LOWER COURTS’ RULING, CONTENTIONS,

FACTS ISSUE RULING

MANILA BANKERS LIFE INSURANCE CORPORATION, petitioner vs. CRESENCIA P. ABAN, respondent. G.R. No. 175666. July 29, 2013. DEL CASTILLO, J.
Re: 2-Year Manila Bankers (upon investigation): The purpose of the law is to give protection to the insured or his beneficiary by limiting
Incontestability 1. Sotero did not personally apply for insurance the rescinding of the contract of insurance on the ground of fraudulent concealment or
Period coverage, as she was illiterate; misrepresentation to a period of only two (2) years from the issuance of the policy or its
2. Sotero was sickly since 1990; last reinstatement.
Delia Sotero took out a 3. Sotero did not have the financial capability to
life insurance policy on pay the insurance premiums on Insurance An insurer is given two years - from the effectivity of a life insurance contract and while
July 3, 1993 from Policy No. 747411; the insured is alive - to discover or prove that the policy is void ab initio or is rescindible
Bankers Life designating 4. Sotero did not sign the July 3, 1993 application by reason of the fraudulent concealment or misrepresentation of the insured or his agent.
her niece, Cresencia P. for insurance; and, After the two-year period lapses, or when the insured dies within the period, the insurer
Aban as beneficiary. 5. Respondent was the one who filed the must make good on the policy, even though the policy was obtained by fraud,
Bankers Life issued the insurance application, and designated herself as concealment, or misrepresentation. This is not to say that insurance fraud must be
policy with a face value the beneficiary. rewarded, but that insurers who recklessly and indiscriminately solicit and obtain business
of P100K in Sotero's 6. Policy was obtained by fraud, concealment must be penalized, for such recklessness and lack of discrimination ultimately work to the
favor on August 30, and/or misrepresentation under the Insurance detriment of bona fide takers of insurance and the public in general.
1993, after the requisite Code, which thus renders it voidable under
medical examination and Article 1390, NCC Yes. As borne by the records, the policy was issued on August 30, 1993, the insured died
payment of the on April 10, 1996, and the claim was denied on April 16, 1997. The insurance policy was
insurance premium. On RTC: Ruled in favor of Aban. thus in force for a period of 3 years, 7 months, and 24 days. Considering that the insured
April 10, 1996, when the died after the two-year period, Bankers Life is, therefore, barred from proving that the
insurance policy had CA: Affirmed on the basis of Sec. 48. policy is void ab initio by reason of the insured's fraudulent concealment or
been in force for more - petitioner may no longer prove that the subject misrepresentation or want of insurable interest on the part of the beneficiary. Life
than two years and policy was void ab initio or rescindible by reason insurance policies that pass the statutory two-year period are essentially treated as
seven months, Sotero of fraudulent concealment or misrepresentation legitimate and beyond question, and the individuals who wield them are made secure by
died. after the lapse of more than two years from its the thought that they will be paid promptly upon claim. In this manner, Section 48
issuance. contributes to the stability of the insurance industry.
Cresencia Aban filed a - petitioner was equipped with ample means to
claim for the insurance determine, within the first two years of the Section 48 prevents a situation where the insurer knowingly continues to accept annual
proceeds on July 9, policy, whether fraud, concealment or premium payments on life insurance, only to later on deny a claim on the policy on
1996. Bankers Life misrepresentation was present when the specious claims of fraudulent concealment and misrepresentation, such as what obtains
denied the claim. insurance coverage was obtained. If it failed to in the instant case. In this case, instead of conducting at the first instance an investigation
do so within the statutory two-year period, then into the circumstances surrounding the issuance of Insurance Policy No. 747411 which
Case filed by the the insured must be protected and allowed to would have timely exposed the supposed flaws and irregularities attending it as it now
insurer: rescission claim upon the policy. professes, Bankers Life appears to have turned a blind eye and opted instead to continue
and/or annulment of collecting the premiums on the policy. For nearly three years, petitioner collected the
the policy ISSUE: Whether Bankers Life is precluded from proving premiums and devoted the same to its own profit. It cannot now deny the claim when it
that the policy is void ab initio by reason of fraudulent is called to account. Section 48 must be applied to it with full force and effect.
concealment (YES)

Katya Bringas
Faculty of Civil Law
University of Santo Tomas
 LOWER COURTS’ RULING, CONTENTIONS, ISSUE
FACTS RULING
SUN LIFE OF CANADA V. SANDRA TAN KIT, G.R. NO. 183272, OCTOBER 15, 2014.
Sandra Tan Kit is the widow and Sandra: Sun Life. properly complied with its
designated beneficiary of Norberto - its underwriters would not have approved Norberto’s application for life obligation under the law and contract.
Tan Kit whose application for a life insurance had they been given the correct information. Hence, it should not be made liable to pay
insurance policy with face value of - Reimbursement of premium is clearly a money obligation or one that arises from compensatory interest. The CA incorrectly
P300,000.00, was granted by forbearance of money, hence, the imposition of 12% interest per annum is just, imposed compensatory interest on the
petitioner on October 28, 1999. On proper and supported by jurisprudence premium refund reckoned from the time of
February 19, 2001, or within the two- death of the insured until fully paid.
year contestability period, Norberto Sun Life:
died of disseminated gastric - policy is null and void, thus liability is limited to the refund of all the premiums There are two kinds of interest:
carcinoma. Consequently, Tan Kit paid. a. Monetary - refers to the compensation set
filed a claim under the subject policy. - Returned the premium P13K (refund) by the parties for the use or forbearance of
- no interest can be assessed against petitioner. Tio Khe Chio case – delay. money. No such interest shall be due unless
This was denied by Sun Life on it has been expressly stipulated in writing.
account of Norberto’s failure to fully RTC Makati: b. Compensatory- refers to the penalty or
and faithfully disclose in his insurance - Ruled in favor of Sandra Kit indemnity for damages imposed by law or by
application certain material and - Insurer had already cleared Norberto of any misrepresentation that he may have the courts
relevant information about his health committed.
and smoking history. Specifically, - Affidavit of the doctor who said that the deceased is a smoker is hearsay since As a form of damages, compensatory
Norberto answered “No” to the the doctor did not testify in court. interest is due only if the obligor is proven to
question inquiring whether he had - It was incumbent upon the insurer to ascertain the health condition of Norberto have failed to comply with his obligation.
smoked cigarettes or cigars within the - Insurer did not comply with the requirements for rescission of insurance contract
last 12 months prior to filling out said Sun Life is ordered to reimburse to
application. However, the medical CA: Reversed. respondents Sandra Tan Kit and the Estate
report of Dr. Anna Chua (Dr. Chua), - Norberto is guilty of concealment which misled petitioner in forming its estimates of the Deceased Norberto Tan Kit the sum of
one of the several physicians that of the risks of the insurance policy. This gave petitioner the right to rescind the P13,080.93 representing the premium paid
Norberto consulted for his illness, insurance contract which it properly exercised in this case. by the insured within fifteen (15) days from
reveals that he was a smoker and had - [petitioner] is ordered to reimburse [respondents] the sum of P13,080.93 date of finality of this Decision. If the amount
only stopped smoking in August 1999. representing the [premium] paid by the insured with interest at the rate of 12% is not reimbursed within said period, the
per annum from the time of the death of the insured until fully paid. same shall earn interest of 6% per
Sun Life thus refunded the premium annum until fully paid.
paid. Sandra refused to accept this. ISSUE: Whether Sun Life is liable to pay interest on the premium to be refunded to
respondents. (NO)
Case Filed by Sandra:
Complaint for Rescission of Insurance
Contract before RTC Makati.

