Insurance Case Digest Template

MLC INSURANCE LAW (S.Y.
2020-2021)
Reyes, Karl Marxcuz R.
Subject Matter: Interpretation
Case Title: Gaisano Cagayan, Inc. vs. Insurance Co. of North America
G.R. No. 147839, January 1, 2020
(J., Ma. Alicia Austria-Martinez)
Facts: Intercapitol Marketing Corporation (IMC) and Levi Strauss (Phils.) Inc.
separately obtained from respondent Insurance Co. of North America fire insurance
policies with book debt endorsements. The insurance policies provide for coverage on
"book debts in connection with ready-made clothing materials which have been sold or
delivered to various customers and dealers of the Insured anywhere in the Philippines."
On February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City,
owned by petitioner, was consumed by fire. Included in the items lost or destroyed in
the fire were stocks of ready-made clothing materials sold and delivered by IMC and
LSPI.
Respondent filed a complaint for damages against petitioner. It alleges that IMC and
LSPI filed with it their claims under their respective fire insurance policies with book debt
endorsements; that the unpaid accounts of petitioner on the sale and delivery of ready-
made clothing materials with IMC was P2,119,205.00 while with LSPI it was
P535,613.00; that respondent paid the claims of IMC and LSPI and, by virtue thereof,
respondent was subrogated to their rights against petitioner; that respondent made
several demands for payment upon petitioner but these went unheeded.
In its Answer with Counter Claim, petitioner contends that it could not be held liable
because the property covered by the insurance policies were destroyed due to fortuities
event or force majeure; that respondent's right of subrogation has no basis inasmuch as
there was no breach of contract committed by it since the loss was due to fire which it
could not prevent or foresee; that IMC and LSPI never communicated to it that they
insured their properties; that it never consented to paying the claim of the insured.
Issue:
WON fire insurance policy on book debts is one covering the unpaid accounts of IMC
and LSPI since such insurance applies to loss of the ready-made clothing materials sold
and delivered to petitioner.
Held:
MLC INSURANCE LAW (S.Y. 2020-2021)
It is well-settled that when the words of a contract are plain and readily understood,
there is no room for construction.
In this case, the questioned insurance policies provide coverage for "book debts in
connection with ready-made clothing materials which have been sold or delivered to
various customers and dealers of the Insured anywhere in the Philippines.";
The contract defined book debts as the "unpaid account still appearing in the Book of
Account of the Insured 45 days after the time of the loss covered under this Policy."
Nowhere is it provided in the questioned insurance policies that the subject of the
insurance is the goods sold and delivered to the customers and dealers of the
insured.
Terms are to be understood literally just as they appear on the face of the contract.
Thus, what were insured against were the accounts of IMC and LSPI with petitioner
which remained unpaid 45 days after the loss through fire, and not the loss or
destruction of the goods delivered.
Petitioner argues that IMC bears the risk of loss because it expressly reserved
ownership of the goods by stipulating in the sales invoices that "it is further agreed that
merely for purpose of securing the payment of the purchase price the above described
merchandise remains the property of the vendor until the purchase price thereof is fully
paid."
The present case clearly falls under paragraph (1), Article 1504 of the Civil Code when
the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss
is borne by the buyer. Accordingly, petitioner bears the risk of loss of the goods
delivered.
IMC and LSPI did not lose complete interest over the goods.
They have an insurable interest until full payment of the value of the delivered goods.
Unlike the civil law concept of res perit domino, where ownership is the basis for
consideration of who bears the risk of loss, in property insurance, one's interest is
not determined by concept of title, but whether insured has substantial economic
interest in the property.
Section 13 of our Insurance Code defines insurable interest as "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."
Parenthetically, under
Section 14 of the same Code, an insurable interest in property may consist in: (a) an
existing interest; (b) an inchoate interest founded on existing interest; or (c) an
expectancy, coupled with an existing interest in that out of which the expectancy arises.
insurable interest in property does not necessarily imply a property interest in, or a lien
upon, or possession of, the subject matter of the insurance, and neither the title nor a
beneficial interest is requisite to the existence of such an interest, it is sufficient that the
insured is so situated with reference to the property that he would be liable to loss
should it be injured or destroyed by the peril against which it is insured.
The vendor or seller retains an insurable interest in the property sold so long as he has
any interest therein, in other words, so long as he would suffer by its destruction, as
where he has a vendor's lien.
Lastly, with respect to the respondents’ claims IMC, has adequately established its
claim.
The subrogation receipt, by itself, is sufficient to establish not only the relationship of
respondent as insurer and IMC as the insured, but also the amount paid to settle the
insurance claim. The right of subrogation accrues simply upon payment by the
insurance company of the insurance claim.
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action.
Case Title: Malayan Insurance Corp. vs. CA

G.R. No. 119599, March 20, 1997
(J., Romero)
Facts: Private respondent TKC Marketing Corp. was the owner/consignee of

metric tons of soya bean meal which was loaded on board the ship MV Al Kaziemah on
or about September 8, 1989 for carriage from the port of Rio del Grande, Brazil, to the
port of Manila. Said cargo was insured against the risk of loss by petitioner Malayan
Insurance Corporation for which it issued two (2) Marine Cargo Policies.
While the vessel was docked in South Africa enroute to Manila, the civil authorities
arrested and detained it because of a lawsuit on a question of ownership and
possession. As a result, private respondent notified petitioner of the arrest of the vessel
and made a formal claim representing the dollar equivalent on the policies, for non-
delivery of the cargo. Petitioner replied that the arrest of the vessel by civil authority was
not a peril covered by the policies.
Later on, the cargo was sold due to its perishable nature which could no longer stand a
voyage of twenty days to Manila and another twenty days for the discharge thereof.
Respondent thereafter reduced its claim. However, petitioner maintained its position
that the arrest was an excepted risk under the marine insurance policies.
The trial court ruled in TKC’s favor with damages to boot. The appellate court affirmed
the decision under the reason that clause 12 of the policy regarding an excepted risk
due to arrest by civil authorities was deleted by Section 1.1 of the Institute War Clauses
which covered ordinary arrests by civil authorities. Failure of the cargo to arrive was
also covered by the Theft, Pilferage, and Non-delivery Clause of the contract. Hence
this petition.
Issue: 1. WON the arrest of the vessel was a risk covered under the subject
insurance policies.
2. WON the insurance policies must strictly construed against the insurer.
Held: The court ruled positive on both issues.

1. Section 12 or the "Free from Capture & Seizure Clause was replaced by the
subsection 1.1 of section 1 of Institute War Clauses (Cargo) which included “the
risks excluded from the standard form of English Marine Policy by the clause
warranted free of capture, seizure, arrest, restraint or detainment, and the
consequences thereof of hostilities or warlike operations, whether there be a
declaration of war or not.”
The petitioner’s claim that the Institute War Clauses can be operative in case of
hostilities or warlike operations on account of its heading "Institute War Clauses"
is not tenable. It reiterated the CA’s stand that “its interpretation in recent years to
include seizure or detention by civil authorities seems consistent with the general
purposes of the clause.” This interpretation was regardless of the fact whether
the arrest was in war or by civil authorities.
The petitioner was said to have confused the Institute War clauses and the
F.C.S. in English law.
The court found that the insurance agency tried to interpret executive and
political acts as those not including ordinary arrests in the exceptions of the FCS
clause , and claims that the War Clauses now included executive and political
acts without including ordinary arrests in the new stipulation.
“A strained interpretation which is unnatural and forced, as to lead to an absurd

conclusion or to render the policy nonsensical, should, by all means, be avoided.”
2. Indemnity and liability insurance policies are construed in accordance with the
general rule of resolving any ambiguity therein in favor of the insured, where the
contract or policy is prepared by the insurer. A contract of insurance, being a contract of
adhesion, means that any ambiguity should be resolved against the insurer.
Case Title: Diosdado C. Ty vs. Filipinas Compania De Seguros

