1. ETERNAL GARDENS MEMORIAL PARK v.
PHILAM LIFE INSURANCE received by Philamlife
FACTS:
• December 1980 – Philamlife entered into an agreement with Eternal
Gardens (Eternal)
o Clients of Eternal who purchased burial lots on installment
would be insured by Philamlife
o Amount of insurance coverage depended upon the existing
balance of the purchased burial lots
o Policy to be effective for a period of 1 year
• Relevant provisions of the policy are:
o ELIGIBILITY
§ Any lot purchaser of assured who is at least 18 but not more
than 65
§ Indebted to assured for unpaid balance of loan
§ Accepted for Life Insurance coverage
o EVIDENCE OF INSURABILITY
§ No medical examination required for amounts of insurance
up to P50K
§ Declaration of good health required for all lot purchasers
§ Further evidence of insurability in respect of:
• Amount of insurance in excess of P50K
• Lot purchaser who is more than 55y/o
o LIFE INSURANCE BENEFIT
§ Coverage shall be the amount of the unpaid balance of his
loan
§ Such benefit shall be paid to the assured if the lot purchaser
dies while insured under the policy
o EFFECTIVE DATE OF BENEFIT
§ Effective on the date lot purchasers contracts a loan with the
Assured
§ No insurance if application is not approved
• Eternal was required to submit to Philamlife a list of all new lot
purchasers, copy of the application of each purchaser and amounts of
unpaid balances
• One of those included in the list was a certain John Chuang
o Balance of payments was P100K
o Died on Aug. 2, 1984
• Eternal sent a letter to Philamlife which served as an insurance claim for
Chuang’s death
o In reply, Philamlife required Eternal to submit documents
relative to Eternal’s claim for Chuang’s death
o Eternal transmitted the required documents which were
• More than a year after – there was no reply from Philamlife
o This prompted Eternal to demand from Philamlife the payment
of P100K
• In response, Philamlife denied Eternal’s insurance claim stating:
o Deceased was 59 years old when he entered into the 2
contracts with Eternal for 100K each
o No application for Group Insurance was submitted
o No application had been submitted by the Insured/Assured
prior to his death but submitted after his death – John Chuang
was not covered under the policy
• Eternal filed a case before the Makati RTC for a sum of money against
Philamlife
• RTC: rendered judgment in favor of Eternal
o RTC found that Eternal submitted Chuang’s application for
insurance which he accomplished before his death to
Philamlife
o Due to Philamlife’s inaction from the submission of the
requirements of the group insurance to Chuang’s death, as well
as acceptance of premiums during the same period –
Philamlife was deemed to have approved Chuang’s
application
• CA: reversed and set aside RTC decision
o Chuang’s application was no enclosed in Etternal’s letter
o Non-accomplishment of the submitted application form
violated Sec. 26 of the Insurance code
ISSUES:
W/N the application for insurance was duly submitted to respondent Philamlife
before death of John Chuang – YES
• The letter dated December 29, 1982 which Philamlife received states
that the insurance forms were attached to the letter
• Stamp of receipt has the effect of acknowledging receipt of the letter
together with the attachments
o Receipt is an admission by Philamlife against its own interest
o Philamlife is deemed to have received Chuang’s insurance
application
• Philam claims that Eternal did not know where the original application of
Chuang was as shown by the testimony of Edilberto Mendoza
o The Court finds that the witness admitted not knowing where
the original insurance application was but believed that the
ABUNALES CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO 1
 application was transmitted to Philamlife as an attachment to a
transmittal letter
• As to the seeming inconsistencies between the terstimonies of Manuel
Cortez and Edilberto Mendoza on who actually filled out the form – the
Court ruled that minor inconsistencies are too trivial to affect the
credibility of witnesses
W/N there was a valid insurance coverage – YES
• Philamlife and Eternal entered into an agreement dated December 10,
1980
o Insurance shall be effective of on the date the lot purchaser
contracts a loan with the Assured. However, there shall be no
insurance if the application of the Lot Purchaser is not
approved.
• The provision would show ambiguity between 2 sentences – first
sentence appears to state that the insurance coverage of the clients
became effective upon contracting a loan while the second appears to
require Philamlife to approve the insurance contract before the same
can become effective
o It must be remembered that an insurance contract is a
contract of adhesion — which should be construed liberally
in favor of the insured and strictly against the insurer
• The vague contractual provision must be construed in favor of the
insured and in favor of the effectivity of the insurance contract
• On the other hand, the conflicting provisions must be harmonized to
mean that upon a party’s purchase of a memorial lot on installment
from Eternal, an insurance contract covering the lot purchaser is
created and the same is effective, valid and binding until terminated
by Philamlife by disapproving the insurance application
o Second sentence – nature of a resolutory condition
• The mere inaction of the insurer on the insurance application must not
work to prejudice the insured – it cannot be interpreted as a termination
of the insurance contract
o Termination of insurance contract must be explicit and
unambigious
o In order to protect the interest of insurance applicants,
insurance companies must act with haste upon insurance
applications
• CA decision reversed & set aside
2 CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO
2. PHILAMCARE HEALTH SYSTEMS v. CA
FACTS:
Ø Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a
health care coverage with petitioner Philamcare Health Systems, Inc. In the
standard application form, he answered no to the following question: Have
you or any of your family members ever consulted or been treated for high
blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or
peptic ulcer? (If Yes, give details).
Ø The application was approved for the period of March 1988 – March 1989
and was later extended to March 1, 1990, then March 1990 to June 1, 1990,
where the coverage was up to 75,000 per disability.
Ø Ernani suffered a heart attack and was confined at the Manila Medical
Center (MMC) for one month beginning March 9, 1990. Respondent tried to
claim the benefits under the health care agreement. However, petitioner
denied her claim saying that the Health Care Agreement was void because
there was a concealment regarding Ernani's medical history. Doctors at the
MMC allegedly discovered at the time of Ernani's confinement that he was
hypertensive, diabetic and asthmatic, contrary to his answer in the
application form. Thus, respondent paid the hospitalization expenses herself,
amounting to about P76,000.00.
Ø Ernani died at Chinese General Hospital on April 13, 1990.
Ø Respondent instituted with the Regional Trial Court of Manila, Branch 44, an
action for damages against petitioner and its president, Dr. Benito Reverente
for reimbursement, moral damages, and attorney’s fees. RTC ruled in favor
of respondent and was affirmed by CA but removed damages.
PHILAMCARE arguments:
Ø a health care agreement is not an insurance contract; hence the
"incontestability clause" under the Insurance Code 6 does not apply
Ø that the agreement grants "living benefits," such as medical check-ups and
hospitalization which a member may immediately enjoy so long as he is alive
upon effectivity of the agreement until its expiration one-year thereafter.
