BAR QUESTIONS

Concealment; Material Concealment (2013)

No.II. Benny applied for life insurance for Php 1.5 Million. The insurance company approved his
application and issued an insurance policy effective Nov, 6, 2008. Benny named his children as his
beneficiaries. On April 6, 2010, Benny died of hepatoma, a liver ailment.
The insurance company denied the childrens claim for the proceeds of the insurance policy on the
ground that Benny failed to disclose in his application two previous consultations with his doctors for
diabetes and hypertension, and that he had been diagnosed to be suffering from hepatoma. The
insurance company also rescinded the policy and refunded the premiums paid.
Was the insurance company correct? (8%)
SUGGESTED ANSWER
The insurance company correctly rescinded the policy because of concealment (Section 27 of
Insurance
Code). Benny did not disclose that he was suffering from diabetes, hypertension, and hepatoma.
The concealment is material, because these are serious ailments (Florendo v. Philam Plans, Inc.,
666 SCRA 618, 2012). Benny died less than two years from the date of the issuance of the policy
(Section 48 of Insurance Code).
Insurance; Property Insurance; Late Payment of Premiums (2010)
No.XI. Enrique obtained from Seguro Insurance Company a comprehensive motor vehicle insurance
to cover his top of the line Aston martin. The policy was issued on March 31, 2010 and, on even
date, Enrique paid the premium with a personal check postdated April 6, 2010. On April 5, 2010, the
car was involved in an accident that resulted in its total loss. On April 10, 2010, the drawee bank
returned Enriques check with the notation Insurance funds. Upon notification, Enrique
immediately deposited additional funds with the bank and asked the insurer to redeposit the check.
Enrique thereupon claimed indemnity from the insurer. Is the insurer liable under the insurance
coverage? Why or why not? (3%)
SUGGESTED ANSWER:
The insurer is not liable under the insurance policy. Under Article 1249 of the Civil Code, the delivery
of a check produces the effect of payment only when it is encashed. The loss occurred on April 5,
2010. When the check was deposited, it was returned on April 10, 2010, for insufficiency of funds.
The check was honored only after Enrique deposited additional funds with the bank. Hence, it did
not produce the effect of payment (Vitug, Commercial Laws and Jurisprudence, Vol. I, p.250).
ALTERNATIVE ANSWER:
Yes. The insurer is liable. The insurance policy was issued. In effect, there was a grant of credit for
the payment of the premium. The insurer can deduct the amount of the check from the proceeds of
the insurance.

Insurance; Property Insurance; Payment of Premiums by Check (2007)

No.IV. Alfredo took out a policy to insure this commercial building fire. The broker for the insurance
company agreed to give a 15-day credit within which pay the insurance premium. Upon delivery of
the policy on May 15, 2006, Alfredo issued a postdated check payable on May 30, 2006.
On May 28, 2006, a fire broke out and destroyed the building owned by Alfredo.(10%)
May Alfredo recover on the insurance policy?
SUGGESTED ANSWER:
Yes, Alfredo may recover on the policy. It is valid to stipulate that the insured will be granted credit
term for payment of premium. Payment by means of a check which was accepted by the insurer,
bearing a date prior to the loss, would be sufficient. The subsequent effects of encashment retroact
to the date of the check (UCPB General Insurance Co., Inc. v. Masagana Telamart, Inc., 356 SCRA
307 [2001]).

Insurance; Property Insurance; Payment of Premiums even after Loss (2013)

No.VII. Stable Insurance Co. (SIC) and St. Peter Manufacturing Co. (SPMC) have had a longstanding insurance relationship with each other; SPMC secures the comprehensive fire insurance on
its plant and facilities from SIC. The standing business practice between them has been to allow
SPMC a credit period of 90 days from the renewal of the policy with which to pay the premium. Soon
after the new policy was issued and before premium payments could be made, a fire gutted the
covered plant and facilities to the ground. The day after the fire, SPMC issued a managers check to
SIC for the fire insurance premium, for which it was issued a receipt; a week later SPMC issued its
notice of loss.
SIC responded by issuing its own managers check for the amount of the premiums SPMC had paid,
and denied SPMCs claim on the ground that under the cash and carry principle governing fire
insurance, no coverage existed at the time the fire occurred because the insurance premium had not
been paid.Is SPMC entitled to recover for the loss form SIC? (8%)
SUGGESTED ANSWER:
St. Peter Manufacturing Company is entitled to recover for the loss from stable Insurance Company.
Stable Insurance Company granted a credit term to pay the premiums. This is not against the law,
because the standing business practice of allowing St. Peter Manufacturing Company to pay the
premiums after 60 or 90 days, was relied upon in good faith by SPMC. Stable Insurance Company is
in estoppels (UCPB General Insurance Company, Inc. v. Masagana Telemart, Inc. 356 SCRA 307,
2001).