G.R. No. L-21821-22, May 31, 1966
(J., Barrera)
Facts: Plaintiff-appellant was an employee of Broadway Cotton Factory at Grace

as mechanic operator. In the latter part of 1953, he took Personal Accident Policies from
several insurance companies, among which are herein defendants-appellees, on
different dates,1 effective for 12 months. During the effectivity of these policies, or on
December 24, 1953, a fire broke out in the factory where plaintiff was working. As he
was trying to put out said fire with the help of a fire extinguisher, a heavy object fell upon
his left hand.
The attending surgeon certified that the injuries sustained would cause temporary total
disability of appellant's left hand.
As the insurance companies refused to pay his claim for compensation under the
policies by reason of the said disability of his left hand, Ty filed motions in the Municipal
Court of Manila, which rendered favorable decision. On appeal to the Court of First
Instance by the insurance companies, the cases were dismissed on the ground that
under the uniform terms of the insurance policies, partial disability of the insured caused
by loss of either hand to be compensable, the loss must result in the amputation of that
hand. Hence, these appeals by the insured.
Issue: Whether or not Ty can claim against the insurance company.
Held: The court ruled in the negative. The provision of the Policy in question
provides the following:
"INDEMNITY FOR TOTAL OR PARTIAL DISABILITY
If the Insured sustains any Bodily Injury which is effected solely through violent,
external, visible and accidental means, and which shall not prove fatal but shall result,
independently of all other causes and within sixty (60) days from the occurrence,
thereof, in Total or Partial Disability of the Insured, the Company shall pay, subject to
the exceptions as provided for hereinafter, the amount set opposite such injury.”
The loss of a hand shall mean the loss, by amputation through the bones of the wrist.
The interpretation of the contract cannot go beyond the clear and express conditions of
the insurance policies. All of which define partial disability as loss of either hand by
amputation through the bones of the wrist. It is noted that the disability of plaintiff's hand
was merely temporary, having been caused by fracture of the index, the middle and the
fourth fingers of the left hand.
Also, the court also ruled that the agreement contained in the insurance policies is the
law between the parties. As the terms of the policies are clear, express and specific that
only amputation of the left hand should be considered as a loss thereof, an
interpretation that would include the mere fracture or other temporary disability not
covered by the policies would certainly be unwarranted.
Case Title: Gulf Resorts, Inc. vs. Phil. Charter Ins

G.R. NO. 156167, May 16, 2005
(J., Puno)
Facts: Plaintiff is the owner of the Plaza Resort situated at Agoo, La Union and
had its properties in said resort insured originally with the American Home Assurance
Company (AHAC-AIU).
In the first four insurance policies issued by AHAC-AIU from 1984-85; 1985-86; 1986-
1987; and 1987-88 (Exhs. "C", "D", "E" and "F"; also Exhs. "1", "2", "3" and "4"
respectively), the risk of loss from earthquake shock was extended only to plaintiff's two
swimming pools.
On July 16, 1990, an earthquake struck Central Luzon and Northern Luzon and the
properties and 2 swimming pools in its Agoo Playa Resort were damaged. On August
23, 1990, Gulf’s claim was denied on the ground that its insurance policy only afforded
earthquake shock coverage to the two swimming pools of the resort. Petitioner
contends that pursuant to this rider, no qualifications were placed on the scope of the
earthquake shock coverage. Thus, the policy extended earthquake shock coverage to
all of the insured properties. The RTC Favored American Home endorsement rider
means that only the two swimming pools were insured against earthquake shock the
CA, affirmed RTC.
Issue: Whether or not Gulf can claim for its properties aside from the 2 swimming
pools.
Held: YES. A careful examination of the premium recapitulation will show that it
is the clear intent of the parties to extend earthquake shock coverage only to the two
swimming pools.
In fire, casualty, and marine insurance, the premium payable becomes a debt as soon
as the risk attaches. In the subject policy, no premium payments were made with regard
to earthquake shock coverage, except on the two swimming pools. There is no mention
of any premium payable for the other resort properties with regard to earthquake shock.
This is consistent with... the history of petitioner's previous insurance policies from
AHAC-AIU.
It is basic that all the provisions of the insurance policy should be examined and
interpreted in consonance with each other. All its parts are reflective of the true intent of
the parties. Under Section 2 (1), contract of insurance as an agreement whereby one
undertakes consideration to indemnify another against loss damages or liability arising
from unknown or contingent events. An insurance premium is the consideration paid an
insurer for undertaking to indemnify the insured against a specified peril. In the subject
policy, no premium payments were made with regard to earthquake shock coverage,
except on the two swimming pools.
Case Title: Simon De La Cruz vs. The Capital Ins. and Surety Inc
G.R. No. L-21574, June 30, 1966
(J., Barrera)
Facts: Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc Mines,

Inc. in Baguio, was the holder of an accident insurance policy underwritten by the
Capital Insurance & Surety Co., Inc., for the period beginning November 13, 1956 to
November 12, 1957. On January 1, 1957, in connection with the celebration of the New
Year, the Itogon-Suyoc Mines, Inc. sponsored a boxing contest for general
entertainment wherein the insured Eduardo de la Cruz, a non-professional boxer
participated. In the course of his bout with another person, likewise a non-professional,
of the same height, weight, and size, Eduardo slipped and was hit by his opponent on
the left part of the back of the head, causing Eduardo to fall, with his head hitting the
rope of the ring. He was brought to the Baguio General Hospital the following day. The
cause of death was reported as hemorrhage, intracranial, left.
Simon de la Cruz, the father of the insured and who was named beneficiary under the
policy, thereupon filed a claim with the insurance company. The Capital Insurance and
Surety co., inc denied stating that the death caused by his participation in a boxing
contest was not accidental.
The Insurer denied Simon’s claims. Simon instituted the action in the Court of First
Instance of Pangasinan where the court ruled for specific performance.
Issue: Whether or not the cause of death was an accident covered by the
insurance policy.
Held: The court ruled on the positive.
The terms "accident" and "accidental" as used in insurance contracts, have not acquired
any technical meaning and are construed by the courts in their ordinary and common
acceptation happen by chance or fortuitously, without intention and design, and which is
unexpected, unusual, and unforeseen event that takes place without one's foresight or
expectation event that proceeds from an unknown cause, or is an unusual effect of a
known cause and, therefore, not expected where the death or injury is not the natural or
probable result of the insured's voluntary act, or if something unforeseen occurs in the
doing of the act which produces the injury, the resulting death is within the protection of
policies insuring against death or injury from accident while the participation of the
insured in the boxing contest is voluntary.
The fact that boxing is attended with some risks of external injuries does not make any
injuries received in the course of the game not accidental.
In boxing as in other equally physically rigorous sports, such as basketball or baseball,

death is not ordinarily anticipated to result. If, therefore, it ever does, the injury or death
can only be accidental or produced by some unforeseen happening or event as what
occurred in this case
Furthermore, Death or disablement resulting from engagement in boxing contests was

not declared outside of the protection of the insurance contract.
Case Title: The Insular Life Ass. Co., Ltd. vs. Paz Y. Khu, Felipe Y. Khu,
Jr., et. al.,
G.R. No. 195176, April 18, 2016
(J., Del Castillo)
Facts: Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy with Insular
Life under the latter's Diamond Jubilee Insurance Plan. Felipe accomplished the
required medical questionnaire wherein he did not declare any illness or adverse
medical condition. Insular Life thereafter issued him a Policy with a face value of PI
million. This took effect on June 22, 1997.
On June 23, 1999, Felipe's policy lapsed due to non-payment of the premium. On
September 7, 1999, Felipe applied for the reinstatement of his policy and paid
P25,020.00 as premium
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 paid the agreed additional
premium.
On September 22, 2001, Felipe died. Paz Y. Khu, Felipe Y. Khu, Jr. .and Frederick Y.
Khu (collectively, Felipe's beneficiaries or respondents) filed with Insular Life a claim for
benefit under the reinstated policy. This claim was denied.
Hence, respondents instituted a complaint for specific performance with damages.

Respondents prayed that the reinstated life insurance policy be declared valid,
enforceable and binding on Insular Life; and that the latter be ordered to pay unto
Felipe’s beneficiaries the proceeds of this policy, among others.
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.
Issue: Whether Felipe's reinstated life insurance policy is already incontestable at

