Insurance 2nd Exam Cases

Insurance 2nd Exam Case Shortcuts | Anastasia Beaverhausen
From 3-SR case digests
COQUIA AND MANILA YELLOW TAXICAB CO., INC v.

FIELDMEN’S INSURANCE CO., INC. ISSUE: WON Lampano had a right to recover from Barretto any
G.R. No. L-23276 portion of the insurance money.
FACTS:
Under Section 17 of the Insurance Policy, it provides that if there is RULING: NO. Lampano may not receive anything
dispute with respect to the amount of the Insurer’s liability, this
shall be referred to a single arbitrator, or two arbitrators should the Right to Proceeds of Policy: building contractor is not
parties fail to decide on a single arbitrator. It also requires that this obligated to surrender to owner
reference to an arbitrator shall be a condition precedent to any If Barretto had an insurable interest in the house, he could ensure
right of action or suit upon this policy. that his interest for his sole protection. The policy was in the name
of Barretto alone. it was a personal contract between him and the
ISSUE: insurance company and not a contract which ran with the property.
W/N the failure of the Insured to comply with Section 17 of the According to this personal contract, able to the insured without
Policy concerning arbitration is fatal to the Insured’s cause. - NO regard to the nature and extent of his interest in the property,
provided that he has an insurable interest at the time of the making
HELD: of the contract, and also at the time of the fire.
No. The acts and omissions, of both the Insured and the Insurer, The general rule is: Where different persons have different
had the effect of waiver of their respective right to demand an interests in the same property, the insurance taken by one is in his
arbitration. own right and in his own interest does not in any way insure to the
benefit of another.
Waiver of the right to demand for arbitration
In this case: Barretto assumed responsibility for the Insurance.
The Court, in citing the case of Kahnweiler v. Phenix Ins. Co. of The premiums wre paid by him without any agreement or right to
Brooklyn, said that: recoup the amount paid even if no loss results to the property. It
would not be in accordance with the law to compel him to account
The obligation to demand an arbitration is not unilateral nor self- for the insurance money, or any part thereof, to Lampano, who
executing, it requires the joint and concurrent action of both the assumed no risk whatsoever.
Insured and the Insurer. A single party to a contract cannot bring
about arbitration, while each party may demand for arbitration, Insurance of the Building Contractor: Has interest in the
said party cannot compel the other to do so. Completed Building pending payment of Construction Price
That Barretto had an insurable interest in the house, we think there
This being the case, a party cannot stipulate that the other must can be no question. He construed the building, furnishing all the
first demand for arbitration otherwise the said party forfeits a right materials and supplies, and insured it after it had been completed.
by not doing so.
NOTE:
Regardless, in this case, the Court held that as between the Insured Insurance policy does not attach to property
and the Insurer, the right to demand for arbitration has already
been waived. That is why when you are transferring property, if you are conveying
the property, you must tell the buyer that you are not transferring the
Test to determine waiver policy. You may transfer the policy but always with the consent of the
insurance company, because an insurance contract is a personal
The Court said that the test in determining whether there has been contract. It is a contract between the insured and the company. It is
waiver is: Any conduct of the parties inconsistent with the notion not a contract between the company and the property.
that they treated the arbitration provision as in effect, or any
conduct which might be reasonably construed as showing that they An insurance contract does not attach to the property itself when the
did not intend to avail themselves of such provision, may amount property is transferred, conveyed or assigned. So, if you intend, the
to a waiver thereof and estop the party charged with such conduct buyer, to continue availing the benefits of the insurance policy taken
from claiming its benefits. by him, then, the seller should tell the insurance company and
have the policy indorsed. When you say indorsed, meaning have the
In this case, both parties from the start of their dispute entirely consent of the insurance company that it is allowing the transfer of the
disregarded the provisions relating to arbitration, they never, at insurance coverage to this person.
any stage of the dispute, commenced or demanded for arbitration,
whether oral or written. This conduct was in the effect of a So, the buyer cannot claim, if something happens to the
complete rejection of the right to arbitrate. property, from the insurance contract procured by the seller.
No action clause BONIFACIO BROS., INC., ET AL, vs. ENRIQUE MORA, ET AL.,
There can be no claim against the insurance companies until an action G.R. No. L-20853
has been pursued against the insured himself. May 29, 1967
Topic/Gist of the case: A third person has no right in law or
These are actually provisions that are meant to delay payment of the equity to the proceeds of an insurance unless there is a contract or
compensation to the parties eventually entitled to claim the same. trust, expressed or implied, between the insured and the third
person.
NOTE: the Court has consistently ruled against the insurance
companies if their defense is based on these kinds of stipulations. The word "loss" in insurance law embraces bodily injury, including
death, or property damage or destruction.
REASON:
1. an insurance contract is a contract of adhesion. In FACTS:
interpreting a contract of adhesion, if the provision is to Enrique Mora mortgaged his sedan car to HS Reyes Inc. with the
defeat the claim of the plaintiff, then the Court will rule condition that Mora would insure the car with HS Reyes as
against the insurance company if it finds legitimacy in the beneficiary.
claim.
2. This is another way of circumventing claims settlement. If The car was then insured with State Insurance Company and
you say that parties have agreed to that, but then, these are thereafter the was policy delivered to Mora wherein paragraph 4
unfair provisions because the plaintiffs, the claimants, the provides that:
third parties did not freely enter into the contract and agree
to those provisions, then your claim can actually prosper. 4. The Insured may authorize the repair of the Motor
Vehicle necessitated by damage for which the Company
LAMPANO V. JOSE may be liable under this Policy, subject to the condition
GR. No. L-9401 that "Loss, if any is payable to H.S. Reyes, Inc.," by
March 30, 1915 virtue of the fact that said sedan car was mortgaged in
Topic/Gist of the case: A building contractor has an insurable favor of H.S. Reyes, Inc. and that under a clause in said
interest in the completed building pending the payment of the insurance policy, any loss was made payable to the H.S.
construction price; Reyes, Inc. as Mortgagee;
xxx xxx xxx
A building contractor is not obligated to surrender to the owner or
her grantees any part of the proceeds of a policy ensuring his own During the effectivity of the insurance contract, the car met an
interest exclusively and paid for by him, for the mere reason well, accident. The company then assigned the accident to an insurance
at the time of the fire, the amount of the policy exceeds that still do appraiser for investigation and appraisal of the damage.
him on the construction price.
Mora without the knowledge and consent of HS Reyes, authorized
FACTS: Bonifacio Bros to fix the car, using materials supplied by the Ayala
Mariano Barretto constructed a house for Placida Jose, who then Auto Parts Company.
sold the house to Antonina Lampano. A fire then destroyed the
house, but Antonina still owed Placida ₱2,000, and Placida still ISSUE: Whether or not Bonifacio Bros and Ayala Auto are entitled
owed Mariano ₱2,000. to the insurance proceeds?
After the Completion of the house, but before it was destroyed, RULING: NO.
Barretto took out an insurance policy on the property in his name,
with the consent of Jose, for ₱4000. After its destruction, Barretto As a general rule: contracts take effect only between the
received ₱3,600/ parties, and a third person has no right in law or equity to
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the proceeds of an insurance policy.”
Exception: if there is a contract or trust, expressed or The exception to this rule: insurance contract was
implied, between the insured and the third person or in intended to benefit third persons who are not parties to
some specific instance provided by law where the contract the same in the form of favorable stipulations or
contains some stipulation in favor of a third person. Such indemnity. In such a case, third parties may directly sue
stipulation is known as a stipulation pour autrui. and claim from the insurer.
Under this doctrine, a third person is to avail himself of a benefit 2. By virtue Article 2012 in relation to Article 739 of the
granted to him by the terms of the contract, provided that the New Civil Code, the designation of Eva De Guzman
contracting parties have clearly and deliberately conferred a favor Maramag, a concubine, was invalid.
upon such person. Consequently, a third person NOT a party to the
contract has NO action against the parties thereto and cannot In effect, her share to the proceeds is forfeited and
generally demand the enforcement of the same. awarded to the nearest beneficiary which are the
illegitimate children of Loreto Maramag pursuant to
The question of whether a third person has an enforceable interest Article 12 of the Insurance Code.
in a contract must be settled by determining whether the
contracting parties intended to tender him such an interest by 3. No legal proscription exists in naming as beneficiaries the
deliberately inserting terms in their agreement with the avowed children of illicit relationships by the insured.
purpose of conferring favor upon such third person. COMMENTS:
NOTE: Rules of succession do not actually apply to the receipt of
In this connection, this court has laid down the rule that the fairest proceeds of beneficiaries.
test to determine whether the interest of a third person in a
contract is a stipulation pour autrui or merely an incidental interest, RCBC v. CA
is to rely upon the intention of the parties as disclosed by their GR. No. 128833
contract. April 20, 1998
Topic/Gist of the case: Mortgagee has a right over the proceeds
In the instant case the insurance contract does not contain any (to the extent of its credit) of insurance policies over mortgaged
words or clauses to disclose an intent to give any benefit to any properties endorsed to it.
repairmen or material men in case of repair of the car in question.
Bonifacio Bros and Ayala Auto parts are not mentioned in the FACTS:
contract as parties thereto nor is there any clause or provision from
which we can infer that there is an obligation on the part of the Goyu and Sons (GOYU) obtained credit facilities and
insurance company to pay the cost of repairs directly to them. accommodations with RCBC Bank, amounting to Php 117M. As
security, GOYU mortgaged 4 of its properties. Under each of the
On the other hand, the "loss payable" clause of the insurance policy mortgage contracts, GOYU committed itself to insure these
stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." properties with an insurance company approved by the bank, and
indicating that it was only the H.S. Reyes, Inc. which they intended subsequently, to endorse and deliver the said policies to the bank.
to benefit. 10 policies were then obtained by GOYU with Malayan Insurance.
Alchester Insurance Agency, the insurance agent where GOYU
A policy of insurance is a distinct and independent contract between obtained said insurance policies, issued 9 endorsements in favor of
the insured and insurer, and third persons have no right either in a RCBC upon instructions of GOYU.
court of equity, or in a court of law, to the proceeds of it, unless
there be some contract of trust, expressed or implied, by the Later on, one of the mortgaged buildings burned down. GOYU then
insured and third person. In this case, no contract of trust, express sued the insurance company for specific performance after it had
or implied. In this case, no contract of trust, expressed or implied denied to pay the former the proceeds of the insurance policies on
exists. the grounds that either 1) the insurance policies were attached
pursuant to writs of attachments/garnishments issued by various
The Bonifacio and Ayala claim, if at all, is merely equitable in nature courts; or 2) the insurance proceeds were also being claimed by
and must be made effective through Enrique Mora who entered into other creditors of GOYU.
a contract with the Bonifacio Bros Inc.
When RCBC asked for the proceeds of the insurance policies,
The policy in question has been so framed that "Loss, if any, is Malayan denied the claims for the same reasons.
payable to H. S. Reyes, Inc." which unmistakably shows the
intention of the parties. ISSUE: Whether or not RCBC has a claim over the insurance
policies taken out by GOYU.
The final contention of the Bonifacio Bros and Ayala Auto parts is
that the right of the H.S.Reyes, Inc. to the insurance proceeds RULING: YES
arises only if there was loss and not where there is mere damage
as in the instant case. Suffice it to say that any attempt to draw a It is settled that a mortgagor and a mortgagee have separate and
distinction between "loss" and "damage" is uncalled for, because distinct insurable interests in the same mortgaged property,
the word "loss" in insurance law embraces injury or damage. such that each one of them may insure the same property for his
own sole benefit.
Loss in insurance, defined. — The injury or damage
sustained by the insured in consequence of the There is no question that GOYU could insure the mortgaged
happening of one or more of the accidents or misfortune property for its own exclusive benefit. In the present case, although
against which the insurer, in consideration of the it appears that GOYU obtained the subject insurance policies
premium, has undertaken to indemnify the insured. (1 naming itself as the sole payee, the intentions of the parties as
Bouv. Ins. No. 1215; Black's Law Dictionary; Cyclopedic shown by their contemporaneous acts, must be given due
Law Dictionary, cited in Martin's Phil. Commercial Laws, consideration.
Vol. 1, 1961 ed. p. 608).
Take note that eight endorsement documents (the alleged ninth
For example, a portion of your property suffered from fire and then being shown to not have been endorsed after all) were prepared by
you hired a team of carpenters to repair. In other words, the ones who Alchester in favor of RCBC. Thus, these eight policies cannot be
are claiming against the insurance policy are the people working on attached by GOYU’s creditors up to the extent of GOYU’s
your car or the people working on your property trying to get payment outstanding obligation in RCBC’s favor.
for their services.
GOYU cannot also seek relief under Section 53 of the ICP, which
So, the Court said that the proceeds of the insurance policy provides that the proceeds of insurance shall exclusively apply to
cannot be paid to them because the proceeds can be paid only the interest of the person in whose name or for whose benefit it is
to the insured, to the proper interest of the person for whom made.
the contract was made. And who is the person for whom the
contract was made for? The insured himself The circumstances in this case present a justification to take
exception to the strict application of said provision, it is having
HEIRS OF MARAMAG VS MARAMAG been sufficiently established that it was the intention of the parties
GR. NO. 181132 to designate RCBC as the party for whose benefit the insurance
June 5, 2019 policies were taken out.
Topic/Gist of the case:
A. Application of Article 53 of the Insurance Code as to the In summary:
insurance proceeds, and the exception with regard to
third parties 1. Insured properties were the subject of mortgage
B. Valid designation of beneficiary (involving a concubine contracts;
and illegitimate children); Article 2012 in relation to 2. GOYU voluntarily procured the policies to cover the
Article 739 of the New Civil Code mortgaged properties;
3. Endorsement documents were prepared by Malayan’s
NOTABLE RULINGS: underwriter and copies were sent to the parties
1. Section 53 of the Insurance Code provides that: “The interested;
insurance proceeds shall be applied exclusively to the 4. GOYU continued until the occurrence of the fire, to enjoy
proper interest of the person in whose name or for whose the benefits of the credit facilities extended by RCBC
benefit it is made unless otherwise specified in the which was conditioned upon the endorsement of the
insurance policies to be taken out by GOYU to cover the
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mortgaged properties. The above provision is not applicable because payment of the
premium was in fact eventually made in this case. Notably,
Thus, Malayan must pay RCBC the proceeds of the insurance the premium invoice issued to Pinca at the time of the delivery of
policies amounting to Php 51M, less the Php 50M earlier deposited the policy on June 7, 1981 was stamped "Payment Received" of the
with the RTC which should also be released by the Clerk of Court to amount of P930.60 on "12-24-81" by Domingo Adora. This is
RCB including interests. important because it suggests an understanding between MICO and
the insured that such payment could be made later, as agent Adora
GOYU must also pay its loan obligation with RCBC in the principal had assured Pinca. In any event, it is not denied that this payment
amount of Php107M, minus payments made by Malayan and the was actually made by Pinca to Adora on December 24, 1981, who
proceeds of the amount deposited with the trial court and its received it on behalf of MICO, to which it was remitted on January
earned interest. 15, 1982. What is questioned is the validity of Pinca's payment and
COMMENTS: of Adora's authority to receive it.
The 10 policies were taken out and paid by GOYU. But then, 8 out of
10 policies were indorsed in favor RCBC. The indorsement was made MICO's acknowledgment of Adora as its agent defeats its contention
by GOYU through the services of an insurance agent. That sort of that he was not authorized to receive the premium payment on its
separated the properties covered by the insurance policy and protected behalf. It is clearly provided in Section 306 of the Insurance Code
them from all other creditors. So, the Court was saying that the that:
proceeds cannot be attached by the other creditors, except the other "SEC. 306. . . .
parts not covered by the indorsement. The operative act transferring "Any insurance company which delivers to an insurance
the interest in the policy was the indorsement of the original insured. agent or insurance broker a policy or contract of
insurance shall be deemed to have authorized such agent
or broker to receive on its behalf payment of any
SUN INSURANCE OFFICE, LTD. vs. COURT OF APPEALS and premium which is due on such policy or contract of
EMILIO TAN insurance at the time of its issuance or delivery or which
G.R. No. 89741 becomes due thereon."
March 13, 1991
Just the important ruling: And it is a well-known principle under the law of agency that:
"Payment to an agent having authority to receive or collect
The insured's cause of action or his right to file a claim commences payment is equivalent to payment to the principal himself; such
from the time of the denial of his claim by the Insurer, either payment is complete when the money delivered is into the agent's
expressly or impliedly. hands and is a discharge of the indebtedness owing to the
principal."
The rejection referred to should be construed as the rejection in the Thereafter, the policy could be cancelled on any of the supervening
first instance. grounds enumerated in Article 64 (except "non-payment of
premium") provided the cancellation was made in accordance
Otherwise, if the filing of a motion for reconsideration would therewith and with Article 65.
suspend the running of the prescriptive period of twelve months, a
whole new body of rules on the matter should be promulgated so as Section 64 reads as follows:
to avoid any conflict that may be brought by it. "SEC. 64. No policy of insurance other than life shall be cancelled
by the insurer except upon prior notice thereof to the insured, and
Also, the Court noted the rationale for the necessity of bringing no notice of cancellation shall be effective unless it is based on the
suits against the Insurer within one year from the rejection of the occurrence, after the effective date of the policy, of one or more of
claim. the following:
(a) non-payment of premium;
In Ang v. Fulton Fire Insurance Co., the Court held that: (b) conviction of a crime arising out of acts increasing the hazard
The condition contained in an insurance policy that claims insured against;
must be presented within one year after rejection is not (c) discovery of fraud or material misrepresentation;
merely a procedural requirement but an important matter (d) discovery of willful or reckless acts or commissions increasing
essential to a prompt settlement of claims against the hazard insured against;
insurance companies as it demands that insurance suits (e) (e) physical changes in the property insured which result in
be brought by the insured while the evidence as to the the property becoming uninsurable; or
origin and cause of destruction have not yet disappeared. (f) a determination by the Commissioner that the continuation of
the policy would violate or would place the insurer in violation
NOTE: cause of action accrues upon receipt of the rejection. (not of this Code."
after decision on the MR)
A valid cancellation must, therefore, require concurrence of the
Otherwise, if it will be reckoned after the resolution to the motion for following conditions:
reconsideration, then it would require another body of rules to avoid (1) There must be prior notice of cancellation to the insured;
any conflict (i.e. how many motions for reconsideration should be
(2) The notice must be based on the occurrence, after the
allowed, etc.).
effective date of the policy, of one or more of the grounds
mentioned.
MALAYAN INSURANCE VS CRUZ-ARNALDO
GR. No. L-67835 (3) The notice must be (a) in writing, (b) mailed, or delivered
1987-10-12 to the named insured, (c) at the address shown in the
Insurance policy was taken. MICO, the insurer, PINCA, policy;
insured (4) It must state (a) which of the grounds mentioned in
Section 64 is relied upon and (b) that upon written
On October 15, 1981, MICO allegedly cancelled the policy for non- request of the insured, the insurer will furnish the facts
payment of the premium and sent the corresponding notice to on which the cancellation is based.
Pinca.
On December 24, 1981, payment of the premium for Pinca was Section 64 and 65 (they come together). Section 64 on the
received by Domingo Adora, agent of MICO. cancellation and Section 65 on the manner of cancellation.Ma’am:
On January 15, 1982, Adora remitted this payment to MICO, The other important thing in your case is the finding that payment of
together with other payments. premium to the agent (and received by the agent) of the insurance
company binds the insurance company, as though payment was
On January 18, 1982, Pinca’s property was completely burned. received by the insurance company (REMEMBER).
On February 5, 1982, Pinca's payment was returned by MICO to ARGENTE vs WEST COAST LIFE
Adora on the ground that her policy had been cancelled earlier. But GR. No. L-24899
Adora refused to accept it. March 19, 1928
ISSUE: Whether or not there was an effective policy at the time of ARGENTE’S CONTENTIONS: alleges that both he and his wife
loss. revealed to the company's physician. Doctor Sta. Ana, all the facts
concerning the previous illnesses and medical attendance, but that
RULING: YES. Doctor Sta. Ana, presumably acting in collusion, with the insurance
agent, del Rosario, failed to record them in the medical reports.
On the nonpayment of premium and cancellation of policy.
MICO relies heavily on Section 77 of the Insurance Code providing ISSUE: WON Argente and de Ocampo were guilty of concealment
that: and thereby misled the insurer into accepting the risk? YES
"SEC. 77. An insurer is entitled to payment of the
premium as soon as the thing is exposed to the peril RULING: YES
insured against. Notwithstanding any agreement to the One ground for the rescission of a contract of insurance under the
contrary, no policy or contract of insurance issued by an Insurance Act is "a concealment," which in section 25 is defined as
insurance company is valid and binding unless and until "A neglect to communicate that which a party knows and ought to
the premium thereof has been paid, except in the case of communicate." Appellant argues that the alleged concealment was
a life or an industrial life policy whenever the grace immaterial and insufficient to avoid the policy. We cannot agree. In
period provision applies." an action on a life insurance policy where the evidence conclusively
shows that the answers to questions concerning diseases were
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untrue, the truth of falsity of the answers become the determining Nevertheless, there are two answers to the problem as
factor. propounded. The first is that the California law as construed by the
code examiners, at whose recommendation it was adopted,
If the policy was procured by fraudulent representations, the conceded that "A failure to exercise the right (of rescission),
contract of insurance apparently set forth therein was never legally cannot, of course, prejudice any defense to the action which
existent. It can fairly be assumed that had the true facts been the concealment may furnish." (Codes of California annotated;
disclosed by the assured, the insurance would never have been Tan Chay Heng vs. West Coast Life Insurance Company [1927], p.
granted. 80, ante.) The second answer is that the insurance company
more than one month previous to the commencement of the
It is also held that the concealment must, in the absence of present action wrote the plaintiff and informed him that the
inquiries, be not only material, but fraudulent, or the fact must insurance contract was void because it had been procured
have been intentionally withheld; so it is held under English law through fraudulent representations and offered to refund to
that if no inquiries are made and no fraud or design to conceal the plaintiff the premium which the latter had paid upon the
enters into the concealment the contract is not avoided. And it is return of the policy for cancellation. As held in California as
determined that even though silence may constitute to a fire insurance policy, where any of the material
misrepresentation or concealment it is not itself necessarily so as it representations are false, the insurer's tender of the
is a question of fact. Nor is there a concealment justifying a premium and notice that the policy is canceled, before the
forfeiture where the fact of insanity is not disclosed no questions commencement of suit thereon, operate to rescind the
being asked concerning the same. . . contract of insurance. (Rankin vs. Amazon Insurance Co. [1891],
89 Cal., 203.)
In the case at bar, the court found from the evidence that the
representations made by Bernardo Argente and his wife in their TAN CHAY vs. WEST COAST
applications to the defendant for life insurance were false with G.R. No. L-27541
respect to their estate of health during the period of five years November 21, 1927
preceding the date of such applications, and that they knew the ISSUE: Whether or not the insurer is estopped from claiming fraud
representations made by them in their applications were false. by virtue of not rescinding the insurance contract prior to the filing
of a suit
The court further found from that the answers given by Bernardo
RULING: NO.
Argente and his wife at the time of the medical examination by
Doctor Sta. Ana were false with respect to the condition of their
Based upon those facts the plaintiff vigorously contended in the
health at that time and for a period of several years prior thereto.
lower court and now contends in the court, that section 47 of the
Insurance Act should be applied.
MEDICAL EXAMINATION REPORT OF VICENTA:
Section 47 of the Insurance Act:
It is further admitted that it appears in the Medical Examiner's
Whenever a right to rescind a contract of insurance
Report that Vicenta de Ocampo, in response to the question asked
is given to the insurer by any provision of this
by the medical examiner, "How frequently, if at all, and in what
chapter, such right must be exercised previous to
quantity do you use beer, wine, spirits or other intoxicants?"
the commencement of an action on the contract.
answered "Beer only in small quantities occasionally." To the
question, "Have you ever consulted a physician for or have you
The word "rescind" has a well-defined legal meaning, and as
ever suffered from any ailment or disease of the brain or nervous
applied to contracts, it presupposes the existence of a contract
system?" answered "No." To the question, "What physician or
to rescind.
physicians, if any, not named above, have you consulted or been
treated by, within the last five years and for what illness or
In the instant case, it will be noted that even in its prayer, the
ailment? (If none, so state)" answered "None." And to the question,
defendant does not seek to have the alleged insurance contract
"Are you in good health as far as you know and believe?" answered
rescinded. It denies that it ever made any contract of
"Yes." It is, however, not disputed that Vicenta de Ocampo
insurance on the life of Tan Ceang or that any such a contract
was taken by a patrolman, at the request of her husband,
ever existed, and that is the question which it seeks to have
Bernardo Argente, on May 19, 1924, to the Meisic police
litigated by its special defense. In the very nature of things, if the
station, and from there was transferred to the San Lazaro
defendant never made or entered into the contract in
Hospital. In San Lazaro Hospital, her case was diagnosed by
question, there is no contract to rescind, and, hence, section
the admitting physician as "alcoholism," but later Doctor
47 upon which the lower based its decision in sustaining the
Domingo made a diagnosis of probable "manic-depressive
demurrer does not apply.
psychosis," and still, later in Mary Chiles Hospital, made a
final diagnosis of "phycho-neurosis."
The Supreme Court therefore ruled that section 47 does not apply
to the allegations made in the answer, and that the trial court erred
The basis of the rule vitiating the contract in case of concealment is
in sustaining the demurrer.
that it misleads or deceives the insurer into accepting the risk or
accepting it at the rate of premium agreed upon. The insurer, NOTE: if there is no valid and binding contract, there is really
relying upon the belief that the assured will disclose every material nothing to rescind.
within his actual or presumed knowledge, is misled into a belief that
the circumstance withheld does not exist, and he is thereby induced TAN VS. COURT OF APPEALS AND THE PHILIPPINE
to estimate the risk upon a false basis that it does not exist. The AMERICAN LIFE INSURANCE COMPANY
principal question, therefore, must be, Was the assurer misled or G.R. No. 48049
deceived into entering a contract obligation or in fixing the June 29, 1989
premium of insurance by a withholding of material information of ISSUE #1: Whether or not the insurance company has the right to
facts within the assured's knowledge or presumed knowledge? rescind the policy contract when the insured had already died.
It therefore follows that the assurer in assuming a risk is entitled to RULING #1: YES, the insurance company has the right to rescind
know every material fact of which the assured has exclusive or the policy contract notwithstanding the fact that the insured had
peculiar knowledge, as well as all material facts which directly tend already died.
to increase the hazard or risk which are known by the assured, or
which ought to be or are presumed to be known by him. And a The Tans contend that the insurance company no longer had the
concealment of such facts vitiates the policy. "It does not seem to right to rescind the contract of insurance as rescission must
be necessary . . . that the . . . suppression of the truth should have allegedly be done during the lifetime of the insured within two
been willful." If it were but an inadvertent omission, yet if it were years and prior to the commencement of action.
material to the risk and such as the plaintiff should have known to
be so, it would render the policy void. But it is held that if untrue or According to the Tans, the Insurance Law was amended, and the
false answers are given in response to inquiries and they relate to second paragraph of Section 48 added to prevent the insurance
material facts the policy is avoided without regard to the knowledge company from exercising a right to rescind after the death of the
or fraud of assured, although under the statute statements are insured.
representations which must be fraudulent to avoid the policy. So,
under certain codes the important inquiries are whether the However, the same cannot be countenanced. The so-called
concealment was willful and related to a matter material to the risk. “incontestability clause” precludes the insurer from raising the
defenses of false representations or concealment of material facts
AS TO THE CONTENTION THAT NMO RESCISION CAN BE HAD insofar as health and previous diseases are concerned if the
BECAUSE AN ACTION AGAINST THE CONTRACT HAS insurance has been in force for at least two years during the
ALREADY BEEN COMMENCED insured’s lifetime. The phrase “during the lifetime” found in Section
48 simply means that the policy is no longer considered in force
Lastly, appellant contends that even if the insurance company had after the insured has died.
a right to rescind the contract, such right cannot now be enforced
in view of the provisions of section 47 of the Insurance Act The key phrase in the second paragraph of Section 48 is “for a
providing "Whenever a right to rescind a contract of period of two years,” to wit:
insurance is given to their insurer by provision of this
chapter, such right must be exercised previous to the Section 48. xxx
commencement of an action on the contract." This section was
derived from section 2583 of the California Civil Code, but in After a policy of life insurance made payable on the death
contrast thereto, makes use of the imperative "must" instead of the of the insured shall have been in force during the lifetime
permissive "may." of the insured for a period of two years from the date
of its issue or of its last reinstatement, the insurer cannot
4|P a g e
prove that the policy is void ab initio or is rescindable by policy was obtained by fraud, concealment, or misrepresentation.
reason of the fraudulent concealment or
misrepresentation of the insured or his agent. Section 48 prevents a situation where the insurer knowingly
continues to accept annual premium payments on life insurance,
In the case at bar, the policy was issued in 1973 and the insured only to later on deny a claim on the policy on specious claims of
died in 1975. The policy was thus in force for a period of only fraudulent concealment and misrepresentation, such as what
one year and five months. Considering that the insured died obtains in the instant case. Thus, instead of conducting at the first
before the two-year period had lapsed, the insurance company is instance an investigation into the circumstances surrounding the
not, therefore, barred from proving that the policy is void ab issuance of insurance Policy No. 747411 which would have timely
initio by reason of the insured’s fraudulent concealment or exposed the supposed flaws and irregularities attending it as it now
misrepresentation. Moreover, the insurance company rescinded professes, petitioner appears to have turned a blind eye and opted
the contract of insurance and refunded the premiums paid, previous instead to continue collecting the premiums on the policy. For
to the commencement of this action. nearly three years, petitioner collected the premiums and devoted
the same to its own profit. It cannot now deny the claim when it is
ISSUE #2: Whether or not the insurance company may be allowed called to account. Section 48 must be applied to it with full force
to avoid the policy on the ground of concealment of the deceased and effect.
assured.
The "incontestability clause" is a provision in law that after a policy
RULING #2: YES, the insurance company is allowed to avoid the of life insurance made payable on the death of the insured shall
policy on grounds of concealment of the deceased assured. have been in force during the lifetime of the insured for a period of
two (2) years from the date of its issue or of its last reinstatement,
The Tans contend that there could have been no the insurer cannot prove that the policy is void ab initio or is
concealment or misrepresentation by their late father rescindible by reason of fraudulent concealment or
because Tan Lee Siong did not have to buy insurance. He misrepresentation of the insured or his agent.
was only pressured by insistent salesmen to do so.
The purpose of the law is to give protection to the insured or his
It is of common knowledge that the selling of insurance beneficiary by limiting the rescinding of the contract of insurance on
today is subjected to the whirlwind pressure of modern the ground of fraudulent concealment or misrepresentation to a
salesmanship. It would be unjust if, having been period of only two (2) years from the issuance of the policy or its
subjected to the whirlwind pressure of insurance last reinstatement.
salesmanship this Court itself has long denounced, the
assured who dies within the two-year period, should The insurer is deemed to have the necessary facilities to discover
stand charged of fraudulent concealment and such fraudulent concealment or misrepresentation within a period
misrepresentation. of two (2) years. It is not fair for the insurer to collect the
premiums as long as the insured is still alive, only to raise the issue
Lastly, the “Fine Print” or “Contract of Adhesion” rule is not of fraudulent concealment or misrepresentation when the insured
applicable in this case. There is no showing that the questions in dies in order to defeat the right of the beneficiary to recover under
the application form for insurance regarding the insured’s medical the policy.
history are in smaller print than the rest of the printed form or that
they are designed in such a way as to conceal from the applicant The so-called "incontestability clause" precludes the insurer from
their importance. However, if a warning in bold red letters or a raising the defenses of false representations or concealment of
boxed warning similar to that required for cigarette material facts insofar as health and previous diseases are
advertisements by the Surgeon General of the United States is concerned if the insurance has been in force for at least two years
necessary, that is for Congress or the Insurance Commission during the insured’s lifetime. The phrase "during the lifetime" found
to provide as protection against high pressure insurance in Section 48 simply means that the policy is no longer considered
salesmanship. in force after the insured has died. The key phrase in the second
COMMENTS: paragraph of Section 48 is "for a period of two years."
By the time the action was brought to court by the heir, the insured
was already dead. DISCUSSION:
The issues in this case were:
Take note how important Section 48 is about incontestability clauses 1) Can the insurance company deny liability on the ground of fraud/
and when you institute an action for rescission. misrepresentation on the part of the insured? Answer: No. The
SC said that Manila Bankers cannot deny its obligations because
MANILA BANKERS LIFE INSURANCE CORPORATION the insured had already denied and 2 years had already lapsed.
v. CRESENCIA P. ABAN The insured denied beyond the 2-year period (Section48,
G.R. No. 175666 Insurance Code)
July 29, 2013 2) Question: What if the insured died WITHIN the 2-year period?
Topic/Gist of the case: The ultimate aim of Section 48 of the Answer: Still, no because the SC said here that the insured must
Insurance Code is to compel insurers to solicit business from or be ALIVE within the two-year period but the insured already died.
provide insurance coverage only to legitimate clients, by requiring
them to thoroughly investigate those they insure within two years What’s quite unique with this case is that we know that applying the
from effectivity of the policy and while the insured is still alive. If second paragraph of Sec. 48, if the insured died beyond the 2-year
they do not, they will be obligated to honor claims on the policies period, any questions of fraud, misrepresentation, concealment cannot
they issue, regardless of fraud, concealment or misrepresentation. be raised anymore by the insurance company against the beneficiary.
But what is notable in this case of Aban is that the court made a
FACTS: statement that if the insured dies within the two-year period, and
Delia Sotero took out a life insurance policy from Manila Bankers the court fails to investigate within the two-year period, the insurance
Life Insurance Corporation (Bankers Life), designating respondent company would still be liable to the beneficiary under the insurance
Cresencia P. Aban (Aban), her niece, as her beneficiary. contract.
When the insurance policy had been in force for more than two Kasi dapat while the insured is still alive, but in this case the insured
years and seven months, Sotero died. Respondent Aban filed a already died after the two-year period. The statement here of the court
claim for the insurance proceeds. Manila Bankers Life Insurance saying that the insured MUST BE ALIVE within the two-year
conducted an investigation into the claim, and came out with the period and the insurance company fails to question or raise the
following findings: defense, then the insurance company would still be liable.
Sotero did not personally apply for insurance coverage,
as she was illiterate, sickly since 1990, did not have the AMERICAN HOME ASSURANCE COMPANY VS TANTUCO
financial capability to pay the insurance premiums, did ENTERPRISES
not sign the application for insurance; and respondent 366 SCRA 740
Aban was the one who filed the insurance application, (2001)
and x x x designated herself as the beneficiary. Mistake in the Description of the Building, Liberally
Construed
ISSUE: Whether or not Manila Bankers Life Insurance can rescind The Court held that, liberal construction must be applied in
the contract of insurance based on fraud, concealment, and construing the words used to describe the building insured as to
misrepresentation? NO. give effect to the insurance.
RULING: The insurance policy was thus in force for a period of 3 The Court considered that the policy of insurance covers any
years, 7 months, and 24 days. Considering that the insured died building which the parties manifestly intended to insure no matter
after the two-year period, the Manila Bankers is, therefore, barred how inaccurate the description may be.
from proving that the policy is void ab initio by reason of the
insured fraudulent concealment or misrepresentation or want of In this case: it is apparent in the policy that the equipment and
insurable interest on the part of the beneficiary, herein Aban. machineries were described as new. If the parties really intended to
protect the first oil mill, then there is no need to specify it as new.
Section 48 serves a noble purpose, as it regulates the actions of
both the insurer and the insured. Under the provision, an insurer is Thus, the parties really intended to insure the second oil mill.
given two years - from the effectivity of a life insurance contract
and while the insured is alive - to discover or prove that the policy Warranties, Strictly Construed against the Insurer
is void ab initio or is rescindible by reason of the fraudulent It ought to be remembered that not only are warranties strictly
concealment or misrepresentation of the insured or his agent. After construed against the insurer, but they should, likewise, by
the two-year period lapses, or when the insured dies within the themselves be reasonably interpreted. That reasonableness is to be
period, the insurer must make good on the policy, even though the ascertained in light of the factual conditions prevailing in each case.
5|P a g e
G.R. No. 130421

