VII.

RISK AND COVERAGES
A. In general: risk and causation
- The element of risk is the very foundation of insurance
- Human activity or endeavor is invariably susceptible to
risks or failure
- Since only a portion of the relevant facts affecting such
activity/endeavor can ever be known, predictions about
the occurrence of a potential loss are based on estimates
or guesswork
= this speculative aspect is considered as the “element of
risk”
Causation - the loss, damage, or liability which may befall the
insured must be caused by the risk insured against
1. Insurable risks (Sec. 3)
Sec. 3 Any contingent or unknown event, whether past or future,
which may damnify a person having an insurable interest, or create
a liability against him, may be insured against, subject to the
provisions of this chapter.
The consent of the spouse is not necessary for the validity of an
insurance policy taken out by a married person on his or her life or
that of his or her children.
Exclusions - apply in specified policies -> “those not included in
the specified risks are excluded”
4. Causes mention in the Code: “proximate,”
“remote,” and “immediate” (Sec. 84 and 86)
Section 86. Unless otherwise provided by the policy, an insurer is
liable for a loss of which a peril insured against was the proximate
cause, although a peril not contemplated by the contract may have
been a remote cause of the loss; but he is not liable for a loss of
which the peril insured against was only a remote cause.
-Usual example of applying Sec. 86 is when fire insurance policy
excludes explosion, which, however, was caused by fire which is
considered the proximate cause.
Section 88. Where a peril is especially excepted in a contract of
insurance, a loss, which would not have occurred but for such peril,
is thereby excepted although the immediate cause of the loss was
a peril which was not excepted.
-Sec. 88 is the opposite situation of Sec. 86. It covers a situation
where a fire policy excludes explosion which, however, caused a
fire which burned the property--the insurer is not liable. The fire
is the “immediate cause”

All rights, title and interest in the policy of insurance taken out by
an original owner on the life or health of the person insured shall
automatically vest in the latter upon the death of the original
owner, unless otherwise provided for in the policy.
Notes:
- Event or peril insured against may be any (future) or
contingent or unknown event, past or future which can
either:
a) Cause damage or cause loss to a person having
an insurable interest (ex. Marine insurance
against damage that may be suffered by the
vessel and its owner)
b) Create a liability against the person insured (ex.
Third party liability taken by the owner of a car
or a common carrier)
- A married woman may take out insurance on her life or
children without the consent of her husband; she may also
insure her paraphernal properties
- A minor may also enter into a valid contract of insurance
for life, health, and accident; other contracts of insurance
entered into by the minor shall be voidable (cf Civil
Code)
-Other terms used (ex. Legal, efficient, predominant, etc)
Loss: the injury, damage, or liability sustained by the insured due
to the happening of the perils against which the insurer has insured
him
-How much the insured will pay will depend upon the extent of the
loss
-Insurer assumes liability only for loss proximately caused by
perils insured against even though the peril not insured against
may have been a remote cause of the loss
-Insurer is still liable even if proximate cause is not insured IF the
immediate cause is a peril insured against
-Insurer has the burden of proof that it is not liable
-The insurer may not be liable for a loss where the proximate cause
of the peril is not insured against even if the immediate cause is
not excepted (eg. an explosion, which is excepted, caused a fire
which is insured against→ insurer not liable)
5. Meaning of “Proximate Cause”

2. “Specified-risks” and “all-risks” policies
Specified - the policy specifies what risks are covered
- Generally, policies are of this kind
- Burden of proof to prove that the risk is covered is on the
insured
All-risk - insurance covers any and all risks that may imperil the
insurer’s property
- Burden of proof is on the insurer to prove that the risk is
excluded
3. Exceptions/Exclusions
- Both pertain to risks not covered
- Strictly construed against the insurer
Exceptions - apply in all-risk policies -> “all are covered EXCEPT
the following”
Proximate Cause: That which, in a natural and continuous
sequence, unbroken by any new independent cause, produces an
event and without which the event would not have occurred.
-It is the efficient cause to which the loss can be attributed although
other immediate causes are nearer in time to the loss
Vda de Bataclan v. Medina
SUMMARY:
FACTS:
· Sept 13, 1952: Shortly after midnight, Bus No. 30 of the
Medina Transportation, operated and owned by Mariano
Medina, left Amadeo, Cavite travelling to Pasay City. The bus
was driven by Conrado Saylon.
· There were 18 passengers and among these passengers
were Juan Bataclan (seated to the right of the driver) Felipe
Lara (seated to the right of Lara), a passenger from the
 Visayan Islands whom the witnesses referred to as Visaya
(seated on the left side of the driver), and Natalia Villanueva
(behind all those mentioned).
· At about 2 am, one of front tires burst and the vehicle
began to zigzag until it fell into a canal or ditch and turned
turtle.
· Some of the passengers were able to get out of the bus but
the four passengers who were near the driver – Bataclan,
Lara, the Visayan, and Villanueva were not able to get out of
the bus.
o Some of the passengers were able to hear the moans
and shouts from inside the bus, particularly shouts of
help from Bataclan and Lara.
· There is no evidence to show that the passengers who got
out, as well as the driver and his conductor, made any attempt
to help them, but calls for help were made in the surrounding
neighborhood.
· After half an hour, about 10 men came. One of them was
carrying a lighted torch. They presumably approached to
overturned bus, and almost immediately a fire started burning
all and consuming the bus including the passengers trapped
inside.
o It seemed that the gasoline began to leak and spread
all over the bus due to the overturning of the bus.
That same day, the charred bodies were removed and
identified.
