interest in property insured is based on sound public policy: to prevent a
person from taking out an insurance policy on property upon which he has no
Cha v. Cha - Insurable Interest
277 SCRA 690 (1997)
Facts:
> Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract
with CKS Development Corporation (CKS), as lessor.
> One of the stipulations of the one (1) year lease contract states: "18. . . .
The LESSEE shall not insure against fire the chattels, merchandise, textiles,
goods and effects placed at any stall or store or space in the leased premises
without first obtaining the written consent and approval of the LESSOR. If the
LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then
the policy is deemed assigned and transferred to the LESSOR for its own
benefit; . . ."
> Notwithstanding the above stipulation, the Cha spouses insured against loss
by fire their merchandise inside the leased premises for Five Hundred
Thousand (P500,000.00) with the United Insurance without the written
consent CKS.
> On the day that the lease contract was to expire, fire broke out inside the
leased premises. When CKS learned of the insurance earlier procured by the
Cha spouses (without its consent), it wrote the United a demand letter asking
that the proceeds of the insurance contract (between the Cha spouses and
United) be paid directly to CKS, based on its lease contract with the Cha
spouses.
> United refused to pay CKS, alleging that the latter had no insurable interest.
Hence, the latter filed a complaint against the Cha spouses and United.
Issue:
Whether or not CKS can claim the proceeds of the fire insurance.
Held:
NO. CKS has no insurable interest.
Sec. 18 of the Insurance Code provides:
"Sec. 18. 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. The basis of such requirement of insurable
insurable interest and collecting the proceeds of said policy in case of loss of the
property.
In the present case, it cannot be denied that CKS has no insurable interest in the
goods and merchandise inside the leased premises under the provisions of
Section 17 of the Insurance Code which provide:
"Section 17. The measure of an insurable interest in property is the extent
to which the insured might be damnified by loss of injury thereof."
Therefore, CKS cannot, under the Insurance Code — a special law — be validly
a beneficiary of the fire insurance policy taken by the petitioner-spouses over
their merchandise. This insurable interest over said merchandise remains with
the insured, the Cha spouses. The automatic assignment of the policy to CKS
under the provision of the lease contract previously quoted is void for being
contrary to law and/or public policy. The proceeds of the fire insurance policy
thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha (herein co-
petitioners). The insurer (United) cannot be compelled to pay the proceeds of
the fire insurance policy to a person (CKS) who has no insurable interest in the
property insured.
Geagonia v CA G.R. No. 114427
Geagonia v CA G.R. No. 114427 February 6, 1995
Facts:
Geagonia, owner of a store, obtained from Country Bankers fire insurance
policy for P100,000.00. The 1 year policy and covered thestock trading of dry
goods. The policy noted the requirement that "3. The insured shall give notice
to the Company of any insurance or insurances already effected, or which may
subsequently be effected, covering any of the property or properties consisting
of stocks in trade, goods in process and/or inventories only hereby insured,
and unless notice be given and the particulars of such insurance or insurances
be stated therein or endorsed in this policy pursuant to Section 50 of the
Insurance Code, by or on behalf of the Company before the occurrence of any
loss or damage, all benefits under this policy shall be deemed forfeited,
provided however, that this condition shall not apply when the total insurance
or insurances in force at the time of the loss or damage is not more than
P200,000.00." The petitioners’ stocks were destroyed by fire. He then filed a
claim which was subsequently denied because the petitioner’s stocks were
covered by two other fire insurance policies for Php 200,000 issued by PFIC.
The basis of the private respondent's denial was the petitioner's alleged
violation of Condition 3 of the policy. Geagonia then filed a complaint against
the private respondent in the Insurance Commission for the recovery of
P100,000.00 under fire insurance policy and damages. He claimed that he
knew the existence of the other two policies. But, he said that he had no
knowledge of the provision in the private respondent's policy requiring him to
inform it of the prior policies and this requirement was not mentioned to him
by the private respondent's agent. The Insurance Commission found that the
petitioner did not violate Condition 3 as he had no knowledge of the existence
of the two fire insurance policies obtained from the PFIC; that it was Cebu
Tesing Textiles w/c procured the PFIC policies w/o informing him or securing
his consent; and that Cebu Tesing Textile, as his creditor, had insurable
interest on the stocks. The Insurance Commission then ordered the
respondent company to pay complainant the sum of P100,000.00 with interest
and attorney’s fees. CA reversed the decision of the Insurance Commission
because it found that the petitioner knew of the existence of the two other
policies issued by the PFIC.
