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Case 1 ISSUE:

Heirs of Maramag v. Maramag Whether or not illegitimate children can be beneficiaries in an insurance contract.
G.R. No. 181132 , June 5, 2009 RULING:
FACTS: Yes. Section 53 of the Insurance Code states that the insurance proceeds shall be
The case stems from a petition filed against respondents with the RTC for revocation applied exclusively to the proper interest of the person in whose name or for
and/or reduction of insurance proceeds for being void and/or inofficious. The petition whose benefit it is made unless otherwise specified in the policy. Pursuant thereto, it is
alleged that: (1) petitioners were the legitimate wife and children of Loreto Maramag obvious that the only persons entitled to claim the insurance proceeds are either the
(Loreto), while respondents were Loreto’s illegitimate family; (2) Eva de Guzman insured, if still alive; or the beneficiary, if the insured is already deceased, upon the
Maramag (Eva) was a concubine of Loreto and a suspect in the killing of the latter, thus, maturation of the policy.The exception to this rule is a situation where the insurance
she is disqualified to receive any proceeds from his insurance policies from Insular Life contract was intended to benefit third persons who are not parties to the same in the
Assurance Company, Ltd. (Insular) and Great Pacific Life Assurance Corporation form of favorable stipulations or indemnity. In such a case, third parties may directly
(Grepalife) (3) the illegitimate children of Loreto—Odessa, Karl Brian, and Trisha Angelie sue and claim from the insurer.
—were entitled only to one-half of the legitime of the legitimate children, thus, the Petitioners are third parties to the insurance contracts with Insular and Grepalife and,
proceeds released to Odessa and those to be released to Karl Brian and Trisha Angelie thus, are not entitled to the proceeds thereof. Accordingly, respondents Insular
were inofficious and should be reduced; and (4) petitioners could not be deprived of and Grepalife have no legal obligation to turn over the insurance proceeds to
their legitimes, which should be satisfied first. Insular admitted that petitioners. The revocation of Eva as a beneficiary in one policy and
Loreto misrepresented Eva as his legitimate wife and Odessa, Karl Brian, and Trisha her disqualification as such in another are of no moment considering that
Angelie as his legitimate children, and that they filed their claims for the insurance the designation of the illegitimate children as beneficiaries in Loreto’s insurance policies
proceeds of the insurance policies; that when it ascertained that Eva was not remains valid. Because no legal proscription exists in naming as beneficiaries the
the legal wife of Loreto, it disqualified her as a beneficiary and divided the proceeds children of illicit relationships by the insured, the shares of Eva in the insurance
among Odessa, Karl Brian, and Trisha Angelie, as the remaining designated proceeds, whether forfeited by the court in view of the prohibition on donations under
beneficiaries; and that it released Odessa’s share as she was of age, but withheld the Article 739 of the Civil Code or by the insurers themselves for reasons based on the
release of the shares of minors Karl Brian and Trisha Angelie pending submission of insurance contracts, must be awarded to the said illegitimate children, the designated
letters of guardianship. Insular alleged that the complaint or petition failed to state a beneficiaries, to the exclusion of petitioners. It is only in cases where the insured has
cause of action insofar as it sought to declare as void the designation of Eva not designated any beneficiary, or when the designated beneficiary is disqualified by
as beneficiary, because Loreto revoked her designation as such in Policy No. law to receive the proceeds, that the insurance policy proceeds shall redound to the
A001544070 and it disqualified her in Policy No. A001693029; and insofar as it sought benefit of the estate of the insured.
to declare as inofficious the shares of Odessa, Karl Brian, and Trisha Angelie,
considering that no settlement of Loreto’s estate had been filed nor had the respective
shares of the heirs been determined. Insular further claimed that it was bound to honor Case 2
the insurance policies designating the children of Loreto with Eva as beneficiaries
pursuant to Section 53 of the Insurance Code. Grepalife alleged that Eva was not
designated as an insurance policy beneficiary; that the claims filed by Odessa, Karl DOCTRINE:
Brian, and Trisha Angelie were denied because Loreto was ineligible for insurance due
to a misrepresentation in his application form that he was born on December 10, 1936 "The stipulation in a life insurance policy giving the insured the privilege to reinstate it
and, thus, not more than 65 years old when he signed it in September 2001; that the upon written application does not give the insured absolute right to such reinstatement
case was premature, there being no claim filed by the legitimate family of Loreto; and by the mere filing of an application. The insurer has the right to deny the reinstatement
that the law on succession does not apply where the designation of insurance if it is not satisfied as to the insurability of the insured and if the latter does not pay all
beneficiaries is clear. overdue premium and all other indebtedness to the insurer. After the death of the
insured the insurance Company cannot be compelled to entertain an application for 1999 Insular Life responded a demand letter of the plaintiff by agreeing to conduct a re-
reinstatement of the policy because the conditions precedent to reinstatement can no evaluation of Violeta’s claim.
longer be determined and satisfied."
Without waiting for the re-evaluation the plaintiff filed a complaint in the RTC for death
FACTS: claim benefit. The court however ruled in favor of respondent on the ground that the
Policy had indeed lapsed and Eulogio needed to have the same reinstated
Eulogio the husband of plaintiff applied for an insurance policy with respondent
through malaluan its agent, which contained a 20-Year Endowment Variable Income
Package Flexi Plan worth P500,000.00 with two riders valued at P500,000.00 each, ISSUE:
wherein, the plaintiff is named as the primary beneficiary of the said policy. Under the
terms, Eulogio is required to pay the premiums on a quarterly basis in the amount of WON EULOGIO WAS ABLE TO REINSTATE THE LAPSED INSURANCE POLICY BEFORE HIS
8,062 of each year until the end of the 20-year period of the policy. Included in the DEATH
terms is a grace period of 31 days for the payment of each premium subsequent to the
first. If any premium was not paid on or before the due date, the policy would be in HELD:
default, and if the premium remained unpaid until the end of the grace period, the
policy would automatically lapse and become void. No, The Policy had already lapsed is a fact beyond dispute. Eulogio’s filing of his
Application for Reinstatement with Insular Life constitutes an admission that Policy had
Eulogio failed to pay the 3rd premium which was due on January even after the lapse of lapsed.
the grace period. Hence, it became void. Eulogio as a remedy he filed an Application for
Reinstatement together with the amount of P8,062.00 to pay for the premium due on To reinstate a policy means to restore the same to premium-paying status after it has
24 January 1998. However, this was not processed since he left unpaid the overdue been permitted to lapse. Both the Policy Contract and the Application for
interest thereon amounting to P322.48. Thus, Insular Life instructed Eulogio to pay the Reinstatement provide for specific conditions for the reinstatement of a lapsed policy.
amount of interest and to file another application for reinstatement and Eulogio was
likewise advised by Malaluan to pay the premiums that subsequently became due on The Policy Contract between Eulogio and Insular Life identified the following conditions
24 April 1998 and 24 July 1998, plus interest. On 17 September 1998, eulogio submitted for reinstatement should the policy lapse:
his 2nd application for reinstatement in the amount of 17,500 which was instead
received by the husband of malaluan since she was on a business errand, A receipt was The policy may be reinstated at any time within three years after it lapsed if the
issued for the amount deposited by eulogio. following conditions are met:

On sept 17, 1998 eulogio died of cardio-respiratory arrest. Without knowing of (1) the policy has not been surrendered for its cash value or the period of extension as a
Eulogio’s death, Malaluan forwarded to the Insular Life the 2nd application of term insurance has not expired;
reinstatement and the amount of 17,500. This application was not acted upon anymore (2) evidence of insurability satisfactory to [Insular Life] is furnished;
since insular life was already informed by the death on sept 21, 1998. (3) overdue premiums are paid with compound interest at a rate not exceeding that
which would have been applicable to said premium and indebtedness in the policy
Plaintiff filed with Insular Life a claim for payment of the full proceeds of the Policy of years prior to reinstatement; and
his husband. The respondent denied the claim on the ground that the policy has (4) indebtedness which existed at the time of lapsation is paid or renewed.
already lapsed and there was failure to reinstate. Plaintiff requested for a
reconsideration of the disallowance over the claim. This was also denied. On august 11, Additional conditions for reinstatement of a lapsed policy were stated in the Application
for Reinstatement which Eulogio signed and submitted, to wit:
Eulogio’s death, just hours after filing his Application for Reinstatement and depositing
I/We agree that said Policy shall not be considered reinstated until this application is his payment for overdue premiums and interests with Malaluan, does not constitute a
approved by the Company during my/our lifetime and good health and until all other special circumstance that can persuade this Court to already consider Policy No.
Company requirements for the reinstatement of said Policy are fully satisfied. 9011992 reinstated. Said circumstance cannot override the clear and express provisions
of the Policy Contract and Application for Reinstatement, and operate to remove the
In the instant case, Eulogio’s death rendered impossible full compliance with the prerogative of Insular Life thereunder to approve or disapprove the Application for
conditions for reinstatement of the Policy. True, Eulogio, before his death, managed to Reinstatement. Even though the Court commiserates with Violeta, as the tragic and
file his Application for Reinstatement and deposit the amount for payment of his fateful turn of events leaves her practically empty-handed, the Court cannot arbitrarily
overdue premiums and interests thereon with Malaluan; but it could only be burden Insular Life with the payment of proceeds on a lapsed insurance policy. Justice
considered reinstated after the Application for Reinstatement had been processed and and fairness must equally apply to all parties to a case. Courts are not permitted to
approved by Insular Life during Eulogio’s lifetime and good health. make contracts for the parties. The function and duty of the courts consist simply in
enforcing and carrying out the contracts actually made.
It does not matter that when he died, Eulogio’s Application for Reinstatement and
deposits for the overdue premiums and interests were already with Malaluan. Insular THEREFORE, Policy No. 9011992 remained lapsed and void
Life, through the Policy Contract, expressly limits the power or authority of its insurance
agents, thus: Case 3