· Bataclan’s widow, Salud Villanueva, brought the present
suit to recover from Mariano Medina damages.
· CFI: awarded the plaintiffs damages.
· Plaintiffs and defendants appealed to the CA, who
endorsed them to the SC.
ISSUES/S (substantive):
WON the negligence of Medina was the proximate cause of the
death of Bataclan YES.
· The Court cited CC Art 1733, 1755, 1756, 1759, and
1763, stating that these provisions provide for the
responsibility of the common carrier to its passengers and
their goods.
· The Court agreed with the CFI that:
o the case involved a breach of contract of transportation
for hire
o there is negligence on the part of Medina through his
agent/driver, Saylon
§ Testimony of the witnesses shows that the bus
was speeding, and there was a distance of
150m, as shown by skid marks, from where
the tire blew out until the bus fell into the
canal.
§ A witness also stated that he heard Medina,
who was visiting those hospitalized, that the
tires of the bus were old and needed to be
replaced.
Q: To what degree is the carrier liable, given the fire which killed
the victims? – Negligence = PC.
PROXIMATE CAUSE (American Jurisprudence): That cause,
which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which
the result would not have occurred.
The proximate legal cause is that acting first and producing the
injury, either immediately or by setting other events in motion, all
constituting a natural and continuous chain of events, each having
a close causal connection with its immediate predecessor, the final
event in the chain immediately effecting the injury as a natural and
probable result of the cause which first acted, under such
circumstances that the person responsible for the first event
should, as an ordinary prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default
that an injury to some person might probably result therefrom.
· In this case, it was the overturning of the bus which was
the PC of Bataclan’s death
o When the vehicle turned not only on its side but
completely on its back, the leaking of the gasoline
from the tank was not unnatural or unexpected;
o That the coming of the men with a lighted torch was
in response to the call for help, made not only by the
passengers, but most probably, by the driver and the
conductor themselves, and that because it was dark
(about 2:30 am), the rescuers had to carry a light with
them, and coming as they did from a rural area where
lanterns and flashlights were not available; and what
was more natural than that said rescuers should
innocently approach the vehicle to extend the aid and
effect the rescue requested from them.
o In other words, the coming of the men with a torch
was to be expected and was a natural sequence of
the overturning of the bus, the trapping of some
of its passengers and the call for outside help.
· What is more, the burning of the bus can also in part
be attributed to the negligence of the carrier, through its
driver and its conductor.
o According to the witness, the driver and the conductor
were on the road walking back and forth. They, or at
least, the driver should and must have known that
in the position in which the overturned bus was,
gasoline could and must have leaked from the
gasoline tank and soaked the area in and around
the bus, this aside from the fact that gasoline
when spilled, specially over a large area, can be
smelt and directed even from a distance, and yet
neither the driver nor the conductor would appear to
have cautioned or taken steps to warn the rescuers
not to bring the lighted torch too near the bus.
o Said negligence on the part of the agents of the carrier come
under Arts 1733, 1759 and 1763.
RULING: In view of the foregoing, with the modification that the
damages awarded by the trial court are increased from ONE
THOUSAND (P1,000) PESOS TO SIX THOUSAND (P6,000)
PESOS, and from SIX HUNDRED PESOS TO EIGHT
HUNDRED (P800) PESOS, for the death of Bataclan and for the
attorney's fees, respectively, the decision appealed is from hereby
affirmed, with costs.
6. Rescue from covered peril (Sec. 85)
Section 85. An agreement not to transfer the claim of the insured
against the insurer after the loss has happened, is void if made
before the loss except as otherwise provided in the case of life
insurance.
Section 86. Unless otherwise provided by the policy, an insurer is
liable for a loss of which a peril insured against was the proximate
cause, although a peril not contemplated by the contract may have
been a remote cause of the loss; but he is not liable for a loss of
which the peril insured against was only a remote cause.
7. Loss due to negligence (Cf. willful act: Sec 87)
Section 87. An insurer is liable where the thing insured is rescued
from a peril insured against that would otherwise have caused a
loss, if, in the course of such rescue, the thing is exposed to a peril 13. Subsequently, ANCO, with leave of court, filed a Third-
not insured against, which permanently deprives the insured of its Party Complaint against FGU,
possession, in whole or in part; or where a loss is caused by efforts 14. In its answer to the Third-Party complaint, third-party
to rescue the thing insured from a peril insured against. defendant FGU admitted the existence of the Insurance Policy but
● FGU v. CA maintained that the alleged loss of the cargoes covered by the said
SUMMARY: insurance policy cannot be attributed directly or indirectly to any
FACTS: of the risks insured against in the said insurance policy.
1. Anco Enterprises Company (ANCO), a partnership 15. Furthermore, FGU alleged that the Third-Party Plaintiff
between Ang Gui and Co To, was engaged in the shipping ANCO and Plaintiff SMC failed to exercise ordinary diligence or
business. It owned the M/T ANCO tugboat and the D/B Lucio the diligence of a good father of the family in the care and
barge which were operated as common carriers. Since the D/B supervision of the cargoes insured
Lucio had no engine of its own, it could not maneuver by itself and 16. TC: Cargo was lost due to fortuitous event and there was
had to be towed by a tugboat for it to move. failure on the part of ANCO’s representatives to observe the
2. On 23 September 1979, San Miguel Corporation (SMC) degree of negligence required and are thus liable. Also the court a
shipped from Mandaue City, Cebu, on board the D/B Lucio, for quo found FGU liable to bear Fifty-Three Percent (53%) of the
towage by M/T ANCO, the following cargoes: amount of the lost cargoes.