Ø that only medical and hospitalization benefits are given under the agreement
without any indemnification, unlike in an insurance contract where the
insured is indemnified for his loss.
Ø Health Care Agreements are only for a period of one year, as compared to
insurance contracts which last longer, petitioner argues that the
incontestability clause does not apply, as the same requires an effectivity
period of at least two years.
 Ø that it is not an insurance company, which is governed by the Insurance
Commission, but a Health Maintenance Organization under the authority of
the Department of Health
ISSUE: Whether or not the agreement entered into was a contract of
insurance? YES!
Held: Petition Denied; CA affirmed.
1. COMMERCIAL LAW; INSURANCE LAW; CONTRACT OF INSURANCE;
DEFINED. — Section 2 (1) of the Insurance Code defines a contract of
insurance as an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or
contingent event.
2. ELEMENTS. — An insurance contract exists where the following elements
concur: 1. The insured has an insurable interest; 2. The insured is subject to a
risk of loss by the happening of the designated peril; 3. The insurer assumes
the risk; 4. Such assumption of risk is part of a general scheme to distribute
actual losses among a large group of persons bearing a similar risk; and 5. In
consideration of the insurer's promise, the insured pays a premium.
3. INSURABLE INTEREST, CONSTRUED; CASE AT BAR. — Section 3 of the
Insurance Code states that any contingent or unknown event, whether past or
future, which may damnify a person having an insurable interest against him,
may be insured against. Every person has an insurable interest in the life and
health of himself. Section 10 provides: "Every person has an insurable interest
in the life and health: (1) of himself, of his spouse and of his children; (2) of any
person on whom he depends wholly or in part for education or support, or in
whom he has a pecuniary interest; (3) of any person under a legal obligation to
him for the payment of money, respecting property or service, of which death
or illness might delay or prevent the performance; and (4) of any person upon
whose life any estate or interest vested in him depends." In the case at bar,
the insurable interest of respondent's husband in obtaining the health
care agreement was his own health. The health care agreement was in
the nature of non-life insurance, which is primarily a contract of
indemnity. Once the member incurs hospital, medical or any other
expense arising from sickness, injury or other stipulated contingent, the
health care provider must pay for the same to the extent agreed upon
under the contract.
4. CONCEALMENT; AVOIDS A POLICY; EXCEPTION; CASE AT BAR. — The
answer assailed by petitioner was in response to the question relating to the
medical history of the applicant. This largely depends on opinion rather than
fact, especially coming from respondent's husband who was not a medical
doctor. Where matters of opinion or judgment are called for, answers made in
good faith and without intent to deceive will not avoid a policy even though
they are untrue. Thus, "(A)lthough false, a representation of the expectation,
intention, belief, opinion, or judgment of the insured will not avoid the policy if
there is no actual fraud in inducing the acceptance of the risk, or its
acceptance at a lower rate of premium, and this is likewise the rule although
the statement is material to the risk, if the statement is obviously of the
foregoing character, since in such case the insurer is not justified in relying
upon such statement, but is obligated to make further inquiry. There is a clear
distinction between such a case and one in which the insured is fraudulently
and intentionally states to be true, as a matter of expectation or belief, that
which he then knows, to be actually untrue, or the impossibility of which is
shown by the facts within his knowledge, since in such case the intent to
deceive the insurer is obvious and amounts to actual fraud."
5. ID.; MUST BE ESTABLISHED BY SATISFACTORY AND CONVINCING
EVIDENCE BY INSURER. — The fraudulent intent on the part of the insured
must be established to warrant rescission of the insurance contract.
Concealment as a defense for the health care provider or insurer to avoid
liability is an affirmative defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon the provider or insurer.
6. HEALTH CARE AGREEMENT; HEALTH CARE PROVIDER, WHEN LIABLE;
CASE AT BAR. — In any case, with or without the authority to investigate,
petitioner is liable for claims made under the contract. Having assumed a
responsibility under the agreement, petitioner is bound to answer the same to
the extent agreed upon. In the end, the liability of the health care provider
attaches once the member is hospitalized for the disease or injury covered by
the agreement or whenever he avails of the covered benefits which he has
prepaid.
7. RESCISSION OF; CONDITIONS; NOT FULFILLED IN CASE AT BAR. —
Under Section 27 of the Insurance Code, "a concealment entitles the injured
party to rescind a contract of insurance." The right to rescind should be
exercised previous to the commencement of an action on the contract. In this
case, no rescission was made. Besides, the cancellation of health care
ABUNALES CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO 3
 agreements as in insurance policies require the concurrence of the following
conditions: 1. Prior notice of cancellation to insured; 2. Notice must be based
on the occurrence after effective date of the policy of one or more of the
grounds mentioned; 3. Must be in writing, mailed or delivered to the insured at
the address shown in the policy; 4. Must state the grounds relied upon
provided in Section 64 of the Insurance Code and upon request of insured, to
furnish facts on which cancellation is based. None of the above pre-conditions
was fulfilled in this case.
8. TERMS AND PHRASEOLOGY CONTAINED THEREIN MUST BE STRICTLY
INTERPRETED AGAINST THE INSURER AND LIBERALLY IN FAVOR OF THE
INSURED; CASE AT BAR. — When the terms of insurance contract contain
limitations on liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his obligation. Being a contract
of adhesion, the terms of an insurance contract are to be construed strictly
against the party which prepared the contract — the insurer. By reason of the
exclusive control of the insurance company over the terms and phraseology of
the insurance contract, ambiguity must be strictly interpreted against the
insurer and liberally in favor of the insured, especially to avoid forfeiture. This is
equally applicable to Health Care Agreements. The phraseology used in
medical or hospital service contracts, such as the one at bar, must be liberally
construed in favor of the subscriber, and if doubtful or reasonably susceptible
of two interpretations the construction conferring coverage is to be adopted,
and exclusionary clauses of doubtful import should be strictly construed
against the provider
3. ASIAN TERMINALS v. FIRST LEPANTO –TAISHO INSURANCE CORP.
FACTS: 3,000 bags of sodium tripolyphosphate were loaded into a carrier owned
by China Ocean Shipping Co. (COSCO) in favor of consignee Grand Asian Sales
Inc. (GASI). It was insured against all risks by GASI with First Lepanto for P8
million pesosesoses. It arrived in Manila and was discharged into the custody of
ATI, a corporation performing arrastre services. It was then withdrawn by broker
Proven Customs Brokerage Corporation (PROVEN) for delivery to the consignee.