Our agents have no authority to make or modify this contract, to extend the time limit Facts:
for payment of premiums, to waive any lapsation, forfeiture or any of our rights or IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from respondent fire
requirements, such powers being limited to our president, vice-president or persons insurance policies with book debt endorsements. The insurance policies provide for
authorized by the Board of Trustees and only in writing. Malaluan did not have the coverage on "book debts in connection with ready-made clothing materials which have
authority to approve Eulogio’s Application for Reinstatement. Malaluan still had to turn been sold or delivered to various customers and dealers of the Insured anywhere in the
over to Insular Life Eulogio’s Application for Reinstatement and accompanying deposits, Philippines."
for processing and approval by the latter. The policies defined book debts as the "unpaid account still appearing in the Book of
Account of the Insured 45 days after the time of the loss covered under this Policy." The
Eulogio’s death, just hours after filing his Application for Reinstatement and depositing policies also provide for the following conditions:
his payment for overdue premiums and interests with Malaluan, does not constitute a 1. Warranted that the Company shall not be liable for any unpaid account in respect of
special circumstance that can persuade this Court to already consider Policy No. the merchandise sold and delivered by the Insured which are outstanding at the date of
9011992 reinstated. Said circumstance cannot override the clear and express provisions loss for a period in excess of six (6) months from the date of the covering invoice or
of the Policy Contract and Application for Reinstatement, and operate to remove the actual delivery of the merchandise whichever shall first occur.
prerogative of Insular Life thereunder to approve or disapprove the Application for 2. Warranted that the Insured shall submit to the Company within twelve (12) days
Reinstatement. Even though the Court commiserates with Violeta, as the tragic and after the close of every calendar month all amount shown in their books of accounts as
fateful turn of events leaves her practically empty-handed, the Court cannot arbitrarily unpaid and thus become receivable item from their customers and dealers.
burden Insular Life with the payment of proceeds on a lapsed insurance policy. Justice Gaisano is a customer and dealer of the products of IMC and LSPI. On February 25,
and fairness must equally apply to all parties to a case. Courts are not permitted to 1991, the Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner,
make contracts for the parties. The function and duty of the courts consist simply in was consumed by fire. Included in the items lost or destroyed in the fire were stocks of
enforcing and carrying out the contracts actually made. ready-made clothing materials sold and delivered by IMC and LSPI.
Insurance of America filed a complaint for damages against Gaisano. It alleges that IMC
and LSPI were paid for their claims and that the unpaid accounts of petitioner on the
sale and delivery of ready-made clothing materials with IMC was P2,119,205.00 while by the seller merely to secure performance by the buyer of his obligations under the
with LSPI it was P535,613.00. contract, the goods are at the buyer's risk from the time of such delivery
The RTC rendered its decision dismissing Insurance's complaint. It held that the fire was Thus, when the seller retains ownership only to insure that the buyer will pay its debt,
purely accidental; that the cause of the fire was not attributable to the negligence of the risk of loss is borne by the buyer. Petitioner bears the risk of loss of the goods
the petitioner. Also, it said that IMC and LSPI retained ownership of the delivered goods delivered.
and must bear the loss. IMC and LSPI had an insurable interest until full payment of the value of the delivered
The CA rendered its decision and set aside the decision of the RTC. It ordered Gaisano goods. Unlike the civil law concept of res perit domino, where ownership is the basis for
to pay Insurance the P 2 million and the P 500,000 the latter paid to IMC and Levi consideration of who bears the risk of loss, in property insurance, one's interest is not
Strauss. determined by concept of title, but whether insured has substantial economic interest
Hence this petition. in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest in
Issues: property, whether real or personal, or any relation thereto, or liability in respect
1. WON the CA erred in construing a fire insurance policy on book debts as one thereof, of such nature that a contemplated peril might directly damnify the insured."
covering the unpaid accounts of IMC and LSPI since such insurance applies to loss of the Parenthetically, under Section 14 of the same Code, an insurable interest in property
ready-made clothing materials sold and delivered to petitioner may consist in: (a) an existing interest; (b) an inchoate interest founded on existing
2. WON IMC bears the risk of loss because it expressly reserved ownership of the goods interest; or (c) an expectancy, coupled with an existing interest in that out of which the
by stipulating in the sales invoices that "[i]t is further agreed that merely for purpose of expectancy arises.
securing the payment of the purchase price the above described merchandise remains Anyone has an insurable interest in property who derives a benefit from its existence or
the property of the vendor until the purchase price thereof is fully paid." would suffer loss from its destruction. Indeed, a vendor or seller retains an insurable
3. WON petitioner is liable for the unpaid accounts interest in the property sold so long as he has any interest therein, in other words, so
4. WON it has been established that petitioner has outstanding accounts with IMC and long as he would suffer by its destruction, as where he has a vendor's lien. In this case,
LSPI. the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their
Books of Account 45 days after the time of the loss covered by the policies.
Held: No. Yes. Yes. Yes but account with LSPI unsubstantiated. Petition partly granted. 3. Petitioner's argument that it is not liable because the fire is a fortuitous event under
Article 117432 of the Civil Code is misplaced. As held earlier, petitioner bears the loss
Ratio: under Article 1504 (1) of the Civil Code.
1. Nowhere is it provided in the questioned insurance policies that the subject of the Moreover, it must be stressed that the insurance in this case is not for loss of goods by
insurance is the goods sold and delivered to the customers and dealers of the insured. fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45 days after
Thus, what were insured against were the accounts of IMC and LSPI with petitioner the fire. Accordingly, petitioner's obligation is for the payment of money. As correctly
which remained unpaid 45 days after the loss through fire, and not the loss or stated by the CA, where the obligation consists in the payment of money, the failure of
destruction of the goods delivered. the debtor to make the payment even by reason of a fortuitous event shall not relieve
2. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code: him of his liability. The rationale for this is that the rule that an obligor should be held
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the exempt from liability when the loss occurs thru a fortuitous event only holds true when
ownership therein is transferred to the buyer, but when the ownership therein is the obligation consists in the delivery of a determinate thing and there is no stipulation
transferred to the buyer the goods are at the buyer's risk whether actual delivery has holding him liable even in case of fortuitous event. It does not apply when the
been made or not, except that: obligation is pecuniary in nature.
(1) Where delivery of the goods has been made to the buyer or to a bailee for the Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the
buyer, in pursuance of the contract and the ownership in the goods has been retained loss or destruction of anything of the same kind does not extinguish the obligation."
This rule is based on the principle that the genus of a thing can never perish. An
obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any
specific property of the debtor. Held:
4. With respect to IMC, the respondent has adequately established its claim. The P 3 m NO.
claim has been proven. 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 The civil code prohibitions on donations made between persons guilty of adulterous
amount paid to settle the insurance claim. The right of subrogation accrues simply upon concubinage applies to insurance contracts. On matters not specifically provided for by
payment by the insurance company of the insurance claim Respondent's action against the Insurance Law, the general rules on Civil law shall apply. A life insurance policy is no
petitioner is squarely sanctioned by Article 2207 of the Civil Code which provides: different from a civil donation as far as the beneficiary is concerned, since both are
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity founded on liberality.
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 Case 5
insured against the wrongdoer or the person who has violated the contract. FACTS:
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action.
There was no evidence that respondent has been subrogated to any right which LSPI FEB Leasing and Finance Corporation (FEB) leased equipment and motor vehicles to JVL
may have against petitioner. Failure to substantiate the claim of subrogation is fatal to Food Products with a monthly rental of P170,494
petitioner's case for recovery of P535,613.00. At the same date, Vicente Ong Lim Sing, Jr. (Lim) an executed an Individual Guaranty
Agreement with FEB to guarantee the prompt and faithful performance of the terms
Case 4 and conditions of the lease agreement
Insular Life vs. Ebrado JVL defaulted in the payment of the monthly rentals resulting to arrears of
P3,414,468.75 and refused to pay despite demands
Facts: FEB filed a complaint for damages and replevin against JVL, Lim and John Doe
> Buenaventura Ebrado was issued al life plan by Insular Company. He designated JVL and Lim admitted the existence of the lease agreement but asserted that it is in
Capriona as his beneficiary, referring to her as his wife. reality a sale of equipment on installment basis, with FEB acting as the financier
RTC: Sale on installment and the FEB elected full payment of the obligation so for the
> The insured then died and Carponia tried to claim the proceeds of the said plan. unreturned units and machineries the JVL and Lim are jointly and severally liable to pay
CA: granted FEB appeal that it is a financial lease agreement under Republic Act (R.A.)
> She admitted to being only the common law wife of the insured. No. 8556 and ordered JVL and Lim jointly and severally to pay P3,414,468.75
ISSUE: W/N JVL and Lim should jointly and severally be liable for the insured financial
> Pascuala, the legal wife, also filed a claim asserting her right as the legal wife. The lease
company then filed an action for interpleader.
HELD: YES. CA affirmed.

contract of adhesion is as binding as any ordinary contract


Issue: The Lease Contract with corresponding Lease Schedules with Delivery and Acceptance
Certificates is, in point of fact, a financial lease within the purview of R.A. No. 8556
FEB leased the subject equipment and motor vehicles to JVL in consideration of a
Whether or not the common law wife named as beneficiary can collect the proceeds. monthly periodic payment of P170,494.00. The periodic payment by petitioner is
sufficient to amortize at least 70% of the purchase price or acquisition cost of the said
movables in accordance with the Lease Schedules with Delivery and Acceptance > Grepalife was ordered to pay the widow by the Insurance Commissioner holding that
Certificates. there was no intentional concealment on the Part of Canilang and that Grepalife had
JVL entered into the lease contract with full knowledge of its terms and conditions. waived its right to inquire into the health condition of the applicant by the issuance of
Lim, as a lessee, has an insurable interest in the equipment and motor vehicles leased. the policy despite the lack of answers to "some of the pertinent questions" in the
In the financial lease agreement, FEB did not assume responsibility as to the quality, insurance application. CA reversed.
merchantability, or capacity of the equipment. This stipulation provides that, in case of
defect of any kind that will be found by the lessee in any of the equipment, recourse
should be made to the manufacturer. “The financial lessor, being a financing company,
i.e., an extender of credit rather than an ordinary equipment rental company, does not Issue:
extend a warranty of the fitness of the equipment for any particular use. Thus, the Whether or not Grepalife is liable.
financial lessee was precisely in a position to enforce such warranty directly against the
supplier of the equipment and not against the financial lessor. We find nothing contra
legem or contrary to public policy in such a contractual arrangement Held:
SC took note of the fact that Canilang failed to disclose that hat he had twice consulted
CONCEALMENT Dr. Wilfredo B. Claudio who had found him to be suffering from "sinus tachycardia" and
"acute bronchitis. Under the relevant provisions of the Insurance Code, the information
concealed must be information which the concealing party knew and "ought to [have]
Case 6 communicate[d]," that is to say, information which was "material to the contract.

