Beneficiary; Death of Insured Due to Beneficiary (A) How much, if any, can Armando recover from

(2008) either or both insurance companies? (2%)

No.VI. On January 1, 2000, Antonio Rivera secured a life SUGGESTED ANSWER:

insurance from SOS Insurance Corp. for P1 Million with
Gemma Rivera, his adopted daughter, as the beneficiary. Armando can receive P5 million from Second Insurance
Antonio Rivera died on March 4, 2005 and in the police Company. As mortgagee, he had an insurable interest in
investigation, it was ascertained that Gemma Rivera the building (Panlileo v. Cosio, 97 Phil. 919 (1955)).
participated as an accessory in the killing of Antonio Armando cannot collect anything from First Insurance
Rivera. Can SOS Insurance Corp. avoid liability by setting Company. First Insurance Company is not liable for the
up as a defense the participation of Gemma Rivera in the loss of the building. First, it was due to a willful act of
killing of Antonio Rivera? Discuss with reasons.(4%) Mario, who committed arson (Section 87 of the Insurance
Code; East Furnitures, Inc. v. Globe & Rutgers Fire
SUGGESTED ANSWER: Insurance Company, 57 Phil. 576 (1932)). Second, fire
insurance policies contain a warranty that the insured will
Under Sec. 12 of the Insurance Code. The interest of a not store hazardous materials within the insured premises.
beneficiary shall be forfeited when the beneficiary is the Mario breached this warranty when he stored inflammable
principal, accomplice, or accessory in willfully bringing materials in the building. (Young v. Midland Textile
about the death of the insured. In which event, the nearest Insurance Company, 30 Phil. 617 (1915)).These two
relative of the insured shall receive the proceeds of said factors exonerate First Insurance Company from liability to
insurance, if not otherwise disqualified. Thus, the Armando as mortgagee even though it was Mario who
insurance company must still pay out the proceed of the committed them (Section 8 of the Insurance Code).
life insurance policy to the nearest qualified relative of the
insured. (B) What happens to the P10 million debt of Mario to
Armando? Explain. (3%) SUGGESTED ANSWER:
Concealment; Material Concealment (2013)
Since Armando would have collected P5 million from
No.II. Benny applied for life insurance for Php 1.5 Million. Second Insurance Company, this amount should be
The insurance company approved his application and considered as partial payment of the loan. Armando can
issued an insurance policy effective Nov, 6, 2008. Benny only collect the balance of P5 million (Panlileo v. Cosio,
named his children as his beneficiaries. On April 6, 2010, supra). Second Insurance Company can recover from
Benny died of hepatoma, a liver ailment. Mario the amount of P5 million it paid, because it became
The insurance company denied the children’s claim for the subrogated to the rights of Armando (Panlileo v. Cosio,
proceeds of the insurance policy on the ground that Benny supra).
failed to disclose in his application two previous Insurance; Double Insurance, Validity (2012)
Insurance Bar Qs 1
consultations with his doctors for diabetes and
hypertension, and that he had been diagnosed to be No.V X borrowed from CCC Bank. She mortgaged her
suffering from hepatoma. The insurance company also house and lot in favor of the bank. X insured her house.
rescinded the policy and refunded the premiums paid. The bank also got the house insured.

Was the insurance company correct? (8%) (A) Is this double insurance? Explain your answer.
(3%)
SUGGESTED ANSWER
SUGGESTED ANSWER
The insurance company correctly rescinded the policy
because of concealment (Section 27 of Insurance Code). No, there is no double insurance. Double insurance exists
Benny did not disclose that he was suffering from where the same person is insured by several insurers
diabetes, hypertension, and hepatoma. The concealment separately with respect to the same subject and interest.
is material, because these are serious ailments (Florendo (Sec. 93, Insurance Code)
v. Philam Plans, Inc., 666 SCRA 618, 2012). Benny died
less than two years from the date of the issuance of the (B) Is this legally valid? Explain your answer. (3%)
policy (Section 48 of Insurance Code). SUGGESTED ANSWER:
Insurable Interest; Building Destroyed by Fire (2010) Yes, X and CCC Bank can both insure the house as they
No.X. To secure a loan of P10 million, Mario mortgaged have different insurable interest therein. X, the borrower
his building to Armando. In accordance with the loan mortgagor, has an insurable interest in the house being
arrangements, Mario had the building insured with First the owner thereof while CCC Bank, the lender, also has
Insurance Company for P10 million, designating Armando an insurable interest in the house as mortgagee thereof.
as the beneficiary. (C) In case of damage, can X and CCC Bank
Armando also took an insurance of the building upon his separately claim for the insurance proceeds? (4%)
own interest with Second Insurance Company for P5 SUGGESTED ANSWER:
million.
Yes. If X obtained an open policy then she could claim an
The building was totally destroyed by fire, a peril insured amount corresponding to the extent of the damage based
against under both insurance policies. It was subsequent on the value of the house determined as of the date the
determined that the fire had been intentionally started by damage occurred, but not to exceed the face value of the
Mario and that in violation of the loan agreement, he had insurance policy; however, if she obtained a valued policy
been storing inflammable materials in the building. then she could claim an amount corresponding to the
extent of the damage based on the agreed upon valuation
of the house.
As for CCC Bank, it could claim an amount corresponding procured by Ciriaco, SBC demanded from FUIC that the
to the extent of the damage but not to exceed the amount proceeds of the insurance policy be paid directly to it, as
of the loan it extended to X or so much thereof as may provided in the lease contract.
remain unpaid.
Who is legally entitled to receive the insurance
Insurance; Perfection of Insurance Contracts (2009) proceeds? Explain. (4%)

No.IV. Antarctica Life Assurance Corporation (ALAC) SUGGESTED ANSWER:

publicly offered a specially designed insurance policy
covering persons between the ages of 50 to 75 who may Ciriaco is entitled to receive the proceeds of the insurance
be afflicted with serious and debilitating illnesses. Quirico policy. The stipulation that the policy is deemed assigned
applied for insurance coverage, stating that he was and transferred to SBC is void, because SBC has no
already 80 years old. Nonetheless, ALAC approved his insurable interest in the merchandise of Ciriaco (Cha v.
application. Court of Appeals, 277 SCRA 690 (1997))

Quirico then requested ALAC for the issuance of a cover Insurance; Property Insurance; Late Payment of
note while he was trying to raise funds to pay the Premiums (2010)
insurance premium. ALAC granted the request. Ten days No.XI. Enrique obtained from Seguro Insurance Company
after he received the cover note, Quirico had a heart a comprehensive motor vehicle insurance to cover his top
seizure and had to be hospitalized. He then filed a claim of the line Aston martin. The policy was issued on March
on the policy. 31, 2010 and, on even date, Enrique paid the premium
(A) Can ALAC validly deny the claim on the ground with a personal check postdated April 6, 2010 On April 5,
that the insurance coverage, as publicly offered, was 2010, the car was involved in an accident that resulted in
available only to persons 50 to 75 years of age? Why or its total loss.
why not? (2%) On April 10, 2010, the drawee bank returned Enrique’s
SUGGESTED ANSWER: check with the notation―Insurance funds.‖ Upon
notification, Enrique immediately deposited additional
No. By approving the application of Quirino who disclosed funds with the bank and asked the insurer to redeposit the
that he was already 80 years old, ALAC waived the age check.
requirement. ALAC is now estopped from raising such
defense of age of the insured. Enrique thereupon claimed indemnity from the insurer. Is
the insurer liable under the insurance coverage? Why or
(B) Did ALAC’s issuance of a cover note result in the why not? (3%)
perfection of an insurance contract between Quirico and
Insurance
ALAC? Bar Qs
Explain. (3%) SUGGESTED ANSWER: 2

