1.
Philippine Health Care Providers loaded to petitioner vessel, MV
vs. CIR
Facts: Petitioner is a health
maintenance organization. Individuals
enrolled in the health care programs pay
an annual membership fee and are
entitled to various preventive, diagnostic
and curative medical services provided
by its duly licensed physicians,
specialists and other professional
technical staff.
CIR sent petitioner a demand letter and
the corresponding assessment notices
demanding the payment of deficiency
taxes. The deficiency (documentary
stamp tax) DST assessment was
imposed on petitioner’s health care
agreement with the members of its
health care program.
Issue: Whether petitioner is engaged in
the business of insurance?
Held: No. Petitioner health care
programs are designed to prevent or to
minimize the possibility of any
assumption of risk on its part. Thus, its
undertaking under its agreements is not
to indemnify its members against any
loss or damage arising from a medical
condition but, on the contrary, to provide
the health and medical services needed
to prevent such loss or damage.
2. Aboitiz Shipping Corp vs.
Insurance Company of N.
America
Facts: MSAS Cargo Int’l Ltd and/or
Assoc and/or Subsidiary Com
(MSAS) procured a marine
insurance policy from respondent
ICNA UK ltd of London. The
insurance was for a transshipment of
certain wooden work tools and
workbenches purchased for the
consignee STIP. ICNA issued an “all
risk” open marine policy. The cargo
was received by petitioner Aboitiz
and issued a bill of lading contained
the notation “grounded outside
warehouse”. The container was then
Super Concarrier I. The cargo was
received by Mr. Willig informing him
that the cargo sustained water
damage. Willig informed Aboitiz of
the damage noticed upon opening of
the cargo. The consignee (STIP)
contacted the Phil office of ICNA for
insurance claims. STIP filed a formal
claim with Aboitiz the latter refused
to settled the claim. ICNA paid the
amount to consignee. ICNA advised
Aboitiz of the claim & subrogation
receipt executed in its favor. ICNA
filed a civil complaint against Aboitiz
for collection of actual damages.
ISSUE: Whether respondent ICNA
possesses the right of subrogation to
claim reimbursement from
petitioner?
HELD: Yes. Respondent's cause of
action is founded on it being subrogated
to the rights of the consignee of the
damaged shipment. The right of
subrogation springs from Article 2207 of
the Civil Code, which states:
Article 2207. If the plaintiff's property
has been insured, and he has received
indemnity from the insurance company
for the injury or loss arising out of the
wrong or breach of contract complained
of, the insurance company shall be
subrogated to the rights of the insured
against the wrongdoer or the person
who has violated the contract. If the
amount paid by the insurance company
does not fully cover the injury or loss,
the aggrieved party shall be entitled to
recover the deficiency from the person
causing the loss or injury.
Upon payment to the consignee of
indemnity for damage to the insured
goods, ICNA's entitlement to
subrogation equipped it with a cause of
action against petitioner in case of a
contractual breach or negligence. This
right of subrogation, however, has its
limitations. First, both the insurer and
the consignee are bound by the
contractual stipulations under the bill of
lading. Second, the insurer can be
subrogated only to the rights as the
insured may have against the
wrongdoer. If by its own acts after
receiving payment from the insurer, the
insured releases the wrongdoer who
caused the loss from liability, the insurer
loses its claim against the latter.
3. White Gold Marine Services Vs.
Pioneer Insurance & Surety
Corporation
Facts: Petitioner procured a protection &
indemnity coverage for its vessels from
the Steamship Mutual Underwriting
Assoc (Bermuda) Limited (Steamship
Mutual) through Pioneer Insurance &
Surety Corp (Pioneer). Pioneer issued
receipts evidencing payments for the
coverage. When White Gold failed to
fully pay its accounts, Steamship Mutual
refused to renew the coverage.
Steamship filed a case against White
Gold for collection of sum of money to
recover the latter’s unpaid balance. In
turn, White Gold file a case against
Steamship Mutual contending that it
violated the Insurance Code for its
failure to obtain a license and certificate
of authority while being engaged in the
insurance business.
ISSUE: Whether Steamship Mutual is
engaged in insurance business.
HELD: Yes. Steamship Mutual as a P&I
Club is a form of insurance against third
party liability, where the third party is
anyone other than the P&I Club and the
member hence Steamship is a mutual
insurance assoc engaged in the marine
insurance business. Basically, an
insurance contract is a contract of
indemnity, one undertakes for a
consideration to indemnity another
against loss, damage or liability arising
from an unknown or contingent event. In
particular, a marine insurance
undertakes to indemnify the assured
against marine losses, such as the
losses incident to a marine adventure.
4. Paramount Life & General
Insurance Corporation VS.
Castro
Facts: Philippine Postal Savings Bank,
Inc (PPSBI) applied for & obtained
insurance from Paramount as stated in
the policy “all death benefits shall be
payable to the creditor, PPSBI, as its
interest may appeal. Virgilio Castro
obtained a housing loan from the
PPSBI, the latter required Virgilio to
apply for a mortgage redemption
insurance (MRI) from Paramount to
cover the loan. Virgilio named
Respondent as beneficiaries. Virgilio
died, a claim was filed for death benefits
under the individual insurance coverage
however Paramount denied the claim on
the ground of material concealment or
misrepresentation. Paramount filed a
complaint praying that the individual
insurance of Virgilio be declared null
and void by reason of material
concealment and misrepresentation.
Respondent filed a motion to file a third
party complain and to admit attached
third party complaint. They argued that
due to the death of Virgilio, PPSBI
stepped into the shoes of respondents
under the principle of indemnity,
subrogation, or any other reliefs. CA
allowed third party complaint to be filed
against PPSBI.
ISSUE: Whether the admission of the
third party complaint against PPSBI is
correct.