Vda. De Canilang v. CA - Concealment

The information which Canilang failed to disclose was material to the ability of Grepalife
Facts: to estimate the probable risk he presented as a subject of life insurance. Had Canilang
> Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus disclosed his visits to his doctor, the diagnosis made and the medicines prescribed by
tachycardia." Mr. Canilang consulted the same doctor again on 3 August 1982 and this such doctor, in the insurance application, it may be reasonably assumed that Grepalife
time was found to have "acute bronchitis." 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
> On the next day, 4 August 1982, Canilang applied for a "non-medical" insurance coverage.
policy with Grepalife naming his wife, as his beneficiary. Canilang was issued ordinary
life insurance with the face value of P19,700.

> On 5 August 1983, Canilang died of "congestive heart failure," "anemia," and "chronic The materiality of the information withheld by Canilang from Grepalife did not depend
anemia." The wife as beneficiary, filed a claim with Grepalife which the insurer denied upon the state of mind of Jaime Canilang. A man's state of mind or subjective belief is
on the ground that the insured had concealed material information from it. 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
> Vda Canilang filed a complaint with the Insurance Commissioner against Grepalife drawn. Neither does materiality depend upon the actual or physical events which
contending that as far as she knows her husband was not suffering from any disorder ensue. Materiality relates rather to the "probable and reasonable influence of the facts"
and that he died of kidney disorder. 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" the health history of the insured was immaterial since the insurance policy was "non-
concealed must, of course, be determined objectively, by the judge ultimately. medical." CA affirmed.

Issue:
SC found it difficult to take seriously the argument that Grepalife had waived inquiry Whether or not the beneficiary can claim despite the concealment.
into the concealment by issuing the insurance policy notwithstanding Canilang's failure
to set out answers to some of the questions in the insurance application. Such failure
precisely constituted concealment on the part of Canilang. Petitioner's argument, if
accepted, would obviously erase Section 27 from the Insurance Code of 1978. Held:
NOPE.

Case 7 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
Sun Life v. CA - Concealment in Insurance which are material to the contract and as to which he makes no warranty, and which
the other has no means of ascertaining.

Facts:
> On April 15, 1986, Bacani procured a life insurance contract for himself from Sun Life.
He was issued a life insurance policy with double indemnity in case of accidental death. Materiality is to be determined not by the event, but solely by the probable and
The designated beneficiary was his mother, Bernarda. reasonable influence of the facts upon the party to whom communication is due, in
forming his estimate of the disadvantages of the proposed contract or in making his
> On June 26, 1987, the insured died in a plane crash. Bernarda Bacani filed a claim inquiries (The Insurance Code, Sec 31)
with Sun Life, seeking the benefits of the insurance. Sun Life conducted an investigation
and its findings prompted it to reject the claim.

> Sun Life discovered that 2 weeks prior to his application, Bacani was examined and The terms of the contract are clear. The insured is specifically required to disclose to the
confined at the Lung Center of the Philippines, where he was diagnosed for renal insurer matters relating to his health. The information which the insured failed to
failure. During his confinement, the deceased was subjected to urinalysis, ultra- disclose were material and relevant to the approval and the issuance of the insurance
sonography and hematology tests. He did not reveal such fact in his application. policy. The matters concealed would have definitely affected petitioner's action on his
application, either by approving it with the corresponding adjustment for a higher
> In its letter, Sun Life informed Berarda, that the insured did not disclosed material premium or rejecting the same. Moreover, a disclosure may have warranted a medical
facts relevant to the issuance of the policy, thus rendering the contract of insurance examination of the insured by petitioner in order for it to reasonably assess the risk
voidable. A check representing the total premiums paid in the amount of P10,172.00 involved in accepting the application.
was attached to said letter.

> Bernarda and her husband, filed an action for specific performance against Sun Life.
RTC ruled for Bernarda holding that the facts concealed by the insured were made in Thus, "good faith" is no defense in concealment. The insured's failure to disclose the
good faith and under the belief that they need not be disclosed. Moreover, it held that 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 Sec. 27. Such party a contract of insurance must communicate to the other, in good
deliberate on his part. faith, all facts within his knowledge which are material to the contract, and which the
other has not the means of ascertaining, and as to which he makes no warranty.
Case 8 "Concealment exists where the assured had knowledge of a fact material to the risk,
and honesty, good faith, and fair dealing requires that he should communicate it to the
Facts: assurer, but he designedly and intentionally withholds the same."
Kwong Nam applied for a 20-year endowment insurance on his life for the sum of It has also been held "that the concealment must, in the absence of inquiries, be not
P20,000.00, with his wife, appellee Ng Gan Zee as beneficiary. On the same date, Asian only material, but fraudulent, or the fact must have been intentionally withheld."
Crusader, upon receipt of the required premium from the insured, approved the Fraudulent intent on the part of the insured must be established to entitle the insurer
application and issued the corresponding policy. Kwong Nam died of cancer of the liver to rescind the contract. And as correctly observed by the lower court,
with metastasis. All premiums had been paid at the time of his death. "misrepresentation as a defense of the insurer to avoid liability is an 'affirmative'
Ng Gan Zee presented a claim for payment of the face value of the policy. On the same defense. The duty to establish such a defense by satisfactory and convincing evidence
date, she submitted the required proof of death of the insured. Appellant denied the rests upon the defendant. The evidence before the Court does not clearly and
claim on the ground that the answers given by the insured to the questions in his satisfactorily establish that defense."
application for life insurance were untrue. It bears emphasis that Kwong Nam had informed the appellant's medical examiner of
Appellee brought the matter to the attention of the Insurance Commissioner. The latter, the tumor. His statement that said tumor was "associated with ulcer of the stomach"
after conducting an investigation, wrote the appellant that he had found no material should be construed as an expression made in good faith of his belief as to the nature
concealment on the part of the insured and that, therefore, appellee should be paid the of his ailment and operation.
full face value of the policy. The company refused to settle its obligation. While the information communicated was imperfect, the same was sufficient to have
Appellant alleged that the insured was guilty of misrepresentation when he answered induced appellant to make further inquiries about the ailment and operation of the
"No" to the following question appearing in the application for life insurance- insured.
Has any life insurance company ever refused your application for insurance or for Section 32 of Insurance Law:
reinstatement of a lapsed policy or offered you a policy different from that applied for? Section 32. The right to information of material facts maybe waived either by the terms
If, so, name company and date. of insurance or by neglect to make inquiries as to such facts where they are distinctly
The lower court ruled against the company on lack of evidence. implied in other facts of which information is communicated.
Appellant further maintains that when the insured was examined in connection with his Where a question appears to be not answered at all or to be imperfectly answered, and
application for life insurance, he gave the appellant's medical examiner false and the insurers issue a policy without any further inquiry, they waive the imperfection of
misleading information as to his ailment and previous operation. The company the answer and render the omission to answer more fully immaterial.
contended that he was operated on for peptic ulcer 2 years before the policy was The company or its medical examiner did not make any further inquiries on such
applied for and that he never disclosed such an operation. matters from the hospital before acting on the application for insurance. The fact of the
matter is that the defendant was too eager to accept the application and receive the
Issue: WON Asian Crusader was deceived into entering the contract or in accepting the insured's premium. It would be inequitable now to allow the defendant to avoid liability
risk at the rate of premium agreed upon because of insured's representation? under the circumstances

Held: No. Petition dismissed.