In the case at bar: The warranty did not require Tantuco to 28 June 1999
provide for all the fire extinguishing appliances enumerated therein. Topic/Gist of the case: This case discussed questions on validity
Additionally, neither did it require that the appliances are restricted of payment of premium and violation of a policy by submission of
to those mentioned in the warranty. What the warranty mandates fraudulent documents and non-disclosure of other existing
is that Tantuco should maintain in efficient working condition within insurance contracts.
the premises of the insured property, firefighting equipment such
as, but not limited to, those identified in the list, which will serve as RULING:
the oil mill's first line of defense in case any part of it bursts into
flame. FIRST ISSUE: There was a valid payment of premium. Hence, an
insurance contract exists at the time the loss occurred.
COMMENTS:
Tantuco had substantial compliance with the requirements of The general rule in insurance laws is that unless the
maintaining in good working condition the firefighting equipment. premium is paid the insurance policy is not valid and
binding. The only exceptions are life and industrial life
The requirement was not to list down every or to comply with every insurance. Whether payment was indeed made is a question
firefighting equipment that is required in the policy but rather to of fact which is best determined by the trial court. The trial
comply substantially with the requirements. Substantial compliance is court found, as affirmed by the Court of Appeals, that there was a
good enough. valid check payment by Chua to Home American a day before the
fire occurred. This is notwithstanding the fact that the check was
What construction rule was applied by the Court? cashed after the occurrence of the fire. In the absence of any clear
As to the description of the building, it must be liberally construed in showing that the trial court overlooked certain facts or
favor of the insured. circumstances which would substantially affect the disposition of
the case, there is no reason to depart from such a ruling.
As to the construction of the warranties, it should be strictly construed
against the insurer and in favor of the insured. Section 306 of the Insurance Code provides that any
insurance company which delivers a policy or contract of
GEN. INSURANCE V. NG HUA insurance to an insurance agent or insurance broker shall be
G.R. No. L-14373 deemed to have authorized such agent or broker to receive
January 30, 1960 on its behalf payment of any premium which is due on such
FACTS: policy or contract of insurance at the time of its issuance or
General Insurance issued a fire insurance policy covering the stock delivery or which becomes due thereon. In the instant case,
in trade of Central Pomade Factory owned by Ng Hua (insured). The the best evidence of such authority is the fact that insurer accepted
next day, the factory burned, and the insured properties were the check and issued the official receipt for the payment. It is, as
destroyed. The policy covered damages up to P10k. After well, bound by its agent's acknowledgment of receipt of payment.
negotiations (and suggestion of Manila Adjustment Company), he
reduced the claim to P5k. Sec. 78 of the Insurance Code explicitly provides:
The Policy No. 471 contains this stipulation on the back thereof: An acknowledgment in a policy or contract of
insurance of the receipt of premium is conclusive
“3. The insured shall give notice to the company of any evidence of its payment, so far as to make the
insurance or insurances already affected, or which may policy binding, notwithstanding any stipulation
subsequently be effected, covering any of the property therein that it shall not be binding until the
hereby insured, and unless such notice be given and the premium is actually paid.
particulars of such insurance or insurances be stated in This Section establishes a legal fiction of payment
or endorsed on this Policy by or on behalf of the and should be interpreted as an exception to
Company before the occurrence of any loss or damage, Section 77.
all benefits under the policy shall be forfeited.”
SECOND ISSUE: Chua is not guilty of the policy violations imputed
The face of the policy bore the annotation: “Co-Insurance Declared against him.
– NIL”
As to alleged submission of fraudulent income tax return and
It is undenied that Ng Hua obtained fire insurance on the same financial statements
goods for the same period of time (P20k) from General Indemnity
Co. Chua presented a BIR certification that he had paid the proper
taxes for the years concerned. The lower courts gave credence to
ISSUE: Is there a violation of the policy in this case? - YES such evidence.
RULING: The situation of co-insurance as discussed by CA is not As to failure to disclose co-insurers

