del val that, the agreement being analogous to a contract of insurance, then the
amount in question belonged exclusively to AQUILINA and her children and not
to the estate of Roman Concepcion, and that such proceeds are the separate
and individual property of the beneficiary, and not of the heirs of the person
insured (Roman in this case). This doctrine is supported by sec 428 of the Code
of Commerce which reads:
"The amounts which the underwriter must deliver to the person insured, in
fulfillment of the contract, shall be the property of the latter, even against the
claims of the legitimate heirs or creditors of any kind whatsoever of the person
who effected the insurance in favor of the former."
And even granting that the claim of the counsel for Golpeo that the provision of
the New Civil Code should be applied, their argument with regard to Aquilina’s
status shall still not affect the rights of Aquilina’s children who are also named
beneficiaries of Roman, because even the New Civil Code recognizes the
successional rights of illegitimate children.
 Heirs of Maramag v. Maramag whose benefit it is made unless otherwise specified in the policy. Pursuant thereto, it is
G.R. No. 181132 , June 5, 2009 obvious that the only persons entitled to claim the insurance proceeds are either the
insured, if still alive; or the beneficiary, if the insured is already deceased, upon the
FACTS: 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
The case stems from a petition filed against respondents with the RTC for revocation sue and claim from the insurer.
and/or reduction of insurance proceeds for being void and/or inofficious. The petition
alleged that: (1) petitioners were the legitimate wife and children of Loreto Maramag
(Loreto), while respondents were Loreto’s illegitimate family; (2) Eva de Guzman Petitioners are third parties to the insurance contracts with Insular and Grepalife and,
Maramag (Eva) was a concubine of Loreto and a suspect in the killing of the latter, thus, thus, are not entitled to the proceeds thereof. Accordingly, respondents Insular
she is disqualified to receive any proceeds from his insurance policies from Insular and Grepalife have no legal obligation to turn over the insurance proceeds to
Life Assurance Company, Ltd. (Insular) and Great Pacific Life Assurance Corporation petitioners. The revocation of Eva as a beneficiary in one policy and
(Grepalife) (3) the illegitimate children of Loreto—Odessa, Karl Brian, and Trisha her disqualification as such in another are of no moment considering that the designation
Angelie—were entitled only to one-half of the legitime of the legitimate children, thus, the of the illegitimate children as beneficiaries in Loreto’s insurance policies remains valid.
proceeds released to Odessa and those to be released to Karl Brian and Trisha Angelie Because no legal proscription exists in naming as beneficiaries the children of illicit
were inofficious and should be reduced; and (4) petitioners could not be deprived of their relationships by the insured, the shares of Eva in the insurance proceeds, whether
legitimes, which should be satisfied first. Insular admitted that Loreto misrepresented Eva forfeited by the court in view of the prohibition on donations under Article 739 of the Civil
as his legitimate wife and Odessa, Karl Brian, and Trisha Angelie as his legitimate Code or by the insurers themselves for reasons based on the insurance contracts, must
children, and that they filed their claims for the insurance proceeds of the insurance be awarded to the said illegitimate children, the designated beneficiaries, to the exclusion
policies; that when it ascertained that Eva was not the legal wife of Loreto, it disqualified of petitioners. It is only in cases where the insured has not designated any beneficiary, or
her as a beneficiary and divided the proceeds among Odessa, Karl Brian, and Trisha when the designated beneficiary is disqualified by law to receive the proceeds, that the
Angelie, as the remaining designated beneficiaries; and that it released Odessa’s share insurance policy proceeds shall redound to the benefit of the estate of the insured.
as she was of age, but withheld the release of the shares of minors Karl Brian and Trisha
Angelie pending submission of letters of guardianship. Insular alleged that the complaint
or petition failed to state a cause of action insofar as it sought to declare as void the
designation of Eva as beneficiary, because Loreto revoked her designation as such in
Policy No. A001544070 and it disqualified her in Policy No. A001693029; and insofar as
it sought to declare as inofficious the shares of Odessa, Karl Brian, and Trisha Angelie,
considering that no settlement of Loreto’s estate had been filed nor had the respective
shares of the heirs been determined. Insular further claimed that it was bound to honor
the insurance policies designating the children of Loreto with Eva as beneficiaries
pursuant to Section 53 of the Insurance Code. Grepalife alleged that Eva was not
designated as an insurance policy beneficiary; that the claims filed by Odessa,
Karl Brian, and Trisha Angelie were denied because Loreto was ineligible for insurance
due to a misrepresentation in his application form that he was born on December 10,
1936 and, thus, not more than 65 years old when he signed it in September 2001; that
the case was premature, there being no claim filed by the legitimate family of Loreto; and
that the law on succession does not apply where the designation of insurance
beneficiaries is clear.

ISSUE:

Whether or not illegitimate children can be beneficiaries in an insurance contract.

RULING:

Yes. 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
PHILAMCARE HEALTH SYSTEMS, INC. vs. COURT OF APPEALS (SAME CASE)
G.R. No. 125678, March 18, 2002 (YNARES-SANTIAGO, J.)
FACTS: Ernani Trinos applied for a health care coverage with Philamcare Health
Systems, Inc. To the question ‘Have you or any of your family members ever
consulted or been treated for high blood pressure, heart trouble, diabetes, cancer,
liver disease, asthma or peptic ulcer?’, Ernani answered ‘No’. Under the agreement,
Ernani is entitled to avail of hospitalization benefits and out-patient benefits. The
coverage was approved for a period of one year from March 1, 1988 to March 1,
1989. The agreement was however extended yearly until June 1, 1990 which
increased the amount of coverage to a maximum sum of P75,000 per disability.
During the period of said coverage, Ernani suffered a heart attack and was confined
at the Manila Medical Center (MMC) for one month. While in the hospital, his wife
Julita tried to claim the benefits under the health care agreement. However, the
Philamcare denied her claim alleging that the agreement was void because Ernani
concealed his medical history. Doctors at the MMC allegedly discovered at the time
of Ernani’s confinement that he was hypertensive, diabetic and asthmatic, contrary
to his answer in the application form. Thus, Julita paid for all the hospitalization
expenses.
After Ernani was discharged from the MMC, he was attended by a physical
therapist at home. Later, he was admitted at the Chinese General Hospital. Due to
financial difficulties, however, respondent brought her husband home again. In the
morning of April 13, 1990, Ernani had fever and was feeling very weak.
Respondent was constrained to bring him back to the Chinese General Hospital
where he died on the same day.
Julita filed an action for damages and reimbursement of her expenses plus moral
damages attorney’s fees against Philamcare and its president, Dr. Benito Reverente.
The Regional Trial court or Manila rendered judgment in favor of Julita. On appeal,
the decision of the trial court was affirmed but deleted all awards for damages and
absolved petitioner Reverente. Hence, this petition for review raising the primary
argument that a health care agreement is not an insurance contract; hence the
“incontestability clause” under the Insurance Code does not apply.
ISSUES:
(1) Whether or not the health care agreement is not an insurance contract
(2) Whether or not there is concealment of material fact made by Ernani
HELD:
(1)YES. Section2 (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.
Section 3 of the Insurance Code states that any contingent or unknown event,
whether past or future, which my damnify a person having an insurable against
him, may be insured against. Every person has an insurable interest in the life and
health of himself.
Section 10 provides that every person has an insurable interest in the life and
health (1) of himself, of his spouse and of his children.
The insurable interest of respondent’s husband in obtaining the health care
agreement was his own health. The health care agreement was in the nature of
non-life insurance, which is primarily a contract of indemnity. Once the member
incurs hospital, medical or any other expense arising from sickness, injury or other
stipulated contingent, the health care provider must pay for the same to the extent
agreed upon under the contract.
(2) NO. The answer assailed by petitioner was in response to the question relating
to the medical history of the applicant. This largely depends on opinion rather than
fact, especially coming from respondent’s husband who was not a medical doctor.
Where matters of opinion or judgment are called for answers made I good faith and
without intent to deceive will not avoid a policy even though they are untrue.
The fraudulent intent on the part of the insured must be established to warrant
rescission of the insurance contract. Concealment as a defense for the health care
provider or insurer to avoid liability is an affirmative defense and the duty to
establish such defense by satisfactory and convincing evidence rests upon the
provider or insurer. In any case, with or without the authority to investigate,
petitioner is liable for claims made under the contract. Having assumed a
responsibility under the agreement, petitioner is bound to answer to the extent
agreed upon. In the end, the liability of the health care provider attaches once the
member is hospitalized for the disease or injury covered by the agreement or
wherever he avails of the covered benefits which he has prepaid.
Being a contract of adhesion, the terms of an insurance contract are to be
construed strictly against the party which prepared the contract – the insurer. By
reason of the exclusive control of the insurance company over the terms and
phraseology of the insurance contract, ambiguity must be strictly interpreted
against the insurer and liberally in favor of the insured, especially to avoid
forfeiture. This is equally applicable to Health Care Agreements.
cancellation of health care agreements as in insurance policies require the
concurrence of the following conditions: - none of these was made
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the policy of one
or more of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown in
the policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code
and upon request of insured, to furnish facts on which cancellation is based.
When the terms of insurance contract contain limitations on liability, courts should
construe them in such a way as to preclude the insurer from non-compliance with
his obligation.
Being a contract of adhesion, the terms of an insurance contract are to be
construed strictly against the party which prepared the contract - the insurer.
Sec. 10. Every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in part for education or support,
or in whom he has a pecuniary interest;
(3) of any person under a legal obligation to him for the payment of money,
respecting property or service, of which death or illness might delay or prevent the
performance; and
(4) of any person upon whose life any estate or interest vested in him depends.

not the legal wife (deceased was previously married to another woman who was
still alive)
health care agreement is in the nature of a contract of indemnity.
 YES. The decision appealed from is affirmed. Costs against appellants Nario. The appeal
DELFIN NARIO vs. PHILIPPINE AMERICAN LIFE INSURANCE COMPANY is unmeritorious.
G.R. No. L-22796, June 26, 1967, EN BANC (REYES J.B.L., J.)
SC agreed with the lower court that the vested interest or right of the beneficiaries in the
policy should be measured on its full face value and not on its cash surrender value, for
FACTS:
in case of death of the insured, said beneficiaries are paid on the basis of its face value
and in case the insured should discontinue paying premiums, the beneficiaries may
Mrs. Alejandra Santos-Mario was, upon application, issued, on June 12, 1959, by the
continue paying it and are entitled to automatic extended term or paid-up insurance
Philippine American Life Insurance Co., a life insurance policy under a 20-year
options, etc. and that said vested right under the policy cannot be divisible at any given
endowment plan, with a face value of P5,000.00. She designated thereon her husband,
time. SC likewise agreed with the conclusion of the lower court that the proposed
Delfin Nario, and their unemancipated minor son, Ernesto Nario, as her irrevocable
transactions in question constitute acts of disposition or alienation of property rights and
beneficiaries. About the middle of June, 1963, She then applied for a loan on the above
not merely of management or administration because they involve the incurring or
policy with PHILAMLIFE w/c she is entitled to as policy holder, after the policy has been
termination of contractual obligations. The full face value of the policy is P5,000.00 and
in force for 3 years. The purpose of such loan was for the school expenses
the minor’s vested interest therein, as one of the two (2) irrevocable beneficiaries,
of Ernesto.The application bore the written signature and consent of Delfin Nario in two
consists of one-half (½) of said amount or P2,500.00. Applying laws (CC and rules of
capacities first, as one of the irrevocable beneficiaries of the policy; and the other, as the
Court),the father a must file a petition for guardianship and post a guardianship bond.
father-guardian of said minor son and irrevocable beneficiary, Ernesto Nario, and as the
In the case at bar, the father did not file any petition for guardianship nor post a
legal administrator of the minor’s properties, pursuant to Article 320 of the Civil Code of
guardianship bond, and as such cannot possibly exercise the powers vested on him as
the Philippines.
legal administrator of the minor’s property. The consent gives for and in behalf of the son
without prior court authorization to the loan application and the surrender was insufficient
PHILAMLIFE denied the loan application contending that written consent of the minor
and ineffective and PHILAMLIFE was justified in disapproving the said applications.
son must not only be given by his father as legal guardian but it must also be authorized
Assuming that the property of the ward was less than P2,000, the effect would be the
by the court in a competent guardianship proceeding. Mrs. Nario then signified her
same, since the parents would only be exempted from filing a bond and judicial
decision to surrender her policy and demand its cash value which then amounted to P
authorization, but their acts as legal administrators are only limited to acts of
520. The Insurance Company also denied the surrender of the policy on the same
management or administration and not to acts of encumbrance or disposition
ground as that given in disapproving the loan application. Mrs. Nario sued PHILAMLIFE
praying that the latter grant their loan application and/or accept the surrender of said
policy in exchange for its cash value. On September 10, 1963, Mrs. Nario and her
husband, Delfin, sued PHILAMLIFE praying that the latter grant their loan application
and/or accept the surrender of said policy in exchange for its cash value. Defendant
PHILAMLIFE contends that the loan application and the surrender of the policy involved
acts of disposition and alienation of the property rights of the minor, said acts are not
within the power of administrator granted under Art. 320 in relation to art. 326 CC, hence,
mere written consent given by the father-guardian, for and in behalf of the minor son,
without any court authority therefor, was not a sufficient compliance of the law.