HELD: In allowing the inclusion of
PPSBI as a third party defendant, the
court recognizes the inseparable
interest of the bank in the validity of the
individual insurance certificates issued
by Paramount. The PPSBI as the
mortgagee bank required Virgilio to
obtain MRI from Paramount to cover his
housing loan. Paramount undertook to
pay the PPSBI “the benefits in
accordance with Insurance Schedule,
upon receipt and approval of due proof
that the member has incurred a loss for
which benefits are payable. As stated in
the policy it is hereby agreed that all
death benefits shall be payable to the
Creditors, PPSBI, as its interest may
appeal.
 person (CKS) who has no insurable
interest in the property insured.
5. Cha vs. CA
FACTS: Petitioner Spouses Cha
(lessees) entered into a lease contract
with private respondent CKS Dev’t Corp
(lessor). One of the stipulation of the
lease contract states:
The LESSEE shall not insure against for the
chattels, merchandise, textiles, goods and
effects placed at any stall or store or space
in the lease premises without first obtaining
the written consent and approval of the
LESSOR. If the LESSEE obtain the
insurance w/o the consent of the LESSOR,
then the policy is deemed assigned and
transferred to the LESSOR for its own
benefit.
The spouses Cha insured against loss
by fire their merchandise inside the
leased premises for 500K with United
Insurance Co., Inc without the written
consent of private respondent CKS. On
the day that the lease contract was to
expire, fire broke out inside the leased
premises. CKS wrote to the insurer
demanding that the proceeds be paid
directly to CKS by virtue of the
stipulation in the leased contract.
ISSUE: Whether CKS had insurable
interest in the subject property insured
so as to enable it to recover under the
policy.
HELD: No. Insurable interest in the
property insured must exist at the time
insurance takes effect and at the time
the loss occurs. Therefore, the
respondent CKS cannot be a valid
beneficiary of the fire insurance policy
taken by the petitioner Sps. Cha over
their merchandise. The insurable
interest over said merchandise remains
with the insured Sps Cha. The
automatic assignment of the policy to
CKS under the provision of the lease
contract is void for being contrary to law
and/or public policy. The insurer (united)
cannot be compelled to pay the
proceeds of the fire insurance policy to a
6. Rizal Surety & Insurance
Company Vs. Court of Appeals &
Transworld Knitting Mills, Inc.
FACTS: Rizal Surety & Insurance
Company (Rizal) issued a Fire
Insurance Policy in favor of
Transworld amounting Php1.5Million.
Pertinent portions of subject policy
on the buildings insured and location
thereof. Fire broke out in the
compound of Transworld razing the
middle portion of its 4 span building
and partly gutting the left & right
sections. Transworld filed its
insurance claims with Rizal Surety &
Insurance Company but to no avail.
Private respondent brought against
the said insurance companies an
action for collection of sum of money
& damages. Petitioner countered
that its fire insurance policy sued
upon covered only the contents of
the 4- span building, which was
partly burned, and not the damage
caused by the fire on the 2-storey
annex building where fun &
amusement machines & spare parts
were stored.
ISSUE: Whether Transworld has an
insurable interest in the fun &
amusement machines & spare parts,
which entitles it to be indemnified for
the loss.
HELD: The fire insurance policy in
question did not limit its coverage to
what were stored in the 4-span
building. Two requirements must
concur in order that the said fun &
amusement machines and spare
parts would be deemed protected by
the fire insurance policy. (1)
Properties must be contained and/or
stored in the areas occupied by
Transworld & (2) said areas must
form part of the building described in
the policy. The so called “annex” was
not an annex building but an integral
and inseparable part of the 4-span claim on the ground of non-payment
building described in the policy & of premium.
consequently, the machines and
ISSUE: Whether FEBTC had
spare parts stored therein were
insurable interest over the
covered by the fire insurance in
merchandise.
dispute. Therefore, Petitioner is
liable for the total loss and damage HELD. Prior to the full settlement of
suffered by Transworld. the trust receipt account, FEBTC had
insurable interest over the
merchandise, and thus had greater
7. Far Eastern Bank & Trust reason to debit Maxilite’s account.
Company vs. Jose Marques & Maxilite’s bank account had
Maxilite Technologies sufficient funds to pay the insurance
premium prior to the settlement of
FACTS: Maxilite is a domestic
the trust receipt account, FEBTC
corporation engaged in the
should have debited Maxilite’s
importation & trading of equipment
account with respect to the
for energy-efficiency systems. Jose
insurance policies. However, FEBTC
Marques is the President &
failed to debit Maxilite’s accounts
controlling stockholder of Maxilite.
which constitutes negligence. As a
Far Eastern Bank & Trust Co.
consequence of its negligence,
(FEBTC) is a local bank which
FEBTC must be held liable for
handled the financing and related
damages.
requirements of Marques & Maxilite
who maintained accounts with
FEBTC. Accordingly, FEBTC
8. Vicente Ong Lim Sing Jr. Vs.
financed Maxilite’s capital &
FEB Leasing & Finance
operational requirements through
Corporation
loans secured with properties of
Marques under the latter’s name. FACTS: FEB entered into a lease of
equipment and motor vehicles with
Maxilite and Marques entered into a
JVL Food Products (JVL). On the
trust receipt transaction with FEBTC
same date, Lim executed an
for the shipment of various high-
Individual Guaranty Agreement with
technology equipment with the
FEB to guarantee the prompt and
merchandise serving as collateral.
faithful performance of the terms and
Marques agrees to keep said
conditions of the aforesaid lease
merchandise insured against fire to
agreement. JVL was obliged to pay
its full value, payable to the said
FEB an aggregate gross monthly
bank at the cost and expense of
rental. JVL defaulted in the payment
Marques who agrees to pay all
of the monthly rentals hence the
charges for storage on said
arrears, including the penalty
merchandise or other expenses
charges and insurance premiums
incurred thereon. FEBTC facilitated
amounted to 3,414,468.75. FEB filed
the procurement & processing form
a complaint for sum of money and
Makati Insurance Company 4
replevin against JVL & Lim.
separate and independent fire
insurance policies over the trust ISSUE: Whether Petitioner is a
receipted merchandise. A fire gutted lessee with insurable interest over
Maxilite’s office and warehouse. the subject personal properties.