17. CA Affirmed TC
Shipment
Destination
25K cases of Pale Pilsen ISSUES/S AND RULING (substantive):
Estancia Iloilo W/N ANCO’s representatives failed to exercise the
350 ses of Cerveza Negra extraordinary degree of diligence required by the law to
Estancia Iloilo exculpate them from liability for the loss of the
15K cases of Pale Pilsen Cargoes. - YES
San Jose Antique
200 cases of Cerveza Negra 1. First, ANCO admitted that they failed to deliver to the
San Jose Antique designated consignee the 29,210 cases of Pale Pilsen and 550
cases of Cerveza Negra.
3. The D/B Lucio was towed by the M/T ANCO all the way
from Mandaue City to San Jose, Antique. Second, it is borne out in the testimony of the witnesses on record
4. The vessels arrived at San Jose, Antique, at 1 PM of 30 that the barge D/B Lucio had no engine of its own and could not
September 1979. The tugboat M/T ANCO left the barge maneuver by itself. Yet, the patron of ANCO’s tugboat M/T
immediately after reaching San Jose, Antique. ANCO left it to fend for itself notwithstanding the fact that as the
5. At that time, the clouds over the area were dark and the two vessels arrived at
waves were already big. (There was a storm) the port of San Jose, Antique, signs of the impending storm were
6. The arrastre workers unloading the cargoes of SMC on already manifest.
board the D/B Lucio began to complain about their difficulty in
unloading the cargoes. SMC’s District Sales Supervisor, Fernando 2. The TC even noted that:
Macabuag, requested ANCO’s representative to transfer the barge
to a safer place because the vessel might not be able to withstand “At that precise moment, since it is the duty of the defendant to
the big waves. exercise and observe extraordinary diligence in the vigilance over
7. ANCO’s representative did not heed the request because the cargo of the plaintiff, the patron or captain of M/T ANCO,
he was confident that the barge could withstand the waves representing the defendant could have placed D/B Lucio in a very
8. At about ten to eleven o’clock in the evening of 01 safe location before they left knowing or sensing at that time the
October 1979, the crew of D/B Lucio abandoned the vessel coming of a typhoon. The presence of big waves and dark clouds
because the barge’s rope attached to the wharf was cut off by the could have warned the patron or captain of M/T ANCO to insure
big waves. At around midnight, the barge run aground and was the safety of D/B Lucio including its cargo…In short, therefore,
broken and the cargoes of beer in the barge were swept away. defendants through their representatives, failed to observe the
9. As a result, ANCO failed to deliver to SMC’s consignee degree of diligence required of them under the provision of Art.
Twenty-Nine Thousand Two Hundred Ten (29,210) cases of Pale 1733 of the Civil Code of the Philippines.
Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra (loss
of P1,346,197.00).
10. SMC filed a complaint for Breach of Contract of Carriage W/N the loss was due to a fortuitous event and thus absolving
and Damages against ANCO ANCO of liability (which in effect will have FGU pay the
11. ANCO admitted that the cases of beer Pale Pilsen and amount stipulated in the insurance policy)- NO
Cerveza Negra mentioned in the complaint were indeed loaded on
the vessel belonging to ANCO. It claimed however that it had an 1. NOTE the following provisions:
agreement with SMC that ANCO would not be liable for any
losses or damages resulting to the cargoes by reason of fortuitous Art. 1733. Common carriers, from the nature of their business
event. and for reasons of public policy are bound to observe extraordinary
12. ANCO further asserted that there was an agreement diligence in the vigilance over the goods and for the safety of the
between them and SMC to insure the cargoes in order to recover passengers transported by them, according to all the circumstances
indemnity in case of loss. Pursuant to that agreement, the cargoes of each case…
to the extent of 20,000 cases was insured with FGU Insurance
Corporation (FGU) for P858,500.00
Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due
to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
...
Art. 1739. In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the proximate
and only cause of the loss. However, the common carrier must
exercise due diligence to prevent or minimize loss before, during
and after the occurrence of flood,
storm, or other natural disaster in order that the common carrier
may be exempted from liability for the loss, destruction, or
deterioration of the goods
ALSO: In cases of fortuitous events, it is not enough that the event
should not have been foreseen or anticipated, as is commonly
believed but it must be one impossible to foresee or to avoid
2. In this case, the calamity which caused the loss of the cargoes
was not unforeseen nor was it unavoidable. In fact, the other
vessels in the port of San Jose, Antique, managed to transfer to
another place, a circumstance which prompted SMC’s District
Sales Supervisor to request that the D/B Lucio be likewise
transferred, but to no avail. The D/B Lucio had no engine and
could not maneuver by itself. Even if ANCO’s representatives
wanted to transfer it, they no longer had any means to do so as the
tugboat M/T ANCO had already departed, leaving the barge to its
own devices. The captain of the tugboat should have had the
foresight not to leave the barge alone considering the pending
storm.
3. CA was correct, there was blatant negligence on the part of M/T
ANCO’s crewmembers, first in leaving the engine-less barge D/B
Lucio at the mercy of the storm without the assistance of the tug-
boat, and again in failing to heed the request of SMC’s
representatives to have the barge transferred to a safer place, as
was done by the other vessels in the port; thus, making said blatant
negligence the proximate cause of the loss of the cargoes.
W/N FGU may be held liable-NO
1. One of the purposes for taking out insurance is to protect the
insured against the consequences of his own negligence and that
of his agents.