The lower court ruled agreeing with defendant’s contention, sustained defendant’s
affirmative defense, and rendered, on January 28, 1964, its decision dismissing plaintiffs’
complaint. Unable to secure reconsideration of the trial Court’s ruling, petitioner appealed
directly to this Court, contending that the minor’s interest amounted to only one-half of
the policy’s cash surrender value of P520.00; that under Rule 96, Section 2 of the
Revised Rules of Court, payment of the ward’s debts is within the powers of the
guardian, where no realty is involved; hence, there is no reason why the father may not
validly agree to the proposed transaction on behalf of the minor without need of court
authority.

ISSUE:
Whether or not PHILAMLIFE was justified in refusing to grant the loan application and
the surrender of the policy.

HELD:
Philam v Pineda G.R. No. L-54216 July 19, 1989 Therefore, the parent-insured cannot exercise rights and/or privileges pertaining to the
J. Paras insurance contract, for otherwise, the vested rights of the irrevocable beneficiaries would
be rendered inconsequential.

Facts:
Pineda procured an ordinary life insurance policy from the petitioner company and
designated his wife and children as irrevocable beneficiaries.
He then filed a petition to amend the designation of the beneficiaries in his life policy from
irrevocable to revocable.
The judge granted the request.
Petitioner promptly filed a motion but was denied. Hence, this petition.
Of equal importance is the well-settled rule that the contract between the parties is the
law binding on both of them and for so many times, this court has
consistently issued pronouncements upholding the validity and effectivity of contracts.
Likewise, contracts which are the private laws of the contracting parties should be fulfilled
according to the literal sense of their stipulations, for contracts are obligatory, no matter
in what form they may be, whenever the essential requisites for their validity are present
The change in the designation of was not within the contemplation of the parties. The
lower court instead made a new contract for them. It acted in excess of its authority when
it did so.

Issues:
1. WON the designation of the irrevocable beneficiaries could be changed or amended
without the consent of all the irrevocable beneficiaries.

2. WON the irrevocable minor beneficiaries could give consent to the change in
designation

Held: No to both. Petition dismissed.

Ratio:

Under the Insurance Act, the beneficiary designated in a life insurance contract cannot
be changed without the consent of the beneficiary because he has a vested interest in
the policy.
There was an express stipulation to this effect: “It is hereby understood and agreed that,
notwithstanding the provisions of this policy to the contrary, inasmuch as the designation
of the primary/contingent beneficiary/beneficiaries in this Policy has been made without
reserving the right to change said beneficiary/ beneficiaries, such designation may not be
surrendered to the Company, released or assigned; and no right or privilege under the
Policy may be exercised, or agreement made with the Company to any change in or
amendment to the Policy, without the consent of the said beneficiary/beneficiaries.”
The alleged acquiescence of the six (6) children beneficiaries of the policy cannot be
considered an effective ratification due to the fact that they were minors. Neither could
they act through their father insured since their interests are quite divergentfrom one
another.
 been allowed the continued use of the same as the site of its operation as an educational
institution. Harvardian therefore would have been directly benefited by the preservation
Harvardian Colleges v. Country Bankers Insurance Corp. of the property, and certainly suffered a pecuniary loss by its being burned.

1 CARA 2

Facts:

> Harvardian is a family corporation, the stockholders of which are Ildefonso Yap,
Virginia King Yap and their children.

> Prior to Aug. 9, 1979, an agent of Country Bankers proposed to Harvardian to insure
its school building. Although at first reluctant, Harvardian agreed.

> Country Banks sent an inspector to inspect the school building and agreed to insure
the same for P500,000 for which Harvardian paid an annual premium of P2,500.

> On Aug. 9, 1979, Country Bankers issued to Harvardian a fire insurance policy. On
March 12, 1980, (39 days before I was born… hehehehe )during the effectivity of said
insurance policy, the insured property was totally burned rendering it a total loss.
> A claim was made by plaintiff upon defendant but defendant denied it contending that
plaintiff had no insurable interest over the building constructed on the piece of land in the
name of the late Ildefonso Yap as owner.
> It was contended that both the lot and the building were owned by Ildefonso Yap and
NOT by the Harvardian Colleges.

Issue:

Whether or not Harvardian colleges has a right to the proceeds.

Held:

Harvardian has a right to the proceeds.

Regardless of the nature of the title of the insured or even if he did not have title to the
property insured, the contract of fire insurance should still be upheld if his interest in or
his relation to the property is such that he will be benefited in its continued existence or
suffer a direct pecuniary loss from its destruction or injury. The test in determining
insurable interest in property is whether one will derive pecuniary benefit or advantage
from its preservation, or will suffer pecuniary loss or damage from its destruction,
termination or injury by the happening of the event insured against.

Here Harvardian was not only in possession of the building but was in fact using the
same for several years with the knowledge and consent of Ildefonso Yap. It is
reasonably fair to assume that had the building not been burned, Harvardian would have
COMMERCIAL UNION ASSURANCE COMPANY LIMITED vs.
LEPANTOCONSOLIDATED MINING COMPANY and THE HONORABLE COURT OF
APPEALS

FACTS:

This is a petition for review on certiorari of the resolution of the Court of Appeals dated
February 26,1976 in CA-G.R. No. 55948-R entitled "Lepanto Consolidated Mining
Company vs. Commercial UnionAssurance Co., Ltd., et al." denying petitioners' motion
for reconsideration of the resolution of November 25, 1975 which actually set aside its
earlier decision of May 23, 1975.

ISSUE:

Whether or not the petition for review on certiorari will prosper.