SUGGESTED ANSWER: The insurer is not liable under the insurance policy. Under
Article 1249 of the Civil Code, the delivery of a check
The issuance of a cover note by ALAC resulted in the produces the effect of payment only when it is encashed.
perfection of the contract of insurance. In that case, it is The loss occurred on April 5, 2010. When the check was
only because there is delay in the issuance of the policy deposited, it was returned on April 10, 2010, for
that the cover notes was issued. insufficiency of funds. The check was honored only after
Enrique deposited additional funds with the bank. Hence,
The cover note is a receipt whereby the company agrees it did not produce the effect of payment (Vitug,
to insure the insured for 60 days pending the issuance of Commercial Laws and Jurisprudence, Vol. I, p.250).
a regular policy. No separate premium is to be paid on a
cover note. It is not a separate policy but is integrated in ALTERNATIVE ANSWER:
the regular policy to be subsequently issued.
Yes. The insurer is liable. The insurance policy was
Insurance; Property Insurance; Assignments (2009) issued. In effect, there was a grant of credit for the
payment of the premium. The insurer can deduct the
No.XIII. Ciriaco leased a commercial apartment from amount of the check from the proceeds of the insurance.
Supreme Building Corporation (SBC). One of the
provisions of the one-year lease contract states: Insurance; Property Insurance; Payment of Premiums
by Check (2007)
―18.xxx The LESSEE shall not insure against fire the
chattels, merchandise, textiles, goods and effects placed No.IV. Alfredo took out a policy to insure this commercial
at any stall or store or space in the leased premises building fire. The broker for the insurance company
without first obtaining the written consent of the LESSOR. agreed to give a 15-day credit within which pay the
If the LESSEE obtains fire insurance coverage without the insurance premium. Upon delivery of the policy on May
consent of the LESSOR, the insurance policy is deemed 15, 2006, Alfredo issued a postdated check payable on
assigned and transferred to the LESSOR for the latter’s May 30, 2006. On May 28, 2006, a fire broke out and
benefit. destroyed the building owned by Alfredo. (10%)

Notwithstanding the stipulation in the contract, without the (A) May Alfredo recover on the insurance policy?
consent of SBC, Ciriaco insured the merchandise inside
the leased premises against loss by fire in the amount of SUGGESTED ANSWER:
P500, 000 with First United Insurance Corporation (FUIC). Yes, Alfredo may recover on the policy. It is valid to
A day before the lease contract expired, fire broke out stipulate that the insured will be granted credit term for
inside the leased premises, damaging Ciriaco’s payment of premium. Payment by means of a check which
merchandise. Having learned of the insurance earlier was accepted by the insurer, bearing a date prior to the
loss, would be sufficient. The subsequent effects of No.VII. Terrazas de Patio Verde, a condominium building,
encashment retroact to the date of the check (UCPB has a value of P50 Million. The owner insured the building
General Insurance Co., Inc. v. Masagana Telamart, Inc., against fire with three (3) insurance companies for the
356 SCRA 307 [2001]). following amounts:

(B) Would your answer in (a) be the same if it was Northern Insurance Corp. – P20 Million Southern
found that the proximate cause of the fire was an Insurance Corp. – P30 Million Eastern Insurance Corp. –
explosion and that fire was but the immediate cause of P50 Million
loss and there is no excepted peril under the policy?
(A) Is the owner’s taking of insurance for the building
SUGGESTED ANSWER: with three (3) insurers valid? Discuss. (3%)

Yes, recovery under the insurance contract is allowed if SUGGESTED ANSWER:

the cause of the loss was either the proximate or the
immediate cause as long as an excepted peril, if any was Taking out insurance covering the same property, same
not the proximate cause of the loss (Section 86, Insurance insurable interest and same risk with three insurance
Code of the Philippines). companies is “double insurance,” recognized under Sec.
93 of the Insurance Code. However, in American Home
(C) If the fire was found to have been caused by Assurance Co. v, Chua, G.R. No. 130421, 28 June 1999,
Alfredo’s own negligence, can he still recover on the the court referred to the common inclusion of the “other
policy? insurance clause” in fire insurance policies, requiring
disclosure of co-insurance of the same property with other
Reason briefly in (a), (b) and (c). insurers.
SUGGESTED ANSWER: (B) The Building was totally razed by fire. If the owner
Yes, mere negligence on the part of the insured will not decides to claim from Eastern Insurance Corp. only P50
prevent recovery under the insurance policy. The law Million, will the claim prosper? Explain. (2%)
merely prevents recovery when the cause of loss is the SUGGESTED ANSWER:
willful act of the insured, alone or in connivance with
others (Section 87, Insurance Code of The Philippines). Insured can recover from Eastern Insurance Corp. up to
the extent of his loss. However, Eastern may refuse to pay
Insurance; Property Insurance; Payment of Premiums if the policy contains an “other insurance clause”
even after Loss (2013) stipulating that non-disclosure of double insurance will
No.VII. Stable Insurance Co. (SIC) and St. Peter avoid the policy (Geagonia v. Country Bankers Insurance,
Manufacturing Co. (SPMC) have had a long-standing G.R. No. 114427, 06 February 1995.) As there is no
Insurance Bar Qs
insurance relationship with each other; SPMC secures the indication of a contractual prohibition on double or other 3
comprehensive fire insurance on its plant and facilities insurance, all insurance contracts over the building are
from SIC. The standing business practice between them deemed valid and enforceable.
has been to allow SPMC a credit period of 90 days from The law prohibits double or over-recovery, not double
the renewal of the policy with which to pay the premium. insurance. Since Eastern insured the property up 50% of
Soon after the new policy was issued and before premium the total coverage, it is liable for only 50% of the total
payments could be made, a fire gutted the covered plant actual loss. Eastern insurance Corp. is liable to the extent
and facilities to the ground. The day after the fire, SPMC of its coverage but may recover one-half of the total
issued a manager’s check to SIC for the fire insurance indemnity from the co-insurers in the proportion of 60%
premium, for which it was issued a receipt; a week later (Southern Insurance) – 40% (Northern Insurance).
SPMC issued its notice of loss. Beneficiary: Effects: Irrevocable Beneficiary (2005)
SIC responded by issuing its own manager’s check for the What are the effects of an irrevocable designation of a
amount of the premiums SPMC had paid, and denied beneficiary under the Insurance Code? Explain. (2%)
SPMC’s claim on the ground that under the cash and
carry‖ principle governing fire insurance, no coverage SUGGESTED ANSWER:
existed at the time the fire occurred because the
insurance premium had not been paid. The irrevocable designation gives the beneficiary a vested
right over Life Insurance. The Insured cannot act to divest
Is SPMC entitled to recover for the loss form SIC? (8%) the irrevocable beneficiary, in whole or in part, without the
beneficiary's consent. To be specific:
SUGGESTED ANSWER:
(1) The beneficiary designated in a life insurance
St. Peter Manufacturing Company is entitled to recover for contract cannot be changed without the consent of the
the loss from stable Insurance Company. Stable beneficiary because he has a vested interest in the policy
Insurance Company granted a credit term to pay the (Philamlife v. Pineda, G.R. No. 54216, July 19, 1989,
premiums. This is not against the law, because the citing Gcrcio v. Sun Life, G.R. No. 23703, September 28,
standing business practice of allowing St. Peter 1925; and Go v. Redfern, G.R. No. 47705, April 25, 1841);
Manufacturing Company to pay the premiums after 60 or
90 days, was relied upon in good faith by SPMC. Stable (2) Neither can the Insured take the cash surrender
Insurance Company is in estoppel (UCPB General value, assign or even borrow on said policy without the
Insurance Company, Inc. v. Masagana Telemart, Inc. 356 beneficiary's consent (Nario v. Philamlife, G.R. No. 22796,
SCRA 307, 2001). June 26, 1967);

Insurer: Effects: Several Insurers (2008) (3) The Insured cannot add another beneficiary
because that would reduce the amount which the first
beneficiary may recover and therefore adversely affect his No. The concealed fact is material to the approval and
vested right (Go v. Redfem, G.R. No. 47705, April 25, issuance of the insurance policy. It is well settled that the
1941); insured need not die of the disease he failed to disclose to
the insurer. It is sufficient that his nondisclosure misled the
(4) Unless the policy allows, the Insured cannot even insurer in forming his estimate of the risks of the proposed
designate another beneficiary should the original insurance policy or in making inquiries.
beneficiary predecease him. His estate acquires the
beneficiary's vested right upon his death; and Concealment; Material Concealment: Incontestability
Clause (1994)
(5) The Insured cannot allow his creditors to attach or
execute on the policy. (Philamlife v. Pineda, G.R. No. On September 23, 1990, Tan took a life insurance policy
54216, July 19, 1989) from Philam. The policy was issued on November 6, 1990.
He died on April 26, 1992 of hepatoma. The insurance
Beneficiary: Rights; Irrevocable Beneficiary (2005) company denied the beneficiaries‘ claim and rescinded
Jacob obtained a life insurance policy for P1 Million the policy by reason of alleged misrepresentation and
designating irrevocably Diwata, a friend, as his concealment of material facts made by Tan in his
beneficiary. Jacob, however, changed his mind and wants application. It returned the premiums paid.
Yob and Jojo, his other friends, to be included as The beneficiaries contend that the company had no right
beneficiaries considering that the proceeds of the policy to rescind the contract as rescission must be done during
are sufficient for the three friends. Can Jacob still add Yob the lifetime of the insured within two years and prior to the
and Jojo as his beneficiaries? Explain. (2%) commencement of the action. Is the contention of the
SUGGESTED ANSWER: beneficiaries tenable?

