San Miguel Brewery vs Law Union and Rock Inurance Co., G.R. No.

14300 January 19, 1920

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 mortgaged debt.
Instead, however, of affecting the insurance himself Dunn authorized and requested the Brewery
Company to procure insurance on the property in the amount of P 15, 000 at Dunn’s expense.
San Miguel insured the property only as mortgagee. In the month of March of the year 1917
Dunn sold the insured property to the defendant Henry Harding, but no assignment of the
insurance, 01" of the insurance policies, was at any time made to him. When it was destroyed by
fire, the two companies settled with San Miguel to the extent of the mortgage credit. The 2
companies were absolved from the difference. Hendry Harding is not entitled to the difference
between the mortgage credit to the face value of the policies.
ISSUE: Whether or not San Miguel has insurable interest as mortgagor only to the extent of the
mortgage credit? And whether or not Hendry Harding has insurable interest as owner?
RULING: Yes for San Miguel. No for Hendry Harding. No cause of action in Henry Harding against
the Insurance companies. He is not a party to the contracts of insurance and cannot directly
'maintain an action thereon. His claim is merely of an equitable and subsidiary nature and must
be made effective, if at all, through the San Miguel Brewery in whose name the contracts are
written. Now the Brewery, as mortgagee of the insured property, undoubtedly had an insurable
interest therein; but it could not, in any event, recover upon these policies an amount in excess
of its mortgage credit. This conclusion is not only deducible from the principles governing the
operation and effect of insurance contracts in general but the point is clearly covered by the
express provisions of sections 16 and 50 of the Insurance Act (Act No. 2427). In section 19 of the
Insurance Act we find it stated that "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 is vested
in the same person." Again in section 55 it is declared that "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." 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.
Musgni vs West Coast Life Insurance Company, G.R. No. L-41794, August 30, 1935
The Case: The plaintiffs, as beneficiaries, brought suit against the defendant to recover the value
of two life insurance policies. The defendant appealed from a judgment sentencing it to pay the
plaintiffs the amount of said policies, and the costs.

FACTS: 1. Arsenio T. Garcia was insured by the WCLIC in the sum of P5,000;
2. Garcia was again insured by the WCLIC in the sum of P10,000;
3. The two policies were valid and subsisting at the time of the death of the insured on December
30, 1932;
4. The beneficiaries in said policies, Segundina Musñgi and Buenaventura Garcia demanded upon
the WCLIC for the payment of the two policies, but the defendant company refused to pay.
The two policies were issued upon applications filed by the insured on July 20, 1931 and October
15, of the same year, respectively. In both applications, the insured had to answer inquiries as to
his state of health and that of his family, which he did voluntarily. In each of the said applications
the following question was asked: "1. What physician or practitioner or any other person not
named above have you consulted or been treated by, and for what illness, or ailment? (If none,
so state.)" In the first application, the insured answered "None", and in the second, "No". These
answers of the insured as well as his other statements contained in his applications were one of
the causes or considerations for the issuance of the policies, and they so positively appear
therein. After the death of the insured and as a result of the demand made by the beneficiaries
upon the defendant to pay the value of the policies, the latter discovered that the
aforementioned answers were false and fraudulent, because the truth was that the insured,
before answering and signing the applications and before the issuance of the policies, had been
treated in the General Hospital by a lady physician for different ailments. It indisputably appears
that between May 13 and 19, 1929, the insured had entered the General Hospital in Manila, and
was treated by Dr. Cruz for peptic ulcer and chronic catarrhal nasopharyngitis; on August 5, 1930,
he entered the same hospital and was treated by the same physician for chronic pyelocystitis and
for incipient pulmonary tuberculosis; on the 13th of the same month he returned to the hospital
and was treated by the same physician for chronic suppurative pyelocystitis and for chronic
bronchitis; on the 20th of the same month he again entered the hospital and was treated by the
same doctor for acute tracheo-bronchitis and chronic suppurative pyelocystitis; on the 27th of
the same month he again entered the same hospital and was treated for the same ailments; on
December 11, 1930, he again entered the hospital and was treated for the same ailments; on the
18th of the same month, he again entered the hospital and was treated for the same ailments;
on the 28th of the same month he again entered the hospital and was treated for the same
ailments, and, finally, on January 11, 1931, he again entered the hospital and was treated by the
same doctor for the same ailments. The defendant contended at the outset that the two policies
did not create any valid obligation because they were fraudulently obtained by the insured. The
appealed decision holds that the health of the insured before the acceptance of his applications
and the issuance of the policies could neither be discussed nor questioned by the defendant,
because the insured was examined by three physicians of the company and all of them
unanimously certified that he was in good health and that he could be properly insured.