HELD:

The practice of the Supreme Court in disposing of petitions for review by dismissing them
for lack of merit in minute resolutions is a practice that has been patterned after the
United States Supreme Courtwherein petitions for review are often merely ordered
"dismissed"; it has helped the Court in alleviatingits heavy docket. (Novino, et al. vs. CA,
et al., 8 SCRA 279). In the aforecited case of Novino, the SupremeCourt, speaking thru
Chief Justice Bengzon, said:In connection with Identical short resolutions, the same
question has been raised before; and We heldthat these "resolutions" are not "decisions"
within the above constitutional requirement. They merelyhold that the petition for review
should not be entertained in view of the provisions of Rule 46 of theRules of Court and
even ordinary lawyers have all this time so understood it. The petition to review
thedecision of the Court of Appeals is not a matter of right but of sound judicial discretion
and so there isno need fully to explain the court's denial. For one thing, the facts and the
law are already mentioned inthe Court of Appeal's opinion. Petition denied.

Harding v. Commercial Union Assurance Company- Willful Misstatement
38 PHIL 464
Facts:
> Henry Harding bought a car for 2T in 1915. He then gave the car to his wife Mrs.
Harding.
> While Mrs. Harding was having the car repaired at the Luneta Garage (Luneta was an
agent of Smith Bell and Co., which in turn is Commercial Union’s agent), the latter
induced Mrs. Harding to insure the care with Commercial.
> Mrs. Harding agreed, and Smith Bell sent an agent to Luneta Garage, who together
with the manager of LUneta, appraised the car and declared that its present value was
P3T. This amt was written in the proposal form which Mrs. Harding signed.
> Subsequently, the car was damaged by fire. Commercial refused to pay because the
car’s present value was only 2.8T and not 3T.
HELD: Yes. Commercial Union is not the proper party to attack the validity of the gift
made by Mr. Harding to his wife.
The statement made by Mrs. Harding as to the cost of the car is not a warranty. The
evidence does not prove that the statement is false. In fact, the evidence shows that the
cost of the car is more than the price of the insurance. The car was bought for P2,800.00
and then thereafter, Luneta Garage made some repairs and body paints which amounted
to P900.00. Mr. Server attested that the car is as good as new at the time the insurance
was effected.
Commercial Union, upon the information given by Mrs. Harding, and after an inspection
of the automobile by its examiner, having agreed that it was worth P3,000, is bound by
this valuation in the absence of fraud on the part of the insured. All statements of value
are, of necessity, to a large extent matters of opinion, and it would be outrageous to hold
that the validity of all valued policies must depend upon the absolute correctness of such
estimated value.

Issue:
Whether or not Commercial is liable.

Held:
Commercial is liable.

Where it appears that the proposal form, while signed by the insured was made out by
the person authorized to solicit the insurance (Luneta and Smith Bell) the facts stated in
the proposal, even if incorrect, will not be regarded as warranted by the insured, in the
absence of willful misstatement. Under such circumstances, the proposal is to be
regarded as the act of the insurer.

In February 1916, Mrs. Harding applied for car insurance for a Studebaker she received
as a gift from her husband. She was assisted by Smith, Bell, and Co. which was the duly
authorized representative (insurance agent) of Commercial Union Assurance Company
in the Philippines. The car’s value was estimated with the help of an experienced
mechanic (Mr. Server) of the Luneta Garage. The car was bought by Mr. Harding for
P2,800.00. The mechanic, considering some repairs done, estimated the value to be at
P3,000.00. This estimated value was the value disclosed by Mrs. Harding to Smith, Bell,
and Co. She also disclosed that the value was an estimate made by Luneta Garage
(which also acts as an agent for Smith, Bell, and Co).

In March 1916, a fire destroyed the Studebaker. Mrs. Harding filed an insurance claim
but Commercial Union denied it as it insisted that the representations and averments
made as to the cost of the car were false; and that said statement was a warranty.
Commercial Union also stated that the car does not belong to Mrs. Harding because
such a gift [from her husband] is void under the Civil Code.

ISSUE: Whether or not Mrs. Harding is entitled to the insurance claim.

Antonina Lampano vs Placida Jose  Where different persons have different interests in the same property, the insurance
taken by one in his own right and in his own interest does not in any way insure to
In 1912, Placida Jose contracted with Mariano Barreto for the construction of a house the benefit of another
worth P6,000.00. While the house is under construction, Barreto, with the consent of  A contract of insurance made for the insurer's (insured) indemnity only, as where
Jose, took out an insurance policy in his own name on the said building. Barreto paid the there is no agreement, express or implied, that it shall be for the benefit of a third
corresponding premium. person, does not attach to or run with the title to the insured property on a transfer
thereof personal as between the insurer and the insured.
Later, Jose sold the house to Antonina Lampano for P6,000.00. In 1913, the house was
 Barretto had an insurable interest in the house. He construed the building, furnishing
gutted by fire. Barreto was able to collect P3,600.00 from the insurance policy. Lampano
all the materials and supplies, and insured it after it had been completed
then demanded that Barreto hand her over the proceeds because she alleged that Jose
verbally agreed to transfer to her the said insurance policy along with the property.
ISSUE: Whether or not Lampano has a right to collect from the insurance policy.
HELD: No. In the case at bar, Barretto assumed the responsibility for the insurance. The
premiums were paid by him without any agreement or right to recoup the amount paid
therefor should no loss result to the property. It would not, therefore, be in accordance
with law and his contractual obligations to compel him to account for the insurance
money, or any part thereof, to Lampano, who assumed no risk whatever. It is well settled
that a policy of insurance is a distinct independent contract between the insured and
insurers, and third persons have no right either in a court of equity, or in a court of law, to
the proceeds of it, unless there be some contract or trust, expressed or implied, between
the insured and third persons.
As to the question whether or not Barreto has an insurable interest on the house, the
answer is in the affirmative. He constructed the building, furnishing all the materials and
supplies, and insured it after it had been completed. Further, it appears that Jose has not
fully paid Barreto as she has an outstanding balance of P2,000.00.

