WEEK 2:
Insurance; Contracts of Adhesion; Words and Phrases; A contract of adhesion
TOPIC: Essential Elements, Applicability of the Civil Code, Subrogation
1. Petitioner contends that the earthquake shock endorsement rider
should be given precedence over the wording of the insurance policy
because the rider is the deliberate expression of the contracting
parties. Is the contention tenable?
- No.
GULF RESORTS, INC. VS. PHILIPPINE CHARTER INSURANCE
CORPORATION 458 SCRA 550 , MAY 16, 2005
1. Insurance; It is basic that all the provisions of the insurance policy should be
examined and interpreted in consonance with each other.-
It is basic that all the provisions of the insurance policy should be examined and
interpreted in consonance with each other. All its parts are reflective of the true
intent of the parties. The policy cannot be construed piecemeal. Certain
stipulations cannot be segregated and then made to control; neither do
particular words or phrases necessarily determine its character. Petitioner cannot
focus on the earthquake shock endorsement to the exclusion of the other
provisions. All the provisions and riders, taken and interpreted together,
indubitably show the intention of the parties to extend earthquake shock
coverage to the two swimming pools only.
2. Insurance; Elements; Words and Phrases; A contract of insurance is an
agreement whereby one undertakes for a consideration to indemnify another
2.
against loss, damage or liability arising from an unknown or contingent event.-
A careful examination of the premium recapitulation will show that it is the clear
intent of the parties to extend earthquake shock coverage only to the two
swimming pools. Section 2(1) of the Insurance Code defines a contract of
insurance as an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an un- known or
contingent event. Thus, an insurance contract exists where the following
elements concur: 1. The insured has an insurable interest; 2. The insured is
subject to a risk of loss by the happening of the designated peril; 3. The insurer
assumes the risk; 4. Such assumption of risk is part of a general scheme to
distribute actual losses among a large group of persons bearing a similar risk;
and 5. In consideration of the insurer’s promise, the insured pays a premium.
3. Insurance; Elements; Words and Phrases; Premium; An insurance premium is
the consideration paid an insurer for undertaking to indemnify the insured
against a specified peril.-
An insurance premium is the consideration paid an insurer for undertaking to
indemnify the insured against a specified peril. In fire, casualty, and marine
insurance, the premium payable becomes a debt as soon as the risk attaches. In
the subject policy, no premium payments were made with regard to earthquake
shock coverage, except on the two swimming pools. There is no mention of any
premium payable for the other resort properties with regard to earthquake
shock. This is consistent with the history of petitioner’s previous insurance
policies from AHAC-AIU.
4.
is one wherein a party, usually a corporation, prepares the stipulations in the
contract, while the other party merely affixes his signature or his “adhesion”
thereto; The Supreme Court will only rule out blind adherence to terms where
facts and circumstances will show that they are basically one-sided.-
In sum, there is no ambiguity in the terms of the contract and its riders.
Petitioner cannot rely on the general rule that insurance contracts are contracts
of adhesion which should be liberally construed in favor of the insured and
strictly against the insurer company which usually prepares it. A contract of
adhesion is one wherein a party, usually a corporation, prepares the stipulations
in the contract, while the other party merely affixes his signature or his
“adhesion” thereto. Through the years, the courts have held that in these type of
contracts, the parties do not bargain on equal footing, the weaker party’s
participation being reduced to the alternative to take it or leave it. Thus, these
contracts are viewed as traps for the weaker party whom the courts of justice
must protect. Consequently, any ambiguity therein is resolved against the
insurer, or construed liberally in favor of the insured. The case law will show that
this Court will only rule out blind adherence to terms where facts and
circumstances will show that they are basically one-sided. Thus, we have called
on lower courts to remain careful in scrutinizing the factual circumstances behind
each case to determine the efficacy of the claims of contending parties. In
Development Bank of the Philippines v. National Merchandising Corporation, et
al., the parties, who were acute businessmen of experience, were presumed to
have assented to the assailed documents with full knowledge.
Petitioner raises the argument that a health care agreement is not a
health care contract; hence the incontestability clause under the
Insurance Code does not apply. Decide.
PHILAMCARE HEALTH SYSTEMS, INC. VS. COURT OF APPEALS 379
SCRA 356 , MARCH 18, 2002
1. Insurance; Elements; Words and Phrases; A contract of insurance is an
agreement whereby one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event.-
Section 2 (1) of the Insurance Code defines a contract of insurance as an
agreement whereby one undertakes for a consideration to indemnify another
against loss, damage or liability arising from an unknown or contingent event. An
insurance contract exists where the fol- lowing elements concur: 1. The insured
has an insurable interest; 2. The insured is subject to a risk of loss by the
happening of the designated peril; 3. The insurer assumes the risk; 4. Such
assumption of risk is part of a general scheme to distribute actual losses among
a large group of persons bearing a similar risk; and 5. In consideration of the
insurer’s promise, the insured pays a premium.
2. Insurance; Every person has an insurable interest in the life and health of
himself.-
 Section 3 of the Insurance Code states that any contingent or unknown event,
whether past or future, which may damnify a person having an insurable interest
against him, may be insured against. Every person has an insurable interest in
the life and health of himself. Section 10 provides: 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.
3. Insurance; Health Care Agreements; A health care agreement is in the nature
of non-life insurance, which is primarily a contract of indemnity.-
In the case at bar, 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.
3. Buenaventura obtained a full life insurance policy from Insular for ___
with a rider of accidental death benefits for the same amount. He
designated Carponia Ebrado, his live-in partner as the beneficiary,
referring to her as her wife. When Buenaventura died, Pascuala filed as
the widow of the deceased. Will the claim prosper?
-Yes, the claim will prosper. Pascuala, being the wife of the deceased, may claim
the benefits.
THE INSULAR LIFE ASSURANCE COMPANY, LTD. VS. EBRADO 80 SCRA
181 , OCTOBER 28, 1977
1. Commercial Law; Insurance; Insurance Code; Word “Interest” in Sec. 50 of
Insurance Act which provides that insurance shall be applied exclusively to the
proper interest of the person in whose name it is made refers only to the insured
and not to the beneficiary; contract of insurance personal in character.-
Section 50 of the Insurance Act which provides that “(t)he insurance shall be
applied exclusively to the proper interest of the person in whose name it is
made” cannot be validly seized upon to hold that the same includes the
beneficiary. The word “interest” highly suggests that the provision refers only to
the “insured” and not 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.
2. Commercial Law; Insurance; On matters not otherwise specifically provided
for by the Insurance Law, the contract of life insurance is governed by general
rules of civil law.-
Rather the general rules of civil law should be applied to resolve this void in the
Insurance Law. Article 2011 of the New Civil Code states: “The contract of
insurance is governed by special laws. Matters not expressly provided for in such
special laws shall be regulated by this Code.” 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 forbiden from receiving any donation under
Article 739 cannot be named beneficiary of a life insurance policy by the person
who cannot make a donation to him.” Common-law spouses are, definitely,
barred from receiving donations from each other.
3. Commercial Law; Insurance; Life Insurance policy no different from civil
donation as far as beneficiary is concerned; Both are founded on liberality;
Common-law spouses designated as beneficiary barred from receiving life
insurance proceeds from a legally married person; Reasons therefor.-
In essence, a life insurance policy is no different from a civil donation insofar as
the beneficiary is concerned. Both are founded upon the same consideration:
liberality. A beneficiary is like a donee, because from the premiums of the policy
which the insured pays out of liberality, the beneficiary will receive the proceeds
or profits of said insurance. As a consequence, the proscription in Article 739 of
the new Civil Code should equally operate in life insurance contracts. The
mandate of Article 2012 cannot be laid aside: any person who cannot receive a
donation cannot be named as beneficiary in the life insurance policy of the
person who cannot make the donation. Under American law, a policy of life
insurance is considered as a testament and in construing it, the courts will, so far
as possible treat it as a will and determine the effect of a clause designating the
beneficiary by rules under which wills are interpreted.