the time of his death.
Held: Yes. The Court discerns a genuine ambiguity or obscurity in the language
of the two documents.
In the Endorsement, the obscurity is patent. 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."
The court ruled that given the obscurity of the language, the construction favorable to
the insured will be adopted by the courts.
Accordingly, the subject policy is deemed reinstated as of June 22, 1999. Thus, the
period of contestability has lapsed.
Indemnity and liability insurance policies are construed in accordance with the general
rule of resolving any ambiguity therein in favor of the insured, where the contract or
policy is prepared by the insurer. A contract of insurance, being a contract of adhesion,
par excellence, any ambiguity therein should be resolved against the insurer; in other
words, it should be construed liberally in favor of the insured and strictly against the
insurer. Limitations of liability should be regarded with extreme jealousy and must be
construed in such a way as to preclude the insurer from noncompliance with its
obligations.
Subject Matter: Beneficiaries
Case Title: Heirs of Loreto C. Maramag vs. Eva Verna De Guzman, et.al.,
G.R. No. 181132, June 5, 2009
(J., Nachura)
Facts: The petition alleged that: (1) petitioners were the legitimate wife and
children of Loreto Maramag (Loreto), while respondents were Loreto’s illegitimate
family; (2) Eva de Guzman Maramag (Eva) was a concubine of Loreto and a suspect in
the killing of the latter, thus, she is disqualified to receive any proceeds from his
insurance policies from Insular Life Assurance Company, Ltd. (Insular)4 and Great
Pacific Life Assurance Corporation (Grepalife); (3) the illegitimate children of Loreto—
Odessa, Karl Brian, and Trisha Angelie—were entitled only to one-half of the legitime of
the legitimate children, thus, the proceeds released to Odessa and those to be released
to Karl Brian and Trisha Angelie were inofficious and should be reduced; and (4)
petitioners could not be deprived of their legitimes, which should be satisfied first.
Vicenta alleges that Eva is disqualified from claiming
Issue: W/N Eva can claim even though prohibited under the civil code against
donation
Held: Petitioners are third parties to the insurance contracts with Insular and
Grepalife and, thus, are not entitled to the proceeds thereof. Accordingly, respondents
Insular and Grepalife have no legal obligation to turn over the insurance proceeds to
petitioners. The revocation of Eva as a beneficiary in one policy and her disqualification
as such in another are of no moment considering that the designation of the illegitimate
children as beneficiaries in Loreto's insurance policies remains valid. Because no legal
proscription exists in naming as beneficiaries the children of illicit relationships by the
insured, the shares of Eva in the insurance proceeds, whether forfeited by the court in
view of the prohibition on donations under Article 739 of the Civil Code or by the
insurers themselves for reasons based on the insurance contracts, must be awarded to
the said illegitimate children, the designated beneficiaries, to the exclusion of
petitioners. It is only in cases where the insured has not designated any beneficiary, or
when the designated beneficiary is disqualified by law to receive the proceeds, that the
insurance policy proceeds shall redound to the benefit of the estate of the insured.
Further as a general rule, only persons entitled to claim the insurance proceeds are
either the insured, if still alive; or the beneficiary, if the insured is already deceased,
upon the maturation of the policy. However, such admits of exception which is during a
situation where the insurance contract was intended to benefit third persons who are not
parties to the same in the form of favorable stipulations or indemnity. In such a case,
third parties may directly sue and claim from the insurer. It is only in cases where the
insured has not designated any beneficiary, or when the designated beneficiary is
disqualified by law to receive the proceeds, that the insurance policy proceeds shall
redound to the benefit of the estate of the insured.
Case Title: Southern Luzon Employees’ Ass. v. Golpeo, et al

G.R. No. L-6114 October 30, 1954
(J., Paras)
Facts: SLEA is composed of laborers and employees of the LTBC and BTC (now
BLTB Co.), and one of its purposes is mutual aid of its members and their dependents
in case of death. In 1949, SLEA adopted a resolution providing that: A member may, if
he chooses, put down his common law wife and/or children he had with her as his
beneficiaries; and such person so named by the member will be the sole persons to be
recognized by SLEA regarding claims for condolence contributions.
Roman listed as his beneficiaries Aquilina Maloles and their 4 children. After his death,
SLEA was able to collect voluntary contribution from its members. Three sets of
claimants to the amount presented themselves to the association. SLEA then filed an
action for interpleader.
rial court rendered a decision declaring Maloles and her children the sole beneficiaries
of the amount
Issue: 1. Whether or not Golpeo, the legal wife is entitled to the amount.
2. Whether or not Aquilina Molales common-law wife and her illegitimate
children can claim the benefits.
Held: 1. NO. First of all, the lower court did not consider the association as a
regular insurance company, but merely ruled that the death benefit in question is
analogous to insurance. Besides, even the Administrative Code describes a mutual
benefit company as one which provides any method of life insurance among its
members out of dues or assessments collected from its membership.
Without considering the intimation in the brief for Maloles that Golpeo, by her silence
and actions had acquiesced in the illicit relations between her husband and Maloles,
Golpeo’s argument would certainly NOT apply to the children of Maloles likewise named
beneficiaries by the deceased. As a matter of fact, the NCC recognizes certain
successional rights of illegitimate children.
2. Juanita Golpeo, by her silence and actions, had acquiesced in the illicit relations
between her husband and appellee Aquilina Maloles. Thus, appellant argument would
certainly not apply to the children of Aquilina likewise named beneficiaries by the
deceased because new Civil Code recognized certain successional rights of illegitimate
children.
Case Title: Vda. de Consuegra v. GSIS

No. L-28093, January 30, 1971
(J., Zaldivar)
Facts: The late Jose Consuegra, at the time of his death, was employed as a
shop foreman of the office of the District Engineer. In his lifetime, Consuegra contracted
two marriages, the first with herein respondent Rosario Diaz, solemnized in the parish
church of San Nicolas de Tolentino, Surigao, Surigao, on July 15, 1937, out of which
marriage were born two children, namely, Jose Consuegra, Jr. and Pedro Consuegra,
but both predeceased their father; and the second, which was contracted in good faith
while the first marriage was subsisting, with herein petitioner Basilia Berdin, on May 1,
1957 in the same parish and municipality, out of which marriage were born seven
children, namely, Juliana, Pacita, Maria Lourdes, Jose, Rodrigo, Lenida and Luz, all
surnamed Consuegra.
Being a GSIS member when he died, the proceeds of his life insurance were paid by
the GSIS to Berdin and her children who were the beneficiaries named in the policy.
Since he was in the gov’t service for 22.5028 years, he was entitled to retirement
insurance benefits, for which no beneficiary was designated.
Both families filed their claims with the GSIS, which ruled that the legal heirs were Diaz
who is entitled to one-half or 8/16 of the retirement benefits and Berdin and her children
were entitled to the remaining half, each to receive an equal share of 1/16.
Berdin went to CFI on appeal. CFI affirmed GSIS decision.
Issue: To whom should the retirement insurance benefits be paid?
Held: Both families are entitled to half of the retirement benefits.
The beneficiary named in the life insurance does NOT automatically become the
beneficiary in the retirement insurance. When Consuegra, during the early part of 1943,
or before 1943, designated his beneficiaries in his life insurance, he could NOT have
intended those beneficiaries of his life insurance as also the beneficiaries of his
retirement insurance because the provisions on retirement insurance under the GSIS
came about only when CA 186 was amended by RA 660 on June 18, 1951.
Sec. 11(b) clearly indicates that there is need for the employee to file an application for
retirement insurance benefits when he becomes a GSIS member and to state his
beneficiary. The life insurance and the retirement insurance are two separate and
distinct systems of benefits paid out from 2 separate and distinct funds.
In case of failure to name a beneficiary in an insurance policy, the proceeds will accrue
to the estate of the insured. And when there exist two marriages, each family will be
entitled to one-half of the estate.
Case Title: The Insular Life Ass. Co., Ltd. v. Ebrado, No.
GR No. L-44059, Oct. 28, 1977
(J., Martin)
Facts: On September 1, 1968, Buenaventura Cristor Ebrado was issued by The

Insular Life Assurance Co., Ltd., a Policy on a whole-life plan with a rider for Accidental
Death Benefits for the same amount. Buenaventura C. Ebrado designated Carponia T.
Ebrado as the revocable beneficiary in his policy. He referred to her as his wife.
Ebrado died as a result of an accident when he was hit by a falling branch of a tree. As
the insurance policy was in force, The Insular Life Assurance Co., Ltd. stands liable to
pay the coverage of the policy.
Carponia filed with the insurer a claim for the proceeds of the policy as the designated
beneficiary therein, although she admits that she and the insured Buenaventura C.
Ebrado were merely living as husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured.
She asserts that she is the one entitled to the insurance proceeds, not the common-law
wife, Carponia T. Ebrado.
In view of the conflicting claims, Insular Life brought the matter to court interpleading
both parties in the case. The trial court ruled in favor of Pascuala.
Issue: Whether or not the common-law wife named as beneficiary in the life
insurance policy of a legally married man can claim the proceeds thereof in case of
death of the latter?
Held: NO. Carponia is disqualified. Common-law spouses are, definitely, barred