the only situation where co-insurance exists. Other insurers of the
same property against the same hazard are sometimes referred to Ordinarily, where the insurance policy specifies as a
as co-insurers and the ensuing combination is co-insurance. condition the disclosure of existing co-insurers, non-
disclosure thereof is a violation that entitles the insurer to
Considering the terms of the policy which required the insured to avoid the policy. This condition is common in fire insurance
declare other insurances, the statement (annotation) must be policies and is known as the "other insurance clause." The
deemed to be a statement (warranty) that there was no other purpose for the inclusion of this clause is to prevent an increase
insurance on the property, which is binding on both the insurer and in the moral hazard. We have ruled on its validity. However, we
insured. see an exception in the instant case.
If "Co-insurance" means what the Court of Appeals says, the
annotation served no purpose. It would even be contrary to the Citing Section 29 of the Insurance Code, the trial court reasoned
policy itself, which in its clause No. 17 made the insured a co- that respondent's failure to disclose was not intentional and
insurer for the excess of the value of the property over the amount fraudulent. The application of Section 29 is misplaced. Section 29
of the policy. concerns concealment which is intentional. The relevant provision is
Section 75, which provides that:
The annotation then must be deemed to be a warranty that the
property was not insured by any other policy. Violation thereof A policy may declare that a violation of specified
entitles the insurer to rescind. The materiality of non-disclosure of provisions thereof shall avoid it, otherwise the
other insurance is not open to doubt. breach of an immaterial provision does not avoid
the policy.
Even without the annotation, the insurer would still not be liable
because there is no question that the policy issued by General To constitute a violation the other existing insurance
Indemnity (co-insurer) has not been stated in nor endorsed on contracts must be upon the same subject matter and with
Policy No. 471. As stipulated, “all benefits under the policy shall be the same interest and risk. Indeed, Chua acquired several co-
forfeited.” insurers and he failed to disclose this information to the Home
American. Nonetheless, Home American is estopped from invoking
As to Ng Hua’s defense that there was actual knowledge on the this argument. The trial court cited the testimony of Home
part of General Insurance that he had taken out additional American’s loss adjuster who admitted previous knowledge of the
insurance with Gen Indemnity. He does not say when such co-insurers.
knowledge was acquired or imparted. The CA also found no
evidence of such knowledge. Indubitably, it cannot be said that Home American was deceived by
Chua by the latter's non-disclosure of the other insurance contracts
General Insurance successfully established its defense of warranty when Home American actually had prior knowledge thereof. Its loss
breach or concealment of the other insurance and/or violation of adjuster had known all along of the other existing insurance
the policy. contracts, yet, he did not use that as basis for his recommendation
of denial. The loss adjuster, being an employee of the insurance
The non-disclosure of other insurance policies will amount to breach of company, is deemed a representative of the latter whose
warranty, which is a defense of an insurance companies against the awareness of the other insurance contracts binds Chua. We,
insured, in the event loss occurs. therefore, hold that there was no violation of the "other insurance"
clause.
AMERICAN HOME ASSURANCE VS. CHUA
PHILIPPINE PRYCE ASSURANCE CORPORATION V. CA, AND
6|P a g e
GEGROCO, INC. regular policies subsequently issued, the purpose and function of
G.R. No. 107062 the Cover Note would be set at naught or rendered meaningless,
February 21, 1994 for it is in a real sense a contract, not a mere application for
FACTS: insurance which is a mere offer.
Gegroco, Inc. filed a complaint against Philippine Pryce Assurance
Corporation for the collection of sum of money. It was alleged in It was not necessary to ask Pacific Timber to pay premium on the
the complaint that Philippine Pryce issued two surety bonds in Cover Note for the loss insured against have already occurred. The
behalf of its principal, Sagum General Merchandise for Php 500,000 more practical procedure is simply to deduct the premium from the
and Php 1,000,000. These bonds are requirements that were amount due Pacific Timber on the Cover Note. The non-payment of
submitted by Sagum General Merchandise before they were allowed premium on the Cover Note is, therefore, no cause for the insured
to purchase spare parts from Gegroco, Inc. to lose what is due it as if there had been payment of premium, for
non-payment by it was not chargeable against its fault.
In their answer, Philippine Pryce admitted having executed said
bonds but denied liability. Had all the logs been lost during the loading operations, but after
the issuance of the Cover Note, liability on the note would have
ISSUE: Whether or not, Philippine Pryce Assurance Corporation is already arisen even before payment of premium. This is how the
liable to Gegroco, Inc. for the value of the bonds it issued on behalf cover note as a "binder" should legally operate otherwise, it would
of Sagum General Merchandise serve no practical purpose in the realm of commerce and is
supported by the doctrine that where a policy is delivered without
RULING: YES. requiring payment of the premium, the presumption is that a credit
was intended, and policy is valid.
Philippine Pryce is liable for the value of the bonds it issued.
(ISSUE #2)
For the first defense, the Supreme Court cited Section 177 of the As to the alleged delay in giving notice of loss, the law requires the
Insurance Code. ground of delay to be promptly and specifically asserted when a
claim on the insurance agreement is made.
Sec. 177. The surety is entitled to payment of the
premium as soon as the contract of suretyship or bond is HERE: Instead of invoking the ground of delay in objecting to the
perfected and delivered to the obligor. No contract of insured’s claim of recovery on the cover note, it took steps clearly
suretyship or bonding shall be valid and binding unless indicative that this ground for objection to the claim was never in
and until the premium therefor has been paid, except its mind.
where the obligee has accepted the bond, in which
case the bond becomes valid and From April 1963 (receipt of notice of loss) to July 1963 (sent
enforceable irrespective of whether or not the insurance adjusters to investigate), enough time was available for
premium has been paid by the obligor to the the insurance company to determine if Pacific Timber was guilty of
surety. . . . (emphasis added) delay in communicating the loss to the insurance company.
Despite this, Philippine Pryce, still asserted that Section 177 cannot In the proceedings that took place in the Office of the Insurance
apply to it because Gegroco, Inc. allegedly had not accepted the Commissioner, the insurance company should then have raised this
surety bond, hence, the goods could not have been delivered to ground of delay to avoid liability. It did not do so.
Sagum General Merchandise. (Waiver of defense in the delay of notice of loss) Assuming
that there was delay, waiver can successfully be raised against the
Nevertheless, the court still held them liable because of the insurance company. Thus Section 84 of the Insurance Act provides:
following reasons: Section 84. —Delay in the presentation to an insurer of
First, Philippine Assurance already admitted to have notice or proof of loss is waived if caused by any act of
issued the bonds. his or if he omits to take objection promptly and
Second, based on Mr. Guzman, a witness for Gegroco, specifically upon that ground.
Sagum General Merchandise complied with their
requirement of a Surety Bond to guaranty payment of the HERE: The Court ruled that sending of insurance adjuster to assess
spare parts and that they have accepted two surety the loss amounts to waiver of delay in giving notice of loss.
bonds of Interworld Assurance Corporation. NOTE: cover notes are also one of the exceptions to the general rule
Third, delivery invoices addressed to Sagum General that ‘even if there is no premium paid, the insurance policy will be
Merchandise was presented as proof that the spare parts binding.’
were purchased, delivered, and received.
MAKATI TUSCANY CONDOMINIUM CORPORATION vs. THE
As to its second defense that it did not have authority to issue a COURT OF APPEALS
Surety Bond, the court ruled that the said defense is an admission G.R. No. 95546
of fraud of Philippine Pryce committed against Gegroco, Inc. The November 6, 1992
court held that no person could claim benefit from the wrong he Section 77 merely precludes the parties from stipulating that the
himself committed. This representation by Philippine Assurance was policy is valid even if premiums are not paid, but does not
rendered conclusive upon it, and the same cannot be denied or expressly prohibit an agreement granting credit extension, and
disproved as against persons relying thereon. such an agreement is not contrary to morals, good customs, public
order or public policy.
To conclude, Philippine Pryce Assurance Corporation was
held liable to Gegroco, Inc. for the value of the surety bonds. At the very least, both parties should be deemed in estoppel to
NOTE: “if the obligee honors the surety bond, even if no question the arrangement they have voluntarily accepted.
premium was paid on the surety bond, the insurance company
(that issued the surety bond) will be liable on that insurance It paid the initial installment and thereafter made staggered
contract.” payments resulting in full payment of the 1982 and 1983 insurance
policies. For the 1984 policy, petitioner paid 2 installments although
Remember that if a surety bond is issued by an insurance company, it refused to pay the balance, appearing that they actually intended
that surety bond takes on the character and nature of an insurance to make 3 insurance contracts valid.
contract.
UCPB GENERAL INSURANCE CO., INC. vs. MASAGANA
PACIFIC TIMBER EXPORT CORPORATION vs. COURT OF TELAMART, INC.
APPEALS and WORKMEN'S INSURANCE COMPANY, INC. G.R. No. 137172
G.R. No. L-38613 April 4, 2001
February 25, 1982 GENERAL RULE: Section 77 of the Insurance Code of 1978
Topic/Gist of the case: If a loss occurs during the period covered provides:
by a cover note and an insurance policy is later on given, SECTION 77. An insurer is entitled to payment of the
accounting for loss during the cover notes, the insurance company premium as soon as the thing insured is exposed to the
is still liable by virtue of the of the cover note. peril insured against. Notwithstanding any agreement to
the contrary, no policy or contract of insurance
FACTS: issued by an insurance company is valid and
(Issue #1) binding unless and until the premium thereof has
The Cover Note was with consideration. The fact that no separate been paid, except in the case of a life or an industrial
premium was paid on the Cover Note before the loss insured life policy whenever the grace period provision applies.
against occurred, does not militate against the validity of the
insured’s contention, for no such premium could have been paid, EXCEPTIONS:
since by the nature of the Cover Note, it did not contain, as all 1. In case of a life or industrial life policy whenever
Cover Notes do not contain particulars of the shipment that would the grace period provision applies. (Section 77 of the
serve as basis for the computation of the premiums. As a logical Insurance Code of 1978)
consequence, no separate premiums are intended or required to be
paid on a Cover Note. 2. Section 78 of the Insurance Code, which provides:
HERE: Pacific Timber paid in full all the premiums as called for by SECTION 78. Any acknowledgment in a policy or contract
the statement issued by the insurance company after the issuance of insurance of the receipt of premium is conclusive
of the two regular marine insurance policies, thereby leaving no evidence of its payment, so far as to make the policy
account unpaid by the insured due on the insurance coverage, binding, notwithstanding any stipulation therein that it
which must be deemed to include the Cover Note. If the Note is to shall not be binding until premium is actually paid.
be treated as a separate policy instead of integrating it to the
7|P a g e
3. If the parties have agreed to the payment in to Woodworks where it paid P3,000.00 out of the P6,021.95
installments of the premium and partial payment premium due.
has been made at the time of loss. (Makati Tuscany
Condominium Corporation vs. Court of Appeals) The Court held that there was not only a perfected contract of
insurance buy a partially performed one as far as the payment of
We said therein, thus: the agreed premium was concerned.
The initial insurance contract entered into in 1982 was
renewed in 1983, then in 1984. In those three years, Therefore, the obligation of the insurer to pay the insured the
the insurer accepted all the installment payments. amount for which the policy was issued in case the conditions
Such acceptance of payments speaks loudly of the therefore had been complied with, arose and became binding upon
insurer's intention to honor the policies it issued to it, while the obligation of the insured to pay the remainder of the
petitioner. Certainly, basic principles of equity and total amount of the premium due became demandable.
fairness would not allow the insurer to continue collecting
and accepting the premiums, although paid on RULING #2:
installments, and later deny liability on the lame excuse The Court disagrees with Woodwork’s contention. Such theory
that the premiums were not prepaid in full. would place exclusively in the hands of one of the contracting
parties the right to decide whether the contract should stand or not.
4. If the insurer may grant credit extension for the
payment of the premium. This simply means that if the The correct view is that once the contract had become perfected,
insurer has granted the insured a credit term for the the parties could demand from each other the performance of
whatever obligations they had assumed.
payment of the premium and loss occurs before the
expiration of the term, recovery on the policy should be
For the Insurer, it had the right to demand from the insured the
allowed even though the premium is paid after the loss completion of the payment of premium due or to sue for rescission.
but within the credit term. (Makati Tuscany Condominium In the present case, Phil. Phoenix chose to demand specific
Corporation vs. Court of Appeals—when the SC quoted performance. Therefore, it is Woodwork’s obligation to pay the
with approval the pronouncement of the CA) balance of the premium.
COMMENTS:
Section 77 merely precludes the parties from RULE: The non-payment of the balance of the premium will not cause
stipulating that the policy is valid even if premiums the cancellation of the insurance contract.
are not paid but does not expressly prohibit an
agreement granting credit extension, and such an PHILIPPINE PHOENIX SURETY & INSURANCE COMPANY, v.
agreement is not contrary to morals, good customs, WOODWORKS, INC.
public order or public policy (De Leon, The Insurance G.R. No. L-25317, August 6, 1979
Code, p. 175).
Moreover, there is nothing in Section 77 which prohibits This case tells us that an insurance contract is not valid and binding
the parties in an insurance contract to provide a credit without the payment of premium.
term within which to pay the premiums. That agreement
is not against the law, morals, good customs, public FACTS:
order or public policy. The agreement binds the parties
pursuant to Article 1306 of the Civil Code Woodworks (insured) did not pay the premium stipulated in
5. Estoppel (in this case) the policy when it was issued nor at any time thereafter.
IN THIS CASE, it would be unjust and inequitable if recovery on On April 19, 1961, or before the expiration of the one-year term,
the policy would not be permitted against UCPB, which had Philippine Phoenix notified Woodworks of the cancellation of the
consistently granted a 60- to 90-day credit term for the payment of Policy allegedly upon request of Woodworks, which the latter denied
premiums despite its full awareness of Section 77. Estoppel bars it having made such request.
from taking refuge under said Section, since Masagana relied in
good faith on such practice. Woodworks disclaimed any liability in its reply-letter contending
that it need not pay premium "because the Insurer did not stand
Moreover, the following facts, as found by the trial court and the liable for any indemnity during the period the premiums were not
Court of Appeals, are indeed duly established: paid."
1. For years, UCPB had been issuing fire policies to the
Masagana, and these policies were annually renewed. ISSUE: Whether or not the Fire Insurance Policy was a binding
contract despite premium stipulated has not been paid.
2. UCPB had been granting Masagana a 60- to 90-day credit
term within which to pay the premiums on the renewed RULING: NO, it was not a binding contract.
policies.
Section 77 of the Insurance Code provides that no contract of
3. There was no valid notice of non-renewal of the policies insurance issued by an insurance company is valid and binding
in question, as there is no proof at all that the notice sent unless and until the premium thereof has been paid,
by ordinary mail was received by Masagana, and the copy notwithstanding any agreement to the contrary.
thereof allegedly sent to Zuellig was ever transmitted to
Masagana. Since the premium had not been paid, the policy must be
deemed to have lapsed.
4. The premiums for the policies in question in the
The non-payment of premiums does not merely suspend but
aggregate amount of P225,753.95 were paid by
puts an end to an insurance contract, since the time of the
Masagana within the 60- to 90-day credit term and were
payment is peculiarly of the essence of the contract. The rule is
duly accepted and received by UCPB's cashier. that under policy provisions that upon the failure to make a
payment of a premium or assessment at the time provided for, the
policy shall become void or forfeited, or the obligation of the insurer
NOTE: Principle of estoppel was applied here. shall cease, or words to like effect, because the contract so
prescribes and because such a stipulation is a material and
PHILIPPINE PHOENIX VS WOODWORKS essential part of the contract. This is true, for instance, in the case
G.R. No. L-22684 of life, health and accident, fire and hail insurance policies.
August 31, 1967
FACTS: The provision in the policy reads:
Philippine Phoenix Surety & Insurance Co. Inc and Woodworks Inc "THE COMPANY HEREBY AGREES with the Insured . . .
entered into a fire insurance contract. Phil. Phoenix issued to that if the Property above described, or any part thereof,
Woodworks,on April 1, 1960, Fire Policy No. 9652 for the amount of shall be destroyed or damaged by Fire or Lightning after
P300,000.00. The same was delivered on September 22, 1960. payment of Premium, at any time between 4:00
Woodworks paid to Phil. Phoenix the sum of P3,000.00 on account o’clock in the afternoon of the TWENTY FIRST day of JULY
of the total premium of P6,051.95 due thereon. One Thousand Nine Hundred and SIXTY and 4:00 o’clock
in the afternoon of the TWENTY FIRST day of JULY One
Thereafter, Phil. Phoenix filed a complaint for the recovery of the Thousand Nine Hundred and SIXTY ONE, . . ." (Emphasis
sum of money (P3.522.09) for the unpaid premium. supplied)
Woodworks Contends that there was no perfected contract of Explicit in the Policy itself is Philippine Phoenix’s agreement
insurance due to the non-payment of premiums. to indemnify Woodworks for loss by fire only "after payment
of premium.” Compliance by the insured with the terms of the
ISSUE: contract is a condition precedent to the right of recovery.
1. Whether or not there was a perfected contract of insurance. –
YES Since there was no binding contract, the insurer cannot collect the
earned premiums.
2. Whether or not Woodwork’s non-payment of the premium
caused the cancellation of the insurance contract. - NO This is different from that involving the same parties
entitled Philippine Phoenix Surety & Insurance Inc. v.
RULING #1: Woodworks, Inc., where recovery of the balance of the unpaid
premium was allowed inasmuch as in that case "there was not only
In the present case, Fire Insurance Policy was issued and delivered a perfected contract of insurance but a partially performed one as
8|P a g e
far as the payment of the agreed premium was concerned." This is was insured on June 23, 1959 with the State Bonding & Insurance
not the situation obtaining here where no partial payment of Co., Inc., and a motor car insurance policy was issued to Mora.
premiums has been made whatsoever.
During the effectivity of the insurance contract, the car met with an
GREPA LIFE v. Court of Appeals accident. The insurance company then assigned the accident to the
G.R. No. 113899. Bayne Adjustment Co. for investigation and appraisal of the
October 13, 1999 damage. Mora, without the knowledge and consent of the H.S.
Reyes, Inc., authorized the Bonifacio Bros. Inc. to furnish the labor