Katya Bringas
Faculty of Civil Law
University of Santo Tomas
 LOWER COURTS’ RULING, CONTENTIONS, ISSUE
FACTS RULING

INSULAR LIFE ASSURANCE COMPANY, LTD., VS PAZ Y. KHU, FELIPE Y. KHU, JR., and FREDERICK Y. KHU
Felipe Khu’s life insurance for 1M with Respondents: prayed that the reinstated life insurance policy YES. In the Endorsement, the obscurity is patent. In the
Insular took effect on June 22, 1997. be declared valid, enforceable and binding on Insular Life; and first sentence of the Endorsement, it is not entirely clear
But in June 1999, Felipe's policy lapsed that the latter be ordered to pay unto Felipe’s beneficiaries the whether the phrase "effective June 22, 1999" refers to the
due to non-payment of the premium. proceeds of this policy subject of the sentence, namely "the reinstatement of this
On September 7, 1999, Felipe applied policy," or to the subsequent phrase "changes are made on
for the reinstatement of his policy and Insular Life: Felipe did not disclose the ailments (viz., Type 2 the policy." Given the obscurity of the language, the
paid P25,020.00 as premium. Diabetes Mellitus, Diabetes Nephropathy and Alcoholic Liver construction favorable to the insured will be adopted by
Cirrhosis with Ascites) that he already had prior to his the courts. Accordingly, the subject policy is deemed
On 10/12/1999, Insular Life advised application for reinstatement of his insurance policy; reinstated as of June 22, 1999. Thus, the period of
Felipe that his application for contestability has lapsed.
reinstatement may only be considered - it would not have reinstated the insurance policy had
if he agreed to certain conditions such Felipe disclosed the material information on his adverse After a policy of life insurance made payable on the death of the
as payment of additional premium and health condition. It contended that when Felipe died, insured shall have been in force during the lifetime of the insured
the cancellation of the riders pertaining the policy was still contestable for a period of two years from the date of its issue or of its last
to premium waiver and accidental reinstatement, the insurer cannot prove that the policy is void ab
death benefits. Felipe agreed to these initio or is rescindible by reason of the fraudulent concealment or
RTC: Ruled in favor of respondents
conditions. On Jan 7, 2000, Insular Life
- Any ambiguity in a contract of insurance should be misrepresentation of the insured or his agent.
reinstated of the policy.
resolved strictly against the insurer upon the principle
that an insurance contract is a contract of adhesion In the instant case, Eulogio’s death rendered impossible full
Felipe died on 9/22/2001. Then on
- The reinstated insurance policy had already become compliance with the conditions for reinstatement of Policy No.
10/5/2001, respondent beneficiaries
incontestable by the time of Felipe’s death on 9011992. True, Eulogio, before his death, managed to file his
filed with Insular Life a claim for benefit
September 22, 2001 since more than two years had Application for Reinstatement and deposit the amount for payment
under the reinstated policy. This claim
already lapsed from the date of the policy’s of his overdue premiums and interests thereon with t Malaluan; but
was denied. Instead, Insular Life Policy No. 9011992 could only be considered reinstated after the
reinstatement on June 22, 1999.
advised Felipe's beneficiaries that it had
- Since it was Insular Life itself that supplied all the Application for Reinstatement had been processed and approved
decided to rescind the reinstated policy
pertinent forms relative to the reinstated policy, then it by Insular Life during Eulogio’s lifetime and good health.
on the grounds of concealment and
is barred from taking advantage of any
misrepresentation by Felipe.
ambiguity/obscurity perceived therein particularly as Thus, it is settled that the reinstatement of an insurance policy
regards the date when the reinstated insurance policy should be reckoned from the date when the same was approved by
Case filed by respondents:
became effective. the insurer.
complaint for specific performance with
damages.
CA: Affirmed. In this case, the parties differ as to when the reinstatement was
- upheld the RTC’s ruling on the non-contestability of the actually approved. Insular Life claims that it approved the
reinstated insurance policy on the date the insured died. reinstatement only on December 27, 1999. On the other hand,
It declared that contrary to Insular Life’s contention,
there in fact exists a genuine ambiguity or obscurity in
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
 the language of the two documents prepared by Insular
Life itself, viz., Felipe’s Letter of Acceptance and Insular
Life’s Endorsement; that given the obscurity/ambiguity
in the language of these two documents, the
construction/interpretation that favors the insured’s
right to recover should be adopted; and that in keeping
with this principle, the insurance policy in dispute must
be deemed reinstated as of June 22, 1999.
ISSUE: Whether Felipe’s reinstated life insurance policy is
already incontestable at the time of his death. (YES)
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
respondents contend that it was on June 22, 1999 that the
reinstatement took effect.
The resolution of this issue hinges on the following documents: 1)
Letter of Acceptance; and 2) the Endorsement. 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."
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.

FACTS
SUN LIFE OF CANADA V. SIBYA
On January 10, 2001, Atty. Jesus Sibya,
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. The policy indicated the
respondents as beneficiaries and entitles
them to a death benefit of P1M should
Atty. Jesus Jr. dies on or before February
5, 2021, or a sum of money if Atty. Jesus
Jr. is still living on the endowment date.
On May 11, 2001, Atty. Jesus Jr. died as
a result of a gunshot wound in San
Joaquin, Iloilo. As such, Ma. Daisy filed a
claim with Sun Life which the latter
denied on the ground that the details on
Atty. Jesus Jr.'s medical history were not
disclosed in his application
Case Filed by Sun Life: Rescission and
Judicial Confirmation of Rescission by
Atty. Sibya
LOWER COURTS’ RULING, CONTENTIONS, ISSUE
RULING
SUN LIFE: Yes. If the insured dies within the two-year
- Atty. Jesus Jr. did not disclose in his insurance application his previous contestability period, the insurer is bound to
medical treatment at the National Kidney Transplant Institute in May and make good its obligation under the policy,
August of 1994. regardless of the presence or lack of
- The undisclosed fact suggested that the insured was in "renal failure" and at concealment or misrepresentation.
a high risk medical condition. Consequently, had it known such fact, it would
not have issued the insurance policy in favor of Atty. Jesus Jr. Sec. 48 After the two-year period
lapses, or when the insured dies within
Respondents: the period, the insurer must make good
- Atty. Jesus Jr. did not commit misrepresentation in his application for on the policy, even though the policy
insurance. was obtained by fraud, concealment,
- Atty. Jesus Jr. was in good faith when he signed the insurance application or misrepresentation.
and even authorized Sun Life to inquire further into his medical history for
verification purposes. According to them, the complaint is just a ploy to avoid In the present case, Sun Life issued Atty.
the payment of insurance claims. Jesus Jr.'s policy on February 5, 2001. Thus,
it has two years from its issuance, to
RTC: dismissed the complaint filed by Sun Life. investigate and verify whether the policy
- Atty. Jesus Jr. did not commit material concealment and misrepresentation was obtained by fraud, concealment, or
- It observed that given the disclosures and the waiver and authorization to misrepresentation. Upon the death of Atty.
investigate executed by Atty. Jesus Jr. to Sun Life, the latter had all the Jesus Jr., however, on May 11, 2001, or a
means of ascertaining the facts allegedly concealed by the applicant. mere three months from the issuance of the
policy, Sun Life loses its right to rescind the
CA: Affirmed. policy. As discussed in Manila Bankers, the
- There was no fraudulent intent on the part of Atty. Jesus Jr. in submitting death of the insured within the two-
his insurance application. year period will render the right of the
- Atty. Jesus Jr. admitted in his application that he had sought medical insurer to rescind the policy nugatory.
treatment for kidney ailment. As such, the incontestability period will
now set in.
ISSUE: Whether Sun Life must pay even though the insured (who may be guilty of
fraud, concealment, or misrepresentation) dies within the 2-year incontestability Sun Life failed to clearly and satisfactorily
period. (YES) establish its allegations, and is therefore
liable to pay the proceeds of the insurance.
Katya Bringas
Faculty of Civil Law
University of Santo Tomas