from receiving donations from each other In essence, a life insurance policy is no
different from a civil donation insofar as the beneficiary is concerned. Both are founded
upon the same consideration: liberality. A beneficiary is like a donee, because from the
premiums of the policy which the insured pays out of liberality, the beneficiary will
receive the proceeds or profits of said insurance. As a consequence, the proscription in
Article 739 of the new Civil Code should equally operate in life insurance contracts.
We do not think that a conviction for adultery or concubinage is exacted before the
disabilities mentioned in Article 739 may effectuate.
requisite proof of common-law relationship between the insured and the beneficiary has
been conveniently supplied by the stipulations between the parties in the pre-trial
conference of the case.
Subject Matter: Insurance Interest
Case Title: Sps.Nilo Cha & Stella Uy Cha, et. Al. vs. Court of Appeals, et.
al., G.R. No. 124520 Aug. 18, 1997
(J., Padilla)
Facts: Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease
contract with CKS Development Corporation, as lessor. One of the stipulations of the 1
year lease contract states that:
“The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods
and effects placed at any stall or store or space in the leased premises without first
obtaining the written consent and approval of the LESSOR.
If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR, then
the policy is deemed assigned and transferred to the LESSOR for its own benefit”
Notwithstanding the above stipulation in the lease contract, the Cha spouses insured
against loss by fire their merchandise inside the leased premises for P500,000.00 with
the United Insurance Co., Inc. without the written consent of CKS.
On the day the lease contract was to expire, fire broke out inside the leased premises
and CKS learning that the spouses procured an insurance wrote to United to have the
proceeds be paid directly to them. But United refused so CKS filed against Spouses
Cha and United.
The Regional Trial Court rendered a decision ordering United to pay CKS the amount
and the Cha spouses to pay P50,000.00 as exemplary damages, P20,000.00 as
attorney’s fees and costs of suit.
On appeal, the Court of Appeals rendered a decision, affirming the trial court decision,
deleting however the awards for exemplary damages and attorney’s fees. A motion for
reconsideration by United was denied. The spouses Cha and United filed the petition for
review on certiorari.
Issue: Whether or not the CKS has insurable interest because the spouses Cha
violated the stipulation.
Held: NO. The court ruled stating Sec. 18 of the Insurance Code which provides
as follows: No contract or policy of insurance on property shall be enforceable except
for the benefit of some person having an insurable interest in the property insured.
A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses
over their merchandise is primarily a contract of indemnity. Insurable interest in the
property insured must exist a t the time the insurance takes effect and at the time the
loss occurs. The basis of such requirement of insurable interest in property insured is
based on sound public policy: to prevent a person from taking out an insurance policy
on property upon which he has no insurable interest and collecting the proceeds of said
policy in case of loss of the property. In such a case, the contract of insurance is a
mere wager which is void under Section 25 of the Insurance Code.
Also, the court also stated Section 17 which states that “The measure of an insurable
interest in property is the extent to which the insured might be damnified by loss of
injury thereof”
Hence, the automatic assignment of the policy to CKS under the provision of the lease
contract previously quoted is void for being contrary to law and/or public policy. The
proceeds of the fire insurance policy thus rightfully belong to the spouses. The liability
of the Cha spouses to CKS for violating their lease contract in that Cha spouses
obtained a fire insurance policy over their own merchandise, without the consent of
CKS, is a separate and distinct issue which the court did not resolve in this case.
Case Title: Gaisano Cagayan, Inc. vs. Ins. Co. of North America
G.R. No. 147839, June 8, 2006
(J., Austria-Martinez)
Facts: Intercapitol Marketing Corporation (IMC) and Levi Strauss (Phils.) Inc.
separately obtained from respondent Insurance Co. of North America fire insurance
policies with book debt endorsements. The insurance policies provide for coverage on
"book debts in connection with ready-made clothing materials which have been sold or
delivered to various customers and dealers of the Insured anywhere in the Philippines."
On February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City,
owned by petitioner, was consumed by fire. Included in the items lost or destroyed in
the fire were stocks of ready-made clothing materials sold and delivered by IMC and
LSPI.
Respondent filed a complaint for damages against petitioner. It alleges that IMC and
LSPI filed with it their claims under their respective fire insurance policies with book debt
endorsements; that the unpaid accounts of petitioner on the sale and delivery of ready-
made clothing materials with IMC was P2,119,205.00 while with LSPI it was
P535,613.00; that respondent paid the claims of IMC and LSPI and, by virtue thereof,
respondent was subrogated to their rights against petitioner; that respondent made
several demands for payment upon petitioner but these went unheeded.
In its Answer with Counter Claim, petitioner contends that it could not be held liable
because the property covered by the insurance policies were destroyed due to fortuities
event or force majeure; that respondent's right of subrogation has no basis inasmuch as
there was no breach of contract committed by it since the loss was due to fire which it
could not prevent or foresee; that IMC and LSPI never communicated to it that they
insured their properties; that it never consented to paying the claim of the insured.
Issue: Whether or not IMC bears the risk of loss because it expressly reserved ownership of
the goods by stipulating in the sales invoices that "it is further agreed that merely for purpose of
securing the payment of the purchase price the above described merchandise remains the property
of the vendor until the purchase price thereof is fully paid."
Held: The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein
is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are
at the buyer's risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in the goods has been retained by the seller merely to
secure performance by the buyer of his obligations under the contract, the goods are at the buyer's
risk from the time of such delivery
Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss
is borne by the buyer. Petitioner bears the risk of loss of the goods delivered.
IMC and LSPI had an insurable interest until full payment of the value of the delivered goods. Unlike
the civil law concept of res perit domino, where ownership is the basis for consideration of who bears
the risk of loss, in property insurance, one's interest is not determined by concept of title, but
whether insured has substantial economic interest in the property.
Section 13 of our Insurance Code defines insurable interest as "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." Parenthetically, under Section 14 of the same
Code, an insurable interest in property may consist in: (a) an existing interest; (b) an inchoate
interest founded on existing interest; or (c) an expectancy, coupled with an existing interest in that
out of which the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its existence or would suffer
loss from its destruction. Indeed, a vendor or seller retains an insurable interest in the property sold
so long as he has any interest therein, in other words, so long as he would suffer by its destruction,
as where he has a vendor's lien. In this case, the insurable interest of IMC and LSPI pertain to the
unpaid accounts appearing in their Books of Account 45 days after the time of the loss covered by
the policies.
Case Title: Vicente Ong Lim Sing, Jr. vs. FEB Leasing & Finance Corp.,
G.R. No. 168115, June 8, 2007
(J., Nachura)
Facts: FEB Leasing and Finance Corporation (FEB) entered into a lease of
equipment and motor vehicles with JVL Food Products (JVL). On the same date,
Vicente Ong Lim Sing, Jr. (Lim) executed an Individual Guaranty Agreement with FEB
to guarantee the prompt and faithful performance of the terms and conditions of the
aforesaid lease agreement. Corresponding Lease Schedules with Delivery and
Acceptance Certificates over the equipment and motor vehicles formed part of the
agreement. Under the contract, JVL was obliged to pay FEB an aggregate gross
monthly rental. JVL defaulted in the payment of the monthly rentals.
FEB filed a Complaint with the RTC. JVL and Lim admitted the existence of the lease
agreement but asserted that it is in reality a sale of equipment on installment basis, with
FEB acting as the financier. JVL and Lim claimed that this intention was apparent from
the fact that they were made to believe that when full payment was effected, a Deed of
Sale will be executed by FEB as vendor in favor of JVL and Lim as vendees.
Issue: Whether or not JVL as the lessee have an insurable interest over the
leased items.
Ruling: Yes. The stipulation in Section 14 of the lease contract, that the equipment
shall be insured at the cost and expense of the lessee against loss, damage, or
destruction from fire, theft, accident, or other insurable risk for the full term of the lease,
is a binding and valid stipulation. Petitioner, as a lessee, has an insurable interest in the
equipment and motor vehicles leased. Section 17 of the Insurance Code provides that
the measure of an insurable interest in property is the extent to which the insured might
be damnified by loss or injury thereof. It cannot be denied that JVL will be directly
damnified in case of loss, damage, or destruction of any of the properties leased.
It has also been held that the test of insurable interest in property is whether the
assured has a right, title or interest therein that he will be benefited by its preservation
and continued existence or suffer a direct pecuniary loss from its destruction or injury by
the peril insured against.
Subject Matter: Concealment
Case Title: Great Pacific Life Ass. Corp. vs. CA and Medarda V. Leuterio
G.R. No. 113899. Oct. 13, 1999
(J., Quisumbing)
Facts: A contract of group life insurance was executed between petitioner Great
Pacific Life Assurance Corporation (Grepalife) and Development Bank of the Philippines
(DBP). Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP.
Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership
in the group life insurance plan. In an application form, Dr. Leuterio answered questions
concerning his health condition.
On August 6, 1984, Dr. Leuterio died due to massive cerebral hemorrhage.