Upon receipt, GASI inspected the sodium and found a shortage of 8,600 kg and
spillage of 3,315 kg for a total loss of 11,915 kg valued at P160,000.
GASI sought recompense from COSCO, thru its Philippine agent Smith Bell
Shipping Lines, Inc. (SMITH BELL), ATI, and PROVEN but was denied. Hence, it
pursued indemnification from the shipment’s insurer. LEPANTO paid the amount
lost to GASI and demanded from COSCO, SMITTH BELL, ATI, and PROVEN the
4 CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO
amount paid to GASI before the MTC. The demand was unheeded causing
LEPANTO to file a case for sum of money with the MeTC.
ATI’s CONTENTION:
-denied liability claiming that it exercised due diligence and care in handling the
shipment
-ATI avers that upon arrival of the shipment, there was already damage to the
same while it was in the custody of COSCO as evidenced by the joint execution
of Turn Over Survey of Bad Cargo by ATI and COSCO
-upon PROVEN’s withdrawal of the shipment, it was re-examined and found to
have been in the exact same condition that it arrived in
-even assuming it is found liable for damages, its contract limits its liability to not
more than P5,000 per package
PROVEN’s CONTENTION:
-PROVEN denied any liability for the lost/damaged shipment and averred that the
complaint alleged no specific acts or omissions that makes it liable for damages
-PROVEN claimed that the damages in the shipment were sustained before they
were withdrawn from ATI’s custody under which the shipment was left in an open
area exposed to the elements, thieves and vandals
-PROVEN contended that it exercised due diligence and prudence in handling
the shipment.
COSCO and SMITH BELL failed to answer the complaint.
MeTC RULING: dismissed the case finding only COSCO to be at fault but
without jurisdiction over it being a foreign corporation
RTC RULING: decision reversed, ATI at fault because it received the shipment
on July 18 but the Bad Order Survey and Turn Over Survey of Bad Cargo were
prepared only on Aug 6 and 9 respectively. Limit on its liability not applicable
CA RULING: ATI further averred in the CA that LEPANTO not validly subrogated
to GASI’s rights for failure to present a valid, existing, and enforceable Marine
Open Policy or insurance contract. ATI reasoned that the Certificate of Insurance
or Marine Cover Note submitted by FIRST LEPANTO as evidence is not the same
as an actual insurance contract. CA dismissed the appeal and affirmed RTC
ISSUE: w/n presentation of the insurance policy is indispensable in proving the
right of LEPANTO to be subrogated to the right of the consignee

HELD: NO. Non-presentation of the insurance contract is not fatal to
LEPANTO’s cause of action for reimbursement as subrogee.
As a general rule, the marine insurance policy needs to be presented in
evidence before the insurer may recover the insured value of the lost/damaged
cargo in the exercise of its subrogatory right. In Malayan Insurance Co., Inc.
v.Regis Brokerage Corp., the Court stated that the presentation of the contract
constitutive of the insurance relationship between the consignee and insurer is
critical because it is the legal basis of the latter’s right to subrogation.
Nevertheless, the rule is not inflexible. In certain instances, the Court
has admitted exceptions by declaring that a marine insurance policy is
dispensable evidence in reimbursement claims instituted by the insurer.
In Delsan Transport Lines, Inc. v. CA, the Court ruled that the right of
subrogation accrues simply upon payment by the insurance company of the
insurance claim. Hence, presentation in evidence of the marine insurance policy
is not indispensable before the insurer may recover from the common carrier the
insured value of the lost cargo in the exercise of its subrogatory right. The
subrogation receipt, by itself, was held sufficient to establish not only the
relationship between the insurer and consignee, but also the amount paid to
settle the insurance claim. The presentation of the insurance contract was
deemed not fatal to the insurer’s cause of action because the loss of the cargo
undoubtedly occurred while on board the petitioner’s vessel.
The same rationale was the basis of the judgment in International
Container Terminal Services, Inc. v. FGU Insurance Corporation,wherein the
arrastre operator was found liable for the lost shipment despite the failure of the
insurance company to offer in evidence the insurance contract or policy. As in
Delsan, it was certain that the loss of the cargo occurred while in the petitioner’s
custody.
Based on the attendant facts of the instant case, the application of the
exception is warranted. As discussed above, it is already settled that the
loss/damage to the GASI’s shipment occurred while they were in ATI’s custody,
possession and control as arrastre operator. Verily, the Certificate of Insurance
and the Release of Claim presented as evidence sufficiently established
LEPANTO’s right to collect reimbursement as the subrogee of the consignee,
GASI.
Lastly, ATI’s liability was deemed to have been established by the long
interal between its receipt of the shipment and the issuance of the Bad
Order/Turn Over Survey of Bad Cargo
4. CHA v. CA
5. GAISANO CAGAYAN Inc. v. INSURANCE COMPANY OF NORTH AMERICA
6. SUN LIFE OF CANADA PH v. SIBYA
FACTS: Atty. Jesus Sibya, Jr. (Atty. Jesus Jr.) applied for life insurance with Sun
Life. In his Application for Insurance, he indicated that he had sought advice for
kidney problems. Atty. Jesus Jr. indicated the following in his application: "Last
1987, had undergone lithotripsy due to kidney stone under Dr. Jesus Benjamin
Mendoza at National Kidney Institute, discharged after 3 days, no recurrence as
claimed."
On February 5, 2001, Sun Life approved Atty. Jesus Jr.'s application. The policy
indicated the respondents as beneficiaries and entitles them to a death benefit of
P1,000,000.00 should Atty. Jesus Jr. dies on or before February 5, 2021, or a
sum of money if Atty. Jesus Jr. is still living on the endowment date.
On May 11, 2001, Atty. Jesus Jr. died as a result of a gunshot wound; as such,
Ma. Daisy filed a Claimant's Statement with Sun Life. Sun Life denied the claim
on the ground that the details on Atty. Jesus Jr.'s medical history were not
disclosed in his application. Simultaneously, Sun Life tendered a check
representing the refund of the premiums paid by Atty. Jesus Jr.
The respondents reiterated their claim. Sun Life, however, refused to heed the
respondents' requests and instead filed a Complaint for Rescission before the
RTC. Sun Life alleged that Atty. Jesus Jr. did not disclose in his insurance
application his previous medical treatment. The undisclosed fact suggested that
the insured was in "renal failure" and at a high risk medical condition.
Consequently, had Sun Life known such fact, it would not have issued the
insurance policy.
The respondents claimed that Atty. Jesus Jr. did not commit misrepresentation
in his application for insurance. They averred that Atty. Jesus Jr. was in good
faith when he signed the insurance application and even authorized Sun Life to
inquire further into his medical history for verification purposes.