FACTS
ALPHA INSURANCE VS ARSENIA SONIA CASTOR
Castor entered into a contract of insurance, Motor Car RTC: Ruled in favor of Castor.
Policy No. MAND/CV-00186, with Alpha Insurance
amounting to P630K involving her motor vehicle, a
Toyota Revo DLX DSL. The period covered is from
February 26, 2007 to February 26, 2008.
On April 16, 2007, at about 9:00 a.m., respondent
instructed her driver, Jose Joel Salazar Lanuza
(Lanuza), to bring the above-described vehicle to a
nearby auto-shop for a tune-up. However, Lanuza no
longer returned the motor vehicle to respondent and
despite diligent efforts to locate the same, said efforts
proved futile. Resultantly, respondent promptly
reported the incident to the police and concomitantly
notified petitioner of the said loss and demanded
payment of the insurance proceeds in the total sum of
P630,000.00.
Alpha Insurance: denied the claim contending that
their insurance contract sated that the insurer shall not
be liable for any malicious damage caused by the
Insured, any member of his family or by “A PERSON
IN THE INSURED’S SERVICE.
respondent reiterated her claim and argued that the
exception refers to damage of the motor vehicle and
not to its loss.
Case Filed: Complaint for Sum of Money with
Damages before RTC QC.
LOWER COURTS’ RULING,
CONTENTIONS, ISSUE
- Theft perpetrated by the
driver of the insured is not an
exception to the coverage
from the insurance policy
CA: Affirmed
ISSUE: Whether the loss of
respondent’s vehicle is excluded
under the insurance policy. (NO)
Alpha Insurance:
- the word “damage,” under
paragraph 4 of “Exceptions to
Section III,” means loss due
to injury or harm to person,
property or reputation, and
should be construed to cover
malicious “loss” as in “theft.”
Thus, it asserts that the loss
of respondent’s vehicle as a
result of it being stolen by the
latter’s driver is excluded
from the policy.
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
RULING
No. The theft is not excluded. Thus, Alpha Insurance must pay.
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 (Z’s book)
Contracts of insurance, like other contracts, are to be construed according to
the sense and meaning of the terms which the parties themselves have used.
If such terms are clear and unambiguous, they must be taken and understood
in their plain, ordinary and popular sense. Accordingly, in interpreting the
exclusions in an insurance contract, the terms used specifying the excluded
classes therein are to be given their meaning as understood in common
speech.
Adverse to petitioner’s claim, the words “loss” and “damage” mean different
things in common ordinary usage. The word “loss” refers to the act or fact of
losing, or failure to keep possession, while the word “damage” means
deterioration or injury to property. Therefore, petitioner cannot exclude the
loss of respondent’s vehicle under the insurance policy under paragraph 4 of
“Exceptions to Section III,” since the same refers only to “malicious damage,”
or more specifically, “injury” to the motor vehicle caused by a person under
the insured’s service. Paragraph 4 clearly does not contemplate “loss of
property,” as what happened in the instant case.
A contract of insurance is a contract of adhesion. So, when the terms of the
insurance contract contain limitations on liability, courts should construe them
in such a way as to preclude the insurer from non-compliance with his
obligation. A contract of insurance, being a contract of adhesion, par
excellence, any ambiguity therein should be resolved against the insurer

FACTS
ALVAREZ II VS SUN LIFE OF CANADA
On December 1, 2003, Sun Life issued
Participating Life Insurance Policy to Erlinda V.
Alvarez II covering the life of her mother Erlinda
V. Alvarez, the insured, with a face value of
P500K payable upon the death of said insured.
Since the insured was found to have been
suffering from high blood pressure, she was
classified as high-risk, which required petitioner
to pay a higher premium.
On April 27, 2005, the insured passed away.
Discovering several medical conditions which pre-
dated the application for the policy, Sun Life
denied the claim and informed Alvarez that the
policy is void.
Sun Life discovered that in 2003, the insured
sought consultations with the following: (1) UST
Hospital, which found her to be suffering from
stable angina, atherosclerosis, and lateral wall
ischemia; and (2) AIM Imaging Medical Services,
which likewise found her to be suffering from
lateral wall ischemia. Sun Life explained that had
it been informed of the foregoing medical history
in the insured's application for insurance at the
time of the application for the policy, it would
have issued the same with a higher rating. It
stated, however, that the premiums paid by
petitioner will be refunded.
Disgruntled, Alvarez filed a complaint for breach
of contract and damages against Sun Life before
RTC Makati.
LOWER COURTS’ RULING,
CONTENTIONS, ISSUE
RTC: in favor of Alvarez.
⁃ no concealment or
misrepresentation on the part
of the insured.
⁃ The insured was able to
disclose to respondent her
general condition
CA: Reversed.
⁃ the insured's concealment of
her chest pain, lateral wall
ischemia, and stable angina
entitled respondent to
rescind the contract of
insurance, especially because
the information that the
insured failed to disclose
were material and relevant to
the approval and issuance of
the insurance policy
⁃ Sun Life’s acceptance of the
premiums paid by petitioner,
according to the CA, cannot
be deemed as a waiver of its
right to rescind the contract.
⁃ did not consider the
incontestability period. Thus,
Sun Life is not precluded
from rescinding the contract.
ISSUE: Whether Alvarez
concealed material information
which would warrant rescission by
Sun Life (YES)
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
RULING
RULING: YES. Section 27 of the Insurance Code provides that a concealment,
whether intentional or unintentional, entitles the injured party to rescind a contract of
insurance. Concealment, according to the same Code, is a neglect to communicate that
which a party knows and ought to communicate. A party to an insurance contract,
therefore, is obliged to communicate all facts within his knowledge which are material
to the same, to be determined by the probable and reasonable influence of the facts
upon the party to whom the communication is due, in forming his estimate of the
disadvantages of the proposed contract, or in making his inquiries
In the case at hand, it is undisputed that prior to the approval of the insured's insurance
policy and during the stage of her application, she did not disclose the fact that she
consulted with the UST Hospital and the AIM Imaging Medical Services which
diagnosed her to be suffering from stable angina, atherosclerosis, and lateral wall
ischemia. Such fact is material to the contract in view of its effect on the respondent
in forming its estimate of whether to deny or approve the application as well as in
prescribing the amount of premium thereon. Given this materiality of the UST Hospital's
and AIM's findings, the insured was necessarily obliged to disclose the same to
respondent. She, however, failed to do so.
The fact that the insured gave affirmative answers in the application form does not
relieve her from the obligation to disclose the diagnoses of the UST Hospital and AIM.
If she was able to provide information thereon, we do not see why she was unable to
disclose her consultations with the UST Hospital and the AIM, which were all made in
the same year of 2003. No explanation was given to clarify the same. This concealment,
therefore, by insured effectively entitled respondent to rescind the contract of
insurance.
Incontestability period had not yet set in - The insured herein died on April 27,
2005 while the insurance policy was issued on December 1, 2003. Hence, since the
incontestability period of two years had not yet set in, respondent was not barred from
rescinding the contract on the ground of concealment or misrepresentation, receipt of
premium payments from petitioner, notwithstanding.

