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CALANOC v CA (G.R. L-8151): Melencio Basilio was a security guard who died while on duty.

The
insurance company paid his widow, Virginia Calanoc, the face value of the policy, P2,000, but
refused to give the additional sum of P2,000 in the supplementary contract covering death by
accident. The insurance company said he was killed by someone participating in a robbery and
while making an arrest, two contingencies expressly excluded in the contract.
Basilio was killed as he stood outside the iron gate of Atty Ojeda, as they tried to get into the
house where they suspected a robber had broken into.
The Court of Appeals upheld the company, that said Basilio’s killing was not an accident, but
rather an intentional act on the part of the robber. The Supreme Court ruled that there was no
proof that it was intentional, that the robber had aimed for Basilio, because there was nothing
on record that showed how the fatal shot was fired while it was an accident on the part of
Basilio. The house being robbed was not the one he was guarding, and he had earlier refused to
go to the house without a policeman. Insurer ordered to pay.

Heirs of Maramag v. Maramag


G.R. No. 181132 , June 5, 2009

FACTS:

The case stems from a petition filed against respondents with the RTC for revocation and/or
reduction of insurance proceeds for being void and/or inofficious. The petition alleged that: (1)
petitioners were the legitimate wife and children of Loreto Maramag (Loreto), while
respondents were Loreto’s illegitimate family; (2) Eva de Guzman Maramag (Eva) was a
concubine of Loreto and a suspect in the killing of the latter, thus, she is disqualified to receive
any proceeds from his insurance policies from Insular Life Assurance Company, Ltd. (Insular)
and Great Pacific Life Assurance Corporation (Grepalife) (3) the illegitimate children of Loreto—
Odessa, Karl Brian, and Trisha Angelie—were entitled only to one-half of the legitime of the
legitimate children, thus, the proceeds released to Odessa and those to be released to
Karl Brian and Trisha Angelie were inofficious and should be reduced; and (4) petitioners could
not be deprived of their legitimes, which should be satisfied first. Insular admitted that
Loreto misrepresented Eva as his legitimate wife and Odessa, Karl Brian, and Trisha Angelie as
his legitimate children, and that they filed their claims for the insurance proceeds of the
insurance policies; that when it ascertained that Eva was not the legal wife of Loreto, it
disqualified her as a beneficiary and divided the proceeds among Odessa, Karl Brian, and Trisha
Angelie, as the remaining designated beneficiaries; and that it released Odessa’s share as she
was of age, but withheld the release of the shares of minors Karl Brian and Trisha Angelie
pending submission of letters of guardianship. Insular alleged that the complaint or petition
failed to state a cause of action insofar as it sought to declare as void the designation of Eva
as beneficiary, because Loreto revoked her designation as such in Policy No. A001544070 and it
disqualified her in Policy No. A001693029; and insofar as it sought to declare as inofficious the
shares of Odessa, Karl Brian, and Trisha Angelie, considering that no settlement of
Loreto’s estate had been filed nor had the respective shares of the heirs been
determined. Insular further claimed that it was bound to honor the insurance policies
designating the children of Loreto with Eva as beneficiaries pursuant to Section 53 of the
Insurance Code. Grepalife alleged that Eva was not designated as an insurance
policy beneficiary; that the claims filed by Odessa, Karl Brian, and Trisha Angelie were denied
because Loreto was ineligible for insurance due to a misrepresentation in his application
form that he was born on December 10, 1936 and, thus, not more than 65 years old when
he signed it in September 2001; that the case was premature, there being no claim filed by the
legitimate family of Loreto; and that the law on succession does not apply where
the designation of insurance beneficiaries is clear.

ISSUE:

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

RULING:

Yes. Section 53 of the Insurance Code states that the insurance proceeds shall be applied
exclusively to the proper interest of the person in whose name or for whose benefit it is made
unless otherwise specified in the policy. Pursuant thereto, it is obvious that the only
persons entitled to claim the insurance proceeds are either the insured, if still alive; or
the beneficiary, if the insured is already deceased, upon the maturation of the policy.The
exception to this rule is a situation where the insurance contract was intended to benefit third
persons who are not parties to the same in the form of favorable stipulations or indemnity. In
such a case, third parties may directly sue and claim from the insurer.

Petitioners are third parties to the insurance contracts with Insular and Grepalife and, thus, are
not entitled to the proceeds thereof. Accordingly, respondents Insular and Grepalife have no
legal obligation to turn over the insurance proceeds to petitioners. The revocation of Eva as
a beneficiary in one policy and her disqualification as such in another are of no moment
considering that the designation of the illegitimate children as beneficiaries in Loreto’s
insurance policies remains valid. Because no legal proscription exists in naming as beneficiaries
the children of illicit relationships by the insured, the shares of Eva in the insurance proceeds,
whether forfeited by the court in view of the prohibition on donations under Article 739 of the
Civil Code or by the insurers themselves for reasons based on the insurance contracts, must be
awarded to the said illegitimate children, the designated beneficiaries, to the exclusion of
petitioners. It is only in cases where the insured has not designated any beneficiary, or when
the designated beneficiary is disqualified by law to receive the proceeds, that the
insurance policy proceeds shall redound to the benefit of the estate of the insured.
FINMAN GENERAL ASSURANCE CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and JULIA SURPOSA, respondents.

Aquino and Associates for petitioner.

