I.
Introduction
1. History
2. Development of Insurance in the
Philippines
3. Applicable Laws
4. Insurance Commission
Cases:
1. Philippine Health Care Providers, Inc. vs.
Commissioner of Internal Revenue, G.R. No.
167330, September 18, 2009, Special First
Division, Corona, J.
FACTS: Phil. Health Care Providers, Inc.
(Petitioner) received a demand letter and
assessment notices from the Commission of
Internal Revenue (Respondent) on the
Documentary Stamp Tax (DST) deficiencies for
the taxable years 1996 and 1997.
Petitioner protested that DST under Section
185 of the National Internal Revenue Code (NIRC)
is imposed only on a company engaged in the
business of fidelity bonds and other insurance
policies. Petitioner, as a Health Maintenance
Organization (HMO), is a service provider, not an
insurance company, and that its agreements do not
fall under the phrase "other branch of insurance" of
said Section. However, as Respondent did not act
on the protest, Petitioner filed a petition for review
in the Court of Tax Appeals (CTA) which ordered
the Respondent to cease and desist from collecting
the DST.
Respondent appealed to the Court of
Appeals (CA) claiming that Petitioner’s agreement
was a contract of insurance subject to DST as it is
not a tax on the business transacted but an excise
on the privilege, opportunity or facility offered at
exchanges for the transaction of the business. CA
held that Petitioner’s health care agreement was in
the nature of a non-life insurance contract subject
to DST. Petitioner moved for reconsideration but
was denied.
Hence, petitioner appealed with the
Supreme Court (SC) which denied the petition.
Hence, this present motion for reconsideration and
supplemental motion for reconsideration.
ISSUE: Whether the Petitioner is an insurance
company?
RULING: No. The petitioner is an HMO and is
not engaged in the insurance business. Hence, it is
not subject to DST.
Petitioner is admittedly an HMO under
Republic Act 7875 or The National Health
Insurance Act of 1995 which provides that an
HMO is "an entity that provides, offers or
arranges for coverage of designated health
services needed by plan members for a fixed
prepaid premium." The payments do not vary
with the extent, frequency or type of services
provided.
Section 2(1) of the Insurance Code
defines a contract of insurance as an
agreement whereby one undertakes for a
consideration to indemnify another against
loss, damage or liability arising from an
unknown or contingent event. An insurance
contract exists where the following elements
concur:
1. The insured has an
insurable interest;
2. The insured is subject to
a risk of loss by the happening of
the designed peril;
3. The insurer assumes the
risk;
4. Such assumption of risk
is part of a general scheme to
distribute actual losses among a
large group of persons bearing a
similar risk and
5. In consideration of the
insurer’s promise, the insured
pays a premium.
An examination of petitioner’s
agreements with its members leads the Court
to conclude that it is not an insurance contract
within the context of our Insurance Code. Not
all the necessary elements of a contract of
insurance are present in petitioner’s
agreements. To begin with, there is no loss,
damage or liability on the part of the member
that should be indemnified by petitioner as an
HMO. Under the agreement, the member pays
petitioner a predetermined consideration in
exchange for the hospital, medical and
professional services rendered by the
petitioner’s physician or affiliated physician to
him. In case of availment by a member of the
benefits under the agreement, petitioner does
not reimburse or indemnify the member as the
latter does not pay any third party. Instead, it is
the petitioner who pays the participating
physicians and other health care providers for
the services rendered at pre-agreed rates. The
member does not make any such payment.
Related Topics:
a) Section 2 (2) of Presidential Decree (PD)
1460 or the Insurance Code enumerates
what constitutes "doing an insurance
business" or "transacting an insurance
business:"
a) making or proposing to make, as
insurer, any insurance contract;
b) making or proposing to make, as surety,
any contract of suretyship as a vocation
and not as merely incidental to any
other legitimate business or activity of
the surety;
c) doing any kind of business, including a
reinsurance business, specifically
recognized as constituting the doing of
an insurance business within the
meaning of this Code;
d) doing or proposing to do any business
in substance equivalent to any of the
foregoing in a manner designed to
evade the provisions of this Code.
b) The SC have applied the "principal object and
purpose test." It relates to whether the assumption
of risk and indemnification of loss (which are
elements of an insurance business) are the
principal object and purpose of the organization or
whether they are merely incidental to its business.
If these are the principal objectives, the business is
that of insurance. But if they are merely incidental
and service is the principal purpose, then the
business is not insurance.
Even though petitioner appears to provide
insurance-type benefits to its members (with
respect to its curative medical services), but these
are incidental to the principal activity of providing
them medical care. The "insurance-like" aspect of
petitioner’s business is miniscule compared to its
non-insurance activities. Therefore, since it
substantially provides health care services rather
than insurance services, it cannot be considered as
being in the insurance business.
c) It is significant to note that a health care
agreement is not an insurance contract
contemplated under Section 185 of the NIRC,
thus, not subject to DST. It is evident that two
requisites must concur before the DST can apply,
namely:
1.the document must be a policy of
insurance or an obligation in the nature
of indemnity; and
2.the maker should be transacting the
business of accident, fidelity,
employer’s liability, plate, glass, steam
boiler, burglar, elevator, automatic
sprinkler, or other branch of insurance
(except life, marine, inland, and fire
insurance).
2, 9. PHILAMCARE Health Systems, Inc. v.
Court of Appeals, G.R. No. 125678, March 18,
2002, First Divisio, Ynares-Santiago, J.
FACTS: Ernani Trinos (Ernani), deceased
husband of Respondent Julita Trinos, applied
for a health care coverage with Petitioner
PHILAMCARE Health Systems, Inc.
Under the agreement, Ernani was entitled
to avail of hospitalization benefits, whether
ordinary or emergency, and of out-patient
benefits such as annual physical examinations,
preventive health care and other out-patient
services. Upon its termination, the same was
extended for another year with an increase
amount to a maximum sum of P75,000.00 per
disability.
During the coverage period, Ernani
suffered a heart attack. While in confinement,
Respondent tried to claim the benefits but,
Petitioner denied her claim saying that the
Agreement was void for concealing Ernani's
medical history.
When discharged, Ernani was attended by
a physical therapist at home but later, he had
fever. Respondent was constrained to bring
him back to the Hospital, and he died on the
same day.
Respondent filed an action for damages
before the Regional Trial Court (RTC) against
Petitioner and its President, Dr. Benito
Reverente, asking for reimbursement of her
expenses plus moral damages and attorneys
fees. RTC ruled in favor of Respondent.
Upon appeal, the Court of Appeals (CA)
affirmed RTC but deleted all awards for
damages and absolved petitioner Reverente.
Hence, this petition.
ISSUE: Whether the Health Care Agreement
is a valid insurance contract?
RULING: Yes. Supreme Court affirmed the
decision of CA.
Section 2 (1) of the Insurance Code
defines a contract of insurance as an agreement
whereby one undertakes for a consideration to
indemnify another against loss, damage or
liability arising from an unknown or
contingent event. An insurance contract exists
where the following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss
by the happening of the designated
peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a
general scheme to distribute actual
losses among a large group of persons
bearing a similar risk; and
5. In consideration of the insurers
 promise, the insured pays a premium.[8
Section 3 of the Insurance Code states that
any contingent or unknown event, whether past or
future, which may indemnify a person having an
insurable interest against him, may be insured
against. Every person has an insurable interest in
the life and health of himself. Section 10 provides
that, “Every person has an insurable interest in the
life and health:
(1) of himself, of his spouse and of his
children;
(2) of any person on whom he depends
wholly or in part for education or
support, or in whom he has a
pecuniary interest;
(3) of any person under a legal obligation
to him for the payment of money,
respecting property or service, of
which death or illness might delay
or prevent the performance; and
(4) of any person upon whose life any
estate or interest vested in him
depends.
In the case at bar, the insurable interest of
respondent’s husband in obtaining the health care
agreement was his own health. The health care
agreement was in the nature of non-life insurance,
which is primarily a contract of indemnity. Once
the member incurs hospital, medical or any other
expense arising from sickness, injury or other
stipulated contingent, the health care provider
must pay for the same to the extent agreed upon
under the contract.
Concealment as a defense for the health care
provider or insurer to avoid liability is an
affirmative defense and the duty to establish such
defense by satisfactory and convincing evidence
rests upon the provider or insurer. In any case, with
or without the authority to investigate, petitioner is
liable for claims made under the contract. Having
assumed a responsibility under the agreement,
petitioner is bound to answer the same to the extent
agreed upon. In the end, the liability of the health
care provider attaches once the member is
hospitalized for the disease or injury covered by
the agreement or whenever he avails of the covered
benefits which he has prepaid.
3, 10. Lalican v. Insular Life, G.R. No. 183526,
August 25, 2009, Third Division, Chico-Nazario, J.
FACTS: Eulogio C. Lalican applied for an
insurance policy with Respondent Insular Life
containing a 20-Year Endowment Variable Income
Package Flexi Plan worth P500,000.00, with two
riders valued at P500,000.00 each or
P1,500,000.00 in total. Petitioner Violeta Lalican
was named as the primary beneficiary.
Eulogio was to pay the premiums on a
quarterly basis, with a grace period of 31 days
for the payment of each premium subsequent
to the first. If any premium was not paid on or
before the due date, the policy would be in
default, and if the premium remained unpaid
until the end of the grace period, the policy
would automatically lapse and become void.
Eulogio failed to pay the premium due
on 24 January 1998, even after the lapse of the
grace period thus, the policy lapsed and
became void. He submitted to the Cabanatuan
District Office his Application for
Reinstatement but Respondent notified him
that it could not be processed because,
although he already deposited P8,062.00 as
payment for said premium, he left unpaid the
overdue interest amounting to P322.48.
On 17 September 1998, Eulogio went
to Agent Malaluan’s house and submitted a
second Application to latter’s husband who
issued a receipt for ₱17,500.00, representing
payments for the overdue interest on the
premium for 24 January, and the premiums
which became due on 24 April and 24 July
1998. A while later, Eulogio died of cardio-
respiratory arrest secondary to electrocution.
Without knowing of Eulogio’s death,
Malaluan forwarded such to the San Fernando
Regional Office the next day. However,
Respondent no longer acted upon the
Application, as the former was informed on 21
September of his death.
Petitioner filed a claim for payment of
the proceeds but Respondent refused to pay
since, at the time of the death, the policy
already lapsed, and Eulogio failed to reinstate
the same as it has no approval by Insular Life
during his "lifetime and good health,” and the
amount paid was considered to be a deposit
only. Enclosed in its letter was DBP Check for
the amount of ₱25,417.00 representing the full
refund of the payments made by Eulogio on
the policy. Petitioner requested a
reconsideration but was rejected.
Petitioner returned the letter and the
check to the Cabanatuan District Office. Her
counsel subsequently sent a letter demanding
payment of the full proceeds of the policy
which a re-evaluation of her claim was
granted.
Without waiting for the result,
Petitioner filed with the Regional Trial Court
(RTC), a Complaint for Death Claim Benefit
for unfair claim settlement practice and prayed
for her death claim benefits in the amount of
₱1,500,000.00, plus interests, attorney’s fees,
and cost of suit. Insular Life filed an Answer
with Counterclaim to pay attorney’s fees and
expenses of litigation.
RTC found that the policy had indeed lapsed and
needed to have it reinstated. A motion for
reconsideration was also denied. On 22 November
2007, Petitioner filed a Reply to the Motion for
Reconsideration. Despite receiving the Order
denying it, she still filed on 26 February 2008, a
Reply Extended Discussion. On 10 April 2008,
RTC declared finality of its decision in view of
Petitioner’s failure to file the appropriate notice of
appeal within the reglementary period.
Violeta filed on 20 May 2008, a Notice of
Appeal with Motion praying to be allowed to file
an appeal with the Court of Appeals but was
denied given that the Decision dated 30 August
2007 had long since attained finality.
Hence, the instant Petition for Review on
Certiorari.
ISSUE: whether Eulogio was able to reinstate the
lapsed policy on his life before his death?
RULING: No. The policy remained lapsed and
void, not having been reinstated in accordance with
the Policy Contract and Application for
Reinstatement before Eulogio’s death but
Petitioner is entitled to receive the full refund of
the payments made by Eulogio.
The Court must correct the erroneous
declaration of the RTC that the policy lapsed
because of Eulogio’s non-payment of the
premiums which became due on 24 April 1998 and
24 July 1998. It had lapsed and become void
earlier, on 24 February 1998, upon the expiration
of the 31-day grace period for payment of the
premium, which fell due on 24 January 1998,
without any payment having been made. Eulogio’s
filing of his first Application constitutes an
admission that policy had lapsed by then.
To reinstate a policy means to restore the
same to premium-paying status after it has been
permitted to lapse. Both the Policy Contract and
the Application for Reinstatement provide for
specific conditions for the reinstatement of a
lapsed policy.
The Policy Contract between Eulogio and
Insular Life identified the following conditions for
reinstatement should the policy lapse:
10. REINSTATEMENT
You may reinstate this policy at any
time within three years after it lapsed if the
following conditions are met: (1) the policy has
not been surrendered for its cash value or the
period of extension as a term insurance has not
expired; (2) evidence of insurability
satisfactory to [Insular Life] is furnished; (3)
overdue premiums are paid with compound
interest at a rate not exceeding that which
would have been applicable to said premium
and indebtedness in the policy years prior to
reinstatement; and (4) indebtedness which
existed at the time of lapsation is paid or
renewed.