"other insurance" clause in fire policies is to prevent over-insurance and thus
avert the perpetration of fraud. When a property owner obtains insurance
policies from two or more insurers in a total amount that exceeds the property's
value, the insured may have an inducement to destroy the property for the
purpose of collecting the insurance. The public as well as the insurer is
interested in preventing a situation in which a fire would be profitable to the
insured
Insurance Case Digest: Rizal Commercial Banking Corporation V. CA (1998)
G.R.Nos. 128833 April 20, 1998

Issues: Lessons Applicable: Assignee (Insurance)

1. WON the petitioner had not disclosed the two insurance policies when he
obtained the fire insurance and thereby violated Condition 3 of the policy.
2. WON he is prohibited from recovering FACTS:

Held: Yes. No. Petition Granted

 RCBC Binondo Branch initially granted a credit facility of P30M
Ratio: to Goyu & Sons, Inc. GOYU’s applied again and through
1. The court agreed with the CA that the petitioner knew of the prior policies Binondo Branch key officer's Uy’s and Lao’s recommendation,
issued by the PFIC. His letter of 18 January 1991 to the private respondent
RCBC’s executive committee increased its credit facility to
conclusively proves this knowledge. His testimony to the contrary before the
Insurance Commissioner and which the latter relied upon cannot prevail over P50M to P90M and finally to P117M.
a written admission made ante litem motam. It was, indeed, incredible that he
did not know about the prior policies since these policies were not new or  As security, GOYU executed 2 real estate mortgages and 2
original. chattel mortgages in favor of RCBC.
2. Stated differently, provisions, conditions or exceptions in policies which tend  GOYU obtained in its name 10 insurance policy on the
to work a forfeiture of insurance policies should be construed most strictly
mortgaged properties from Malayan Insurance Company, Inc.
against those for whose benefits they are inserted, and most favorably toward
those against whom they are intended to operate. With these principles in (MICO). In February 1992, he was issued 8 insurance policies
mind, Condition 3 of the subject policy is not totally free from ambiguity and
must be meticulously analyzed. Such analysis leads us to conclude that (a) in favor of RCBC.
the prohibition applies only to double insurance, and (b) the nullity of the policy  April 27, 1992: One of GOYU’s factory buildings was burned so
shall only be to the extent exceeding P200,000.00 of the total policies
obtained. Furthermore, by stating within Condition 3 itself that such condition he claimed against MICO for the loss who denied contending
shall not apply if the total insurance in force at the time of loss does not exceed
that the insurance policies were either attached pursuant to
P200,000.00, the private respondent was amenable to assume a co-insurer's
liability up to a loss not exceeding P200,000.00. What it had in mind was to
discourage over-insurance. Indeed, the rationale behind the incorporation of
 writs of attachments/garnishments or that creditors are ISSUE: W/N RCBC as mortgagee, has any right over the insurance
claiming to have a better right policies taken by GOYU, the mortgagor, in case of the occurrence
 GOYU filed a complaint for specific performance and damages of loss
at the RTC
 RCBC, one of GOYU’s creditors, also filed with MICO its formal
claim over the proceeds of the insurance policies, but said
claims were also denied for the same reasons that MICO HELD: YES.
denied GOYU’s claims
 mortgagor and a mortgagee have separate and distinct
 RTC: Confirmed GOYU’s other creditors (Urban Bank, Alfredo
insurable interests in the same mortgaged property, such that
Sebastian, and Philippine Trust Company) obtained their writs
each one of them may insure the same property for his own
of attachment covering an aggregate amount
sole benefit
of P14,938,080.23 and ordered that 10 insurance policies be
 although it appears that GOYU obtained the subject insurance
deposited with the court minus the said amount so MICO
policies naming itself as the sole payee, the intentions of the
deposited P50,505,594.60.
parties as shown by their contemporaneous acts, must be
 Another Garnishment of P8,696,838.75 was handed down
given due consideration in order to better serve the interest of
 RTC: favored GOYU against MICO for the claim, RCBC for
justice and equity
damages and to pay RCBC its loan
 8 endorsement documents were prepared by Alchester in favor
 CA: Modified by increasing the damages in favor of GOYU
of RCBC
 In G.R. No. 128834, RCBC seeks right to intervene in the
 MICO, a sister company of RCBC
action between Alfredo C. Sebastian (the creditor) and GOYU
 GOYU continued to enjoy the benefits of the credit facilities
(the debtor), where the subject insurance policies were
extended to it by RCBC.
attached in favor of Sebastian
 GOYU is at the very least estopped from assailing their
 RTC and CA: endorsements do not bear the signature of any
operative effects.
officer of GOYU concluded that the endorsements favoring
 The two courts below erred in failing to see that the
RCBC as defective.
promissory notes which they ruled should be excluded for
bearing dates which are after that of the fire, are mere
renewals of previous ones
 RCBC has the right to claim the insurance proceeds, in substitution of the
property lost in the fire. Having assigned its rights, GOYU lost its
standing as the beneficiary of the said insurance policies
 insurance company to be held liable for unreasonably delaying and
withholding payment of insurance proceeds, the delay must be wanton,
oppressive, or malevolent - not shown
 Sebastian’s right as attaching creditor must yield to the preferential rights
of RCBC over the Malayan insurance policies as first mortgagee.