and materials, some of which were supplied by the Ayala Auto Parts
Co. For the cost of labor and materials, Enrique Mora was billed at
The rationale of a group insurance policy of mortgagors, otherwise P2,102.73 through the H.H. Bayne Adjustment Co. The insurance
known as the mortgage redemption insurance, is a device for the company after claiming a franchise in the amount of P100, drew a
protection of both the mortgagee and the mortgagor. check in the amount of P2,002.73, as proceeds of the insurance
policy, payable to the order of Enrique Mora or H.S. Reyes,. Inc.,
and entrusted the check to the H.H. Bayne Adjustment Co. for
On the part of the mortgagee (bank/creditor), it must enter into
disposition and delivery to the proper party. In the meantime, the
such form of contract so that in the event of the unexpected demise
car was delivered to Enrique Mora without the consent of the H.S.
of the mortgagor during the subsistence of the mortgage contract,
Reyes, Inc., and without payment to the Bonifacio Bros. Inc. and
the proceeds from such insurance will be applied to the payment of
the Ayala Auto Parts Co. of the cost of repairs and materials.
the mortgage debt, thereby relieving the heirs of the mortgagor
from paying the obligation.
Bonifacio Bros. Inc. and the Ayala Auto Parts Co. filed a complait
against Enrique Mora and the State Bonding & Insurance Co., Inc.
In a similar vein, ample protection is given to the mortgagor under for the collection of the sum of P2,002.73 arguing that the State
such a concept so that in the event of death; the mortgage Bonding & Insurance Co., Inc. and Enrique Mora are parties to the
obligation will be extinguished by the application of the insurance repair of the car as well as the towage thereof performed. Bonifacio
proceeds to the mortgage indebtedness. Consequently, where the Bros. et al anchors their argument in paragraph 4 of the insurance
mortgagor pays the insurance premium under the group insurance contract which provides that:
policy, making the loss payable to the mortgagee, the insurance is
on the mortgagor’s interest, and the mortgagor continues to be a "the insured may authorize the repair of the Motor
party to the contract. In this type of policy insurance, the Vehicle necessitated by damage for which the company
mortgagee is simply an appointee of the insurance fund, such loss- may be liable under the policy provided that (a) the
payable clause does not make the mortgagee a party to the estimated cost of such repair does not exceed the
contract Authorized Repair Limit, and (b) a detailed estimate of
the cost is forwarded to the company without delay."
Insured may be regarded as the real party in interest, although he ISSUE: Whether or not Bonifacio Bros. Inc. and Ayala Auto
has assigned the policy for the purpose of collection or has assigned Parts Co. is entitled to the insurance proceeds obtained by
as collateral security any judgment he may obtain. Enrique Mora.
And since a policy of insurance upon life or health may pass by RULING: No. Bonifacio Bros. Inc. and Ayala Auto Parts Co. is
transfer, will or succession to any person, whether he has an not entitled to the insurance proceeds obtained by Enrique
insurable interest or not, and such person may recover it whatever Mora.
the insured might have recovered, the widow of the decedent Dr.
Leuterio may file the suit against the insurer, Grepalife. It is fundamental that contracts take effect only between the
parties thereto, except in some specific instances provided by law
where the contract contains some stipulation in favor of a third
1. WON the widow of the decedent Dr. Leuterio may claim the person. Such stipulation is known as stipulation pour
insurance of the proceeds which amounts to 86,200.00 pesos? autrui or a provision in favor of a third person not a party to
Yes. The proceeds now rightly belong to the heirs of Dr. the contract. Under this doctrine, a third person is allowed
Leuterio after the subject property was foreclosed by the DBP. to avail himself of a benefit granted to him by the terms of
the contract, provided that the contracting parties have
clearly and deliberately conferred a favor upon such person.
RULING 3: A life insurance policy is a valued policy. Unless the Consequently, a third person not a party to the contract has
interest of a person insured is susceptible of exact pecuniary no action against the parties thereto, and cannot generally
measurement, the measure of indemnity under a policy of demand the enforcement of the same.
insurance upon life or health is the sum fixed in the policy.
The question of whether a third person has an enforcible interest in
The mortgagor paid the premium according to the coverage of his a contract, must be settled by determining whether the contracting
insurance, which states that: parties intended to tender him such an interest by deliberately
inserting terms in their agreement with the avowed purpose of
conferring a favor upon such third person.
The policy states that upon receipt of due proof of the
Debtors death during the terms of this insurance, a death The Supreme Court has laid down the rule that the fairest
benefit in the amount of P86,200.00 shall be paid. test to determine whether the interest of a third person in a
contract is a stipulation pour autrui or merely an incidental
interest, is to rely upon the intention of the parties as
In the event of the debtors death before his indebtedness disclosed by their contract.
with the creditor shall have been fully paid, an amount to
pay the outstanding indebtedness shall first be paid to the In this case, the insurance contract does not contain any words or
Creditor (DBP) and the balance of the Sum Assured, if there clauses to disclose an intent to give any benefit to any repairmen or
is any shall then be paid to the beneficiary/ies (Widow) materialmen in case of repair of the car in question. The parties to
designated by the debtor. the insurance contract omitted such stipulation, which is a
circumstance that supports the said conclusion. On the other hand,
However, The Supreme Court noted that the Court of Appeals the "loss payable" clause of the insurance policy stipulates that
decision was promulgated on May 17, 1993. The widow’s "Loss, if any, is payable to H.S. Reyes, Inc." indicating that it was
memorandum, she states that DBP foreclosed in 1995 their only the H.S. Reyes, Inc. which they intended to benefit. If it were
residential lot, in satisfaction of mortgagors outstanding loan. the intention of the insurance company to make itself liable to the
Considering this supervening event, the insurance proceeds shall repair shop or materialmen, it could have easily inserted in the
inure to the benefit of the heirs of the deceased person or his contract a stipulation to that effect.
beneficiaries. Equity dictates that DBP should not unjustly enrich
itself at the expense of another (Nemo cum alterius detrimenio Paragraph 4 of the insurance contract establishes the procedure
protest). Hence, it cannot collect the insurance proceeds, after it that the insured has to follow in order to be entitled to indemnity
already foreclosed on the mortgage. The proceeds now rightly for repair. Thus, it must not be construed as bringing into existence
belong to Dr. Leuterios heirs represented by his widow, herein in favor of the appellants a right of action against the insurance
private respondent Medarda Leuterio, the widow. company as such intention can never be inferred therefrom.
BONIFACIO BROS., INC., ET AL. VS. MORA "A policy of insurance is a distinct and independent contract
G.R. No. L-20853 between the insured and insurer, and third persons have no right
May 29, 1967 either in a court of equity, or in a court of law, to the proceeds of it,
unless there be some contract of trust, expressed or implied
Insurance Policy is a distinct and independent contract between the between the insured and third person."
insured and insurer, and third persons have no right either in a
court of equity, or in a court of law, to the proceeds of it, unless In this case, no contract of trust, expressed or implied exists. No
there be some contract of trust, expressed or implied between the cause of action exists in favor of the appellants in so far as the
insured and third person. proceeds of insurance are concerned. The appellants' claim, if at all,
is merely equitable in nature and must be made effective through
Enrique Mora who entered into a contract with the Bonifacio Bros.
FACTS: Inc. This conclusion is deducible not only from the principle
Enrique Mora owns a 1956 model of Oldsmobile sedan. The said governing the operation and effect of insurance contracts in
sedan was mortgaged to H.S. Reyes. Subsequently the automobile general, but is clearly covered by the express provisions of section
50 of the Insurance Act which read:
9|P a g e
bad weather.
The insurance shall be applied exclusively to the proper  ANCO’s representative did not heed Macabuag’s request
interests of the person in whose name it is made unless that the barge be moved to a more secure place.
otherwise specified in the policy.  the fact that on 01 October 1979, the only simple vessel
left at the wharf in San Jose was the D/B Lucio
The policy in question has been so framed that "Loss, if any, is
payable to H.S. Reyes, Inc.," which unmistakably shows the
intention of the parties. Allied Banking Corporation vs. Lim Sio Wan
G.R. No. 133179
FGU INSURANCE CORPORATION vs. March 27, 2008
CA, SAN MIGUEL CORPORATION, and ESTATE OF ANG GUI
G.R. No. 140704. March 31, 2005 Proximate cause is "that cause, which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces
PRINCIPLE: In insurance, the carelessness and negligence of the the injury and without which the result would not have occurred.
insured or his agents constitute no defense on the part of the Thus, there is an efficient supervening event if the event breaks the
insurer. This rule however presupposes that the loss has occurred sequence leading from the cause to the ultimate result. To
due to causes which could not have been prevented by the insured, determine the proximate cause of a controversy, the
despite the exercise of due diligence. HOWEVER, when the question that needs to be asked is: If the event did not
evidence show that the insured’s negligence or recklessness is so happen, would the injury have resulted? If the answer is
gross as to be sufficient to constitute a willful act, the insurer must NO, then the event is the proximate cause.
be exonerated, thus the insured is deprived of the right to recover
under the insurance contract Stokes vs. Malayan Insurance
GR No. L-34768, February 24, 1984
FACTS:
 Anco Enterprises Company (ANCO), a partnership Facts:
between Ang Gui and Co To, was engaged in the shipping Daniel Adolfson had an existing car insurance policy with Malayan
business. Insurance when his car collided with another car owned by Cesar
 It owned the M/T ANCO tugboat and the D/B Lucio barge Poblete. The collision damaged both vehicles. At the time of the
which were operated as common carriers. collision, the car of Adolfson was driven by James Stokes, who was
 Since the D/B Lucio had no engine of its own, it could not authorized to do so by Adolfson. James Stokes was an Irish citizen
maneuver by itself and had to be towed by a tugboat for who had been staying in the Philippines as tourist for more than
it to move from one place to another. ninety days. He had a valid Irish driver’s license but he does not
have a valid Philippine driver’s license.
On 23 September 1979, San Miguel Corporation (SMC)
shipped from Mandaue City, Cebu, on board the D/B Lucio, for Consequently, Adolfson filed a claim with Malayan. However,
towage by M/T ANCO, bound to (25,350 cases) San Jose, Malayan refused to pay Adolfson alleging James Stokes was not an
Antique, and (15,200 cases) Estancia Ilo-ilo. A total of 40,550 “Authorized Driver” under the insurance policy. An authorized driver
Cases could be the insured or any person driving with the insured’s
permission, provided that the person driving is permitted in
The D/B Lucio was towed by the M/T ANCO all the way from accordance with the licensing and not disqualified from driving such
Mandaue City to San Jose, Antique. The vessels arrived at San motor vehicle. This must be read in relation to Section 21 of the
Jose, Antique, at about 1:00PM of 30 September 1979. The tugboat Land Transportation and Traffic Code. Under such provision,
M/T ANCO left the barge immediately after reaching San Jose, tourists who are duly licensed to operate motor vehicles in their
Antique. respective countries may be allowed to operate motor vehicles
during but not after ninety days of their sojourn in the Philippines.
When the barge and tugboat arrived at San Jose, Antique, After ninety (90) days the tourist must obtain a driver’s license.
the clouds over the area were dark and the waves were
already big. The arrastre workers unloading the cargoes of SMC It must also be noted that Malayan Insurance received payment of
on board the D/B Lucio began to complain about their difficulty in premium from Adolfson after the incident. Thus, it is also
unloading the cargoes. contended that Malayan Insurance is estopped from raising the
defense that Stokes is not an authorized driver.
SMC’s District Sales Supervisor, Fernando Macabuag,
requested ANCO’s representative to transfer the barge to a safer Issue No. 1: Whether Malayan Insurance could validly raise the
place because the vessel might not be able to withstand the big defense that Stokes is not an authorized driver in refusing to pay
waves. the claims of Adolfson. YES.
Issue No. 2: Whether the principle of estoppel is applicable in this
ANCO’s representative did not heed the request because he was case. NO.
confident that the barge could withstand the waves.
Ruling:
This, notwithstanding the fact that at that time, only the M/T ANCO As to the first issue:
was left at the wharf of San Jose, Antique, as all other vessels Malayan Insurance could validly raise the defense that Stokes is not
already left the wharf to seek shelter. an authorized driver in refusing to pay the claims of Adolfson. A
contract of insurance is a contract of indemnity upon the terms and
With the waves growing bigger and bigger, only 10,790 cases of conditions specified therein. The insurer has the right to insist upon
beer were discharged into the custody of the arrastre compliance with the terms of the contract by the insured. If the
operator. insured cannot bring himself within the terms and conditions of the
contract, he is not entitled as a rule to recover for the loss or
At 10 PM of 01 October 1979, the crew of D/B Lucio abandoned damage suffered. For the terms of the contract constitute the
the vessel because the barge’s rope attached to the wharf was cut measure of the insurer’s liability, and compliance therewith is a
off by the big waves. condition precedent to the right of recovery.
At around midnight, the barge run aground and was broken and In this case, Stokes is not an authorized driver. An authorized
the cargoes of beer in the barge were swept away. driver must not only be permitted to drive by the insured. It is also
essential that he is permitted under the law and regulations to drive
As a result, ANCO failed to deliver to SMC’s consignee (29,210) the motor vehicle and is not disqualified from so doing under any
cases of Pale Pilsen and (550) cases of Cerveza Negra. enactment or regulation. In this case, Stokes did not have a valid
Philippine driver’s license.
ISSUE: W/N FGU can be held liable under the insurance policy to
reimburse ANCO for the loss of the cargoes? NO As to the second issue:
Acceptance of premium within the stipulated period for payment
RULING: thereof, including the agreed period of grace, merely assures
continued effectivity of the insurance policy in accordance with its
(2) NO. FGU cannot be held liable under the insurance policy terms. Such acceptance does not estop the insurer from interposing
to reimburse ANCO for the loss of the cargoes. any valid defense under the terms of the insurance policy.
The principle of estoppel is an equitable principle rooted upon
It is a basic rule in insurance that the carelessness and negligence natural justice which prevents a person from going back on his own
of the insured or his agents constitute no defense on the part of the acts and representations to the prejudice of another whom he has
insurer. This rule however presupposes that the loss has occurred led to rely upon them. The principle does not apply to the instant
due to causes which could not have been prevented by the insured, case. In accepting the premium payment of the insured, MALAYAN
despite the exercise of due diligence. was not guilty of any inequitable act or representation. There is
nothing inconsistent between acceptance of premium due under an
HOWEVER, when evidence show that the insured’s negligence or insurance policy and the enforcement of its terms.
recklessness is so gross as to be sufficient to constitute a willful act, Hence, Malayan Insurance was justified in refusing to pay Daniel
the insurer must be exonerated. Thus, the insured is deprived of Adolfson.
the right to recover under the insurance contract.
IN THIS CASE, the crewmembers of both the D/B Lucio and the
United Merchants Corporation vs. Country Bankers
M/T ANCO were blatantly negligent:
Insurance Corporation
 the patron (operator) of the tug boat immediately left the
G.R. No. 198588
barge at the San Jose, Antique wharf despite the looming
10 | P a g e
676 SCRA 382 testimony of Cabrera revealed that there was no Fuze
July 11, 2012 Industries Manufacturer Phils. located at the business address
appearing in the invoices and the records of the Department of
Topic/Gist of the case: Trade & Industry.
 A false and material statement made with an intent to deceive
or defraud voids an insurance policy. Yu Ban Chuan v. Fieldmen’s Insurance, Co., Inc.: The submission of
 The submission of false invoices to the adjusters establishes a false invoices to the adjusters establishes a clear case of fraud and
clear case of fraud and misrepresentation which voids the misrepresentation which voids the insurer’s liability as per condition
insurer’s liability as per condition of the policy. of the policy. Their falsity is the best evidence of the fraudulent
character of plaintiff’s claim.
FACTS:
In 1995, UMC’s insured UMC’s stocks in trade of Christmas lights Verendia v. Court of Appeals: Where the insured presented a
against fire with Country Bankers Insurance Corporation (CBIC) for fraudulent lease contract to support his claim for insurance
P15,000,000.00. On May 7, 1996, it was increased to benefits, the insured forfeited all benefits under the policy provision
P50,000,000.00 similar to Condition No. 15 of the Insurance Policy in this case.
Two months later, on 3 July 1996, a fire gutted the warehouse A false and material statement made with an intent to
rented by UMC. CBIC designated CRM Adjustment Corporation deceive or defraud voids an insurance policy. In this case,
(CRM) to investigate and evaluate UMC’s loss while CBIC’s UMC’s Income Statement or Financial Reports in 1885 & 1996 is
reinsurer, Central Surety, likewise requested the NBI to conduct a twenty-five times the claim UMC seeks to enforce.
parallel investigation.
The most liberal human judgment cannot attribute such difference
On February 25, 1997, CBIC rejected UMC’s claim due to breach of to mere innocent error in estimating or counting but to a deliberate
Condition No. 15 of the Insurance Policy, which provides: intent to demand from insurance companies payment for indemnity
“If the claim be in any respect fraudulent, or if any false of goods not existing at the time of the fire. This constitutes the so-
declaration be made or used in support thereof, or if any called “fraudulent claim” which, by express agreement between
fraudulent means or devices are used by the Insured or the insurers and the insured, is a ground for the exemption of
anyone acting in his behalf to obtain any benefit under insurers from civil liability.
this Policy; or if the loss or damage be occasioned by the
willful act, or with the connivance of the Insured, all the Section 75 of the Insurance Code provides that “a policy may
benefits under this Policy shall be forfeited.” declare that a violation of specified provisions thereof shall avoid
it.” Thus, in fire insurance policies, which contain provisions such
UMC filed a Complaint against CBIC with the RTC of Manila. as Condition No. 15 of the Insurance Policy, a fraudulent
discrepancy between the actual loss and that claimed in the proof
RTC: Ruled in favor of UMC, holding that there was no dispute as to of loss voids the insurance policy. Mere filing of such a claim will
UMC’s fire insurance contract with CBIC. exonerate the insurer.
CA: Set aside RTC’s ruling and rules in favor of CBIC, holding that Considering that all the circumstances point to the inevitable
UMC’s claim under the Insurance Policy is void as: conclusion that UMC padded its claim and was guilty of fraud, UMC
1. The fire was intentional in origin; and violated Condition No. 15 of the Insurance Policy. Thus, UMC
2. UMC’s claim was overvalued through fraudulent transactions. forfeited whatever benefits it may be entitled under the Insurance
Policy, including its insurance claim.
ISSUE: Whether or not UMC is entitled to claim from CBIC the full
coverage of its fire insurance policy.
Geagonia vs. Court of Appeals
RULING: NO. G.R. No. 114427, February 6, 1995
UMC established a prima facie case against CBIC. However, CBIC