Maxilite suffered losses and claimed
against the fire insurance policy with HELD: Yes, the stipulation of the
the Makati Insurance Company lease contract, that the equipment
where the latter denied the fire loss shall be insured at the cost and
expense of the lessee against loss,
damage, or destruction form fire,
theft, accident or other insurable risk
for the full term of the lease is a
binding and valid stipulation.
Petitioner as lessee has an insurable
interest in the equipment and motor
vehicles leased. Section 17 of
Insurance Code provides that the
measurement of an insurable
interest in property is the extent to
which the insured might be
damnified by loss or injury. It cannot
be denied that JVL will be directly
damnified in case of loss, damage or
destruction of any of the properties
leased.
9. Philamcare Health System, Inc
vs. Court of Appeals and Julita
Trinos
FACTS: Ernani Trinos, deceased
husband of respondent Julita Trinos
applied for a health care coverage
with Petitioner. The application was
approved but the deceased lied with
regards to his medical history, which
was invoked by insurer when
petitioner tried to claim the benefits
upon the death of Ernani. Petitioner
points out that only medical and
hospitalization benefits are given
under the agreement without any
indemnification, unlike in an
insurance contract where the insured
is indemnified for his loss.
Respondent instituted the instant
case asking for reimbursement of
her expenses and other legal fees.
ISSUE: Whether a health care
agreement is an insurance contract.
Whether Julita Trinos has insurable
interest over the insurance contract.
HELD: 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. The court also
enumerates the requisites for an
insurance contract to exist and one
of which is that an insured should
have insurable interest. Section 10
provides that every person has an
insurable interest in the life and
health of himself. In the case at bar,
the insurable interest of respondents’
husband in obtaining the health care
agreement was his own health. The
health care agreement was in the
nature of a non-life insurance, which
was a contract of indemnity. Hence,
reimbursement should be made to
the party who incurred all expenses.
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. Hence, Julita Trinos is
therefore entitled to reimbursement.
10. Malayan Insurance Company Inc.
Vs. PAP Co., ltd.
FACTS: Petitioner Malayan issued
Fire Insurance Policy to PAP Co.,
Ltd for the latter’s machineries and
equipment located at Sanyo building.
The insurance was procured by PAP
Co. for RCBC the mortgagee of the
insured machineries and equipment.
During the subsistence of the
renewal policy, the insured
machineries and equipment were
totally lost by fire. Hence, PAP Co.
filed a fire insurance claim with
Malayan in the amount insured
(Php15Million). Malayan denied the
claim on the ground that the insured
machineries and equipment were
transferred to a different location
(Pace Pacific). Hence this petition.
ISSUE: Whether PAP committed
concealment, misrepresentation and
breach of an affirmative warranty
under the renewal policy when it
transferred the location of the
insured properties without informing
it.
HELD: Yes. The transfer of the
insured properties to the Pace
Factory without notice and without
Malayan’s consent exposed the
properties to a hazardous
environment and negatively affected
the fire rating stated in the renewal
policy. PAP clearly committed
concealment, misrepresentation and
a breach of a material warranty. Sec.
26, a neglect to communicate that
which a party knows and ought to
communicate is called a paid on the subject insurance
concealment. Hence Malayan is
entitled to rescind the insurance
contract. Sec 27, a concealment
entitles the injured party to rescind a
contract of insurance.
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
11. Manulife Philippine, Inc.
Vs. Ybanez
FACTS: The insurance policy
which Manulife issued both in
favor of Dr. Gumersindo
Ybanez (insured) were void
due to concealment or
misrepresentation of material
facts in the latter’s application
for life insurance.
Hermenegilda wife of the said
insured, was revocably
designated as beneficiary in
the subject insurance policies.
When the insured died,
respondent filed a death claim
however, Manulife conducted
an investigation and
concluded that the insured
misrepresented or concealed
material facts with regards to
his medical history at the time
the subject insurance policies
were applied for, hence,
Manulife denied respondent’s
death claim and refunded the
premiums that the insured
policies. Due to insured’s
concealment of material facts
Manulife exercised its right to
rescind he subject insurance
contract and denied the claim
on those policies.
ISSUE: Whether Manulife’s
Complaint for rescission of
insurance contracts for failure
to prove concealment on the
part of the insured is correct.
HELD: 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.” For failure of
Manulife to prove intent to
defraud on the part of the
insured, it cannot validly sue
for rescission of insurance
contracts.
12. Sun Life of Canada vs.
Sibya
FACTS: Atty. Jesus Sibya Jr.
applied for life insurance with
Sun Life. In his application for
insurance, he indicated that
he had sought advice for
kidney problems, had
undergone lithotripsy due to
kidney stone. Sun Life
approved Atty. Jesus Jr.’s
application and issued insurance
policy. The policy indicated the
respondents as beneficiaries and
entitles them to a death benefit
of 1M should Atty dies on or
before Feb 5, 2021 or a sum of
money if Atty is still living on the
endowment date. Atty died as a
result of a gunshot wound. As
such, Ma. Daisy seek the death
benefits with Sun Life indicated
in his insurance policy.
Sun Life denied the claim on the
ground that the details on Atty
medical history were not
disclosed in his application. Sun
Life tendered a check
representing the refund of the
premiums paid by Atty.
ISSUE: Whether there was a
concealment or
misrepresentation when Atty.
Jesus, Jr. submitted his
insurance application with Sun
Life.
HELD: No. Atty. Jesus Jr.,
admitted in his application his
medical treatment for kidney
ailment. Moreover, he executed
an authorization in favor of Sun
Life to conduct investigation in
reference with his medical
history. Given the express
language of the Authorization, it
cannot be said that Atty
concealed his medical history
since Sun Life had the means of
ascertaining insured’s medical
record. Where matters of opinion
or judgment are called for,
answers made in good faith and
without intent to deceive will not
avoid a policy even though they
are untrue. Indeed, concealment
as a defense for the insurer to
avoid liability is an affirmative
defense and the duty to establish
such defense by satisfactorily
and convincing evidence rests
upon the provider or insurer. In
the case at bar, Sun Life failed to
clearly and satisfactorily
establish its allegations, and is
therefore liable to pay the
proceeds of the insurance.