In the instant case, Eulogio’s death
rendered impossible full compliance with the
conditions for reinstatement. True, Eulogio,
before his death, managed to file his
Application for Reinstatement and deposit the
amount for payment of his overdue premiums
and interests thereon with Malaluan; but it
could only be considered reinstated after the
Application for Reinstatement had been
processed and approved by Insular Life during
Eulogio’s lifetime and good health.
In Andres v. The Crown Life Insurance
Company, citing McGuire v. The
Manufacturer's Life Insurance Co.:
"The stipulation in a life insurance policy
giving the insured the privilege to
reinstate it upon written application does
not give the insured absolute right to such
reinstatement by the mere filing of an
application. The insurer has the right to
deny the reinstatement if it is not satisfied
as to the insurability of the insured and if
the latter does not pay all overdue
premium and all other indebtedness to the
insurer. After the death of the insured the
insurance Company cannot be compelled
to entertain an application for
reinstatement of the policy because the
conditions precedent to reinstatement can
no longer be determined and satisfied."
(Emphases ours.)
Related Topics:
An insurable interest, in general, is
that interest which a person is deemed to have
in the subject matter insured, where he has a
relation or connection with or concern in it,
such that the person will derive pecuniary
benefit or advantage from the preservation of
the subject matter insured and will suffer
pecuniary loss or damage from its destruction,
termination, or injury by the happening of the
event insured against. The existence of an
insurable interest gives a person the legal right
to insure the subject matter of the policy of
insurance. Section 10 of the Insurance Code
indeed provides that every person has an
insurable interest in his own life. Section 19 of
the same code also states that an interest in the
life or health of a person insured must exist
when the insurance takes effect, but need not
exist thereafter or when the loss occurs.
4. Alpha Insurance and Surety Co. vs.
Castor, G.R. NO. 198174, September 2, 2013,
Third Division, Peralta, J.
FACTS: Respondent Arsenia Sonia Castor
entered into a contract of insurance with
Petitioner Alpha involving her motor vehicle, a
Toyota Revo DLX DSL. Petitioner, in case of loss
or damage within the period of coverage, from
February 26, 2007 to February 26, 2008 will pay
P630,000.00.
On April 16, 2007, Respondent sent her
vehicle for a tune-up at a nearby autoshop through
her driver Jose Joel Salazar Lanuza (Lanuza).
However, Lanuza never returned the vehicle and
despite diligence to locate the same. Respondent
reported the incident to the police and demanded
payment of the insurance proceeds.
Citing an exception under Section III of the
contract, Petitioner denied said claim stating that
the culprit is under the employ of Respondent.
Respondent reiterated its claim but was rejected.
Respondent filed a Complaint for Sum of
Money with Damages with the Regional Trial
Court (RTC) in Quezon City which was granted
stating that the theft perpetrated by her driver is not
covered under paragraph 4 of exceptions to Section
III of the policy contract as it does not mention any
“loss” of the property but merely “malicious
damage” caused by the insured, a family member,
or by a person in the insured’s service.
The Court of Appeals (CA), on appeal,
affirmed the decision of the RTC. Hence, this
petition for review on certiorari.
ISSUE: Whether the loss of Respondent’s vehicle
is excluded from insurance coverage?
RULING: No. Petitioner cannot exclude the loss
of respondent’s vehicle under the insurance policy
under paragraph 4 of "Exceptions to Section III,"
since the same refers only to "malicious damage,"
or more specifically, "injury" to the motor vehicle
caused by a person under the insured’s service.
Paragraph 4 clearly does not contemplate "loss of
property," as what happened in the instant case.
CA aptly ruled that "malicious damage," as
provided for in the subject policy as one of the
exceptions from coverage, is the damage that is the
direct result from the deliberate or willful act of the
insured, members of his family, and any person in
the insured’s service, whose clear plan or purpose
was to cause damage to the insured vehicle for
purposes of defrauding the insurer, viz.:
This interpretation by the Court is bolstered
by the observation that the subject policy appears
to clearly delineate between the terms "loss" and
"damage" by using both terms throughout the said
policy. x x x
xxxx
If the intention of the defendant-appellant was to
include the term "loss" within the term "damage"
then logic dictates that it should have used the term
"damage" alone in the entire policy or otherwise
included a clear definition of the said term as part
of the provisions of the said insurance
contract. Which is why the Court finds it
puzzling that in the said policy’s provision
detailing the exceptions to the policy’s
coverage in Section III thereof, which is one of
the crucial parts in the insurance contract, the
insurer, after liberally using the words "loss"
and "damage" in the entire policy, suddenly
went specific by using the word "damage"
only in the policy’s exception regarding
"malicious damage." Now, the defendant-
appellant would like this Court to believe that
it really intended the word "damage" in the
term "malicious damage" to include the theft
of the insured vehicle.
It is a basic rule in the interpretation of
contracts that the terms of a contract are to be
construed according to the sense and meaning
of the terms which the parties thereto have
used. However, when the terms of the
insurance policy are ambiguous, equivocal or
uncertain, such that the parties themselves
disagree about the meaning of particular
provisions, the policy will be construed by the
courts liberally in favor of the assured and
strictly against the insurer.
Related Topics:
A contract of insurance is a contract
of adhesion. So, when the terms of the
insurance contract contain limitations on
liability, courts should construe them in such a
way as to preclude the insurer from non-
compliance with his obligation.
Malayan Insurance Corporation v.
Court of Appeals: Indemnity and liability
insurance policies are construed in accordance
with the general rule of resolving any
ambiguity therein in favor of the insured,
where the contract or policy is prepared by the
insurer. A contract of insurance, being a
contract of adhesion, par excellence, any
ambiguity therein should be resolved against
the insurer; in other words, it should be
construed liberally in favor of the insured and
strictly against the insurer. Limitations of
liability should be regarded with extreme
jealousy and must be construed in such a way
as to preclude the insurer from non-
compliance with its obligations.
Philamcare Health Systems, Inc. v.
Court of Appeals: When the terms of
insurance contract contain limitations on
liability, courts should construe them in such a
way as to preclude the insurer from non-
compliance with his obligation. Being a
contract of adhesion, the terms of an insurance
contract are to be construed strictly against the
party which prepared the contract, the insurer.
By reason of the exclusive control of the insurance
company over the terms and phraseology of the
insurance contract, ambiguity must be strictly
interpreted against the insurer and liberally in favor
of the insured, especially to avoid forfeiture.
II. Contract of Insurance
1. Definition and Elements
2. Nature and Characteristics
3. Contracts for Contingent Benefits or
Services; Pre-Need Plans and Similar
Agreements
4. Classes of Insurance Contracts
5. Construction
6. Fortune Medicare, Inc. vs. Amorin, G. R. No.
195872, March 12, 2014, First Division, Reyes, J.
FACTS: Respondent David Robert U. Amorin was
a cardholder/member of Petitioner Fortune
Medicare, Inc., engaged in providing health
maintenance services. The medical coverage were
provided in a Corporate Health Program Contract
which was executed by Fortune Care and the
House of Representatives, where Respondent was
a permanent employee.
While on a vacation in Honolulu, Hawaii,
Respondent underwent an emergency surgery,
specifically appendectomy causing him to incur
professional and hospitalization expenses of
US$7,242 and US$1,777.79. He attempted to
recover from Fortune Care the amount upon his
return but the company merely approved a
reimbursement of P12,151.36 that was based on
the average cost of appendectomy, net of medicare
deduction, if the procedure were performed in an
accredited hospital in Metro Manila. He protested
asking for adjustment to cover the total amount of
professional fees, and eighty percent (80%) of the
approved standard charges based on "American
standard", considering that the emergency
procedure occurred in the U.S.A. citing Section 3,
Article V on Benefits and Coverages of the Health
Care Contract.
Respondent filed a complaint for breach of
contract with damages with the Regional Trial
Court which dismissed being convinced that the
parties intended to use the Philippine standard as
basis.
Upon appeal, the Court of Appeals (CA)
ruled in favor of Respondeny stating that health
care agreements such as the subject Health Care
Contract, being like insurance contracts, must be
liberally construed in favor of the subscriber. In
case its provisions are doubtful or reasonably
susceptible of two interpretations, the construction
conferring coverage is to be adopted and
exclusionary clauses of doubtful import should
be strictly construed against the provider.
Second, the CA explained that there was
nothing under Article V of the Health Care
Contract which provided that the Philippine
standard should be used even in the event of an
emergency confinement in a foreign territory.
Hence, this petition for review on
certiorari.
ISSUE: Whether the Health Care contract
should be liberally construed in favor of the
subscriber?
The Court finds no cogent reason to disturb the
CA’s finding that Fortune Care’s liability to
Amorin under the subject Health Care
Contract should be based on the expenses for
hospital and professional fees which he
actually incurred, and should not be limited by
the amount that he would have incurred had
his emergency treatment been performed in an
accredited hospital in the Philippines.
RULING: Yes. We emphasize that for
purposes of determining the liability of a
health care provider to its members,
jurisprudence holds that a health care
agreement is in the nature of non-life
insurance, which is primarily a contract of
indemnity. Once the member incurs hospital,
medical or any other expense arising from
sickness, injury or other stipulated contingent,
the health care provider must pay for the same
to the extent agreed upon under the contract.
In the instant case, the extent of Fortune
Care’s liability to Amorin under the attendant
circumstances was governed by Section 3(B),
Article V of the subject Health Care Contract,
considering that the appendectomy which the
member had to undergo qualified as an
emergency care, but the treatment was
performed at St. Francis Medical Center in
Honolulu, Hawaii, U.S.A., a non-accredited
hospital.
B. EMERGENCY CARE IN NON-
ACCREDITED HOSPITAL
1. Whether as an in-patient or out-patient,
FortuneCare shall reimburse the total
hospitalization cost including the
professional fee (based on the total
approved charges) to a member who
receives emergency care in a non-
accredited hospital. The above coverage
applies only to Emergency confinement
within Philippine Territory. However, if
the emergency confinement occurs in
foreign territory, Fortune Care will be
obligated to reimburse or pay eighty
(80%) percent of the approved standard
charges which shall cover the
hospitalization costs and professional
fees. x x x23 (Emphasis supplied)
 The Court agrees with the CA that this must
be interpreted in its literal sense, guided by the rule
that any ambiguity shall be strictly construed
against Fortune Care, and liberally in favor of
Amorin.. As may be gleaned from the Health Care
Contract, the parties thereto contemplated the
possibility of emergency care in a foreign country.
As the contract recognized Fortune Care’s liability
for emergency treatments even in foreign
territories, it expressly limited its liability only
insofar as the percentage of hospitalization and
professional fees that must be paid or reimbursed
was concerned, pegged at a mere 80% of the
approved standard charges.
Settled is the rule that ambiguities in a
contract are interpreted against the party that
caused the ambiguity. "Any ambiguity in a contract
whose terms are susceptible of different
interpretations must be read against the party who
drafted it."
Related Topics:
Philamcare Health Systems v. CA: The
phraseology used in medical or hospital service
contracts, such as the one at bar, must be liberally
construed in favor of the subscriber, and if doubtful
or reasonably susceptible of two interpretations the
construction conferring coverage is to be adopted,
and exclusionary clauses of doubtful import should
be strictly construed against the provider.x x
We ruled that a health care agreement is in
the nature of a non-life insurance. It is an
established rule in insurance contracts that when
their terms contain limitations on liability, they
should be construed strictly against the insurer.
These are contracts of adhesion the terms of which
must be interpreted and enforced stringently
against the insurer which prepared the contract.
This doctrine is equally applicable to health care
agreements. x x x
Limitations of liability on the part of the
insurer or health care provider must be construed
in such a way as to preclude it from evading its
obligations. Accordingly, they should be
scrutinized by the courts with "extreme jealousy"
and "care" and with a "jaundiced eye." x x x
7. Heirs of Loreto C. Maramag vs. Maramag, et
al., G.R. No. 181132, June 5, 2009, Third Division,
Nachura, J.
FACTS: Petitioners were the legitimate wife and
children of Loreto Maramag (Loreto), while
Respondents were Loreto’s illegitimate family.
They alleged that 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); the illegitimate
children of Loreto are Odessa, Karl Brian, and
Trisha Angelie, and the proceeds released to
Odessa and those to be released upon the
appointment of their legal guardian to Karl
Brian and Trisha Angelie were inofficious and
should be reduced.
Petitioners filed against Respondents with
the Regional Trial Court (RTC) for revocation
and/or reduction of insurance proceeds, with a
temporary restraining order (TRO) and a writ
of preliminary injunction.
Insular admitted that Loreto
misrepresented Eva as his legitimate wife and
Odessa, Karl Brian, and Trisha Angelie as his
legitimate children, who filed their claims
under the insurance policies; Upon knowledge,
it disqualified Eva as a beneficiary and as the
remaining designated beneficiaries, 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 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; and that the law on
succession does not apply where the
designation of insurance beneficiaries is clear.
The illegitimate family of Loreto failed to
file their answer and declared them in default.
In their comment, petitioners alleged that
the issue raised by Insular and Grepalife was
purely legal, and that the designation of a
beneficiary is an act of liberality or a donation
and, therefore, subject to the provisions of
Articles 7528 and 7729 of the Civil Code.
In reply, both Insular and Grepalife
countered that the insurance proceeds belong
exclusively to the designated beneficiaries in
the policies, not to the estate or to the heirs of
the insured. Grepalife also reiterated that it had
disqualified Eva as a beneficiary when it
ascertained that Loreto was legally married to
Vicenta Pangilinan Maramag.
RTC ruled that Art. 2011 of the Civil
Code provides that the contract of insurance is
governed by the (sic) special laws. Only in
case of deficiency in the Insurance Code that
the Civil Code may be resorted to. (Enriquez v.