Public Attorney’s Office for private respondent.

Ponente: NOCON

FACTS:

[P]etitioner filed this petition alleging grove abuse of discretion on the part of the appellate
court in applying the principle of “expresso unius exclusio alterius” in a personal accident
insurance policy since death resulting from murder and/or assault are impliedly excluded in said
insurance policy considering that the cause of death of the insured was not accidental but
rather a deliberate and intentional act of the assailant in killing the former as indicated by the
location of the lone stab wound on the insured. Therefore, said death was committed with
deliberate intent which, by the very nature of a personal accident insurance policy, cannot be
indemnified.

ISSUE:

Whether or not death petitioner is correct that results from assault or murder deemed are not
included in the terms “accident” and “accidental”.

HELD:

NO. Petition for certiorari with restraining order and preliminary injunction was denied for lack
of merit.

RATIO:

The terms “accident” and “accidental” as used in insurance contracts have not acquired any
technical meaning, and are construed by the courts in their ordinary and common acceptation.
Thus, the terms have been taken to mean that which happen 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.
[I]t is well settled that contracts of insurance are to be construed liberally in favor of the
insured and strictly against the insurer. Thus ambiguity in the words of an insurance contract
should be interpreted in favor of its beneficiary.

Sun v CA G.R. No. 89741 March 13, 1991

J. Paras

Facts:

Tan took from Sun Insurance a Php 300,000 policy to cover his electrical store in Iloilo city. Tan’s
request for an indemnity in 1983 was repeatedly denied, firstly in 1984. He wrote for a
reconsideration in the same year. This was rejected in 1985, prompting him to file a civil case in
the same year. The insurance company filed a motion to dismiss due to prescription in 1987,
but this was denied. The company went to the court of appeals to petition the same thing, but
this was denied.

Issue:

1. WON the filing of a motion for reconsideration interrupts the twelve months prescriptive
period to contest the denial of the insurance claim.

2. WON the rejection of the claim shall be deemed final only if it contains words to the effect
that denial is final. (ie. the first letter in 1984)

3. When does the cause of action accrue?

Held:

1.No

2.No

3. At the time of the first rejection of the insurance company

Ratio:
1. The policy states in section 27.

Action or suit clause — If a claim be made and rejected and an action or suit be not commenced
either in the Insurance Commission or in any court of competent jurisdiction within twelve (12)
months from receipt of notice of such rejection, or in case of arbitration taking place as
provided herein, within twelve (12) months after due notice of the award made by the
arbitrator or arbitrators or umpire, then the claim shall for all purposes be deemed to have
been abandoned and shall not thereafter be recoverable hereunder.

Respondent Tan admitted that he received a copy of the letter of rejection on April 2, 1984.
Thus, the 12-month prescriptive period started to run from the said date of April 2, 1984, under
section 27.

2. It was clear in the letter.

Ang v. Fulton Fire Insurance Co.- The condition contained in an insurance policy that claims
must be presented within one year after rejection is not merely a procedural requirement but
an important matter essential to a prompt settlement of claims against insurance companies as
it demands that insurance suits be brought by the insured while the evidence as to the origin
and cause of destruction have not yet disappeared.

Therefore, there was a necessity of bringing suits against the Insurer within one year from the
rejection of the claim. (1984) The contention of the respondents that the one-year prescriptive
period does not start to run until the petition for reconsideration had been resolved by the
insurer (1985), runs counter to the doctrine.

The provision in the contract was pursuant to Sec. 63.

A condition, stipulation or agreement in any policy of insurance, limiting the time for
commencing an action thereunder to a period of less than one year from the time when the
cause of action accrues, is void.

3. Eagle star- The right of the insured to the payment of his loss accrues from the happening of
the loss. However, the cause of action in an insurance contract does not accrue until the
insured's claim is finally rejected by the insurer. This is because before such final rejection there
is no real necessity for bringing suit.

The cause of action, then, started when the insurer denied his claim in the first
instance(1984). This rejection of a petition for reconsideration as insisted by respondents
wasn’t the beginning of the cause of action
eagonia v CA G.R. No. 114427 February 6, 1995

Facts:

Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for
P100,000.00. The 1 year policy and covered thestock trading of dry goods.

The policy noted the requirement that

"3. The insured shall give notice to the Company of any insurance or insurances already
effected, or which may subsequently be effected, covering any of the property or properties
consisting of stocks in trade, goods in process and/or inventories only hereby insured, and
unless notice be given and the particulars of such insurance or insurances be stated therein or
endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the
Company before the occurrence of any loss or damage, all benefits under this policy shall be
deemed forfeited, provided however, that this condition shall not apply when the total
insurance or insurances in force at the time of the loss or damage is not more than
P200,000.00."

The petitioners’ stocks were destroyed by fire. He then filed a claim which was subsequently
denied because the petitioner’s stocks were covered by two other fire insurance policies for
Php 200,000 issued by PFIC. The basis of the private respondent's denial was the petitioner's
alleged violation of Condition 3 of the policy.

Geagonia then filed a complaint against the private respondent in the Insurance Commission
for the recovery of P100,000.00 under fire insurance policy and damages. He claimed that he
knew the existence of the other two policies. But, he said that he had no knowledge of the
provision in the private respondent's policy requiring him to inform it of the prior policies and
this requirement was not mentioned to him by the private respondent's agent.