Insurance Case Digest: Gaisano Cagayan, Inc. V. Insurance Company Of
North America (2006)
G.R. No. 147839 June 8, 2006
Lessons Applicable: Existing Interest (Insurance)
Laws Applicable: Article 1504,Article 1263, Article 2207 of the Civil
Code, Section 13 of Insurance Code
FACTS:
 Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue
Jeans. while Levi Strauss (Phils.) Inc. (LSPI) is the local
distributor of products bearing trademarks owned by Levi
Strauss & Co
 IMC and LSPI separately obtained from Insurance Company of North
America fire insurance policies for their book debt endorsements related
to their ready-made clothing materials which have been sold
or delivered to various customers and dealers of the Insured
anywhere in the Philippines which are unpaid 45 days after the
time of the loss
 February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro City,
owned by Gaisano Cagayan, Inc., containing the ready-made clothing
materials sold and delivered by IMC and LSPI was consumed by fire.
 February 4, 1992: Insurance Company of North America filed a
complaint for damages against Gaisano Cagayan, Inc. alleges
that IMC and LSPI filed their claims under their respective fire
insurance policies which it paid thus it was subrogated to their
rights
 Gaisano Cagayan, Inc: not be held liable because it
was destroyed due to fortuities event or force majeure
 RTC: IMC and LSPI retained ownership of the delivered goods
until fully paid, it must bear the loss (res perit domino)
 CA: Reversed - sales invoices is an exception under Article
1504 (1) of the Civil Code to res perit domino
ISSUE: W/N Insurance Company of North America can claim
against Gaisano Cagayan for the debt that was isnured
HELD: YES. petition is partly GRANTED. order to pay P535,613 is
DELETED
 insurance policy is clear that the subject of the insurance is the book debts
and NOT goods sold and delivered to the customers and dealers of the
insured
 ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk
until the ownership therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the goods are at the buyer's
risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee
for the buyer, in pursuance of the contract and the ownership in the goods
has been retained by the seller merely to secure performance by the buyer
of his obligations under the contract, the goods are at the buyer's risk from
the time of such delivery;
 IMC and LSPI did not lose complete interest over the goods. They have an
insurable interest until full payment of the value of the delivered goods.
Unlike the civil law concept of res perit domino, where ownership is the
basis for consideration of who bears the risk of loss, in property insurance,
one's interest is not determined by concept of title, but whether insured
has substantial economic interest in the property
 Section 13 of our Insurance Code defines insurable interest as "every
interest in property, whether real or personal, or any relation thereto, or
liability in respect thereof, of such nature that a contemplated peril might
directly damnify the insured." Parenthetically, under Section 14 of the
same Code, an insurable interest in property may consist in: (a) an existing
interest; (b) an inchoate interest founded on existing interest; or (c) an
expectancy, coupled with an existing interest in that out of which the
expectancy arises.
 Anyone has an insurable interest in property who derives a benefit from
its existence or would suffer loss from its destruction.
 it is sufficient that the insured is so situated with reference to the property
that he would be liable to loss should it be injured or destroyed by the
peril against which it is insured
 an insurable interest in property does not necessarily imply a property
interest in, or a lien upon, or possession of, the subject
 matter of the insurance, and neither the title nor a beneficial
interest is requisite to the existence of such an interest
 insurance in this case is not for loss of goods by fire but for petitioner's
accounts with IMC and LSPI that remained unpaid 45 days after the fire
- obligation is pecuniary in nature
 obligor should be held exempt from liability when the loss occurs thru a
fortuitous event only holds true when the obligation consists in the
delivery of a determinate thing and there is no stipulation holding him
liable even in case of fortuitous event
 Article 1263 of the Civil Code in an obligation to deliver a
generic thing, the loss or destruction of anything of the same
kind does not extinguish the obligation (Genus nunquan perit)
 The subrogation receipt, by itself, is sufficient to establish not only the
relationship of respondent as insurer and IMC as the insured, but also the
amount paid to settle the insurance claim
 Art. 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.
 As to LSPI, no subrogation receipt was offered in evidence.