Sun Life Assurance Co., 41 Phil. 269.) Loreto
revoked the designation of Eva in one policy and
that Insular disqualified her as a beneficiary in the
other policy such that the entire proceeds would be
paid to the illegitimate children of Loreto with Eva
pursuant to Section 53 of the Insurance Code. It
ruled that it is only in cases where there are no
beneficiaries designated, or when the only
designated beneficiary is disqualified, that the
proceeds should be paid to the estate of the
insured.
Upon appeal, CA dismissed the case for lack
of jurisdiction for filing beyond reglementary
period.
Hence, this petition.
ISSUE: Whether the members of the legitimate
family entitled to the proceeds of the insurance for
the concubine?
RULING: No. It is clear that, although petitioners
are the legitimate heirs of Loreto, they were not
named as beneficiaries in the insurance policies
issued by Insular and Grepalife. They prayed that
the share of Eva and portions of the shares of
Loreto’s illegitimate children should be awarded to
them, being the legitimate heirs of Loreto entitled
to their respective legitimes.
Section 53 of the Insurance Code. 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.
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. 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.
8. Sps. Tibay vs. Court of Appeals, G.R. No.
119655, May 24, 1996, First Division,
Bellosillo, J.
FACTS: Respondent Fortune Life and General
Insurance Co., Inc. (Fortune) issued Fire
Insurance Policy in favor of Violeta R. Tibay
and/or Nicolas Roraldo on their two-storey
residential building with their personal effects
therein for P600,000.00 from 23 January 1987
to 23 January 1988. On 23 January 1987,
Violeta only paid P600.00 of the total premium
of P2,983.50.
On 8 March, the insured building was
destroyed by fire. On 10 March, she paid the
balance and filed the claim which was referred
to Goodwill Adjustment Services, Inc. (GASI)
for the investigation and processing. On 28
March, she signed a non-waiver agreement.
Fortune denied the claim of Violeta for
violation of Policy Condition No. 2 and of Sec.
77 of the Insurance Code. The case was not
settled before the Insurance Commission.
Violeta and other petitioners filed for
damages in the amount of total coverage plus
12% interest per annum, P100,000.00 moral
damages, and attorney's fees equivalent to
20% of the total claim. The trial court
adjudged Fortune liable.
The Court of Appeals reversed and
ordered petitioners to return the premium of
P2,983.50 plus 12% interest from 10 March
1987.
Hence this petition for review.
ISSUE: Whether the fire insurance policy is
enforceable upon mere partial payment of
premium?
RULING: No. Insurance is a contract
whereby one undertakes for a consideration to
indemnify another against loss, damage or
liability arising from an unknown or
contingent event. The consideration is the
premium, which must be paid at the time and
in the way and manner specified in the policy,
and if not so paid, the policy will lapse and be
forfeited by its own terms.
It is clear in the Policy that payment of
premium in full is required. Accordingly,
where the premium has only been partially paid
and the balance paid only after the peril insured
against has occurred, the insurance contract did not
take effect and the insured cannot collect at all on
the policy. This is fully supported by Sec. 77 of the
Insurance Code which provides:
Sec. 77. An insurer is entitled to payment
of the premium as soon as the thing insured
is exposed to the peril insured
against. Notwithstanding any agreement to
the contrary, no policy or contract of
insurance issued by an insurance company
is valid and binding unless and until the
premium thereof has been paid, except in
the case of a life or an industrial life policy
whenever the grace period provision
applies (emphasis supplied).
The terms of the insurance policy constitute
the measure of the insurer's liability. In the absence
of statutory prohibition to the contrary, insurance
companies have the same rights as individuals to
limit their liability and to impose whatever
conditions they deem best upon their obligations
not inconsistent with public policy. 17 The validity
of these limitations is by law passed upon by the
Insurance Commissioner who is empowered to
approve all forms of policies, certificates or
contracts of insurance which insurers intend to
issue or deliver. That the policy contract in the case
at bench was approved and allowed issuance
simply reaffirms the validity of such policy,
particularly the provision in question.
III. Insurable Interest
1. Definition and Purpose
2. Insurable Interest in Life Insurance
3. Insurable Interest in Property
4. Double Insurance and Over-
Insurance
5. Where Multiple and Several Interests
are Involved
6. Special Provisions on Mortgagor and
Mortgagee
11. El Oriente Fabrica De Tabacos, Inc. vs.
Juan Posadas, G.R. No. 34774, September 21,
1931, En Banc, Malcolm J.
FACTS: Plaintiff is a domestic corporation, and
the defendant is the acting Collector of Internal
Revenue. Plaintiff, in order to protect itself against
the loss that it might suffer by reason of the death
of its manager, A. Velhagen, who had had more
than 35 years of experience in the manufacture of
cigars, procured from the Manufacturers Life
Insurance Co., of Toronto, Canada, thru its local
agent E.E. Elser, for the sum of $50,000, United
States currency.
Plaintiff designated itself as the sole
beneficiary and paid premiums from its funds
deducted from its gross incomes. These
deductions were allowed by the defendant as
legitimate expenses of its business.
A. Velhagen had no interest or participation in
the proceeds of said life insurance policy.
Upon his death in 1929, plaintiff received the
proceeds, with interests and dividends
aggregating P104,957.88.
Plaintiff protested claiming for exemption
under section 4 of the Income Tax Law over
P3,148.74 levied as income tax on the
proceeds, which was paid under instant protest
but defendant overruled.
The Court of First Instance, Manila absolved
defendant. Hence, this appeal.
ISSUE: Whether the proceeds of insurance
taken by a corporation on the life of an
important official to indemnify it against loss
in case of his death, are taxable as income
under the Philippine Income Tax Law?
RULING: No. We do not believe that that
when the plaintiff received P104,957.88 from
the insurance on the life of its manager, it
thereby realized a net profit in this amount. It
is true that the Income Tax Law, in exempting
individual beneficiaries, speaks of the
proceeds of life insurance policies as income,
but this is a very slight indication of legislative
intention. In reality, what the plaintiff received
was in the nature of an indemnity for the loss
which it actually suffered because of the death
of its manager.
To quote the exact words in the cited case of
Chief Justice Taft delivering the opinion of the
court:
It is earnestly pressed upon us that proceeds of
life insurance paid on the death of the insured
are in fact capital, and cannot be taxed as
income under the Sixteenth Amendment.
Eisner vs. Macomber, 252 U.S., 189, 207;
Merchants' Loan & Trust Co. vs. Smietanka,
255 U.S., 509, 518. It is enough to sustain our
construction of the act to say that proceeds of a
life insurance policy paid on the death of the
insured are not usually classed as income.
. . . Life insurance in such a case is like that of
fire and marine insurance, — a contract of
indemnity. Central Nat. Bank vs. Hume, 128
U.S., 195.
12. Sps. Cha vs. CA, G.R. No. 124520,
August 18, 1997, First Division, Padilla, J.
FACTS: Sps. Nilo and Stella Uy Cha entered into
a lease contract with CKS Development
Corporation (CKS) for a period of one year. Item
No. 18 in the Contract states that the lessees shall
not insure against fire the chattels, merchandise,
textiles goods and effects placed in the leased
premises without first obtaining the written consent
and approval of the lessor and if the lessees obtain
said insurance without the consent of the lessor, the
policy will be deemed assigned and transferred to
the lessor for its own benefit.
Nevertheless, Sps. Cha insured against loss by fire
the merchandise inside the premises with United
Insurance Co. (United) without the consent of
CKS. On the day of expiration of the lease
contract, fire broke out.
CKS sent a demand letter to United for the
proceeds. United refused to pay CKS thus, filed a
complaint against United and Sps. Cha.
The Regional Trial Court, Manila ruled in favor of
CKS which was affirmed by the Court of Appeal
on appeal. Hence, this petition for review on
certiorari.
ISSUE: Whether CKS has an insurable interest in
the property insured?
RULING: No. CKS cannot be validly a
beneficiary of the fire insurance policy taken by
the petitioner over their merchandise. This
insurable interest remains with the insured. The
automatic assignment of the policy to CKS under
the lease contract is void for being contrary to law
and/or public policy. United cannot be compelled
to pay the proceeds to CKS who has no insurable
interest in the property insured.
Sec. 18, Insurance Code provides that no
contract or policy of insurance on property shall be
enforceable except for the benefit of some person
having an insurable interest in the property insured.
A non-life insurance policy such as the fire
insurance policy taken by petitioner-spouses over
their merchandise is primarily a contract of
indemnity. Insurable interest in the property
insured must exist at the time the insurance takes
effect and at the time the loss occurs, based on
sound public policy to prevent a person from
taking out an insurance policy on property upon
which he has no insurable interest and collecting
the proceeds of said policy in case of loss of the
property.
In such a case, the contract of insurance is a
mere wager which is void under Section 25 of the
same Code, which provides that every stipulation
in a policy of Insurance for the payment of loss,
whether the person insured has or has not any
interest in the property insured, or that the
policy shall be received as proof of such
interest, and every policy executed by way of
gaming or wagering, is void.
In the present case, it cannot be denied
that CKS has no insurable interest in the goods
and merchandise inside the leased premises
under Section 17 of the Code which provides
that the measure of an insurable interest in
property is the extent to which the insured
might be damnified by loss of injury thereof.
The liability of Sps. Cha to CKS for
violating their lease contract, is a separate and
distinct issue which is not resolve in this case.
13. Malayan Insurance Company, Inc., vs.
PAP CO., LTD. (Phil. Branch), G.R. NO.
200784, August 7, 2013, Third Division,
Mendoza, J.:
FACTS: Malayan issued Fire Insurance Policy
to PAP Co. for its machineries and equipment
at Sanyo Precision Phils. Bldg., Phase III, Lot
4, Block 15, PEZA, Rosario, Cavite (Sanyo
Building). It was procured for RCBC, the
mortgagee of the insured machineries and
equipment for P15,000,000.00. Before its
expiration, PAP Co. renewed the policy for
May 13, 1997 to May 13, 1998.
On October 12, 1997, the insured were
lost by fire. PAP Co. filed a claim but was
denied because at the time of the loss, the
insured were transferred in September 1996 to
the Pace Pacific Bldg., Lot 14, Block 14,
Phase III, PEZA, Rosario, Cavite (Pace
Pacific), a location different from that
indicated in the policy.
PAP Co. argued that Malayan was
informed of the transfer by RCBC but its claim
was still denied. Hence, the complaint.
Regional Trial Court (RTC) ordered
Malayan to pay PAP Co. an indemnity for the
loss and for attorney’s fees.
Malayan appealed to the Court of
Appeals but it affirmed RTC and deleted the
attorney’s fees since Malayan.
Hence, this petition for review on
certiorari before the SC. With regard to the
alleged increase of risk, Malayan asserts that
the Sanyo Factory was occupied as a factory of
automotive/computer parts by the assured and
factory of zinc & aluminum die cast and
plastic gear for copy machine by Sanyo
Precision Phils., Inc. with a rate of 0.449%
under 6.1.2 A, while Pace Factory was
occupied as factory that repacked silicone
sealant to plastic cylinders with a rate of
0.657% under 6.1.2 A.

ISSUE: Whether Malayan is liable in absence of
consent to the transfer of the insured?
RULING: No. It was clearly established that the
renewal policy stipulated that the insured
properties were located at the Sanyo factory; that
PAP Co. removed the properties without the
consent of Malayan; and that the alteration of the
location increased the risk of loss.
The policy forbade the removal of the
insured properties unless sanctioned by Malayan.
Condition No. 9(c) of the renewal policy provides:
9. Under any of the following circumstances the
insurance ceases to attach as regards the property
affected unless the insured, before the occurrence
of any loss or damage, obtains the sanction of the
company signified by endorsement upon the
policy, by or on behalf of the Company: x x x
(c) If property insured be removed to any
building or place other than in that which is
herein stated to be insured.
Evidently, the removal of the insured
property to any building or place required the
consent of Malayan. Any transfer effected by the
insured, without the insurer’s consent, would free
the latter from any liability.
The transfer from the Sanyo Factory to the
PACE Factory increased the risk. The Court
agrees with Malayan that the transfer to the Pace
Factory exposed the properties to a hazardous
environment and negatively affected the fire rating
stated in the renewal policy, and such would
necessarily entail an increase in the premium
payment.
Related Topics:
Malayan is entitled to rescind the
insurance contract. Considering that the original
policy was renewed on an "as is basis," it follows
that the location of the risk insured against is at the
Sanyo factory in PEZA. Although it was also
located in PEZA, Pace Factory was not the
location stipulated in the renewal policy. There
being an unconsented removal, the transfer was at
PAP Co.’s own risk.
Accordingly, an insurer can exercise its
right to rescind an insurance contract when the
following conditions are present, to wit:
1) the policy limits the use or condition of
the thing insured;
2) there is an alteration in said use or
condition;
3) the alteration is without the consent of
the insurer;
4) the alteration is made by means within
the insured’s control; and
5) the alteration increases the risk of loss.
PAP Co. clearly committed
concealment, misrepresentation and a
breach of a material warranty. Section 26 of
the Insurance Code provides that, “A neglect
to communicate that which a party knows and
ought to communicate, is called a
concealment.” Under Section 27 of the Code,
"a concealment entitles the injured party to
rescind a contract of insurance."
Moreover, under Section 168 of the
same Code, the insurer is entitled to rescind
the insurance contract in case of an alteration
in the use or condition of the thing insured,
to wit:
Sec. 168. An alteration in the use or
condition of a thing insured from that to
which it is limited by the policy made
without the consent of the insurer, by means
within the control of the insured, and
increasing the risks, entitles an insurer to
rescind a contract of fire insurance.