FACTS:

 Mariano R. Barretto, constructed a house for Placida A. Jose sold the house
to Antonina Lampano for P6,000
 The house was destroyed by fire during which Lampano still owed Jose P2,000 as
evidenced by a promissory note. Jose also owed Barretto P2,000 for the
construction.
 After the completion of the house and before it was destroyed, Mariano R. Barretto
took out an insurance policy upon it in his own name, with the consent of Placida A.
Jose, for the sum of P4,000. After its destruction, he collected P3,600 from the
insurance company, having paid in premiums the sum of P301.50
 Lampano filed a complaint against Barreto and Jose alleging that Jose in a verbal
agreement told her that the policy will be delivered to her so she should collected
P3,600 from each of them
 RTC: favored Jose ordering Barreto to pay him P1,298.50 and offsetting the P2,000
 Barreto alone appealed
ISSUE: W/N Barreto had insurable interest in the house and could insure it for his it for
his own protection

HELD: YES. reversed and Barretto is absolved

Insurance Case Digest: Gaisano Cagayan, Inc. V. Insurance Company Of North
America (2006)
G.R. No. 147839 June 8, 2006
Lessons Applicable: Existing Interest (Insurance)
Laws Applicable: Article 1504,Article 1263, Article 2207 of the Civil Code, Section 13 of
Insurance Code
FACTS:
 Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans.
while Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing
trademarks owned by Levi Strauss & Co
 IMC and LSPI separately obtained from Insurance Company of North America fire
insurance policies for their book debt endorsements related to their ready-made
clothing materials which have been sold or delivered to various customers and
dealers of the Insured anywhere in the Philippines which are unpaid 45 days after
the time of the loss
 February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro City, owned by
Gaisano Cagayan, Inc., containing the ready-made clothing materials sold and
delivered by IMC and LSPI was consumed by fire.
 February 4, 1992: Insurance Company of North America filed a complaint for
damages against Gaisano Cagayan, Inc. alleges that IMC and LSPI filed their claims
under their respective fire insurance policies which it paid thus it was subrogated to
their rights
 Gaisano Cagayan, Inc: not be held liable because it was destroyed due to fortuities
event or force majeure
 RTC: IMC and LSPI retained ownership of the delivered goods until fully paid, it
must bear the loss (res perit domino)
 CA: Reversed - sales invoices is an exception under Article 1504 (1) of the Civil
Code to res perit domino
ISSUE: W/N Insurance Company of North America can claim against Gaisano Cagayan
for the debt that was isnured
HELD: YES. petition is partly GRANTED. order to pay P535,613 is DELETED
 insurance policy is clear that the subject of the insurance is the book debts and
NOT goods sold and delivered to the customers and dealers of the insured
 ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is
transferred to the buyer the goods are at the buyer's risk whether actual delivery has
been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the ownership in the goods has been
retained by the seller merely to secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk from the time of such delivery;
 IMC and LSPI did not lose complete interest over the goods. They have an insurable
interest until full payment of the value of the delivered goods. Unlike the civil law
concept of res perit domino, where ownership is the basis for consideration of who
bears the risk of loss, in property insurance, one's interest is not determined by
concept of title, but whether insured has substantial economic interest in the
property
 Section 13 of our Insurance Code defines insurable interest as "every interest in
property, whether real or personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril might directly damnify the insured."
Parenthetically, under Section 14 of the same Code, an insurable interest in property
may consist in: (a) an existing interest; (b) an inchoate interest founded on existing
interest; or (c) an expectancy, coupled with an existing interest in that out of which
the expectancy arises.
 Anyone has an insurable interest in property who derives a benefit from its existence
or would suffer loss from its destruction.
 it is sufficient that the insured is so situated with reference to the property that he
would be liable to loss should it be injured or destroyed by the peril against which it
is insured
 an insurable interest in property does not necessarily imply a property interest in, or
a lien upon, or possession of, the subject
 matter of the insurance, and neither the title nor a beneficial interest is requisite to
the existence of such an interest
 insurance in this case is not for loss of goods by fire but for petitioner's accounts
with IMC and LSPI that remained unpaid 45 days after the fire - obligation is
pecuniary in nature
 obligor should be held exempt from liability when the loss occurs thru a fortuitous
event only holds true when the obligation consists in the delivery of a determinate
thing and there is no stipulation holding him liable even in case of fortuitous event
 Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not extinguish the obligation (Genus
nunquan perit)
 The subrogation receipt, by itself, is sufficient to establish not only the relationship of
respondent as insurer and IMC as the insured, but also the amount paid to settle the
insurance claim
 Art. 2207. If the plaintiff's property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person who has violated the contract.
 As to LSPI, no subrogation receipt was offered in evidence.
 Failure to substantiate the claim of subrogation is fatal to petitioner's case for
recovery of the amount of P535,613
ONG LIM SING, JR. vs. FEB LEASING AND FINANCE CORPORATION insurable interest in property is the extent to which the insured might be damnified by
G.R. No. 168115 - June 8, 2007 loss or injury thereof. It cannot be denied that JVL will be directly damnified in case of
loss, damage, or destruction of any of the properties leased.
FACTS:
On March 9, 1995, FEB Leasing and Finance Corporation entered into a lease of
equipment and motor vehicles with JVL Food Products. On the same date, Vicente Ong
Lim Sing, Jr. executed an Individual Guaranty Agreement with FEB to guarantee the
prompt and faithful performance of the terms and conditions of the aforesaid lease
agreement. Corresponding Lease Schedules with Delivery and Acceptance Certificates
over the equipment and motor vehicles formed part of the agreement. Under the
contract, JVL was obliged to pay FEB an aggregate gross monthly rental of One Hundred
Seventy Thousand Four Hundred Ninety-Four Pesos (P170,494.00).

JVL defaulted in the payment of the monthly rentals. As of July 31, 2000, the amount in
arrears, including the penalty charges and insurance premiums, amounted to Three
Million Four Hundred Fourteen Thousand Four Hundred Sixty-Eight and 75/100 Pesos
(P3,414,468.75). On August 23, 2000, FEB sent a letter to JVL demanding payment of
the said amount. However, JVL failed to pay.

On December 6, 2000, FEB filed a Complaint with the Regional Trial Court of Manila for
sum of money, damages, and replevin against JVL, Lim, and John Doe.

In an Amended Answer, JVL and Lim admitted the existence of the lease agreement but
asserted that it is in reality a sale of equipment on instalment basis, with FEB acting as
the financier. On November 22, 2002, the trial court ruled in favor of JVL and Lim and
stressed the contradictory terms found in the lease agreement. The trial court stated,
among others, that if JVL and Lim (then defendants) were to be regarded as only a
lessee, logically the lessor who asserts ownership will be the one directly benefited or
injured and therefore the lessee is not supposed to be the assured as he has no
insurable interest.