RTC: Dismissal.
1. No material concealment and misrepresentation. Given the disclosures
and the waiver and authorization to investigate, Sun Life, had all the
means of ascertaining the facts allegedly concealed by the applicant.
ABUNALES CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO 5
 2. Sun Life violated Sections 241, paragraph 1(b), (d), and (e)14 and 24215
of the Insurance Code when it refused to pay the rightful claim of the
respondents. Pay death benefits, moral and exemplary damages and the
cost of suit.
CA: Affirm with modifications.
1. Pay death benefits and damages.
2. Absolved Sun Life from the charges of violation of Sections 241 and 242
of the Insurance Code.
ISSUE: WON Sun Life may be held liable to pay the benefits; and if there was
concealment or misrepresentation on the part of Atty. Jesus.
HELD: Sun Life is liable, and there was no concealment or
misrepresentation on the part of Atty. Jesus.
In Manila Bankers Life Insurance Corporation v. Aban the Court held: After the
two-year period lapses, or when the insured dies within the period, the
insurer must make good on the policy, even though the policy was obtained
by fraud, concealment, or misrepresentation. Atty. Jesus died a mere three
months from the issuance of the policy; therefore, Sun Life loses its right to
rescind the policy.
Assuming, however, for the sake of argument, that the incontestability period has
not yet set in, the Court nonetheless holds: that Sun Life failed to show that
Atty. Jesus Jr. committed concealment and misrepresentation.
Records show that in the Application for Insurance, [Atty. Jesus Jr.] admitted that
he had sought medical treatment for kidney ailment. When asked to provide
details on the said medication, [Atty. Jesus Jr.] indicated the following
information: year ("1987"), medical procedure ("undergone lithotripsy due to
kidney stone"), length of confinement ("3 days"), attending physician ("Dr. Jesus
Benjamin Mendoza") and the hospital ("National Kidney Institute"). It appears that
[Atty. Jesus Jr.] also signed the Authorization which gave [Sun Life] the
opportunity to obtain information on the facts disclosed by [Atty. Jesus Jr.] in his
insurance application.
6 CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO
With regard to allegations of misrepresentation, we note that [Atty. Jesus Jr.] was
not a medical doctor, and his answer "no recurrence" may be construed as an
honest opinion. Where matters of opinion or judgment are called for, answers
made in good faith and without intent to deceive will not avoid a policy even
though they are untrue.
7. GEAGONIA v. CA
v Petitioner - owner of Norman's Mart located in the public market of San
Francisco, Agusan del Sur.
Ø 22 Dec 1989 - he obtained from the Private Respondent (PR) fire
insurance policy for 100k for the period Dec 22, 1989-Dec 22, 1990
covering its dry goods such as RTW's for men and women
Ø It was also declared in the policy that Mercantile Insurance Co., Inc. was
the co-insurer for 50k
Ø The policy contained Condition No. 3 that the insured shall give notice to
the Company of any insurance effected covering any of the property
insured before the occurrence of any loss or damage, otherwise all
benefits under this policy shall be deemed forfeited, provided however,
that this condition shall not apply when the total insurance in force at the
time of the loss or damage is not more than 200k
v Consequently, on 27 May 1990 - fire of accidental origin broke out at the
public market of San Francisco, Agusan del Sur which completely destroyed
petitioner’s stocks-in-trade thereby prompting him to file with the PR a claim
under the policy.
§ The latter denied the claim because it found that at the time of the
loss the petitioner's stocks-in-trade were covered by 2 other fire
insurance policies for P100k each issued by the Cebu Branch of the
Philippines First Insurance Co., Inc. (PFIC).
• These policies a mortgage clause reading:
♦ MORTGAGE: Loss, if any shall be payable to Messrs. Cebu
Tesing Textiles, Cebu City as their interest may appear
subject to the terms of this policy. CO-INSURANCE
DECLARED: P100,000. — Phils. First CEB/F 24758
• Petitioner then filed a complaint against the PR with the
Insurance Commission (IC) for the recovery of P100k under the
policy
♦ IC : petitioner did not violate the Condition as he had no
knowledge of the existence of the two fire insurance
policies obtained from the PFIC; that it was Cebu Tesing
 Textiles which procured the PFIC policies without informing
him or securing his consent; and that Cebu Tesing Textile,
as his creditor, had insurable interest on the stocks
Ø CA : reversed the IC Decision - In failing to disclose the
existence of 2 other insurances petitioner violated
Condition No. 3 of the Fire Policy
ISSUE: W/N petitioner violated Condition 3 of the policy
v Petitioner knew of the prior policies issued by the PFIC.
v Condition 3 of the PR’s Policy is a condition which is not proscribed by law.
Such a condition is intended to prevent an increase in the moral hazard -
commonly known as the additional or "other insurance" clause and has
been upheld as valid and as a warranty that no other insurance exists.
Ø Its violation would thus avoid the policy
Ø However, in order to constitute a violation, the other insurance must be
upon the same subject matter, the same interest therein, and the
same risk.
v As to a mortgaged property, the mortgagor and the mortgagee have each an
independent insurable interest therein and both interests may be covered by
one policy, or each may take out a separate policy covering his interest, either
at the same or at separate times.
Ø The usual practice: mortgagor take out insurance for the benefit of the
mortgagee as the latter may be made the beneficial payee in several
ways: the assignee of the policy with the consent of the insurer; or the
mere pledgee without such consent; or the original policy may contain a
mortgage clause; or a rider making the policy payable to the mortgagee
"as his interest may appear" may be attached; or a "standard mortgage
clause," containing a collateral independent contract between the
mortgagee and insurer, may be attached; or the policy, though by its
terms payable absolutely to the mortgagor, in which case the mortgagee
acquires an equitable lien upon the proceeds.
§ In the policy obtained by the mortgagor with loss payable clause in
favor of the mortgagee, the mortgagee is only a beneficiary under the
contract but not made a party to the contract itself
§ On the other hand, a mortgagee may also procure a policy as a
contracting party in accordance with the terms of an agreement by
which the mortgagor is to pay the premiums upon such insurance.
v The fire insurance policies issued by the PFIC is clearly a simple loss
payable clause, not a standard mortgage clause.
§ Unlike the "other insurance" clauses, Condition 3 does not
absolutely declare void any violation thereof. It expressly provides
that the condition "shall not apply when the total insurance or
insurances in force at the time of the loss or damage is not more
than 200k
v Cardinal rule on insurance : a policy or insurance contract is to be interpreted
liberally in favor of the insured and strictly against the company. It is also a
cardinal principle of law that provisions, conditions or exceptions in policies
which tend to work a forfeiture of insurance policies should be construed
most strictly against those for whose benefits they are inserted, and most
favorably toward those against whom they are intended to operate.