Case No 9
Ratio:
Section 27 of the Insurance Law: Saturnino v. Philamlife - False Representation
Facts: The question to determine is: Are the facts then falsely represented material? The
> 2 months prior to the insurance of the policy, Saturnino was operated on for cancer, Insurance Law provides that “materiality is to be determined not by the event, but
involving complete removal of the right breast, including the pectoral muscles and the solely by the probable and reasonable influence of the facts upon the party to whom
glands, found in the right armpit. the communication is due, in forming his estimate of the proposed contract, or making
his inquiries.
> Notwithstanding the fact of her operation, Saturnino did not make a disclosure
thereof in her application for insurance.

> She stated therein that she did not have, nor had she ever had, among others listed The contention of appellants is that the facts subject of the representation were not
in the application, cancer or other tumors; that she had not consulted any physician, material in view of the non-medical nature of the insurance applied for, which does
undergone any operation or suffered any injury within the preceding 5 years. away with the usual requirement of medical examination before the policy is issued.
The contention is without merit. If anything, the waiver of medical examination
> She also stated that she had never been treated for, nor did she ever have any illness renders even more material the information required of the applicant concerning
or disease peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual previous condition of health and diseases suffered, for such information necessarily
disorders. constitutes an important factor which the insurer takes into consideration in deciding
whether to issue the policy or not.
> The application also recited that the declarations of Saturnino constituted a further
basis for the issuance of the policy.

Appellants also contend that there was no fraudulent concealment of the truth
inasmuch as the insured herself did not know, since her doctor never told her, that the
Issue: disease for which she had been operated on was cancer. In the first place, concealment
of the fact of the operation itself was fraudulent, as there could not have been any
mistake about it, no matter what the ailment.
Whether or not the insured made such false representation of material facts as to avoid
the policy.

Secondly, in order to avoid a policy, it is not necessary to show actual fraud on the part
of the insured. In this jurisdiction, concealment, whether intentional or unintentional
Held: entitled the insurer to rescind the contract of insurance, concealment being defined as
YES. “negligence to communicate that which a party knows and ought to communicate.”
The basis of the rule vitiating the contract in cases of concealment is that it misleads or
There can be no dispute that the information given by her in the application for deceives the insurer into accepting the risk, or accepting it at a rate of premium agreed
insurance was false, namely, that she never had cancer or tumors or consulted any upon. The insurer, relying upon the belief that the insured will disclose every material
physician or undergone any operation within the preceding period of 5 years. fact within his actual or presumed knowledge, is misled into a belief that the
circumstances withheld does not exist, and he is thereby induced to estimate the risk
upon a false basis that it does not exist.

Case 10
contained in the said policy constituted a waiver of such condition, similar to Que
Edilon case Chee Gan vs. Law Union Insurance.
Carmen O, Lapuz applied with Manila Bankers for insurance coverage against accident The insurance company was aware, even before the policies were issued, that in the
and injuries. She gave the date of her birth as July 11, 1904. She paid the sum of P20.00 premises insured there were only two fire hydrants contrary to the requirements of
representing the premium for which she was issued the corresponding receipt. The the warranty in question.
policy was to be effective for 90 days. It is usually held that where the insurer, at the time of the issuance of a policy of
During the effectivity, Carmen O. Lapuz died in a vehicular accident in the North insurance, has knowledge of existing facts which, if insisted on, would invalidate the
Diversion Road. contract from its very inception, such knowledge constitutes a waiver of conditions in
Petitioner Regina L. Edillon, a sister of the insured and the beneficiary in the policy, filed the contract inconsistent with the known facts, and the insurer is stopped thereafter
her claim for the proceeds of the insurance. Her claim having been denied, Regina L. from asserting the breach of such conditions.
Edillon instituted this action in the trial court. To allow a company to accept one's money for a policy of insurance which it then
The insurance corporation relies on a provision contained in the contract excluding its knows to be void and of no effect, though it knows as it must, that the assured
liability to pay claims under the policy in behalf of "persons who are under the age of believes it to be valid and binding, is so contrary to the dictates of honesty and fair
sixteen (16) years of age or over the age of sixty (60) years" They pointed out that the dealing.
insured was over sixty (60) years of age when she applied for the insurance coverage, Capital Insurance & Surety Co., Inc. vs. - involved a violation of the provision of the
hence the policy became void. policy requiring the payment of premiums before the insurance shall become
The trial court dismissed the complaint and ordered edillon to pay P1000. The reason effective. The company issued the policy upon the execution of a promissory note for
was that a policy of insurance being a contract of adhesion, it was the duty of the the payment of the premium. A check given subsequent by the insured as partial
insured to know the terms of the contract he or she is entering into. payment of the premium was dishonored for lack of funds. Despite such deviation
The insured could not have been qualified under the conditions stated in said contract from the terms of the policy, the insurer was held liable.
and should have asked for a refund of the premium. “... is that although one of conditions of an insurance policy is that "it shall not be
valid or binding until the first premium is paid", if it is silent as to the mode of
Issue: payment, promissory notes received by the company must be deemed to have been
Whether or not the acceptance by the insurance corporation of the premium and the accepted in payment of the premium. In other words, a requirement for the payment
issuance of the corresponding certificate of insurance should be deemed a waiver of of the first or initial premium in advance or actual cash may be waived by acceptance
the exclusionary condition of coverage stated in the policy. of a promissory note...”

Held: Yes. Petition granted.


