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Insurance Case Digest: Constantino V. Asia Life Insurance Co.

(1950)

G.R. No. L-1669 August 31, 1950


Lessons Applicable: General Principles on Insurance (Insurance)

FACTS:

 Case 1:
 The life of Arcadio Constantino was insured with Asia Life Insurance Company (Asia) for a term of 20 years
with Paz Lopez de Constantino as beneficiary. The first premium covered the period up to September 26, 1942.

 After the first premium, no further premiums were paid. The insured died on September 22, 1944.
 Asia Life Insurance Company, being an American Corp., had to close its branch office in Manila by reason of the
Japanese occupation, i.e. from January 2, 1942, until the year 1945.
 Case 2:
 Spouses Tomas Ruiz and Agustina Peralta. Their premium were initially annually but subsequently changed to
quarterly. The last quarterly premium was delivered on on November 18, 1941 and it covered the period
until January 31, 1942.
 Upon the Japanese occupation, the insurer and insured were not able to deal with each other
 Because the insured had borrowed on the policy P234.00 in January, 1941, the cash surrender value of the
policy was sufficient to maintain the policy in force only up to September 7, 1942.
 Tomas Ruiz died on February 16, 1945 with Agustina Peralta as beneficiary. Her demand for payment was
refused on the ground of non-payment of the premiums.
 Plaintiffs: As beneficiaries, they are entitled to receive the proceeds of the policies minus all sums due for
premiums in arrears. The non-payment of the premiums was caused by the closing of Asia's offices in Manila
during the Japanese occupation and the impossible circumstances created by war.
 lower court: absolved Asia
ISSUE: W/N the insurers still have a right to claim.

HELD: YES. lower court affirmed.


 it would seem that pursuant to the express terms of the policy, non-payment of premium produces its
avoidance
 Forfeitures of insurance policies are not favored, but courts cannot for that reason alone refuse to enforce an
insurance contract according to its meaning.
 Nevertheless, inasmuch as the non-payment of premium was the consequence of war, it should be excused and
should not cause the forfeiture of the policy
 3 Rules in case of war:
 Connecticut Rule
 2 elements in the consideration for which the annual premium is paid:
 mere protection for the year
 privilege of renewing the contract for each succeeding year by paying the premium for that year at the time
agreed upon
 payment of premiums is a condition precedent, the non-performance would be illegal necessarily defeats the
right to renew the contract
 New York Rule - greatly followed by a number of cases
 war between states in which the parties reside merely suspends the contracts of the life insurance, and that,
upon tender of all premiums due by the insured or his representatives after the war has terminated, the
contract revives and becomes fully operative
 United States Rule
 contract is not merely suspended, but is abrogated by reason of non-payments is peculiarly of the essence of
the contract
 it would be unjust to allow the insurer to retain the reserve value of the policy, which is the excess of the
premiums paid over the actual risk carried during the years when the policy had been in force
 The business of insurance is founded on the law of average; that of life insurance eminently so
 contract of insurance is sui generis
 Whether the insured will continue it or not is optional with him. There being no obligation to pay for the
premium, they did not constitute a debt.
 It should be noted that the parties contracted not only for peacetime conditions but also for times of war,
because the policies contained provisions applicable expressly to wartime days. The logical inference,
therefore, is that the parties contemplated uninterrupted operation of the contract even if armed conflict
should ensue.
 the fundamental character of the undertaking to pay premiums and the high importance of the defense of non-
payment thereof, was specifically recognized
 adopt the United States Rule: first policy had no reserve value, and that the equitable values of the second had
been practically returned to the insured in the form of loan and advance for premium

Constantino v. Asia Life- Non-payment of Insurance Premiums

87 PHIL 248

Facts:
> Appeal consolidates two cases.
> Asia life insurance Company (ALIC) was incorporated in Delaware.
> For the sum of 175.04 as annual premium duly paid to ALIC, it issued Policy No. 93912 whereby it insured the life
of Arcadio Constantino for 20 years for P3T with Paz Constantino as beneficiary.

 First premium covered the period up to Sept. 26, 1942. No further premiums were paid after the first
premium and Arcadio died on Sept. 22, 1944.

> Due to Jap occupation, ALIC closed its branch office in Manila from Jan. 2 1942-1945.
> On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the lives of Spouses Tomas Ruiz and Agustina Peralta for
the sum of P3T for 20 years. The annual premium stipulated was regularly paid from Aug. 1, 1938 up to and
including Sept. 30, 1940.

 Effective Aug. 1, 1941, the mode of payment was changed from annually to quarterly and such quarterly
premiums were paid until Nov. 18, 1941.
 Last payment covered the period until Jan. 31, 1942.
 Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his beneficiary.