4. Commercial Law; Insurance; Conviction for adultery or concubinage for those
barred from receiving donations or life insurance not required as only
preponderance of evidence is necessary.-
We do not think that a conviction for adultery or concubinage is exacted before
the disabilities mentioned in Article 739 may effectuate. More specifically, with
regard to the disability on “persons who were guilty of adultery or concubinage
at the time of the donation,” x x x The underscored clause neatly conveys that
no criminal conviction for the disqualifying offense is a condition precedent. In
fact, it cannot even be gleaned from the aforequoted provision that a criminal
prosecution is needed. On the contrary, the law plainly states that the guilt of
the party may be proved “in the same action” for declaration of nullity of
donation. And, it would be sufficient if evidence preponderates upon the guilt of
 the consort for the offense indicated. The quantum of proof in criminal cases is
not demanded.
5. Commercial Law; Insurance; Remedial Law; Evidence; Requisite proof of
common-law relationship between insured and beneficiary supplied by
stipulations of parties at pre-trial conference; Considered judicial admissions, of
which judgment may be validly rendered without rigors of trial to prove illicit
relationship.-
In the case before Us, the requisite proof of common-law relationship between
the insured and the beneficiary has been conveniently supplied by the
stipulations between the parties in the pre-trial conference of the case. It was
agreed upon and stipulated therein that the deceased insured Buenaventura C.
Ebrado was married to Pascuala Ebrado with whom she has six legitimate
children; that during his lifetime, the deceased insured was living with his
common-law wife, Carponia Ebrado, with whom he has two children. These
stipulations are nothing less than judicial admission which, as a consequence, no
longer require proof and cannot be contradicted. A fortiori, on the basis of these
admissions, a judgment may be validly rendered without going through the
rigors of a trial for the sole purpose of proving the illicit liason between the
insured and the beneficiary. In fact, in that pre-trial, the parties even agreed
“that a decision be rendered based on this agreement and stipulation of facts as
to who among the two claimants is entitled to the policy.”
5.
4. Petitioner contends that while the complaint of respondent ask for
P10,000 moral damages, the lower court awarded twice the amount
without factual basis. Was the award of moral damages proper?
Explain.
ZENITH INSURANCE CORPORATION VS. COURT OF APPEALS 185 SCRA
398 , MAY 14, 1990
1. Damages; Basis for award of moral damages.-
“The purpose of moral damages is essentially indemnity or reparation, not
punishment or correction. Moral damages are emphatically not intended to
enrich a complainant at the expense of a defendant, they are awarded only to
enable the injured party to obtain means, diversions or amusements that will
serve to alleviate the moral suffering he has undergone by reason of the
defendant’s culpable action.” (J. Cezar S. Sangco, Philippine Law on Torts and
Damages, Revised Edition, p. 539) (See also R and B Surety Insurance Co., Inc.
v. IAC, G.R. No. 64515, June 22, 1984; 129 SCRA 745). While it is true that no
proof of pecuniary loss is necessary in order that moral damages may be
adjudicated, the assessment of which is left to the discretion of the court
according to the circumstances of each case (Art. 2216, New Civil Code), it is
equally true that in awarding moral damages in case of breach of contract, there
must be a showing that the breach was wanton and deliberately injurious or the
one responsible acted fraudulently or in bad faith (Perez v. Court of Appeals,
G.R. No. L-20238, January 30, 1965; 13 SCRA 137; Solis v. Salvador, G.R. No. L-
17022, August 14, 1965; 14 SCRA 887). In the instant case, there was a finding
that private respondent was given a “run-around” for two months, which is the
basis for the award of the damages granted under the Insurance Code for
unreasonable delay in the payment of the claim. However, the act of petitioner
of delaying payment for two months cannot be considered as so wanton or
malevolent to justify an award of P20,000.00 as moral damages, taking into
consideration also the fact that the actual damage on the car was only P3,460.
In the pre-trial of the case, it was shown that there was no total disclaimer by
respondent. The reason for petitioner’s failure to indemnify private respondent
within the two-month period was that the parties could not come to an
agreement as regards the amount of the actual damage on the car. The amount
of P10,000.00 prayed for by private respondent as moral damages is equitable.
2. Damages; Basis for award of exemplary damages.-
On the other hand, exemplary or corrective damages are imposed by way of
example or correction for the public good (Art. 2229, New Civil Code of the
Philippines). In the case of Noda v. Cruz-Arnaldo, G.R. No. 57322, June 22,
1987; 151 SCRA 227, exemplary damages were not awarded as the insurance
company had not acted in wanton, oppressive or malevolent manner. The same
is true in the case at bar.
The lower court dismissed the complaint as to Jamila on the ground
that it had not consented in the subrogation and therefore, Fireman’s
has no cause of action against him. Was the court correct?
FIREMAN’S FUND INSURANCE COMPANY VS. JAMILA & COMPANY, INC.
70 SCRA 323 , APRIL 07, 1976
1. Insurance; Subrogation; Indemnity received by owner of property;
Subrogation of insurer to rights of insured; Case at bar.-
Fireman’s Fund’s action against Jamila is squarely sanctioned by article 2207. As
the insurer, Fireman’s Fund is entitled to go after the person or entity that
violated its contractual commitment to answer for the loss insured against.
2. Insurance; Subrogation; Subrogation as doctrine of substitution.-
Subrogation has been referred to as the doctrine of substitution. It “is an arm of
equity that may guide or even force one to pay a debt for which an obligation
was incurred but which was in whole or in part paid by another.”
3. Insurance; Subrogation; Subrogation as a normal incident of indemnity
insurance.-
Upon payment of the loss, the insurer is entitled to be subrogated pro tanto to
any right of action which the insured may have against the third person whose
negligence or wrongful act caused the loss.
 by, and acting exclusively in the interest of, the insurance company.” (44 C.J. S.,
4. Insurance; Subrogation; Right of subrogation.- p. 1174.)
The right of subrogation is of the highest equity. The loss in the first instance is
that of the insured but after reimbursement or compensation, it becomes the 2. On appeal on the CFI by the insurance companies, cases were
loss of the insurer. “Although many policies, including policies in the standard dismissed on the ground that under the uniform insurance policies,
form, now provide for subrogation, and thus determine the rights of the insurer partial disability of the insured caused by loss of either hand to be
in this respect, the equitable right of subrogation as the legal effect of payment compensable, the loss must result to amputation. Were the dismissals
insures to the insurer without any formal assignment or any express stipulation proper?
to that effect in the policy.” Stated otherwise, when the insurance company pays -Yes.
for the loss, such payment operates as an equitable assignment to the insurer of
the property and all remedies which the insured may have for the recovery TY VS. FILIPINAS COMPAÑIA DE SEGUROS, ET AL. 17 SCRA 364 , MAY
thereof. That right is not dependent upon, nor does it grow out of, any privity of 31, 1966
contract, or upon written assignment of claim, and payment to the insured 1. Insurance; Personal accident policies; To be compensable amputation and not
makes the insurer as assignee in equity. mere disability of hand is necessary.-
Where the insurance policies define partial disability as loss of either hand by
amputation through the bones of the wrist, the insured cannot recover under
said policies for temporary disability of his left hand caused by the fractures of
WEEK 3 some fingers. The provision is clear enough to inform the party entering into that
contract that the loss to be considered a disability entitled to indemnity, must be
TOPIC: Construction of Insurance Contracts
severance or amputation of that affected member of the body of the insured. (Ty
vs. First National Surety Insurance Co., L-10133, April 29, 1961).