BASIC RULE: in insurance that the carelessness and negligence
of the insured or his agents constitute no defense on the part of the
insurer
This rule however presupposes that the loss has occurred due to
causes which could not have been prevented by the insured,
despite the exercise of due diligence.
The question now is whether there is a certain degree of negligence
on the part of the insured or his agents that will deprive him the
right to recover under the insurance contract. We say there is.
Jurisprudence has stated that “when evidence show that the
insured’s negligence or recklessness is so gross as to be sufficient
to constitute a willful act, the insurer must be exonerated.”
2. In the case at bar, there was blatant negligence:
· the tug boat immediately left the barge at the San Jose,
Antique wharf despite the looming bad weather.
· defendants-appellants’ representative who did not heed
Macabuag’s request that the barge be moved to a more secure
place.
· Also note that the barge was the only simple vessel left at
the wharf in San Jose.
Suchblatant negligence being the proximate cause of the loss of
the cargoes amounting to P1,346,197.00
B. Life Insurance
1. Death or survival (Sec. 179 and 180) (in the
Amended Insurance Code: Sec 181 and 182)
Amended Insurance Code
Section 181. Life insurance is insurance on human lives and
insurance appertaining thereto or connected therewith.
Every contract or undertaking for the payment of annuities
including contracts for the payment of lump sums under a
retirement program where a life insurance company manages or
acts as a trustee for such retirement program shall be considered a
life insurance contract for purposes of this Code.
Section 182. An insurance upon life may be made payable on the
death of the person, or on his surviving a specified period, or
otherwise contingently on the continuance or cessation of life.
Every contract or pledge for the payment of endowments or
annuities shall be considered a life insurance contract for purposes
of this Code.
In the absence of a judicial guardian, the father, or in the latter’s
absence or incapacity, the mother, of any minor, who is an insured
or a beneficiary under a contract of life, health, or accident
insurance, may exercise, in behalf of said minor, any right under
the policy, without necessity of court authority or the giving of a
bond, where the interest of the minor in the particular act involved
does not exceed Five hundred thousand pesos (P500,000.00) or in
such reasonable amount as may be determined by the
Commissioner. Such right may include, but shall not be limited to,
obtaining a policy loan, surrendering the policy, receiving the
proceeds of the Policy, and giving the minor’s consent to any
transaction on the policy.
In the absence or in case of the incapacity of the father or mother,
the grandparent, the eldest brother or sister at least eighteen (18)
years of age, or any relative who has actual custody of the minor
insured or beneficiary, shall act as a guardian without need of a
court order or judicial appointment as such guardian, as long as
such person is not otherwise disqualified or incapacitated.
Payment made by the insurer pursuant to this section shall relieve
such insurer of any liability under the contract.
Sanchez Reviewer:
Life insurance is an insurance payable either upon:
(a) Death of the person;
(b) The person surviving a specified period; or
(c) On the continuance or cessation of life
Essentially, it is the contract where a beneficiary shall be paid,
upon the death of the insured.
Parties involved in life insurance:
 (a) Owner of the policy - with the power to name or change
the beneficiary, assign it, cash it in or use as collateral,
with the obligations to pay premiums
(b) The cestui que vie - whose life is insured
(c) Beneficiary - to whom the proceeds may be paid
There may be only one party involved if the beneficiary upon death
is the estate.
2. Suicide (Sec. 180-A; Cf. Sec 87) (in the
Amended Insurance Code Sec 183)
Section 183. The insurer in a life insurance contract shall be liable
in case of suicide only when it is committed after the policy has
been in force for a period of two (2) years from the date of its issue
or of its last reinstatement, unless the policy provides a shorter
period: Provided, however, That suicide committed in the state of
insanity shall be compensable regardless of the date of
commission.
Sanchez Reviewer:
(a) It is committed after the policy has been in force for a
period of 2 years from the date of issuance -- the ratio
says Sanchez:
● The period will decrease the moral hazard
because the person might not be as bent into
committing suicide as he was two years earlier
(if person really wants to dies, the person will
not wait for the maturity of the insurance)
(b) Suicide is committed after a shorter period provided in
the policy -- policy cannot provide a period longer than 2
years
(c) Suicide is committed in the state of insanity regardless of
the date of commission unless it is an excepted risk.
3. Accidental death; cf. death by accidental means
- Accidental death: death was
unforeseen and unexpected, by
whatever means
- Death by accidental means: the means
must be by accident
- Insurer is not liable if something
unexpected arises from a deliberate or
voluntary act.
-
● Sun Insurance v. CA
SUMMARY:
FACTS:
· Sun Insurance issued a Personal Accident insurance
policy to Felix Lim worth P200,000.
· According to the secretary, after Lim’s mother’s
birthday party, Lim, who was in a happy yet sober mood,
played around with a gun
· He removed the gun’s magazine and assured the
secretary that such gun was not loaded
· He then pointed the gun to his temple and pulled
the trigger, now he’s dead
· After Lim’s death, his wife sought to claim the
benefits of his insurance policy, but Sun Insurance
rejected her, claiming that the cause of Lim’s death made
her ineligible to claim the benefits
· Sun argued that while they believe that Lim did not
commit suicide, he “willfully exposed himself to needless
peril except in an attempt to save human life.” Such is
barred by the provisions on his policy.
ISSUE/S (procedural):
ISSUES/S (substantive):
Whether or not Lim’s death is an accident covered by his
Personal Accident policy
YES.