No, Jacob can no longer add Yob and Jojo as his SUGGESTED ANSWER:
beneficiaries in addition to Diwata. As the irrevocable No. The incontestability clause does not apply. The
beneficiary, Diwata has acquired a vested right over insured dies within less than two years from the issuance
Jacob's life insurance policy. Any additional beneficiaries of the policy on September 23, 1990. The insured died on
will reduce the amount which Diwata, as the first April 26, 1992, or less than 2 years from September 23,
beneficiary, may recover, which will adversely affect her 1990.
vested right. (Go v. Redfern, G.R. No. 47705, April 25,
1941) The right of the insurer to rescind is only lost if the
beneficiary has commenced an action on the policy. There
Beneficiary; Life Insurance; Prohibited Beneficiaries is no such action in this case. (Tan v CA 174 s 143)
(1998)
Insurance Bar Qs Concealment; Material Concealment: Incontestability 4
Juan de la Cruz was issued Policy No. 8888 of the Clause (1996)
Midland Life Insurance Co on a whole life plan for P20,000
on August 19, 1989. Juan is married to Cynthia with whom Juan procured a non-medical life insurance from Good
he has three legitimate children. He, however, designated Life Insurance. He designated his wife, Petra, as the
Purita, his common-law wife, as the revocable beneficiary. beneficiary. Earlier, in his application in response to the
Juan referred to Purita in his application and policy as the question as to whether or not he had ever been
legal wife. 3 years later, Juan died. Purita filed her claim hospitalized, he answered in the negative. He forgot to
for the proceeds of the policy as the designated mention his confinement at the Kidney Hospital.
beneficiary therein. The widow, Cynthia, also filed a claim
as the legal wife. To whom should the proceeds of the After Juan died in a plane crash, Petra filed a claim with
insurance policy be awarded? (5%) Good Life. Discovering Juan‘s previous hospitalization,
Good Life rejected Petra‘s claim on the ground of
SUGGESTED ANSWER: concealment and misrepresentation. Petra sued Good
Life, invoking good faith on part of Juan.
The proceeds of the insurance policy shall be awarded to
the ESTATE of Juan de la Cruz. Purita, the common- law- Will Petra‘s suit prosper? Explain.
wife, is disqualified as the beneficiary of the deceased
because of illicit relation between the deceased and SUGGESTED ANSWER:
Purita, the designated beneficiary. Due to such illicit No, Petra‘s suit will not prosper (assuming that the policy
relation, Purita cannot be a donee of the deceased. of life insurance has been in force for a period of less than
Hence, she cannot also be his beneficiary. 2 years from the date of its issue). The matters which
Concealment; Material Concealment (2001) Juan failed to disclose was material and relevant to the
approval and issuance of the insurance policy. They would
A applied for a non-medical life insurance. The insured did have affected Good Life‘s action on his application, either
not inform the insurer that one week prior to his by approving it with the corresponding adjustment for a
application for insurance, he was examined and confined higher premium or rejecting the same. Moreover, a
at St. Luke‘s Hospital where he was diagnosed for lung disclosure may have warranted a medical examination of
cancer. The insured soon thereafter died in a plane crash. Juan by Good Life in order for it to reasonably assess the
Is the insurer liable considering that the fact concealed risk involved in accepting the application. In any case,
had no bearing with the cause of death of the insured? good faith is no defense in concealment. The waiver of a
Why? (5%) medical examination in the non-medical‘ life insurance
from Good Life makes it even more necessary that Juan
SUGGESTED ANSWER: supply complete information about his previous
hospitalization for such information constitutes an
important factor which Good Life takes into consideration from invoking the ground of misrepresentation as a
in deciding whether to issue the policy or not. (See Sunlife defense in the action for recovery. This is alright since the
Assurance Co of Canada v CA GR 105135, June 22, 1995 bar problem is not covered yet by the incontestability
245 s 268) clause.

If the policy of life insurance has been in force for a period Concealment; Material Concealment; Incontestability
of 2 years or more from the date of its issue (on which Clause (1998)
point the given facts are vague) then Good Life can no
longer prove that the policy is void ab initio or is Renato was issued a life insurance policy on January 2,
rescindible by reason of the fraudulent concealment or 1990. He concealed the fact that 3 years prior to the
misrepresentation of Juan ( Sec 48 Ins Code) issuance of his life insurance policy, he had been seeing a
doctor about his heart ailment. On March 1, 1992, Renato
Concealment; Material Concealment: Incontestability died of heart failure. May the heirs file a claim on the
Clause (1997) proceeds of the life insurance policy of Renato? (5%)

The assured answers Noto the question in the application SUGGESTED ANSWER:
for a life policy: Are you suffering from any form of heart
illness? In fact, the assured has been a heart patient for Yes. The life insurance policy in question was issued on
many years. On 7 Sep 1991, the assured is killed in a January 9, 1990. More than 2 years had elapsed when
plane crash. The insurance company denies the claim for Renato, the insured, died on March 1, 1992. The
insurance proceeds and returns the premiums paid. Is the incontestability clause applies.
decision of the insurance company justified? INCONTESTABILITY CLAUSE
SUGGESTED ANSWER: The insurer has two years from the date of issuance of the
Assuming that the incontestability clause does not apply insurance contract or of its last reinstatement within which
because the policy has not been in force for 2 years, from to contest the policy, whether or not, the insured still lives
the date of issue, during the lifetime of the insured, the within such period. After two years, the defenses of
decision of the insurance company not to pay is justified. concealment or misrepresentation, no matter how patent
There was fraudulent concealment. It is not material that or well founded, no longer lie.
the insured died of a different cause than the fact Insurable Interest: Bank Deposit (2000)
concealed. The fact concealed, that is heart ailment, is
material to the determination by the insurance company BD has a bank deposit of half a million pesos. Since the
whether or not to accept the application for insurance and limit of the insurance coverage of the Philippine Deposit
to require the medical examination of the insured. Insurance Corp (PDIC) (RA 3591) is only one tenth of
Insurance Bar Qs BD‘s deposit, he would like some protection for the excess 5
However, if the incontestability clause which applies to the by taking out an insurance against all risks or
insurance policy covering the life of the insured had been contingencies of loss arising from any unsound or unsafe
in force for 2 years from issuance thereof, the insurance banking practices including unforeseen adverse effects of
company would not be justified in denying the claim for the continuing crisis involving the banking and financial
proceeds of the insurance and in returning the premium sector in the Asian region. Does BD have an insurable
paid. In that case, the insurer cannot prove the policy void interest within the meaning of the Insurance Code of the
ab initio or rescindible by reason of fraudulent , Philippines (PD1460)? (2%)
concealment or misrepresentation of the insured.
SUGGESTED ANSWER:
Concealment; Material Concealment; Incontestability
Clause (1991) Yes. BD has insurable interest in his bank deposit. In case
of loss of said deposit, more particularly to the extent of
Atty Roberto took out a life insurance policy from the Dana the amount in excess of the limit covered by the PDIC Act,
Ins Co (DIC) on 1 Sep 1989. On 31 Aug 1990, Roberto PBD will be damnified. He will suffer pecuniary loss of
died. DIC refused to pay his beneficiaries because it P300,000.00, that is, his bank deposit of half a million
discovered that Robert had misrepresented certain pesos minus P200,000.00 which is the maximum amount
material facts in his application. The beneficiaries sued on recoverable from the PDIC.
the basis that DIC can contest the validity of the insurance
policy only within 2 years from the date of issue and Insurable Interest: Public Enemy (2000)
during the lifetime of the insured. Decide the case.
May a member of the MILF or its breakaway group, the
SUGGESTED ANSWER: Abu Sayyaf, be insured with a company licensed to do
business under the Insurance Code of the Phils (PD
I would rule in favor of the insurance company. The 1460)? Explain. (3%)
incontestability clause, applies only if the policy had been
in effect for at least 2 years. The 2 year period is counted SUGGESTED ANSWER:
from the time the insurance becomes effective until the
A member of the MILF or the Abu Sayyaf may be insured
death of the insured and not thereafter (Tan v CA GR
with a company licensed to do business under the
48044 29Jun1989)
Insurance Code of the Phils. What is prohibited to be
ALTERNATIVE ANSWER: insured is a public enemy. A public enemy is a citizen or
national of a country with which the Philippines is at war.
I would rule in favor of the insurance company. Although Such member of the MILF or the Abu Sayyaf is not a
an insurer may not rescind the contract on ground of citizen or national of another country, but of the
misrepresentation after an action is commenced for Philippines.
recovery under the policy, the insurer is not precluded
Insurable Interest: Separate Insurable Interest (1999)
A businessman in the grocery business obtained from names his neighbor B the beneficiary because of A‘s
First Insurance an insurance policy for P5M to fully cover secret love for B. If A dies, can B successfully claim
his stocks-in-trade from the risk of fire. against the policy?