The Insurance Commission found that the petitioner did not violate Condition 3 as he had no
knowledge of the existence of the two fire insurance policies obtained from the PFIC; that it
was Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or securing his
consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks.

The Insurance Commission then ordered the respondent company to pay complainant the sum
of P100,000.00 with interest and attorney’s fees.

CA reversed the decision of the Insurance Commission because it found that the petitioner
knew of the existence of the two other policies issued by the PFIC.

Issues:

1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire
insurance and thereby violated Condition 3 of the policy.

2. WON he is prohibited from recovering

Held: Yes. No. Petition Granted

Ratio:

1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC.
His letter of 18 January 1991 to the private respondent conclusively proves this knowledge. His
testimony to the contrary before the Insurance Commissioner and which the latter relied upon
cannot prevail over a written admission made ante litem motam. It was, indeed, incredible that
he did not know about the prior policies since these policies were not new or original.

2. Stated differently, provisions, conditions or exceptions in policies which tend to work a


forfeiture of insurance policies should be construed most strictly against those for whose
benefits they are inserted, and most favorably toward those against whom they are intended to
operate.

With these principles in mind, Condition 3 of the subject policy is not totally free from
ambiguity and must be meticulously analyzed. Such analysis leads us to conclude that (a) the
prohibition applies only to double insurance, and (b) the nullity of the policy shall only be to the
extent exceeding P200,000.00 of the total policies obtained.

Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total
insurance in force at the time of loss does not exceed P200,000.00, the private respondent was
amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had
in mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of
"other insurance" clause in fire policies is to prevent over-insurance and thus avert the
perpetration of fraud. When a property owner obtains insurance policies from two or more
insurers in a total amount that exceeds the property's value, the insured may have an
inducement to destroy the property for the purpose of collecting the insurance. The public as
well as the insurer is interested in preventing a situation in which a fire would be profitable to
the insured.

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Fortune v CA G.R. No. 115278 May 23, 1995

J. Davide Jr.

Facts:

Producers Bank’s money was stolen while it was being transported from Pasay to Makati. The
people guarding the money were charged with the theft. The bank filed a claim for the amount
of Php 725,000, and such was refused by the insurance corporation due to the stipulation:

GENERAL EXCEPTIONS

The company shall not be liable under this policy in report of

(b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer,
employee, partner, director, trustee or authorized representative of the Insured whether acting
alone or in conjunction with others. . . .

In the trial court, the bank claimed that the suspects were not any of the above mentioned.
They won the case. The appellate court affirmed on the basis that the bank had no power to
hire or dismiss the guard and could only ask for replacements from the security agency.

Issue: Did the guards fall under the general exceptions clause of the insurance policy and thus
absolved the insurance company from liability?
Held: Yes to both. Petition granted.

Ratio:

The insurance agency contended that the guards automatically became the authorized
representatives of the bank when they cited International Timber Corp. vs. NLRC where a
contractor is a "labor-only" contractor in the sense that there is an employer-employee
relationship between the owner of the project and the employees of the "labor-only"
contractor.

They cited Art. 106. Of the Labor Code which said:

Contractor or subcontractor. — There is "labor-only" contracting where the person supplying


workers to an employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited and placed
by such persons are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same manner and extent
as if the latter were directly employed by him.

The bank asserted that the guards were not its employees since it had nothing to do with their
selection and engagement, the payment of their wages, their dismissal, and the control of their
conduct.

They cited a case where an employee-employer relationship was governed by (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employee's conduct.

The case was governed by Article 174 of the Insurance Code where it stated that casualty
insurance awarded an amount to loss cause by accident or mishap.

“The term "employee," should be read as a person who qualifies as such as generally and
universally understood, or jurisprudentially established in the light of the four standards in the
determination of the employer-employee relationship, or as statutorily declared even in a
limited sense as in the case of Article 106 of the Labor Code which considers the employees
under a "labor-only" contract as employees of the party employing them and not of the party
who supplied them to the employer.”

But even if the contracts were not labor-only, the bank entrusted the suspects with the duty to
safely transfer the money to its head office, thus, they were representatives. According to the
court, “a ‘representative’ is defined as one who represents or stands in the place of another;
one who represents others or another in a special capacity, as an agent, and is interchangeable
with ‘agent.’”

Enriquez v. SunLife- Insurance Policy

41 PHIL 269

Facts:

> On Sept. 24 1917, Herrer made an application to SunLife through its office in Manila for life
annuity.

> 2 days later, he paid the sum of 6T to the company’s anager in its Manila office and was given
a receipt.

> On Nov. 26, 1917, the head office gave notice of acceptance by cable to Manila. On the same
date, the Manila office prepared a letter notifying Herrer that his application has been accepted
and this was placed in the ordinary channels of transmission, but as far as known was never
actually mailed and never receivedby Herrer.

> Herrer died on Dec. 20, 1917. The plaintiff as administrator of Herrer’s estate brought this
action to recover the 6T paid by the deceased.

Issue:

Whether or not the insurance contract was perfected.

Held:

NO.

The contract for life annuity was NOT perfected because it had NOT been proved satisfactorily
that the acceptance of the application ever came to the knowledge of the applicant. An
acceptance of an offer of insurance NOT actually or constructively communicated to the
proposer does NOT make a contract of insurane, as the locus poenitentiae is ended when an
acceptance has passed beyond the control of the party.