1. It is contended in behalf of the company that Basilio was killed during
making an arrest as an officer of law, or as a result of murder or
3. The petitioner Sun Insurance office contends that the insured willfully
assault, and therefore, his death was caused by one of the risks
exposed himself to peril and thus removed himself from the coverage
excluded by the supplementary contract which exempts the company
of the insurance relief. Is the petitioner correct?
from liability. Was the contention tenable?
- No.
- No.
CALANOC VS. COURT OF APPEALS, ET AL. 98 PHIL. 79 , DECEMBER 16,
SUN INSURANCE OFFICE, LTD. VS. COURT OF APPEALS 211 SCRA 554 ,
1955
JULY 17, 1992
1. Insurance Law; Accidental Death; Ambiguous Terms In Insurance Policy, How
1. Insurance Law; Definition of accident.-
Construed.-
An accident is an event which happens without any human agency or, if
While as a general rule “the parties may limit the coverage of the policy to
happening through human agency, an event which, under the circumstances, is
certain particular accidents and risks or causes of loss, and may expressly except
unusual to and not expected by the person to whom it happens. It has also been
other risks or causes of loss therefrom” (45 C.J. S, 781–782), however, it is to be
defined as an injury which happens by reason of some violence or casualty to
desired that the terms and phraseology of the exception clause be clearly
the insured without his design, consent, or voluntary cooperation.
expressed so as to be within the easy grasp and understanding of the insured,
for if the terms are doubtful or obscure the same must of necessity be
2. Insurance Law; Court is convinced that the incident that resulted in Lim’s
interpreted or resolved against the one who has caused the obscurity. (Article
death was indeed an accident.-
1377, new Civil Code.) And so it has been generally held that the “terms in an
In light of these definitions, the Court is convinced that the incident that resulted
insurance policy, which are ambiguous, equivocal, or uncertain * * * are to be
in Lim’s death was indeed an accident. The petitioner, invoking the case of De la
construed strictly and most strongly against the insurer, and liberally in favor of
Cruz v. Capital Insurance, says that “there is no accident when a deliberate act is
the insured so as to effect the dominant purpose of indemnity or payment to the
performed unless some additional, unexpected, independent and unforeseen
insured, especially where a forfeiture is involved” (29 Am. Jur., 181), and the
happening occurs which produces or brings about their injury or death.” There
reason for this rule is that the “insured usually has no voice in the selection or
was such a happening. This was the firing of the gun, which was the additional
arrangement of the words employed and that the language of the contract is
selected with great care and deliberation by experts and legal advisers employed
 unexpected and independent and unforeseen occurrence that led to the insured
person’s death.
3. Insurance Law; Suicide and willful exposure to needless peril are in pari
materia because they both signify a disregard for one’s life.-
It should be noted at the outset that suicide and willful exposure to needless
peril are in pari materia because they both signify a disregard for one’s life. The
only difference is in degree, as suicide imports a positive act of ending such life
whereas the second act indicates a reckless risking of it that is almost suicidal in
intent.
4. Insurance Law; Contract; There is nothing in the policy that relieves the
insurer of the responsibility to pay the indemnity agreed upon if the insured is
shown to have contributed to his own accident.-
Lim was unquestionably negligent and that negligence cost him his own life. But
it should not prevent his widow from recovering from the insurance policy he
obtained precisely against accident. There is nothing in the policy that relieves
the insurer of the responsibility to pay the indemnity agreed upon if the insured
is shown to have contributed to his own accident. Indeed, most accidents are
caused by negligence. There are only four exceptions expressly made in the
contract to relieve the insurer from liability, and none of these exceptions is
applicable in the case at bar.
5. Insurance Law; Contract; As a rule, insurance contracts are supposed to be
interpreted liberally in favor of the assured.-
It bears noting that insurance contracts are as a rule supposed to be interpreted
liberally in favor of the assured. There is no reason to deviate from this rule,
especially in view of the circumstances of this case as above analyzed.
4. Defendant insurer set up the defense that the death of the insured
caused by his participation on a boxing contest was not accidental, and
therefore, not covered by insurance. After due hearing, the court
rendered decision in favor of the plaintiff which is the subject of the
present appeal. Decide.
- Insurance company is liable against the insured.
DE LA CRUZ VS. CAPITAL INS. & SURETY CO., INC. 17 SCRA 559 , JUNE
30, 1966
1. Insurance; Meaning of “accident” and “accidental".-
The terms “accident” and “accidental”, as used in insurance contracts, have not
acquired any technical meaning. They are construed by the courts in their
ordinary and common acceptation. Thus, the terms have been taken to mean
that which happens by chance or fortuitously, without intention and design, and
which is unexpected, unusual and unforeseen. An accident is an event that takes
place without one’s foresight or expectation—an event that proceeds from an
unknown cause, or is an unusual effect of a known cause and, therefore, not
expected. (29A Am. Jur., pp. 308–309.)
2. Insurance; Tendency to eliminate distinction between the terms “accidental”
and “accidental means."-
The tendency of court decisions in the United States in recent years is to
eliminate the fine distinction between the terms “accidental” and “accidental
means” and to consider them as legally synonymous. (Travelers’ Protective
Association vs. Stephens, 185 Ark. 660. 49 S.W. [3d] 364; Equitable Life
Assurance Company vs. Hemenover, 100 Colo. 231, 67 P. [2d] 80, 110 ALR
1270).
3. Insurance; Rule as to death or injury resulting from accident or accidental
means.-
The generally accepted rule is that death or injury does not result from accident
or accidental means within the terms of an accident-policy if it is the natural
result of the insured’s voluntary act, unaccompanied by anything unforeseen
except the death or injury. (Landress vs. Phoenix Mutual Life Insurance Co., 291
U.S. 291, 78 L. ed. 934, 54 S. Ct 461, 90 ALR 1382; Davis vs. Jefferson Standard
Life Ins. Co:, 73 F. [2d] 330, 96 ALR 599.) There is no accident when a
deliberate act is performed unless some additional, unexpected, independent and
unforeseen happening occurs which produces or brings about the result of injury
or death. (Evans vs, Metropolitan Life Insurance Co., 26 Wash. [2d] 594, 174 P.
[2d] 1961.) In other words, where the death or injury is not the natural or
probable result of the insured’s voluntary act, or if something unforeseen occurs
in the doing of the act which produces the injury, the resulting death is within
the protection of policies insuring against death or injury from accident.
4. Insurance; Application of the rule.-
Where the participation of the insured in the boxing contest was voluntary, but
the injury was sustained when he slid, giving occasion to the infliction by his
opponent of the blow that threw him to the ropes of the ring and without this
unfortunate incident, perhaps he could not have received that blow in the head
and would not have died, and his death may be regarded as accidental, although
boxing is attended with some risks of external injuries.
5. Insurance; Liability for risks not enumerated in the contract.-
The failure of the defendant insurance company to include death resulting from a
boxing match or other sports among the prohibitive risks leads to the conclusion
that it did not intend to limit or exempt itself from liability for such death. (Brams
vs. New York Life Ins. Co., 299 Pa. 11, 148 Atl. 855; Jolley vs. Jefferson
Standard Life Ins. Co., 95 Wash. 683, 294 Pac. 585.)