Ø Applying these principles: Condition 3 is ambiguous thus should be
interpreted that (a) the prohibition applies only to double insurance, and
(b) the nullity of the policy shall only be to the extent exceeding P200k of
the total policies obtained.
§ (a) the insurable interests of a mortgagor and a mortgagee on the
mortgaged property are distinct and separate. Since the two policies
of the PFIC do not cover the same interest as that covered by the
policy of the PR, no double insurance exists. The non-disclosure
then of the former policies was not fatal to the petitioner's right to
recover on the PR’s policy.
§ (b) by stating within Condition 3 that such condition shall not apply if
the total insurance in force at the time of loss does not exceed
P200k the PR was amenable to assume a co-insurer's liability up to
a loss not exceeding P200k
• Principally, the purpose of other insurance clauses in fire
insurances is to discourage over-insurance & thus avert the
perpetration of fraud.
Decision of IC reinstated!
8. THE INSULAR LIFE ASSURANCE CO. v. PAZ Y. KHU
FACTS: Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy with Insular
Life. Felipe accomplished the required medical questionnaire wherein he did not
declare any illness or adverse medical condition. Insular Life thereafter issued
him a policy which became effective on June 22, 1997.
On June 23, 1999, Felipe’s policy lapsed due to non-payment of premium.
ABUNALES CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO 7
On September 7, 1999, Felipe applied for the reinstatement of his policy and paid
P25,020.00 as premium. Except for the change in his occupation of being self-
employed to being the Municipal Mayor, all the other information was virtually
identical to those mentioned in his original policy.
On October 12, 1999, Insular Life advised Felipe that his application for
reinstatement may only be considered if he agreed to certain conditions such as
payment of additional premium and the cancellation of the riders pertaining to
premium waiver and accidental death benefits. Felipe agreed to these conditions
and on December 27, 1999 paid the agreed additional premium of P3,054.50.
On January 7, 2000, Insular Life issued Endorsement No. PNA000015683,
which reads:
This certifies that as agreed by the Insured, the reinstatement of
this policy has been approved by the Company on the
understanding that the following changes are made on the
policy effective June 22, 1999:
1. The EXTRA PREMIUM is imposed; and
2. The ACCIDENTAL DEATH BENEFIT (ADB) and WAIVER OF
PREMIUM DISABILITY (WPD) rider originally attached to and
forming parts of this policy [are] deleted.
On September 22, 2001, Felipe died.
Felipe’s beneficiaries (respondents) filed with Insular Life a claim for benefit under
the reinstated policy. This claim was denied. Instead, Insular Life advised Felipe’s
beneficiaries that it had decided to rescind the reinstated policy on the grounds
of concealment and misrepresentation by Felipe.
Respondents instituted a complaint for specific performance with damages.
In its Answer, Insular Life countered that Felipe did not disclose the ailments (viz.,
Type 2 Diabetes Mellitus, Diabetes Nephropathy and Alcoholic Liver Cirrhosis
with Ascites) that he already had prior to his application for reinstatement of his
insurance policy; and that it would not have reinstated the insurance policy had
Felipe disclosed the material information on his adverse health condition. It
contended that when Felipe died, the policy was still contestable.
8 CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO
RTC: In favor of respondents.
1. In ordering Insular Life to pay Felipe’s beneficiaries, the RTC agreed
with the latter’s claim that the insurance policy was reinstated on
June 22, 1999.
2. The RTC also held that the reinstated insurance policy had already
become incontestable by the time of Felipe’s death on September 22,
2001 since more than two years had already lapsed from the date of
the policy’s reinstatement on June 22, 1999.
CA: Affirmed RTC
INSULAR LIFE: Respondents should not be allowed to recover on the reinstated
insurance policy because the two-year contestability period had not yet lapsed
inasmuch as the insurance policy was reinstated only on December 27, 1999,
whereas Felipe died on September 22, 2001; that the CA overlooked the fact that
Felipe paid the additional extra premium only on December 27, 1999, hence,
it is only upon this date that the reinstated policy had become effective.
RESPONDENTS: Respondents maintain that the phrase "effective June 22,
1999" found in both the Letter of Acceptance and in the Endorsement is unclear
whether it refers to the subject of the sentence, i.e., the "reinstatement of this
policy" or to the subsequent phrase "changes are made on the policy;" that
granting that there was any obscurity or ambiguity in the insurance policy, the
same should be laid at the door of Insular Life as it was this insurance company
that prepared the necessary documents that make up the same; and that given
the CA’s finding which effectively affirmed the RTC’s finding on this particular
issue, it stands to reason that the insurance policy had indeed become
incontestable upon the date of Felipe’s death.
ISSUE: When was the policy reinstated, considering the ambiguity in Insular
Life’s endorsement?
HELD: The policy was reinstated on June 22, 1999. Insular Life is liable to
pay the respondents because the policy is already incontestable.
The reinstatement of an insurance policy should be reckoned from the date when
the same was approved by the insurer.

In the first sentence of the Endorsement, it is not entirely clear whether the
phrase "effective June 22, 1999" refers to the subject of the sentence, namely
"the reinstatement of this policy," or to the subsequent phrase "changes are
made on the policy." Given the obscurity of the language, the construction
favorable to the insured will be adopted by the courts because a Contract of
Insurance is a contract of Adhesion. Accordingly, the subject policy is deemed
reinstated as of June 22, 1999. Thus, the period of contestability has lapsed.