NOTE: Life annuity is the opposite of a life insurance. In life annuity, a big amount is given to
the insurance company, and if after a certain period of time the insured is stil living, he is
entitled to regular smaller amounts for the rest of his life. Examples of Life annuity are
pensions. Life Insurance on the other hand, the insured during the period of the coverage
makes small regular payments and upon his death, the insurer pays a big amount to his
beneficiaries.

Perez v CA G.R. No. 112329. January 28, 2000

J. Ynares-Santiago

Facts:

Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation for P20,000.00.
Sometime in October 1987, an agent of the insurance corporation, visited Perez in Quezon and
convinced him to apply for additional insurance coverage of P50,000.00. Virginia A. Perez,
Primitivo’s wife, paid P2,075.00 to the agent. The receipt issued indicated the amount received
was a "deposit." Unfortunately, the agent lost the application form accomplished by Perez and
he asked the latter to fill up another application form. The agent sent the application for
additional insurance of Perez to the Quezon office. Such was supposed to forwarded to the
Manila office.

Perez drowned. His application papers for the additional insurance of P50,000.00 were still with
the Quezon. It was only after some time that the papers were brought to Manila. Without
knowing that Perez died, BF Lifeman Insurance Corporation approved the application and
issued the corresponding policy for the P50,000.00.

Petitioner Virginia Perez went to Manila to claim the benefits under the insurance policies of
the deceased. She was paid P40,000.00 under the first insurance policy for P20,000.00 but the
insurance company refused to pay the claim under the additional policy coverage of
P50,000.00, the proceeds of which amount to P150,000.00.

The insurance company maintained that the insurance for P50,000.00 had not been perfected
at the time of the death of Primitivo Perez. Consequently, the insurance company refunded the
amount paid.
BF Lifeman Insurance Corporation filed a complaint against Virginia Perez seeking the rescission
and declaration of nullity of the insurance contract in question.

Petitioner Virginia A. Perez, on the other hand, averred that the deceased had fulfilled all his
prestations under the contract and all the elements of a valid contract are present.

On October 25, 1991, the trial court rendered a decision in favor of petitioner ordering
respondent to pay 150,000 pesos. The Court of Appeals, however, reversed the decision of the
trial court saying that the insurance contract for P50,000.00 could not have been perfected
since at the time that the policy was issued, Primitivo was already dead.

Petitioner’s motion for reconsideration having been denied by respondent court, the instant
petition for certiorari was filed on the ground that there was a consummated contract of
insurance between the deceased and BF Lifeman Insurance Corporation.

Issue: WON the widow can receive the proceeds of the 2nd insurance policy

Held: No. Petition dismissed.

Ratio:

Perez’s application was subject to the acceptance of private respondent BF Lifeman Insurance
Corporation. The perfection of the contract of insurance between the deceased and respondent
corporation was further conditioned with the following requisites stated in the application
form:

"there shall be no contract of insurance unless and until a policy is issued on this application
and that the said policy shall not take effect until the premium has been paid and the policy
delivered to and accepted by me/us in person while I/We, am/are in good health."

BF Lifeman didn’t give its assent when it merely received the application form and all the
requisite supporting papers of the applicant. This happens only when it gives a policy.

It is not disputed, however, that when Primitivo died on November 25, 1987, his application
papers for additional insurance coverage were still with the branch office of respondent
corporation in Quezon. Consequently, there was absolutely no way the acceptance of the
application could have been communicated to the applicant for the latter to accept inasmuch
as the applicant at the time was already dead.
Petitioner insists that the condition imposed by BF that a policy must have been delivered to
and accepted by the proposed insured in good health is potestative, being dependent upon the
will of the corporation and is therefore void. The court didn’t agree. A potestative condition
depends upon the exclusive will of one of the parties and is considered void. The Civil Code
states: When the fulfillment of the condition depends upon the sole will of the debtor, the
conditional obligation shall be void.

The following conditions were imposed by the respondent company for the perfection of the
contract of insurance: a policy must have been issued, the premiums paid, and the policy must
have been delivered to and accepted by the applicant while he is in good health.

The third condition isn’t potestative, because the health of the applicant at the time of the
delivery of the policy is beyond the control or will of the insurance company. Rather, the
condition is a suspensive one whereby the acquisition of rights depends upon the happening of
an event which constitutes the condition. In this case, the suspensive condition was the policy
must have been delivered and accepted by the applicant while he is in good health. There was
non-fulfillment of the condition, because the applicant was already dead at the time the policy
was issued.

As stated above, a contract of insurance, like other contracts, must be assented to by both
parties either in person or by their agents. So long as an application for insurance has not been
either accepted or rejected, it is merely an offer or proposal to make a contract. The contract,
to be binding from the date of application, must have been a completed contract.

The insurance company wasn’t negligent because delay in acting on the application does not
constitute acceptance even after payment. The corporation may not be penalized for the delay
in the processing of the application papers due to the fact that process in a week wasn’t the
usual timeframe in fixing the application. Delay could not be deemed unreasonable so as to
constitute gross negligence
Great Pacific v CA G.R. No. L-31845 April 30, 1979

J. De Castro

Facts:

Ngo Hing filed an application with the Great Pacific for a twenty-year endowment policy in the
amount of P50,000.00 on the life of his one-year old daughter Helen. He supplied the essential
data which petitioner Mondragon, the Branch Manager, wrote on the form. The latter paid the
annual premium the sum of P1,077.75 going over to the Company, but he retained the amount
of P1,317.00 as his commission for being a duly authorized agent of Pacific Life.