Consequently, DBP submitted a death claim to Grepalife. Grepalife denied the claim
alleging that Dr. Leuterio was not physically healthy when he applied for an insurance
coverage on November 15, 1983.
Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from
hypertension, which caused his death. Allegedly, such nondisclosure constituted
concealment that justified the denial of the claim. The widow of the late Dr. Leuterio,
respondent Medarda V. Leuterio, filed a complaint against Grepalife for Specific
Performance with Damages.
The trial court rendered a decision in favor of respondent widow and against Grepalife.
The Court of Appeals sustained the trial court’s decision. Hence, the present petition.
Issue: Whether or not Dr. Leuterio concealed that he had hypertension, which
would vitiate the insurance contract.
Held: The insured private respondent did not cede to the mortgagee all his rights
or interests in the insurance, the policy stating that: In the event of the debtors death
before his indebtedness with the Creditor [DBP] shall have been fully paid, an amount to
pay the outstanding indebtedness shall first be paid to the creditor and the balance of
sum assured, if there is any, shall then be paid to the beneficiary/ies designated by the
debtor. When DBP submitted the insurance claim against petitioner, the latter denied
payment thereof, interposing the defense of concealment committed by the insured.
Thereafter, DBP collected the debt from the mortgagor and took the necessary action of
foreclosure on the residential lot of private respondent. In Gonzales La O vs. Yek Tong
Lin Fire & Marine Ins. Co. we held: Insured, being the person with whom the contract
was made, is primarily the proper person to bring suit thereon. *** Subject to some
exceptions, insured may thus sue, although the policy is taken wholly or in part for the
benefit of another person named or unnamed, and although it is expressly made
payable to another as his interest may appear or otherwise. *** Although a policy issued
to a mortgagor is taken out for the benefit of the mortgagee and is made payable to him,
yet the mortgagor may sue thereon in his own name, especially where the mortgagees
interest is less than the full amount recoverable under the policy, *** And in volume 33,
page 82, of the same work, we read the following: Insured may be regarded as the real
party in interest, although he has assigned the policy for the purpose of collection, or
has assigned as collateral security any judgment he may obtain. And since a policy of
insurance upon life or health may pass by transfer, will or succession to any person,
whether he has an insurable interest or not, and such person may recover it whatever
the insured might have recovered, the widow of the decedent Dr. Leuterio may file the
suit against the insurer, Grepalife.
Case Title: New Life Enterprises v. CA

G.R. No. 94071, March 31, 1992
(J., Regalado)
Facts: Julian Sy and Jose Sy Bang have formed a business partnership in the
City of Lucena. Under the business name of New Life Enterprises, the partnership
engaged in the sale of construction materials at its place of business, a two storey
building situated at Iyam, Lucena City. The facts show that Julian Sy insured the stocks
in trade of New Life Enterprises with Western Guaranty Corporation, Reliance Surety
and Insurance. Co., Inc., and Equitable Insurance Corporation.
October 19, 1982 the building occupied by the New Life Enterprises was gutted by fire.

After the fire, Julian Sy filed claims but it was denied for breach of policy conditions.
Condition No. 3
The insured shall give notice to the Company of any insurance or insurances
already effected, or which may subsequently be effected, unless such notice be
given, all benefits under... this policy shall be deemed forfeited
Petitioners admit that the respective insurance policies issued by private respondents
did not state or endorse thereon the other insurance coverage obtained or subsequently
effected.
Issue: Whether or not Sy can claim against the three insurance companies for
violating the "Other Insurance Clause"
Held: NO. The terms of the contract are clear and unambiguous. The insured is
specifically required to disclose to the insurer any other insurance and its particulars
which he may have effected on the same subject matter.
The knowledge of such insurance by the insurer's agents, even assuming the
acquisition thereof by the former, is not the "notice" that would stop the insurers from
denying the claim.
Conclusion of the trial court that Reliance and Equitable are "sister companies" is an
unfounded conjecture drawn from the mere fact that Yap Kam Chuan was an agent for
both companies which also had the same insurance claims adjuster Availment of the
services of the same agents and adjusters by different companies is a common practice
in the insurance business and such facts do not warrant the speculative conclusion of
the trial court.
The conformity of the insured to the terms of the policy is implied from his failure to
express any disagreement with what is provided for. A clear misrepresentation and a
vital one because where the insured had been asked to reveal but did not, that was
deception - guilty of clear fraud total absence of such notice nullifies the policy
assuming arguendo that petitioners felt the legitimate need to be clarified as to the
policy condition violated, there was a considerable lapse of time from their receipt of the
insurer's clarificatory letter dated March 30, 1983, up to the time the complaint was filed
in court on January 31, 1984.
The one-year prescriptive period was yet to expire on November 29, 1983, or about
eight (8) months from the receipt of the clarificatory letter, but petitioners let the period
lapse without bringing their action in court.
Case Title: Ma. Lourdes S. Florendo vs. Philam Plans, Inc., et. al.,
G.R. No. 186983, Feb. 22, 2012
(J., Abad)
Facts: Manuel Florendo filed an application for comprehensive pension plan after
some convincing by respondent Perla Abcede. The plan had a pre-need price of
P997,050.00, payable in 10 years, and had a maturity value of P2,890,000.00 after 20
years. Manuel signed the application and left to Perla the task of supplying the
information needed in the application. Respondent Ma. Celeste Abcede, Perla’s
daughter, signed the application as sales counselor.
Aside from pension benefits, the comprehensive pension plan also provided life
insurance coverage to Florendo. This was covered by a Group Master Policy that
Philippine American Life Insurance Company (Philam Life) issued to Philam Plans.
Manuel died of blood poisoning. Subsequently, Lourdes filed a claim with Philam Plans
for the payment of the benefits under her husband’s plan. Because Manuel died before
his pension plan matured and his wife was to get only the benefits of his life insurance,
Philam Plans forwarded her claim to Philam Life.
Philam Plans denied Lourdes’ claim. Philam Life found that Manuel was on
maintenance medicine for his heart and had an implanted pacemaker. Further, he
suffered from diabetes mellitus and was taking insulin.
RTC ordered Philam to pay but CA reversed the decision. Hence this case.
Issue: Whether or not there was concealment.
Held: One. Lourdes points out that, seeing the unfilled spaces in Manuel’s
pension plan application relating to his medical history, Philam Plans should have
returned it to him for completion. Since Philam Plans chose to approve the application
just as it was, it cannot cry concealment on Manuel’s part. Further, Lourdes adds that
Philam Plans never queried Manuel directly regarding the state of his health.
Consequently, it could not blame him for not mentioning it.
But Lourdes is shifting to Philam Plans the burden of putting on the pension plan
application the true state of Manuel’s health. She forgets that since Philam Plans
waived medical examination for Manuel, it had to rely largely on his stating the truth
regarding his health in his application. For, after all, he knew more than anyone that he
had been under treatment for heart condition and diabetes for more than five years
preceding his submission of that application. But he kept those crucial facts from Philam
Plans.
Besides, when Manuel signed the pension plan application, he adopted as his own the
written representations and declarations embodied in it. It is clear from these
representations that he concealed his chronic heart ailment and diabetes from Philam
Plans.
With respect to the incontestability clause. Manuel died on the 11 th month. Hence,
Philam can still question Lourdes’ entitlement to the benefits of her husband’s pension
plan.
Case Title: Great Pacific Life Ass. Co. vs. CA and Ngo Hing,
G.R. No. L-31845, April 30, 1979
(J., De Castro)
Facts: Ngo Hing filed an application with the Great Pacific Assurance Company
(Grepalife) for a twenty-year endowment policy in the amount of P50,000.00 on the life
of his one-year old daughter Helen Go. Said respondent supplied the essential data
which petitioner Lapulapu D. Mondragon, Branch Manager of the Grepalife in Cebu City
wrote on the corresponding form in his own handwriting. Mondragon finally type-wrote
the data on the application form which was signed by private respondent Ngo Hing. The
latter paid the annual premuim to the Company, but he retained a certain amount as his
commission for being a duly authorized agent of Grepalife. Upon the payment of the
insurance premium, the binding deposit receipt was issued to private respondent Ngo
Hing. Likewise, petitioner Mondragon handwrote at the bottom of the back page of the
application form his strong recommendation for the approval of the insurance
application. Then Mondragon received a letter from Grepalife disapproving the
insurance application. The letter stated that the said life insurance application for 20-
year endowment plan is not available for minors below seven years old, but Grepalife
can consider the same under the Juvenile Triple Action Plan, and advised that if the
offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company.
The non-acceptance of the insurance plan by Grepalife was allegedly not

