Faith Therese Gitgano M2

Student No. 18470249

Insurance Law

1. Mr. C, a lawyer, is known for his kind heartedness and is extending help to people in
need. Mr. A borrowed money from Mr. B in the amount of P1,000,000. As a security for
the loan, Mr. C, agreed to act as a surety in favor of Mr. B. Hearing from Mr. C’s
generous deed, Mr. D also borrowed P1,000,000 from Mr. E, and his loan was secured by
Mr. C as surety. Is Mr. C doing an insurance business?

b) No, since this is an isolated transaction.

Under the Insurance Code, a contract of suretyship shall be deemed to be an

insurance contract only if made by a surety who is doing an insurance business as a
vocation and not as merely incidental to any other legitimate business or activity of
the surety.

In the instant case, Mr. C bound himself to be a surety as an act of generous

deed and not because he is in the business of doing an insurance business.

2. On October 18, 1980, P took out a life insurance policy and named his son Q as
beneficiary. P learned that Q was hooked on drugs and immediately notified the
insurance company in writing without the knowledge of Q that he is substituting his
neighbor R as the beneficiary in place of Q. P later died of advance tuberculosis. Upon
P’s death, Q claimed the proceeds of the insurance policy contending that as the son he
succeeds on the proceeds of the policy. Who can claim on the insurance proceeds?

b) R, the neighbour being the substituted beneficiary.

Section 11 of the Insurance Code provides that, the insured shall have the
right to change the beneficiary he designated in the policy, unless he has expressly
waived the right in said policy. The designation of Q as beneficiary by P was
revocable, hence, R was validly designated as the new beneficiary of Q.

Further, in life insurance, when one insures his own life, he may designate
any person as beneficiary. Thus, regardless that Q is the son of P since it was R who
was designated to be the beneficiary, so R is the one who has the right to claim the
insurance proceeds.

3. A, B and C are co-owners of a house and lot. The house is valued at P12,000,000.00.
They insured said house with Y Fire Insurance Co. for P9,000,000. And to fully insure its
value, they insure P3,000,000 with Z Insurance Co. In the insurance contract with Y
Insurance Co., the parties agree that no alienation shall be made on the house while the
insurance is still effective. Despite this prohibition, B sold his 1/3 share to C since he
needed money for his heart operation. Thereafter, the house was totally burned. To whom
and how much can the insured recover?
 a) P9,000,000 from Y Insurance and P3,000,000 from Z Insurance.

As provided in Section 24 of the Insurance Code, a transfer of interest by one

of several partners, joint owners, or owners in common, who are jointly insured, to
the others, does not avoid the insurance, even though it has been agreed that the
insurance shall cease upon the alienation of the thing insured.

Thus, regardless of the presence of the express stipulation of the prohibition

of alienation of the insured property, the insurance was not avoided. Further, the
transfer did not affect the risk because no new party is brought into the contractual
relationship with the insurer.

4. A piece of machinery was shipped to Mr. Pablo and on the basis of C & F, Mr. Pablo
insured said machinery with X Insurance Company for loss or damage during the voyage.
The vessel sank en route to Cebu. Mr. Pablo filed a claim but this was denied by the
insurance company. Which is correct?

b) X Insurance Co. is not justified because Mr. Pablo has an equitable interest.

A purchaser of goods under a perfected contract of sale has insurable

interest over the property pending delivery. The shipping arrangement is
immaterial in determining whether the vendee has insurable interest over the goods
in transit.

5. On January 4, 2003, Mr. P joined Alpha Corporation as President of the company. Alpha
took out a life insurance policy with Y Life Insurance Co. with Alpha as the beneficiary.
In the life insurance policy, the parties agree that there should be continued employment
of Mr. P with Alpha Corporation. Alpha also carried a fire insurance with Beta Fire
Insurance Co. on a house owned by it but now temporarily occupied by Mr. P. On
September 1, 2003, Mr. P resigned from Alpha but he purchased the house he was
occupying. Few days later fire occurred resulting in the death of Mr. P and destruction of
the house. In this case:

b) Alpha can recover on the life insurance but not on the fire insurance.

Every person has an insurable interest in the life and health of any person on
who he depends wholly or in part for education or support, or in whom he has a
pecuniary interest. Every interest in property, whether real or personal, or any
relation thereto or liability in respect thereof, of such nature that a contemplated
peril might directly damnify the insured is an insurable interest.

Alpha being the employer of Mr. P has an insurable interest on the life of the
latter. However, Alpha has no insurable interest on the house as it was owned by
Mr. P. Hence, Alpha cannot recover on the fire insurance but can recover on the life
insurance.
6. X owns a house valued at P500,000. He insured it against fire for P500,000 with Y Fire
Insurance Co. from January 1, 2003 to January 1, 2004. At the instance of B who is the
judgment creditor of X, the said house was levied upon by the sheriff and sold at public
auction on March 15, 2003. It was adjudicated to B for P150,000 at the auction sale. B
insured the house against fire for P150,000 from C Insurance Co. for the period March
15, 2003 to March 15, 2004. On April 15, 2003 the house was totally destroyed by fire. In
this situation:

c) X cannot recover but B can recover on his policy.

Section 20 of the Insurance Code states that, except in the cases specified in
the next four sections, and in the cases of life, accident, and health insurance, a
change of interest in any part of a thing insured unaccompanied by a corresponding
change of interest in the insurance, suspends the insurance to an equivalent extent,
until the interest in the thing and the interest in the insurance are vested in the same
person.

In this case, the ownership of the house was transferred to B through public
auction. Hence, B having interest in both the house and the insurance policy can
recover on his policy. However X cannot recover because although he has an
existing policy however, he longer has an insurable interest on the house.