Upon the payment of the insurance premium, the binding deposit receipt was issued Ngo Hing.
Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application
form his strong recommendation for the approval of the insurance application. Then
Mondragon received a letter from Pacific Life disapproving the insurance application. The letter
stated that the said life insurance application for 20-year endowment plan is not available for
minors below seven years old, but Pacific Life can consider the same under the Juvenile Triple
Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be
sent to the company.

The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon
wrote back Pacific Life again strongly recommending the approval of the 20-year endowment
insurance plan to children, pointing out that since the customers were asking for such coverage.

Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the recovery before the Court of First Instance
of Cebu, which ruled against him.

Issues:

1. Whether the binding deposit receipt constituted a temporary contract of the life insurance in
question

2. Whether Ngo Hing concealed the state of health and physical condition of Helen Go, which
rendered void the policy

Held: No. Yes. Petition dismissed.

Ratio:

The receipt was intended to be merely a provisional insurance contract. Its perfection was
subject to compliance of the following conditions: (1) that the company shall be satisfied that
the applicant was insurable on standard rates; (2) that if the company does not accept the
application and offers to issue a policy for a different plan, the insurance contract shall not be
binding until the applicant accepts the policy offered; otherwise, the deposit shall be refunded;
and (3) that if the company disapproves the application, the insurance applied for shall not be
in force at any time, and the premium paid shall be returned to the applicant.

The receipt is merely an acknowledgment that the latter's branch office had received from the
applicant the insurance premium and had accepted the application subject for processing by
the insurance company. There was still approval or rejection the same on the basis of whether
or not the applicant is "insurable on standard rates." Since Pacific Life disapproved the
insurance application of respondent Ngo Hing, the binding deposit receipt in question had
never become in force at any time. The binding deposit receipt is conditional and does not
insure outright. This was held in Lim v Sun.

The deposit paid by private respondent shall have to be refunded by Pacific Life.

2. Ngo Hing had deliberately concealed the state of health of his daughter Helen Go. When he
supplied data, he was fully aware that his one-year old daughter is typically a mongoloid child.
He withheld the fact material to the risk insured.

“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
demotion, however slight.”

The concealment entitles the insurer to rescind the contract of insurance.

Pacific Timber v. CA

112 SCRA 199

Facts:

> On March 13, 1963, Pacific secured temporary insurance from the Workemen’s Insurance Co.
for its exportation of logs to Japan. Workmen issued on said date Cover Note 1010 insuring
said cargo.

> The regular marine policies were issued by the company in favor of Pacific on Apr 2,
1963. The 2 marine policies bore the number 53H01032 and 53H01033.

> After the issuance of the cover note but BEFORE the issuance of the 2 policies, some of the
logs intended to be exported were lost due to a typhoon.

> Pacific filed its claim with the company, but the latter refused, contending that said loss may
not be considered as covered under the cover note because such became null and void by
virtue of the issuance of the marine policies.

Issue:

Whether or not the cover not was without consideration, thus null and void.

Held:

It was with consideration.

SC upheld Pacific’s contention that said cover not was with consideration. The fact that no
separate premium was paid on the cover note before the loss was insured against occurred
does not militate against the validity of Pacific’s contention, for no such premium could have
been paid, since by the nature of the cover note, it did not contain, as all cover notes do not
contain, particulars of the shipment that would serve as basis for the computation of the
premiums. As a logical consequence, no separate premiums are required to be paid on a cover
note.

If the note is to be treated as a separate policy instead of integrating it to the regular policies
subsequently issued, its purpose would be meaningless for it is in a real sense a contract, not a
mere application.

Areola v CA G.R. No. 95641 September 22, 1994

J. Romero

Facts:

Prudential Guarantee cancelled Areola’s personal accident insurance on the grounds that the
latter failed to pay his premiums 7 months after issuing the policy. Areola was supposed to pay
the total amount of P1,609.65 which included the premium of P1,470.00, documentary stamp
of P110.25 and 2% premium tax of P29.40. The statement of account had a stipulation not
considering it a receipt. It also reminded the customer to ask for a receipt after payment. There
was also a stipulation calling for a demand for a provisional receipt after payment to an agent.
A provisional receipt was sent to petitioner telling him that the provisional receipt would be
confirmed by an official one. The company then cancelled the policy for non-payment of
premiums. After being surprised, Areola confronted a company agent and demanded an official
receipt. The latter told him that it was a mistake, but never gave him an official receipt. Areola
sent a letter demanding that he be reinstated or he would file for damages if his demand was
not met. The company then told him that his payments weren’t in full yet. The company replied
to Areola by telling him that there was reason to believe that no payment has been made since
no official receipt was issued. The company then told him that they would still hold him under
the policy. The company then confirmed that he paid the premium and that they would extend
the policy by one year.

Thereby, the company offered to reinstate same policy it had previously cancelled and even
proposed to extend its lifetime on finding that the cancellation was erroneous and that the
premiums were paid in full by petitioner-insured but were not remitted by the company's
branch manager, Mr. Malapit.

However, they were too late for Areola already filed an action for breach of contract in the trial
court.

The company’s defense lay in rectifying its omission; hence, there was no breach of contract.