9. VDA. DE MAGLANA v. HON. FRANCISCO CONSOLACION
FACTS:
• Lope Maglana – employee of Bureau of Customs; work station was at
Lasa, Davao City
• Dec. 1978 – While on his way to work, driving a motorcycle owned by
the Bureau of Customs, he met an accident that resulted in his death
o The PUJ jeep that bumped him was driven by Pepito Into –
operated and owned by Destrajo
• From investigation conducted – the jeep was overtaking another
passenger jeep that was going towards Poblacion. While overtaking, the
jeep was running abreast with the overtaken jeep, the jeep bumped the
motorcycle driven by Maglana
§ The deceased was thrown from the road and died
• Heirs of Maglana filed an action for damages and attorney’s fees against
operation Patricio Destrajo and the Afisco Insurance Corporation
(Afisco) before the Davao CFI; An information for homicide through
reckless imprudence was filed against Pepito Into
o Trial court rendered decision that Destrajo did not exercise
sufficient diligence as the operator of the jeepney
o Afisco ordered to reimburse Destrajo whatever amounts the
latter shall have paid
• Petitioners filed MR – Contending that Afisco should not merely be held
secondarily liable because the Insurance Code provides that the
insurer’s liability is direct and primary and/or jointly and severally with
the operator
o Afisco argued that since the Insurance Code does not
expressly provide for a solidary obligation, the presumption is
that it is joint
• Trial court denied the MR: Since the insurance contract is in the nature
of suretyship, then the liability of the insurer is secondary only up to the
extent of the insurance coverage
o Petitioners filed 2nd MR on the same ground – DENIED
ISSUE: W/N the insurance company is directly and solidarily liable with the
negligent operator up to the extent of its insurance coverage – YES, directly but
JOINT liability only
HELD:
• The provision of the insurance policy on which petitioners base their
claim is as follows:
o Sec. 1 LIABILITY TO THE PUBLIC – The Company will subject
to the Limits of Liability, pay all sums necessary to discharge
the liability of the insured in respect of
§ Death of or bodily injury to any THIRD PARTY
§ xxxx
§ xxxx
In the event of the death of any person entitled to indemnity
under this Policy, the Company will, in respect of the liability
incurred to such person indemnify his personal representatives
in terms of, and subject to the terms and conditions hereof.
• Above provision leads to a conclusion that Afisco can be held directly
liable by petitioners
• As held in Shafer v. Judge, RTC of Olongapo City: where an insurance
policy insures directly against liability, the insurer’s liability accrues
immediately upon the occurrence of the injury or event upon which the
liability depends and does not depend on the recovery of judgment by
the injured party against the insured
o Since petitioners had received from Afisco the sum of 5K under
the no-fault clause, AFISCO’s liability is now limited to 15L
• However, the Court does not agree that Afisco is solidarily liable with
Destrajo
• As held in Malayan Insurance Co. v CA: While it is true that where the
insurance contract provides for indemnity against liability to 3P, such 3P
can directly sue the insurer, however, the direct liability of the insurer
under indemnity contracts against 3P liability does not mean that the
insurer can be held solidarily liable with the insured &/ the other parties
found at fault. The liability of the insurer is based on contract; that of the
insured is based on tort
• Petitioners cannot validly claim that Afisco, whose liability under the
insurance policy is 20K, can be held solidarily liable with Destrajo for the
total amount of 53, 901.70
ABUNALES CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO 9
 • Under both the loaw and the insurance policy, Afisco’s liability is only up
to 20K
• In fine, the liability of Afisco based on contract is direct but no
solidary with that of Destrajo which is based on Art 2180 of the Civil
Code – petitioners have the option to claim the 15K from Afisco and the
balance from Destrajo or enforce the entire judgment from Destrajo
subject to reimbursement from Afisco to the extent of the insurance
coverage
10. TIU v. ARRIESGADO
FACTS:
Ø 10:00 p.m. of March 15, 1987, the cargo truck marked “Condor Hollow
Blocks and General Merchandise” was loaded with firewood in Bogo,
Cebu and left for Cebu City. Upon reaching Sitio Aggies, Poblacion,
Compostela, Cebu, just as the truck passed over a bridge, one of its rear
tires exploded.
Ø Sergio Pedrano (driver) parked along the right side of the national highway
and removed the damaged tire to have it vulcanized at a nearby shop,
about 700 meters away and left his helper, Jose Mitante, Jr. to keep watch
over the stalled vehicle, and instructed the latter to place a spare tire six
fathoms away behind the stalled truck to serve as a warning for oncoming
vehicles. The truck’s tail lights were also left on. It was about 12:00 a.m.,
March 16, 1987.
Ø At about 4:45 a.m., D’ Rough Riders passenger bus (owned by Tiu) driven
by Virgilio Te Laspiñas was cruising along the national highway of Sitio
Aggies, Poblacion, Compostela, Cebu, bound for Cebu City, and had
come from Maya, Daanbantayan, Cebu.
Ø Among its passengers were the Spouses Pedro A. Arriesgado and Felisa
Pepito Arriesgado, who were seated at the right side of the bus, about
three (3) or four (4) places from the front seat.
Ø As the bus was approaching the bridge, Laspiñas saw the stalled truck,
which was then about 25 meters away, applied the breaks and tried to
swerve to the left to avoid hitting the truck. But the bus rammed into the
truck’s left rear. The impact damaged the right side of the bus and left
several passengers injured.
Ø Pedro Arriesgado lost consciousness and suffered a fracture in his right
colles. His wife, Felisa, was brought to the Danao City Hospital. She was
later transferred to the Southern Island Medical Center where she died
shortly thereafter.
10 CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO
Ø Pedro A. Arriesgado then filed a complaint for breach of contract of
carriage, damages and attorney’s fees||| against the petitioners, D’ Rough
Riders bus operator William Tiu and his driver, Virgilio Te Laspiñas
Ø The respondent alleged that the passenger bus in question was cruising at
a fast and high speed along the national road, and that petitioner Laspiñas
did not take precautionary measures to avoid the accident.
Petitioner’s Arguments:
Ø petitioners, for their part, filed a Third-Party Complaint against the
following: respondent Philippine Phoenix Surety and Insurance, Inc.
(PPSII), petitioner Tiu’s insurer; respondent Benjamin Condor, the
registered owner of the cargo truck; and respondent Sergio Pedrano, the
driver of the truck.
Ø They alleged that petitioner Laspiñas was negotiating the uphill climb
along the national highway of Sitio Aggies, Poblacion, Compostela, in a
moderate and normal speed.
Ø It was further alleged that the truck was parked in a slanted manner, its
rear portion almost in the middle of the highway, and that no early warning
device was displayed.
Ø Petitioner Laspiñas promptly applied the brakes and swerved to the left to
avoid hitting the truck head-on, but despite his efforts to avoid damage to
property and physical injuries on the passengers, the right side portion of
the bus hit the cargo truck’s left rear
As to PPSII (insurer)
Ø The respondent PPSII, for its part, admitted that it had an existing contract
with petitioner Tiu, but averred that it had already attended to and
settled the claims of those who were injured during the incident. It
could not accede to the claim of respondent Arriesgado, as such claim
was way beyond the scheduled indemnity as contained in the contract of
insurance
RTC: trial court ruled in favor of respondent Arriesgado.
Ø According to the trial court, there was no dispute that petitioner William
Tiu was engaged in business as a common carrier, in view of his
admission that D’ Rough Rider passenger bus which figured in the
accident was owned by him; engaged in the transportation business for 25
years with a sole proprietorship; and he owned 34 buses.