Three months thereafter, a fire of accidental origin broke SUGGESTED ANSWER:

out and completely destroyed the grocery including his
stocks-in-trade. This prompted the businessman to file a) No. In property insurance, the beneficiary must
with First Insurance a claim for five million pesos have insurable interest in the property insured. (Sec 18 Ins
representing the full value of his goods. Code). B does not have insurable interest in the house
insured.
First Insurance denied the claim because it discovered
that at the time of the loss, the stocks-in-trade were b) Yes. In life insurance, it is not required that the
mortgaged to a creditor who likewise obtained from beneficiary must have insurable interest in the life of the
Second Insurance Company fire insurance coverage for insured. It was the insured himself who took the policy on
the stocks at their full value of P5M. a) May the his own life.
businessman and the creditor obtain separate insurance Insurable Interest; Life vs. Property Insurance (2000)
coverages over the same stocks- in-trade? Explain (3%)
b) First Insurance refused to pay claiming that double IS, an elderly bachelor with no known relatives, obtained
insurance is contrary to law. Is this contention tenable? life insurance coverage for P250,000.00 from Starbrite
(3%) c) Suppose you are the Judge, how much would you Insurance Corporation, an entity licensed to engage in the
allow the businessman and the creditor to recover from insurable business under the Insurance Code of the
their respective insurers. Explain (3%) Philippines (PD1460). He also insured his residential
house for twice that amount within the same corporation.
SUGGESTED ANSWER: He immediately assigned all his rights to the insurance
a) Yes. The businessman, as owner, and the creditor, as proceeds to BX, a friend-companion living with him. Three
mortgagee, have separate insurable interests in the same years later, IS died in a fire that gutted his insured house
stocks-in-trade. Each may insure such interest to protect two days after he had sold it. There is no evidence of
his own separate interest. suicide or arson or involvement of BX in these events. BX
demanded payment of the insurance proceeds from the
b) The contention of First Insurance that double insurance two policies, the premiums for which IS had been faithfully
is contrary to law is untenable. There is no law providing paying during all the time he was alive. Starbrite refused
that double insurance is illegal per se. Moreover, in the payment, contending that BX had no insurable interest
problem at hand, there is no double insurance because and therefore was not entitled to receive the proceeds
the insured with the First Insurance is different from the from IS‘s insurance coverage on his life and also on his
insured with Bar
Insurance the Qs
Second Insurance Company. The same is property. Is Starbrite‘s contention valid? Explain? (5%) 6
true with respect to the interests insured in the two
policies. SUGGESTED ANSWER:

c) As Judge, I would allow the businessman to recover his Starbrite is correct with respect to the insurance coverage
total loss of P5M representing the full value of his goods on the property of IS. The beneficiary in the property
which were lost through fire. As to the creditor, I would insurance policy or the assignee thereof must have
allow him to recover the amount to the extent of or insurable interest in the property insured. BX, a mere
equivalent to the value of the credit he extended to the friend-companion of IS, has no insurable interest in the
businessman for the stocks-in-trade which were residential house of IS. BX is not entitled to receive the
mortgaged by the businessman. proceeds from IS‘s insurance on his property.

Insurable Interest; Equitable Interest (1991) As to the insurance coverage on the life of IS, BX is
entitled to receive the proceeds. There is no requirement
A piece of machinery was shipped to Mr Pablo on the that BX should have insurable interest in the life of IS. It
basis of C&F Manila. Pablo insured said machinery with was IS himself who took the insurance on his own life.
the Talaga Merchants Ins Co (Tamic) for loss or damage
during the voyage. The vessel sank en route to Manila. Insurable Interest; Life vs. Property Insurance (2002)
Pablo then filed a claim with Tamic which was denied for Distinguish insurable interest in property insurance from
the reason that prior to deliver, Pablo had no insurable insurable interest in life insurance. (5%)
interest. Decide the case.
SUGGESTED ANSWER:
SUGGESTED ANSWER:
1. In property insurance, the expectation of benefit
Pablo had an existing insurable interest on the piece of must have a legal basis. In life insurance, the
machinery he bought. The purchase of goods under a expectation of benefit to be derived from the
perfected contract of sale already vests equitable interest continued existence of a life need not have any
on the property in favor of the buyer even while it is legal basis.
pending delivery (Filipino Merchants Ins Co v CA GR 2. In property insurance, the actual value of the
85144 28Nov1989) interest therein is the limit of the insurance that
Insurable Interest; Life vs. Property Insurance (1997) can validly be placed thereon. In life insurance,
there is no limit to the amount of insurance that
a) A obtains a fire insurance on his house and as a may be taken upon life.
generous gesture names his neighbor as the beneficiary. 3. n property insurance, an interest insured must
If A‘s house is destroyed by fire, can B successfully claim exist when the insurance takes effect and when
against the policy? b) A obtains insurance over his life and the loss occurs but need not exist in the
 meantime. In life insurance, it is enough that Distinguish co-insurance from re-insurance.
insurable interest exists at the time when the
contract is made but it need not exist at the time SUGGESTED ANSWER:
of loss. CO-INSURANCE is the percentage in the value of the
Insurable Interest; Property Insurance (1994) insured property which the insured himself assumes or
undertakes to act as insurer to the extent of the deficiency
In a civil suit, the Court ordered Benjie to pay Nat in the insurance of the insured property. In case of loss or
P500,000.00. To execute the judgment, the sheriff levied damage, the insurer will be liable only for such proportion
upon Benjie‘s registered property (a parcel of land and the of the loss or damage as the amount of insurance bears to
building thereon),and sold the same at public auction to the designated percentage of the full value of the property
Nat, the highest bidder. The latter, on March 18, 1992, insured. REINSURANCE is where the insurer procures a
registered with the Register of Deeds the certificate of sale third party, called the reinsurer, to insure him against
issued to him by the sheriff. Meanwhile, on January 27, liability by reason of such original insurance. Basically, a
1993, Benjie insured with Garapal Insurance for
P1,000,000.00 the same building that was sold at public reinsurance is an insurance against liability which the
auction to Nat. Benjie failed to redeem the property by original insurer may incur in favor of the original insured.
March 18, 1993. Insurance; Double Insurance (2005)
On March 19, 1993, a fire razed the building to the When does double insurance exist? (2%)
ground. Garapal Insurance refused to make good its
obligation to Benjie under the insurance contract. SUGGESTED ANSWER:

1) Is Garapal Insurance legally justified in refusing Under Section 93 of the Insurance Code, there is double
payment to Benjie? 2) Is Nat entitled to collect on the insurance when there is over-insurance with two or more
insurance policy? companies, covering the same property, the same
insurable interest and the same risk. Double insurance
SUGGESTED ANSWER: exists where the same person is insured by several
1) Yes. At the time of the loss, Benjie was no longer insurers separately in respect of the same subject matter
the owner of the property insured as he failed to redeem and interests. (Geagonia v. Court of Appeals, G.R. No.
the property. The law requires in property insurance that a 114427, February 6, 1995)
person can recover the proceeds of the policy if he has Insurance; Double Insurance; effect (1993)
insurable interest at the time of the issuance of the policy
and also at the time when the loss occurs. At the time of Julie and Alma formed a business partnership. Under the
fire, Benjie no longer had insurable interest in the property business name Pino Shop, the partnership engaged in a
Insurance Bar Qs sale of construction materials. Julie insured the stocks in
7
insured.
trade of Pino Shop with WGC Insurance Co for P350th.
2) No. While at the time of the loss he had insurable
interest in the building, as he was the owner thereof, Nat Subsequently, she again got an insurance contract with
did not have any interest in the policy. There was no RSI for P1m and then from EIC for P200th. A fire of
automatic transfer clause in the policy that would give him unknown origin gutted the store of the partnership. Julie
such interest in the policy. filed her claims with the three insurance companies.

Insurable Interest; Property Insurance (2001) However, her claims were denied separately for breach of
policy condition which required the insured to give notice
JQ, owner of a condominium unit, insured the same of any insurance effected covering the stocks in trade.
against fire with the XYZ Insurance Co., and made the Julie went to court and contended that she should not be
loss payable to his brother, MLQ. In case of loss by fire of blamed for the omission, alleging that the insurance
the said condominium unit, who may recover on the fire agents for WGC, RSI and EIC knew of the existence of
insurance policy? State the reason(s) for your answer. the additional insurance coverages and that she was not
(5%) informed about the requirement that such other or
SUGGESTED ANSWER: additional insurance should be stated in the policy. Is the
contention of Julie tenable? Explain. May she recover on
JQ can recover on the fire insurance policy for the loss of her fire insurance policies? Explain.
said condominium unit. He has the insurable interest as
owner-insured. As beneficiary in the fire insurance policy, SUGGESTED ANSWER:
MLQ cannot recover on the fire insurance policy. For the 1) No. An insured is required to disclose the other
beneficiary to recover on the fire or property insurance insurances covering the subject matter of the insurance
policy, it is required that he must have insurable interest in being applied for. (New Life Ent v CA 207 s 669)
the property insured. In this case, MLQ does not have
insurable interest in the condominium unit. 2) No, because she is guilty of violation of a
warranty/ condition.
Insurance; Cash & Carry Basis (2003)
Insurance; Effects; Payment of Premiums by
What is meant by ―cash and carry‖ in the business of Installment (2006)
insurance?
The Peninsula Insurance Company offered to insure
SUGGESTED ANSWER: Francis' brand new car against all risks in the sum of PI
Million for 1 year. The policy was issued with the premium
fixed at 160,000.00 payable in 6 months. Francis only paid
Insurance; Co-Insurance vs. Re-Insurance (1994) the first two months installments. Despite demands, he
failed to pay the subsequent installments. Five months Insurance; Property Insurance; Prescription of Claims
after the issuance of the policy, the vehicle was (1996)
carnapped.
Robin insured his building against fire with EFG
Francis filed with the insurance company a claim for its Assurance. The insurance policy contained the usual
value. However, the company denied his claim on the stipulation that any action or suit must be filed within one
ground that he failed to pay the premium resulting in the year after the rejection of the claim.
cancellation of the policy. Can Francis recover from the
Peninsula Insurance Company? (5%) After his building burned down, Robin filed his claim for
fire loss with EFG. On Feb 28, 1994, EFG denied Robin‘s
SUGGESTED ANSWER: claim. On April 3, 1994, Robin sought reconsideration of
the denial, but EFG reiterated its position. On March 20,
Yes, when insured and insurer have agreed to the 1995, Robin commenced judicial action against EFG.
payment of premium by installments and partial payment Should Robin‘s action be given due course? Explain.
has been made at the time of loss, then the insurer
becomes liable. When the car loss happened on the 5th SUGGESTED ANSWER:
month, the six months agreed period of payment had not
yet elapsed (UCPB General Insurance v. Masagana No, Robin‘s action should not be given due course. Its
Telamart, G.R. No. 137172, April 4, 2001). Francis can filing of the request for reconsideration did not suspend
recover from Peninsula Insurance Company, but the latter the running of the prescriptive period of one year
has the right to deduct the amount of unpaid premium stipulated in the insurance policy. Thus, when robin
from the insurance proceeds. commenced judicial action against EFG Assurance on
March 20, 1995, his ability to do so had already
Insurance; Life Insurance; Assignment of Policy prescribed. The one-year period is counted from Feb 28,
(1991) 1994 when EFG denied Robin‘s claim, not from the date
(presumably after April 3, 1994) when EFG reiterated its
The policy of insurance upon his life, with a face value of position denying Robin‘s claim. The reason for this rule is
P100th was assigned by Jose, a married man with 2 to insure that claims against insurance companies are
legitimate children, to his nephew Y as security for a loan promptly settled and that insurance suits are brought by
of P50th. He did not give the insurer any written notice of the insured while the evidence as to the origin and cause
such assignment despite the explicit provision to that of the destruction has not yet disappeared. (See Sun Ins
effect in the policy. Jose died. Upon the claim on the Office Ltd v CA gr 89741, Mar 13 91 195s193)
policy by the assignee, the insurer refused to pay on the
ground that it was not notified of the assignment. Upon the Insurance; Return of Premiums (2000)
other hand, the heirs of Jose contended that Y is not
entitled to any amount under the policy because the Name at least three instances when an insured is entitled
Insurance Bar Qs 8
assignment without due notice to the insurer was void. to a return of the premium paid.

Resolve the issues. SUGGESTED ANSWER:

SUGGESTED ANSWER: Three instances when an insured is entitled to a return of

premium paid are:
A life insurance is assignable. A provision, however, in the
policy stating that written notice of such an assignment 1 To the WHOLE PREMIUM, if no part of his
should be given to the insurer is valid (Secs 181-182 Ins interest in the thing insured be exposed to any of the perils
Code). The failure of the notice of assignment would thus insured against.
preclude the assignee from claiming rights under the 2 Where the insurance is made for a definite period
policy. The failure of notice did not, however, avoid the of time and the insured surrenders his policy, to such
policy; hence, upon the death of Jose, the proceeds portion of the premium as corresponds with the unexpired
would, in the absence of a designated beneficiary, go to time at a pro rata rate, unless a short period rate has been
the estate of the insured. The estate, in turn, would be agreed upon and appears on the face of the policy, after
liable for the loan of P50,000 owing in favor of Y. deducting from the whole premium any claim for loss or
Insurance; Perfection of Insurance Contracts (2003) damage under the policy which has previously accrued.