On December 27, 2002, FEB filed its Notice of Appeal. Accordingly, on January 17,
2003, the court issued an Order elevating the entire records of the case to the Court of
Appeals. On March 15, 2005, the Court of Appeals issued its Decision declaring the
transaction between the parties as a financial lease agreement. The said decision
reversed and set aside the trial court’s decision dated November 22, 2002. Hence, Lim
filed the present Petition for Review on Certiorari.

ISSUE:
Whether or not petitioner has an insurable interest in the equipment and motor vehicles
leased.

RULING:
Yes.

The stipulation in Section 14 of the leased contract, that the equipment shall be insured
at the cost and expense of the lessee against loss, damage, or destruction from fire,
theft, accident, or other insurable risk for the full term of the lease, is a binding and valid
stipulation. Petitioner, as a lessee, has an insurable interest in the equipment and motor
vehicles leased. Section 17 of the Insurance Code provides that the measure of an

Insurance Case Digest: Traders Insurance & Surety Co. V. Golangco, Et Al (1954)
G.R. No. L-6442 Sep 21, 1954
Lessons Applicable: Existing Interest (Insurance)
Laws Applicable: Sec. 13 of the Insurance Code
FACTS:
 Tomas Lianco and the Archbishop entered into a contract of lease on a parcel of
landowned by church
 As lessee, Lianco erected a building on the leased portion of the church’s land.
 Lianco transferred ownership of this building to Kaw Eng
Si,who later transferred the same to Golangco.
 Transfers were made without the consent of the Archbishop
 The Archbishop filed an ejectment case against Lianco, who appears to be
occupants of the premises building with others paying rent to Golangco.
 The right of Golangco to receive rent on the building was judicially recognized in a
case decided between Lianco and others occupying the premises pursuant to a
compromise agreement.
 The Archbishop did not exercise his option to question Golangco’s rights as lessee
 April 7,1949: Golangco applied for fire insurance with Trader’s
Insurance and Surety Co.
 fire insurance policy states: "that all insurancecovered under said policy, includes
the 'rent or othersubject matter of insurance in respect of or inconnection with any
building or any property contained in any building"
 June 5, 1949: the building premises was burned so Golangco requested
Trader’s Insurance to pay the insurance amount of 10,000 including the amount of
rent P1,100 monthly.
 Trader’s insurance refused to pay the insurance for the rent averring that Golangco
has no insurable interest
ISSUE: W/N Golangco has insurable interest
on the rent of the building premises which may lawfully/validly be subject of insurance?
HELD: YES.
 Sec. 13 of the Insurance Code
Every interest in the property, whether real or personal, or any relation thereto, or liability
in respect thereof of such nature that a contemplated peril might directly damnify the
insured, is an insurable interest.
 Both at the time of the issuance of the policy and at the time of the fire,
Golangco was in legal possession of the premises, collecting rentals from its
occupant.
 The argument of Trader’s Insurance that a policy of insurance must specify the
interest of the insured in the property insured, if he is not the absolute owner thereof,
is not meritorious because it was the Trader’s, not Golangco, who prepared that
policy, and it cannot take advantage of its own acts to plaintiff's detriment; and, in
any case, this provisionwas substantially complied with by Golangco when he made
a full and clear statement of his interests to Trader's manager.
 The contract between Lianco and the Archbishop only forbade Lianco from
transferring 'his rights as LESSEE but the contracts Lianco made in favor of Kaw
Eng Siand plaintiff Golangco did not transfer such rights; hence no written consent
thereto was necessary. At worst, the contract would be voidable, but not a void
contract, at the option of the Archbishop and it does not appear that it was ever
exercised
Lopez v. Del Rosario
44 PHIL 98
Facts:
> Benita Del Rosario is the owner of a bonded warehouse in Manila where copra and
other merchandise are deposited.
> Among those who had copra deposited in the warehouse was Froilan Lopez, the
owner of 14 warehouse receipts with a declared value of P107,990.40 in his name.
> Del Rosario secured insurance on the warehouse and its contents with 5 different
insurance companies in the amount of P404,800.
> All policies were in the name of Del Rosario, except for one (with Nat’l Insurance Co.)
for 40T, in favor of Compania Copra de Tayabas.
> The warehouse and its contents were destroyed by fire. When Bayne, a fire loss
adjuster, failed to effect a settlement between the Insurance companies and Del Rosario,
the latter authorized Atty. Fisher to negotiate with the Companies.
> An agreement was reached to submit the matter to arbitration. The claims by different
people who had stored copra in the warehouse were settled with the exception of Friolan
Lopez.
> A case was filed in CFI by Lopez. The court awarded him the sum of P88,492.21 with
legal interest.
Issue:
Whether or not Del Rosario acted as the agent of Lopez in taking out the insurance on
the contents of the warehouse or whether she acted as the reinsurer of the copra.
Held:
She acted as the agent of Lopez.
The agency can be deduced from the warehouse receipts, the insurance policies and the
circumstances surrounding the transaction. Under any aspect, Del Rosario is liable. The
law is that a policy effected by a bailee and covering by its terms in his own property and
property held in trust, inures, in the event of loss, equally and proportionately to the
benefit of all owners of the property insured. Even if one secured insurance covering his
own goods and goods stored with him, and even if the owner of the stored goods did not
request or know the insurance, and did not ratify it before the payment of the loss, it has
been held by a reputable court that the warehouseman is liable to the owner of such
stored goods for his share.
In a case of contributing policies, adjustments of loss made by an expert or by a board of
arbitrators may be submitted to the court NOT as evidence of the facts stated therein, or
as obligatory, but for the purpose of assisting the court in calculating the amount of
liability
FACTS:
 Benita Quiogue de V. del Rosario (Mrs. del Rosario), owner of a bonded warehouse
where Froilan Lopez, holder or 14 waehouse receipts and Elias Zamora had their
copra deposited
 The warehouse recipts states an insurance of 1% their declared value which can be
increase or decrease by giving 1 month's notice in writing
 Lopez paid the insurance to May 18, 1920, but not thereafter
 June 6, 1920: the warehouse was destroyed by fire. Only copra worth P49,985 was
salvaged. At that time Lopez was still liable for the storage and insurance of
P315.90
 Mrs. Del Rosario submitted the insurance with the arbitrators and seems to have
satisfied all of the persons who had copra stored in her warehouse, including the