FACTS
H.H. HOLLERO CONSTRUCTION V. GSIS
Re: One-year prescriptive period; when cause
of action deemed to accrue
GSIS and H.H Hollero entered into a Project
Agreement whereby the latter undertook the
development of a GSIS housing project known as
Modesta Village Section B. H.H Hollero obligated itself
to insure the Project, including all the improvements,
upon the execution of the Agreement under a
Contractors' All Risks (CAR) Insurance with the GSIS
General Insurance Department for an amount equal to
its cost or sound value, which shall not be subject to
any automatic annual reduction.
H.H.Hollero secured two policies in the amount of
P10M and P17.750M, respectively. Under both
policies, it was provided that: (a) there must be prior
notice of claim for loss, damage or liability within
fourteen (14) days from the occurrence of the loss or
damage; (b) all benefits thereunder shall be forfeited
if no action is instituted within 12 months after the
rejection of the claim for loss, damage or liability; and
(c) if the sum insured is found to be less than the
amount required to be insured, the amount
recoverable shall be reduced to such proportion before
taking into account the deductibles stated in the
schedule (average clause provision).
3 typhoons hit the country (Typhoon Biring from June
1 to June 4, 1988, Typhoon Huaning on July 29, 1988,
and Typhoon Saling on October 11, 1989) which
caused considerable damage to the Project.
Accordingly, H.H Hollero filed several claims for
indemnity with the GSIS which the latter denied.
Case filed: HH Hollero filed a Complaint for Sum of
Money and Damages on the ground that the causes of
action stated therein are barred by the twelve-month
LOWER COURTS’ RULING,
CONTENTIONS, ISSUE
GSIS: no amount is recoverable
pursuant to the average clause
provision under the policies and that
the policies were not renewed before
the onset of the said typhoon.
RTC: Ruled in favor of HH Hollero.
- The average clause provision in
the policies which did not contain
the assent or signature of the
petitioner cannot limit the GSIS'
liability, for being inefficacious
and contrary to public policy;
- Petitioner has established that
the damages it sustained were
due to the peril insured against;
and
- CAR Policy No. 88/086 was
deemed renewed when the GSIS
withheld the amount of
php35,855.00 corresponding to
the premium payable, from the
retentions it released to
petitioner.
CA: Reversed.
- The complaint filed on
September 27, 1991 was barred
by prescription, having been
commenced beyond the twelve-
month limitation provided under
the policies, reckoned from the
final rejection of the indemnity
claims on April 26, 1990 and
June 21, 1990.
HH Hollero:
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
RULING
No, the CA did not commit any error. the prescriptive period for the insured’s
action for indemnity should be reckoned from the "final rejection" of the claim.
A perusal of the letter dated April 26, 1990 shows that the GSIS denied
petitioner's indemnity claims wrought by Typhoons Biring and Huaning, it
appearing that no amount was recoverable under the policies. While the GSIS
gave petitioner the opportunity to dispute its findings, neither of the parties
pursued any further action on the matter; this logically shows that they
deemed the said letter as a rejection of the claims. Surely, petitioner cannot
construe the said letter to be a mere "tentative resolution." In fact, despite its
disavowals, petitioner admitted in its pleadings that the GSIS indeed denied its
claim through the aforementioned letter, but tarried in commencing the
necessary action in court.
The same conclusion obtains for the letter dated June 21, 1990 denying
petitioner's indemnity claim caused by Typhoon Saling on a "no loss" basis due
to the nonrenewal of the policies therefor before the onset of the said typhoon.
The fact that petitioner filed a letter of reconsideration therefrom dated April
18, 1991, considering too the inaction of the GSIS on the same similarly shows
that the June 21, 1990 letter was also a final rejection of petitioner's indemnity
claim.
"final rejection" simply means denial by the insurer of the claims of the insured
and not the rejection or denial by the insurer of the insured’s motion or request
for reconsideration. The rejection referred to should be construed as the
rejection in the first instance, as in the two instances above-discussed.
The right of the insured to the payment of his loss accrues from the happening
of the loss. However, the cause of action in an insurance contract does not
accrue until the insured’s claim is finally rejected by the insurer. This is because
before such final rejection there is no real necessity for bringing suit.
In light of the foregoing, it is thus clear that petitioner's causes of action for
indemnity respectively accrued from its receipt of the letters dated April 26,
1990 and June 21, 1990, or the date the GSIS rejected its claims in the first
instance. Consequently, given that it allowed more than twelve (12) months to
limitation provided under the policies, i.e., the - Insists that the GSIS's letters lapse before filing the necessary complaint before the RTC on September 27,
complaint was filed more than one(1) year from the dated April 26, 1990 and June 1991, its causes of action had already prescribed.
rejection of the indemnity claims. 21, 1990 did not amount to a
"final rejection" of its claims,
The insurance contract provides: arguing that they were mere
Section 10 of the General Conditions of the subject tentative resolutions pending
CAR Policies commonly read: “If a claim is in any further action on petitioner's part
respect fraudulent, or if any false declaration is made or submission of proof in
or used in support thereof, or if any fraudulent means refutation of the reasons for
or devices are used by the Insured or anyone acting rejection. Hence, its causes of
on his behalf to obtain any benefit under this Policy, action for indemnity did not
or if a claim is made and rejected and no action or suit accrue on those dates.
is commenced within twelve months after such
rejection or, in case of arbitration taking place as ISSUE: Whether or not the CA
provided herein, within twelve months after the committed reversible error in
Arbitrator or Arbitrators or Umpire have made their dismissing the complaint on the
award, all benefit under this Policy shall be forfeited. ground of prescription. (NO)