alleged an excepted risk, so the burden of evidence shifted to CBIC Topic: A policy may declare that a violation of specified provisions
to prove such exception. thereof shall avoid it, otherwise, the breach of an immaterial
provision does not avoid the policy. To constitute a violation of the
NO ARSON WAS PROVEN “other insurance” clause, the other insurance must be upon the
CBIC failed to discharge its burden of establishing that the damage same subject matter, the same interest therein, and the same risk.
was caused by arson, a limitation in the policy. CBIC’s evidence did
not prove that the fire was intentionally caused by the insured: FACTS:
1. Findings of CBIC’s witnesses stating that there was arson were Geagonia, an owner of a mart, obtained a fire insurance policy
based on an investigation conducted more than four months from Country Bankers Insurance Corp. The period of the policy was
after the fire, was based on hearsay as the witnesses were not from December 22, 1989 to December 22, 1990 which covered
brought to court; “stock-in-trade consisting principally of dry goods such as RTW’s for
2. CBIC is bound by the Sworn Statement of Formal Claim men and women wear and other usual to assured’s business.”
submitted by UMC that states the cause of the fire as “faulty
electrical wiring/accidental in nature because in its Answer, it
admitted that it designated CRM to evaluate UMC’s loss; Geagonia declared in the policy under the subheading entitled CO-
3. The Certification by the Bureau of Fire Protection states that INSURANCE that Mercantile Insurance Co., Inc. was the co-insurer
the fire was accidental in origin. for P50,000.00.
INURANCE STILL VOID DUE TOO FRAUD