1. The Court defined accident as “an event which
happens without any human agency or, if happening
through human agency, an event which, under the
circumstances, is unusual to and not expected by the
person to whom it happens. It has also been defined as an
injury which happens by reason of some violence or
casualty to the injured without his design, consent, or
voluntary co-operation.”
2. Given the definition, the Court was convinced that
what happened was an accident. He might have “willfully
exposed himself to needless peril except in an attempt to
save human life,” but the provision which barred such
circumstance was contemplating suicidal intent, which
was absent in Lim’s case.
THE SWIMMER ANALOGY
3. Sun analogized what happened to Lim to a swimmer
who dived off Quezon Bridge knowing that the currents
might kill him. Sun argued that if they will allow such
kind of man to claim insurance benefits, it will surely
scare off insurance companies.
4. The Court held that such analogy would not work,
because the swimmer who jumped off the bridge knew
the existence of the current which might kill him. Felix
Lim did not know his gun was loaded.
AS TO LIM’S NEGLIGENCE
The Court agreed that there was negligence on the part of Lim for
playing around with a gun, but it also sustained that such
negligence should not be a bar for Mrs. Lim to claim insurance
benefits arising from her husband’s death.
RULING:
CA Decision is affirmed, holding Sun Insurance liable to Mrs. Lim
in the sum of P200,000 representing the face value of the insurance
contract, with interest at the legal rate from the date of the filing of
the complaint until the full amount is paid, but MODIFIED with
the deletion of all awards for damages, including attorney's fees,
except the costs of the suit.
4. Group Life Insurance (Sec. 50; 228 last
paragraph)
Section 50. The policy shall be in printed form which may contain
blank spaces; and any word, phrase, clause, mark, sign, symbol,
signature, number, or word necessary to complete the contract of
insurance shall be written on the blank spaces provided therein.
Any rider, clause, warranty or endorsement purporting to be part
of the contract of insurance and which is pasted or attached to said
policy is not binding on the insured, unless the descriptive title or
name of the rider, clause, warranty or endorsement is also
mentioned and written on the blank spaces provided in the policy.
Unless applied for by the insured or owner, any rider, clause,
warranty or endorsement issued after the original policy shall be
countersigned by the insured or owner, which countersignature
shall be taken as his agreement to the contents of such rider, clause,
warranty or endorsement.
Notwithstanding the foregoing, the policy may be in electronic
form subject to the pertinent provisions of Republic Act No. 8792,
otherwise known as the ‘Electronic Commerce Act’ and to such
rules and regulations as may be prescribed by the Commissioner.
Section 234 (228). No policy of group life insurance shall be
issued and delivered in the Philippines unless it contains in
substance the following provisions, or provisions which in the
opinion of the Commissioner are more favorable to the persons
insured, or at least as favorable to the persons insured and more
favorable to the policyholders:
(a) A provision that the policyholder is entitled to a grace period
of either thirty (30) days or of one (1) month for the payment of
any premium due after the first, during which grace period the
death benefit coverage shall continue in force, unless the
policyholder shall have given the insurer written notice of
discontinuance in advance of the date of discontinuance and in
accordance with the terms of the policy. The policy may provide
that the policyholder shall be liable for the payment of a pro rata
premium for the time the policy is in force during such grace
period;
(b) A provision that the validity of the policy shall not be
contested, except for nonpayment of premiums after it has been in
force for two (2) years from its date of issue; and that no statement
made by any insured under the policy relating to his insurability
shall be used in contesting the validity of the insurance with
respect to which such statement was made after such insurance has
been in force prior to the contest for a period of two (2) years
during such person’s lifetime nor unless contained in a written
instrument signed by him;
(c) A provision that a copy of the application, if any, of the
policyholder shall be attached to the policy when issued, that all
statements made by the policyholder or by persons insured shall
be deemed representations and not warranties, and that no
statement made by any insured shall be used in any contest unless
a copy of the instrument containing the statement is or has been
furnished to such person or to his beneficiary;
(d) A provision setting forth the conditions, if any, under which
the insurer reserves the right to require a person eligible for
insurance to furnish evidence of individual insurability satisfactory
to the insurer as a condition to part or all of his coverage;
(e) A provision specifying an equitable adjustment of premiums or
of benefits or of both to be made in the event that the age of a
person insured has been misstated, such provision to contain a
clear statement of the method of adjustment to be used;
(f) A provision that any sum becoming due by reason of death of
the person insured shall be payable to the beneficiary designated
by the insured, subject to the provisions of the policy in the event
that there is no designated beneficiary, as to all or any part of such
sum, living at the death of the insured, and subject to any right
reserved by the insurer in the policy and set forth in the certificate
to pay at its option a part of such sum not exceeding Five hundred
pesos (P500.00) to any person appearing to the insurer to be
equitably entitled thereto by reason of having incurred funeral or
other expenses incident to the last illness or, death of the person
insured;
(g) A provision that the insurer will issue to the policyholder for
delivery to each person insured a statement as to the insurance
protection to which he is entitled, to whom the insurance benefits
are payable, and the rights set forth in paragraphs (h), (i) and (j)
following;
(h) A provision that if the insurance, or any portion of it, on a
person covered under the policy ceases because of termination of
employment or of membership in the class or classes eligible for
coverage under the policy, such person shall be entitled to have
issued to him by the insurer, without evidence of insurability, an
individual policy of life insurance without disability or other
supplementary benefits, provided application for the individual
policy and payment of the first premium to the insurer shall be
made within thirty (30) days after such termination, and provided
further that:
(1) The individual policy shall be on any one of the forms, except
term insurance, then customarily issued by the insurer at the age
and for an amount not in excess of the coverage under the group
policy; and
(2) The premium on the individual policy shall be at the insurer’s
then customary rate applicable to the form and amount of the
individual policy, to the class of risk to which such person then
belongs, and to his age attained on the effective date of the
individual policy.