> Due to Jap occupation, it became impossible and illegal for the insured to deal with ALIC. Aside from this the
insured borrowed from the policy P234.00 such that the cash surrender value of the policy was sufficient to
maintain the policy in force only up to Sept. 7, 1942.
> Both policies contained this provision: All premiums are due in advance and any unpunctuality in making such
payment shall cause this policy to lapse unless and except as kept in force by the grace period condition.
> Paz Constantino and Agustina Peralta claim as beneficiaries, that they are entitled to receive the proceeds of the
policies less all sums due for premiums in arrears. They also allege that non-payment of the premiums were
caused by the closing of ALIC’s offices during the war and the impossible circumstances by the war, therefore, they
should be excused and the policies should not be forfeited.
> Lower court ruled in favor of ALIC.

Issue:

May a beneficiary in a life insurance policy recover the amount thereof although the insured died after repeatedly
failing to pay the stipulated premiums, such failure being caused by war?

Held:
NO.
Due to the express terms of the policy, non-payment of the premium produces its avoidance. In Glaraga v. Sun
Life, it was held that a life policy was avoided because the premium had not been paid within the time fixed; since
by its express terms, non-payment of any premium when due or within the 31 day grace period ipso fact caused
the policy to lapse.

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. Essentially, the reason why punctual payments are important
is that the insurer calculates on the basis of the prompt payments. Otherwise, malulugi sila.

It should be noted that the parties contracted not only as to peace time conditions but also as to war-time
conditions since the policies contained provisions applicable expressly to wartime days. The logical inference
therefore is that the parties contemplated the uninterrupted operation of the contract even if armed conflict
should ensue.

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


Facts:

J. Martin:

Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with a rider for Accidental Death.
He designated Carponia T. Ebrado as the revocable beneficiary in his policy. He referred to her as his wife.

Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made liable to pay the coverage in
the total amount of P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the
additional benefits for accidental death.

Carponia T. Ebrado filed with the insurer a claim for the proceeds as the designated beneficiary therein, although
she admited that she and the insured were merely living as husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one
entitled to the insurance proceeds.

Insular commenced an action for Interpleader before the trial court as to who should be given the proceeds. The
court declared Carponia as disqualified.

Issue: WON a common-law wife named as beneficiary in the life insurance policy of a legally married man can
claim the proceeds in case of death of the latter?

Held: No. Petition

Ratio:

Section 50 of the Insurance Act which provides that "the insurance shall be applied exclusively to the proper
interest of the person in whose name it is made"

The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since
a contract of insurance is personal in character. Otherwise, the prohibitory laws against illicit relationships
especially on property and descent will be rendered nugatory, as the same could easily be circumvented by modes
of insurance.

When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by
the general rules of the civil law regulating contracts. And under Article 2012 of the same Code, any person who is
forbidden from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance policy by
the person who cannot make a donation to him. Common-law spouses are barred from receiving donations from
each other.

Article 739 provides that void donations are those made between persons who were guilty of adultery or
concubinage at the time of donation.

There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate
ones should be enforced in life insurance policies since the same are based on similar consideration. So long as
marriage remains the threshold of family laws, reason and morality dictate that the impediments imposed upon
married couple should likewise be imposed upon extra-marital relationship.

A conviction for adultery or concubinage isn’t required exacted before the disabilities mentioned in Article 739
may effectuate. The article says that in the case referred to in No. 1, the action for declaration of nullity may be
brought by the spouse of the donor or donee; and the guilty of the donee may be proved by preponderance of
evidence in the same action.

The underscored clause neatly conveys that no criminal conviction for the offense is a condition precedent. The
law plainly states that the guilt of the party may be proved “in the same acting for declaration of nullity of
donation.” And, it would be sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she has six legitimate children. He was also living in with
his common-law wife with whom he has two children.

The Insular Life Assurance Company vs Ebrado, 80 SCRA 181


Fact:

On September 1, 1968, Buenaventura Ebrado issued by the Insular Life Assurance Policy No 009929 a whole-life
plan with a rider for Accidental Death. Buenaventura designated Carponia Ebrado as the revocable beneficiary in
his policy. He referred her as his wife.

On October 21, 1969, Buenaventura Ebrad died as a result of an accident when he was hit by a falling tree.
Carponia filed with the insurer a claim for the proceeds of the policy as the designated beneficiary therein.
Although she admits that she and the insured Buenaventura were merely living as husband and wife without the
benefits of marriage. Pascuala de Ebrado, valid wife, also filed her claim as the widow of the deceased insured.

Issue: Can a common-law wife named as beneficiary in the life insurance policy of legally married man claim the
proceeds thereof in case of death of the latter?

Ruling:

In essence, a life insurance 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 Article739 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 a beneficiary in the life insurance policy of the persons who cannot make the donation.