WEEK 4:
TOPIC: The Business of Insurance, What may be Insured Against, Who may be
an Insurer, Who may be Insured
NOTE: Sections 3, 4, 6, and 7 of the Insurance Code
1. Respondents contend that although Steamship Mutual is a P&I Club, it
is not engaged in insurance business in the Philippines, it is merely an
association of vessel owners who have come together to provide
mutual protection against liabilities incidental to sip owners. Is the
contention tenable?
- No.
WHITE GOLD MARINE SERVICES, INC. VS. PIONEER INSURANCE AND
SURETY CORPORATION 464 SCRA 448 , JULY 28, 2005
1. Insurance Law; Section 2(2) of the Insurance Code enumerates what
constitutes “doing an insurance business” or “transacting an insurance business”;
The fact that no profit is derived from the making of insurance contracts,
agreements or transactions or that no separate or direct consideration is received
therefor, shall not preclude the existence of an insurance business.-
Section 2(2) of the Insurance Code enumerates what constitutes “doing an
insurance business” or “transacting an insurance business.” These are: (a)
making or proposing to make, as insurer, any insurance contract; (b) making, or
proposing to make, as surety, any contract of suretyship as a vocation and not
as merely incidental to any other legitimate business or activity of the surety; (c)
doing any kind of business, including a reinsurance business, specifically
recognized as constituting the doing of an insurance business within the meaning
of this Code; (d) doing or proposing to do any business in substance equivalent
to any of the foregoing in a manner designed to evade the provisions of this
Code. . . . The same provision also provides, the fact that no profit is derived
from the making of insurance contracts, agreements or transactions, or that no
separate or direct consideration is received therefor, shall not preclude the
existence of an insurance business.
2. Insurance Law; Test to determine if a contract is an insurance contract or
not.-
The test to determine if a contract is an insurance contract or not, depends on
the nature of the promise, the act required to be performed, and the exact
nature of the agreement in the light of the occurrence, contingency, or
circumstances under which the performance becomes requisite. It is not by what
it is called.
3. Insurance Law; An insurance contract is a contract of indemnity basically.-
Basically, an insurance contract is a contract of indemnity. In it, one undertakes
for a consideration to indemnify another against loss, damage or liability arising
from an unknown or contingent event.
4. Insurance Law; A marine insurance undertakes to indemnify the assured
against marine losses, such as the losses incident to a marine adventure.-
In particular, a marine insurance undertakes to indemnify the assured against
marine losses, such as the losses incident to a marine adventure. Section 99 of
the Insurance Code enumerates the coverage of marine insurance.
5. Insurance Law; Steamship Mutual as a P I Club is a mutual insurance
association engaged in the marine insurance business.-
A P I Club is “a form of insurance against third party liability, where the third
party is anyone other than the P I Club and the members.” By definition then,
Steamship Mutual as a P I Club is a mutual insurance association engaged in the
marine insurance business.
6. Insurance Law; To continue doing business here, Steamship Mutual or
through its agent Pioneer, must secure a license from the Insurance
Commission.-
The records reveal Steamship Mutual is doing business in the country albeit
without the requisite certificate of authority mandated by Section 187 of the
Insurance Code. It maintains a resident agent in the Philippines to solicit
insurance and to collect payments in its behalf. We note that Steamship Mutual
even renewed its P I Club cover until it was cancelled due to non-payment of the
calls. Thus, to continue doing business here, Steamship Mutual or through its
agent Pioneer, must secure a license from the Insurance Commission. Since a
contract of insurance involves public interest, regulation by the State is
necessary. Thus, no insurer or insurance company is allowed to engage in the
insurance business without a license or a certificate of authority from the
Insurance Commission.
7. Insurance Law; Although Pioneer is already licensed as an insurance company,
it needs a separate license to act as insurance agent for Steamship Mutual.-
Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate
of registration issued by the Insurance Commission. It has been licensed to do or
transact insurance business by virtue of the certificate of authority issued by the
same agency. However, a Certification from the Commission states that Pioneer
does not have a separate license to be an agent/broker of Steamship Mutual.
Although Pioneer is already licensed as an insurance company, it needs a
separate license to act as insurance agent for Steamship Mutual.
2. Private respondent contends that the Insurance Commissioner has
jurisdiction to take cognizance of the case in the exercise of its quasi-
judicial powers. The Solicitor General upholding the jurisdiction of the
Commissioner claims that under Sections 414 and 415 of the Insurance
Code, the Commissioner has authority to nullify the alleged provisions
of contract of agency. Is the respondent correct?
-No, the contention of the private respondent is not correct. Insurance
Commissioner has no jurisdiction over the contract of agency.
PHIL. AMERICAN LIFE INSURANCE COMPANY VS. ANSALDO 234 SCRA
509 , JULY 26, 1994
1. Insurance Code; Insurance Commissioner; Authority.-
A plain reading of the above-quoted provisions show that the Insurance
Commissioner has the authority toregulate the business of insurance, which is
defined as follows: “(2) The term ‘doing an insurance business’ or ‘transacting an
insurance business,’ within the meaning of this Code, shall include (a) making or
proposing to make, as insurer, any insurance contract; (b) making, or proposing
to make, as surety, any contract of suretyship as a vocation and not as merely
incidental to any other legitimate business or activity of the surety; (c) doinq any
kind of business, including a reinsurance business, specifically recognized as
constituting the doing of an insurance business within the meaning of this Code;
(d) doing or proposing to do any business in substance equivalent to any of the
foregoing in a manner designed to evade the provisions of this Code. (Insurance
Code, Sec. 2[2]; Italics supplied).
2. Insurance Code; Agency; Where the contract of agency entered into is not
included within the meaning of an insurance business, Section 2 of Insurance
Code cannot be invoked.-
Since the contract of agency entered into between Philamlife and its agents is
notincluded within the meaning of an insurance business, Section 2 of the
Insurance Code cannot beinvoked to give jurisdiction over the sameto
theInsurance Commissioner.Expressio unius est exclusio alterius.
3. Insurance Code; Agency; Section 416, Quasi-judicial power of the Insurance
Commissioner.-
Section 416 of the Code in pertinent part, provides: “The Commissioner shall
have the power to adjudicate claims and complaints involving any loss, damage
or liability for which an insurer may be answerable under any kind of policy or
contract of insurance, or for which such insurer may be liable under a contract of
suretyship, or for which a reinsurer may be used under any contract or
reinsurance it may have entered into, or for which a mutual benefit association
may be held liable under the membership certificates it has issued to its
members, where the amount of any such loss, damage or liability, excluding
interest, costs and attorney’s fees, being claimed or sued upon any kind of
insurance, bond, reinsurance contract, or membership certificate does not
exceed in any single claim one hundred thousand pesos.”
4. Insurance Code; Agency; Quasi-judicial power of Insurance Commissioner
does not cover the relationship affecting the insurance company and its agents
but is limited to adjudicating claims and complaints filed by the insured against
the insurance company.-
A reading of the said section shows that the quasi-judicial power of the
Insurance Commissioner is limited by law “to claims and complaints involving any
loss, damage or liability for which an insurer may be answerable under any kind
of policy or contract of insurance, xxx.” Hence, this power does not cover the
relationship affecting the insurance company and its agents but is limited to
adjudicating claims and complaints filed by the insured against the insurance
company.