Case 11
Ratio:
The age of Lapuz was not concealed to the insurance company. Her application clearly Philamcare Health Systems, Inc. v. Court of Appeals
indicated her age of the time of filing the same to be almost 65 years of age. Despite G.R. No. 125678, 18 March 2002, 379 SCRA 356
such information which could hardly be overlooked, the insurance corporation received
her payment of premium and issued the corresponding certificate of insurance without FACTS:
question.
There was sufficient time for the private respondent to process the application and to In 1988, Ernani Trinos applied for a health care insurance under the Philamcare Health
notice that the applicant was over 60 years of age and cancel the policy. Systems, Inc. He was asked if he was ever treated for high blood, heart trouble,
Under the circumstances, the insurance corporation is already deemed in estoppel. It diabetes, cancer, liver disease, asthma, or peptic ulcer; he answered no. His application
inaction to revoke the policy despite a departure from the exclusionary condition was approved and it was effective for one year. His coverage was subsequently renewed
twice for one year each. While the coverage was still in force in 1990, Ernani suffered a Abcede, Perla’s daughter, signed the application as sales counselor. Philam Plans issued
heart attack for which he was hospitalized. The cost of the hospitalization amounted to Pension Plan Agreement to Manuel, with petitioner Ma. Lourdes S. Florendo, his wife,
P76,000.00. Julita Trinos, wife of Ernani, filed a claim before Philamcare for the latter to as beneficiary. In time, Manuel paid his quarterly premiums. Eleven months later,
pay the hospitalization cost. Philamcare refused to pay as it alleged that Ernani failed to Manuel died of blood poisoning. Subsequently, Lourdes filed a claim with Philam Plans
disclose the fact that he was diabetic, hypertensive, and asthmatic. Julita ended up for the payment of the benefits under her husband’s plan but Philam Plans declined her
paying the hospital expenses. Ernani eventually died. In July 1990, Julita sued claim prompting her to file the present action against the pension plan company before
Philamcare for damages. Philamcare alleged that the health coverage is not an the Regional Trial Court (RTC) of Quezon City and ruled in favor of Ma. Lourdes.
insurance contract; that the concealment made by Ernani voided the agreement. However, the Court of Appeals then reversed the RTC decision. Hence this appeal.
ISSUE:
ISSUE: Whether or not Ma. Lourdes could claim benefits as the beneficiary of her husband
under the insurance plan despite consideration that her husband Manuel concealed the
Whether or not Philamcare can avoid the health coverage agreement. true condition of his health.
RULING:
HELD: The Supreme Court answers this to the negative and the AFFIRMED in its entirety the
decision of the Court of Appeals.
No. The comprehensive pension plan that Philam Plans issued contains a one-year
The health coverage agreement (health care agreement) entered upon by Ernani with incontestability period. It states:
Philamcare is a non-life insurance contract and is covered by the Insurance Law. It is VIII. INCONTESTABILITY
primarily a contract of indemnity. Once the member incurs hospital, medical or any After this Agreement has remained in force for one (1) year, we can no longer contest
other expense arising from sickness, injury or other stipulated contingent, the health for health reasons any claim for insurance under this Agreement, except for the reason
care provider must pay for the same to the extent agreed upon under the contract. that installment has not been paid (lapsed), or that you are not insurable at the time
There is no concealment on the part of Ernani. He answered the question with good you bought this pension program by reason of age. If this Agreement lapses but is
faith. He was not a medical doctor hence his statement in answering the question asked reinstated afterwards, the one (1) year contestability period shall start again on the
of him when he was applying is an opinion rather than a fact. Answers made in good date of approval of your request for reinstatement.
faith will not void the policy. The above incontestability clause precludes the insurer from disowning liability under
Further, Philamcare, in believing there was concealment, should have taken the the policy it issued on the ground of concealment or misrepresentation regarding the
necessary steps to void the health coverage agreement prior to the filing of the suit by health of the insured after a year of its issuance.
Julita. Philamcare never gave notice to Julita of the fact that they are voiding the Since Manuel died on the eleventh month following the issuance of his plan, the one
agreement. Therefore, Philamcare should pay the expenses paid by Julita. year incontestability period has not yet set in. Consequently, Philam Plans was not
barred from questioning Lourdes’ entitlement to the benefits of her husband’s pension
plan.
Case 12
MA. LOURDES S. FLORENDO, Petitioner,
vs.
PHILAM PLANS, INC., PERLA ABCEDE MA. CELESTE ABCEDE, Respondents.
FACTS: REPRESENTATION
Manuel Florendo filed an application for comprehensive pension plan with respondent Case 13
Philam Plans, Inc. (Philam Plans) Manuel signed the application and left to Perla the
task of supplying the information needed in the application. Respondent Ma. Celeste Insular Life v. Feliciano - Concealment
character to the third person as its agent should be the one to bear the loss. Hence,
Facts: Insular is liable to the beneficiaries.
> Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of
its agents.

> It appears that during that time, Evaristo was already suffering from tuberculosis. PREMIUM
Such fact appeared during the medical exam, but the examiner and the company’s
agent ignored it. Case 14