 Failure to substantiate the claim of subrogation is fatal to
petitioner's case for recovery of the amount of P535,613
 8. Are you now, to the best of your knowledge, in good
Insurance Case Digest: Great Pacific Life Assurance Corp. V. CA (1999)
health?

G.R.No. 113899 October 13, 1999

Answer: [ x ] Yes [ ] No.”[4]
Lessons Applicable:

 Credit in Life and Health Insurance (Insurance)
 Mortgagor (Insurance)
Laws Applicable: Sec. 8 of Insurance Code
FACTS:
 A contract of group life insurance was executed between Great
Pacific Life Assurance Corporation Grepalife) and Development
Bank of the Philippines (DBP)
 Grepalife agreed to insure the lives of eligible housing loan
mortgagors of DBP
 November 11, 1983: Dr. Wilfredo Leuterio, a physician and a
housing debtor of DBP applied for membership in the group life
insurance plan
 Dr. Leuterio answered questions concerning his health
condition as follows:
 November 15, 1983: Grepalife issued Certificate No. B-18558,
as insurance coverage of Dr. Leuterio, to the extent of his DBP
mortgage indebtedness amounting to P86,200
 August 6, 1984: Dr. Leuterio died due to “massive cerebral
hemorrhage.”
 DBP submitted a death claim to Grepalife
 Grepalife denied the claim alleging that Dr. Leuterio was not
physically healthy when he applied
 RTC: Favored Medarda V. Leuterio (widow) and held Grepalife
(insurer) liable to pay DBP (creditor of the insured Dr. Wilfredo
Leuterio)
 CA sustained
ISSUE:
1. W/N DBP has insurable interest as creditor - YES
2. W/N Grepalife should be held liable - YES

“7. Have you ever had, or consulted, a physician for a heart HELD:
condition, high blood pressure, cancer, diabetes, lung, kidney
or stomach disorder or any other physical impairment?
1. YES
Answer: No. If so give details ___________.
 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
 Section 8 of the Insurance Code provides:
“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 Dr. Wilfredo Leuterio did not cede to the mortgagee all his
rights or interests in the insurance. When Grepalife denied payment,
DBP collected the debt from the mortgagor and took the
necessary action of foreclosure on the residential lot of Dr.
Wilfredo Leuterio
 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
2. YES
 medical findings were not conclusive because Dr. Mejia did not
conduct an autopsy
 widow who was not even sure if the medicines taken by Dr.
Leuterio were for hypertension
 Grepalife failed to establish that there was concealment made
by the insured, hence, it cannot refuse payment of the claim
 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
 The policy states that upon receipt of due proof of the Debtor’s
death during the terms of this insurance, a death benefit in the
amount of P86,200.00 shall be paid. In the event of the
debtor’s death before his indebtedness with the creditor shall
have been fully paid, an amount to pay the outstanding
indebtedness shall first be paid to the Creditor and the balance
of the Sum Assured, if there is any shall then be paid to the
beneficiary/ies designated by the debtor.
 DBP foreclosed in 1995 their residential lot, in satisfaction of
mortgagor’s outstanding loan
 insurance proceeds shall inure to the benefit of the heirs of the
deceased person or his beneficiaries
 Equity dictates that DBP should not unjustly enrich itself at the
expense of another (Nemo cum alterius detrimenio
protest). Hence, it cannot collect the insurance proceeds,
after it already foreclosed on the mortgage
SUNLIFE ASSURANCE COMPANY OF CANADA vs. COURT OF
APPEALS
 SUNLIFE ASSURANCE COMPANY OF CANADA vs. COURT OF
APPEALS G.R. No. 105135, 22 June 1995
FACTS:
Robert John Bacani procured a life insurance contract for himself from
petitioner-company, designating his mother Bernarda Bacani, herein private
respondent, as the beneficiary. He was issued a policy valued at P100,000.00
with double indemnity in case of accidental death. Sometime after, the insured
died in a plane crash. Bernarda filed a claim with petitioner, seeking the
benefits of the insurance policy taken by her son. However, said insurance
company rejected the claim on the ground that the insured did not disclose
material facts relevant to the issuance of the policy, thus rendering the contract
of insurance voidable. Petitioner discovered that two weeks prior to his
application for insurance, the insured was examined and confined at the Lung
Center of the Philippines, where he was diagnosed for renal failure. The RTC,
as affirmed by the CA, this fact was concealed, as alleged by the petitioner.
But the fact that was concealed was not the cause of death of the insured and
that matters relating to the medical history of the insured is deemed to be
irrelevant since petitioner waived the medical examination prior to the
approval and issuance of the insurance policy.