Note following Articles from the Civil Code:

Article 2011 - "The contract of insurance is governed by special laws. Matters not expressly provided for in such
special laws shall be regulated by this Code."
Article 2012 - "Any person who in forbidden from receiving any donation under Article 739 cannot be named
beneficiary of a life insurance policy by the person who cannot be make a donation to him."

Article 739- "The donations shall be void:

1. Those made between persons who were guilty of adultery or concubinage at the title of
donation.xx
In the case provided to in No.1, the action for declaration of nullity may be brought by the spouse of the donor or
donee; and the guilt of the donee may be provided by preponderance of evidence in same action."

Qua Chee Gan v. Law Union Rock - Breach of Warranty

98 PHIL 85

Facts:
> Qua Chee Gan, a merchant, owned 4 warehouses in Albay which were used for the storage or copra and hemp in
which the appelle deals with exclusively.
> The warehouses together with the contents were insured with Law Union since 1937 and the loss made payable
to PNB as mortgagee of the hemp and copra.
> A fire of undetermined cause broke out in July 21, 1940 and lasted for almost 1 whole week.
> Bodegas 1, 3, and 4 including the merchandise stored were destroyed completely.
> Insured then informed insurer of the unfortunate event and submitted the corresponding fire claims, which
were later reduced to P370T.
> Insurer refused to pay claiming violations of the warranties and conditions, filing of fraudulent claims and that
the fire had been deliberately caused by the insured.
> Insured filed an action before CFI which rendered a decision in favor of the insured.

Issues and Resolutions:


(1) Whether or not the policies should be avoided for the reason that there was a breach of warranty.

Under the Memorandum of Warranty, there should be no less than 1 hydrant for each 150 feet of external wall
measurements of the compound, and since bodegas insured had an external wall per meter of 1640 feet, the
insured should have 11 hydrants in the compound. But he only had 2.

Even so, the insurer is barred by estoppel to claim violation of the fire hydrants warranty, because knowing that
the number of hydrants it demanded never existed from the very beginning, appellant nevertheless issued the
policies subject to such warranty and received the corresponding premiums. The insurance company was aware,
even before the policies were issued, that in the premises there were only 2 hydrants and 2 others were owned by
the Municipality, contrary to the requirements of the warranties in question.

It should be close to conniving at fraud upon the insured to allow the insurer to claim now as void the policies it
issued to the insured, without warning him of the fatal defect, of which the insurer was informed, and after it had
misled the insured into believing that the policies were effective.

Accdg to American Jurisprudence: It is a well-settled rule that the insurer at the time of the issuance of a policy
has the knowledge of existing facts, which if insisted on, would invalidate the contract from its very inception, such
knowledge constitutes a waiver of conditions in the contract inconsistent with known facts, and the insurer is
stopped thereafter from asserting the breach of such conditions. The reason for the rule is: To allow a company to
accept one’s money for a policy of insurance which it knows to be void and of no effect, though it knows as it must
that the insured believes it to be valid and binding is so contrary to the dictates of honesty and fair dealing, as so
closely related to positive fraud, as to be abhorrent to fair-minded men. It would be to allow the company to treat
the policy as valid long enough to get the premium on it, and leave it at liberty to repudiate it the next moment.

Moreover, taking into account the well-known rule that ambiguities or obscurities must strictly be interpreted
against the party that cause them, the memorandum of warranty invoked by the insurer bars the latter from
questioning the existence of the appliances called for, since its initial expression “the undernoted appliances for
the extinction of fire being kept on the premises insured hereby..” admits of the interpretation as an admission of
the existence of such appliances which insurer cannot now contradict, should the parole evidence apply.

(2) Whether or not the insured violated the hemp warranty provision against the storage of gasoline since insured
admitted there were 36 cans of gasoline in Bodega 2 which was a separate structure and not affected by the fire.

It is well to note that gasoline is not specifically mentioned among the prohibited articles listed in the so-called
hemp warranty. The clause relied upon by the insurer speaks of “oils”. Ordinarily, oils mean lubricants and not
gasoline or kerosene. Here again, by reason of the exclusive control of the insurance company over the terms of
the contract, the ambiguity must be held strictly against the insurer and liberally in favor of the insured, specially
to avoid a forfeiture.

Furthermore, the gasoline kept was only incidental to the insured’s business. It is a well settled rule that keeping
of inflammable oils in the premises though prohibited by the policy does NOT void it if such keeping is incidental to
the business. Also, the hemp warranty forbade the storage only in the building to which the insurance applies,
and/or in any building communicating therewith; and it is undisputed that no gasoline was stored in the burnt
bodegas and that Bodega No. 2 which was where the gasoline was found stood isolated from the other bodegas.