5. Insurance Code; Agency; Insurance company cannot assume jurisdiction over
controversies between the insurance companies and their agents.-
The Insurance Code does not have provisions governing the relations between
insurance companies and their agents. It follows that the Insurance
Commissioner cannot, in the exercise of its quasijudicial powers, assume
jurisdiction over controversies between the insurance companies and their
agents.
3. The petitioners refused to pay the claim on the ground that the policy
in favor of respondent has ceased to be enforced on the day the US
declared war against Germany. Was the petition meritorious?
- Yes.
FILIPINAS CÍA. DE SEGUROS VS. CHRISTERN, HUENEFELD & CO., INC.
89 PHIL. 54 , MAY 25, 1951
1. Corporations J Nationality Of Private Corporation; Control Test.-
The nationality of a private corporation is determined by the character or
citizenship of its controlling stockholders.
2. Corporations J Nationality Of Private Corporation; International Law; Effect Of
War.-
Where majority of the stockholders of a corporation were German subjects, the
corporation became an enemy corporation upon the outbreak of the war
between the United States and Germany.
3. Insurance; Termination Of Policy Of Public Enemy.-
As the Philippine Insurance Law (Act No. 2427, as amended), in its section 8,
provides that "anyone except a public enemy may be insured," an insurance
policy ceases to be allowable as soon as an insured becomes a public enemy.
 4. Insurance; Return Of Premiums Upon Termination Of Policy By Reason Of
War.-
Where an insurance policy ceases to be effective by reason of war, which has
made the insured an enemy, the premiums paid for the period covered by the
policy from the date war is declared, should be returned.
3. Statute; Obligations; No Duty Where Law Forbids.-
There is no duty where the law forbids; and there is no obligation without a
corresponding right enjoyed by another.

4. Decide whether the beneficiary in a Life Insurance policy may recover

WEEK 5:
the amount thereof although the insured died after failing to pay the
stipulated premiums. Such failure having been caused by the war in
TOPIC: Mortgagor/Mortgagee, Insurable Interest in Life Insurance,
the Pacific.
Beneficiaries

CONSTANTINO VS. ASIA LIFE INSURANCE CO. 87 PHIL. 248 , AUGUST

NOTE: Section 10, 11 and 12 of the Insurance Code
31, 1950
1.
1. Insurance; Effect Of Non-Payment Of Premium Due To War; Life Insurance;
Forfeiture Of Policy.-
When the life insurance policy provides that non-payment of premiums will cause
its forfeiture, war does not excuse non-payment, and does not avoid forfeiture.
2. Insurance; Life Insurance; Periodic Payment Of Premiums Is Not An
Actionable Obligation.-
The periodic payment of premiums in life insurance policies is not an obligation
of the insured enforceable by action.
SALES DE GONZAGA VS. CROWN LIFE INSURANCE CO. 91 PHIL. 10 ,
MARCH 20, 1952
2.
1. Insurance; War; Non-Payment Of Premiums By Reason Of War.-
Non-payment of premiums by reason of war puts an end to the contract of
insurance. Time is material and of the essence of the contract, non-payment at
the day involves absolute forfeiture if such be the terms of the contract. Courts
cannot with safety vary the stipulation of the parties by introducing equities for
the relief of the insured against their own negligence.
2. Insurance; War; Failure To Advise The Insured Of The Insurance Company's
New Address.-
Where the offices of the defendant insurance company, being an enemy
corporation, were ordered closed by the Japanese Military authorities, but the
company opened an office clandestinely for the purpose of receiving premiums
from policy holders, the failure of the defendant to advice the insured of the
defendant's new address did not work as a forfeiture of its right to have the
premiums satisfied promptly.
Plaintiff filed a complaint praying that the defendant be ordered to
credit to the plaintiff with the necessary amount from the sum received
by the defendant by the associated insurance surety and apply the
same to the payment of plaintiff’s obligation…. Decide.
PALILEO VS. COSIO 97 PHIL. 919 , NOVEMBER 28, 1955
1. Insurance; Where Mortgaged Property Was Insured By Mortgagee In His Own
Name; Effect Of.-
Where a mortgagee, independently of the mortgagor, insures the mortgaged
property in his own name and for his own interest, he is entitled to the insurance
proceeds in case of loss, but in such case, he is not allowed to retain his claim
against the mortgagor, but is passed by subrogation to the insurer to the extent
of the money paid.
The trial judge came to the conclusion that Harding had no right of
action whatever against the companies and absolved them from
liability without special finding as to cost. Was the judge correct?
- Yes, the decision of the judge was correct.
SAN MIGUEL BREWERY VS. LAW UNION AND ROCK INSURANCE CO. 40
PHIL. 674 , JANUARY 19, 1920
1. Insurance; Insurable Interest; Extent of Recovery By Mortgagee.-
A brewery company, as mortgagee of real property, procured a policy of
insurance to be written thereon payable to itself, in case of loss. The insurer was
notified that the brewery was merely a mortgagee, but no information was asked
or given as to the personality of the owner. Held: That the brewery company had
an insurable interest but could recover on the policy only to the extent of the
credit secured by the mortgage.
2. Insurance; Sale Of Insured Property; Suspension of Insurance.-
A purchaser of insured property who does not take the precaution to obtain a
transfer of the policy of insurance cannot, in case of loss, recover upon such
 contract, as the transfer of the property has the effect of suspending the
insurance until the purchaser becomes owner of the policy as well as of the
property insured.
3. Explain the situation on separate insurances covering different
insurable interests may be obtained by a mortgagor and mortgagee
over the mortgaged property?
5.
GEAGONIA VS. COURT OF APPEALS 241 SCRA 152 , FEBRUARY 06,
1995
1. Insurance; Separate insurances covering different insurable interests may be
obtained by the mortgagor and the mortgagee.—
As to a mortgaged property, the mortgagor and the mortgagee have each an
independent insurable interest therein and both interests may be covered by one
policy, or each may take out a separate policy covering his interest, either at the
same or at separate times. The mortgagor's insurable interest covers the full
value of the mortgaged property, even though the mortgage debt is equivalent
to the full value of the property. The mortgagee's insurable interest is to the
extent of the debt, since the property is relied upon as security thereof, and in
insuring he is not insuring the property but his interest or lien thereon. His
insurable interest is prima facie the value mortgaged and extends only to the
amount of the debt, not exceeding the value of the mortgaged property. Thus,
separate insurances covering different insurable interests may be obtained by
the mortgagor and the mortgagee.
2. Same; Double Insurance; A double insurance exists where the same person is
insured by several insurers separately in respect of the same subject and
interest.—
A double insurance exists where the same person is insured by several insurers
separately in respect of the same subject and interest. As earlier stated, the
insurable interests of a mortgagor and a mortgagee on the mortgaged property
are distinct and separate. Since the two policies of the PFIC do not cover the
same interest as that covered by the policy of the private respondent, no double
insurance exists. The non-disclosure then of the former policies was not fatal to
the petitioner's right to recover on the private respondent's policy.
4. Explain the concept of insurable interest?
Section 10. Every person has an insurable interest in the life and health:
a) Of himself, of his spouse and of his children;
b) Of any person on whom he depends wholly or in part for education or
support, or in whom he has a pecuniary interest;
c) Of any person under a legal obligation to him for the payment of
money, or resecting property or services, of which death or illness
might delay or prevent the performance; and
d) Of any person upon whose life any estate or interest is vested in him
depends.
- An insurable interest is one of the most basic of all requirements in
insurance. In essence, it is that interest which the law requires the owner of
an insurance policy to have in the person or thing insured.