ISSUE: Whether or not the concealment of such material fact, despite it not
being the cause of death of the insured, is sufficient to render the insurance
contract voidable
HELD:
YES. Section 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
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. Anent the
finding that the facts concealed had no bearing to the cause of death of the
insured, it is well settled that the insured need not die of the disease he had
failed to disclose to the insurer. It is sufficient that his non-disclosure misled
the insurer in forming his estimates of the risks of the proposed insurance
policy or in making inquiries. The SC, therefore, ruled that petitioner properly
exercised its right to rescind the contract of insurance by reason of the
concealment employed by the insured. It must be emphasized that rescission
was exercised within the two-year contestability period as recognized in
Section 48 of The Insurance Code. WHEREFORE, the petition is GRANTED
and the Decision of the Court of Appeals is REVERSED and SET ASIDE.
Philamcare v CA G.R. No. 125678. March 18, 2002
J. Ynares-Santiago
Facts:
Ernani Trinos applied for a health care coverage with Philam. He answered
no to a question asking if he or his family members were treated to heart
trouble, asthma, diabetes, etc.
The application was approved for 1 year. He was also given hospitalization
benefits and out-patient benefits. After the period expired, he was given an
expanded coverage for Php 75,000. During the period, he suffered from
heart attack and was confined at MMC. The wife tried to claim the benefits
but the petitioner denied it saying that he concealed his medical history by
answering no to the aforementioned question. She had to pay for the
hospital bills amounting to 76,000. Her husband subsequently passed away.
She filed a case in the trial court for the collection of the amount plus
damages. She was awarded 76,000 for the bills and 40,000 for damages.
The CA affirmed but deleted awards for damages. Hence, this appeal.
Issue: WON a health care agreement is not an insurance contract; hence the
“incontestability clause” under the Insurance Code does not apply.
Held: No. Petition dismissed.
Ratio:
 Petitioner claimed that it granted benefits only when the insured is alive
during the one-year duration. It contended that there was no indemnification
unlike in insurance contracts. It supported this claim by saying that it is a
health maintenance organization covered by the DOH and not the Insurance
Commission. Lastly, it claimed that the Incontestability clause didn’t apply
because two-year and not one-year effectivity periods were required.
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.”
Section 3 states: every person has an insurable interest in the life and
health:
(1) of himself, of his spouse and of his children.
In this case, the husband’s health was the insurable interest. The health care
agreement was in the nature of non-life insurance, which is primarily a
contract of indemnity. The provider must pay for the medical expenses
resulting from sickness or injury.
While petitioner contended that the husband concealed materialfact of his
sickness, the contract stated that:
“that any physician is, by these presents, expressly authorized to disclose or
give testimony at anytime relative to any information acquired by him in his
professional capacity upon any question affecting the eligibility for health
care coverage of the Proposed Members.”
This meant that the petitioners required him to sign authorization to furnish
reports about his medical condition. The contract also authorized Philam to
inquire directly to his medical history.
Hence, the contention of concealment isn’t valid.
They can’t also invoke the “Invalidation of agreement” clause where failure of
the insured to disclose information was a grounds for revocation simply
because the answer assailed by the company was the heart condition
question based on the insured’s opinion. He wasn’t a medical doctor, so he
can’t accurately gauge his condition.
Henrick v Fire- “in such case the insurer is not justified in relying upon such
statement, but is obligated to make further inquiry.”
Fraudulent intent must be proven to rescind the contract. This was
incumbent upon the provider.
“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.”
Section 27 of the Insurance Code- “a concealment entitles the injured party
to rescind a contract of insurance.”
As to cancellation procedure- Cancellation requires certain conditions:
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the
policy of one or more of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address
shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the
Insurance Code and upon request of insured, to furnish facts on which
cancellation is based
None were fulfilled by the provider.
As to incontestability- The trial court said that “under the title Claim
procedures of expenses, the defendant Philamcare Health Systems Inc. had
twelve months from the date of issuance of the Agreement within which to
contest the membership of the patient if he had previous ailment of asthma,
and six months from the issuance of the agreement if the patient was sick of
diabetes or hypertension. The periods having expired, the defense of
concealment or misrepresentation no longer lie.”
THELMA VDA. DE CANILANG vs. COURT OF APPEALS
THELMA VDA. DE CANILANG vs. COURT OF APPEALS G.R. No. 92492,
17 June 1993
FACTS:

Jaime Canilang applied for a “non-medical” insurance policy with respondent
Great Pacific Life Assurance Company naming his wife, Thelma Canilang as
his beneficiary. But he did not disclose the fact that he was diagnosed as
suffering from sinus tachycardia and that he has consulted a doctor twice.