The policy contained Condition No. 3 stating that “The insured shall
CBIC’s failure to prove arson does not mean that it also failed to
give notice to the company of other insurance covering any of the
prove fraud.
property insured, and unless such notice be given and the
 Qua Chee Gan v. Law Union (in which the allegations of fraud
particulars of such insurance be stated in or endorsed on the Policy,
and arson were based on the same set of evidence) does not
all benefits under the Policy shall be forfeited, provided however,
apply in the present case. In this case, arson and fraud are
that this condition shall not apply when the total insurance in force
two separate grounds based on two different sets of evidence.
at the time of the loss or damage is not more than P200,000.00.”
The absence of one does not necessarily result in the absence
of the other.
(fire occurred)
Condition No. 15 of the Insurance Policy provides that all the
benefits under the policy shall be forfeited, if the claim be in any Geagonia then filed a complaint against Century Bankers with the
respect fraudulent, or if any false declaration be made or used in Insurance Commission (IC) for the recovery of the policy.
support thereof.
Uy Hu & Co. v. The Prudential Assurance Co., Ltd., provides that if ISSUES:
a fire insurance policy contains such a provision, and the evidence
is conclusive that the proof of claim which the insured submitted 1. Whether the non-disclosure of other insurance policies violate
was false and fraudulent both as to the kind, quality and amount of condition 3 of the policy so as to deny Geagonia from recovering
the goods and their value destroyed by the fire, such a proof of the policy; and
claim is a bar against the insured from recovering on the 2. Whether the violation of Condition 3 of the policy renders the
policy even for the amount of his actual loss. policy void.
In the present case, a look at the evidence presented would show