Josie Gatbonton obtained from Warranty Insurance 3 When the contract is voidable on account of the
Corporation a comprehensive motor vehicle insurance to fraud or misrepresentation of the insurer or of his agent or
cover her brand new automobile. She paid, and the on account of facts the existence of which the insured was
insurer accepted payment in check. Before the check ignorant without his fault; or when, by any default of the
could be encashed, Josie was involved in a motor vehicle insured other than actual fraud, the insurer never incurred
accident where her car became a total wreck. She sought any liability under the policy.
payment from the insurer. Could the insurer be made ALTERNATIVE INSTANCE:
liable under the insurance coverage? (6%)
In case of an over insurance by several insurers, the
SUGGESTED ANSWER: insured is entitled to a ratable return of the premium,
(per Dondee) Yes, because there was a perfected proportioned to the amount by which the aggregate sum
contract of insurance the moment there is a meeting of the insured in all the policies exceeds the insurable value of
minds with respect to the object and the cause of the thing at risk.
payment. The payment of check is a valid payment unless Insured; Accident Policy (2004)
upon encashment the check bounced.
CNI insure SAM under a homeowner's policy against
claims for accidental injuries by neighbors. SAM's minor
son, BOY, injured 3 children of POS, a neighbor, who which he previously removed the magazine. As his
sued SAM for damages. SAM's lawyer was ATT, who was secretary was watching television, he stood in front of her
paid for his services by the insurer for reporting and pointed the gun at her. She pushed it aside and said
periodically on the case to CNI. In one report, ATT that it may be loaded. He assured her that it was not and
disclosed to CNI that after his investigations, he found the then pointed it at his temple. The next moment, there was
injuries to the 3 children not accidental but intentional. an explosion and Tan slumped to the floor lifeless.

SAM lost the case in court, and POS was awarded one The wife of the deceased sought payment on the policy
million pesos in damages which he sought to collect from but her claim was rejected. The insurance company
the insurer. But CNI used ATTs report to deny the claim agreed that there was no suicide. However, it was the
on the ground that the injuries to POS's 3 children were submission of the insurance company that there was no
intentional, hence excluded from the policy's coverage. accident. In support thereof, it contended a) that there was
no accident when a deliberate act was performed unless
POS countered that CNI was estopped from using ATTs some additional, unexpected, independent and
report because it was unethical for ATT to provide unforeseen happening occur which produces or brings
prejudicial information against his client to the insurer, about the injury or death; and b) that the insured willfully
CNI. Who should prevail: the claimant, POS; or the exposed himself to needless peril and thus removed
insurer, CNI? Decide with reasons briefly. (5%) himself from the coverage of the insurance policy. Are the
SUGGESTED ANSWER: two contentions of the insurance company tenable?
Explain.
CNI is not estopped from using ATT's report, because
CNI, in the first place, commissioned it and paid ATT for it. SUGGESTED ANSWER:
On the other hand, ATT has no conflict of interest because No. These two contentions are not tenable. The insurer is
SAM and CNI are on the same side — their interests liable for injury or death even due to the insured‘s gross
being congruent with each other, namely, to oppose negligence. The fact that the insured removed the
POS's claim. It cannot be said that ATT has used the magazine from the hand gun means that the insured did
information to the disadvantage or prejudice of SAM. not willfully expose himself to needless peril. At most, the
However, in Finman General Assurance Corp. v. Court of insured is only guilty of negligence (Sun Ins v CA 211 s
Appeals, 213 SCRA 493 (1992), it was explained that 554)
there is no "accident" in the context of an accident policy, Insured; Accident vs. Suicide (1995)
if it is the natural result of the insured's voluntary act,
unaccompanied by anything unforeseen except the injury. Sun-Moon Insurance issued a Personal Accident Policy to
There is no accident when a deliberate act is performed, Henry Dy with a face value of P500th. A provision in the
unless someBar
Insurance additional
Qs and unforeseen happening occurs policy states that ―the company shall not be liable in 9
that brings about the injury. This element of respect of ―bodily injury‘ consequent upon the insured
deliberateness is not clearly shown from the facts of the person attempting to commit suicide or willfully exposing
case, especially considering the fact that BOY is a minor, himself to needless peril except in an attempt to save
and the injured parties are also children. human life.‖ Six months later Henry Dy died of a bullet
wound in his head. Investigation showed that one evening
Accordingly, it is possible that CNI may not prosper. ATT's Henry was in a happy mood although he was not drunk.
report is not conclusive on POS or the court. He was playing with his handgun from which he had
Insured; Accident vs. Suicide (1990) previously removed its magazine. He pointed the gun at
his sister who got scared. He assured her it was not
Luis was the holder of an accident insurance policy loaded. He then pointed the gun at his temple and pulled
effective Nov 1, 1988 to Oct 31, 1989. At a boxing contest the trigger. The gun fired and Henry slumped on the floor.
held on Jan 1, 1989 and sponsored by his employer, he
slipped and was hit on the fact by his opponent so he fell Henry‘s wife Beverly, as the designated beneficiary,
and his head hit one of the posts of the boxing ring. was sought to collect under the policy. Sun-Moon Insurance
rendered unconscious and was dead on arrival at the rejected her claim on the ground that the death of Henry
was not accidental. Beverly sued the insurer. Decide and
hospital due to ―intra cranial hemorrhage.
Discuss fully.
Can his father who is a beneficiary under said insurance
SUGGESTED ANSWER:
policy successfully claim indemnity from the insurance
company? Explain. Beverly can recover the proceeds of the policy from the
insurer. The death of the insured was not due to suicide or
SUGGESTED ANSWER:
willful exposure to needless peril which are excepted risks.
Yes, the father who is a beneficiary under the accidental The insured’s act was purely an act of negligence which is
insurance can successfully claim indemnity for the death covered by the policy and for which the insured got the
of the insured. Clearly, the proximate cause of death was insurance for his protection. In fact, he removed the
the boxing contest. Death sustained in a boxing contest is magazine from the gun and when he pointed the gun to
an accident. (De la Cruz v Capital Ins & Surety Co his temple he did so because he thought that it was safe
17s559) for him to do so. He did so to assure his sister that the gun
was harmless. There is none in the policy that would
Insured; Accident vs. Suicide (1993) relieve the insurer of liability for the death of the insured
since the death was an accident.
S Insurance Co issued a personal accident policy to Bob
Tan with a face value of P500th. In the evening of Sep 5, Insurer: Effects: Several Insurers (2005)
1992, after his birthday party, Tan was in a happy mood
but not drunk. He was playing with his hand gun, from
What is the nature of the liability of the several insurers in Code of the Phils (PD1460). The lower court applied the
double insurance? Explain. (2%) no fault‖ indemnity policy of the statute, dismissed the suit
against RM Travel, and ordered Dragon Ins to pay
SUGGESTED ANSWER: indemnity to all three plaintiffs. Do you agree with the
The nature of the liability of the several insurers in double court‘s judgment? Explain (2%)
insurance is that each insurer is bound to the contribute SUGGESTED ANSWER:
ratably to the loss in proportion to the amount for which he
is liable under his contract as provided for by Sec 94 of No. The cause of action of Y is based on the contract of
ICP par. The ratable contribution of each of each insurer carriage, while that of X and Z is based on torts. The court
will be determined based on the following formula: should not have dismissed the suit against RM Travel.
AMOUNT OF POLICY divided by TOTAL INSURANCE The court should have ordered Dragon Ins to pay each of
TAKEN multiplied by LOSS = LIABILITY OF THE X, Y, and Z to the extent of the insurance coverage, but
INSURER. whatever amount is agreed upon in the policy should be
answered first by RM Travel and the succeeding amount
ALTERNATIVE ANSWER: should be paid by Dragon Insurance up to the amount of
Each insurer is bound, as between himself and other the insurance coverage. The excess of the claims of X, Y,
insurers, to contribute ratably to the loss in proportion to and Z, over and above such insurance coverage, if any,
the amount for which he is liable under his contract. (Sec. should be answered or paid by RM Travel.
94, Insurance Code)