14, 16. Geagonia vs. CA, G.R. No. 114427,
February 6, 1995, First Division, Davide, Jr. J.
FACTS: Armando Geagonia is the owner of
Norman's Mart who obtained from Country
Bankers Insurance Corp. (CBIC) a fire
insurance policy from 22 December 1989 to 22
December 1990 covering the "Stock-in-trade
consisting principally of dry goods such as
RTW's for men and women wear and other
usual to assured's business."
Geagonia declared in the policy under
the subheading entitled CO-INSURANCE that
Mercantile Insurance Co., Inc. was the co-
insurer for P50,000.00. From 1989 to 1990, he
had in his inventory stocks amounting to
P392,130.50. The policy contained the
following condition:
3. The insured shall give notice to the
Company of any insurance or insurances
already affected, 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
such 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.
On 27 May 1990, fire of accidental
origin broke out at the public market. The
insured were destroyed prompting Geagonia to
file a claim which was denied because CBIC
found that at the time of the loss the insured were
likewise covered by fire insurance policies issued
by Philippines First Insurance Co., Inc.
(PFIC). These policies indicate that the insured
was "Messrs. Discount Mart (Mr. Armando
Geagonia, Prop.)" with a mortgage clause reading:
MORTGAGE: Loss, if any shall be
payable to Messrs. Cebu Tesing
Textiles, Cebu City as their interest
may appear subject to the terms of
this policy. CO-INSURANCE
DECLARED: P100,000. — Phils.
First CEB/F 24758.
Geagonia filed a complaint against CBIC
with the Insurance Commission for the recovery of
P100,000.00 under the policy, attorney's fees and
costs of litigation. He attached as Annex "AM" his
letter of 18 January 1991 which asked for the
reconsideration of the denial. He admitted
knowledge of two policies but he was not aware of
the provision requiring him to inform CBIC of said
policies as it was not mentioned to him by the its
agent. The Commission found that Petitioner did
not violate Condition 3 of the policy and that it was
Cebu Tesing Textiles which procured the PFIC
policies without his consent; and that Cebu Tesing
Textile, as his creditor, had insurable interest on the
stocks.
CBIC appealed to the Court of Appeals
which reversed that of the Commission.
Hence, this petition for review.
ISSUE: Whether Insurable interests of a
mortgagor and a mortgagee on the mortgaged
property are distinct and separate?
RULING: Yes. As to a mortgaged property, the
mortgagor and the mortgagee have each an
independent insurable interest therein and both
interests may be one policy, or each may take out a
separate policy covering his interest, either at the
same or at separate times. The mortgagor's
insurable interest covers the full value of the
mortgaged property, even though the mortgage
debt is equivalent to the full value of the
property. The mortgagee's insurable interest is to
the extent of the debt, since the property is relied
upon as security thereof, and in insuring he is not
insuring the property but his interest or lien
thereon. His insurable interest is prima facie the
value mortgaged and extends only to the amount of
the debt, not exceeding the value of the mortgaged
property. Thus, separate insurances covering
different insurable interests may be obtained by the
mortgagor and the mortgagee.
Since the two policies of the PFIC do not
cover the same interest as that covered by the
policy of the CBIC, no double insurance exists.
The non-disclosure then of the former policies was
not fatal to the petitioner's right to recover on
the private respondent's policy.
15. Malayan Insurance Co., Inc., vs.
Philippines First Insurance Co., Inc. and
Reputable Forwarder Services, Inc., G.R.
No. 184300, July 11, 2012, Second Division,
Reyes, J.:
FACTS: Since 1989, Wyeth Philippines, Inc.
(Wyeth) and respondent Reputable Forwarder
Services, Inc. (Reputable) had been annually
executing a contract of carriage, the latter to
transport and deliver the former’s products to
its customers, dealers or salesmen.
On November 18, 1993, Wyeth
procured Marine Policy from respondent
Philippines First Insurance Co., Inc.
(Philippines First) insuring nutritional,
pharmaceutical and other products usual or
incidental to the insured’s business while being
shipped in the Philippines and covers all risks
of direct physical loss or damage from any
external cause, if by land, including theft,
robbery, flood, storm, earthquakes, lightning,
and other force majeure until actual delivery to
the customers, salesmen, and dealers of the
COMPANY and provides a limit of
P6,000,000.00 per any one land vehicle.
On December 1, 1993, Wyeth executed
its annual contract of carriage with Reputable
but was not signed by Wyeth’s representative/s
nevertheless, it was signed by Reputable’s
representatives.
On February 11, 1994, as the contract
required, Reputable signed a Special Risk
Insurance Policy (SR Policy) on Wyeth’s
goods with petitioner Malayan for the amount
of P1,000,000.00.
On October 6, 1994, during the
effectivity of both Policies, Reputable received
from Wyeth 1,000 boxes of Promil infant
formula worth P2,357,582.70 to be delivered
by Reputable to Mercury Drug Corporation in
Libis, Quezon City. Unfortunately, the truck
was hijacked and recovered two weeks later
without its cargo.
On March 8, 1995, Philippines First
under Marine Policy, paid Wyeth
P2,133,257.00 then demanded reimbursement
from Reputable but ignored the demand. Thus,
an action for sum of money.
Reputable claimed that it cannot be
made liable under the contract of carriage with
Wyeth since the contract was not signed by
Wyeth’s representative and that the cause of
the loss was force majeure. It impleaded
Malayan as third-party defendant to collect the
amount under the SR Policy alleging that it
was validly insured with Malayan for
P1,000,000.00, and the Policy covered the risk of
robbery or hijacking.
Malayan disclaimed any liability under
Section 5 of the SR Policy (referred to by Malayan
as over insurance clause) which does not cover any
loss or damage to property which at the time of the
happening of such loss or damage is insured by
any marine policy and that the SR Policy expressly
excluded third-party liability.
Section 5. INSURANCE WITH OTHER
COMPANIES. The insurance does not cover any
loss or damage to property which at the time of the
happening of such loss or damage is insured by or
would but for the existence of this policy, be
insured by any Fire or Marine policy or policies
except in respect of any excess beyond the amount
which would have been payable under the Fire or
Marine policy or policies had this insurance not
been effected.
RTC found Reputable liable to Philippines
First for the amount of indemnity it paid to Wyeth,
and in turn, Malayan is liable to Reputable to the
policy coverage.
Reputable and Malayan filed their
respective appeals.
Malayan prayed that it be held liable for no
more than P468,766.70, its alleged pro-rata share
of the loss based on the amount covered by the
policy, subject to the provision of Section 12 of the
SR Policy, which states:
12. OTHER INSURANCE CLAUSE. If at the
time of any loss or damage happening to any
property hereby insured, there be any other
subsisting insurance or insurances, whether
effected by the insured or by any other person or
persons, covering the same property, the
company shall not be liable to pay or contribute
more than its ratable proportion of such loss or
damage.
CA affirmed RTC. (1) Reputable is
estopped from assailing the validity of the contract
of carriage on the ground of lack of signature of
Wyeth’s representative/s; (2) Reputable is liable
under the contract for the value of the goods even
if the same was lost due to fortuitous event; and (3)
Section 12 of the SR Policy prevails over Section
5, it being the latter provision; however, since the
ratable proportion provision of Section 12 applies
only in case of double insurance, which is not
present, then it should not be applied and Malayan
should be held liable for the full amount of the
policy coverage, that is, P1,000,000.00.
Hence, this petition for review on certiorari.
ISSUE: Whether there is double insurance such
that either Section 5 or Section 12 of the SR Policy
may be applied?
RULING: No. By the express provision of Section
93 of the Insurance Code, double insurance exists
where the same person is insured by several
insurers separately in respect to the same
subject and interest. The requisites in order for
double insurance to arise are as follows:38
1. The person insured is the same;
2. Two or more insurers insuring
separately;
3. There is identity of subject matter;
4. There is identity of interest insured;
and
5. There is identity of the risk or peril
insured against.
In the present case, while it is true that
the Marine Policy and the SR Policy were both
issued over the same subject matter, i.e. goods
belonging to Wyeth, and both covered the
same peril insured against, it is, however,
beyond cavil that the said policies were issued
to two different persons or entities. It is
undisputed that Wyeth is the recognized
insured of Philippines First under its Marine
Policy, while Reputable is the recognized
insured of Malayan under the SR Policy. The
fact that Reputable procured Malayan’s SR
Policy over the goods of Wyeth pursuant
merely to the stipulated requirement under its
contract of carriage with the latter does not
make Reputable a mere agent of Wyeth in
obtaining the said SR Policy.
The interest of Wyeth over the property
subject matter of both insurance contracts is
also different and distinct from that of
Reputable’s. The policy issued by Philippines
First was in consideration of the legal and/or
equitable interest of Wyeth over its own goods.
On the other hand, what was issued by
Malayan to Reputable was over the latter’s
insurable interest over the safety of the goods,
which may become the basis of the latter’s
liability in case of loss or damage to the
property and falls within the contemplation of
Section 15 of the Insurance Code.
Therefore, even though the two
concerned insurance policies were issued over
the same goods and cover the same risk, there
arises no double insurance since they were
issued to two different persons/entities having
distinct insurable interests. Necessarily, over
insurance by double insurance cannot likewise
exist. Hence, as correctly ruled by the RTC
and CA, neither Section 5 nor Section 12 of
the SR Policy can be applied.
Related Topics:
The Court is also wont to strictly construe the
controversial provisions of the SR Policy
against Malayan. This is in keeping with the
rule that:
"Indemnity and liability insurance policies are
 construed in accordance with the general rule of
resolving any ambiguity therein in favor of the insured,
where the contract or policy is prepared by the insurer.
A contract of insurance, being a contract of
adhesion, par excellence, any ambiguity therein should
be resolved against the insurer; in other words, it should
be construed liberally in favor of the insured and
strictly against the insurer. Limitations of liability
should be regarded with extreme jealousy and must be
construed in such a way as to preclude the insurer from
noncompliance with its obligations."40
17. Great Pacific Life Assurance Corp. vs. CA,
G.R. No. 113899, October 13, 1999, Second
Division, Quisumbing, J.:
FACTS: Grepalife executed contract of group life
insurance to insure the lives of eligible housing
loan mortgagors of Development Bank of the
Philippines (DBP).
Dr. Wilfredo Leuterio, a physician and a
housing debtor of DBP applied for membership in
the insurance. He answered in the application form
that he had no or not ever consulted, a physician
for a heart condition, high blood pressure, cancer,
diabetes, lung; kidney or stomach disorder or any
other physical impairment and is in good health.
Grepalife issued insurance coverage to him
to the extent of his DBP mortgage indebtedness or
P86,200.00. Dr. Leuterio died due to "massive
cerebral hemorrhage."
DBP submitted a death claim to Grepalife
which was denied alleging that Dr. Leuterio did not
disclose he had been suffering from hypertension.
Respondent Medarda V. Leuterio, widow
filed a complaint with the Regional Trial Court for
"Specific Performance with Damages" which ruled
in favor of Respondent. The Court of Appeals (CA)
sustained hence, the present petition for review on
certiorari.
ISSUE: Whether petitioner is liable to DBP as
beneficiary or to the widow of the
decedent/mortgagor?
RULING: Petitioner is ordered to pay the
insurance proceeds or P86,200.00 pesos to the
heirs of the insured upon presentation of proof of
prior settlement of mortgagor's indebtedness to
Development Bank of the Philippines. DBP
foreclosed in 1995 their residential lot, in
satisfaction of mortgagor's outstanding loan.
Considering this supervening event, the insurance
proceeds shall inure to the benefit of the heirs of
the deceased person or his beneficiaries.
We must consider the insurable interest in
mortgaged properties and the parties to this type of
contract. The rationale of a group insurance policy
of mortgagors, otherwise known as the "mortgage
redemption insurance," is a device for the
protection of both the mortgagee and the
mortgagor. On the part of the mortgagee, it has
to enter into such form of contract so that in
the event of the unexpected demise of the
mortgagor during the subsistence of the
mortgage contract, the proceeds from such
insurance will be applied to the payment of the
mortgage debt, thereby relieving the heirs of
the mortgagor from paying the obligation. In a
similar vein, ample protection is given to the
mortgagor under such a concept so that in the
event of death; the mortgage obligation will be
extinguished by the application of the
insurance proceeds to the mortgage
indebtedness. Consequently, where the
mortgagor pays the insurance premium under
the group insurance policy, making the loss
payable to the mortgagee, the insurance is on
the mortgagor's interest, and the mortgagor
continues to be a party to the contract. In this
type of policy insurance, the mortgagee is
simply an appointee of the insurance fund,
such loss-payable clause does not make the
mortgagee a party to the contract.
Sec. 8 of the Insurance Code. Unless the
policy provides, where a mortgagor of property
effects insurance in his own name providing
that the loss shall be payable to the mortgagee,
or assigns a policy of insurance to a mortgagee,
the insurance is deemed to be upon the interest
of the mortgagor, who does not cease to be a
party to the original contract, and any act of
his, prior to the loss, which would otherwise
avoid the insurance, will have the same effect,
although the property is in the hands of the
mortgagee, but any act which, under the
contract of insurance, is to be performed by the
mortgagor, may be performed by the
mortgagee therein named, with the same effect
as if it had been performed by the mortgagor.
The insured private respondent did not
cede to the mortgagee all his rights or interests
in the insurance, the policy stating that: "In the
event of the debtor's death before his
indebtedness with the Creditor [DBP] shall
have been fully paid, an amount to pay the
outstanding indebtedness shall first be paid to
the creditor and the balance of sum assured, if
there is any, shall then be paid to the
beneficiary/ies designated by the debtor."