that the invoices submitted by UMC included more than the stocks RULING:
in trade that was insured.
1. UMC alleged that it did not include as stocks in trade the raw In both issues, the Court held that No. The non-disclosure of the
materials to be assembled as Christmas lights, which it had on other insurance policies was not fatal to Geagonia's right to recover
31 December 1995. However, as proof of its loss, UMC on Country Bankers’ policy, and that Condition 3 in private
submitted invoices for raw materials, knowing that the respondent’s policy F-14622 does not absolutely declare void any
insurance covers only stocks in trade. violation thereof. What it expressly provides is that the condition
2. Furthermore, the invoices from Fuze Industries Manufacturer shall not apply when the total insurance or insurances in force at
Phils. were suspicious. The purchases, based on the invoices the time of the loss or damage is not more than P200,000.00.
and without any supporting contract, amounted to
P19,550,400.00 worth of Christmas lights. The uncontroverted
11 | P a g e
Condition 3 of the private respondent's Policy No. F-14622 is a Therefore, even though the two concerned insurance policies were
condition which is not proscribed by law. Its incorporation in the issued over the same goods and cover the same risk, there arises
policy is allowed by Section 75 of the Insurance Code which no double insurance since they were issued to two different
provides that "[a] policy may declare that a violation of specified persons/entities having distinct insurable interests.
provisions thereof shall avoid it, otherwise the breach of an
immaterial provision does not avoid the policy." Such a condition is COQUIA v. FIELDMEN’S INSURANCE
a provision which invariably appears in fire insurance policies and is GR. No. L-23276
intended to prevent an increase in the moral hazard. It is November 29, 1968
commonly known as the additional or "other insurance" clause and
has been upheld as valid and as a warranty that no other insurance Topic/Gist of the case: As a rule, only parties to a contract may
exists. Its violation would thus avoid the policy. However, in order bring an action based thereon. However, an exception is when a
to constitute a violation, the other insurance must be upon same third person, although not a party to the contract, may demand the
subject matter, the same interest therein, and the same risk. fulfillment of a contract provided that it was clearly and deliberately
Further, the Court concludes that (a) the prohibition in Condition 3 made for his benefit before being revoked by the contracting
of the subject policy applies only to double insurance, and (b) the parties.
nullity of the policy shall only be to the extent exceeding
P200,000.00 of the total policies obtained. As such, in Insurance Contracts, third parties may file a claim
directly against the insurance company provided that the policy was
explicitly shown to be made for their benefit.
As to a mortgaged property, the mortgagor and the mortgagee
have each an independent insurable interest therein and both
FACTS:
interests may be one policy, or each may take out a separate policy
covering his interest, either at the same or at separate times. The
Fieldmen’s Insurance (Company) issued a common carrier accident
mortgagor's insurable interest covers the full value of the
insurance policy in favor of Manila Yellow Taxicab (Insured),
mortgaged property, even though the mortgage debt is equivalent
stipulating that the Company will indemnify the insured in the event
to the full value of the property. The mortgagee's insurable interest
of an accident in the use of motor vehicle which would cause the
is to the extent of the debt, since the property is relied upon as
death or injury of a passenger, driver, conductor, and/or inspector
security thereof, and in insuring he is not insuring the property but
riding such vehicle.
his interest or lien thereon. His insurable interest is prima facie the
value mortgaged and extends only to the amount of the debt, not
While the policy was in force, a taxi driver of the insured, Carlito
exceeding the value of the mortgaged property. Thus, separate
Coquia, met a vehicular accident and died while driving one of the
insurances covering different insurable interests may be obtained
insured’s taxis.
by the mortgagor and the mortgagee.
The Insured then filed a claim for P5,000 to which the Company
A double insurance exists where the same person is insured by replied with an offer to pay P2,000 as compromise. This was
several insurers separately in respect of the same subject and rejected by the Insured and made a counter-offer for P4,000, but
interest. As earlier stated, the insurable interests of a mortgagor the Company did not accept it. Hence, the Insured and Carlito's
and a mortgagee on the mortgaged property are distinct and parents filed a complaint against the Company to collect the
separate. Since the two policies of the PFIC do not cover the same proceeds of the policy.
interest as that covered by the policy of the private respondent, no
double insurance exists. The non-disclosure then of the former RULING: YES. The general rule is that only parties to a contract
policies was not fatal to the petitioner's right to recover on the may bring an action based thereon, with the exception found in Art.
private respondent's policy. 1311 (par. 2):
"If a contract should contain some stipulation in favor of