Jaime was issued an ordinary life insurance policy with the face value of
P19,700.00. Jaime died of “congestive heart failure”, “anemia”, and “chronic
anemia”. Petitioner widow and beneficiary of the insured, filed a claim with
Great Pacific which the insurer denied upon the ground that the insured had
concealed material information from it. Hence, Thelma filed a complaint
against Great Pacific with the Insurance Commission for recovery of the
insurance proceeds.
ISSUE: Whether or not the non-disclosure of certain facts about the insured’s
previous health conditions is material to warrant the denial of the claims of
Thelma Canilang
HELD: YES. The SC agreed with the Court of Appeals that the information
which Jaime Canilang failed to disclose was material to the ability of Great
Pacific to estimate the probable risk he presented as a subject of life
insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made
and medicines prescribed by such doctor, in the insurance application, it may
be reasonably assumed that Great Pacific would have made further inquiries
and would have probably refused to issue a non-medical insurance policy or,
at the very least, required a higher premium for the same coverage. The
materiality of the information withheld by Great Pacific did not depend upon
the state of mind of Jaime Canilang. A man’s state of mind or subjective belief
is not capable of proof in our judicial process, except through proof of external
acts or failure to act from which inferences as to his subjective belief may be
reasonably drawn. Neither does materiality depend upon the actual or
physical events which ensure. Materiality relates rather to the “probable and
reasonable influence of the facts” upon the party to whom the communication
should have been made, in assessing the risk involved in making or omitting
to make further inquiries and in accepting the application for insurance; that
“probable and reasonable influence of the facts” concealed must, of course,
be determined objectively, by the judge ultimately. WHEREFORE, the Petition
for Review is DENIED for lack of merit and the Decision of the Court of
Appeals dated 16 October 1989 in C.A.-G.R. SP No. 08696 is hereby
AFFIRMED. No pronouncement as to the costs.
PRUDENTIAL GUARANTEE and ASSURANCE INC., vs. TRANS-
ASIA SHIPPING LINES, INC
[G.R. No. 151890; June 20, 2006]
Principle found in the case: Section 343 and 344 applies when there
is unreasonable delay or refusal in the payment of the insurance claims
which could force the insured to file a case thus entitling him of attorney’s
fees.
Facts:
TRANS-ASIA is the owner of the vessel M/V Asia Korea. In consideration of
payment of premiums, PRUDENTIAL insured M/V Asia Korea for
loss/damage of the hull and machinery arising from perils, inter alia, of fire
and explosion for the sum of P40 Million, beginning from the period of July
1, 1993 up to July 1, 1994.On October 25, 1993, while the policy was in force,
a fire broke out while [M/V Asia Korea was] undergoing repairs at the port of
Cebu. On October 26, 1993 TRANS-ASIA filed its notice of claim for damage
sustained by the vessel evidenced by a letter/formal claim. TRANS-ASIA
reserved its right to subsequently notify PRUDENTIAL as to the full amount
of the claim upon final survey and determination by average adjuster
Richard Hogg International (Phil.) of the damage sustained by reason of
fire. TRANS-ASIA executed a document denominated “Loan and Trust
receipt”, a portion of which states that “Received from Prudential Guarantee
and Assurance, Inc., the sum of PESOS THREE MILLION ONLY
(P3,000,000.00) as a loan without interest under Policy No. MH 93/1353
[sic], repayable only in the event and to the extent that any net recovery is
made by Trans-Asia Shipping Corporation, from any person or persons,
corporation or corporations, or other parties, on account of loss by any
casualty for which they may be liable occasioned by the 25 October 1993:
Fire on Board. “PRUDENTIAL later on denied Trans-Asia’s claim in stated in
a letter that “After a careful review and evaluation of your claim arising from
the above-captioned incident, it has been ascertained that you are in breach PRUDENTIAL, to secure a copy of such certification to support its
of policy conditions, among them “WARRANTED VESSEL CLASSED AND conclusion that mere absence of a certification does not warrant denial of
CLASS MAINTAINED”. Accordingly, we regret to advise that your claim is TRANS-ASIA’s claim under the insurance policy.Also the C.A. ruled that
not compensable and hereby DENIED.” and asked for the return of the TRANS-ASIA is entitled to the unpaid claims covered by Marine Policy, or a
3,000,000. TRANS-ASIA filed a Complaint for Sum of Money against total amount of P8,395,072.26 however even if there was unreasonable
PRUDENTIAL with the RTC of Cebu City, wherein TRANS-ASIA sought the denial or withholding of the payment of the claims due Trans-Asia is still
amount of P8,395,072.26 from PRUDENTIAL, alleging that the same not entitled to pay for attorney’s fees for it can only be awarded in the cases
represents the balance of the indemnity due upon the insurance policy in the enumerated in Article 2208 of the Civil Code. But Trans-Asia is entitled to
total amount of P11,395,072.26. TRANS-ASIA similarly sought interest at double interest on the policy for the duration of the delay of payment of the
42% per annum citing Section 243 of Presidential Decree No. 1460, unpaid balance, citing Section 244 of the Insurance Code.