When DBP submitted the insurance claim
against petitioner, the latter denied payment
thereof, interposing the defense of
concealment committed by the insured.
Thereafter, DBP collected the debt from the
mortgagor and took the necessary action of
foreclosure on the residential lot of private
respondent. In Gonzales La O vs. Yek Tong Lin
Fire & Marine Ins. Co. 12 we held:
Insured, being the person with whom the
contract was made, is primarily the proper
person to bring suit thereon. * * * Subject to
 some exceptions, insured may thus sue, although the
policy is taken wholly or in part for the benefit of
another person named or unnamed, and although it
is expressly made payable to another as his interest
may appear or otherwise. * * * Although a policy
issued to a mortgagor is taken out for the benefit of
the mortgagee and is made payable to him, yet the
mortgagor may sue thereon in his own name,
especially where the mortgagee's interest is less than
the full amount recoverable under the policy, * * *.
And in volume 33, page 82, of the same work, we
read the following:
Insured may be regarded as the real party in interest,
although he has assigned the policy for the purpose
of collection, or has assigned as collateral security
any judgment he may obtain.
And since a policy of insurance upon life or
health may pass by transfer, will or succession to
any person, whether he has an insurable interest or
not, and such person may recover it whatever the
insured might have recovered, the widow may file
the suit against the insurer, Grepalife.
Related Topics:
Concealment exists where the assured had
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.
The fraudulent intent on the part of the insured
must be established to entitle the insurer to rescind
the contract. Misrepresentation as a defense of
the insurer to avoid liability is an affirmative
defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon
the insurer.
18. People vs. Yip Wai Ming, G.R. No. 120959,
November 14, 1996, Third Division, Melo, J.
FACTS: Accused-appellant Ming and Lam Po
Chun were engaged to be married. They had toured
China and Macao and were living together in one
apartment. They were registered with the
Hongkong Marriage Registry in May 1993.
Marriage date was set for August 29, 1993 or a
month and a half away from the date of the death
of Chun on July 11. They came to Manila on
vacation but Chun was found dead in their hotel
room while on the day of the killing, Ming was
touring Metro Manila with Filipino welcomers.
Allegedly, Chun had a headache so she did not do
the sights.
Her brother, Lam Chi Keung, learned that
her life was insured with the Insurance Company
of New Zealand in Causeway Bay, Hongkong,
with Ming as the beneficiary. The premium paid
for the insurance was more than the monthly salary
of the deceased as an insurance underwriter.
Regional Trial Court in Manila charged
appellant committed the crime of murder.
Hence, this instant appeal.
ISSUE: Whether there is circumstantial
evidence that Ming killed Chun for the
insurance proceeds?
RULING: No. The tests as to the sufficiency
of the circumstantial evidence to prove guilt
beyond reasonable doubt have not been met in
the case at bar. The trial court would have been
justified in finding that there was evident
premeditation of murder if the story is proved
that Chun insured herself for the amounts of
US $498,750.00 and US $249,375.00 naming
accused-appellant as the beneficiary.
The prosecution presented Exhibit "X",
a mere xerox copy of a document captioned
"Proposal for Life Insurance" as proof the
alleged insurance. It is not a certified copy, nor
was the original first identified. There is no
signature indicating that the victim herself
applied for the insurance. There is no marking
in Exhibit "X" of any entry which purports to
be the victim's signature. There is a signature
of Apple Lam which is most unusual for an
insurance application because the victim's
name is Lam Po Chun.
Anybody can get an application form
for insurance, fill it up at home before filing it
with the insurance company. In fact, the very
first sentence of the form states that it merely
"forms the basis of a contract between you and
NZI Life." There was no contract yet. There is
no proof that the insurance company approved
the proposal, no proof that any premium
payments were made, and no proof from the
record of exhibits as to the date it was
accomplished. It appearing that no insurance
was issued to Lam Po Chun with accused-
appellant as the beneficiary, the motive
capitalized upon by the trial court vanishes.
There are other suspicious
circumstances about the insurance angle. Chun
was working for the National Insurance
Company. Why then should she insure her life
with the New Zealand Insurance Company?
Lam's monthly salary was only HK $5,000.00.
The premiums for the insurance were HK
$5,400.00 or US $702.00 per month. Why
should Lam insure herself with the monthly
premiums exceeding her monthly salary? And
why should any insurance company approve
insurance, the premiums of which the
supposed insured obviously con not afford to
pay, in the absence of any showing that
somebody else is paying for said premiums. It
is not even indicated whether or not there are
rules in Hongkong allowing a big amount of
insurance to be secured where the beneficiary
is not a spouse, a parent, a sibling, a child, or other
close relative. It is usually the man who insures
himself with the wife or future wife or beneficiary
instead of the other way around.
A key element in the web of circumstantial
evidence is motive which the prosecution tried to
establish. In the absence of direct evidence
indubitably showing that accused-appellant was
the perpetrator of the killing, motive becomes
important.
19, 33. Great Pacific Life Assurance Company
vs. CA, G.R. No. L-31845, and
Mondragon vs. CA and Ngo Hing, G.R. No. L-
1878, April 30, 1979, First Division, De Castro, J.
FACTS: Respondent Hing filed an application for
a twenty-year endowment policy on the life of his
one-year old daughter Helen Go with Petitioner
Pacific Life.
Pacific Life disapproved since it is not
available for minors below seven years old but can
consider under the Juvenile Triple Action Plan, and
advised that if the offer is acceptable, the Juvenile
Non-Medical Declaration be sent to the company.
Allegedly, this was not communicated by
Petitioner Lapu-lapu D. Mondragon, Br. Manager
to Hing. Instead, Mondragon wrote back Pacific
Life strongly recommending the approval.
Helen Go died of influenza with
complication of bronchopneumonia. Respondent
sought the payment of the proceeds but failed so he
filed an action for recovery before the Court of
First Instance, which rendered adverse decision
against both petitioners. Court of Appeals affirmed
the former.
Hence, this petition for certiorari by way of
appeal.
ISSUE: (1) whether the binding deposit receipt
constituted a temporary contract of the life
insurance?
RULING: No. The Court is constrained to hold
that no insurance contract was perfected between
the parties with the noncompliance of the
conditions provided in the binding receipt, and
concealment, as legally defined, having been
committed by herein private respondent.
Clearly implied from the conditions is that
the binding deposit receipt is merely an
acknowledgment, on behalf of the company, that
the latter's branch office had received from the
applicant the insurance premium and had accepted
the application subject for processing by the
company; and that the latter will either approve or
reject the same on the basis of whether or not the
applicant is "insurable on standard rates." Since
Pacific Life disapproved the application of Hing,
the binding deposit receipt had never become
in force.
Pacific Life disapproved the insurance
application on the ground that it is not offering
the twenty-year endowment insurance policy
to children less than seven years of age. What
it offered instead is another plan, Juvenile
Triple Action, which respondent failed to
accept. In the absence of a meeting of the
minds between petitioner and respondent over
the 20-year endowment life insurance in the
amount of P50,000.00 in favor of the latter's
one-year old daughter, and with the non-
compliance of conditions in the binding
deposit receipt, there could have been no
insurance contract duly perfected between
them. Accordingly, the deposit paid by Hing
shall have to be refunded by Pacific Life.
Related Topics:
This Court believes that respondent had
deliberately concealed the state of health and
physical condition of his daughter Helen Go.
Where he supplied the required essential data
for the insurance application form, he was
fully aware that his one-year old daughter is
typically a mongoloid child. Such a congenital
physical defect could never be ensconced nor
distinguished. Nonetheless, he, in apparent bad
faith, withheld the fact material to the risk to
be assumed by the company. As an insurance
agent of Pacific Life, he ought to know, as he
surely must have known. his duty and
responsibility to such a material fact. Had he
disclosed said significant fact in the insurance
application form, Pacific Life would have
verified the same and would have had no
choice but to disapprove the application
outright.
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
[Black's Law Dictionary, 2nd Edition], not for
the alone but equally so for the insurer (Field
man's Insurance Co., Inc. vs. Vda de Songco,
25 SCRA 70). Concealment is a neglect to
communicate that which a party knows and
ought to communicate (Section 25, Act No.
2427). Whether intentional or unintentional the
concealment entitles the insurer to rescind the
contract of insurance (Section 26, Id.: Yu
Pang Cheng vs. Court of Appeals, et al, 105
Phil 930; Satumino vs. Philippine American
Life Insurance Company, 7 SCRA 316).
20. Malayan Insurance Co., Inc. vs.
Insurance Commissioner, G.R. No. L-67835,
October 12, 1987, First Division, Cruz, J.:

FACTS: MICO issued to Respondent, Coronacion
Pinca, Fire Insurance Policy on her property for the
amount of P14,000.00 effective July 22, 1981, until
July 22, 1982. On October 15,1981, MICO
cancelled the policy for non-payment of the
premium and sent notice to Pinca. On December
24, 1981, payment was received by Domingo
Adora, agent of MICO who on January 15, 1982,
Adora remitted to MICO, together with other
payments.
On January 18, 1982, Pinca's property was
completely burned. On February 5, 1982, Pinca's
payment was returned by MICO to Adora on the
ground of cancellation earlier. But Adora refused to
accept it.
Pinca made demands which MICO
rejected. Respondent Pinca has been sustained by
the Insurance Commission in her claim for
compensation for her burned property.
Hence, the instant petition on July 2, 1982.
ISSUE: whether there was no valid contract at the
time of the loss?
RULING: No. We do not share MICO's view that
there was no existing insurance at the time of the
loss sustained by Pinca because her policy never
became effective for non-payment of premium.
Payment was in fact made, rendering the policy
operative as of June 22, 1981.
It is not disputed that the premium was
actually paid by Pinca to Adora on December 24,
1981, who received it on behalf of MICO, to which
it was remitted on January 15, 1982.
MICO's acknowledgment of Adora as its
agent defeats its contention that he was not
authorized to receive the premium payment on its
behalf. It is clearly provided in Section 306 of the
Insurance Code that:
SEC. 306. xxx xxx xxx
Any insurance company which delivers to an
insurance agant or insurance broker a policy or
contract of insurance shall be demmed to have
authorized such agent or broker to receive on its
behalf payment of any premium which is due on
such policy or contract of insurance at the time of its
issuance or delivery or which becomes due thereon.
And it is a well-known principle under the
law of agency that:
Payment to an agent having authority to receive or
collect payment is equivalent to payment to the
principal himself; such payment is complete when
the money delivered is into the agent's hands and is
a discharge of the indebtedness owing to the
principal.
Related Topics:
The policy could be cancelled on any of the
supervening grounds enumerated in Section 64
(except "nonpayment of premium") provided
the cancellation was made in accordance
therewith and with Section 65.
SEC. 64. No policy of insurance other than life
shall be cancelled by the insurer except upon
prior notice thereof to the insured, and no
notice of cancellation shall be effective unless
it is based on the occurrence, after the effective
date of the policy, of one or more of the
following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts
increasing the hazard insured against;
(c) discovery of fraud or material
misrepresentation;
(d) discovery of willful, or reckless acts or
commissions increasing the hazard insured
against;
(e) physical changes in the property insured
which result in the property becoming
uninsurable; or
(f) a determination by the Commissioner that
the continuation of the policy would violate or
would place the insurer in violation of this
Code.
As for the method of cancellation,
SEC. 65. All notices of cancellation mentioned
in the preceding section shall be in writing,
mailed or delivered to the named insured at the
address shown in the policy, and shall state (a)
which of the grounds set forth in section sixty-
four is relied upon and (b) that, upon written
request of the named insured, the insurer will
furnish the facts on which the cancellation is
based.
A valid cancellation must, therefore,
require concurrence of the following
conditions:
(1) There must be prior notice of cancellation
to the insured; 17
(2) The notice must be based on the
occurrence, after the effective date of the
policy, of one or more of the grounds
mentioned;18
(3) The notice must be (a) in writing, (b)
mailed, or delivered to the named insured, (c)
at the address shown in the policy; 19
(4) It must state (a) which of the grounds
mentioned in Section 64 is relied upon and (b)
that upon written request of the insured, the
insurer will furnish the facts on which the
cancellation is based.
Considering the strict language of
Section 64 that no insurance policy shall be
cancelled except upon prior notice, it
behooved MICO's to make sure that the
cancellation was actually sent to and received
by the insured. The presumption cited is
unavailing against the positive duty enjoined
by Section 64 upon MICO and the flat denial
made by the private respondent that she had
received notice of the claimed cancellation.
The Court finds that if she did pay on
that date, it was because she honestly believed
that the policy issued on June 7, 1981, was still
in effect and she was willing to make her payment
retroact to July 22, 1981, its stipulated
commencement date. After all, agent Adora was
very accomodating and had earlier told her "to call
him up any time" she was ready with her payment
on the policy earlier issued. She was obviously
only reciprocating in kind when she paid her
premium for the period beginning July 22, 1981,
and not December 24, 1981.
As it has not been shown that there was a
valid cancellation of the policy, there was
consequently no need to renew it but to pay the
premium thereon. Payment was thus legally made
on the original transaction and it could be, and
was, validly received on behalf of the insurer by its
agent Adora. Adora. incidentally, had not been
informed of the cancellation either and saw no
reason not to accept the said payment.
21. Capital Insurance and Surety Co., Inc vs.
Plastic Era Co., Inc., G.R. NO. L-22375, July 18,
1975, First Division, Martin, J.