communicated by Mondragon to Ngo Hing. Instead, Mondragon wrote back Grepalife
again strongly recommending the approval of the 20-year. On appeal, respondent Court
of Appeals affirmed the trial court’s decision, deleting however the awards for exemplary
damages and attorney’s fees. A motion for reconsideration by United was denied.
Hence, this petition.
Issue: Whether or not the stipulation of the lease contract entered into between
CKS and the Cha spouses is valid insofar as it provides that any fire insurance policy
obtained by the lessee over their merchandise inside the leased premises is deemed
assigned or transferred to the lessor if said policy is obtained without the prior written of
the latter.
Held: It is, of course, basic in the law on contracts that the stipulations contained
in a contract cannot be contrary to law, morals, good customs, public order or public
policy.
Sec. 18 of the Insurance Code provides that “No contract or policy of insurance on
property shall be enforceable except for the benefit of some person having an insurable
interest in the property insured.”
A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses
over their merchandise is primarily a contract of indemnity. Insurable interest in the
property insured must exist at the time the insurance takes effect and at the time the
loss occurs. The basis of such requirement of insurable interest in property insured is
based on sound public policy: to prevent a person from taking out an insurance policy
on property upon which he has no insurable interest and collecting the proceeds of said
policy in case of loss of the property. In such a case, the contract of insurance is a mere
wager which is void under Section 25 of the Insurance Code, which provides that “Every
stipulation in a policy of Insurance for the payment of loss, whether the person insured
has or has not any interest in the property insured, or that the policy shall be received
as proof of such interest, and every policy executed by way of gaming or wagering, is
void.”
In the present case, it cannot be denied that CKS has no insurable interest in the goods
and merchandise inside the leased premises under the provisions of Section 17 of the
Insurance Code which provide: “The measure of an insurable interest in property is the
extent to which the insured might be damnified by loss of injury thereof."
Therefore, respondent CKS cannot, under the Insurance Code a special law be validly a
beneficiary of the fire insurance policy taken by the petitioner-spouses over their
merchandise. This insurable interest over said merchandise remains with the insured,
the Cha spouses. The automatic assignment of the policy to CKS under the provision of
the lease contract previously quoted is void for being contrary to law and/or public
policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses
Nilo Cha and Stella Uy-Cha (herein co-petitioners). The insurer (United) cannot be
compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has
no insurable interest in the property insured.
Case Title: Saturnino vs. Phil. American Life

G.R. No. L-16163 February 28, 1963
(J., Makalintal)
Facts: The policy sued upon is one for 20-year endowment non-medical
insurance. 2 months prior to the insurance of the policy, Saturnino was operated on for
cancer, involving complete removal of the right breast, including the pectoral muscles
and the glands, found in the right armpit.
Notwithstanding the fact of her operation, Saturnino did not make a disclosure thereof in
her application for insurance. She stated therein that she did not have, nor had she ever
had, among others listed in the application, cancer or other tumors; that she had not
consulted any physician, undergone any operation or suffered any injury within the
preceding 5 years.
She also stated that she had never been treated for, nor did she ever have any illness
or disease peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual
disorders.
The application also recited that the declarations of Saturnino constituted a further basis
for the issuance of the policy.
Issue: Whether or not the insured made such false representation of material
facts as to avoid the policy.
Held: YES. There can be no dispute that the information given by her in the
application for insurance was false, namely, that she never had cancer or tumors or
consulted any physician or undergone any operation within the preceding period of 5
years.
The question to determine is: Are the facts then falsely represented material? The
Insurance Law provides that “materiality is to be determined not by the event, but solely
by the probable and reasonable influence of the facts upon the party to whom the
communication is due, in forming his estimate of the proposed contract, or making his
inquiries.
The contention of appellants is that the facts subject of the representation were not
material in view of the non-medical nature of the insurance applied for, which does
away with the usual requirement of medical examination before the policy is issued.
The contention is without merit. If anything, the waiver of medical examination renders
even more material the information required of the applicant concerning previous
condition of health and diseases suffered, for such information necessarily constitutes
an important factor which the insurer takes into consideration in deciding whether to
issue the policy or not.
Appellants also contend that there was no fraudulent concealment of the truth inasmuch
as the insured herself did not know, since her doctor never told her, that the disease for
which she had been operated on was cancer. In the first place, concealment of the fact
of the operation itself was fraudulent, as there could not have been any mistake about it,
no matter what the ailment.
Secondly, in order to avoid a policy, it is not necessary to show actual fraud on the part
of the insured. In this jurisdiction, concealment, whether intentional or unintentional
entitled the insurer to rescind the contract of insurance, concealment being defined as
“negligence to communicate that which a party knows and ought to communicate.” The
basis of the rule vitiating the contract in cases of concealment is that it misleads or
deceives the insurer into accepting the risk, or accepting it at a rate of premium agreed
upon. The insurer, relying upon the belief that the insured will disclose every material
fact within his actual or presumed knowledge, is misled into a belief that the
circumstances withheld does not exist, and he is thereby induced to estimate the risk
upon a false basis that it does not exist.
Case Title: Manila Bankers Life Insurance Corp. vs. Cresencia P. Aban
G.R. No. 175666, July 29, 2013
(J., Del Castillo)
Facts: On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from
Manila Bankers Life Insurance Corporation (Bankers Life), designating respondent
Cresencia P. Aban (Aban), her niece, as her beneficiary. Petitioner issued Insurance
Policy No. 747411 (the policy), with a face value of P 100,000.00, in Sotero’s favor on
August 30, 1993, after the requisite medical examination and payment of the insurance
premium. On April 10, 1996, when the insurance policy had been in force for more than
two years and seven months, Sotero died. Respondent filed a claim for the insurance
proceeds on July 9, 1996. Petitioner conducted an investigation into the claim, and
came out with the following findings:
1. Sotero did not personally apply for insurance coverage, as she was
illiterate;
2. Sotero was sickly since 1990;
3. Sotero did not have the financial capability to pay the insurance premiums
on Insurance Policy No. 747411;
4. Sotero did not sign the July 3, 1993 application for insurance; and
5. Respondent was the one who filed the insurance application, and x x x
designated herself as the beneficiary. For the above reasons, petitioner
denied respondent’s claim on April 16, 1997 and refunded the premiums
paid on the policy.
Issue: Whether or not Manila Bankers is barred from denying the insurance
claims based on fraud or concealment.
Held: Yes. The “incontestability clause” is a provision in law that after a policy of
life insurance made payable on the death of the insured shall have been in force during
the lifetime of the insured for a period of two (2) years from the date of its issue or of its
last reinstatement, the insurer cannot prove that the policy is void ab initio or is
rescindible by reason of fraudulent concealment or misrepresentation of the insured or
his agent.
The purpose of the law is to give protection to the insured or his beneficiary by limiting
the rescinding of the contract of insurance on the ground of fraudulent concealment or
misrepresentation to a period of only two (2) years from the issuance of the policy or its
last reinstatement.
The insurer is deemed to have the necessary facilities to discover such fraudulent
concealment or misrepresentation within a period of two (2) years. It is not fair for the
insurer to collect the premiums as long as the insured is still alive, only to raise the issue
of fraudulent concealment or misrepresentation when the insured dies in order to defeat
the right of the beneficiary to recover under the policy.
Section 48 serves a noble purpose, as it regulates the actions of both the insurer and
the insured. Under the provision, an insurer is given two years – from the effectivity of a
life insurance contract and while the insured is alive – to discover or prove that the
policy is void ab initio or is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. 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. This is not
to say that insurance fraud must be rewarded, but that insurers who recklessly and
indiscriminately solicit and obtain business must be penalized, for such recklessness
and lack of discrimination ultimately work to the detriment of bona fide takers of
insurance and the public in general.
Case Title: Sun Life of Canada (Phils), Inc. vs. Ma. Daisy's. Sibya
G.R. No. 211212, June 08, 2016
(J., Reyes)
Facts : On January 10, 2001, 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. On February 5, 2001, Sun Life approved Atty. Jesus
Jr.'s application and issued Insurance Policy No. 031097335. On May 11, 2001, Atty.
Jesus Jr. died as a result of a gunshot wound in San Joaquin, Iloilo. As such, Ma. Daisy
filed a Claimant's Statement with Sun Life to seek the death benefits indicated in his
insurance policy. In a letter dated August 27, 2001, however, Sun Life denied the claim
on the ground that the details on Atty. Jesus Jr.'s medical history were not disclosed in
his application. The respondents reiterated their claim against Sun Life thru a letter
dated September 17, 2001. Sun Life, however, refused to heed the respondents'
requests and instead filed a Complaint for Rescission before the RTC and prayed for
judicial confirmation of Atty. Jesus Jr.'s rescission of insurance policy. In its Complaint,
Sun Life alleged that Atty. Jesus Jr. did not disclose in his insurance application his
previous medical treatment at the National Kidney Transplant Institute in May and
August of 1994. For their defense, the respondents claimed that Atty. Jesus Jr. did not
commit misrepresentation in his application for insurance. The RTC held that Atty.
Jesus Jr. did not commit material concealment and misrepresentation when he applied
for life insurance with Sun Life. Aggrieved, Sun Life elevated the case to the CA. The
CA affirmed the decision of the RTC. Hence this petition.
Issue: Whether or not the CA erred when it affirmed the RTC decision finding
that there was no concealment or misrepresentation when Atty. Jesus Jr. submitted his
insurance application with Sun Life.
Held : In Manila Bankers Life Insurance Corporation v. Aban,22 the Court held
that if the insured dies within the two-year contestability period, the insurer is bound to
make good its obligation under the policy, regardless of the presence or lack of
concealment or misrepresentation. Section 48 serves a noble purpose, as it regulates
the actions of both the insurer and the insured. Under the provision, an insurer is given
two years - from the effectivity of a life insurance contract and while the insured is alive -
to discover or prove that the policy is void ab initio or is rescindible by reason of the
fraudulent concealment or misrepresentation of the insured or his agent. 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. This is not to say that insurance fraud must be rewarded, but that
insurers who recklessly and indiscriminately solicit and obtain business must be
penalized, for such recklessness and lack of discrimination ultimately work to the
detriment of bona fide takers of insurance and the public in general. In the present case,
Sun Life issued Atty. Jesus Jr.'s policy on February 5, 2001. Thus, it has two years from
its issuance, to investigate and verify whether the policy was obtained by fraud,
concealment, or misrepresentation. Upon the death of Atty. Jesus Jr., however, on May
11, 2001, or a mere three months from the issuance of the policy, Sun Life loses its right
to rescind the policy.
Subject Matter: Warranties
Case Title: ARMANDO GEAGONIA v. COURT OF APPEALS and COUNTRY