otherwise known as the “Insurance Code,” as amended. PRUDENTIAL
denied the material allegations of the Complaint and interposed the defense
that TRANS-ASIA breached Issue:
insurance policy conditions, in particular: PRUDENTIAL posits that TRANS
-ASIA violated an express and material warranty in the subject insurance
WON Prudential should pay Trans-Asia the unpaid claims covered by the
contract, i.e., Marine Insurance Policy No. MH93/1363,
marine policy including attorney’s fees.
specifically Warranty Clause No. 5 thereof, which stipulates that the insured
vessel, “M/V ASIA KOREA” is required to be CLASSED AND CLASS
MAINTAINED. According to PRUDENTIAL, on 25 October 1993, or at the Ruling:
time of the occurrence of the fire, “M/V ASIA KOREA” was in violation of the
warranty as it was not CLASSED AND CLASS MAINTAINED. PRUDENTIAL
submits that Warranty Clause No. 5 was a condition precedent to the Yes
recovery of TRANS-ASIA under the policy, the violation of which entitled
PRUDENTIAL to rescind the contract under Sec. 74 of the Insurance
Code. By way of a counterclaim, PRUDENTIAL sought a refund of Rationale:
P3,000,000.00, which it allegedly advanced to TRANS-ASIA by way of a
loan without interest and without prejudice to the final evaluation of the
Sec. 244 of the Insurance Code grants damages consisting of attorney’s fees a
claim, including the amounts of P500,000.00, for survey fees and
P200,000.00, representing attorney’s fees. Trial court ruled in favor of nd other expenses incurred by the insured after a finding by the Insurance
Prudential. It ruled that a determination of the parties’ liabilities hinged on Commissioner or the Court, as the case may be,of an unreasonable denial or
withholding of the payment of the claims due. Moreover, the law imposes an
whether TRANS-ASIA violated and breached
interest of twice the ceiling prescribed by the Monetary Board on the amount
the policy conditions on WARRANTED VESSEL CLASSED AND
CLASS MAINTAINED. It interpreted the provision to mean that TRANS- of the claim due the insured from the date following the time prescribed in
ASIA is required to maintain the vessel at a certain class at all times Section 242 or in Section 243, as the case may be,until the claim is fully
pertinent during the life of the policy. According to the court a quo, TRANS- satisfied. Finally, Section 244 considers the failure to pay the claims within
the time prescribed in Sections 242 or 243, when applicable, as prima facie
ASIA failed to prove compliance of the terms of the warranty, the violation
evidence of unreasonable delay in payment.
thereof entitled PRUDENTIAL to rescind the contract. The court of appeals
reversed the decision. It ruled that PRUDENTIAL, as the party asserting the
non-compensability of the loss had the burden of proof to show that TRANS- To the mind of this Court, Section 244 does not require a showing of bad
ASIA breached the warranty, which burden it failed faith in order that attorney’s fees be granted.As earlier stated, under Section
to discharge.It considered PRUDENTIAL’s admission that at the time the 244, a prima facie evidence of unreasonable delay in payment of the claim is
insurance contract was entered into between the parties, the vessel created by failure of the insurer to pay the claim within the time fixed in both
was properly classed by Bureau Veritas, a classification society recognized by Sections 242 and 243 of the Insurance Code.
the industry. It similarly gave weight to the fact that it was the responsibility
of Richards Hogg International (Phils.) Inc., the average adjuster hired by
As established in Section 244, by reason of the delay and the consequent
filing of the suit by the insured, the insurers shall be adjudged to pay
damages which shall consist of attorney’s fees and other expenses incurred
by the insured.
Section 244 reads:
“In case of any litigation for the enforcement of any policy or contract
of insurance, it shall be the duty of theCommissioner or the Court, as
the case may be, to make a finding as to whether the payment of the
claim of theinsured has been unreasonably denied or withheld; and in
the affirmative case, the insurance company shall beadjudged to pay
damages which shall consist of attorney’s fees and other expenses
incurred by the insured personby reason of such unreasonable denial
or withholding of payment plus interest of twice the ceiling prescribed
by theMonetary Board of the amount of the claim due the insured, from
the date following the time prescribed in sectiontwo hundred forty-two
or in section two hundred forty-three, as the case may be, until the
claim is fully satisfied;Provided, That the failure to pay any such claim
within the time prescribed in said sections shall be considered
primafacie evidence of unreasonable delay in payment.”