FACTS: Petitioner Capital delivered to
Respondent Plastic Era its Fire Policy to insure the
latter’s building, equipment, raw materials,
products and accessories situated at Mandaluyong,
Rizal from December 15, 1960, until 1 o’clock in
the afternoon of December 15, 1961 for
P100,000.00.
Respondent failed to pay premium
amounting to P2,220.00 upon the delivery date on
December 17, 1960 but instead issued an
acknowledgment receipt of the policy with a
promise to pay its premium within 30 days.
On January 8, 1961, Respondent delivered
to Petitioner a post-dated check (dated January 16,
1961) of P1,000.00 in partial payment of the
premium, Bank of America (Bank) attested a
recorded balance amounting to P1,193.41 in
Respondent’s account on January 19, 1961.
Petitioner tried to deposit the check only on
February 20, 1961 (or 35 days later) which was
dishonored by the Bank for lack of funds.
Between 4 and 5 o’clock in the morning of
January 18, 1961, the property insured was
destroyed by fire.
Petitioner denied Respondent’s demand for
coverage claims causing the latter to file its
complaint for the recovery of the sum of
P100,000.00 plus attorney’s fees and other
expenses. Petitioner filed its counterclaim.
The trial court rendered its decision in
favor of Respondent which was later on affirmed
en toto by the Court of Appeals on appeal.
Hence the filing of a Petition for Review by
herein Petitioner.
ISSUE: Whether the contract has been duly
perfected?
RULING: Yes. In consideration of the
stipulations embodied in the contract of
insurance or policy coverage, Petitioner’s
acceptance of the promise by Respondent to
pay the insurance premium within 30 days
from the effective date of the policy, may be
construed that it impliedly agreed to modify
the tenor of the insurance policy and in effect,
waived the provision therein that it would pay
only for the loss or damage in case the same
occurs after the payment of the premium. In
short, Petitioner extended credit to Respondent
rendering the policy immediately operative on
the day it was delivered.
The fact that the check issued by
Respondent in partial payment was later on
dishonored did not in any way operate as a
forfeiture of its rights under the policy, there
being no express stipulation to that effect in
the policy contract.
As in most cases decided in the United
States, if the insurance policy is silent as to the
mode of payment, promissory notes received
by the insurer must be deemed to have been
accepted in payment of premiums.
22. Philippine Phoenix Surety & Insurance
Company vs. Woodworks, Inc., G.R. No. L-
25317, August 6, 1979, First Division,
Melencio-Herrera, J.
FACTS: Woodworks, Inc. applied for a fire
insurance policy for P500,000 to Philippine
Phoenix to insure the former’s building,
machinery and equipment for one year. The
premium and other charges amounted to
P10,593.36.
Woodworks did not pay the premium
stipulated in the policy when it was issued nor
at the time thereafter. Before the expiration,
Phoenix notified Woodworks of the
cancellation of the Policy allegedly upon
request of the same wherein the latter has
denied such. Phoenix credited Woodworks
with P3,110. 25 for the unexpired period of 94
days and claimed the balance of P7,483.11.
Phoenix demanded said amount but
Woodworks disclaimed liability contending
that it need not pay premium because the
insurer did not stand liable for any indemnity
during the period the premiums were not paid.
Consequently, Phoenix instituted an
action before the Court of First Instance for the
recovery of the unpaid premium which was
favored. Woodworks appealed to the Court of
Appeals which certified the case to the
Supreme Court based on a question of law.
ISSUE: Whether Phoenix may collect the unpaid
premiums from Woodworks?
RULING: No. Section 77 of the Insurance Code
provides that “no contract of insurance by an
insurance company is valid and binding unless and
until the premium thereof has been paid,
notwithstanding any agreement to the contrary.”
Insurance is “a contract whereby one
undertakes for a consideration to indemnify
another against loss, damage or liability arising
from an unknown or contingent event.” The
consideration is the “premium”. The premium must
be paid at the time and in the way and manner
specified in the policy and, if not so paid, the
policy will lapse and be forfeited by its own terms.
The Supreme Court also ruled that when
the policy is tendered, the insured must pay the
premium unless credit, which required acceptance
by the insured, is given or there is a waiver, or
some agreement obviating the necessity for pre-
payment.
In this case, since the premium had not
been paid, the policy must be deemed to have
lapsed. The non-payment of premiums does not
merely suspend but put an end to an insurance
contract. The contract becomes void or forfeited, or
the obligation of the insurer shall cease.
An insurer cannot treat a contract as valid
for the purpose of collecting premiums and invalid
for the purpose of indemnity.
DISPOSITION: The judgment appealed from is
reversed and Philippine Phoenix’s complaint is
dismissed.
23. Pacific Timber Export Corp. vs. Court of
Appeals, G.R. No. L-38613, February 25, 1982,
First Division, De Castro, J.
FACTS: Pacific secured a temporary insurance
from Respondent Workmen’s Insurance Company,
Inc. for an exportation of logs. Some of the logs
intended to be exported were lost during loading
operations. Pacific submitted a claim for payment.
Respondent requested the First Philippine
Adjustment Corporation to inspect and the latter
found that the loss of the logs is not covered by the
policies but it can be covered by a Cover Note No.
1010.
Respondent denied the claim of Pacific
thus, brought before the Insurance Commissioner
which ruled to indemnify the insured under the
Cover Note.
The Court of Appeals, however, ruled in
favor of Respondent stating that the cover note was
null and void for lack of valuable consideration.
Hence, this petition for review.
ISSUE: Whether the Cover Note was null and
void for lack of valuable consideration?
RULING: No. The Supreme Court ruled that
the fact that there was no separate premium on
the cover nor, it does not militate against the
validity of petitioner’s contention, for no such
premium could have been paid, since by nature
of the cover note, it did not contain, as all
cover notes do not contain particulars of the
shipment that would serve as a basis for the
computation of the premiums. This is a fact
admitted by an official of the respondent
company.
At any rate, it is not disputed that
petitioner paid in full all the premiums as
called for by the statement issued by private
respondent after the issuance of the two
regular marine insurance policies, thereby
leaving no account unpaid by petitioner due on
the insurance coverage, which must be deemed
to include the Cover Note. If the Note is to be
treated as a separate policy instead of
integrating it to the regular policies
subsequently issued, the purpose and function
of the Cover Note would be set at naught or
rendered meaningless, for it is in a real sense a
contract, not a mere application for insurance
which is a mere offer.
Related Topics: Section 84 of the Insurance
Act. Delay in the presentation to an insurer of
notice or proof of loss is waived if caused by
any act of his or if he omits to take objection
promptly and specifically upon that ground.
24. Valenzuela vs. CA, G.R. No. 83122,
October 19, 1990, Third Division, Gutierrez,
Jr., J.
FACTS: Arturo Valenzuela is a general agent
of Philippine American General Insurance
Company [PhilAmGen] since 1965, authorized
to solicit and sell all kinds of non-life
insurance. He was entitled to receive
commission of 32.5%.
From 1973 to 1975, Valenzuela
solicited marine insurance from Delta Motors.
However, he did not receive his full
commission.
In 1977, PhilAmGen started to express
to share in the commission due Valenzuela on
a 50-50 basis but he refused. In 1978, thru
President [Aragon] insisted on the sharing but
he reiterated his objection thus, PhilAmGen
did credit in his account the commission
earned from the Delta Motors insurance, then
terminated the General Agency Agreement in
December 1978.
Valenzuela filed a complaint for relief and
the RTC ruled in his favor, as his termination was
found to be unjustified.
However, the CA ruled in favor of
PhilAmGen and ordered Valenzuela to pay the
amount of unpaid and uncollected premiums.
Hence, this petition for review.
ISSUE: Whether Valenzuela is liable to
PhilAmGen for unpaid and uncollected premiums?
RULING: No. In this instance, with the lapsing of
the policies through the nonpayment of premiums
by the insured, there were no more insurance
contracts to speak of.
We rule that the respondent court erred in
holding Valenzuela liable. We find no factual and
legal basis for the award. Under Section 77 of the
Insurance Code, the remedy for the non-payment
of premiums is to put an end to and render the
insurance policy not binding —
Sec. 77 ... [N]otwithstanding any agreement to the
contrary, no policy or contract of insurance is valid
and binding unless and until the premiums thereof
have been paid except in the case of a life or
industrial life policy whenever the grace period
provision applies (P.D. 612, as amended otherwise
known as the Insurance Code of 1974)
Section 776 of the Insurance Code (PD
612), which now provides that no contract of
insurance by an insurance company is valid and
binding unless and until the premium thereof has
been paid, notwithstanding any agreement to the
contrary
Hence, for PhilAmGen which had no more
liability under the lapsed and inexistent policies to
demand, much less sue Valenzuela for the unpaid
premiums would be the height of injustice and
unfair dealing.
25. Philippine Pryce Assurance Corporation vs.
CA, G.R. No. 107062, February 21, 1994, Second
Division, Nocon, J.
FACTS: Respondent Gegroco, Inc. filed before the
Makati Regional Trial Court (RTC) a complaint for
collection of money against Petitioner Pryce.
Pryce issued two surety bonds in behalf of
its principal Sagum General Merchandise for
P500,000.00 and P1,000,000.00 but denied liability
because allegedly 1) the checks which were to pay
for the premiums bounced and were dishonored
hence there is no contract to speak of between
petitioner and its supposed principal; and 2) that
the bonds were merely to guarantee payment of its
principal's obligation, thus, excussion is necessary
and that as early as 1986, it is not authorized yet to
issue surety bonds.
RTC ruled in favor of Respondent.
Upon appeal, Court of Appeals affirmed the
former. The rules of procedure frustrated
petitioner's bid to get a favorable decision due
to non-appearance during the pre-trial despite
due notice, and non-payment of docket fees
upon filing of its third-party complaint.
Hence, this petition.
ISSUE: Whether Pryce is liable?
RULING: Yes. Sec. 177 of the Insurance
Code provides that the surety is entitled to
payment of the premium as soon as the
contract of suretyship or bond is perfected and
delivered to the obligor. No contract of
suretyship or bonding shall be valid and
binding unless and until the premium therefor
has been paid, except where the obligee has
accepted the bond, in which case the bond
becomes valid and enforceable irrespective of
whether or not the premium has been paid by
the obligor to the surety. . . .
In a desperate attempt to escape
liability, petitioner asserts that the above
provision is not applicable because the
respondent allegedly had not accepted the
surety bond, hence could not have delivered
the goods to Sagum Enterprises.
In the first place, petitioner, in its
answer, admitted to have issued the bonds
subject matter of the original action. Likewise
attached to the record are exhibits consisting of
delivery invoices addressed to Sagum General
Merchandise proving that parts were
purchased, delivered and received.
As to the petitioner's defense that it did
not have authority to issue a Surety Bond
when it did, such is an admission of fraud
committed against respondent. No person can
claim benefit from the wrong he himself
committed.
26. American Home Assurance Co. vs. Chua
G.R. No. 130421, June 28, 1999, First
Division, Davide, Jr. C.J.
FACTS: On April 5, 1990, Antonio Chua
renewed the fire insurance for its stock-in-
trade of Moonlight Enterprises with American
Home Assurance Company by issuing a check
of P2,983.50 to its agent James Uy who
delivered the Renewal Certificate to him.
On April 6, the insured was razed by
fire with loss ranging P4,000,000 to
P5,000,000.
On April 10, 1990, a policy was issued
covering March 25, 1990 to March 25, 1991.
 Antonio Chua filed a claim with American
Home and 4 other co-insurers (Pioneer Insurance
and Surety Corporation, Prudential Guarantee and
Assurance, Inc. and Filipino Merchants Insurance
Co). American Home refused alleging the no
premium was paid.
A complaint was filed and RTC favored
Antonio Chua for paying by way of check a day
before the fire occurred which the CA affirmed.
Hence, this petition for review.
ISSUE: Whether there was a valid payment of
premium considering that the check was cashed
after the occurrence of the fire since the renewal
certificate issued containing the acknowledgement
receipt?
Whether Chua violated the policy by his
submission of fraudulent documents and non-
disclosure of the other existing insurance
contracts?
RULING: Yes. There was a valid check payment
by respondent to petitioner. The general rule in
insurance laws is that unless the premium is paid
the insurance policy is not valid and binding. The
only exceptions are life and industrial life
insurance.
According to the trial court the renewal
certificate issued to respondent contained the
acknowledgment that premium had been paid. It is
not disputed that the check drawn by respondent in
favor of petitioner and delivered to its agent was
honored when presented and petitioner forthwith
issued its official receipt to respondent on 10 April
1990. Section 306 of the Code provides that any
insurance company which delivers a policy or
contract of insurance to an insurance agent or
insurance broker 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 or contract of insurance at the time of
its issuance or delivery or which becomes due
thereon. The best evidence of such authority is the
fact that petitioner accepted the check and issued
the official receipt for the payment. It is, as well,
bound by its agent’s acknowledgment of receipt of
payment.
Section 77 of the Insurance Code provides
that an insurer is entitled to payment of the
premium as soon as the thing insured is exposed to
the peril insured against. Notwithstanding any
agreement to the contrary, no policy or contract of
insurance issued by an insurance company is valid
and binding unless and until the premium thereof
has been paid, except in the case of life or an
industrial life policy whenever the grace period
provision applies.
Section 78 as an exception to Section
77 states that an acknowledgment in a policy
or contract of insurance of the receipt of
premium is conclusive evidence of its
payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it
shall not be binding until the premium is
actually paid.
No. The purpose for the “other insurance
clause” is to prevent an increase in the moral
hazard. The failure to disclose by Chua was
not intentional and fraudulent
Section 75. A policy may declare that a
violation of specified provisions thereof shall
avoid it, otherwise the breach of an immaterial
provision does not avoid the policy.