13. Sunlife Assurance Company
of Canada vs. CA &
Sps.Rolando & Bernarda
Bacani.
FACTS: Robert John Bacani
procured a life insurance
contract for himself from
petitioner. He was issued Policy
valued at Php100K with double
indemnity in case of accidental
death. The designated
beneficiary was his mother,
respondent Bernarda. The
insured died in a plane crash.
Respondent Bernarda filed a
claim with petitioner seeking the
benefits of the insurance policy
thus rendering the contract of
insurance voidable. Petitioner
claimed that the insured gave
false statements in his
application when he answered
several questions. Respondent
filed an action for specific
performance against petitioner.
ISSUE: Whether concealment
can be invoked by insurer even
though it was not the cause for
the loss.
HELD: Yes. Sec. 26 of the
Insurance Code is explicit in
requiring a party to a contract of
insurance to communicate to the
other, in good faith, all facts
within its knowledge which are
material to the contract and as to
which he makes no warranty and
which the other has no means of
ascertaining. “A neglect to
communicate that which a party
knows and ought to
communicate, is called
concealment. The insured is
specifically required to disclose
to the insurer matters relating to
his health. Thus “good faith” is
no defense in concealment. The
insured’s failure to disclose the
fact that he was hospitalized for
two weeks prior to filing his
application for insurance, raises
grave doubts about his
bonafides. It appears that such
concealment was deliberate on
his part.
14. Manila Bankers Life
Insurance Corporation vs.
Aban
Facts: Delia Sotero took out a
life insurance policy from
Manila Bankers Life Insurance
Corp. (Banker’s Life)
designating respondent
Cresencia Aban, her niece, as
her beneficiary.
When the insurance policy
had been in force for more
than 2 years and 7 months,
Sotero died. Respondent
claim for the insurance
proceeds. Petitioner
conducted an investigation
into the claim and denied the
respondent’s claim with the
following reasons, Sotero was
sick since 1990; Respondent
was the one who filed the
insurance application and
designated herself as the
beneficiary, etc. and refunded
the premiums paid on the
policy. Petitioner filed a civil
case for rescission and/or
annulment of the policy.
ISSUE: Whether fraud,
concealment or
misrepresentation was
present when the insurance
was obtained.
HELD: No. It was Sotero who
obtained the insurance for
herself. Fraudulent intent on
the part of the insured must
be established to entitle the
insurer to rescind the contract.
In the absence of proof of
such fraudulent intent, no right
to rescind arises.
The purpose of the law is to
give protection to the insured
or his beneficiary by limiting
the rescinding of the contract
of insurance on the ground of
fraudulent concealment or
misrepresentation to a period
of only two (2) years from the
issuance of the policy or its
last reinstatement. At least
two (2) years from the
issuance of the policy or its
last reinstatement, the
beneficiary is given the
stability to recover under the
policy when the insured dies.
The provision also makes
clear when the two-year
period should commence in
case the policy should lapse
and is reinstated, that is, from
the date of the last
reinstatement.
After two years, the defenses
of concealment or
misrepresentation, no matter
how patent or well-founded,
will no longer lie.
15. Great Pacific Life
Assurance Corp vs. Court
of Appeals & Medarda
Leuterio
FACTS: A contract of group
life insurance was executed
between petitioner and
Development Bank of the
Philippines (DBP). Grepalife
agreed to insure the lives of
eligible housing loan
mortgagors of DBP. Dr.
Wilfredo Leuterio a housing
debtor of DBP applied for
membership in the group life
insurance plan. Grepalife
issued insurance coverage to
the extent of his DBP
mortgage indebtedness. Dr.
Leuterio died due to massive
cerebral hemorrhage. DBP
submitted a death claim to
Grepalife, but the later denied
the same alleging that Dr.
Leuterio was not physically
healthy when he applied for
an insurance coverage and
insisted that Dr. did not
disclose he had been
suffering for hypertension
which caused his death. Such
non-disclosure constituted
concealment that justified the
denial of the claim. The
widow-respondent filed a
complaint against Grepalife
for Specific Performance with
damages.
ISSUE: Whether there was
concealment was aptly
answered by Dr. Leuterio.
HELD: The insured, Dr.
Leuterio, had answered in his
insurance application that he
was in good health and that
he had not consulted a doctor
or any of the enumerated
ailments, including
hypertension. The former died
of cerebral hemorrhage.
There was no sufficient proof
that the insured had suffered
hypertension. Insurance
company had failed to
establish that there was
concealment made by the
insured, hence, it cannot
refuse payment of the claim.
The fraudulent intent on the
part of the insured must be
established to entitle the
insurer to rescind the contract.
Misrepresentation as a before his pension mature,
defense of the insured to
avoid liability is an affirmative
defense and the duty to
establish such defense by
satisfactory and convincing
evidence rests upon the
insurer. In the case at bar, the
petitioner failed to clearly and
satisfactorily establish its
defense, and is therefore
liable to pay the proceeds of
the insurance.
16. Florendo vs. PhilAm Plan,
Inc, Perla Abcede &
Celeste Abcede
(This case is about an
insured’s alleged concealment
in his pension plan application
of his true state of health and
its effect on the life insurance
portion of that in case of
death)
Facts: Manuel Florendo filed an
application for comprehensive
pension plan with respondent
PhilAm Plans. After some
convincing by respondent Perla
Abcede. Manuel signed the
application and left the task to
Perla of supplying the information
needed in the application. Perla’s
daughter signed the application
as sales counselor. Aside from
pension benefits, the
comprehensive pension plan also
provided life insurance coverage
to Florendo covered by PhilAm
Life. Under the master policy,
PhilAm Life was to automatically
provide life insurance coverage to
all who signed PhilAm Plans
comprehensive plan. If the plan
holder died before the maturity of
the plan, his beneficiary was to
instead receive the proceeds of
the life insurance further, the life
insurance was to take care of any
unpaid premium until the pension
plan matured, entitling the
beneficiary to the maturity value
of the pension plan. Manuel died
Lourdes filed a claim with PhilAm
Plans and was to get benefits of
his life insurance. PhilAm Plans
forwarded her claim to PhilAm
Life. PhilAm Plans declined the
claim because PhilAm Life found
that Manuel was on maintenance
medicine for his heart and had an
implanted pacemaker, prompting
Lourded to file the instant case.