 Ø The trial court ruled that if petitioner Laspiñas had not been driving at a
fast pace, he could have easily swerved to the left to avoid hitting the
truck, thus, averting the unfortunate incident. It then concluded that
petitioner Laspiñas was negligent.
Ø The trial court also ruled that the absence of an early warning device near
the place where the truck was parked was not sufficient to impute
negligence on the part of respondent Pedrano, since the tail lights of the
truck were fully on, and the vicinity was well lighted by street lamps.
ISSUE: Whether or not Tiu is liable to Arriesgado for the death of Felipa. –
Yes! Common carrier – driver was negligent
2. W/N PPSII should be held liable to Arriesgado. – YES! CMVLI
HELD:
1. Petitioner Laspiñas’ negligence in driving the bus is apparent in the records.
By his own admission, he had just passed a bridge and was traversing the
highway of Compostela, Cebu at a speed of 40 to 50 kilometers per hour before
the collision occurred. The maximum speed allowed by law on a bridge is only 30
kilometers per hour.
Ø It is undisputed that the respondent and his wife were not safely
transported to the destination agreed upon. In actions for breach of
contract, only the existence of such contract, and the fact that the obligor,
in this case the common carrier, failed to transport his passenger safely to
his destination are the matters that need to be proved
Ø While evidence may be submitted to overcome such presumption of
negligence, it must be shown that the carrier observed the required
extraordinary diligence, which means that the carrier must show the
utmost diligence of very cautious persons as far as human care and
foresight can provide, or that the accident was caused by fortuitous
event. 41 As correctly found by the trial court, petitioner Tiu failed to
conclusively rebut such presumption. The negligence of petitioner
Laspiñas as driver of the passenger bus is, thus, binding against petitioner
Tiu, as the owner of the passenger bus engaged as a common carrier.
2. Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner
William Tiu are ORDERED to pay, jointly and severally, respondent Pedro A.
Arriesgado the total amount of P13,113.80
As can be gleaned from the Certificate of Cover, such insurance contract was
issued pursuant to the Compulsory Motor Vehicle Liability Insurance Law. It was
expressly provided therein that the limit of the insurer’s liability for each person
was P12,000, while the limit per accident was pegged at P50,000. An insurer in
an indemnity contract for third party liability is directly liable to the injured party
up to the extent specified in the agreement but it cannot be held solidarily liable
beyond that amount. The respondent PPSII could not then just deny petitioner
Tiu’s claim; it should have paid P12,000 for the death of Felisa Arriesgado, and
respondent Arriesgado’s hospitalization expenses of P1,113.80, which the trial
court found to have been duly supported by receipts. The total amount of the
claims, even when added to that of the other injured passengers which the
respondent PPSII claimed to have settled, would not exceed the P50,000 limit
under the insurance agreement.
Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it
is primarily intended to provide compensation for the death or bodily injuries
suffered by innocent third parties or passengers as a result of the negligent
operation and use of motor vehicles. The victims and/or their dependents are
assured of immediate financial assistance, regardless of the financial capacity of
motor vehicle owners. As the Court, speaking through Associate Justice
Leonardo A. Quisumbing, explained in Government Service Insurance System v.
Court of Appeals:
However, although the victim may proceed directly against the insurer for
indemnity, the third party liability is only up to the extent of the insurance policy
and those required by law. While it is true that where the insurance contract
provides for indemnity against liability to third persons, and such persons can
directly sue the insurer, the direct liability of the insurer under indemnity contracts
against third party liability does not mean that the insurer can be held liable in
solidum with the insured and/or the other parties found at fault. For the liability of
the insurer is based on contract; that of the insured carrier or vehicle owner is
based on tort . . .
Obviously, the insurer could be held liable only up to the extent of what was
provided for by the contract of insurance, in accordance with the CMVLI law. At
the time of the incident, the schedule of indemnities for death and bodily injuries,
professional fees and other charges payable under a CMVLI coverage was
provided for under the Insurance Memorandum Circular (IMC) No. 5-78 which
was approved on November 10, 1978. As therein provided, the maximum
indemnity for death was twelve thousand (P12,000.00) pesos per victim. The
schedules for medical expenses were also provided by said IMC, specifically in
paragraphs (C) to (G).
ABUNALES CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO 11

11. PRUDENTIAL GUARANTEE v. TRANS-ASIA SHIPPING LINES
FACTS: Plaintiff (TRANS-ASIA) is the owner of the vessel M/V Asia Korea. In
consideration of payment of premiums, defendant (PRUDENTIAL) insured M/V
Asia Korea for loss/damage of the hull and machinery arising from perils, inter
alia, of fire and explosion for the sum of P40 Million. While the policy was in
force, a fire broke out while M/V Asia Korea was undergoing repairs at the port of
Cebu. Plaintiff TRANS-ASIA filed its notice of claim for damage sustained by the
vessel as evidenced by a letter/formal claim of even date. Plaintiff TRANS-ASIA
reserved its right to subsequently notify defendant PRUDENTIAL as to the full
amount of the claim upon final survey and determination by average adjuster
Richard Hogg International (Phil.) of the damage sustained by reason of fire.
After the survey and determination, plaintiff [TRANS-ASIA] executed a document
denominated "Loan and Trust receipt", a portion of which read (sic):
"Received from Prudential Guarantee and Assurance, Inc., the
sum of PESOS THREE MILLION ONLY (P3,000,000.00) as a loan
without interest under Policy No. MH 93/1353 [sic], repayable only in the
event and to the extent that any net recovery is made by Trans-Asia
Shipping Corporation, from any person or persons, corporation or
corporations, or other parties, on account of loss by any casualty for
which they may be liable occasioned by the 25 October 1993: Fire on
Board."
PRUDENTIAL denied plaintiff’s claims stating that it was in breach of policy
conditions, among them being “WARRANTED VESSEL CLASSED AND CLASS
MAINTAINED”. This was followed by defendant’s letter dated 21 July 1997
requesting the return or payment of the P3,000,000.00 within a period of ten (10)
days from receipt of the letter.
Following this development, TRANS-ASIA filed a complaint for sum of money
with Cebu RTC and sought the amount of P8,395,072.26 from PRUDENTIAL,
alleging that the same represents the balance of the indemnity due upon the
insurance policy in the total amount of P11,395,072.26.
PRUDENTIAL CONTENTION:
-PRUDENTIAL denied the material allegations of the Complaint and interposed
the defense that TRANS-ASIA breached insurance policy conditions, in
particular: "WARRANTED VESSEL CLASSED AND CLASS MAINTAINED."
-PRUDENTIAL further alleged that it acted as facts and law require and incurred
no liability to TRANS-ASIA
12 CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO
-that TRANS-ASIA has no cause of action; and, that its claim has been effectively
waived and/or abandoned, or it is estopped from pursuing the same.