BANKERS INSURANCE
G.R. No. 114427 February 06, 1995
(J., Davide)
Facts: The petitioner is the owner of Norman's Mart located in the public market
of San Francisco, Agusan del Sur. Petitioner obtained from the private respondent fire
insurance policy The policy noted the requirement that the insured shall give notice to
the Company of any insurance or insurances already effected, or which may
subsequently be effected, covering any of the property or properties consisting of stocks
in trade, goods in process and/or inventories only hereby insured, and unless notice be
given and the particulars of such insurance or insurances be stated therein or endorsed
in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the
Company before the occurrence of any loss or damage, all benefits under this policy
shall be deemed forfeited, provided however, that this condition shall not apply when
the total insurance or insurances in force at the time of the loss or damage is not more
than P200,000.00.”
The petitioners’ stocks were destroyed by fire. He then filed a claim which was
subsequently denied because the petitioner’s stocks were covered by two other fire
insurance policies for Php 200,000 issued by PFIC. The basis of the private
respondent’s denial was the petitioner’s alleged violation of Condition 3 of the policy.
Geagonia then filed a complaint against the private respondent in the Insurance
Commission for the recovery of P100,000.00 under fire insurance policy and damages.
He claimed that he knew the existence of the other two policies. But, he said that he
had no knowledge of the provision in the private respondent’s policy requiring him to
inform it of the prior policies and this requirement was not mentioned to him by the
private respondent’s agent.
The Insurance Commission found that the petitioner did not violate Condition 3 as he
had no knowledge of the existence of the two fire insurance policies obtained from the
PFIC; that it was Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him
or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable
interest on the stocks.
The Insurance Commission then ordered the respondent company to pay complainant
the sum of P100,000.00 with interest and attorney’s fees.
CA reversed the decision of the Insurance Commission because it found that the
petitioner knew of the existence of the two other policies issued by the PFIC.
Issue: Whether or not the petitioner had not disclosed the two insurance policies
when he obtained the fire insurance and thereby violated Condition 3 of the policy.
Held: Yes. The court agreed with the CA that the petitioner knew of the prior
policies issued by the PFIC. His letter of 18 January 1991 to the private respondent
conclusively proves this knowledge.
His testimony to the contrary before the Insurance Commissioner and which the latter
relied upon cannot prevail over a written admission made ante litem motam. It was,
indeed, incredible that he did not know about the prior policies since these policies were
not new or original.
Stated differently, 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.
With these principles in mind, Condition 3 of the subject policy is not totally free from
ambiguity and must be meticulously analyzed. Such analysis leads us to conclude that
(a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall
only be to the extent exceeding P200,000.00 of the total policies obtained.
Furthermore, by stating within Condition 3 itself that such condition shall not apply if the
total insurance in force at the time of loss does not exceed P200,000.00, the private
respondent was amenable to assume a co-insurer’s liability up to a loss not exceeding
P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the
rationale behind the incorporation of “other insurance” clause in fire policies is to
prevent over-insurance and thus avert the perpetration of fraud. When a property owner
obtains insurance policies from two or more insurers in a total amount that exceeds the
property’s value, the insured may have an inducement to destroy the property for the
purpose of collecting the insurance. The public as well as the insurer is interested in
preventing a situation in which a fire would be profitable to the insured.
Subject Matter: Warranties
Case Title: Malayan Ins. Co., Inc. vs. Phils. First Ins. Co., Inc. and
Reputable Forwarder Services
G.R. NO. 184300 - July 11, 2012
(J., Reyes)
Facts: Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable
Forwarder Services, Inc. (Reputable) had been annually executing a contract of
carriage, whereby the latter undertook to transport and deliver the former s products to
its customers, dealers or salesmen.
On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 (Marine Policy)
from respondent Philippines First Insurance Co., Inc. (Philippines First) to secure its
interest over its own products. Philippines First thereby insured Wyeth’s nutritional,
pharmaceutical and other products usual or incidental to the insured’s business while
the same were being transported or shipped in the Philippines.
Under the contract, Reputable undertook to answer for “all risks with respect to the
goods and shall be liable to the COMPANY (Wyeth), for the loss, destruction, or
damage of the goods/products due to any and all causes whatsoever, including theft,
robbery, flood, storm, earthquakes, lightning, and other force majeure while the
goods/products are in transit and until actual delivery to the customers, salesmen, and
dealers of the COMPANY”. The contract also required Reputable to secure an
insurance policy on Wyeth’s goods. Thus, on February 11, 1994, Reputable signed a
Special Risk Insurance Policy (SR Policy) with petitioner Malayan for the amount of
P1,000,000.00.
On October 6, 1994, during the effectivity of the Marine Policy and SR Policy, Reputable
received from Wyeth 1,000 boxes of Promil infant formula worth P2,357,582.70 to be
delivered by Reputable to Mercury Drug Corporation in Libis, Quezon City.
Unfortunately, on the same date, the truck carrying Wyeth’s products was hijacked by
about 10 armed men. They threatened to kill the truck driver and two of his helpers
should they refuse to turn over the truck and its contents to the said highway robbers.
The hijacked truck was recovered two weeks later without its cargo.
On March 8, 1995, Philippines First, after due investigation and adjustment, and
pursuant to the Marine Policy, paid Wyeth P2,133,257.00 as indemnity. Philippines First
then demanded reimbursement from Reputable, having been subrogated to the rights of
Wyeth by virtue of the payment. The latter, however, ignored the demand.
Consequently, Philippines First instituted an action for sum of money against Reputable
on August 12, 1996. In its complaint, Philippines First stated that Reputable is a “private
corporation engaged in the business of a common carrier.” In its answer, Reputable
claimed that it is a private carrier. It also claimed that it cannot be made liable under the
contract of carriage with Wyeth since the contract was not signed by Wyeth’s
representative and that the cause of the loss wasforce majeure, i.e., the hijacking
incident.
Subsequently, Reputable impleaded Malayan as third-party defendant in an effort to

collect the amount covered in the SR Policy. According to Reputable, “it was validly
insured with [Malayan] for P1,000,000.00 with respect to the lost products under the
latter’s Insurance Policy No. SR-0001-02577 effective February 1, 1994 to February 1,
1995” and that the SR Policy covered the risk of robbery or hijacking.
Disclaiming any liability, Malayan argued, among others, that under Section 5 of the SR
Policy, the insurance does not cover any loss or damage to property which at the time
of the happening of such loss or damage is insured by any marine policy and that the
SR Policy expressly excluded third-party liability.
Issue: Whether or not there is double insurance.
Held: By the express provision of Section 93 of the Insurance Code, double

insurance exists where the same person is insured by several insurers separately in
respect to the same subject and interest. The requisites in order for double insurance to
arise are as follows:
a) The person insured is the same;

b) Two or more insurers insuring separately;
c) There is identity of subject matter;
d) There is identity of interest insured; and
e) There is identity of the risk or peril insured against.
In the present case, while it is true that the Marine Policy and the SR Policy were
both issued over the same subject matter, i.e., goods belonging to Wyeth, and both
covered the same peril insured against, it is, however, beyond cavil that the said
policies were issued to two different persons or entities. It is undisputed that Wyeth is
the recognized insured of Philippines First under its Marine Policy, while Reputable is
the recognized insured of Malayan under the SR Policy. The fact that Reputable
procured Malayan’s SR Policy over the goods of Wyeth pursuant merely to the
stipulated requirement under its contract of carriage with the latter does not make
Reputable a mere agent of Wyeth in obtaining the said SR Policy.
The interest of Wyeth over the property subject matter of both insurance contracts is
also different and distinct from that of Reputable’s. The policy issued by Philippines First
was in consideration of the legal and/or equitable interest of Wyeth over its own goods.
On the other hand, what was issued by Malayan to Reputable was over the latter’s
insurable interest over the safety of the goods, which may become the basis of the
latter’s liability in case of loss or damage to the property and falls within the
contemplation of Section 15 of the Insurance Code.
Subject Matter: Notice of Loss
Case Title: Philippine American General Insurance Co., Inc. v. Sweet