ISSUE: Whether Manuel is guilty
of concealing his illness
regarding the ailments he
suffered from.
HELD: Yes. It is cleared that
Manuel concealed his chronic
heart ailment and diabetes from
PhilAm Plans. Though, Perla
knew that Manuel had a
pacemaker implanted before he
signed up for the pension plan,
the responsibility for preparing
the application belonged to
Manuel. Nothing in it implies that
someone else may provide the
information that PhilAm Plans
needed. Pursuant to Sec. 27
Manuel’s concealment entitles
PhilAm Plans to rescind its
contract of insurance with him.
17. Sun Life of Canada vs.
Sandra Tan Kit
FACTS: Respondent Tan Kit is
the widow and designated
beneficiary of Norberto whose
application for a life insurance
was granted by petitioner. Within
the 2-year contestability period,
Norberto died, respondent filed a
claim under the subject policy.
Petitioner denied respondent Tan
Kit’s claim on account of
Norberto’s failure to fully and
faithfully disclose in his insurance
application certain material and
relevant information about his
health and smoking history.
Believing that the policy is null
and void, petitioner opined that its
liability is limited to the refund of
all the premiums paid hence
enclosed the check sent to
respondent but the latter refuse
to accept and insisted on the
payment of the insurance
proceeds. Petitioner file a life insurance with Insular Life. Felipe
complaint for rescission of
insurance contract.
ISSUE: Whether petitioner is
liable to pay interest on the
premium to be refunded to
respondent.
HELD: No. In this case, what is involved
is an order for petitioner to refund to
respondents the insurance premium
paid by Norberto as a consequence of
the rescission of the insurance contract
on account of the latter’s concealment of
material information in his insurance
application. Moreover, petitioner did not
unreasonably deny or withhold the
insurance proceeds as it was
satisfactorily established that Norberto
was guilty of concealment. Petitioner
properly complied with its obligation
when he tendered the check in favor of
respondent, hence, it should not be
made liable to pay compensatory
interest.
18. PhilamCare Health Systems, Inc
vs. CA and Julita Trinos
re: Concealment
ISSUE: Whether there was a
misrepresentation by Ernani in his
application
HELD: Where a matter of opinion is
called for, answers made in good faith
and without intent to deceive will not
avoid a policy even though they are
untrue. Thus, a misrepresentation of
expectation, intention, opinion of
judgment of the insured, although false,
will not avoid the policy if there is no
actual fraud in inducing the acceptance
of the risk or its acceptance at a lower
premium.
19. Insular Life Assurance Company
vs. Paz Khu
FACTS: Felipe N. Khu Sr. applied for a
accomplished the required medical
questionnaire wherein he did not
declare any illness or adverse medical
condition. Insular issued him Policy with
a face value of 1M. Felipe’s policy
lapsed due to non-payment of the
premium. Felipe applied for the
reinstatement of his policy. Felipe died.
Respondents or Felipe’s beneficiary
filed with Insular Life a claim for benefit
under the reinstated policy. However,
the claim was denied. Insular decided to
rescind the reinstated policy on the
grounds of concealment and
misrepresentation. Respondents
instituted a complaint for specific
performance with damages. Insular
countered that Felipe did not disclose
the ailments.
ISSUE: Whether Felipe’s reinstated life
insurance policy is already incontestable
at the time of his death.
HELD: No. Sec. 48. Whenever a
right to rescind a contract of
insurance is given to the insurer
by any provision of this chapter,
such right must be exercised
previous to the commencement
of an action on the contract.
After a policy of life insurance
made payable on the death of the
insured shall have been in force
during the lifetime of the insured
for a period of two years from the
date of its issue or of its last
reinstatement, the insurer cannot
prove that the policy is void ab
initio or is rescindible by reason
of the fraudulent concealment or
misrepresentation of the insured
or his agent.
‘The insurer is deemed to have
the necessary facilities to
discover such fraudulent
concealment or
misrepresentation within a period
of two (2) years. It is not fair for
the insurer to collect the
premiums as long as the insured
is still alive, only to raise the
issue of fraudulent concealment
or misrepresentation when the
insured dies in order to defeat the
right of the beneficiary to recover
under the policy.
At least two (2) years from the
issuance of the policy or its last
reinstatement, the beneficiary is
given the stability to recover
under the policy when the insured
dies. The provision also makes
clear when the two-year period
should commence in case the
policy should lapse and is
reinstated, that is, from the date
of the last reinstatement’.
20. Heirs of Loreto Maramag
vs. Eva Maramag
FACTS: Petitioner were the legit
wife and children of Loreto, while
respondent were illegitimate
family. Eva was a concubine of
Loreto. Loreto obtained an
insurance policy designating his
concubine and his 3 illegitimate
children as beneficiary. The legit
family challenged the designation
contending that (Eva) her share
should be forfeited in their favor
as she is disqualified and that the
share of the illegit children should
be limited to that provided by law
on the rules of legitime.
ISSUE: Whether the petitioner is
entitled to the proceeds.
HELD: Although petitioners are
the legitimate heirs of Loreto,
they were not named as
beneficiaries. Sec. 53 provides
that the Insurance proceeds shall
be applied exclusively to the
proper interest of the person in
whose name or for whose benefit
is made. The designation of the
illegitimate children remained
valid. Because no legal
prescription exists in naming as
beneficiaries the illegit children of
the insured, the shares of Eva
should be awarded to the illegit
children to the exclusion of the
petitioners. It is only in cases
where the insured has not
designated any beneficiary or
when the beneficiary is
disqualified by law to receive the
proceeds, that the proceeds shall
redound to the benefit of the
estate of the insured.