ISSUE: Whether the two answers given by the insured in his applications are false, and if they
were the cause, or one of the causes, which induced the defendant to issue the policies.
RULING: On the first point, the facts above set out leave no room for doubt. The insured knew
that he had suffered from a number of ailments, including incipient pulmonary tuberculosis,
before subscribing the applications, yet he concealed them and omitted the hospital where he
was confined as well as the name of the lady physician who treated him. That this concealment
and the false statements constituted fraud, is likewise clear, because the defendant by reason
thereof accepted the risk which it would otherwise have flatly refused. When not otherwise
specially provided for by the Insurance Law, the contract of life insurance is governed by the
general rules of the civil law regarding contracts. Article 1261 of the Civil Code provides that there
is no contract unless there should be, in addition to consent and a definite object, a consideration
for the obligation established. And article 1276 provides that the statement of a false
consideration shall render the contract void. The two answers being one of the considerations of
the policies, and it appearing that they are false and fraudulent, it is evident that the insurance
contracts were null and void and did not give rise to any right to recover their value or amount.
One ground for the rescission of a contract of insurance under the Insurance Act is a
"concealment", which in section 25 is defined as "A neglect to communicate that which a party
knows and ought to communicate". Appellant argues that the alleged concealment was
immaterial and insufficient to avoid the policy. In an action on a life insurance policy where the
evidence conclusively shows that the answers to questions concerning diseases were untrue, the
truth or falsity of the answers become the determining factor. If the policy was procured by
fraudulent representations, the contract of insurance apparently set forth therein was never
legally existent. It can fairly be assumed that had the true facts been disclosed by the assured,
the insurance would never have been granted. In Joyce, The Law of Insurance, second edition,
volume 3, Chapter LV, is found the following: "Concealment exists where the assured has
knowledge of a fact material to the risk, and honesty, good faith and fair dealing requires that he
should communicate it to the assured, but he designedly and intentionally withholds the same.”
BERNARDO ARGENTE WEST COAST LIFE INSURANCE Co. GR. No. 28499 March 19, 1928
FACTS: Vicenta de Ocampo died of cerebral apoplexy. Thereafter Bernardo presented a claim in
due form to the West Coast Life Insurance Co. for the payment of the sum of P15,000 the amount
of their joint life insurance policy. Following investigation conducted by the Manager of the
Manila office of the insurance company, it was apparently disclosed that the answers given by
the insured in their medical examinations with regard to their health and previous illnesses and
medical attendance were untrue. For that reason, the Co. refused to pay the claim of Bernardo
and wrote him to the effect that the claim was rejected because the insurance was obtained
through fraud and misrepresentation.
ISSUE: Was the concealment material and sufficient to avoid the policy?
RULING: Yes. Concealment is defined “A neglect to communicate that which a party knows and
ought to communicate." It can fairly be assumed that had the true facts been disclosed by the
assured, the insurance would never have been granted. The assurer in assuming a risk is entitled
to know every material fact of which the assured has exclusive or peculiar knowledge, as well as
all material facts which directly tend to increase the hazard or risk which are known by the
assured, or which ought to be or are presumed to be known by him. And a concealment of such
facts vitiates the policy. It does not seem necessary that the suppression of the truth should have
been willful. If it were but an inadvertent omission, yet if it were material to the risk and such as
the plaintiff should have known to be so, it would render the policy void.