Lines, Inc.,
G.R. No. 87434 August 5, 1992
(J., Regalado)
Facts: Petitioner Tagum Plastics (TAGUM), from Davao, imported polyethylene

[basic plastic material] from F. E. Zuellig in America. Co-petitioner Philippine American
General Insurance (PHILAMGEN) is its insurer. The shipment has to first arrive in
Manila before it can be interisland shipped to Davao. Respondent Sweet Lines was
hired to ferry said shipment to Davao. Upon arrival at Davao, it was found that some of
the imported plastics were undelivered or damaged. Petitioners filed suit on the basis of
the bills of lading. Unfortunately, said bills of lading contain prescriptive periods of sixty
(60) days to file for claims of loss/damages. It also required notice to respondent carrier
before judicial claims may be had.
Issue: Whether or not giving notice of loss of or injury to the goods is a condition
precedent to the action for loss or injury.
Held: Yes, the fundamental reason or purpose of such a stipulation is not to

relieve the carrier from just liability, but reasonably to inform it that the shipment has
been damaged and that it is charged with liability therefor, and to give it an opportunity
to examine the nature and extent of the injury. This protects the carrier by affording it an
opportunity to make an investigation of a claim while the matter is fresh and easily
investigated so as to safeguard itself from false and fraudulent claims.
Stipulations in bills of lading or other contracts of shipment which require notice of claim
for loss of or damage to goods shipped in order to impose liability on the carrier operate
to prevent the enforcement of the contract when not complied with, that is, notice is a
condition precedent and the carrier is not liable if notice is not given in accordance with
the stipulation, as the failure to comply with such a stipulation in a contract of carriage
with respect to notice of loss or claim for damage bars recovery for the loss or damage
suffered.
In the case at bar, there is neither any showing of compliance by petitioners with the
requirement for the filing of a notice of claim within the prescribed period nor any
allegation to that effect. It may then be said that while petitioners may possibly have a
cause of action, for failure to comply with the above condition precedent they lost
whatever right of action they may have in their favor or, token in another sense, that
remedial right or right to relief had prescribed.
Subject Matter: Premiums
Case Title: Jaime T. Gaisano vs. Development Insurance and Surety

Corp.G.R. No. 190702, Feb. 27, 2017
(J., Jardeleza)
Facts: Petitioner was the registered owner of a 1992 Mitsubishi Montero

with plate number GTJ-777 (vehicle), while respondent is a domestic corporation
engaged in the insurance business. On September 27, 1996, respondent issued a
comprehensive commercial vehicle policy to petitioner over the vehicle for a period of
one year commencing on September 27, 1996 up to September 27, 1997. Respondent
also issued two other commercial vehicle policies to petitioner covering two other motor
vehicles for the same period. To collect the premiums and other charges on the policies,
respondent's agent, Trans-Pacific Underwriters Agency (Trans-Pacific), issued a
statement of account to petitioner's company, Noah's Ark Merchandising (Noah's Ark).
Noah's Ark immediately processed the payments and issued a Far East Bank check
dated September 27, 1996 payable to Trans-Pacific on the same day. The check
bearing the amount of Pl40,893.50 represents payment for the three insurance policies,
with P55,620.60 for the premium and other charges over the vehicle. However, nobody
from Trans-Pacific picked up the check that day (September 27) because its president
and general manager, Rolando Herradura, was celebrating his birthday. Trans-Pacific
informed Noah's Ark that its messenger would get the check the next day, September
28. In the evening of September 27, 1996, while under the official custody of Noah's Ark
marketing manager Achilles Pacquing (Pacquing) as a service company vehicle, the
vehicle was stolen in the vicinity of SM Megamall at Ortigas, Mandaluyong City.
Pacquing reported the loss to the Philippine National Police Traffic Management
Command at Camp Crame in Quezon City. Despite search and retrieval efforts, the
vehicle was not recovered. Oblivious of the incident, Trans-Pacific picked up the check
the next day, September 28. It issued an official receipt numbered 124713 dated
September 28, 1996, acknowledging the receipt of P55,620.60 for the premium and
other charges over the vehicle. The check issued to Trans Pacific for Pl40,893.50 was
deposited with Metrobank for encashment on October 1, 1996.
Issue: Whether there is a binding insurance contract between petitioner and

respondent.
Ruling: The court deny the petition. Insurance is a contract whereby one
undertakes for a consideration to indemnify another against loss, damage or liability
arising from an unknown or contingent event. Just like any other contract, it requires a
cause or consideration. The consideration is the premium, which must be paid at the
time and in the way and manner specified in the policy. If not so paid, the policy will
lapse and be forfeited by its own terms. The law, however, limits the parties' autonomy
as to when payment of premium may be made for the contract to take effect. The
general rule in insurance laws is that unless the premium is paid, the insurance policy is
not valid and binding.
Section 77 of the Insurance Code, applicable at the time of the issuance of the policy,
provides: Sec. 77. An insurer is entitled to payment of the premium as soon as the thing
insured is exposed to the peril insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an insurance company is valid and
binding unless and until the premium thereof has been paid, except in the case of a life
or an industrial life policy whenever the grace period provision applies.

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MLC INSURANCE LAW (S.Y.

Subject Matter: Interpretation

Subject Matter: Interpretation

Case Title: Malayan Insurance Corp. vs. CA

Facts: Private respondent TKC Marketing Corp. was the owner/consignee of

Held: The court ruled positive on both issues.

“A strained interpretation which is unnatural and forced, as to lead to an absurd

Subject Matter: Interpretation

Case Title: Diosdado C. Ty vs. Filipinas Compania De Seguros

Facts: Plaintiff-appellant was an employee of Broadway Cotton Factory at Grace

Issue: Whether or not Ty can claim against the insurance company.

"INDEMNITY FOR TOTAL OR PARTIAL DISABILITY

Subject Matter: Interpretation

Case Title: Gulf Resorts, Inc. vs. Phil. Charter Ins

Subject Matter: Interpretation

Facts: Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc Mines,

Held: The court ruled on the positive.

In boxing as in other equally physically rigorous sports, such as basketball or baseball,

Furthermore, Death or disablement resulting from engagement in boxing contests was

Subject Matter: Interpretation

Hence, respondents instituted a complaint for specific performance with damages.

Issue: Whether Felipe's reinstated life insurance policy is already incontestable at

Subject Matter: Beneficiaries

Vicenta alleges that Eva is disqualified from claiming

Subject Matter: Beneficiaries

Case Title: Southern Luzon Employees’ Ass. v. Golpeo, et al

Subject Matter: Beneficiaries

Case Title: Vda. de Consuegra v. GSIS

Berdin went to CFI on appeal. CFI affirmed GSIS decision.

Issue: To whom should the retirement insurance benefits be paid?

Held: Both families are entitled to half of the retirement benefits.

Subject Matter: Beneficiaries

Facts: On September 1, 1968, Buenaventura Cristor Ebrado was issued by The

Held: NO. Carponia is disqualified. Common-law spouses are, definitely, barred

Subject Matter: Insurance Interest

Subject Matter: Insurance Interest

Subject Matter: Insurance Interest

Subject Matter: Concealment

On August 6, 1984, Dr. Leuterio died due to massive cerebral hemorrhage.

Subject Matter: Concealment

Case Title: New Life Enterprises v. CA

October 19, 1982 the building occupied by the New Life Enterprises was gutted by fire.

Subject Matter: Concealment

Issue: Whether or not there was concealment.

Subject Matter: Concealment

The non-acceptance of the insurance plan by Grepalife was allegedly not

Subject Matter: Concealment

Case Title: Saturnino vs. Phil. American Life

Subject Matter: Concealment

Subject Matter: Concealment

Subject Matter: Warranties

Case Title: ARMANDO GEAGONIA v. COURT OF APPEALS and COUNTRY

Subject Matter: Warranties

Subsequently, Reputable impleaded Malayan as third-party defendant in an effort to

Issue: Whether or not there is double insurance.

Held: By the express provision of Section 93 of the Insurance Code, double

a) The person insured is the same;

Subject Matter: Notice of Loss

Case Title: Philippine American General Insurance Co., Inc. v. Sweet

Facts: Petitioner Tagum Plastics (TAGUM), from Davao, imported polyethylene

Held: Yes, the fundamental reason or purpose of such a stipulation is not to

Subject Matter: Premiums

Case Title: Jaime T. Gaisano vs. Development Insurance and Surety

Facts: Petitioner was the registered owner of a 1992 Mitsubishi Montero