The court ruled in favor of Areola and asked Prudential to pay 250,000 pesos in moral and
exemplary damages. The court held that the company was in bad faith in cancelling the policy.
Had the insured met an accident at that time, he wouldn’t be covered by the policy.

This ruling was challenged on appeal by respondent insurance company, denying bad faith in
unilaterally cancelling the policy. The AC absolved Prudential on the grounds that it was not
motivated by negligence, malice or bad faith in cancelling subject policy. Rather, the
cancellation of the insurance policy was based on what the existing records showed. The court
even added that the errant manager who didn’t remit the profits was forced to resign. Areola
then filed for a petition in the Supreme Court.

Issue:

1. Did the erroneous act of cancelling subject insurance policy entitle petitioner-insured to
payment of damages?

2. Did the subsequent act of reinstating the wrongfully cancelled insurance policy by
respondent insurance company, in an effort to rectify such error, obliterate whatever liability
for damages it may have to bear, thus absolving it?
Held: Yes. No. Petition granted.

Ratio:

1. Petitioner alleged that the manager’s misappropriation of his premium payments is the
proximate cause of the cancellation of the insurance policy. Subsequent reinstatement could
not possibly absolve respondent insurance company from liability, due to the breach of
contract. He contended that damage had already been done.

Prudential averred that the equitable relief sought by petitioner-insured was granted to the
filing of the complaint, petitioner-insured is left without a cause of action. Reinstatement
effectively restored petitioner-insured to all his rights under the policy.

The court held that Malapit's fraudulent act of misappropriating the premiums paid by
petitioner-insured is directly imputable to respondent insurance company. A corporation, such
as respondent insurance company, acts solely thru its employees. The latters' acts are
considered as its own. Malapit represented its interest and acted in its behalf. His act of
receiving the premiums collected is well within the province of his authority. Thus, his receipt of
said premiums is receipt by private respondent insurance company who, by provision of law is
bound by the acts of its agent.

Article 1910 thus reads:

Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly.

Malapit's failure to remit the premiums he received cannot constitute a defense for private
respondent insurance company; no exoneration from liability could result therefrom. The fact
that private respondent insurance company was itself defrauded due to the anomalies that
took place does not free the same from its obligation to petitioner Areola. As held in Prudential
Bank v. Court of Appeals

“A bank is liable for wrongful acts of its officers done in the interests of the bank or in the
course of dealings of the officers in their representative capacity but not for acts outside the
scope of their authority. Accordingly, a banking corporation is liable to innocent third persons
where the representation is made in the course of its business by an agent acting within the
general scope of his authority even though the agent is secretly abusing his authority and
attempting to perpetrate a fraud upon his principal or some other person.”

Prudential is liable for damages for the fraudulent acts committed by Malapit. Reinstating the
insurance policy can not obliterate the injury inflicted. A contract of insurance creates
reciprocal obligations for both insurer and insured. Reciprocal obligations are those which arise
from the same cause and in which each party is both a debtor and a creditor of the other, such
that the obligation of one is dependent upon the obligation of the other.

2. Due to the agreement to enter into a contract of insurance where Prudential promised to
extend protection to petitioner-insured against the risk insured, there was a debtor creditor
relation ship between the two parties. Under Article 1191, the injured party is given a choice
between fulfillment or rescission of the obligation in case one of the obligors fails to comply
with what is incumbent upon him. However, said article entitles the injured party to payment of
damages, regardless of whether he demands fulfillment or rescission of the obligation.

The damages would be nominal because the insurance company took steps to rectify the
contract . There was also no actual or substantial damage inflicted. Nominal damages are
"recoverable where a legal right is technically violated and must be vindicated against an
invasion that has produced no actual present loss of any kind, or where there has been a
breach of contract and no substantial injury or actual damages whatsoever have been or can be
shown

MA. LOURDES VALENZUELA, petitioner, vs. COURT OF APPEALS, RICHARD LI and ALEXANDER
COMMERCIAL, INC., respondents.

G.R. No. 115024 [February 7, 1996]

Facts:

At around 2:00 in the morning of June 24, 1990, plaintiff Ma. Lourdes Valenzuela was driving a
blue Mitsubishi lancer from her restaurant at Marcos highway to her home. While travelling
along Aurora Blvd., she noticed something wrong with her tires; she stopped at a lighted place
where there were people, to verify whether she had a flat tire and to solicit help if needed.
Having been told by the people present that her rear right tire was flat and that she cannot
reach her home in that car’s condition, she parked along the sidewalk, about 1½ feet away, put
on her emergency lights, alighted from the car, and went to the rear to open the trunk.

She was standing at the left side of the rear of her car pointing to the tools to a man who will
help her fix the tire when she was suddenly bumped by a 1987 Mitsubishi Lancer driven
by defendant Richard Li and registered in the name of defendant Alexander Commercial, Inc.
Because of the impact plaintiff was thrown against the windshield of the car of the defendant,
which was destroyed, and then fell to the ground. She was pulled out from under defendant’s
car. Plaintiff’s left leg was severed up to the middle of her thigh, with only some skin and sucle
connected to the rest of the body. She was brought to the UERM Medical Memorial Center
where she was found to have a “traumatic amputation, leg, left up to distal thigh (above
knee).” She was confined in the hospital for twenty (20) days and was eventually fitted with an
artificial leg.

Issues:

1.) Whether or not Li was negligent.