21. New Life Enterprises &
Julian Sy vs. CA
Facts: Julian Sy and Jose Sy
Bang formed partnership under
the business name of New Life
Enterprises engaged in the sale
of construction materials. Sy
insured the stocks in trade of
Western Guaranty Corp – fire
policy in the amount of Php300K;
Reliance Surety and Insurance
Co., Inc. – fire policy in the
amount 300k additional 700k;
Equitable Insurance Corporation
– fire policy in the amount of
200k.
When the building is gutted by
fire, the stocks were insured
against fire in the total amount of
1,550,000.00. Sy went to the
Reliance Insurance and file his
claim, he further testified that 3
insurance companies are sister
companies. Ultimately, the 3
denied plaintiff’s claim for
payment by reason of breach of
policy, “which requires the
insured to give notice of any
insurance/s already effected
covering the stocks in trade”.
Hence this petition.
ISSUE: Whether insurance
contracts were violated by
misrepresentation resulting in the
forfeiture of all the benefits.
HELD: Yes. The terms of the
contract are clear and
unambiguous. The insured is
specifically required to disclose to
the insure any other insurance
and its particulars which he may
have effected on the same
subject matter. The parties must
abide by the terms of the contract
because such terms constitute
the measure of the insurer’s
liability and compliance therewith
is a condition precedent to the
insured’s right of recovery from
the insurer.
22. Filipinas Life Assurance
Company now Ayala Life
Assurance Inc vs. Pedroso
FACTS: Respondent is a benefited from the investments
policyholder of a 20-year
endowment life insurance by
petitioner. Pedroso claims
Renato Valle was her insurance
agent and collected her monthly
premiums. Valle told her that
petitioner holding a promotional
investment program for
policyholders. Enticed, she
invested. Relying on the
representation made by
petitioners duly authorized
representatives known agent
Valle, respondent waited for the
maturity of her initial investment.
A month after, her investment
was returned. After a second
investment, she tried to withdraw
her investment but Valle did not
return some of it. Hence,
respondent filed an action for the
recovery of a sum of money. RTC
of Manila held Filipinas and its
co-defendants Valle jointly and
solidarily liable to the
respondents.
ISSUE: Whether petitioner & its
co-defendants jointly and
severally liable?
HELD: Yes. It appears that
respondents had invested
respectively and were received
by Valle and remitted to Filipinas
Life using Filipinas Life’s Official
Receips. Filipinas Life, as the
principal, is liable for obligations
contracted by its agent Valle. The
general rule is that the principal is
responsible for the acts of its
agent done within the scope of its
authority, and should bear the
damage caused to third persons.
When the agents exceed his
authority, the agent becomes
personally liable for the damage.
Filipinas Life cannot profess
ignorance of Valles acts. Even if
Valles representations were
beyond his authority as a
debit/insurance agent, Filipinas
Life thru Alcantara & Apetrior
expressly and knowingly ratified
Valles acts. It cannot even be
denied that Filipinas Life
deposited by Valle in the account
of Filipinas Life. In our considered
view, Filipinas Life had clothed
Valle with apparent authority;
hence, it is now estopped to deny
said authority.
23. Santos Areola vs. CA &
Prudential Guarantee &
Assurance, Inc.
FACTS: Petitioner bought a
personal accident insurance
policy with the Prudential.
Petitioner was supposed to pay
Php1,609.65. In the lower-hand
corner of the term and condition
is legibly printed. “SOA must not
be considered a OR. OR will be
issued upon payment of this
account.
If payment was made to a
representative, demand for
provisional receipt and if OR is
not received within 7 days please
notify us.” If payment is made to
our office, demand for an OR.
Respondent insurance company
issued collector’s provisional
receipt to petitioner for the
amount of Php1,609.65.
Respondent sent petitioner
endorsement which “cancelled
flat” for non-payment of premium.
Shocked by the cancellation of
the policy, petitioner confronted
Carlito Ang, agent of respondent
and demanded the issuance of
an OR.
Respondent offered to reinstate
same policy it had previously
cancelled and even proposed to
extend its lifetime, upon finding
that the cancellation was
erroneous and that the premiums
were paid in full by petitioner but
were not remitted by Malapit,
respondent insurance company’s
branch manager.
Hence, petitioner filed an action
for damages due to breach of
contract.
ISSUE: Whether the subsequent
act of reinstating the wrongfully
cancelled insurance policy by
respondent absolving the latter
from its liability for damages.
HELD: Consequently, respondent
insurance company is liable by
way of damages for the
fraudulent acts committed by
Malapit that gave occasion to the
erroneous cancellation of subject
insurance policy. Its earlier act of
reinstating the insurance policy
cannot obliterate the injury
inflicted on petitioner-insured.
Respondent company should be
reminded that a contract of
insurance creates reciprocal
obligations for both insurer and
insured. Reciprocal obligations
are those which arise from the
same cause and in which each
party is both a debtor and a
creditor of the other, such that the
obligation of one is dependent
upon the obligation of the other.
24. AFP General Insurance
Corporation Vs. Noel
Molina
FACTS: Private respondent are
the complainants in a case for
illegal dismissal filed against
Radon Security & Allied Services
Agency and/or Raquel Aquias
and Ever Emporium, Inc. The
Labor Arbiter ruled that private
respondent were illegally
dismissed and ordered Radon
Security to pay them separation
pay, backwages, and other
monetary claims. Radon
appealed and posted
supersedeas bond issued by
herein petitioner, AFPGIC as
surety.
AFPGIC entered the fray filing
before the LA an Omnibus Motion
to Quash Notice/Writ of
Garnishment and to discharge
AFPGIC appeal bond on the
ground that said bond has been
cancelled and thus non-existent
in view of the failure of Radon to
pay yearly premiums, but it was
subsequently denied. Hence this
petition.
ISSUE: Whether the subject
appeal bong was already
cancelled for non-payment of
premium and thus it could not be
subject of execution or
garnishment.