Insurer; 3rd Party Liability (1996) Insurer; 3rd Party Liability; No Fault Indemnity (1994)
While driving his car along EDSA, Cesar sideswiped What is your understanding of a no fault indemnity‖ clause
Roberto, causing injuries to the latter, Roberto sued Cesar found in an insurance policy?
and the third party liability insurer for damages and/or
insurance proceeds. The insurance company moved to SUGGESTED ANSWER:
dismiss the complaint, contending that the liability of
Cesar has not yet been determined with finality. a) Is the Under the NO FAULT INDEMNITY clause, any claim for
contention of the insurer correct? Explain. b) May the death or injury of any passenger or third party shall be
insurer be held liable with Cesar? paid without the necessity of proving fault or negligence of
any kind. The indemnity in respect of any one person shall
SUGGESTED ANSWER: not exceed P5,000.00, provided they are under oath, the
following proofs shall be sufficient:
No, the contention of the insurer is not correct. There is no
need to wait
Insurance BarforQsthe decision of the court determining 1. police report of the accident; death certificate and 10
Cesar‘s liability with finality before the third party liability evidence sufficient to establish the proper payee; or
insurer could be sued. The occurrence of the injury to
Roberto immediately gave rise to the liability of the insurer 3. medical report and evidence of medical or hospital
under its policy. In other words, where an insurance policy disbursement in respect of which refund is claimed. Claim
insures directly against liability, the insurer‘s liability may be made against one motor vehicle only.
accrues immediately upon the occurrence of the injury or Insurer; 3rd Party Liability; Quitclaim (1994)
event upon which the liability depends (Sherman Shafer v
Judge RTC Olongapo City Branch 75 GR l-78848, Nov 14 Raul‘s truck bumped the car owned by Luz. The car was
88 167s386) insured by Cala Insurance. For the damage caused, Cala
paid Luz P5,000.00 in amicable settlement. Luz executed
The insurer cannot be held solidarily liable with Cesar. a release of claim, subrogating Cala to all her rights
The liability of the insurer is based on contract while that against Raul. When Cala demanded reimbursement from
of Cesar is based on tort. If the insurer were solidarily Raul, the latter refused saying that he had already paid
liable with Cesar, it could be made to pay more than the Luz P4,500 for the damage to the car as evidenced by a
amount stated in the policy. This would, however, be release of claim executed by Luz discharging Raul.
contrary to the principles underlying insurance contracts.
On the other hand, if the insurer were solidarily liable with So Cala demanded reimbursement from Luz, who refused
Cesar and it is made to pay only up to the amount stated to pay, saying that the total damage to the car was
in the insurance policy, the principles underlying solidary P9,500.00 Since Cala paid P5,000 only, Luz contends that
obligations would be violated. (Malayan Ins Co v CA GR she was entitled to go after Raul to claim the additional
L-36413 Sep 26, 88 165s536; Figuracion vda de Maglana P4,500.00 1) Is Cala, as subrogee of Luz, entitled to
v Consolacion GR 60506 Aug 6, 92 212s268) reimbursement from Raul? 2) May Cala recover what it
has paid Luz?
Insurer; 3rd Party Liability (2000)
SUGGESTED ANSWER:
X was riding a suburban utility vehicle (SUV) covered by a
comprehensive motor vehicle liability insurance (CMVLI) 1) No. Luz executed a release in favor of Raul
underwritten by FastPay Insurance Company when it (Manila Mahogany Mfg Corp v CA GR 52756, 12 Oct
collided with a speeding bus owned by RM Travel Inc. The 1987)
collision resulted in serious injuries to X; Y, a passenger of
2) Yes. Cala lost its right against Raul because of
the bus; and Z, a pedestrian waiting for a ride at the scene
the release executed by Luz. Since the release was made
of the collision. The police report established that the bus
without the consent of Cala, Cala may recover the amount
was the offending vehicle. The bus had CMVLI policy
of P5,000 form Luz (Manila Mahogany Mfg Corp v CA GR
issued by Dragon Ins Co. X, Y, and Z jointly sued RM
52756, 12 Oct 1987).
Travel and Dragon Ins for indemnity under the Insurance
Insurer; Authorized Driver Clause (1991) car a) by accidental collision ... b) by fire, external
explosion, burglary, or theft, and c) malicious act.
Sheryl insured her newly acquired car, a Nissan Maxima
against any loss or damage for P50th and against 3rd After a month, the car was carnapped while parked in the
party liability for P20th with the XYZ Ins Co. Under the parking space in front of the Intercontinental Hotel in
policy, the car must be driven only by an authorized driver Makati. HL‘s wife who was driving said car before it was
who is either: 1) the insured, or 2) any person driving on carnapped reported immediately the incident to various
the insured‘s order or with his permission: provided that government agencies in compliance with the insurance
the person driving is permitted in accordance with the requirements.
licensing or other laws or regulations to drive the motor
vehicle and is not disqualified from driving such motor Because the car could not be recovered, HL filed a claim
vehicle by order of a court. for the loss of the car with the insurance company but it
was denied on the ground that his wife who was driving
During the effectivity of the policy, the car, then driven by the car when it was carnapped was in the possession of
Sheryl herself, who had no driver‘s license, met an an expired driver‘s license, a violation of the ―authorized
accident and was extensively damaged. The estimated driver‖ clause of the insurance company. 1) May the
cost of repair was P40th. Sheryl immediately notified XYZ, insurance company be held liable to indemnify HL for the
but the latter refused to pay on the policy alleging that loss of the insured vehicle?
Sheryl violated the terms thereof when she drove it
without a driver‘s license. Is the insurer correct? Explain. 2) Supposing that the car was brought by HL on
installment basis and there were installments due and
SUGGESTED ANSWER: payable before the loss of the car as well as installments
not yet payable. Because of the loss of the car, the vendor
The insurer was not correct in denying the claim since the demanded from HL the unpaid balance of the promissory
proviso ―that the person driving is permitted in note. HL resisted the demand and claimed that he was
accordance with the licensing, etc.‖ qualified only a person only liable for the installments due and payable before the
driving the vehicle other than the insured at the time of the loss of the car but no longer liable for other installments
accident (Palermo v Pyramid Ins Co GR 36480 31 May not yet due at the time of the loss of the car. Decide.
88)
SUGGESTED ANSWER:
ALTERNATIVE ANSWER:
1) Yes. The car was lost due to theft. What applies in
The insurer is correct. The clause ―authorized driver‖ in this case is the ―theft‖ clause, and not the ―authorized
the policy evidently applies to both the insured and any driver‖ clause. It is immaterial that HL‘s wife was driving
other person driving the vehicle at the time of the accident. the car with an expired driver‘s license at the time it was
The term ―authorized driver‖ should be construed as a carnapped. (Perla Compania de Seguros v CA 208 s 487)
Insurance Bar Qs 11
person who is authorized by law to driver the vehicle
(Peza v Alikpala 160s31) 2) The promissory note is not affected by whatever
befalls the subject matter of the accessory contract. The
Insurer; Authorized Driver Clause (2003) unpaid balance on the promissory note should be paid
Rick de la Cruz insured his passenger jeepney with Asiatic and not only the installments due and payable before the
Insurers, Inc. The policy provided that the authorized loss of the car.
driver of the vehicle should have a valid and existing Insurer; Group Insurance; Employer-Policy Holder
driver‘s license. The passenger jeepney of Rick de la Cruz (2000)
which was at the time driven by Jay Cruz, figured in an
accident resulting in the death of a passenger. At the time X company procured a group accident insurance policy for
of the accident, Jay Cruz was licensed to drive but it was its construction employees variously assigned to its
confiscated by an LTO agent who issued him a Traffic provincial infrastructure projects. Y Insurance Company
Violation Report (TVR) just minutes before the accident. underwrote the coverage, the premiums of which were
Could Asiatic Insurers, Inc., be made liable under its paid for entirely by X Company without any employee
policy? Why? (6%) contributions. While the policy was in effect, five of the
covered employees perished at sea on their way to their
SUGGESTED ANSWER: provincial assignments. Their wives sued Y Insurance
Asiatic Insurers, Inc., should be made liable under the Company for payment of death benefits under the policy.
policy. The fact that the driver was merely holding a TVR While the suit was pending, the wives signed a power of
does not violate the condition that the driver should have a attorney designating X Company executive, PJ, as their
valid and existing driver‘s license. authorized representative to enter into a settlement with
the insurance company. When a settlement was reached,
Besides, such a condition should be disregarded because PJ instructed the insurance company to issue the
what is involved is a passenger jeepney, and what is settlement check to the order of X Company, which will
involved here is not own damage insurance but third party undertake the payment to the individual claimants of their
liability where the injured party is a third party not privy to respective shares. PJ misappropriated the settlement
the contract of insurance. amount and the wives pursued their case against Y
Insurance Co. Will the suit prosper? Explain (3%)
Insurer; Authorized Driver Clause; vehicle is stolen
(1993) SUGGESTED ANSWER:
HL insured his brand new car with P Ins Co for Yes. The suit will prosper. Y Ins Co is liable. X Co, through
comprehensive coverage wherein the insurance company its executive, PJ, acted as agent of Y Ins Co. The latter is
undertook to indemnify him against loss or damage to the thus bound by the misconduct of its agent. It is the usual
practice in the group insurance business that the Loss: Actual Total Loss (1996)
employer-policy holder is the agent of the insurer.
RC Corporation purchased rice from Thailand, which it
Insurer; Liability of the Insurers (1990) intended to sell locally. Due to stormy weather, the ship
carrying the rice became submerged in sea water, and
a) Suppose that Fortune owns a house valued at with it the rice cargo. When the cargo arrived in Manila,
P600th and insured the same against fire with 3 insurance RC filed a claim for total loss with the insurer, because the
companies as follows: X – P400th Y – P200th Z – P600t rice was no longer fit for human consumption. Admittedly,
In the absence of any stipulation in the policies from which the rice could still be used as animal feed. Is RC‘s claim
insurance company or companies may Fortune recover in for total loss justified? Explain.
case fire should destroy his house completely? SUGGESTED ANSWER:
SUGGESTED ANSWER: Yes, RC‘s claim for total loss is justified. The rice, which
Fortune may recover from the insurers in such order as he was imported from Thailand for sale locally, is obviously
may select up to their concurrent liability (Sec 94 Ins intended for consumption by the public. The complete
Code) physical destruction of the rice is not essential to
constitute an actual total loss. Such a loss exists in this
Valued Policy case since the rice, having been soaked in sea water and
thereby rendered unfit for human consumption, has
b) If each of the fire insurance policies obtained by
become totally useless for the purpose for which it was
Fortune in the problem (a) is a valued policy and the value
imported (Pan Malayan Ins Co v CA gr 95070 Sep 5,
of his house was fixed in each of the policies at P1m, how
1991)
much would Fortune recover from X if he has already
obtained full payment on the insurance policies issued by Loss: Constructive Total Loss (2005)
Y and Z?
M/V Pearly Shells, a passenger and cargo vessel, was
SUGGESTED ANSWER: insured for P40,000,000.00 against ―constructive total
loss.‖ Due to a typhoon, it sank near Palawan. Luckily,
Fortune may still recover only the balance of P200,000
there were no casualties, only injured passengers. The
from X insurance company since the insured may only
ship owner sent a notice of abandonment of his interest
recover up to the extent of his loss.
over the vessel to the insurance company which then
ALTERNATIVE: hired professionals to afloat the vessel for P900,000.00.
When re-floated, the vessel needed repairs estimated at
Having already obtained full payment on the insurance P2,000,000.00. The insurance company refused to pay
policies issued
Insurance Barby
QsY and Z, Fortune may no longer recover the claim of the ship owner, stating that there was ―no 12
from X insurance policy. constructive total loss.‖ a) Was there ―constructive total
loss‖ to entitle the ship owner to recover from the
Open Policy
insurance company? Explain. b) Was it proper for the ship
c) If each of the policies obtained by Fortune in the owner to send a notice of abandonment to the insurance
problem (a) above is an open policy and it was company? Explain.
immediately determined after the fire that the value of
SUGGESTED ANSWER:
Fortune‘s house was P2.4m, how much may he collect
from X,Y and Z? No, there was no "constructive total loss" because the
vessel was refloated and the costs of refloating plus the
SUGGESTED ANSWER:
needed repairs (P 2.9 Million) will not be more than three-
In an open policy, the insured may recover his total loss fourths of the value of the vessel. A constructive total loss
up to the amount of the insurance cover. Thus, the extent is one which gives to a person insured a right to abandon.
of recovery would be P400th from X, P200th from Y, and (Sec, 131, Insurance Code) There would have been a
P600th from Z. constructive total loss had the vessel MN Pearly Shells
suffer loss or needed refloating and repairs of more than
d) In problem (a), what is the extent of the liability of the required three-fourths of its value, i.e., more than
the insurance companies among themseves? P30.0 Million (Sec. 139, Insurance Code, cited in Oriental
Assurance v. Court of Appeals and Panama Saw Mill,
SUGGESTED ANSWER:
G.R. No. 94052, August 9, 1991)
In problem (a), the insurance companies among
However, the insurance company shall pay for the total
themselves would be liable, viz: X – 4/12 of P600th =
costs of refloating and needed repairs (P2.9 Million).
P200th Y – 2/12 of P600th = P100th Z – 6/12 of P600th =
P300th c) Was it proper for the ship owner to send a notice
of abandonment to the insurance company?
e) Supposing in problem (a) above, Fortune was
able to collect from both Y and Z, may he keep the entire SUGGESTED ANSWER:
amount he was able to collect from the said 2 insurance
companies? No, it was not proper for the ship owner to send a noticeof
abandonment to the insurance company because
SUGGESTED ANSWER: abandonment can only be availed of when, in a marine
insurance contract, the amount to be expended to recover
No, he can only be indemnified for his loss, not profit
the vessel would have been more than three-fourths of its
thereby; hence he must return P200th of the P800th he
value. Vessel MN Pearly Shells needed only P2.9 Million,
was able to collect.
which does not meet the required three-fourths of its value
to merit abandonment. (Section 139, Insurance Code, collected from among themselves and solely for their own
cited in Oriental Assurance v. Court of Appeals and protection and not for profit. Members are both the insurer
Panama Saiv Mill, G.R. No. 94052, August 9, 1991) and insured. A mutual life insurance company has no
capital stock and relies solely upon its contributions or
Loss: Total Loss Only (1992) premiums to meet unexpected losses, contingencies and
An insurance company issued a marine insurance policy expenses (Republic v. Sunlife, G.R. No 158085, October
covering a shipment by sea from Mindoro to Batangas of 14, 2005).
1,000 pieces of Mindoro garden stones against ―total
loss only.‖ The stones were loaded in two lighters, the first
with 600 pieces and the second with 400 pieces. Because
of rough seas, damage was caused the second lighter
resulting in the loss of 325 out of the 400 pieces. The
owner of the shipment filed claims against the insurance
company on the ground of constructive total loss
inasmuch as more than ¾ of the value of the stones had
been lost in one of the lighters. Is the insurance company
liable under its policy? Why?