(i) A provision that if the group policy terminates or is amended
so as to terminate the insurance of any class of insured persons,
every person insured thereunder at the date of such termination
whose insurance terminates and who has been so insured for five
(5) years prior to such termination date shall be entitled to have
issued to him by the insurer an individual policy of life insurance
subject to the same limitations as set forth in paragraph (h), except
that the group policy may provide that the amount of such
individual policy shall not exceed the amount of the person’s life
insurance protection ceasing;
(j) A provision that if a person insured under the group policy dies
during the thirty (30)-day period within which he would have been
entitled to an individual policy issued to him in accordance with
paragraphs (h) and (i) above and before such individual policy
shall have become effective, the amount of life insurance which he
would have been entitled to have issued to him as an individual
policy shall be payable as a claim under the group policy whether
or not application for the individual policy or the payment of the
first premium has been made;
(k) In the case of a policy issued to a creditor to insure debtors of
such creditor, a provision that the insurer will furnish to the
policyholder for delivery to each debtor insured under the policy a
form which will contain a statement that the life of the debtor is
insured under the policy and that any death benefit paid thereunder
by reason of his death shall be applied to reduce or extinguish
indebtedness.
The provisions of paragraphs (f) to (j) shall not apply to policies
issued to a creditor to insure his debtors. If a group life policy is
on a plan of insurance other than term, it shall contain a non-
forfeiture provision or provisions which in the opinion of the
Commissioner is or are equitable to the insured or the
policyholder: Provided, That nothing herein contained shall be so
construed as to require group life policies to contain the same non-
forfeiture provisions as are required of individual life policies.
This a type of insurance in which a single contract covers an entire
group of people.
It is often provided as part of a complete employee benefit
package, known as the master contract.
Where the employee is required to pay a portion of the premium,
the arrangement is known as a “contributory plan”.
● Eternal Gardens v. PHILAMLIFE
SUMMARY: Philamlife entered into a group life policy
agreement with Eternal Gardens where those who purchased burial
lots from it on installment basis would be insured by Philamlife.
As required, Eternal submitted a list of all new lot purchaser,
including the application of John Chuang. Chuang died but
Philamlife denied claims on the ground that there was no
application, The Court held that Philamlife assumed the risk of loss
without approving the application. The termination must be
explicit and unambiguous.
FACTS:
On December 10, 1980, respondent Philippine American Life
Insurance Company (Philamlife) entered into an agreement
denominated as Creditor Group Life Policy No. P19202 with
petitioner Eternal Gardens Memorial Park Corporation
(Eternal). Under the policy, the clients of Eternal who purchased
burial lots from it on installment basis would be insured by
Philamlife. The amount of insurance coverage depended upon the
existing balance of the purchased burial lots. The policy was to be
effective for a period of one year, renewable on a yearly basis
(check notes for relevant provisions of the policy).
Pursuant to the policy, Eternal was required under the policy to
submit to Philamlife a list of all new lot purchasers, together with
a copy of the application of each purchaser, and the amounts of the
respective unpaid balances of all insured lot purchasers. Eternal
complied by submitting a letter on December 29, 1982. One of
those included in the list as “new business” was a certain John
Chuang. His balance of payments was P100,000.
On August 2, 1984, Chuang died. Eternal sent a letter on August
20, which also served as an insurance claim. Philamlife initially
replied by asking Eternal to submit other documents but after that,
Philamlife stopped replying. This prompted Philamlife to claim
P100,000 from Eternal. Philamlife denied the claim, stating that
no application for group insurance was submitted in office prior to
Chuang’s death. Eternal filed a case before the Makati RTC for a
sum on money. The Trial Court decided in favor of Eternal, but the
Court of Appeals reversed.
ISSUE/S:
1) W/N the application for insurance was duly submitted to
respondent Philamlife before the death of John Chuang.
2) W/N Philamlife assumed the risk of loss without approving
the application.
RULING:
1) YES. It was submitted.
The fact of the matter is, the letter dated December 29, 1982, which
Philamlife stamped as received, states that the insurance forms for
the attached list of burial lot buyers were attached to the letter
(including Chuang’s). Such stamp of receipt has the effect of
acknowledging receipt of the letter together with the attachments.
Such receipt is an admission by Philamlife against its own interest.
The burden of evidence has shifted to Philamlife, which must
prove that the letter did not contain Chuang’s insurance
application. However, Philamlife failed to do so; thus, Philamlife
is deemed to have received Chuang’s insurance application.
There were also inconsistencies with regard to the testimonies of
witnesses on Eternal Gardens not knowing where the original
insurance application was but the Court ruled that these were
minor.
2) YES.
Philamlife and Eternal entered into an agreement. In the policy, it
is provided that:
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall be effective on
the date he contracts a loan with the Assured. However, there shall
be no insurance if the application of the Lot Purchaser is not
approved by the Company.
An examination of the above provision would show ambiguity
between its two sentences. The first sentence appears to state that
the insurance coverage of the clients of Eternal already became
effective upon contracting a loan with Eternal while the second
sentence appears to require Philamlife to approve the insurance
contract before the same can become effective. However, this
vague contractual provision must be construed in favor of the
insured and in favor of the effectivity of the insurance contract.
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. The
termination of the insurance contract by the insurer must be
explicit and unambiguous.