HELD: The instant case pertains
to a surety bond; thus, the
applicable provision of the
Insurance Code is Section
177, which specifically governs
suretyship. It provides that a
surety bond, once accepted by
the obligee becomes valid and
enforceable, irrespective of
whether or not the premium has
been paid by the obligor. The
private respondents, the obligees
here, accepted the bond posted
by Radon Security and issued by
the petitioner. Hence, the bond is
both valid and enforceable.
The Labor Arbiter directed the
NLRC Sheriff to garnish the
surety bond issued by the
petitioner. The latter, as surety, is
mandated to comply with the writ
of garnishment, for as earlier
pointed out, the bond remains
enforceable and under the
jurisdiction of the NLRC until it is
discharged. In turn, the petitioner
may proceed to collect the
amount it paid on the bond, plus
the premiums due and
demandable, plus any interest
owing from Radon Security. This
is pursuant to the principle of
subrogation enunciated in Article
2067 of the Civil Code which we
apply to the suretyship
agreement between AFPGIC and
Radon Security, in accordance
with Section 178 of the Insurance
Code.
25. United Merchants
Corporation (UMC) vs.
Country Banker’s
Insurance Corporation
(CBIC)
FACTS: Petitioner is engaged in
the business of buying, selling
and manufacturing Christmas
lights. UMC leased a warehouse
in QC where UMC assembled
and stored its products. UMC
insured its stocks in trade against
fire with CBIC for Php15M valid
until Sept 6, 1996. A fire gutted
the warehouse rented by UMC,
and demanded for at least 50%
payment of its claim but UMC
rejected the claim due to breach
of Condition in Insurance Policy.
If the claim be in any respect
fraudulent, or if any false declaration
be made or used in support thereof,
or if any fraudulent means or
devices are used by the Insured or
anyone acting in his behalf to obtain
any benefit under this Policy; or if
the loss or damage be occasioned
by the willful act, or with the
connivance of the Insured, all the
benefits under this Policy shall be
forfeited
Hence, UMC filed a complaint
against CBIC.
ISSUE: Whether arson and fraud
in the instant case is present and
whether UMC is entitled to claim
from CBIC the full coverage of its
fire insurance policy.
HELD: In the present case, CBIC
evidence did not prove that the
fire was intentionally caused by
the insured.
An insurer who seeks to defeat a claim
because of an exception or limitation in
the policy has the burden of establishing
that the loss comes within the purview of
the exception or limitation. If loss is
proved apparently within a contract
of insurance, the burden is upon the
insurer to establish that the loss arose
from a cause of loss which is excepted
or for which it is not liable, or from a
cause which limits its liability.[24] In the
present case, CBIC failed to discharge
its primordial burden of establishing that
the damage or loss was caused by
arson, a limitation in the policy.
However, the Insurance Code provides
that a policy may declare that a violation
of specified provisions thereof shall
avoid it. Thus, in fire insurance policies,
which contain provisions such as
Condition No. 15 of the Insurance
Policy, a fraudulent discrepancy
between the actual loss and that
claimed in the proof of loss voids the
insurance policy. Mere filing of such a
claim will exonerate the insurer.
Considering that all the circumstances
point to the inevitable conclusion that
UMC padded its claim and was guilty of
fraud, UMC violated Condition No. 15 of
the Insurance Policy. Thus, UMC
forfeited whatever benefits it may be
entitled under the Insurance Policy,
including its insurance claim.
26. Gaisano vs. Dev’t
Insurance and Surety
Corporation.
FACTS: Petitioner was the
registered owner of a Montero,
while respondent is a domestic
corporation engaged in the
insurance business. Respondent
issued a comprehensive
commercial vehicle policy to
petitioner in the amount of 1.5M
over the vehicle. Respondent
also issued 2 other commercial
vehicle policies covering another
2 motor vehicles of petitioner.
To collect premium, respondent
agents, Trans-Pacific, issued a
SOA to petitioner’s company,
Noah’s Ark Merchandising
(Noah’s Ark) the latter
immediately processed the
payments and issued a Far East
Bank Check representing
payment for the 3 insurance
policies. However, nobody from
Trans-Pacific picked up the check
and informed Noah’s Ark that its
messenger would get the check.
While under the official custody of
Noah’s Ark Manager, Pacquing
as a service company vehicle,
the vehicle was stolen and its
whereabouts cannot be
recovered.
Oblivious of the incident, Trans-
Pacific picked up the check and
issued an OR acknowledging the
receipt for premium.
Pacquing informed petitioner of
the vehicle’s loss. Petitioner
reported the loss and filed a claim
with respondent for the insurance
proceeds of P1.5M.
Respondent denied petitioner’s
claim on the ground that there
was no insurance contract.
Petitioner filed a complaint for
collection of sum of money and
damages against respondent.
ISSUE: Whether there is a
binding insurance contract
between petitioner and
respondent.
HELD: 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.
Just like any other contract, it requires a
cause or consideration. The
consideration is the premium, which
must be paid at the time and in the way
and manner specified in the policy. If not
so paid, the policy will lapse and be
forfeited by its own terms.
The general rule is that unless the
premium is paid the insurance policy id
not valid and binding. Sec 77 of
Insurance Code
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. Exception to the rule is that,
1) in case of life or industrial life policy
whenever the grace period provision applies.
2) Sec. 78. SEC. 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.
3) A third exception was laid down in Makati
Tuscany Condominium Corporation vs. Court of
Appeals, 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.
4) 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.
5) Estoppel. bars it from taking refuge under
said Section, since Respondent relied in good
faith on such practice when it has consistently
granted a 60 to 90-day credit term for the
payment of premiums.
Thus, petitioner is not entitled to the insurance
proceeds because no insurance policy became
effective for lack of premium payment.
27. Jose Marques and Maxilite
Technologies, Inc., vs. Far East
Bank & Trust Company (FEBTC)
FACTS: Maxilite Technologies is a
domestic corporation engaged in the
importation and trading of equipment for
energy-efficiency systems. Marques is
the President and controlling
stockholder of Maxilite.
FEBTC is a local bank which handled
the financing and related requirements
of Marques and Maxilite. FEBTC
financed Maxilite’s capital and
operational requirements through loans
secured with properties of Marques.