SUGGESTED ANSWER:

The insurance company is not liable under its policy

covering against ―total loss only‖ the shipment of 1,000
pieces of Mindoro garden stones. There is no constructive
total loss that can claimed since the ¾ rule is to be
computed on the total 1,000 pieces of Mindoro garden
stones covered by the single policy coverage (see Oriental
Assurance Co v CA 200 s 459)

Marine Insurance; Implied Warranties (2000)

What warranties are implied in marine insurance?

SUGGESTED ANSWER:

The following warranties are implied in marine insurance:

Insurance Bar Qs
1) That the ship is seaworthy to make the voyage and/or
13
to take in certain cargoes 2) That the ship shall not deviate
from the voyage insured; 3) That the ship shall carry the
necessary documents to show nationality or neutrality and
that it will not carry any document which will cast
reasonable suspicion thereon; 4) That the ship shall not
carry contraband, especially if it is making a voyage
through belligerent waters.

Marine Insurance; Peril of the Ship vs. Peril of the Sea

(1998)

A marine insurance policy on a cargo states that ―the

insurer shall be liable for losses incident to perils of the
sea.‖ During the voyage, seawater entered the
compartment where the cargo was stored due to the
defective drainpipe of the ship. The insured filed an action
on the policy for recovery of the damages caused to the
cargo. May the insured recover damages? (5%)

SUGGESTED ANSWER:

No. The proximate cause of the damage to the cargo

insured was the defective drainpipe of the ship. This is
peril of the ship, and not peril of the sea. The defect in the
drainpipe was the result of the ordinary use of the ship. To
recover under a marine insurance policy, the proximate
cause of the loss or damage must be peril of the sea.

Mutual Insurance Company; Nature & Definition (2006)

What is a mutual insurance company or association?

SUGGESTED ANSWER:

A mutual life insurance corporation is a cooperative that

promotes the welfare of its own members, with the money