Katya Bringas
Faculty of Civil Law
University of Santo Tomas

FACTS
ETERNAL GARDENS MEMORIAL PARK VS PHILIPPINE AMERICAN LIFE INSURANCE COMPANY
On December 10, 1980, Philamlife entered into Eternal:
an agreement denominated as Creditor Group
Life Policy No. P-1920 with Eternal. Under the
policy, the clients of Eternal who purchased burial
lots from it on installment basis would be insured
by Philamlife. The amount of insurance coverage
depended upon the existing balance of the
purchased burial lots. The policy was to be
effective for a period of one year, renewable on
a yearly basis.
Eternal was required under the policy to submit
to Philamlife a list of all new lot purchasers,
together with a copy of the application of each
purchaser, and the amounts of the respective
unpaid balances of all insured lot purchasers. In
relation to the instant petition, Eternal complied
by submitting a letter dated December 29, 1982,
containing a list of insurable balances of its lot
buyers for October 1982. One of those included
in the list as "new business" was a certain John
Chuang. His balance of payments was P100K. On RTC: Ruled in favor of Eternal and ordered received, states that the insurance forms for the attached list of burial lot
August 2, 1984, Chuang died.
Eternal sent a letter dated August 20, 19845 to
Philamlife, which served as an insurance claim for
Chuang’s death. Attached to the claim were the
following documents: (1) Chuang’s Certificate of
Death; (2) Identification Certificate stating that
Chuang is a naturalized Filipino Citizen; (3)
Certificate of Claimant; (4) Certificate of
Attending Physician; and (5) Assured’s
Certificate.
In reply, Philamlife wrote Eternal a letter on
November 12, 1984, requiring Eternal to submit
the following documents relative to its insurance
claim for Chuang’s death: (1) Certificate of
Claimant (with form attached); (2) Assured’s
LOWER COURTS’ RULING,
CONTENTIONS, ISSUE RULING
Z’s book: Being a contract of adhesion, the terms of an insurance contract
- The deceased was 59 years old when he are to be construed strictly against the party which prepared the contract,
entered into Contract #9558 and 9529 the insurer. By reason of the exclusive control of the insurance company
with Eternal Gardens Memorial Park in over the terms and phraseology of the insurance contract, ambiguity must
October 1982 for the total maximum be strictly interpreted against the insurer and liberally in favor of the
insurable amount of P100,000.00 each. insured, especially to avoid forfeiture.
No application for Group Insurance was
submitted in our office prior to his death The seemingly conflicting provisions must be harmonized to mean that
on August 2, 1984. upon a party's purchase of a memorial lot on installment from Eternal, an
- Since no application had been submitted insurance contract covering the lot purchaser is created and the same is
by the Insured prior to his death but was effective, valid, and binding until terminated by Philamlife by disapproving
submitted instead on November 15, the insurance application. The second sentence of Creditor Group Life Policy
1984, after his death, Mr. John Uy No. P-1920 on the Effective Date of Benefit is in the nature of a resolutory
Chuang was not covered under the Policy condition which would lead to the cessation of the insurance contract.
- With regard to our acceptance of Moreover, the mere inaction of the insurer on the insurance application
premiums, these do not connote our must not work to prejudice the insured; it cannot be interpreted as a
approval per se of the insurance termination of the insurance contract. The termination of the insurance
coverage but are held by us in trust for contract by the insurer must be explicit and unambiguous.
the payor until the prerequisites for
insurance coverage shall have been met. The evidence on record supports Eternal’s position. The fact of the matter
is, the letter dated December 29, 1982, which Philamlife stamped as
Philamlife to pay P100K representing the buyers were attached to the letter. Such stamp of receipt has the effect of
proceeds of the Policy of John Uy Chuang. acknowledging receipt of the letter together with the attachments. Such
- Chuang’s application for insurance was receipt is an admission by Philamlife against its own interest.13 The burden
accomplished before his death of evidence has shifted to Philamlife, which must prove that the letter did
- Due to Philamlife’s inaction from the not contain Chuang’s insurance application. However, Philamlife failed to
submission of the requirements of the do so; thus, Philamlife is deemed to have received Chuang’s insurance
group insurance on December 29, 1982 application.
to Chuang’s death on August 2, 1984, as
well as Philamlife’s acceptance of the To reiterate, it was Philamlife’s bounden duty to make sure that before a
premiums during the same period, transmittal letter is stamped as received, the contents of the letter are
Philamlife was deemed to have approved correct and accounted for.
Chuang’s application.
- Since the contract is a group life In the present case, the number of copies of the insurance application that
insurance, once proof of death is Chuang executed is not at issue, neither is whether the insurance
submitted, payment must follow. application presented by Eternal has been falsified. Thus, the
CA: Reversed.
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
Certificate (with form attached); (3) Application
for Insurance accomplished and signed by the
insured, Chuang, while still living; and (4)
Statement of Account showing the unpaid
balance of Chuang before his death.
Eternal transmitted the required documents
through a letter dated November 14, 1984, which
was received by Philamlife on November 15,
1984. After more than a year, Philamlife had not
furnished Eternal with any reply to the latter’s
insurance claim. This prompted Eternal to
demand from Philamlife the payment of the claim
for PhP 100,000 on April 25, 1986.
In response to Eternal’s demand, Philamlife
denied Eternal’s insurance claim sometime on
May 1986.
Case Filed: Complaint for collection of sum of
money.
- Chuang’s application was not enclosed in
Eternal’s letter dated December 29,
1982.
- The non-accomplishment of the
submitted application form violated
Section 26 of the Insurance Code. Thus,
there being no application form, Chuang
was not covered by Philamlife’s
insurance.
ISSUE: May the inaction of the insurer on the
insurance application be considered as
approval of the application? (YES)
/ Whether Philamlife assumed the risk of loss
without approving the application.
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
inconsistencies pointed out by Philamlife are minor and do not affect the
credibility of Eternal’s witnesses.
Clearly, the vague contractual provision, in Creditor Group Life Policy No.
P-1920 dated December 10, 1980, must be construed in favor of the insured
and in favor of the effectivity of the insurance contract.
On the other hand, the seemingly conflicting provisions must be
harmonized to mean that upon a party’s purchase of a memorial lot on
installment from Eternal, an insurance contract covering the lot purchaser
is created and the same is effective, valid, and binding until terminated by
Philamlife by disapproving the insurance application. The second sentence
of Creditor Group Life Policy No. P-1920 on the Effective Date of Benefit is
in the nature of a resolutory condition which would lead to the cessation of
the insurance contract. Moreover, the mere inaction of the insurer on the
insurance application must not work to prejudice the insured; it cannot be
interpreted as a termination of the insurance contract. The termination of
the insurance contract by the insurer must be explicit and unambiguous.
As a final note, to characterize the insurer and the insured as contracting
parties on equal footing is inaccurate at best. Insurance contracts are
wholly prepared by the insurer with vast amounts of experience in the
industry purposefully used to its advantage. More often than not, insurance
contracts are contracts of adhesion containing technical terms and
conditions of the industry, confusing if at all understandable to laypersons,
that are imposed on those who wish to avail of insurance. As such,
insurance contracts are imbued with public interest that must be considered
whenever the rights and obligations of the insurer and the insured are to
be delineated. Hence, in order to protect the interest of insurance
applicants, insurance companies must be obligated to act with haste upon
insurance applications, to either deny or approve the same, or otherwise
be bound to honor the application as a valid, binding, and effective
insurance contract
 LOWER COURTS’ RULING,
FACTS CONTENTIONS, ISSUE
PHILAMCARE HEALTH SYSTEMS INC VS CA AND JULITA TRINOS
Ernani Trinos, deceased husband of respondent Julita Trinos, RTC: Ruled in favor of petitioners.
applied for a health care coverage with petitioner Philamcare
Health Systems, Inc. In the standard application form, he CA: Affirmed
answered no to the following question:
Philamcare: A health care agreement is
Have you or any of your family members ever not an insurance contract; hence the
consulted or been treated for high blood pressure, "incontestability clause" under the
heart trouble, diabetes, cancer, liver disease, asthma Insurance Code does not apply.
or peptic ulcer? (If Yes, give details).1
- the agreement grants "living
The application was approved for a period of one year from benefits," such as medical check-
March 1, 1988 to March 1, 1989. Accordingly, he was issued ups and hospitalization which a
Health Care Agreement No. P010194. Under the agreement, member may immediately enjoy
respondent’s husband was entitled to avail of hospitalization so long as he is alive upon
benefits, whether ordinary or emergency, listed therein. He effectivity of the agreement until
was also entitled to avail of "out-patient benefits" such as its expiration one-year thereafter.
annual physical examinations, preventive health care and - Only medical and hospitalization
other out-patient services. benefits are given under the
agreement without any
indemnification, unlike in an
Upon the termination of the agreement, the same was
insurance contract where the
extended for another year from March 1, 1989 to March 1,
insured is indemnified for his loss.
1990, then from March 1, 1990 to June 1, 1990. The amount
- Since Health Care Agreements are
of coverage was increased to a maximum sum of P75,000.00
only for a period of one year, as
per disability
compared to insurance contracts
which last longer, the
During the period of his coverage, Ernani suffered a heart incontestability clause does not
attack and was confined at the Manila Medical Center (MMC) apply, as the same requires an
for one month beginning March 9, 1990. While her husband effectivity period of at least two
was in the hospital, respondent tried to claim the benefits years.
under the health care agreement. However, petitioner - Petitioner further argues that it is
denied her claim saying that the Health Care Agreement was not an insurance company, which
void. According to petitioner, there was a concealment is governed by the Insurance
regarding Ernani’s medical history. Doctors at the MMC Commission, but a Health
allegedly discovered at the time of Ernani’s confinement that Maintenance Organization under
he was hypertensive, diabetic and asthmatic, contrary to his the authority of the DOH.
answer in the application form. Thus, respondent paid the - Respondent’s husband concealed
a material fact in his application.
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
RULING
YES, it is a contract of indemnity. In the case at bar, the insurable
interest of respondent’s husband in obtaining the health care
agreement was his own health. The health care agreement was in
the nature of non-life insurance, which is primarily a contract of
indemnity.9 Once the member incurs hospital, medical or any other
expense arising from sickness, injury or other stipulated contingent,
the health care provider must pay for the same to the extent agreed
upon under the contract.
Petitioner cannot rely on the stipulation regarding "Invalidation of
agreement" which reads: Failure to disclose or misrepresentation
of any material information by the member in the application or
medical examination, whether intentional or unintentional, shall
automatically invalidate the Agreement
Under Section 27 of the Insurance Code, "a concealment entitles
the injured party to rescind a contract of insurance." The right to
rescind should be exercised previous to the commencement of an
action on the contract.17 In this case, no rescission was made.
Besides, the cancellation of health care agreements as in insurance
policies require the concurrence of the following conditions:
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of
the policy of one or more of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the
address shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the
Insurance Code and upon request of insured, to furnish facts on
which cancellation is based.
None of the above pre-conditions was fulfilled in this case. When
the terms of insurance contract contain limitations on liability,
courts should construe them in such a way as to preclude the
insurer from non-compliance with his obligation.19 Being a contract
hospitalization expenses herself, amounting to about - Respondent was not the legal wife of adhesion, the terms of an insurance contract are to be construed
P76,000.00. of the deceased strictly against the party which prepared the contract – the insurer
-
After her husband was discharged from the MMC, he was
attended by a physical therapist at home. Later, he was ISSUE: Whether the health care
admitted at the Chinese General Hospital. Due to financial agreement is in the nature of a contract of
difficulties, however, respondent brought her husband home indemnity (YES)
again. In the morning of April 13, 1990, Ernani had fever and
was feeling very weak. Respondent was constrained to bring
him back to the Chinese General Hospital where he died on
the same day.