FEB Insurance Broker’s Inc. (FEBIBI) is
a local insurance brokerage corporation
while Makati Insurance Company is a
local insurance company both are
subsidiaries of FEBTC.
Marques entered into a trust receipt
transaction with FEBTC and further
agrees to keep said merchandise
insured against fire to its full value,
payable to the said bank.
FEBIBI facilitated the procurement and
processing from Makati Insurance
Company of 4 separate & independent
fire insurance policies. Maxilite paid the
premiums for 4 policies through debit
arrangement. FEBTC would debit
Maxilites account for the premium
payments, as reflected in SOA sent by
FEBTC to Maxilite.
On 9 March 1995, a fire gutted the
Aboitiz Sea Transport Building along
M.J. Cuenco Avenue, Cebu City, where
Maxilite's office and warehouse were
located. As a result, Maxilite suffered
losses amounting to at least P 2.1
million, which Maxilite claimed against
the fire insurance policy with Makati
Insurance Company. Makati Insurance
Company denied the fire loss claim on
the ground of non-payment of premium.
FEBTC and FEBIBI disclaimed any
responsibility for the denial of the claim.
ISSUE: Whether there was a non-
payment of premiums
HELD: Both trial and appellate courts
basically agree that FEBTC is estopped
from claiming that the insurance
premium has been unpaid. That FEBTC
induced Maxilite and Marques to believe
that the insurance premium has in fact
been debited from Maxilite's account is
grounded on the the following facts: (1)
FEBTC represented and committed to
handle Maxilite's financing and capital
requirements, including the related
transactions such as the insurance of
the trust receipted merchandise; (2)
prior to the subject Insurance Policy No.
1024439, the premiums for the three
separate fire insurance policies had
been paid through automatic debit
arrangement; (3) FEBIBI sent FEBTC,
not Maxilite nor Marques, written
reminders dated 19 October 1994, 24
January 1995, and 6 March 1995 to
debit Maxilite's account, establishing
FEBTC's obligation to automatically
debit Maxilite's account for the premium
amount; (4) there was no written
demand from FEBTC or Makati
Insurance Company for Maxilite or
Marques to pay the insurance premium;
(5) the subject insurance policy was
released to Maxilite on 19 August 1994;
and (6) the subject insurance policy
remained uncancelled despite the
alleged non-payment of the premium,
making it appear that the insurance
policy remained in force and binding.
As a consequence of its negligence,
FEBTC must be held liable for
damages.
28. Gulf Resorts, Inc. vs. Philippine
Charter Insurance Corporation
Facts: Plaintiff is the owner of the Plaza
Resort and had its properties in said
resort insured originally with American
Home Assurance Company (AHAC-AIU)
and the risk of loss is from earthquake
shock. The plaintiff agreed to insure with
defendant the properties covered by
AHAC (AIU) provided that the policy
wording and rates in said policy be
copied in the policy to be issued by
defendant.
An earthquake struck Central &
Northern Luzon and plaintiffs properties
covered by policy issued by defendant
were damaged.
After earthquake, respondent advised
petitioner to file a formal claim. After
investigation, finding extensive damage
caused by the earthquake to the
clubhouse and to the 2 swimming pool,
but all affected items have no coverage
for earthquake shocks. Respondent,
denied petitioners claim on the ground
that its insurance policy only afforded
earthquake shock coverage to the 2
swimming pools of the resort. Both
parties failed to arrive at a settlement
thus, petitioner filed a complaint.
ISSUE: Whether petitioner can only
recover for the damage to its 2
swimming pool rather than all the
properties covered under its policy.
HELD: Four key items are important in
the resolution of the case at bar.
1) In the designation of location of
risk, only 2 swimming pools were
specified.
2) Under the breakdown for
premium payments, it was stated
PREMIUM RECAPITULATION
3) The insurance does not cover
any loss or damage occasioned
by or through or in consequence,
directly or indirectly of
earthquake, volcanic eruption or
other convulsion of nature.
4) The rider attached to the policy,
which shall apply to any
reference to loss or damage by
fire through or in consequence of
Earthquake.
An insurance premium is the
consideration paid an insurer for
undertaking to indemnify the insured
against a specified peril. In the
subject policy, no premium payments
were made with regard to
earthquake shock coverage except
on the 2 swimming pools. There is
no mention of any premium payable
for the other resort properties with
regard to earthquake shock.
29. UCPB General Insurance Co,
Inc Vs. Masagana Telemart, Inc
Facts: Masagana Telemart obtained
from herein Petitioner 5 insurance
policies on its properties in Pasay City &
Manila. All 5 policies effectivity term until
May 22, 1992. On June 13, 1992,
plaintiff’s properties in Pasay City were
razed by fire. On July 14, 1992, Plaintiff
tendered and defendant accepted 5
Manager’s Checks as renewal premium
payment. July 14, 1992 Masagana
made its formal demand for
indemnification for the burned insured
properties. On the same day defendant
returned the 5 checks and rejecting
Masagana’s claim on the ground that:
1. Said policies expired last May 22,
1992 and were not renewed for
another term.
2. Defendant had put plaintiff and its
alleged broker on notice of non-
renewal earlier; and
3. The properties covered by the said
policies were burned in a fire that
took place last June 13, or before
tender of premium payment.
Refer: exception to sec. 77
Finally in the instant case, 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.
30. Gaisano vs. Development
Insurance & Surety Corporation.

Hence Masagana filed the instant case.

Both the Court of Appeals and the trial
court found that sufficient proof exists
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. Such a practice had existed
up to the time the claims were filed.
ISSUE: Whether Sec. 77 of the
insurance code must be strictly applied
to Petitioners advantage despite is
practice of granting a 60-90-day credit
term for the payment of premiums.

HELD: 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.

SEC. 72. An insurer is entitled to

payment of premium as soon as the
thing insured is exposed to the peril
insured against, unless there is clear
agreement to grant the insured credit
extension of the premium due. No policy
issued by an insurance company is valid
and binding unless and until the
premium thereof has been paid.