-By way of a counterclaim, PRUDENTIAL sought a refund of P3,000,000.00,
which it allegedly advanced to TRANS-ASIA by way of a loan without interest and
without prejudice to the final evaluation of the claim
RTC RULING: claim was denied for TRANS-ASIA’s failure to maintain the vessel
at a certain class at all times as required by the terms of the policy , furthermore,
the court a quo ratiocinated that the concealment made by TRANS-ASIA that the
vessel was not adequately maintained to preserve its class was a material
concealment sufficient to avoid the policy
CA RULING: REVERSED. It ruled that PRUDENTIAL, as the party asserting the
non-compensability of the loss had the burden of proof to show that TRANS-
ASIA breached the warranty, which burden it failed to discharge. PRUDENTIAL
cannot rely on the lack of certification to the effect that TRANS-ASIA was
CLASSED AND CLASS MAINTAINED as its sole basis for reaching the
conclusion that the warranty was breached, In the same token, the Court of
Appeals found the subject warranty allegedly breached by TRANS-ASIA to be a
rider which, while contained in the policy, was inserted by PRUDENTIAL without
the intervention of TRANS-ASIA. As such, it partakes of a nature of a contract
d’adhesion which should be construed against PRUDENTIAL
ISSUE:
HELD: The party which alleges a fact as a matter of defense has the burden of
proving it. PRUDENTIAL, as the party which asserted the claim that TRANS-ASIA
breached the warranty in the policy, has the burden of evidence to establish the
same. Hence, on the part of PRUDENTIAL lies the initiative to show proof in
support of its defense; otherwise, failing to establish the same, it remains self-
serving. We sustain the findings of the Court of Appeals that PRUDENTIAL was
not successful in discharging the burden of evidence that TRANS-ASIA breached
the subject policy condition on CLASSED AND CLASS MAINTAINED.
As found by the Court of Appeals and as supported by the records, Bureau
Veritas is a classification society recognized in the marine industry. As it is
undisputed that TRANS-ASIA was properly classed at the time the contract of
insurance was entered into, thus, it becomes incumbent upon PRUDENTIAL to
show evidence that the status of TRANS-ASIA as being properly CLASSED by
Bureau Veritas had shifted in violation of the warranty. Unfortunately,
PRUDENTIAL failed to support the allegation.
Assuming arguendo that TRANS-ASIA violated the policy condition on
WARRANTED VESSEL CLASSED AND CLASS MAINTAINED, PRUDENTIAL
made a valid waiver of the same. After the loss, Prudential renewed the insurance
policy of Trans-Asia for two (2) consecutive years, from noon of 01 July 1994 to
noon of 01 July 1995, and then again until noon of 01 July 1996. This renewal is
deemed a waiver of any breach of warranty.
PRUDENTIAL claims that it renewed the policy on 1994 and 1995 but only found
of the breach of warranty in 1997. However, the SC held that there could be no
intent to waive the alleged breach by these two successive renewals.
Furthermore, PRUDENTIAL asked for a certification that it was classed and
classed maintained, yet despite the non-certification to such effect it still
renewed the policy.
Lastly, it was not a loan agreement but rather a contract for subrogation. As
evidenced by the clause that the amount of P3,000,000.00 constitutes an
advance payment to TRANS-ASIA by PRUDENTIAL, subrogating the former to
the extent of "any net recovery made by TRANS ASIA SHIPPING CORP., from
any person or persons, corporation or corporations, or other parties, on account
of loss by any casualty for which they may be liable, occasioned by the 25
October 1993: Fire on Board."
12. ROQUE v. IAC
13. AMERICAN HOME ASSURANCE CO. v. CHUA
14. LOURDES FLORENDO v. PHILAM PLANS
FACTS:
-Florendo, after convincing by Insurance agent Abcede, filed an application for
comprehensive pension plan with Philam.
- After signing the application, he left it to Abcede to accomplish the application
form.
- The pension plan included life insurance that would be payable to the
beneficiary upon accidental death of the policyholder before maturity of the plan,
said life insurance was also to cover unpaid premiums upon accidental death of
policyholder until the pension policy matured.
-Polciy was issued to Florendo with his wife as beneficiary. 11 months after,
Florendo died of blood poisoning. Since Florendo died before maturity of the
pension, wife was only entitled to the life insurance.
-Philam denied the claim of the wife, Lourdes, on the grounds that her husband
was taking maintenance medicine for his heart and had an implanted pacemaker.
Further, he suffered from diabetes mellitus and was taking insulin.
- Lourdes filed her claim with the RTC of QC which ruled in her favor, declaring
that her husband was not guilty of concealment. CA reversed the ruling on the
premise that Insurance policies are contracts of utmost good faith and the
husband should have disclosed his medical condition.
ISSUES:
WON husband is guilty of concealment for leaving unanswered the blank spaces
on the application form regarding his medical condition
WON husband is bound by the failure of Abcede and her daughter in failing to
disclose his ailments while accomplishing his application form,
WON Philam is bound by its acceptance of premiums and approval of Florendo’s
policy, and thus precluded from denying the wife’s claim,
HELD:
YES. Lourdes the wife cannot allege that Philam is estopped by its
acceptance and approval of the policy since it waived medical examination on
the husband, thus Philam had to rely in good faith on the information indicated in
the application form. Abcede’s accomplishment of the form is of no merit since it
devolved upon the husband to accomplish the form personally, his signing of the
form signifies his representation that all information indicated therein is true to
the best of his knowledge.
The said application form asked applicant to disclose his/ her medical
history and any sickness, operation or condition undergone or experiencing
within the last 5 years from signing. Though the pacemaker was placed within the
husband in the 70s, the presence of such in his body upon submission of the
application, and his taking of medication for a heart condition and diabetes
constitutes concealment and entitles Philam to rescind.
YES. Husband is bound by the fact of his signing of the document.
Though Abcede accomplished it for him, a clause in the policy states that upon
signing, applicant signifies that all information indicated therein is true. Husband
should have read the document before signing, just as he did when he was a civil
engineer and manager of a construction company. He is not uneducated and
would not enter into a contract without reading it first.
NO. It is true that the policy contains an Incontestability clause which
provides that after the policy has remained in effect for one(1) year, Insurance
company can no longer contest validity of such for health reasons. Husband died
11 months after issuance of policy, Philam was not yet precluded from
questioning the policy based on health reasons of Florendo.
Court AFFIRMS CA.
ABUNALES CAUILAN DANSAL FRIAS GARCIA SACLAYAN SANTIAGO 13