> After that, Evaristo was made to sign an application form and thereafter the blank
spaces were filled by the medical examiner and the agent making it appear that Evaristo UCPB v Masagana G.R. No. 137172. April 4, 2001
was a fit subject of insurance. (Evaristo could not read and understand English)
Facts:
> When Evaristo died, Insular life refused to pay the proceeds because of concealment. In our decision of 15 June 1999 in this case, we reversed and set aside the assailed
decision[1] of the Court of Appeals, which affirmed with modification the judgment of
the trial court (a) allowing Respondent to consign the sum of P225,753.95 as full
payment of the premiums for the renewal of the five insurance policies on
Issue: Respondent’s properties; (b) declaring the replacement-renewal policies effective and
Whether or not Insular Life was bound by their agent’s acts. binding from 22 May 1992 until 22 May 1993; and (c) ordering Petitioner to pay
Respondent P18,645,000.00 as indemnity for the burned properties covered by the
renewal-replacement policies. The modification consisted in the (1) deletion of the trial
court’s declaration that three of the policies were in force from August 1991 to August
Held: 1992; and (2) reduction of the award of the attorney’s fees from 25% to 10% of the
Yes. total amount due the Respondent.
Masagana obtained from UCPB five (5) insurance policies on its Manila properties.
The insurance business has grown so vast and lucrative within the past century. The policies were effective from May 22, 1991 to May 22, 1992. On June 13, 1992,
Nowadays, even people of modest means enter into insurance contracts. Agents who Masagana’s properties were razed by fire. On July 13, 1992, plaintiff tendered five
solicit contracts are paid large commissions on the policies secured by them. They act checks for P225,753.45 as renewal premium payments. A receipt was issued. On July
as general representatives of insurance companies. 14, 1992, Masagana made its formal demand for indemnification for the burned
insured properties. UCPB then rejected Masagana’s claims under the argument that the
fire took place before the tender of payment.
Hence Masagana filed this case.
IN the case at bar, the true state of health of the insured was concealed by the agents The Court of Appeals disagreed with UCPB’s argument that Masagana’s tender of
of the insurer. The insurer’s medical examiner approved the application knowing fully payment of the premiums on 13 July 1992 did not result in the renewal of the policies,
well that the applicant was sick. The situation is one in which of two innocent parties having been made beyond the effective date of renewal as provided under Policy
must bear a loss for his reliance upon a third person. In this case, it is the one Condition No. 26, which states:
who drafted and accepted the policy and consummated the contract. It seems 26. Renewal Clause. -- Unless the company at least forty five days in advance of the end
reasonable that as between the two of them, the one who employed and gave of the policy period mails or delivers to the assured at the address shown in the policy
notice of its intention not to renew the policy or to condition its renewal upon
reduction of limits or elimination of coverages, the assured shall be entitled to renew parties should be deemed in estoppel to question the arrangement they have
the policy upon payment of the premium due on the effective date of renewal. voluntarily accepted.
Both the Court of Appeals and the trial court found that sufficient proof exists that The Tuscany case has provided another exception to Section 77 that the insurer may
Masagana, which had procured insurance coverage from UCPB for a number of years, grant credit extension for the payment of the premium. If the insurer has granted the
had been granted a 60 to 90-day credit term for the renewal of the policies. Such a insured a credit term for the payment of the premium and loss occurs before the
practice had existed up to the time the claims were filed. Most of the premiums have expiration of the term, recovery on the policy should be allowed even though the
been paid for more than 60 days after the issuance. Also, no timely notice of non- premium is paid after the loss but within the credit term.
renewal was made by UCPB. Moreover, there is nothing in Section 77 which prohibits the parties in an insurance
The Supreme Court ruled against UCPB in the first case on the issue of whether the fire contract to provide a credit term within which to pay the premiums. That agreement is
insurance policies issued by petitioner to the respondent covering the period from May not against the law, morals, good customs, public order or public policy. The agreement
22, 1991 to May 22, 1992 had been extended or renewed by an implied credit binds the parties.
arrangement though actual payment of premium was tendered on a later date and It would be unjust if recovery on the policy would not be permitted against Petitioner,
after the occurrence of the risk insured against. which had consistently granted a 60- to 90-day credit term for the payment of
UCPB filed a motion for reconsideration. premiums. Estoppel bars it from taking refuge since Masagana relied in good faith on
The Supreme Court, upon observing the facts, affirmed that there was no valid notice of such practice. Estoppel then is the fifth exception
non-renewal of the policies in question, as there is no proof at all that the notice sent
by ordinary mail was received by Masagana. Also, the premiums were paid within the Case 15
grace period. Gaisano vs Development Bank
Facts:
Issue: Whether Section 77 of the Insurance Code of 1978 must be strictly applied to
Petitioner’s advantage despite its practice of granting a 60- to 90-day credit term for the Petitioner was the registered owner of a 1992 Mitsubishi Montero with plate number
payment of premiums. GTJ-777 (vehicle), while respondent is a domestic corporation engaged in the insurance
business. On September 27, 1996, respondent issued a comprehensive commercial
Held: No. Petition denied. vehicle policy to petitioner in the amount of Pl,500,000.00 over the vehicle for a period
of one year commencing on September 27, 1996 up to September 27, 1997.
Ratio: Respondent also issued two other commercial vehicle policies to petitioner covering
Section 77 of the Insurance Code provides: No policy or contract of insurance issued by two other motor vehicles for the same period. To collect the premiums and other
an insurance company is valid and binding unless and until the premium thereof has charges on the policies, respondent's agent, Trans-Pacific Underwriters Agency (Trans-
been paid… Pacific), issued a statement of account to petitioner's company, Noah's Ark
An exception to this section is Section 78 which provides: Any acknowledgment in a
policy or contract of insurance of the receipt of premium is conclusive evidence of its Merchandising (Noah's Ark). Noah's Ark immediately processed the payments and
payment, so far as to make the policy binding, notwithstanding any stipulation therein issued a Far East Bank check dated September 27, 1996 payable to Trans-Pacific on the
that it shall not be binding until premium is actually paid. same day. The check bearing the amount of Pl40,893.50 represents payment for the
Makati Tuscany v Court of Appeals- Section 77 may not apply if the parties have agreed three insurance policies, with P55,620.60 for the premium and other charges over the
to the payment in installments of the premium and partial payment has been made at vehicle. However, nobody from Trans-Pacific picked up the check that day (September
the time of loss. 27) because its president and general manager, Rolando Herradura, was celebrating his
Section 78 allows waiver by the insurer of the condition of prepayment and makes the birthday. Trans-Pacific informed Noah's Ark that its messenger would get the check the
policy binding despite the fact that premium is actually unpaid. Section 77 does not next day, September 28. In the evening of September 27, 1996, while under the official
expressly prohibit an agreement granting credit extension. At the very least, both custody of Noah's Ark marketing manager Achilles Pacquing (Pacquing) as a service
company vehicle, the vehicle was stolen in the vicinity of SM Megamall at Ortigas,
Mandaluyong City. Pacquing reported the loss to the Philippine National Police Traffic Facts:
Management Command at Camp Crame in Quezon City. Despite search and retrieval
efforts, the vehicle was not recovered. Oblivious of the incident, Trans-Pacific picked up Petitioner United Merchants Corporation (UMC) is engaged in the business of buying,
the check the next day, September 28. It issued an official receipt numbered 124713 selling, and manufacturing Christmas lights. UMC leased a warehouse at 19-B Dagot
dated September 28, 1996, acknowledging the receipt of P55,620.60 for the premium Street, San Jose Subdivision, Barrio Manresa, Quezon City, where UMC assembled and
and other charges over the vehicle. The check issued to Trans Pacific for Pl40,893.50 stored its products.
was deposited with Metrobank for encashment on October 1, 1996.
n 6 September 1995, UMC's General Manager Alfredo Tan insured UMC's stocks in
trade of Christmas lights against fire with defendant Country Bankers Insurance
Issue: Corporation (CBIC) for P15,000,000.00.

Whether there is a binding insurance contract between petitioner and respondent. On 7 May 1996, UMC and CBIC executed Endorsement F/96-154 and Fire Invoice No.
16583A to form part of the Insurance Policy. Endorsement F/96-154 provides that
UMC's stocks in trade were insured against additional perils, to wit: "typhoon, flood,
Ruling: ext. cover, and full earthquake."

The court deny the petition. Insurance is a contract whereby one undertakes for a The sum insured was also increased to P50,000,000.00 effective 7 May 1996 to 10
consideration to indemnify another against loss, damage or liability arising from an January 1997. On 9 May 1996, CBIC issued Endorsement F/96-157 where the name of
unknown or contingent event. Just like any other contract, it requires a cause or the assured was changed from Alfredo Tan to UMC.
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 On 3 July 1996, a fire gutted the warehouse rented by UMC.
forfeited by its own terms. The law, however, limits the parties' autonomy as to when
payment of premium may be made for the contract to take effect. The general rule in UMC demanded for at least fifty percent (50%) payment of its claim from CBIC.
insurance laws is that unless the premium is paid, the insurance policy is not valid and
binding. 10 January 1997, rejecting UMC's claim due to breach of Condition No. 15 of the
Insurance Policy. Condition No. 15... states:
Section 77 of the Insurance Code, applicable at the time of the issuance of the policy,
provides: Sec. 77. An insurer is entitled to payment of the premium as soon as the thing If the claim be in any respect fraudulent, or if any false declaration be made or used in
insured is exposed to the peril insured against. Notwithstanding any agreement to the support thereof, or if any fraudulent means or devices are used by the Insured or
contrary, no policy or contract of insurance issued by an insurance company is valid and anyone acting in his behalf to obtain any benefit under this Policy; or if the loss or
binding unless and until the premium thereof has been paid, except in the case of a life damage... be occasioned by the willful act, or with the connivance of the Insured, all the
or an industrial life policy whenever the grace period provision applies. benefits under this Policy shall be forfeited