Julita Trinos’ deceased husband, Ernani Trinos applied for a

health care coverage with petitioner Philamcare Health
Systems, Inc. In the standard application form, he answered
NO to the following question: Have you or any of your family
members ever consulted or been treated for high blood
pressure, heart trouble, diabetes, cancer, liver disease,
asthma or peptic ulcer?

The application was approved and extended for 13 months,

until June 1, 1990. During the period of the coverage, Ernani
suffered a heart attack resulting in confinement for a month
at the Manila Medical Center (MMC). While her husband was
in the hospital, respondent tried to claim the benefits under
the health care agreement. However, petitioner denied her
claim saying that the Health Care Agreement was void on the
ground that there was a concealment regarding Ernani’s
medical history.

After his discharge, Ernani was brought again at the Chinese

General Hospital where he died. Julita then filed an action for
damages against Philamcare including its President Dr.
Benito Reverente. RTC ruled in favour of Julita, and this was
affirmed by the CA except that it deleted awards for damages
and absolved Dr. Reverente.

Case Filed: action for damages against petitioner and its

president

Katya Bringas
Faculty of Civil Law
University of Santo Tomas
 LOWER COURTS’ RULING,
FACTS CONTENTIONS, ISSUE RULING
SPOUSES CHA & UNITED INSURANCE vs CA & CKS DEVELOPMENT CORP
Re: Insurable Interest in RTC Manila: ordered therein Lessor has no insurable interest in goods and merchandise inside the leased premises under
Property United to pay CKS the amount Section 17 of the Insurance Code.
Spouses Nilo Cha and Stella Uy- of P335,063 and defendant
Cha entered into a lease contract Cha spouses to pay No. A lessor has no insurable interest in goods and merchandise inside the leased premises under Section
with CKS Development P50,000.00 as exemplary 17 of the Insurance Code. The SC reversed the decision of the lower courts and directed the awarding of
Corporation as lessor. One of the damages, P20,000.00 as the fire insurance proceeds to Spouses Cha.
stipulations in the lease contract attorney's fees and costs of
was a prohibition on taking fire suit. CKS could not be validly a beneficiary of the fire insurance policy taken by Spouses Cha over their
insurance by the lessee without merchandise. The insurable interest over said merchandise remains with the insured. The automatic
the approval of the lessor. In case CA: Affirmed. assignment of the policy to CKS under the provision of the lease contract previously quoted is void for
the lessee shall obtain insurance being contrary to law and/or public policy. The insurer cannot be compelled to pay the proceeds of
without the consent of the lessor ISSUE: Whether or not a the fire insurance policy to a person who has no insurable interest in the property insured.
then the policy shall be deemed lessor (CKS) has an insurable
assigned and transferred to the interest in the goods and A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their
lessor. Notwithstanding this merchandises inside the merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist at
stipulation, the spouses Cha leased premises and are the time the insurance takes effect and at the time the loss occurs. The basis of such requirement of
insured against loss by fire their therefore entitled to be paid insurable interest in property insured is based on sound public policy: to prevent a person from taking out
merchandise inside the leased their claims. (NO) an insurance policy on property upon which he has no insurable interest and collecting the proceeds of
premises. On the day the lease said policy in case of loss of the property.
contract was to expire, fire broke Whether paragraph 18 of the
out inside the leased premises. lease contract entered into In the present case, it cannot be denied that CKS has no insurable interest in the goods and merchandise
CKS learned of the insurance between CKS and the Cha inside the leased premises under the provisions of Section 17 of the Insurance Code which provide: Sec.
procured without its consent by spouses is valid insofar as it 17. The measure of an insurable interest in property is the extent to which the insured might be damnified
the Cha spouses. provides that any fire by loss of injury thereof.
insurance policy obtained by
Therefore, CKS claimed the the lessee (Cha spouses) over Therefore, respondent CKS cannot, under the Insurance Code — a special law — be validly a beneficiary
proceeds of the insurance from the their merchandise inside the of the fire insurance policy taken by the petitioner-spouses over their merchandise. This insurable interest
insurer (United), but was refused leased premises is deemed over said merchandise remains with the insured, the Cha spouses. The automatic assignment of the policy
by the latter. United refused to pay assigned or transferred to the to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or
CKS. Hence, the latter filed a lessor (CKS) if said policy is public policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and
complaint against the Cha spouses obtained without the prior Stella Uy-Cha (herein co-petitioners). The insurer (United) cannot be compelled to pay the proceeds of
and United. written consent of the latter. the fire insurance policy to a person (CKS) who has no insurable interest in the property insured.
(NO)
CKS then filed a complaint against
The liability of the Cha spouses to CKS for violating their lease contract in that the Cha spouses obtained
the Cha spouses and United and
a fire insurance policy over their own merchandise, without the consent of CKS, is a separate and distinct
won its case.
issue which we do not resolve in this case.