WHEREFORE, we GRANT the petition. The November 26, 2004
CA Decision in CAG.R. CV No. 57810 is REVERSED and SET
ASIDE. The May 29, 1996 Decision of the Makati City RTC,
Branch 138 is MODIFIED. Philamlife is hereby ORDERED:
(1) To pay Eternal the amount of PhP100,000 representing the
proceeds of the Life Insurance Policy of Chuang;
(2) To pay Eternal legal interest at the rate of six percent (6%) per
annum of PhP100,000 from the time of extrajudicial demand by
Eternal until Philamlife’s receipt of the May 29, 1996 RTC
Decision on June 17, 1996;
(3) To pay Eternal legal interest at the rate of twelve percent (12%)
per annum of PhP 100,000 from June 17, 1996 until full payment
of this award; and
(4) To pay Eternal attorney’s fees in the amount of PhP10,000.
No costs.
5. Industrial Life (Sec. 229)
SEC. 229. Every insurance company doing business in the
Philippines shall terminate its fiscal period on the thirty-first day
of December every year, and shall annually on or before the
thirtieth day of April of each year render to the Commissioner a
statement signed and sworn to by the chief officer of such
company showing, in such form and details as may be prescribed
by the Commissioner, the exact condition of its affairs on the
preceding thirty-first day of December.
“The annual statement shall be prepared in accordance with the
financial reporting framework as determined by the
Commissioner. In addition, the Commissioner may require other
relevant information. The form and details of such other relevant
information shall be prescribed by the Commissioner and shall
form part of the supplementary schedules to the annual statement.
“Any entry in the statement which is found to be false shall
constitute a misdemeanor and the officer signing such statement
shall be subject to the penalty provided for under Section 442.
6. Mutual Life Insurance companies (Sec. 262)
SEC. 262. Upon approval or adoption of the agreement to merge
or consolidate by the stockholders or members of the constituent
companies, the corresponding articles of merger or of
consolidation shall be duly executed by the presidents and attested
by the corporate secretaries and shall bear the corporate seals of
the merging or consolidating companies setting forth:
“(a) The plan of merger or the plan of consolidation;
“(b) As to each corporation, the number of shares outstanding, or
in case of mutual corporations, the number of members; and
“(c) As to each corporation, the number of shares or members
voted for and against such plan, respectively. Thereafter, a
certified copy of such articles of merger or consolidation, together
with a certificate of approval or adoption by the stockholders or
members of such articles of merger or consolidation, verified by
affidavits of such officers and under the seal of the constituent
companies, shall be submitted to the Commissioner, together with
such other papers or documents which the Commissioner may
require, for his consideration.
● Republic v. Sunlife
SUMMARY:
FACTS:
ISSUE/S (procedural):
ISSUES/S (substantive):
RULING:
C. Fire Insurance
1. What “fire insurance” includes (Sec. 169);
Section 169. As used in this Code, the term fire insurance shall
include insurance against loss by fire, lightning, windstorm,
tornado or earthquake and other allied risks, when such risks are
covered by extension to fire insurance policies or under separate
policies
[Sanchez Reviewer]
Fire insurance- A contract of indemnity by which the insurer
agrees to indemnify the loss caused by hostile fire
● Also involves loss from “allied lines” like lightning if
such risks are covered by fire and extended coverage
● The standard fire contract pertains to payment of direct
loss but it may also extend to indirect or consequential
losses
a. Physical damage- caused to other property not
covered by the policy
b. Loss of earning- due to interruption of business
by the damage to insured’s property
c. Extra expense- additional expenditure following
the damage like charges on demolition
Hostile fire- the fire occurs outside the usual confines or begins as
a friendly fire and becomes hostile by escaping from the place
where it ought to be
Friendly fire- if it burns in a place where it was intended to burn,
and ought to be, and regarded as an agency for the accomplishment
of some purpose, and not as a hostile peril
● Phil. home Assurance v. CA
SUMMARY:
FACTS:
ISSUE/S (procedural):
ISSUES/S (substantive):
RULING:
2. “Increase of risks” and moral hazard” clauses;
Alteration of insured property (Sec. 170-172)
Section 170. An alteration in the use or condition of a thing insured
from that to which it is limited by the policy made without the
consent of the insurer, by means within the control of the insured,
and increasing the risks, entitles an insurer to rescind a contract of
fire insurance.
Section 171. An alteration in the use or condition of a thing insured
from that to which it is limited by the policy, which does not
increase the risk, does not affect a contract of fire insurance.
Section 172. A contract of fire insurance is not affected by any act
of the insured subsequent to the execution of the policy, which
does not violate its provisions, even though it increases the risk
and is the cause of the loss.
- It is notable from Sec 170 that the use or condition of the
property has been limited by the policy and that the
alteration increases the risk
- Based on the book of Carale, Sec 172 creates confusion
for it is hard to imagine a situation where an alteration
which the Code declares to be a ground for rescinding a
fire insurance contract can be deemed as NOT violative
of the provisions of the policy
3. Measure and indemnity (Sec. 173 and 174)
Section 173. If there is no valuation in the policy, the measure of
indemnity in an insurance against fire is the expense it would be to
the insured at the time of the commencement of the fire to replace
the thing lost or injured in the condition in which it was at the time
of the injury; but if there is a valuation in a policy of fire insurance,
the effect shall be the same as in a policy of marine insurance.
Section 174. Whenever the insured desires to have a valuation
named in his policy, insuring any building or structure against fire,
he may require such building or structure to be examined by an
independent appraiser and the value of the insured’s interest
therein may then be fixed as between the insurer and the insured.