The Bureau further certifies that no evidence was gathered to prove that the
establishment was willfully, feloniously and intentionally set on fire.
LOSS
That the investigation of the fire incident is already closed being ACCIDENTAL in nature.
United Merchants vs Country Bankers
In its Answer with Compulsory Counterclaim[9] dated 4 March 1998, CBIC admitted the
issuance of the Insurance Policy to UMC but raised the following defenses: (1) that the In prosecutions for arson, proof of the crime charged is complete where the evidence
Complaint states no cause of action; (2) that UMC's claim has already... prescribed; and establishes: (1) the corpus delicti, that is, a fire caused by a criminal act; and (2) the
(3) that UMC's fire claim is tainted with fraud. identity of the defendants as the one responsible for the crime.[25]

BIC alleged that UMC's claim was fraudulent because UMC's Statement of Inventory Corpus delicti means the substance of the crime, the fact that a crime has actually been
showed that it had no stocks in trade as of 31 December 1995, and that UMC's committed.[26] This is satisfied by proof of the bare occurrence of the fire and of its
suspicious purchases for the year 1996 did... not even amount to P25,000,000.00. having been intentionally caused.

Issues: CBIC's failure to prove arson does not mean that it also failed to prove fraud.

WHETHER THE COURT OF APPEALS MADE A RULING INCO[N]SISTENT WITH LAW, In the present case, arson and fraud are two separate grounds based on two different
APPLICABLE JURISPRUDENCE AND EVIDENCE AS TO THE EXISTENCE OF ARSON AND sets of evidence, either of which can void the insurance claim of UMC.
FRAUD IN THE ABSENCE OF "MATERIALLY CONVINCING EVIDENCE."
on the allegation of fraud, we affirm the... findings of the Court of Appeals.
II.
WHETHER THE COURT OF APPEALS MADE A RULING INCONSISTENT WITH LAW, Condition No. 15
APPLICABLE JURISPRUDENCE AND EVIDENCE WHEN IT FOUND THAT PETITIONER
BREACHED ITS WARRANTY.[16] 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
Ruling: anyone acting in his behalf to obtain any benefit under this Policy; or if the loss or...
n insurer who seeks to defeat a claim because of an exception or limitation in the policy damage be occasioned by the willful act, or with the connivance of the Insured, all the
has the burden of establishing that the loss comes within the purview of the exception benefits under this Policy shall be forfeited.
or limitatio either amount in UMC's Income Statement or Financial Reports is twenty-five times the
claim UMC seeks to enforce.
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 It has long been settled that a false and material statement made with an intent to
exception or limitation. deceive or defraud voids an insurance policy.

In the present case, CBIC failed to discharge its primordial burden of... establishing that in fire insurance policies, which contain provisions such as Condition No. 15 of the
the damage or loss was caused by arson, a limitation in the policy. 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
n prosecutions for arson, proof of the crime charged is complete where the evidence the insurer.
establishes: (1) the corpus delicti, that is, a fire caused by a criminal act; and (2) the
identity of the defendants as the one responsible for the crime.[25] WHEREFORE, we DENY the petition.

Corpus delicti means the substance of the crime, the fact that a crime has actually been The Business of Insurance
committed.[26] This is satisfied by proof of the bare occurrence of the fire and of its
having been inten Republic v Del Monte Motors
Facts: exclusion of all others. The other parties may have their own claims against the
Vilfran Liner lost in a case against Del Monte Motors. They were made to pay 11 million insurance company under other insurance contracts it has entered into.”
pesos for service contracts with Del Monte, and such was sourced from the 2. The Insurance Code has vested the Office of the Insurance Commission with both
counterbond posted by Vilfran. CISCO issued the counterbond. CISCO opposed but was regulatory and adjudicatory authority over insurance matters.
rebuffed. The RTC released a motion for execution commanding the sheriff to levy the Under Sec 414 of the Insurance Code, "The Commissioner may issue such rulings,
amount on the property of CISCO. To completely satisfy the amount, the Insurance instructions, circulars, orders and decisions as he may deem necessary to secure the
Commissioner was also commanded to withdraw the security deposit filed by CISCO enforcement of the provisions of this Code.”
with the Commission according to Sec 203 of the Insurance Code. “The commissioner is authorized to (1) issue (or to refuse to issue) certificates of
Insurance Commissioner Malinis was ordered by the RTC to withdraw the security bond authority to persons or entities desiring to engage in insurance business in the
of CISCO for the payment of the insurance indemnity won by Del Monte Motor against Philippines;16 (2) revoke or suspend these certificates of authority upon finding
Vilfran Liner, the insured. grounds for the revocation or suspension; (3) impose upon insurance companies, their
Malinis didn’t obey the order, so the respondent moved to cite him in contempt of directors and/or officers and/or agents appropriate penalties -- fines, suspension or
Court. The RTC ruled against Malinis because he didn’t have legal basis. removal from office -- for failing to comply with the Code or with any of the
commissioner's orders, instructions, regulations or rulings, or for otherwise conducting
Issues: business in an unsafe or unsound manner.”
1. Whether or not the security deposit held by the Insurance Commissioner pursuant to Included here is the duty to hold security deposits under Secs 191 and 202 of the Code
Section 203 of the Insurance Code may be levied or garnished in favor of only one for the benefit of policy holders. Sec 192, on the other hand, states:
insured. “the securities deposited as aforesaid shall be returned upon the company's making
2. Whether or not the Insurance Commissioner has power to withhold the release of application therefor and proving to the satisfaction of the Commissioner that it has no
the security deposit. further liability under any of its policies in the Philippines.”
He has been given great discretion to regulate the business to protect the public. Also
Held: No. Yes. Petition granted. “An implied trust is created by the law for the benefit of all claimants under subsisting
insurance contracts issued by the insurance company.” He believed that the security
Ratio: deposit was exempt from execution to protect the policy holders.
1. Sec 203- No judgment creditor or other claimant shall have the right to levy upon any
of the securities of the insurer held on deposit pursuant to the requirement of the
Commissioner.
The court also claimed that the security deposit shall be (1) answerable for all the READ HEIRS OF ALVAREZ CASE FOR REPRESENTATION/ CONCEALMENT
obligations of the depositing insurer under its insurance contracts; (2) at all times free
from any liens or encumbrance; and (3) exempt from levy by any claimant.
“To allow the garnishment of that deposit would impair the fund by decreasing it to less
than the percentage of paid-up capital that the law requires to be maintained. Further,
this move would create, in favor of respondent, a preference of credit over the other
policy holders and beneficiaries.”
“Also, the securities are held as a contingency fund to answer for the claims against the
insurance company by all its policy holders and their beneficiaries. This step is taken in
the event that the company becomes insolvent or otherwise unable to satisfy the
claims against it. Thus, a single claimant may not lay stake on the securities to the