Katya Bringas
Faculty of Civil Law
University of Santo Tomas

FACTS
MALAYAN INSURANCE VS LIN
Lin alleged that she obtained various loans
from RCBC secured by six clustered
warehouses located at Plaridel, Bulacan;
that the five warehouses were insured with
Malayan against fire for ₱56 million while the
remaining warehouse was insured for ₱2
million; that on February 24, 2008, the five
warehouses were gutted by fire;
Emma Lin is a client of both RCBC and
Malayan Insurance Co., Inc. Acquired
through various loans from RCBC, she had
insured five of the properties which were six
clustered warehouses located at Plaridel,
Bulacan to Malayan Insurance Co. The
insurance was purposed specifically against
occurrence of fire for P 56 million and P2
million for the remaining warehouse.
On February 24, 2008 five warehouses were
gutted by fire and 2 months after on April 8,
2008, the Bureau of Fire Protection (BFP)
issued a Fire Clearance Certification to
respondent after having determined that the
cause of fire was accidental.
Despite the foregoing, her demand for
payment of her insurance claim was denied
since the forensic investigators hired by
Malayan claimed that the cause was arson
instead of accident. Respondent then sought
assistance from the Insurance Commission
(IC) which, after a reinvestigation into the
cause of fire, recommended that Malayan
should pay Lin’s insurance claim to accord
with BFP’s findings. Nevertheless, Malayan
still refused to do so. As against RCBC, Lin
averred that notwithstanding of the loss of
LOWER COURTS’ RULING,
CONTENTIONS, ISSUE
Malayan: filed an MD
- Forum shopping - he
administrative case was instituted
to prompt or incite IC into
ordering Malayan to pay her
insurance claim
- There is identity of causes of
action, too, because the ultimate
objective of both the civil case and
the administrative case is to
compel Malayan to pay Lin's fire
insurance claim
RTC: denied the MD.
- The administrative case, Lin was
seeking a relief clearly distinct
from that sought in the civil case;
that while in the administrative
case Lin prayed for the suspension
or revocation of Malayan's license
to operate as a non-life insurance
company, in the civil case Lin
prayed for the collection of a sum
of money with damages; that it is
abundantly clear that any
judgment that would be obtained
in either case would not be res
judicata to the other, hence, there
is no forum shopping to speak of.
CA: Affirmed.
ISSUE: Whether or not the CA erred in
not dismissing the Civil Case on the
ground of willful and deliberate forum
shopping despite the fact that the civil
case and the administrative case both
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
RULING
No.
Z’s book: A civil case before the trial court involving recovery of payment of the
insured's insurance claim plus damages, can proceed simultaneously with an
administrative case before the Insurance Commission. True, the parties are the same,
and both actions are predicated on the same set of facts, and will require identical
evidence. But the issues to be resolved, the quantum of evidence, the procedure to be
followed, and the reliefs to be adjudged by these two bodies are different.
The SC held that the case at bar is to be governed by the case law rulings in the Go
and Almendras cases where it was stressed that an administrative case for unfair claim
settlement practice may proceed simultaneously with the civil case for collection of
the insurance proceeds filed by at the same claimant since a judgment in one will not
amount to res judicata to the other, and vice versa, due to the variance or differences
in the issues, in the quantum of evidence, and in the procedure to be followed in
prosecuting the cases.
In the present case, petitioners basically insist that Lin committed willful and deliberate
forum shopping which warrants the dismissal of her civil case because it is not much
different from the administrative case in terms of the parties involved, the causes of
action pleaded, and the reliefs prayed for. Petitioners also posit that another ground
warranting the dismissal of the civil case was Lin’s failure to notify the RTC about the
pendency of the administrative case within five days from the filing thereof.
These above-mentioned arguments will not avail. The proscription against forum
shopping is found in Section 5, Rule 7 of the Rules of Court which cover the very
essence of forum shopping itself. It is the filing of multiple suits involving the same
parties for the same cause of action, either simultaneously, for the purpose of obtaining
a favorable judgment. It exists where the elements of litis pendentia are present or
where a final judgment in one case will amount to res judicata in another. The settled
rule is that criminal and civil cases are altogether different from administrative matters
as postulated in Almendras Mining Corporation v. Office of the Insurance Commission.
The Office of the Ombudsman further reiterated and enunciated in the decision that a
civil case before the trial court involving recovery of payment of the insured’s insurance
claim plus damages, can proceed simultaneously with an administrative case before
the I.C. As the afore cited cases are analogous in many aspects to the present case,
both in respect to their factual backdrop and in their jurisprudential teachings, the case
mortgaged properties, the bank refused to
go after Malayan and instead insisted that
she herself must pay the loans to the RCBC.
The latter also added that foreclosure
proceedings would ensue if the former
would not comply; to add insult to injury,
RCBC has been compounding the interest on
her loans, despite the former’s refusal to
after Malayan.
Following the aforementioned, respondent
then filed a petition to order the petitioners
to pay her insurance claim plus interest on
the amounts owing her; that the loans and
mortgage to RCBC be enjoined from
foreclosing the mortgage on the properties
put up as collaterals.
seek the payment of the same fire
insurance claim. (NO)
law ruling in the Almendras and in the Go cases must apply with implacable force to
the present case. Consistency alone demands----because of justice cannot be
inconsistent, that the final authoritative mandate in the cited cases must produce and
end result not much different from the present case.
The adjudicatory authority of the Insurance Commissioner is generally described in
Section 416 of the Insurance Code, as amended, which reads as follows:
'Sec. 416. The Commissioner shall have the power to adjudicate claims and complaints
involving any loss, damage or liability for which an insurer may be answerable under
any kind of policy or contract of insurance,
All told, we find that the CA did not err in holding that the petitioners utterly failed to
prove that the RTC exhibited grave abuse of discretion, amounting to lack or excess of
jurisdiction, which would justify the issuance of the extraordinary writ of certiorari

Later on June 17, 2010, while the case was

being filed, Lin filed an administrative case
before the Insurance Commission (IC)
against the Malayan represented by Yvonne,
thus docketed as Administrative Case No.
431. The purpose is to put Malayan under
liability for unfair claim settlement practice
under Section 241 in relation to Section 247
of the Insurance Code. Thus, alleging that
Malayan’s license to operate as a non-life
insurance company should be revoked or
suspended until it fully complies with the IC
Resolution.

CASES FILED: Emma Concepcion L. Lin

(Lin) filed a Complaint9 for Collection of Sum
of Money with Damages against Malayan
Insurance Co., Inc. (Malayan) AND
Administrative Case

Katya Bringas
Faculty of Civil Law
University of Santo Tomas
 LOWER COURTS’ RULING,
FACTS CONTENTIONS, ISSUE RULING
INSULAR LIFE ASSURANCE CO TLD. VS HEIRS OF JOSE ALVAREZ
On June 18, 1997, Alvarez applied ISSUE: Whether or not Alvarez was Z’s book: Also, neither party to a contract of insurance is bound to communicate, even upon
for and was granted a housing guilty of fraudulent inquiry, information of his own judgment upon the matters in question (Sec. 35, IC). Section 26
loan by Union Bank in the amount misrepresentation as to warrant the defines concealment as "a neglect to communicate that which a party knows and ought to
of P648K. This loan was secured rescission of the Group Mortgage communicate." However, Alvarez did not withhold information on or neglect to state his age. He
by a promissory note, a real estate Redemption Insurance obtained by made an actual declaration and assertion about it. What this case involves, instead, is an allegedly
mortgage over the lot,and a Union Bank on Alvarez’s life (NO) false representation. Section 44 of the Insurance Code states, "A representation is to be deemed
mortgage redemption insurance false when the facts fail to correspond with its assertions or stipulations." If indeed Alvarez
taken on the life of Alvarez with misdeclared his age such that his assertion fails to correspond with his actual age, he made a false
UnionBank as beneficiary. representation, not a concealment.

Alvarez passed away on April 17, Concealment applies only with respect to material facts. That is, those facts which by their nature
1998. In May 1998, UnionBank would clearly, unequivocally, and logically be known by the insured as necessary for the insurer to
filed with Insular Life a death claim calculate the proper risks.
under Alvarez’s name pursuant to
the Group Mortgage Redemption Insular Life correctly notes that proof of fraudulent intent is unnecessary for the rescission of an
Insurance. insurance contract on account of concealment. This is neither because intent to defraud is
intrinsically irrelevant in concealment, nor because concealment has nothing to do with fraud. To
Insular Life denied the claim after the contrary, it is because in insurance contracts, concealing material facts is inherently fraudulent:
determining that Alvarez was not "if a material fact is actually known to the insured, its concealment must of itself necessarily be
eligible for coverage as he was fraud." When one knows a material fact and conceals it, "it is difficult to see how the inference of a
supposedly more than 60 years old fraudulent intent or intentional concealment can be avoided." Thus, a concealment, regardless of
at the time of his loan’s approval. actual intent to defraud, "is equivalent to a false representation.
Relying on Alvarez’s Health
Statement Form where he wrote For purposes of rescission, Section 27 of the Insurance Code unequivocally negates any distinction
“1942” as his birth year, Insular between intentional and unintentional concealments. Not being similarly qualified as rescission
Life rescind the Group Mortgage under Section 27, rescission under Section 45 remains subject to the basic precept of fraud having
Redemption Insurance obtained to be proven by clear and convincing evidence. The fraudulent intent on part of the insured must
by Union Bank on Alvarez’s life. be established to entitle the insurer to rescind the contract. Misrepresentation as a defense of the
insurer to avoid liability is an affirmative defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon the insurer

The Insurance Code dispenses with proof of fraudulent intent in cases of rescission due to
concealment, but not so in cases of rescission due to false representations. When an abundance of
available documentary evidence can be referenced to demonstrate a design to defraud, presenting
a singular document with an erroneous entry does not qualify as clear and convincing proof of
fraudulent intent. Neither does belatedly invoking just one other document, which was not even
authored by the alleged miscreant.
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
The Insurance Code dispenses with proof of fraudulent intent in cases of rescission due to
concealment, but not so in cases of rescission due to false representations. When an abundance of
available documentary evidence can be referenced to demonstrate a design to defraud, presenting
a singular document with an erroneous entry does not qualify as clear and convincing proof of
fraudulent intent.