What is the law regarding the revocability of designation of the
beneficiary under the Insurance Code?
Section 11. The insured shall have the right to change the beneficiary he
designated in the policy, unless he has expressly waived this right in said policy.
Notwithstanding the foregoing, in the event the insured does not change the
beneficiary during his lifetime, the designation shall be deemed irrevocable.
PHILIPPINE LIFE INSURANCE COMPANY VS. PINEDA 175 SCRA 416 ,
JULY 19, 1989
1. Commercial Law; Insurance; Under the Insurance Act otherwise known as Act
No. 2427, 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.-
Needless to say, the applicable law in the instant case is the Insurance Act,
otherwise known as Act No. 2427 as amended, the policy having been procured
in 1968. Under the said law, 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.
2. Commercial Law; Insurance; The Beneficiary Designation Indorsement in the
policy states that the designation of the beneficiary is irrevocable.-
In this regard, it is worth noting that the Beneficiary Designation Indorsement in
the policy which forms part of Policy Number 0794461 in the name of Rodolfo
Cailles Dimayuga states that the designation of the beneficiaries is irrevocable.
3. Commercial Law; Insurance; Based on the provision of the contract and the
law applicable it is only with the consent of all the beneficiaries that any change
or amendment in the policy concerning the irrevocable beneficiaries may be
legally and validly effected.-
Inevitably therefore, based on the aforequoted provision of the contract, not to
mention the law then applicable, it is only with the consent of all the
beneficiaries that any change or amendment in the policy concerning the
irrevocable beneficiaries may be legally and validly effected. Both the law and
the policy do not provide for any other exception, thus, abrogating the
contention of the private respondent that said designation can be amended if the
Court finds a just, reasonable ground to do so.
WEEK 6:
TOPIC: Insurable Interest in Property Insurance, When Insurable Interest must
Exist
1. Whether or not the lease contract entered into by CKS and the Spouses
Cha is valid in so far as it provides that any fire insurance obtained by
the lessee Cha Spouses over the merchandise inside the leased
property is deemed assigned to the lessor if said policy is obtained
without the prior written consent of the latter….
- No, the provision is not valid.
2.
CHA VS. COURT OF APPEALS 277 SCRA 690 , AUGUST 18, 1997
1. Contracts; Stipulations contained in a contract cannot be contrary to law,
morals, good customs, public order or public policy.—
The core issue to be resolved in this case is whether or not the aforequoted
paragraph 18 of the lease contract entered into between CKS and the Cha
spouses is valid insofar as it provides that any fire insurance policy obtained by
the lessee (Cha spouses) over their merchandise inside the leased premises is
deemed assigned or transferred to the lessor (CKS) if said policy is obtained
without the prior written consent of the latter. It is, of course, basic in the law on
contracts that the stipulations contained in a contract cannot be contrary to law,
morals, good customs, public order or public policy.
2. Same; Insurance; No contract or policy of insurance on property shall be
enforceable except for the benefit of some person having an insurable interest in
the property insured.—
Sec. 18 of the Insurance Code provides: “Sec. 18. No contract or policy of
insurance on property shall be enforceable except for the benefit of some person
having an insurable interest in the property insured.” A non-life insurance policy
such as the fire insurance policy taken by petitioner spouses over their
merchandise is primarily a contract of indemnity. Insurable interest in the
property insured must exist at the time the insurance takes effect and at the
time the loss occurs. The basis of such requirement of insurable interest in
property insured is based on sound public policy: to prevent a person from
taking out an insurance policy on property upon which he has no insurable
interest and collecting the proceeds of said policy in case of loss of the property.
In such a case, the contract of insurance is a mere wager which is void under
Section 25 of the Insurance Code.
3.
3. Same; Same; Leases; The lessor cannot be validly a beneficiary of a fire
insurance policy taken by a lessee over his merchandise, and the provision in the
lease contract providing for such automatic assignment is void for being contrary
to law and/or public policy—the insurer cannot be compelled to pay the proceeds
of the policy to a person who has no insurable interest in the property insured.—
Therefore, respondent CKS cannot, under the Insurance Code—a special law—be
validly a beneficiary of the fire insurance policy taken by the petitioner-spouses
over their merchandise. This insurable interest over said merchandise remains
with the insured, the Cha spouses. The automatic assignment of the policy to
CKS under the provision of the lease contract previously quoted is void for being
contrary to law and/or public policy. The proceeds of the fire insurance policy
thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha (herein co-
petitioners.) The insurer (United) cannot be compelled to pay the proceeds of
the fire insurance policy to a person (CKS) who has no insurable interest in the
property insured.
A building burned down in a fire and Golangco sought to collect from
Traders. Traders denied any liability on the ground that since Golangco
was not the owner of the premises and had no insurable interest on the
same. And consequently, he cannot collect the insurance proceeds.
Decide.
- Golangco has insurable interest on the rent of the building premises therefore,
may be lawfully or validly be subject of insurance.
The Insurance Code provides that: 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 provision was 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
Petitioner submits that there is no subrogation in favor of respondent
cause no valid insurance could be ___ thereon by IMC and LSPI, since
all risk had transferred to petitioner upon delivery of the goods, that
this lack of privity or closest real interest on the part of the respondent
____ obligation to pay….. Did IMC and LSPI lose complete interest
over the goods?
 GAISANO CAGAYAN, INC. VS. INSURANCE COMPANY OF NORTH Yap. It is reasonably fair to assume that had the building not been burned,
AMERICA 490 SCRA 286, JUNE 08, 2006 Harvardian would have been allowed the continued use of the same as the site
1. Civil Law; Contracts; Insurance; Insurable Interest; Kinds; An insurable of its operation as an educational institution. Harvardian therefore would have
interest in property may consist in the following.- been directly benefited by the preservation of the property, and certainly
Section 13 of our Insurance Code defines insurable interest as “every interest in suffered a pecuniary loss by its being burned.
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 WEEK 7:
insured.” Parenthetically, under Section 14 of the same Code, an insurable
interest in property may consist in: (a) an existing interest; (b) an inchoate TOPIC: Concealment
interest founded on existing interest; or (c) an expectancy, coupled with an
1. One ground for the rescission of the contract of insurance under the
existing interest in that out of which the expectancy arises.
Insurance Code is concealment – a neglect to communicate which the
party knows and ought to communicate. Appellant argues that the
2. Civil Law; Contracts; Insurance; Insurable Interest; Anyone has an insurable
alleged concealment was immaterial and insufficient to avoid the
interest in property who derives a benefit from its existence or would suffer loss
policy. Decide.
from its destruction.-
An insurable interest in property does not necessarily imply a property interest
ARGENTE VS. WEST COAST LIFE INSURANCE CO. 51 PHIL. 725 , MARCH
in, or a lien upon, or possession of, the subject matter of the insurance, and
19, 1928
neither the title nor a beneficial interest is requisite to the existence of such an
1. Insurance; Concealment As Ground For Rescission Of Contract Of Insurance;
interest, it is sufficient that the insured is so situated with reference to the
Section 25 Of The Insurance Act Applied And Construed.-
property that he would be liable to loss should it be injured or destroyed by the
One ground for the rescission of a contract of insurance under the Insurance Act
peril against which it is insured. Anyone has an insurable interest in property who
is "a concealment/' whichin section 25 is defined as "A neglect to communicate
derives a benefit from its existence or would suffer loss from its destruction.
that which a party knows and ought to communicate." Applied to the facts, it is
Indeed, a vendor or seller retains an insurable interest in the property sold so
held that the concealment was material and sufficient to avoid the policy. It can
long as he has any interest therein, in other words, so long as he would suffer by
fairly be assumed that had the true facts been disclosed by the assured, the
its destruction, as where he has a vendor’s lien. In this case, the insurable
insurance would never have been granted.
interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books
of Account 45 days after the time of the loss covered by the policies.