To constitute a violation the other existing
insurance contracts must be upon the same
subject matter and with the same interest and
risk. Indeed, respondent acquired several co-
insurers and he failed to disclose this
information to petitioner. Nonetheless,
petitioner is estopped from must invoking this
argument.
American Home is estopped because its
loss adjusters had previous knowledge of the
co-insurers. The loss adjuster, being an
employee of petitioner, is deemed a
representative of the latter whose awareness of
the other insurance contracts binds petitioner.
 no legal and factual basis for the award
of P200,000 for loss of profit
 no such fraud or bad faith = no moral
damages
 grant of attorney’s fees as part of
damages is the exception rather than the
rule
 award attorney’s fees where it deems
just and equitable that it be so granted
 reduced to P10,000
27. UCPB General Insurance, Co. vs.
Masagana Telemart, Inc., G.R. No. 137172,
April 4, 2001, En Banc, Davide, Jr. C.J.
FACTS: Respondent obtained from Petitioner
5 insurance policies on its properties in Pasay
City and Manila. All policies reflect the
effectivity term: “from 4:00 P.M. of 22 May
1991 to 4:00 P.M. of 22 May 1992.”
On June 13, 1992, properties located at
2410-2432 and 2442-2450 Taft Avenue, Pasay
City were razed by fire. On July 13, 1992,
plaintiff tendered, and defendant accepted, 5
Equitable Bank Manager’s Checks amounting
to P225,753.45 as renewal premium payments.
On July 14, 1992, Respondent made
demand for indemnification but was denied.
Hence, Respondent filed this case.
Both the Court of Appeals and trial court found
that Respondent, which had procured insurance
coverage from Petitioner for a number of years,
had been granted a 60 to 90-day credit term for the
renewal of the policies. Moreover, there was no
timely notice of non-renewal was made by
Petitioner. Affirmed with modification the
judgment of the trial court (a) allowing Respondent
to consign the sum of P225,753.95 as full payment
of the premiums for the renewal of the five
insurance policies on Respondent's properties; (b)
declaring the replacement-renewal policies
effective and binding from 22 May 1992 until 22
May 1993; and (c) ordering Petitioner to pay
Respondent P18,645,000.00 as indemnity for the
burned properties covered by the renewal-
replacement policies. The modification consisted
in the (1) deletion of the trial court's declaration
that three of the policies were in force from August
1991 to August 1992; and (2) reduction of the
award of the attorney's fees from 25% to 10% of
the total amount due the Respondent.
Petititioner argues that on 6 April 1992, it sent
by ordinary mail to Respondent a notice of non-
renewal and sent by personal delivery a copy
thereof to Respondent’s broker, Zuellig.
Hence, this Motion for Reconsideration.
ISSUE: Whether the fire insurance policies issued
had been extended or renewed by an implied credit
arrangement though actual payment of premium
tendered on a later date and after the occurrence of
the (fire) risk insured against?
RULING: Yes. It would be unjust and inequitable
if recovery on the policy would not be permitted
against Petitioner, which had consistently granted a
60- to 90-day credit term for the payment of
premiums despite its full awareness of Section 77.
Estoppel bars it from taking refuge under said
Section, since Respondent relied in good faith on
such practice. Estoppel then is the fifth exception
to Section 77.
Section 77 of the Insurance Code of 1978. An
insurer is entitled to payment of the premium as soon
as the thing insured is exposed to the peril insured
against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by
an insurance company is valid and binding unless and
until the premium thereof has been paid, except in the
case of a life or an industrial life policy whenever the
grace period provision applies.
The first exception is provided by Section 77
itself, and that is, in case of a life or industrial life
policy whenever the grace period provision
applies.
The second is SECTION 78. Any acknowledgment
in a policy or contract of insurance of the receipt of
premium is conclusive evidence of its payment, so far
as to make the policy binding, notwithstanding any
stipulation therein that it shall not be binding
until premium is actually paid.
A third exception was laid down in Makati
Tuscany Condominium Corporation vs. Court
of Appeals, 5 wherein we ruled that Section 77
may not apply if the parties have agreed to the
payment in installments of the premium and
partial payment has been made at the time of
loss.
Not only that, Tuscany provided a fourth
exception to Section 77, namely, that the
insurer may grant credit extension for the
payment of the premium. This simply means
that if the insurer has granted the insured a
credit term for the payment of the premium
and loss occurs before the expiration of the
term, recovery on the policy should be allowed
even though the premium is paid after the loss
but within the credit term.
Moreover, there is nothing in Section 77 which
prohibits the parties in an insurance contract to
provide a credit term within which to pay the
premiums. That agreement is not against the
law, morals, good customs, public order or
public policy. The agreement binds the parties.
Article 1306 of the Civil Code provides:
ARTICLE 1306. The contracting parties may
establish such stipulations clauses, terms and
conditions as they may deem convenient,
provided they are not contrary to law, morals,
good customs, public order, or public policy.
28. Makati Tuscany Condominium Corp.,
vs. CA, G.R. No. 95546, November 6, 1992,
First Division, Bellosillo, J.
FACTS: Respondent American Home
Assurance Co. (AHAC), represented by
American International Underwriters (Phils.),
Inc., issued in favor of Petitioner Tuscany
Insurance Policy. The premium was paid on
installments accepted by Respondent. The
insurance policy was renewed twice.
On the second renewal, Petitioner made
two installment payments, on 6 February 1984
for P52,000.00 and on 6 June 1984 for
P100,000.00. Thereafter, Petitioner refused to
pay the balance of the premium.
Responden filed an action to recover the
unpaid balance. Petitioner explained that it
discontinued the payment because the policy
did not contain a credit clause in its favor and
the receipts for the installment payments
covering the 3 policies, stated the following
reservations: Acceptance of this payment shall
not waive any of the company rights to deny
liability on any claim under the policy arising
before such payments or after the expiration of
the credit clause of the policy; and Subject to
no loss prior to premium payment. If there be any
loss such is not covered.
The trial court dismissed the complaint and the
counterclaim on the ground that the receipts issued
to the defendant contained the aforementioned
reservations, and it is equally true that payment of
the premiums of the 3 policies (being sought to be
refunded) were made during the lifetime or term of
the policies hence, inspite of the reservations, risk
is attached therein. Defendant's counterclaim for
refund is not justified. The plaintiff also has no
right to demand their payment after the lapse of the
term of said policy on March 1, 1985.
Both parties appealed and the Court of Appeals
modified by ordering Petitioner to pay the balance
of the premiums due plus legal interest until fully
paid, and affirming the denial of the counterclaim.
ISSUE: Whether payment by installment
invalidates the contract of insurance under Sec. 77
of P.D. 612?
RULING: No. The policies are valid even if the
premiums were paid on installments.
The records clearly show that Petitioner and
Respondent intended subject insurance policies to
be binding and effective notwithstanding the
staggered payment of the premiums. In 3 years,
the insurer accepted all the installment payments.
Such acceptance of payments speaks loudly of the
insurer's intention to honor the policies it issued to
petitioner. Certainly, basic principles of equity and
fairness would not allow the insurer to continue
collecting and accepting the premiums, although
paid on installments, and later deny liability on the
lame excuse that the premiums were not prepared
in full.
29. Marques vs. Far East Bank and Trust Co.,
G.R. No. 171379 and
Far East Bank and Trust Co. vs. Marques
G.R. No. 171419, January 10, 2011, Second
Division, Carpio J.
FACTS: Maxilite Technologies, Inc. (Maxilite),
with its President Jose N. Marques (Marques),
entered into a trust receipt transaction with Far
East Bank and Trust Co. (FEBTC) on June 17,
1993 for the shipment of various high-technology
equipment from the United States, with the
merchandise serving as collateral.
The trust receipt provides that Marques agrees
to keep the merchandise insured against fire to its
full value, payable to the bank, at his own cost and
expense. Far East Bank Insurance Brokers, Inc.
(FEBIBI), a subsidiary of FEBTC, facilitated the
procurement and processing from Makati
Insurance Company (MIC), another subsidiary of
FEBTC, of four separate and independent fire
insurance policies over the trust receipted
merchandise.
Maxilite paid the premiums for these
policies through debit arrangement with
FEBTC. It provides that the policy including
any renewal or endorsement, is not in force
until the premium has been fully paid.
Maxilite failed to pay the insurance
premium for the period June 24, 1994 to June
24, 1995. FEBIBI sent written reminders to
FEBTC to debit Maxilite’s account. On
October 24 and 26, 1994, Maxilite fully settled
its trust receipt account.
On March 5, 1995, a fire broke out at the
Aboitiz Sea Transport Building in Cebu City
where Maxilite’s office and warehouse were
located. Maxilite claimed with MIC but was
denied on the ground of non-payment of
premium. FEBTC and FEBIBI disclaimed any
responsibility for the denial of the claim.
Maxilite and Marques sued FEBTC,
FEBIBI and MIC.
The lower court ruled in favor of Maxilite
and Marques, finding that the non-payment
was due to the fault or negligence of FEBTC.
When it did not heed the reminders even when
Maxilite had sufficient funds in its trust receipt
account. MIC did not cancel the policy if the
premiums were not paid. As FEBTC, FEBIBI
and MIC are sister companies, the non-
payment should be imputable to their fault or
negligence.
The Court of Appeals affirmed hence, this
petition.
ISSUE: Whether FEBTC, FEBIBI and MIC
are jointly and severally liable to pay
Respondents the full coverage of the policy?
RULING: Yes. FEBTC is estopped from
claiming that the insurance premium has been
unpaid for leading Maxilite and Marques to
believe that the insurance premium was
debited from Maxilite’s account through
automatic debit arrangement. There was no
written demand from FEBTC or MIC for
Maxilite or Marques to pay the insurance
premium. The policy was released on 19
August 1994 and remained uncancelled despite
the alleged non-payment of the premium,
making it appear that it remained in force and
binding.
Related Topics:
FEBTC’s conduct constitutes negligence.
Negligence is defined as “the omission to do
something which a reasonable man, guided
upon those considerations which ordinarily
regulate the conduct of human affairs, would
do, or the doing of something which a prudent man
and reasonable man could not do.” It must be held
liable for damages under Article 2176 of the Civil
Code. Maxilite suffered damage to the extent of
the face value of the insurance policy.
FEBTC is solely liable for the payment of the
face value of the insurance policy and the
monetary awards stated in the Court of Appeal’s
decision.
FEBTC, FEBIBI and MIC are independent and
separate juridical entities, even if two are
subsidiaries of FEBTC. A subsidiary’s separate
existence shall be respected, and the liability of the
parent corporation as well as the subsidiary shall
be confined to those arising in their respective
business. There is no evidence showing FEBIBI’s
and MIC’s negligence as regards the non-payment
of the insurance premium.
30. Mcguire vs. Manufactures Insurance Co.,
G.R. No. L-3581, September 21, 1950, En Banc,
Ozaeta, J.
FACTS: Respondent gave a life insurance policy
on the life of Jaime Mcguire for $5,000 and
additional $5,000 as double indemnity benefit
payable to him as beneficiary.
He paid the premiums including that due on
July 19, 1940. On June 22, he secured from $760
loan against the policy but failed to pay the loan
and its interest on January 1, 1941 when it became
due, and also his premiums which fell due on July
19,1941.
Respondent executed clause 8 granting
Automatic Premium Loan which would would
cover the unpaid premium only up to March 1,
1942 or the expiration of the policy.
Mcguire died on August 4, 1943 in a
motorcycle accident. Plaintiff alleged from March
1, 1942 to August 4, 1943, they attempted to
reinstate the policy but due to the occupation of the
enemy in Manila from January 1, 1942 to February
1945, communication was never made.
The trial court ordered payment for
Petitioner Php 20,000 minus the premium arrears
up to his death considered paragraph 6 erroneous
in stating lapsed on March 1, 1942 for the failure
to pay the premiums on account of the war.
Payment where legally suspended due to state of
war up to the time the insured died which was still
the period of war.
Hence, elevated to the Supreme Court.
ISSUE: Whether payment of premiums are
suspended during times of war or contract had
lapsed?
RULING: No. Aside from the error of trial court
in moto proprio setting aside the stipulation of fact
from the policy that lapsed March 1, 1942 is
contrary to the decision of the court in
Constantino vs Asia life and Perlata vs Asia
life . In those cases the court a quo rejected the
New York rule which holds that war between
states suspends the payment of premiums and
gets reinstated once the premium arrears gets
paid after the war. The SC adopted the United
States rule which declared that the contract is
not merely suspended but is abrogated by
reason of nonpayment of premiums since the
time of the payment is peculiarly of the
essence of the contract.
After Perusing the Insurance Act, the
court a quo firmly believes that non payment
of premiums is a vital defense of insurance
companies. Under Act 2427 Sec 184 that if the
policy has been enforced for two (2) years it
shall become incontestable( Insurance
companies shall no defense) except for fraud
or nonpayment premiums which was amended
by RA 171 which removed the defense of
fraud and retained nonpayment premium as
utmost importance.
Respondent is absolved since it appears
that the insured has used up all the reserve
value of the policy in question thru loans in
cash and the application of the nonforfeiture
clause by keeping the policy subsisting until
March 1, 1942.
31. Andres vs. Crown Life Insurance, Co.,
G.R. No. L-l0874, January 28, 1958, En Banc,
Reyes, J.B.L, J.
FACTS: Rufino D. Andres filed a complaint
with Court of First Instance (CFI) against
Crown for the recovery of P5,000, the face
value of a joint 20-year endowment insurance
policy issued in his favor and wife Severa. On
Jun 7, 1951, Andres presented death claim as
survivor-beneficiary of his wife who died May
3, 1951 but was denied for the policy had
already lapsed.