Assuming that the aforesaid answer given by the insured is false, as claimed by the appellant, Sec.
27 of the Insurance Law, nevertheless requires that fraudulent intent on the part of the insured be
established to entitle the insurer to rescind the contract. And as correctly observed by the lower
court, “misrepresentation” as a defense of the insurer to avoid liability is an ‘affirmative’ defense.
The duty to establish such a defense by satisfactory and convincing evidence rests upon the
defendant.

Here, as pointed out by the CA, Insular Life, failed to establish this defense. It only relied on Alvarez’s
Health Statement Form where he wrote “1942” as his birth year. This form alone was insufficient
to prove that he fraudulently intended to misrepresent his age because aside from this, Alvarez had
to fill out an application for insurance. This application would have supported the conclusion that
he consistently wrote “1942” in all the documents that he had submitted to Union Bank. However,
the records made no reference to this document.

Petitioners Union Bank of the Philippines and The Insular Life Assurance Co., Ltd. are ordered to
comply with the insurance undertaking under Mortgage Redemption Insurance Policy.

Katya Bringas
Faculty of Civil Law
University of Santo Tomas

FACTS
BPI VS LAINGO
Rheozel Laingo the son of respondent Yolanda Laingo
opened a "Platinum 2-in-1 Savings and Insurance"
account with BPI Dvo. The Platinum 2-in-1 Savings
and Insurance account is a savings account where
depositors are automatically covered by an insurance
policy against disability or death issued by petitioner
FGU Insurance Corporation (FGU Insurance), now
known as BPI/MS Insurance Corporation. A Personal
Accident Insurance Coverage Certificate No. 043549
was also issued by FGU Insurance in the name of
Rheozel with Laingo as his named beneficiary.
On 25 September 2000, Rheozel died due to a
vehicular accident as evidenced by a Certificate of
Death issued by the Office of the Civil Registrar
General of Tagum City, Davao del Norte. Since
Rheozel came from a reputable and affluent family,
the Daily Mirror headlined the story in its newspaper
on 26 September 2000.
On 27 September 2000, Laingo instructed the family's
personal secretary, Alice Torbanos (Alice) to go to BPI,
Claveria, Davao City branch and inquire about the
savings account of Rheozel. Laingo wanted to use the
money in the savings account for Rheozel's burial and
funeral expenses.
Alice went to BPI and talked to Jaime Ibe Rodriguez,
BPI's Branch Manager regarding Laingo's request. Due
to Laingo's credit standing and relationship with BPI,
BPI accommodated Laingo who was allowed to
withdraw P995,000 from the account of Rheozel. A
certain Ms. Laura Cabico, an employee of BPI, went to
Rheozel's wake at the Cosmopolitan Funeral Parlor to
verify some information from Alice and brought with
her a number of documents for Laingo to sign for the
withdrawal of the P995,000.
LOWER COURTS’ RULING, CONTENTIONS,
ISSUE
RTC: decided in favor of Laingo
- The prescriptive period of 90 days shall commence
from the time of death of the insured and not from
the knowledge of the beneficiary.
- Since the insurance claim was filed more than 90
days from the death of the insured, the case must
be dismissed.
CA: Reversed.
- Laingo could not be expected to do an
obligation which she did not know existed.
- Laingo was not a party to the insurance contract
entered into between Rheozel and petitioners.
Thus, she could not be bound by the 90-day
stipulation.
ISSUE: Whether or not Laingo, as named beneficiary
who had no knowledge of the existence of the insurance
contract, is bound by the three calendar month deadline
for filing a written notice of claim upon the death of the
insured. (NO)
BPI:
- The words or language used in the insurance
contract, particularly under paragraph 15, is clear
and plain or readily understandable by any reader
which leaves no room for construction.
- Ignorance about the insurance policy does not
exempt respondent from abiding by the deadline
and petitioners cannot be faulted for respondent's
failure to comply.
Laingo:
- The insurance contract is ambiguous since
there is no provision indicating how the
beneficiary is to be informed of the three
calendar month claim period.
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
RULING
No, Laingo is not bound by the 3 calendar month deadline
for filing a written notice of claim upon the death of the
insured.
BPI, as agent of FGU Insurance, had the primary
responsibility to ensure that the 2-in-1 account be reasonably
carried out with full disclosure to the parties concerned,
particularly the beneficiaries. Thus, it was incumbent upon
BPI to give proper notice of the existence of the insurance
coverage and the stipulation in the insurance contract for
filing a claim to Laingo, as Rheozel's beneficiary, upon the
latter's death.
Agency: doctrine of representation
Art. 1884. The agent is bound by his acceptance to carry out
the agency and is liable for the damages which, through his
non-performance, the principal may suffer.
He must also finish the business already begun on the death
of the principal, should delay entail any danger.
Art. 1887. In the execution of the agency, the agent shall act
in accordance with the instructions of the principal.
In default, thereof, he shall do all that a good father of a
family would do, as required by the nature of the business.
an agent is bound to carry out the agency. The relationship
existing between principal and agent is a fiduciary one,
demanding conditions of trust and confidence. It is the duty
of the agent to act in good faith for the advancement of the
interests of the principal. In this case, BPI had the obligation
to carry out the agency by informing the beneficiary, who
appeared before BPI to withdraw funds of the insured who
was BPI's depositor, not only of the existence of the
insurance contract but also the accompanying terms and
More than two years later or on 21 January 2003,
Rheozel's sister, Rhealyn Laingo-Concepcion, while
arranging Rheozel's personal things in his room at
their residence in Ecoland, Davao City, found the
Personal Accident Insurance Coverage Certificate No.
043549 issued by FGU Insurance. Rhealyn
immediately conveyed the information to Laingo.
Laingo sent two letters dated 11 September 2003 and
7 November 2003 to BPI and FGU Insurance
requesting them to process her claim as beneficiary of
Rheozel's insurance policy. On 19 February 2004, FGU
Insurance sent a reply-letter to Laingo denying her
claim. FGU Insurance stated that Laingo should have
filed the claim within three calendar months from the
death of Rheozel as required under Paragraph 15 of
the Personal Accident Certificate of Insurance
- Since BPI did not notify her of the insurance
coverage of her son where she was named as
beneficiary in case of his death, then her lack of
knowledge made it impossible for her to fulfill
the condition set forth in the insurance contract.
- argues that she dealt with BPI after her son's
death, when she was allowed to withdraw funds
from his savings account in the amount of
P995,000. However, BPI did not notify her of
the attached insurance policy. Thus, Laingo
attributes responsibility to BPI and FGU
Insurance for her failure to file the notice of
insurance claim within three months from her
son's death.
Katya Bringas
Faculty of Civil Law
University of Santo Tomas
conditions of the insurance policy in order for the beneficiary
to be able to properly and timely claim the benefit.
First, Rheozel's death was headlined in a daily major
newspaper a day after his death. Second, not only was
Laingo, through her representative, able to inquire about
Rheozel's deposit account with BPI two days after his death
but she was also allowed by BPI's Claveria, Davao City
branch to withdraw from the funds in order to help defray
Rheozel's funeral and burial expenses. Lastly, an employee
of BPI visited Rheozel's wake and submitted documents for
Laingo to sign in order to process the withdrawal request.
These circumstances show that despite being given many
opportunities to communicate with Laingo regarding the
existence of the insurance contract, BPI neglected to carry
out its duty.
Since BPI, as agent of FGU Insurance, fell short in notifying
Laingo of the existence of the insurance policy, Laingo had
no means to ascertain that she was entitled to the insurance
claim. It would be unfair for Laingo to shoulder the burden
of loss when BPI was remiss in its duty to properly notify her
that she was a beneficiary.