stockholders in the Compañia Coprera de Tayabas (whose stock she took over),
with the exception of Froilan Lopez
 Ineffectual attempts by Mrs. Del Rosario to effect a compromise with Lopez first for
P71,994, later raised to P72,724, and finally reduced to P17,000, were made. But
Lopez stubbornly contended, or, at least, his attorney contended for him, that he
should receive not a centavo less than P88,595.43 (from originally P107,990.40)
ISSUE: W/N Mrs. Del Rosario should be held liable to Lopez even if he has not paid the
insurance at the time of the fire
HELD: YES. entitled to P88,595.43 minus P7,185.88, his share of the expenses, minus
P315.90, due for insurance and storage, or approximately a net amount of P81,093.65,
with legal interest
San Miguel Brewery v. Law Union Rock Insurance Company - Insurance Proceeds
(SAME CASE)
40 PHIL 674
Facts:
> On Jan. 12, 1918, Dunn mortgaged a parcel of land to SMB to secure a debt of 10T.
> Mortgage contract stated that Dunn was to have the property insured at his own expense,
authorizing SMB to choose the insurers and to receive the proceeds thereof and retain so
much of the proceeds as would cover the mortgage debt.
> Dunn likewise authorized SMB to take out the insurance policy for him.
> Brias, SMB’s general manager, approached Law Union for insurance to the extent of 15T
upon the property. In the application, Brias stated that SMB’s interest in the property was
merely that of a mortgagee.
> Law Union, not wanting to issue a policy for the entire amount, issued one for P7,500 and
procured another policy of equal amount from Filipinas Cia de Seguros. Both policies were
issued in the name of SMB only and contained no reference to any other interests in the
propty. Both policies required assignments to be approved and noted on the policy.
> Premiums were paid by SMB and charged to Dunn. A year later, the policies were renewed.
> In 1917, Dunn sold the property to Harding, but no assignment of the policies was made to
the latter.
> Property was destroyed by fire. SMB filed an action in court to recover on the policies.
Harding was made a defendant because by virtue of the sale, he became the owner of the
property, although the policies were issued in SMB’s name.
> SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to
go to Harding.
> Insurance Companies contended that they were not liable to Harding because their liability
under the policies was limited to the insurable interests of SMB only.
> SMB eventually reached a settlement with the insurance companies and was paid the
balance of it’s mortgage credit. Harding was left to fend for himself. Trial court ruled against
Harding. Hence the appeal.
Issue: Whether or not the insurance companies are liable to Harding for the balance of the
proceeds of the 2 policies.
Held:
NO. Under the Insurance Act, the measure of insurable interest in the property is the extent to
which the insured might be daminified by the loss or injury thereof. Also it is provided in the IA
that the insurance shall be applied exclusively to the proper interest of the person in whose
name it is made. Undoubtedly, SMB as the mortgagee of the property, had an insurable
interest therein; but it could NOT, an any event, recover upon the two policies an amount in
excess of its mortgage credit.
By virtue of the Insurance Act, neither Dunn nor Harding could have recovered from the two
policies. With respect to Harding, when he acquired the property, no change or assignment of
the policies had been undertaken. The policies might have been worded differently so as to
protect the owner, but this was not done
If the wording had been: “Payable to SMB, mortgagee, as its interests may appear, remainder
to whomsoever, during the continuance of the risk, may become owner of the interest
insured”, it would have proved an intention to insure the entire interest in the property, NOT
merely SMB’s and would have shown to whom the money, in case of loss, should be paid.
Unfortunately, this was not what was stated in the policies.
If during the negotiation for the policies, the parties had agreed that even the owner’s interest
would be covered by the policies, and the policies had inadvertently been written in the form in
which they were eventually issued, the lower court would have been able to order that the
contract be reformed to give effect to them in the sense that the parties intended to be bound.
However, there is no clear and satisfactory proof that the policies failed to reflect the real
agreement between the parties that would justify the reformation of these two contracts.
ANOTHER DIGEST:
Lessons Applicable:
Mortgagor (Insurance)
Measure of Insurable Interest (Insurance)
Effect of Change of Interest in Thing Insured (Insurance)
Effect of transfer of thing insured (Insurance)
Laws Applicable: sec. 16,sec. 19 (now sec. 20),sec. 50,sec.55 (now sec. 58) of the Insurance
Code (all old law)
FACTS:
In the contract of mortgage, the owner P.D. Dunn had agreed, at his own expense, to insure
the mortgaged property for its full value and to indorse the policies in such manner as to
authorize the Brewery Company to receive the proceeds in case of loss and to retain such part
thereof as might be necessary to satisfy the remainder then due upon the mortgage debt.
Instead, however, of effecting the insurance himself Dunn authorized and requested the
Brewery Company to procure insurance on the property in the amount of P15,000 at Dunn's
expense.
San Miguel insured the property only as mortgagee.
Dunn sold the propert to Henry Harding. The insurance was not assigned by Dunn to Harding.
When it was destroyed by fire, the two companies settled with San Miguelto the extent of the
mortgage credit.
RTC: Absolved the 2 companies from the difference. Henry Harding is not entitled to the
difference between the mortgage credit and the face value of the policies.
Henry Harding appealed.
ISSUE:

1. W/N San Miguel has insurable interest as mortgagor only to the extent of the mortgage
credit - YES

2. W/N Harding has insurable interest as owner - NO

HELD: affirmed

section 19 of the Insurance Act:

a change of interest in any part of a thing insured unaccompanied by a corresponding change

of interest in the insurance, suspends the insurance to an equivalent extent, until the interest
in the thing and the interest in the insurance are vested in the same person

section 55:

the mere transfer of a thing insured does not transfer the policy, but suspends it until the same
person becomes the owner of both the policy and the thing insured

Undoubtedly these policies of insurance might have been so framed as to have been "payable
to the San Miguel Brewery, mortgagee, as its interest may appear, remainder to whomsoever,
during the continuance of the risk, may become the owner of the interest insured." (Sec 54,
Act No. 2427.) Such a clause would have proved an intention to insure the entire interest in
the property, not merely the insurable interest of the San Miguel Brewery, and would have
shown exactly to whom the money, in case of loss, should be paid. But the policies are not so
written.