2.) Whether or not Valenzuela was contributory negligent.

3.) Whether or not Alexander Commercial, Inc. Li’s employer is liable.

Held:

1.) Yes. A witness testified that Li’s car was being driven at a “very fast” speed, racing towards
the general direction of Araneta Avenue. He also saw the car hit Valenzuela, hurtling her
against the windshield of the defendant’s Mitsubishi Lancer, from where she eventually fell
under the defendant’s car. Moreover the witness declared that he observed Valenzuela’s car
parked parallel and very near the sidewalk, contrary to Li’s allegation that Valenzuela’s car was
close to the center of the right lane.

2.) No. The Court held that Valenzuela was not negligent applying the emergency rule.

Under the “emergency rule,” an individual who suddenly finds himself in a situation of danger
and is required to act without much time to consider the best means that may be adopted to
avoid the impending danger, is not guilty of negligence if he fails to undertake what
subsequently and upon reflection may appear to be a better solution, unless the emergency
was brought by his own negligence.

Valenzuela did exercise the standard reasonably dictated by the emergency and could not be
considered to have contributed to the unfortunate circumstances which eventually led to the
amputation of one of her lower extremities. The emergency which led her to park her car on a
sidewalk in Aurora Boulevard was not of her own making, and it was evident that she had taken
all reasonable precautions. Obviously, the only negligence ascribable was the negligence of Li
on the night of the accident.
3.) Yes. Alexander Commercial, Inc. has not demonstrated, to the Court’s satisfaction, that it
exercised the care and diligence of a good father of the family in entrusting its company car to
Li. No allegations were made as to whether or not the company took the steps necessary to
determine or ascertain the driving proficiency and history of Li, to whom it gave full and
unlimited use of a company car. Not having been able to overcome the burden of
demonstrating that it should be absolved of liability for entrusting its company car to Li, said
company, based on the principle of bonus pater familias, ought to be jointly and severally liable
with the former for the injuries sustained by Ma. Lourdes Valenzuela during the accident.

Li was an Assistant Manager of Alexander Commercial, Inc. He admitted that his functions
as Assistant Manager did not require him to scrupulously keep normal office hours as he was
required quite often to perform work outside the office, visiting prospective buyers and
contacting and meeting with company clients. These meetings, clearly, were not strictly
confined to routine hours because, as a managerial employee tasked with the job of
representing his company with its clients, meetings with clients were both social as well as
work-related functions. The service car assigned to Li by Alexander Commercial, Inc. therefore
enabled both Li – as well as the corporation – to put up the front of a highly successfulentity,
increasing the latter’s goodwill before its clientele. It also facilitated meeting between Li and its
clients by providing the former with a convenient mode of travel.

South Sea v CA G.R. No. 102253 June 2, 1995

J. Vitug

Facts:

Valenzuela Hardwood entered into an agreement with the defendant Seven Brothers whereby
the latter undertook to load the former's 940 lauan logs for shipment to Manila.

South Sea insured the logs for P2,000,000.00 in its marine policy. Valenzuela then gave the
check in payment of the premium on the insurance policy to Mr. Victorio Chua.

Seven Brothers’ ship sank resulting in the loss of the logs.

A check for P5,625.00 to cover payment of the premium tendered to the insurer but was not
accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it
issued as of the date of inception for non-payment of the premium due in accordance with
Section 77 of the Insurance Code.

Valenzuela demanded from South Sea the payment of the proceeds of the policy but the latter
denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven
Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim.

Valenzuela filed a complaint a complaint for the recovery of the value of lost logs and freight
charges from Seven Brothers Shipping Corporation or from South Sea Surety and Insurance
Company, the insurer.

The trial court rendered judgment in favor of plaintiff Valenzuela. The Court of Appeals
affirmed the judgment only against the insurance corporation and absolved the shipping entity
from liability. The court held that there was a stipulation in the charter party exempted the ship
owner from liability in case of loss.

In the SC petition, petitioner argues that it should have been freed from any liability to
Hardwood. It faults the appellate court (a) for having disregarded Section 77 of the insurance
Code and (b) for holding Victorio Chua to have been an authorized representative of the
insurer.

Issue:

WON Mr. Chua acted as an agent of the surety company or of the insured when he received the
check for insurance premiums.

Held: Agent of the surety. Petition denied.

Ratio:

To determine if there was a valid contract of insurance, it must be determine if the premium
was validly paid to the company or its agents at the time of the loss.

The appellate and trial courts have found that Chua acted as an agent.

South Sea insisted that Chua has been an agent for less than ten years of the Columbia
Insurance Brokers, a different company. Appellant argued that Mr. Chua, having received the
premiums, acted as an agent under Section 301 of the Insurance Code which provides:

Sec. 301. Any person who for any compensation, commission or other thing of value, acts, or
aids in soliciting, negotiating or procuring the making of any insurance contract or in placing risk
or taking out insurance, on behalf of an insured other than himself, shall be an insurance broker
within the intent of this Code, and shall thereby become liable to all the duties requirements,
liabilities and penalties to which an insurance broker is subject.

Valenzuela claimed that the second paragraph of Section 306 of the Insurance Code provided:

Sec. 306 Any insurance company which delivers to an insurance agent or insurance broker a
policy or contract of insurance shall be deemed to have authorized such agent or broker to
receive on its behalf payment of any premium which is due on such policy of contract of
insurance at the time of its issuance or delivery or which becomes due thereon.