2. Insurance; Concealment As Ground For Rescission Of Contract Of Insurance;
Id.-
4. Gountry Banker insured to Harvardian a fire insurance policy, during
The basis of the rule vitiating the contract in cases of concealment is that it
the effectivity of said policy, insured property was totally burned
misleads or deceives the insurer into accepting the risk, or accepting it at the
rendering it a total loss. Claim was made by plaintiff upon the
rate of premium agreed upon. The insurer, relying upon the belief that the
defendant but defendant denied it contending that plaintiff does not
assured will disclose every material f act within his actual or presumed
have insurable interest over the building constructed on a piece of land
knowledge, is misled into a belief that the circumstance withheld does not exist,
on the name of the late Alfonso Yap. Decide.
and he is thereby induced to estimate the risk upon a false basis that it does not
- Harvardian has a right to the proceeds.
exist. The principal question, therefore, must be, Was the assurer misled or
Regardless of the nature of the title of the insured or even if he did not have
deceived into entering a contract obligation or in fixing the premium of insurance
title to the property insured, the contract of fire insurance should still be upheld
by a withholding of material information or facts within the assured's knowledge
if his interest in or his relation to the property is such that he will be benefited
or presumed knowledge?
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
3. Insurance; Concealment As Ground For Rescission Of Contract Of Insurance;
will derive pecuniary benefit or advantage from its preservation, or will suffer
Id.-
pecuniary loss or damage from its destruction, termination or injury by the
Where any of the material representations are false, the insurer's tender of the
happening of the event insured against.
premium and notice that the policy is canceled, before the commencement of
Here, Harvardian was not only in possession of the building but was in fact
suit thereon, operate to rescind the contract of insurance, and are a sufficient
using the same for several years with the knowledge and consent of Ildefonso
compliance with the law.

2. Explain the concept of uberrima fides in relation to concealment in
insurance contracts.
GREAT PACIFIC LIFE ASSURANCE COMPANY VS. COURT OF APPEALS
89 SCRA 543 , APRIL 30, 1979
1. Insurance; Concealment; Nature and effect of concealment on insurance
contract.-
The contract of insurance is one of perfect good faith (uberrima fides meaning
good faith; absolute and perfect candor or openness and honesty; the absence
of any concealment or deception, however slight [Black’s Law Dictionary, 2nd
Edition], not for the insured alone but equally so for the insurer Fieldman’s
Insurance Co., Inc. vs. Vda. de Songco, 25 SCRA 70). Concealment is a neglect
to communicate that which a party known and ought to communicate (Section
25, Act No. 2427). Whether intentional or unintentional, the concealment entitles
the insurer to rescind the contract of insurance (Section 26, Id.; Yu Pang Cheng
vs. Court of Appeals, et al., 105 Phil. 930; Saturnino vs. Philippine American Life
Insurance Company, 7 SCRA 316). Private respondent appears guilty thereof.
3. Appellant contend that there was no fraudulent concealment of the
truth in as much as the insured herself did not know since the doctor
never told her that the disease from which she was operated on was
cancer. Is the contention tenable?
- No, the contention is untenable. The concealment of the operation itself was
fraudulent.
SATURNINO VS. PHILIPPINE AMERICAN LIFE INS. CO. 7 SCRA 316 ,
FEBRUARY 28, 1963
1. Insurance; Non-medical insrance; Concealment, whether intentional or
unin-tentional; Ground for rescission.-
In this jurisdiction, a con-cealment, whether intentional or unintentional, entitles
the in-surer to rescind the contract of insurance, concealment being defined as
“negligence to communicate that which a party knows and ought to
communicate” (Sections 24 and 26, Act No. 2427).
2. Same; Same; Concealment of previous operation.-
The con-cealment of the fact of the operation itself is fraudulent, as there could
not have been any mistake about it, no matter what the ailment.
4. What is a non-medical insurance?
SATURNINO VS. PHILIPPINE AMERICAN LIFE INS. CO. 7 SCRA 316 ,
FEBRUARY 28, 1963
1. Insurance; Non-medical insurance; Medical history mate-rial to insurability of
applicant.-
—In non-medical insurance, the waiver of medical examination renders even
more material the information required of the applicant concerning previous
con-dition of health and diseases suffered, for such information necessarily
constitutes an important factor which the insurer takes into consideration in
deciding whether to issue the policy or not.
SUNLIFE ASSURANCE COMPANY OF CANADA VS. COURT OF APPEALS
245 SCRA 268 , JUNE 22, 1995
1. Insurance Law; Concealment; Non-Medical Insurance Contracts; The waiver of
a medical examination in a non-medical insurance contract renders even more
material the information required of the applicant concerning previous condition
of health and diseases suffered.-
The argument, that petitioner’s waiver of the medical examination of the insured
debunks the materiality of the facts concealed, is untenable. We reiterate our
ruling in Saturnino v. Philippine American Life Insurance Company, 7 SCRA 316
(1963), that “x x x the waiver of a medical examination [in a non-medical
insurance contract] renders even more material the information required of the
applicant concerning previous condition of health and diseases suffered, for such
information necessarily constitutes an important factor which the insurer takes
into consideration in deciding whether to issue the policy or not x x x.”
5. Decide whether or not Insular Life was estopped and could no longer
cancel the contract due to the fact that it accepted tender of overdue
payment from…
NG GAN ZEE VS. ASIAN CRUSADER LIFE ASSURANCE CORP. 122 SCRA
461, MAY 30, 1983
1. Mercantile Law; Insurance; Concealment; Misrepresentation; Fraudulent intent
of insured must be established to entitle insurer to rescind insurance contract;
Misrepresentation, as defense of insurer, is an affirmative defense which must be
proved.-
Sec. 27 of the Insurance Law, abovequoted, nevertheless requires that
fraudulent intent on the part of the insured be established to entitle the insurer
to rescind the contract. And as correctly observed by the lower court,
“misrepresentation as a defense of the insurer to avoid liability is an ‘affirmative’
defense. The duty to establish such a defense by satisfactory and convincing
evidence rests upon the defendant. The evidence before the Court does not
clearly and satisfactorily establish that defense.”
2. Mercantile Law; Insurance; Concealment; Statement of insured that tumor he
was operated on was associated with ulcer of the stomach, an expression made
in good faith as to the nature of his ailment and operation and without
knowledge of its incorrectness and without any deliberate intent to mislead the
insurer.-
 It bears emphasis that Kwong Nam had informed the appellant’s medical
examiner that the tumor for which he was operated on was “associated with
ulcer of the stomach.” In the absence of evidence that the insured had sufficient
medical knowledge as to enable him to distinguish between “peptic ulcer” and “a
tumor”, his statement that said tumor was “associated with ulcer of the
stomach,” should be construed as an expression made in good faith of his belief
as to the nature of his ailment and operation. Indeed, such statement must be
presumed to have been made by him without knowledge of its incorrectness and
without any deliberate intent on his part to mislead the appellant.