7. A owns a house valued at P50,000 but he insured it against fire for P100,000. He
obtained a loan from B for P100,000 mortgaging his house in favor of B but without
assigning the insurance policy to the latter. B foreclosed the house for non-payment of
the P100,000 and was the highest bidder in the auction sale. Immediately upon issuance
of the certificate of sale, B insured the house for P100,000 with another insurance
company. In order to redeem the house, A borrowed from C P100,000 and to secure the
loan, A assigned the fire insurance policy to him. However, before A could pay B, the
house was destroyed by fire. Who can recover on the policy?

d) B for P100,000 and nothing for A and C.

Section 20 of the Insurance Code states that, except in the cases specified in
the next four sections, and in the cases of life, accident, and health insurance, a
change of interest in any part of a thing insured unaccompanied by a corresponding
change of interest in the insurance, suspends the insurance to an equivalent extent,
until the interest in the thing and the interest in the insurance are vested in the same
person.

In this case, B can recover because he both have an interest on the policy and
the house as he acquired interest in the latter when he purchased it at the public
auction. However, A and C cannot recover on the policy because both have no
corresponding interest in the insured property.
8. Blanco took out a P1 Million life insurance policy naming his friend and creditor,
Montenegro as his beneficiary. When Blanco died, his outstanding loan to Montenegro
was only P50,000. How much should Montenegro received on the proceeds, if he can?

d) P1,000,000

A person who took out an insurance policy on his own life may designate
anyone as his beneficiary and the beneficiary can recover the full amount.

9. A double insurance exists when the same person is insured by several insurers separately
in respect to the same subject and interest. Which of the following is considered to be
such:

d) X insures his automobile against theft with Y, company and against theft Z,
company.

Double insurance exists in this case because X insures his interest over his
automobile against the same peril which is theft to two insurers, Y and Z company,
insuring separately.

10. M insured his building for P10M with X, Insurance Co. In the policy, it was agreed that
the insurance is not binding unless the premium is paid to the insurer. M did not pay the
premium on the fire insurance. The policy also contains an acknowledgment receipt of
the premium. M did not actually paid the premium on the fire insurance. The building of
M was completely destroyed by fire. Can M recover on the policy?

d) Yes, because the acknowledgment receipt of premium in the policy admits no

other evidence.

Section 79 of the Insurance Code provides that, an acknowledgment in a

policy or contract of insurance or the receipt of premium is conclusive evidence of
its payment, so far as to make the policy binding, notwithstanding any stipulation
therein that it shall not be binding until the premium is actually paid.

11. The insured expressly warrants that the house which at that time was rented to tenants,
shall cease to be rented and shall be used as private-dwelling place for the family within
three months from the issuance of the policy, and a law was passed prohibiting eviction
of tenants without fixed period, within a period of one year. The loss occurs after three
months with the insured failing to comply his warranty. In this case:

b) The insurance is not avoided because the failure to comply was due to a law.

Section 73 of the Insurance Code provides that, when, before the time arrives
for the performance of a warranty relating to the future, a loss insured against
 happens, or performance becomes unlawful at the place of the contract, or
impossible, the omission to fulfill the warranty does not avoid the policy.

The insurance is not avoided because his failure to comply with the warranty
was due to the passing of the law which prohibits the eviction of tenants without
fixed period, within a period of one year.

12. X insured his house and its contents by fire with explosion as the excepted cause of fire.
An explosion occurred inside the house of X that started the fire, and so he got his
furniture outside, and because the neighbors panicked, they destroyed the same. Can x
recover from the insurance company on the value of the furniture?

d) No, because the proximate and the immediate cause of the loss are different.

The insurer is not liable if the loss is through a proximate cause which is an
excepted peril from the policy although the immediate cause is a peril not excepted.

The proximate cause of the loss is explosion while the destruction by the
neighbor of the furniture was only an immediate cause. Hence, X cannot recover
from the insurance company of the value of the furniture.

13. X owned a house valued at P500,000.00. The parties agree on a co-insurance clause in
the fire insurance policy. X insured the house for P300,000.00. If the house was burnt by
fire with a damage of P300,000.00. How much can X recover from the insurance
company?

c) P 300,000.00

A valued policy is one which expresses on its face an agreement that the thing
insured shall be valued at a specific sum. In no case shall the insurer be required to
pay more than the amount thus stated in the policy. Therefore, X can only recover
up to 300,000.

14. M, a married man, went to a karaoke and tabled N, a sexy 18 year old lady. In order to
induce N to have a one-night stand, M told N that he will insure his life and make N his
irrevocable beneficiary. A month after the policy was issued, M died of heart attack after
a sexual encounter with N. Who can recover from the policy?

a) N

The rule is that, when a person takes an insurance on his own life he may
designate any person as beneficiary. However, Article 739 of the Civil Code provides
an exception such that an insured cannot designate as beneficiary with whom he is
guilty of concubinage.
 In this case, M and N are not guilty of concubinage as under the
contemplation of the Revised Penal Code.

15. X married M daughter of Z, in a civil wedding in 2009. X insured his wife for P10M with
Aeta Insurance with himself as the beneficiary. After one month of staying together, X
filed an annulment case against M which marriage was annulled. X later married W. M
died of heart attack. Who can recover on the policy?

b) X, the ex-husband of M

Interest in the life or health of a person insured must exist when the
insurance takes effect, but need not exist thereafter or when the loss occurs.

Hence, although X and M are already annulled however, X can still recover
on the life insurance policy because at the time the policy was constituted X was still
the husband and M and thus, have an insurable interest on M’s life at that time.