Mr. Chua testified that the marine cargo insurance policy logs was by South Sea to be given to
the wood company.

When South Sea delivered to Mr. Chua the marine cargo insurance policy for Valenzuela’s logs,
he is deemed to have been authorized by former to receive the premium which is due on its
behalf.

When the logs were lost, the insured had already paid the premium to an agent of the South
Sea Surety and Insurance Co., Inc., which is consequently liable to pay the insurance proceeds
under the policy it issued to the insured.

The court followed the factual evidence of the lower courts and held that they didn’t try
questions of fact

Filipinas Cia de Seguros v. Christern Huenfeld & Co. - Enemy Corporation

80 PHIL 54

Facts:

> Oct. 1, 1941, Domestic Corp Christern, after payment of the premium, obtained from
Filipinas, fire policy no. 29333 for P100T covering merchandise contained in a building located
in Binondo.

> On Feb. 27, 1942, during the Jap occupation, the building and the insured merchandise were
burned. Christern submitted to Filipinas its claim.

> Salvaged goods were sold and the total loss of Christern was P92T.

> Filipinas denied liability on the ground that Christern was an enemy corporation and cannot
be insured.

Issue:

Whether or not Filipinas is liable to Christern, Huenfeld & Co.

Held:

NO.

Majority of the stockholders of Christern were German subjects. This being so, SC ruled that
said corporation became an enemy corporation upon the war between the US and
Germany. The Phil Insurance Law in Sec. 8 provides that anyone except a public enemy may be
insured. It stands to reason that an insurance policy ceases to be allowable as soon as an
insured becomes a public enemy.

The purpose of the war is to cripple the power ad exhaust the resources of the enemy, and it is
inconsistent that one country should destroy its enemy property and repay in insurance the
value of what has been so destroyed, or that it should in such manner increase the resources of
the enemy or render it aid.

All individuals who compose the belligerent powers, exist as to each other, in a state of utter
exclusion and are public enemies. Christern having become an enemy corporation on Dec. 10.
1941, the insurance policy issued in his favor on Oct. 1, 1941 by Filipinas had ceased to be valid
and enforceable, and since the insured goods were burned after Dec. 10, 1941, and during the
war, Christern was NOT entitled to any indemnity under said policy from Filipinas.

Elementary rules of justice require that the premium paid by Christern for the period covered
by the policy from Dec. 10, 1941 should be returned by Filipinas.

We will be live on:

INSULAR LIFE VS. EBRADO 80 SCRA 181- COMMON LAW WIFE INSURANCE

Law on Insurance
Insular Life vs. Ebrado

80 SCRA 181

Facts:

> Buenaventura Ebrado was issued al life plan by Insular Company. He designated Capriona as
his beneficiary, referring to her as his wife.

> The insured then died and Carponia tried to claim the proceeds of the said plan.

> She admitted to being only the common law wife of the insured.

> Pascuala, the legal wife, also filed a claim asserting her right as the legal wife. The company
then filed an action for interpleader.

Issue:

Whether or not the common law wife named as beneficiary can collect the proceeds.

Held:

NO.

The civil code prohibitions on donations made between persons guilty of adulterous
concubinage applies to insurance contracts. On matters not specifically provided for by the
Insurance Law, the general rules on Civil law shall apply. A life insurance policy is no different
from a civil donation as far as the beneficiary is concerned, since both are founded on liberality.

Why was the common law wife not ed to collect the proceeds despite the fact that she was the
beneficiary? Isn’t this against Sec. 53?

It is true that SC went against Sec. 53. However, Sec. 53 is NOT the only provision that the SC
had to consider. Art. 739 and 2012 of CC prohibit persons who are guilty of adultery or
concubinage from being beneficiaries of the life insurance policies of the persons with whom
they committed adultery or concubinage. If the SC used only Sec. 53, it would have gone
against Art. 739 and 2012.
Insurance Case Digest: Southern Luzon Employees' Ass. v. Golpeo, et al. (1954)

G.R. No. L-6114 October 30, 1954

Lessons Applicable: Invalid Designation (Insurance)

FACTS:

Roman A. Concepcion listed as his beneficiaries Aquilina Maloles, Roman M. Concepcion, Jr.,
Estela M. Concepcion, Rolando M. Concepcion and Robin M. Concepcion for the death benefit
of an association amounting to P2,505

Two sets of claimants presented themselves:

Juanita Golpeo, legal wife and her children, named beneficiaries by the deceased

Marcelino and Josefina Concepcion intervened in their own right aligning themselves Juanita
Golpeo and her minor children

Elsie Hicban, another common law wife and her child

RTC:Aquilina Maloles and her children the sole beneficiaries

Only the Juanita Golpeo and her minor children and the intervenors Marcelino and Josefina
Concepcion have appealed to this court

ISSUE: W/N Aquilina Molales common-law wife and her illegitimate children can claim the
benefits

HELD: YES.

Juanita Golpeo, by her silence and actions, had acquiesced in the illicit relations between her
husband and appellee Aquilina Maloles

new Civil Code recognized certain successional rights of illegitimate children

Separate Opinions:

REYES, J.B.L., J., concurring


I concur in the result for the reason that the contract here involved was perfected before the
new Civil Code took effect, and hence its provisions cannot be made to apply retroactively

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