The blame for the situation thus created rests, however, with the Brewery rather than with the
insurance companies, and there is nothing in the record to indicate that the insurance
companies were requested to write insurance upon the insurable interest of the owner or
intended to make themselves liable to that extent

If by inadvertence, accident, or mistake the terms of the contract were not fully set forth in the
policy, the parties are entitled to have it reformed. But to justify the reformation of a contract,
the proof must be of the most satisfactory character, and it must clearly appear that the
contract failed to express the real agreement between the parties

In the case now before us the proof is entirely insufficient to authorize reformation.
  Sec. 18. No contract or policy of insurance on property shall be enforceable except
Insurance Case Digest: Cha V. CA (1997)
for the benefit of some person having an insurable interest in the property insured
 A non-life insurance policy such as the fire insurance policy taken by petitioner-
G.R. No. 124520 August 18, 1997
spouses over their merchandise is primarily a contract of indemnity. Insurable
interest in the property insured must exist a t the time the insurance takes effect and
Lessons Applicable: Effect of Lack of Insurable Interest (Insurance)
at the time the loss occurs. The basis of such requirement of insurable interest in
Laws Applicable: Sec. 17, Sec. 18, Sec. 25 of the Insurance Code property insured is based on sound public policy: to prevent a person from taking out
an insurance policy on property upon which he has no insurable interest and
collecting the proceeds of said policy in case of loss of the property. In such a case,
the contract of insurance is a mere wager which is void under Section 25 of the
FACTS:
Insurance Code.

 Spouses Nilo Cha and Stella Uy-Cha and CKS Development Corporation entered a  SECTION 25. Every stipulation in a policy of Insurance for the payment of loss,

1 year lease contract with a stipulation not to insure against fire the chattels, whether the person insured has or has not any interest in the property insured, or

merchandise, textiles, goods and effects placed at any stall or store or space in the that the policy shall be received as proof of such interest, and every policy executed

leased premises without first obtaining the written consent and approval of the by way of gaming or wagering, is void

lessor. But it insured against loss by fire their merchandise inside the leased  Section 17. The measure of an insurable interest in property is the extent to which

premises for P500,000 with the United Insurance Co., Inc. without the written the insured might be damnified by loss of injury thereof

consent of CKS  The automatic assignment of the policy to CKS under the provision of the lease

 On the day the lease contract was to expire, fire broke out inside the leased contract previously quoted is void for being contrary to law and/or public policy. The

premises and CKS learning that the spouses procured an insurance wrote to United proceeds of the fire insurance policy thus rightfully belong to the spouses. The

to have the proceeds be paid directly to them. But United refused so CKS filed liability of the Cha spouses to CKS for violating their lease contract in that Cha

against Spouses Cha and United. spouses obtained a fire insurance policy over their own merchandise, without the

 RTC: United to pay CKS the amount of P335,063.11 and Spouses Cha to pay consent of CKS, is a separate and distinct issue which we do not resolve in this

P50,000 as exemplary damages, P20,000 as attorney’s fees and costs of suit case.

 CA: deleted exemplary damages and attorney’s fees

ISSUE: W/N the CKS has insurable interest because the spouses Cha violated the
stipulation

HELD: NO. CA set aside. Awarding the proceeds to spouses Cha.

 corporation of Wise & Co., Ltd., which represented the insurance company, have
Domingo Garcia vs The Hong Kong Fire and Marine Insurance Co., Ltd. been in the belief that it was not the building but the merchandise that was insured,
for the reason that none of them paid attention to the context of the policy.
45 Phil. 122 – Mercantile Law – Insurance Law – Insurable Interest – Mistake in the
issuance of an insurance policy Issue:
Whether or not Garcia can collect.
In March 1918, Domingo Garcia entered into an insurance contract with Hong Kong Fire
Insurance (HKFI). HKFI agreed to insure the merchandise of Garcia in the amount of
P15,000.00. In 1919, Garcia entered into a loan agreement with the Philippine National
Bank (PNB) for P6,000.00 and to secure the loan, Garcia mortgaged his merchandise Held:
which were housed in a building. Garcia also indorsed the insurance policy to PNB. In YES.
February 1920, while the insurance policy was still in force, a fire broke out which
destroyed the merchandise as well as the building which housed said merchandise, the The defense of the insurer is purely technical. The mistake was obviously on the part of
damage amounted to P20,000.00. When PNB filed an insurance claim, HKFI refused. the insurer when it issued a wrong policy. It cannot deny such allegation due to the fact
Apparently, the insurance policy issued in 1918 covered the building which housed the that it even confirmed with PNB the nature of said policy when it was endorsed. Garcia
merchandise and not the merchandise; that PNB is negligent for in the insurance policy could not have noticed the mistake due to his ignorance of the English language.
indorsed by Garcia to them, it clearly stated that it was the building which was insured.
ISSUE: Whether or not HKFI should pay the insurance claim.
HELD: Yes. Garcia does not own or claim any interest in the building because he does
not own the building which housed his merchandise. Further, in the letter sent by PNB to
HKFI in August 1919, after the indorsement, they notified HKFI of the fact that what was
mortgaged was the insured merchandise. Also, the fact that Garcia is a merchant, and
the bank knew him as such, and that he does not own the building housing his
merchandise indicates that there has been a mistake in the issuance of the policy. From
the circumstances surrounding the case, the Supreme Court looked upon the intent of
Garcia and that it was competently shown that Garcia wanted insurance on his
merchandise and the reason why he wanted it.

FACTS:

 August 30, 1919: Garcia executed a mortgage to the Philippine National Bank on the
merchandise allegedly insured by Hongkong Fire & Marine Insurance Co. and with
the consent of the latter endorsed the policy to PNB
 PNB informed Hongkong Fire through exchange of letters. Hongkong failed to notify
PNB or Garcia that it was for the building and not the merchandise.
 February 6, 1920: Fire took place and destroyed the merchandise so Garcia filed a
claim which was refused.
 RTC: favored Garcia
ISSUE: W/N

HELD: the lower court is affirmed

 as a matter of fair dealing, it should have notified the Bank that the policy was on the
building. It will be noted that the letters in question were all written several months
before the fire.
 Under these circumstances it seems clear and manifest that the insured, as well as
the manager of the National Bank at Legaspi, who was interested in the policy,
because the same secured a loan of P6,000 made to Domingo Garcia, and the