Sections 243 and 244 of the Insurance Code apply when the court finds an
unreasonable delay or refusal in the payment of the insurance claims.
In the case at bar, the facts as found by the Court of Appeals, and confirmed
by the records show that there was an unreasonable delay by PRUDENTIAL
in the payment of the unpaid balance of P8,395,072.26 to TRANS-ASIA. On
26 October 1993, a day after the occurrence of the fire in “M/V Asia Korea”,
TRANS-ASIA filed its notice of claim. On 13 August 1996, the adjuster,
Richards Hogg International (Phils.), Inc., completed its survey report
recommending the amount of P11,395,072.26 as the total indemnity due to
TRANS-ASIA. On 21 April 1997, PRUDENTIAL, in a letter addressed to
TRANS-ASIA denied the latter’s claim for the amount of P8,395,072.26
representing the balance of thetotal indemnity. On 21 July 1997,
PRUDENTIAL sent a second letter to TRANS-ASIA seeking a return of the
amount of P3,000,000.00. On 13 August 1997, TRANS-ASIA was
constrained to file a complaint for sum of money against
PRUDENTIAL praying, inter alia, for the sum
of P8,395,072.26 representing the balance of the proceeds of the
insurance claim.As can be gleaned from the foregoing, there was an
unreasonable delay on the part of PRUDENTIAL to pay TRANS-ASIA, as in
fact, it refuted the latter’s right to the insurance claims, from the time proof
of loss was shown and the ascertainment of the loss was made by the
insurance adjuster. Evidently, PRUDENTIAL’s unreasonable delay in
satisfying TRANS-ASIA’s unpaid claims compelled the latter to file a suit for
collection.Succinctly, an award equivalent to ten percent (10%) of the unpaid
proceeds of the policy as attorney’s fees to TRANS-ASIA is reasonable under
the circumstances, or otherwise stated, ten percent (10%) of P8,395,072.26.
In the case of Cathay Insurance, Co., Inc. v. Court of Appeals, where a finding
of an unreasonable delay under Section 244 of the Insurance Code was made
by this Court, we grant an award of attorney’s fees equivalent to ten percent
(10%) of the total proceeds. We find no reason to deviate from this judicial
precedent in the case at bar.
G.R. No. 186983 February 22, 2012 MA.LOURDES S. FLORENDO, Petitioner, vs.PHILAM
PLANS, INC., PERLA ABCEDEMA. CELESTE ABCEDE, Respondents.FACTS: Manuel
Florendo filed anapplication for comprehensive pension planwith respondent Philam Plans,
Inc. (PhilamPlans) Manuel signed the application andleft to Perla the task of supplying
theinformation needed in the application.
Respondent Ma. Celeste Abcede, Perla’s
daughter, signed the application as salescounselor. Philam Plans issued PensionPlan
Agreement to Manuel, with petitionerMa. Lourdes S. Florendo, his wife, asbeneficiary. In time,
Manuel paid hisquarterly premiums. Eleven months later,Manuel died of blood
poisoning.Subsequently, Lourdes filed a claim withPhilam Plans for the payment of the
benefits
under her husband’s plan but Philam Plans
declined her claim prompting her to file thepresent action against the pension plancompany
before the Regional Trial Court(RTC) of Quezon City and ruled in favor ofMa. Lourdes.
However, the Court of Appeals then reversed the RTC decision.Hence this
appeal.ISSUE: Whether or not Ma. Lourdes couldclaim benefits as the beneficiary of
herhusband under the insurance plan despiteconsideration that her husband
Manuelconcealed the true condition of his health.RULING: The Supreme Court answers
thisto the negative and the AFFIRMED in itsentirety the decision of the Court
of Appeals. The comprehensive pension planthat Philam Plans issued contains a
one-year incontestability period. It states: VIII.INCONTESTABILITY After this Agreementhas
remained in force for one (1) year, wecan no longer contest for health reasonsany claim for
insurance under this Agreement, except for the reason thatinstallment has not been
paid (lapsed), orthat you are not insurable at the time youbought this pension program by
reason ofage. If this Agreement lapses but isreinstated afterwards, the one (1) year
contestability period shall start again on thedate of approval of your request forreinstatement.
The above incontestabilityclause precludes the insurer from disowningliability under the policy it
issued on theground of concealment or misrepresentationregarding the health of the insured
after ayear of its issuance. Since Manuel died onthe eleventh month following the issuanceof
his plan, the one year incontestabilityperiod has not yet set in. Consequently,Philam Plans was
not barred from
questioning Lourdes’ entitlement to thebenefits of her husband’s pension plan.