Furthermore, by stating within Condition 3 itself that such condition a third person, he may demand its fulfillment provided
shall not apply if the total insurance in force at the time of loss does communicated his acceptance to the obligor before its
not exceed P200,000.00, the private respondent, Country Bankers revocation. A mere incidental benefit or interest of a
Insurance Corp was amenable to assume a co-insurer's liability up person is not sufficient. The contracting parties must
to a loss not exceeding P200,000.00. What it had in mind was to have clearly and deliberately conferred a favor upon a
discourage over-insurance. The public as well as the insurer is third person.”
interested in preventing a situation in which a fire would be
profitable to the insured. wherein a third person, although not a party to the contract, may
demand the fulfillment of a contract provided that it was clearly and
deliberately made for his benefit before being revoked by the
MALAYAN INSURANCE CO., INC., vs. PHILIPPINES FIRST contracting parties. This is the principle concerning contracts pour
INSURANCE CO., INC. and REPUTABLE FORWARDER autrui.
SERVICES, INC.
G.R. No. 184300. July 11, 2012 In the case, the policy is in the nature of a contract pour autrui
Digest by: Krissa Omandam because pursuant to the stipulations in the policy, the Company will
indemnify any authorized driver driving the Insured’s vehicle, and
Doctrine: Double insurance exists where the same person is in the event of his death, the Company shall, likewise, indemnify
insured by several insurers separately in respect to the same his personal representatives and may, at its option, make
subject and interest. indemnity payable directly to the claimants or heirs of claimants.
This was to protect the liabilities of the Insured towards the
Issue: Whether or not there is double insurance. passengers of the vehicle and the public.
Ruling: None. By the express provision of Section 93 of the This is further manifested by the fact that the deceased driver paid
Insurance Code, double insurance exists where the same person is 50% of the corresponding premiums, which were deducted from his
insured by several insurers separately in respect to the same weekly commissions.
subject and interest and risk. The requisites in order for double
insurance to arise are as follows: It is therefore clear that the Coquias, the sole heirs of the
1. The person insured is the same; deceased, have a direct cause of action against the Company. Since
2. Two or more insurers insuring separately; they can maintain this action by themselves, without assistance
3. There is identity of subject matter; from the Insured, they can properly join the latter in filing the
4. There is identity of interest insured; and complaint against the insurance company to collect the proceeds of
5. There is identity of the risk or peril insured against. the policy.
In the present case, while it is true that the Marine Policy and the
SR Policy were both issued over the same subject matter, i.e.
goods belonging to Wyeth, and both covered the same peril insured
against, it is, however, beyond cavil that the said policies were
issued to two different persons or entities. It is undisputed that
Wyeth is the recognized insured of Philippines First under its Marine
Policy, while Reputable is the recognized insured of Malayan under
the SR Policy. The fact that Reputable procured Malayan’s SR Policy
over the goods of Wyeth pursuant merely to the stipulated
requirement under its contract of carriage with the latter does not
make Reputable a mere agent of Wyeth in obtaining the said SR
Policy.
The interest of Wyeth over the property subject matter of both

insurance contracts is also different and distinct from that of
Reputable’s. The policy issued by Philippines First was in
consideration of the legal and/or equitable interest of Wyeth over
its own goods. On the other hand, what was issued by Malayan to
Reputable was over the latter’s insurable interest over the safety of
the goods, which may become the basis of the latter’s liability in
case of loss or damage to the property and falls within the
contemplation of Section 15 of the Insurance Code.
12 | P a g e

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Insurance 2nd Exam Case Shortcuts | Anastasia Beaverhausen

From 3-SR case digests

COQUIA AND MANILA YELLOW TAXICAB CO., INC v.

the proceeds of an insurance policy.”

G.R. No. 130421

RULING: The situation of co-insurance as discussed by CA is not As to failure to disclose co-insurers

UMC established a prima facie case against CBIC. However, CBIC

INURANCE STILL VOID DUE TOO FRAUD

In the present case, a look at the evidence presented would show

"If a contract should contain some stipulation in favor of

The interest of Wyeth over the property subject matter of both

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