The policy lapsed for non-payment of
premiums on December 26, 1950, upon
expiration of the customary 31-day period of
grace. The subsequent reinstatement of the
policy was available but he did not comply
with its last condition; for he only paid P100
(on account of the over due semi-annual
premium of P165.15) on February 20, 1951,
before his wife's death; and, despite the
Company's reminders on April 14 and 27, he
remitted the balance of P65 on May 5, 1951
(received by the Company's agency on May
11), two days after his wife died.
CFI absolved Crown from any liability
affirmed by the Court of Appeals.
Appeal was submitted to Supreme Court.
ISSUE: Whether policy was reinstated?
RULING: No. The Company had the right to treat
the contract as lapsed and refuse payment of the
policy. We see no intention on the insurer's part to
waive the full payment of the overdue premium as
prerequisite to the reinstatement of the lapsed
policy, considering the well settled rule that a
waiver must be clear and positive, and intent to
waive shown clearly and convincingly (Fernandez
vs. Sebido, 70 Phil. 151, 159; Lang vs. Sheriff * 49
Off. Gaz. 3323, 3329; Jocson vs. Capitol
Subdivision, Inc. G.R. L-6573, February 28, 1955).
The stipulation in a life insurance policy giving
the insured the privilege to reinstate it upon written
application does not give the insured absolute right
to such reinstatement by the mere filing of an
application. The Company has the right to deny the
reinstatement if it is not satisfied as to the
insurability of the insured and if the latter does no
pay all overdue premium and all other
indebtedness to the Company. After the death of
the insured the insurance Company cannot be
compelled to entertain an application for
reinstatement of the policy because the conditions
precedent to reinstatement can no longer be
determined and satisfied.
32. Great Pacific Life Insurance Corp. vs. CA,
G.R. No. L-57308, April 23, 1990, First Division,
Grino-Aquino, J.
FACTS: Respondent Teodoro Cortez, upon the
solicitation of Margarita Siega an underwriter for
Petitioner Great Pacific, applied for a 20-year
endowment policy for P30,000. The policy
effective on December 25, 1972, was delivered by
Mrs. Siega on January 25, 1973 who assured him
that the first premium may be paid within 30 days.
The first annual premium of P1,416.60 was paid by
him in 3 installments.
He was advised by Petitioner that policy was
not in force but to enforce it, he should remit the
balance of P1,015.60 due December 15, 1972, and
see Dr. Felipe V. Remollo for another medical
examination at his own expense. He demanded the
return of his premium plus damages but was
ignored.
He filed a complaint for damages in the Court
of First Instance (CFI) praying for refund of
P1,416.60 plus P45,000 as moral damages, and
P2,000 as attorney's fees
CFI granted which was affirmed by the Court
of Appeals. Hence, this petition for review.
ISSUE: Whether Cortez is entitled to a refund
of his premium?
RULING: Yes. When Petitioner advised
Respondent on June 1, 1973 to make the
policy effective, it committed a serious breach
of the contract of insurance.
Petitioner should have informed Cortez of
the deadline for paying the first premium
before or at least upon delivery of the policy to
him, so he could have complied with what was
needful and would not have been misled into
believing that his life and his family were
protected by the policy, when actually they
were not. And, if the premium paid by Cortez
was unacceptable for being late, it was the
company's duty to return it. By accepting his
premiums without giving him the
corresponding protection, the company acted
in bad faith.
Sections 79, 81 and 82 of P.D. 612 of
the Insurance Code of 1978 provide when the
insured is entitled to the return of premium
paid. Since his policy was in fact inoperative
or ineffectual from the beginning, the company
was never at risk, hence, it is not entitled to
keep the premium.
The award of moral damages to Cortez
was proper for there can hardly be any doubt
that he must have suffered moral shock,
serious anxiety and wounded feelings upon
being informed by the petitioner six (6)
months after it issued the policy to him and
four (4) months after receiving the full
premium, that his policy was in fact worthless
for it never took effect, hence, he and his
family never received the protection that he
paid for.
34. Ng Gan Zee vs. Asian Crusader Life
Assurance Corporation, G.R. No. L-30685
May 30, 1993, Second Division, escolin J.
FACTS: Kwong Nam applied for a 20-year
endowment insurance on his life for
P20,000.00, with his wife, Zee as beneficiary.
On December 6, 1963, Kwong Nam died of
cancer of the liver with metastasis. All
premiums had been paid at the time of his
death.
Ng Gan Zee filed a claim but was denied on
the ground that the answers in his application
were untrue.
Insurance Commissioner found no material
concealment on the part of the insured.
Appellant still refused to settle its obligation.
Court of First Instance of Manila ordered to
pay Zee. Hence, this appeal.
ISSUE: Whether the insured mirepresented,
misled or deceived into entering the contract?
RULING: No. It bears emphasis that Kwong Nam
had informed the appellant's medical examiner that
the tumor for which he was operated on was
"associated with ulcer of the stomach." In the
absence of evidence that the insured had sufficient
medical knowledge as to enable him to distinguish
between "peptic ulcer" and "a tumor", his
statement that said tumor was "associated with
ulcer of the stomach, " should be construed as an
expression made in good faith of his belief as to
the nature of his ailment and operation. Indeed,
such statement must be presumed to have been
made by him without knowledge of its
incorrectness and without any deliberate intent on
his part to mislead the appellant.
Sec. 27. Such party a contract of insurance must
communicate to the other, in good faith, all facts
within his knowledge which are material to the
contract, and which the other has not the means
of ascertaining, and as to which he makes no
warranty.
Thus, "concealment exists where the
assured had knowledge of a fact material to the
risk, and honesty, good faith, and fair dealing
requires that he should communicate it to the
assurer, but he designedly and intentionally
withholds the same."
It has also been held "that the concealment
must, in the absence of inquiries, be not only
material, but fraudulent, or the fact must have been
intentionally withheld."
35. New Life Enterprises vs. CA, G.R. No.
94071, March 31, 1992, Second Division,
Regalado, J.
FACTS: Julian Sy and Jose Sy Bang have formed
a business partnership under the name of New Life
Enterprises, which is engaged in the sale of
construction materials. Julian Sy insured the
materials in trade.
Fire
Date Insurer Insurance
Policy No.
May 15, 1981 Western Guaranty 37201
(renewed on May Corp.
13, 1982)
July 30, 1981 Reliance Surety and 69135
Insurance Co., Inc.
November 12, 71547
1981 (additional)
February 8, 1982 Equitable Insurance 39328
Corporation
Total
The building and the stocks in the trade
were gutted by fire caused by electrical failure.
Julian Sy filed a claim on the companies
but they denied because in violation of Condition
Nos. "3" and “27”.
Petitioner filed separate civil actions
before the RTC which rendered against the
companies.
Court of Appeals reversed the former,
hence this petition.
ISSUE: Whether forfeiture of benefits was
valid?
RULING: Yes. Conditions Nos. 3 and 27 of
the insurance contracts were violated by
petitioners resulting to forfeiture of all the
benefits. As to Condition No. 3, although
Petitioners contend that they are not to be
blamed for the omissions, alleging that
insurance agent Leon Alvarez (for Western)
and Yap Kam Chuan (for Reliance and
Equitable) knew about the existence of the
additional insurance coverage and that they
were not informed about the requirement that
such other or additional insurance should be
stated in the policy, as they have not even read
policies. The conclusion of the trial court that
Reliance and Equitable are "sister companies"
is an unfounded conjecture drawn from the
mere fact that Yap Kam Chuan was an agent
for both companies which also had the same
insurance claims adjuster. These contentions
cannot pass judicial muster.
The terms of the contract are clear
and unambiguous. The insured is specifically
required to disclose to the insurer any other
insurance and its particulars which he may
have effected on the same subject matter. The
knowledge of such insurance by the insurer's
agents, even assuming the acquisition thereof
by the former, is not the "notice" that would
estop the insurers from denying the claim.
Besides, the so-called theory of imputed
knowledge, that is, knowledge of the agent is
knowledge of the principal, aside from being
of dubious applicability here has likewise been
roundly refuted by respondent court whose
factual findings we find acceptable.
Amount Moreover, obligations arising from
350,000.00
contracts have the force of law between the
contracting parties and should be complied
with in good faith. It is and was incumbent
300,000.00
upon petitioner Sy to read the insurance
700,000.00
contracts, and this can be reasonably expected
200,000.00 of him considering that he has been a
businessman since 1965, and the contract
1,550,000.00
concerns indemnity in case of loss in his
money-making trade of which important
consideration he could not have been unaware
as it was pre-in case of loss in his money-
making trade of which important consideration
he could not have been unaware as it was
precisely the reason for his procuring the same.
The statement in question must be deemed
to be a statement (warranty) binding on both
insurer and insured, that there were no other
insurance on the property. Violation thereof
entitled the insurer to rescind. Such
misrepresentation is fatal. The obvious purpose of
the aforesaid requirement in the policy is to
prevent over-insurance and thus avert the
perpetration of fraud. The public, as well as the
insurer, is interested in preventing the situation in
which a fire would be profitable to the insured.
The insured may have been guilty of a false
declaration; a clear misrepresentation and a vital
one because where the insured had been asked to
reveal but did not, that was deception. Otherwise
stated, had the insurer known that there were many
co-insurances, it could have hesitated or plainly
desisted from entering into such contract. Hence,
the insured was guilty of clear fraud.
As to Condition no. 27, additionally, the
complaint for recovery was filed in court by
petitioners only on January 31, 1984, or after more
than one (1) year had elapsed from petitioners'
receipt of the insurers' letter of denial.
The court held that 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.
36. Sunlife Assurance Company of Canada vs.
CA, G.R. No. 105135, June 22, 1995, First
Division, Quiason, J.
FACTS: Robert John B. Bacani procured a life
insurance contract for himself from Petitioner. He
was issued a policy with double indemnity for
accidental death with mother, Bernarda Bacani, as
beneficiary.
The insured died in a plane crash. Respondent
filed a claim, and Petitioner conducted an
investigation and rejected the claim because the
insured did not disclose material facts relevant to
the issuance of the policy, thus rendering the
contract void. That two weeks prior to his
application, he was confined at the Lung Center of
the Philippines for renal failure.
Respondent filed an action for specific
performance with the Regional Trial Court which
ws granted since the health history of the insured
was immaterial since the insurance policy was
"non-medical".
Upon appeal, CA affirmed the decision of
the trial court. Hence, this petition.
ISSUE: Whether the facts concealed or
misrepresented were irrelevant to the non-
medical policy?
RULING: No. The information which the
insured failed to disclose were material and
relevant to the approval and issuance of the
insurance policy. The matters concealed would
have definitely affected petitioner's action on
his application, either by approving it with the
corresponding adjustment for a higher
premium or rejecting the same. Moreover, a
disclosure may have warranted a medical
examination of the insured by petitioner in
order for it to reasonably assess the risk
involved in accepting the application.
Petitioner properly exercised its right to
rescind the contract by reason of concealment
by the insured. It must be emphasized that
rescission was exercised within the two-year
contestability period under Section 48 of The
Insurance Code.
Section 26 is explicit in requiring a party
to a contract of insurance to communicate to
the other, in good faith, all facts within his
knowledge which are material to the contract
and as to which he makes no warranty, and
which the other has no means of ascertaining.
Said Section provides:
A neglect to communicate that which a party
knows and ought to communicate, is called
concealment.
Materiality is to be determined not by
the event, but solely by the probable and
reasonable influence of the facts upon the
party to whom communication is due, in
forming his estimate of the disadvantages of
the proposed contract or in making his
inquiries (The Insurance Code, Sec. 31).
37. Saturnino vs. Philippine American Life
Insurance Company, G.R. No. L-16163,
February 28, 1963, En Banc, Makalintal, J.
FACTS: The policy is one for 20-year
endowment non-medical insurance which
dispenses with the medical examination of the
applicant usually required in ordinary life
policies. Detailed information is still called for
concerning the applicant's health and medical
history. The application was submitted by
Saturnino to appellee on November 16, 1957,
witnessed by appellee's agent Edward A.
Santos. The policy was issued upon payment
of the first year's premium of P339.25.
On September 19, 1958 Saturnino died
of pneumonia, secondary to influenza.
Appellants who are her surviving husband and
minor child demanded payment of the face
value of the policy. The claim was rejected.
 Plaintiffs filed an action to recover the value
of policy issued by Respondent on the life of
Estefania A. Saturnino. Both the complaint and the
counterclaim were dismissed by the trial court; but
Plaintiffs were declared entitled to the return of
the premium already paid; plus interest at 6% up to
January 8, 1959, when a check for the
corresponding amount — P359.65 — was sent to
them by appellee.

ISSUE: Whether the insured made such false

representations of material facts?

RULING: Yes. There can be no dispute that the

information given by her in her application for
insurance was false, namely, that she had never had
cancer or tumors, or consulted any physician or
undergone any operation within the preceding
period of five years.
The Insurance Law (Section 30) provides
that "materiality is to be determined not by the
event, but solely by the probable and reasonable
influence of the facts upon the party to whom the
communication is due, in forming his estimate of
the proposed contract, or in making his inquiries."
The waiver of medical examination renders
even more material the information required of the
applicant concerning previous condition of health
and diseases suffered, for such information
necessarily constitutes an important factor which
the insurer takes into consideration in deciding
whether to issue the policy or not. It is logical to
assume that if appellee had been properly apprised
of the insured's medical history she would at least
have been made to undergo medical examination in
order to determine her insurability.