YU PANG CHENG v. CA, G.R. No. L-12465, May 29, 1959
FACTS: On September 1950, Yu Pang Eng submitted his application for insurance to an insurance
company [defendant]. He answered “no” to questions on his medical history (stomach diseases,
dizziness, ulcers, vertigo, cancer, tumors, etc.) as well as to the question of WON he consulted
any physician regarding said diseases. Upon payment of the first premium, the company issued
to him an insurance policy. On December 1950, he went to St. Luke’s for medical treatment but
he died two months later. According to the death certificate, he died of infiltrating medullary
carcinoma, Grade 4, advanced cardiac and of lesser curvature, stomach metastases spleen. His
brother and beneficiary, Yu Pang Cheng [petitioner], demanded from the insurance company the
payment of the policy proceeds [10k], but his demand was refused so he brought the present
action. The insurance company’s defense was that the insured was guilty of misrepresentation
and concealment of material facts in that he gave false and untruthful answers to questions asked
him in his application; hence, the effect is the avoiding of the policy. It appears that the insured
entered the Chinese General Hospital for medical treatment on January 1950 [before application
for insurance policy], complaining of dizziness, anemia, abdominal pains and tarry stools. His
illness history shows that this started a year ago as frequent dizziness. An x-ray picture of his
stomach and the diagnosis was that he suffered from peptic ulcer, bleeding.
ISSUE: Is the insured Yu Pang Eng guilty of concealment of material facts?
RULING: YES. Concealment is a neglect to communicate that which a party knows and ought to
communicate. Whether intentional or not, concealment entitles the insurer to rescind the
contract. The law requires the insured to communicate to the insurer all facts within his
knowledge which are material to the contract and which the other party has not the means of
ascertaining. The materiality is determined not by the event but by the probable and reasonable
influence of the facts upon the party to whom the communication is due. The insured’s negative
answers to the questions on his previous ailments, or his concealment of his hospitalization
deprived the insurance company of the opportunity to make the necessary inquiry as to the
nature of his past illness so that it may form its estimate relative to the approval of his application.
Had the insurance company been given such opportunity, it would not probably consent to the
policy issuance.
SATURNINO vs. PHILAMLIFE, G.R.No. L-22375 July 18, 1975
FACTS: Capital Insurance & Surety Co., Inc. delivered to the respondent Plastic Era Manufacturing
Co., Inc. its open Fire Policy insuring its building, equipment, raw materials, products and
accessories located at Sheridan Street, Mandaluyong, Rizal between December 15, 1960 1 pm -
December 15, 1961 up to P100,000 but Plastic Era did not pay the premium Plastic Era delivered
to Capital Insurance its partial payment through check P1,000 postdated. Capital Insurance tried
to deposit the check but it was dishonored due to lack of funds. According to the records, Plastic
Era has had a bank balance of P1,193.41 Plastic Era's properties were destroyed by fire amounting
to a loss of P283,875. The property was also insured to Philamgen Insurance Company for P200K.
Capital Insurance refused Plastic Era's claim for failing to pay the insurance premium CFI favored
Capital Insurance and CA affirmed the decision of the former.
ISSUE: Whether or not there was a valid insurance contract because there was an extention of
credit despite failing to encash the check payment.
RULING: YES. Article 1249 of the New Civil Code provides that the delivery of promissory notes
payable to order, or bills of exchange or other mercantile documents shall produce the effect of
payment only when they have been cashed, or when through the fault of the creditor they have
been impaired. Capital Insurance accepted the promise of Plastic Era to pay the insurance
premium within 30 days from the effective date of policy. Considering that the insurance policy
is silent as to the mode of payment, Capital Insurance is deemed to have accepted the promissory
note in payment of the premium. This rendered the policy immediately operative on the date it
was delivered. By accepting its promise to pay the insurance premium within thirty (30) days
from the effectivity date of the policy, Capital Insurance had in effect extended credit to Plastic
Era. Where credit is given by an insurance company for the payment of the premium it has no
right to cancel the policy for nonpayment except by putting the insured in default and giving him
personal notice. Having held the check for such an unreasonable period of time, Capital Insurance
was estopped from claiming a forfeiture of its policy for non-payment even if the check had been
dishonored later.