3. Mercantile Law; Insurance; Concealment; Failure of insurer to undertake a
further inquiry on insurance application on the question of the insured’s ailment
and operation which is important in determination of grant of insurance or not,
constitutes waiver by insurer of imperfection in the answer and renders omission
to answer more fully immaterial; Case at bar.-
Where, “upon the face of the application, a question appears to be not answered
at all or to be imperfectly answered, and the insurers issue a policy without any
further inquiry, they waive the imperfection of the answer and render the
omission to answer more fully immaterial. As aptly noted by the lower court, “if
the ailment and operation of Kwong Nam had such an important bearing on the
question of whether the defendant would undertake the insurance or not, the
court cannot understand why the defendant or its medical examiner did not
make any further inquiries on such matters from the Chinese General Hospital or
require copies of the hospital records from the appellant before acting on the
application for insurance. The fact of the matter is that the defendant was too
eager to accept the application and receive the insured’s premium. It would be
inequitable now to allow the defendant to avoid liability under the
circumstances.”
TOPIC: Representation
1. Decide whether the acceptance of the private respondent insurance
company of the premium and the issuance of the certificate of
insurance shall be deemed a waiver of the exclusionary overage
provision stated in the said contract of insurance.
- It is deemed a waiver on the part of the insurance company.
REGINA L. EDILLON, as assisted by her husband, MARCIAL EDILLON,
petitioners-appellants, vs. MANILA BANKERS LIFE INSURANCE
CORPORATION and the COURT OF FIRST INSTANCE OF RIZAL, BRANCH
V, QUEZON CITY, respondents-appellees. 117 SCRA 187 , September
30, 1982
1. Commercial Law; Insurance; Concealment of age, not a case of; Estoppel;
Acceptance by insurance corporation of the premium and issuance of
corresponding certificate of insurance in favor of the insured was deemed a
waiver of the exclusionary condition of overage stated in said certificate of
insurance.—
The age of the insured Carmen O. Lapuz was not concealed to the insurance
company. Her application for insurance coverage which was on a printed form
furnished by private respondent and which contained very few items of
information clearly indicated her age at the time of filing the same to be almost
65 years of age. Despite such information which could hardly be overlooked in
the application form, considering its prominence thereon and its materiality to
the coverage applied for, the respondent insurance corporation received her
payment of premium and issued the corresponding certificate of insurance
without question. The accident which resulted in the death of the insured, a risk
covered by the policy, occurred on May 31, 1969 or FORTY-FIVE (45) DAYS after
the insurance coverage was applied for. There was sufficient time for the private
respondent to process the application and to notice that the application was over
60 years of age and thereby cancel the policy on that ground if it was minded to
do so. If the private respondent failed to act, it is either because it was willing to
waive such disqualification; or, through the negligence or incompetence of its
employees for which it has only itself to blame, it simply overlooked such fact.
Under the circumstances, the insurance corporation is already deemed in
estoppel. Its inaction to revoke the policy despite a departure from the
exclusionary condition contained in the said policy constituted a waiver of such
condition.
2. It was argued that the insured was not chargeable of such negligence
as to render him liable for false answers inserted by agent merely
because he signed a blank and he trusted the agent to fill out the
same. Decide.
INSULAR LIFE ASSURANCE CO. VS. FELICIANO ET AL. 74 PHIL., 468 ,
DECEMBER 29, 1943
1. Life Insurance; Validity of Policy Containing False State-ments Regarding
Health of the Insured.-
The policies were issued on the basis of the statement subscribed by the
applicant to the effect that he was and had been in good health, when as a
matter of fact he was then suffering from advanced pulmonary tuberculosis.
Held: Although the agent and the medical examiner knew that statement to be
false, no valid contract of insurance was entered into because there was no real
meeting of the minds of the parties.
2. Id.; Id.; Connivance with Soliciting Agent and Medical Examiner.-
From all the facts and circumstances of the case, we are constrained to conclude
that the insured was a coparticipant, and coresponsible with Agent David and
Medical Examiner Valdez, in the fraudulent procurement of the policies in
question and that by reason thereof said policies are void ab initio.
3. Id.; Id.-
When Evaristo Feliciano, the applicant for insurance, signed the application in
blank and authorized the soliciting agent and/or the medical examiner of the
 Company to write the answers for him, he made them his own agents for that
pur-pose, and he was responsible for their acts in that connection. If they
falsified the answers for him, he could not evade the responsibility for the
falsification. He was not supposed to sign the application in blank. He knew that
the answers to the questions therein, contained would be "the basis of the
pol-icy," and for that very reason he was required with his signature to vouch for
the truth thereof.
3. The defendant contended that Section 47 does not apply to the matters
alleged in the special defense if in legal effect, defendant’s special
defense is in a nature of an act to rescind a contract of insurance, and
then such right must be exercised prior to the commencement of an
action…
- Section 47 does not apply in the present case.
TAN CHAY HENG VS. WEST COAST LIFE INSURANCE CO. 51 PHIL. 80 ,
NOVEMBER 21, 1927
1. Nature Of Action To Rescind.—
An action to rescind a contract is founded upon and presupposes the existence
of the contract which is sought to be rescinded.
2. When Section 47 Of Insurance Act Is Not A Bar.—
A defense to an action to recover insurance that the policy was obtained through
false representations, fraud and deceit is not in the nature of an action to rescind
and, hence, is not barred by section 47 of the Insurance Act.
3. Nature Of That Defense.—
A defense of that nature is founded upon the theory that, through fraud in its
execution, the policy is void ab initio, and that no valid contract was ever made.
4. The petitioners contend that the respondent company no longer have
the right to rescind the insurance contract as rescission must allegedly
be done within two years of … and prior to the commencement of an
action.
- The contention of the petitioners is incorrect. The insurance company is not
barre from rescinding the insurance policy.
TAN VS. COURT OF APPEALS 174 SCRA 403 , JUNE 29, 1989
1. Commercial Law; Insurance; Essence of the phrase “Incontestability clause.”-
The so-called “incontestability clause” precludes the insurer from raising the
defenses of false representations or concealment of material facts insofar as
health and previous diseases are concerned if the insurance has been in force for
at least two years during the insured’s lifetime. The phrase “during the lifetime”
found in Section 48 simply means that the policy is no longer considered in force
after the insured has died. The key phrase in the second paragraph of Section 48
is “for a period of two years.”
2. Commercial Law; Insurance; Respondent company not barred from proving
that the policy is void ab initio by reason of the insured’s fraudulent concealment
or misrepresentation.-
As noted by the Court of Appeals, to wit: “The policy was issued on November 6,
1973 and the insured died on April 26, 1975. The policy was thus in force for a
period of only one year and five months. Considering that the insured died
before the two-year period had lapsed, respondent company is not, therefore,
barred from proving that the policy is void ab initio by reason of the insured’s
fraudulent concealment or misrepresentation. Moreover, respondent company
rescinded the contract of insurance and refunded the premiums paid on
September 11, 1975, previous to the commencement of this action on November
27, 1975.”
3. Commercial Law; Insurance; Incontestability clause is a sufficient answer to
the various tactics employed by insurance companies to avoid liability.-
The insurer has two years from the date of issuance of the insurance contract or
of its last reinstatement within which to contest the policy, whether or not, the
insured still lives within such period. After two years, the defenses of
concealment or misrepresentation, no matter how patent or well founded, no
longer lie. Congress felt this was a sufficient answer to the various tactics
employed by insurance companies to avoid liability. The petitioners’
interpretation would give rise to the incongruous situation where the
beneficiaries of an insured who dies right after taking out and paying for a life
insurance policy, would be allowed to collect on the policy even if the insured
fraudulently concealed material facts.