The cost of such examination shall be paid for by the insured. A
clause shall be inserted in such policy stating substantially that the
value of the insured’s interest in such building or structure has
been thus fixed. In the absence of any change increasing the risk
without the consent of the insurer or of fraud on the part of the
insured, then in case of a total loss under such policy, the whole
amount so insured upon the insured’s interest in such building or
structure, as stated in the policy upon which the insurers have
received a premium, shall be paid, and in case of a partial loss the
full amount of the partial loss shall be so paid, and in case there
are two (2) or
more policies covering the insured’s interest therein, each policy
shall contribute pro rata to the payment of such whole or partial
loss. But in no case shall the insurer be required to pay more than
the amount thus stated in such policy. This section shall not
prevent the parties from stipulating in such policies concerning the
repairing, rebuilding or replacing of buildings or structures wholly
or partially damaged or destroyed.
D. Casualty and Liability Insurance (Sec. 176)
Section 176. Casualty insurance is insurance covering loss or
liability arising from accident or mishap, excluding certain types
of loss which by law or custom are considered as falling
exclusively within the scope of other types of insurance such as
fire or marine. It includes, but is not limited to, employer’s liability
insurance, motor vehicle liability insurance, plate glass insurance,
burglary and theft insurance, personal accident and health
insurance as written by non-life insurance companies, and other
substantially similar kinds of insurance.
● Fortune Insurance v. CA
SUMMARY:
FACTS:
● Producers Bank (PB) was insured by the Fortune and an
insurance policy was issued.
● An armored car of PB, while in the process of transferring
cash under the custody of its teller, Maribeth Alampay,
from its Pasay Branch to its Head Office in Makati, was
robbed of the said cash along Taft Avenue.
○ Armored Car was driven by Benjamin
Magalong Y de Vera, escorted by Security
Guard Saturnino Atiga Y Rosete.
○ Driver Magalong was assigned by PRC
Management Systems with PB by virtue of an
Agreement.
○ Security Guard Atiga was assigned by Unicorn
Security Services, Inc. by virtue of a contract of
Security Service.
● Pasay police authoritie found that the driver Magalong
and guard Atiga were charged, together with Edelmer
Bantigue Y Eulalio, Reynaldo Aquino and John Doe,
with violation of P.D. 532 (AntiHighway Robbery Law)
before the Fiscal of Pasay City.
○ The case is still being tried as of this date;
● Demands were made by the PB upon Fortune to pay the
amount of the loss of P725,000.00, but the latter refused
to pay as the loss is excluded from the coverage of the
insurance policy:
○ “GENERAL EXCEPTIONS
The company shall not be liable under this
policy in report of
■ (b) any loss caused by any dishonest,
fraudulent or criminal act of the insured
or any officer, employee, partner,
director, trustee or authorized
representative of the Insured whether
acting alone or in conjunction with
others. . . . “
● PB opposes the contention of Fortune and contends that
Atiga and Magalong are not its "officer, employee, . . .
trustee or authorized representative . . . at the time of the
robbery.
● RTC ruled in favor of PB by reasoning out that Magalong
and Atiga were not employees/representatives of PB, and
were just assigned by their respective firms to PB.
● CA: Affirmed.
● Fortune’s may contention:
○ When PB commissioned the guard and driver to
transfer its funds from one branch to tanother,
they necessarily became its authorized
representatives and employees of PB.
○ That based on the four-fold test, PB has control
over the employees, and that PRC Management
System and Unicorn Security Services are labor-
only contractors under Art. 106 LC.
ISSUE/S (procedural): W/N the loss falls within the general
exception clause?
RULING: YES, Fortune is exempt from liability under the
general exceptions clause of the insurance policy.
● INTENTION OF FORTUNE ON THE USE OF THE
WORD “EMPLOYEE”
○ When it used then the term "employee," it must
have had in mind any person who qualifies as
such as generally and statutorily declared as in
the case of Article 106 LC under a "laboronly"
contract as employees of the party employing
them and not of the party who supplied them to
the employer.
○ Whether they are is Labor-only contracting is a
question of fact, and since they agreed to submit
a stipulation of facts solely on the insurance
policy, the contracts with the said firms (PRC
and Unicorn), the complaint for violation of
P.D. No. 532, and the information therefor filed
by the City Fiscal there is a paucity of evidence
as to whether the contracts between Producers
and PRC Management Systems and Unicorn
Security Services are "laboronly" contracts.
● EVEN IF, THE CONTRACTS WERE NOT LABOR-
ONLY, MAGALONG AND ATIGA WERE ITS
“AUTHORIZED REPRESENTATIVES” who served
as such with teller ALAMPAY.
○ Producers entrusted the three with the specific
duty to safely transfer the money to its head
office:
■ Alampay to be responsible for its
custody in transit;
■ Magalong to drive the armored vehicle
which would carry the money;
■ Atiga to provide the needed security for
the money, the vehicle, and his two
other companions.
○ In short, for these particular tasks, the three
acted as agents of Producers.
● A "representative" is defined as one who represents or
stands in the place of another; one who represents others
or another in a special capacity, as an agent, and is
interchangeable with "agent."
WHEREFORE, the instant petition is hereby GRANTED. The
decision of the Court of Appeals in CAG.R. CV No. 32946 dated
3 May 1994 as well as that of Branch 146 of the Regional Trial
Court of Makati in Civil Case No. 1817 are REVERSED and SET
ASIDE. The complaint in Civil Case No. 1817 is DISMISSED.