Gaisano Cagayan, Inc. vs. Insurance Co.

of North America • IMC and LSPI filed with respondent their claims under their respective
G.R. No. 147839, June 8, 2006 J. AUSTRIA-MARTINEZ, J fire insurance policies with book debt endorsements;
• As of February 25, 1991, the unpaid accounts of petitioner on the sale
DOCTRINE and delivery of ready-made clothing materials with IMC
Anyone has an insurable interest in property that derives a benefit from its existence
was P2,119,205.00 while with LSPI it was P535,613.00;
or would suffer loss from its destruction. It is sufficient that the insured is so situated
• Respondent paid the claims of IMC and LSPI and, by virtue thereof,
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 an insurable interest in property respondent was subrogated to their rights against petitioner;
does not necessarily imply a property interest in, or a lien upon, or possession of, the • Respondent made several demands for payment upon petitioner but
subject matter of the insurance, and neither the title nor a beneficial interest is these went unheeded.
requisite to the existence of such an interest insurance.
Petitioner’s contention:
FALLO
• It could not be held liable because the property covered by the
WHEREFORE, the petition is partly GRANTED. The assailed Decision dated October
insurance policies were destroyed due to fortuities event or force
11, 2000 and Resolution dated April 11, 2001 of the Court of Appeals in CA-G.R. CV
No. 61848 are AFFIRMED with the MODIFICATION that the order to pay the amount majeure;
of P535,613.00 to respondent is DELETED for lack of factual basis. No • Respondent's right of subrogation has no basis inasmuch as there was
pronouncement as to costs. SO ORDERED. no breach of contract committed by it since the loss was due to fire
which it could not prevent or foresee;
FACTS: • IMC and LSPI never communicated to it that they insured their
[Nature of the Case: Petition for review (Rule 45) assailing CA decision which properties; that it never consented to paying the claim of the insured
reversed RTC Manila (Br. 21) decision]
Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi RTC: the fire was purely accidental; that the cause of the fire was not attributable
Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks to the negligence of the petitioner; IMC and LSPI retained ownership of the
owned by Levi Strauss & Co. delivered goods and must bear the loss. (res perit domino)

IMC and LSPI separately obtained from respondent fire insurance policies with CA: reversed the decision of RTC. Sales invoices is an exception under Article 1504
book debt endorsements. The insurance policies provide for coverage on "book (1) of the Civil Code to res perit domino
debts in connection with ready-made clothing materials which have been sold or
ISSUE: Whether or not Insurance Company of North America can claim against
delivered to various customers and dealers of the Insured anywhere in the
Gaisano Cagayan for the debt that was insured –Yes.
Philippines. The policies 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 RATIO:
under this Policy.
The insurance in this case is not for loss of goods by fire but for petitioner's
On February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City, accounts with IMC and LSPI that remained unpaid 45 days after the fire.
owned by petitioner, was consumed by fire. Included in the items lost or destroyed Accordingly, petitioner's obligation is for the payment of money. As correctly
in the fire were stocks of ready-made clothing materials sold and delivered by IMC stated by the CA, where the obligation consists in the payment of money, the
and LSPI. failure of the debtor to make the payment even by reason of a fortuitous event
shall not relieve him of his liability. The rationale for this is that the rule that an
On February 4, 1992, Respondent filed a complaint for damages against petitioner.
obligor should be held exempt from liability when the loss occurs thru a fortuitous
Alleging that:
event only holds true when the obligation consists in the delivery of a determinate
thing and there is no stipulation holding him liable even in case of fortuitous event. and LSPI that remained unpaid 45 days after the fire - obligation is pecuniary in
It does not apply when the obligation is pecuniary in nature. nature obligor should be held exempt from liability when the loss occurs thru a
fortuitous event only holds true when the obligation consists in the delivery of a
Thus, whether fire is a fortuitous event or petitioner was negligent are matters determinate thing and there is no stipulation holding him liable even in case of
immaterial to this case. What is relevant here is whether it has been established fortuitous event.
that petitioner has outstanding accounts with IMC and LSPI.
Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the destruction of anything of the same kind does not extinguish the obligation (Genus
ownership therein is transferred to the buyer, but when the ownership therein is nunquan perit)
transferred to the buyer the goods are at the buyer's risk whether actual delivery
has been made or not, except that: 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
(1) Where delivery of the goods has been made to the buyer or to a bailee for the the insurance claim
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 Art. 2207. If the plaintiff's property has been insured, and he has received
under the contract, the goods are at the buyer's risk from the time of such indemnity from the insurance company for the injury or loss arising out of the
delivery; wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
IMC and LSPI did not lose complete interest over the goods. They have an has violated the contract.
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 As to LSPI, no subrogation receipt was offered in evidence. Failure to substantiate
consideration of who bears the risk of loss, in property insurance, one's interest is the claim of subrogation is fatal to petitioner's case for recovery of the amount of
not determined by concept of title, but whether insured has substantial economic P535,613
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 that derives a benefit from its
existence or would suffer loss from its destruction. 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 an 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 insurance
in this case is not for loss of goods by fire but for petitioner's accounts with IMC
Malayan Insurance Corp. vs. CA the instant case, is an excepted risk under Clause 12 of the Institute Cargo Clause or
the F.C. & S. Clause (the Policy). However, with the deletion of Clause 12 of the
FALLO: WHEREFORE, the petition for review is DENIED and the decision of the Court Institute Cargo Clause and the consequent adoption or institution of the Institute
of Appeals is AFFIRMED. War Clauses (Cargo), the arrest and seizure by judicial processes which were
excluded under the former policy became one of the covered risks. The CA made
DOCTRINE: such interpretation on the policy applying the doctrine that insurance policies are
An insurance contract should be so interpreted as to carry out the purpose for which strictly construed against the insurer.
the parties entered into the contract which is, to insure against risks of loss or
damage to the goods. Such interpretation should result from the natural and ISSUE: W/N the CA erred in giving undue reliance to the doctrine that insurance
reasonable meaning of language in the policy. Where restrictive provisions are open policies are strictly construed against the insurer.
to two interpretations, that which is most favorable to the insured is adopted.
HELD:
A contract of insurance, being a contract of adhesion, par excellence, any ambiguity No. A contract of insurance, being a contract of adhesion, par excellence, any
therein should be resolved against the insurer; in other words, it should be construed ambiguity therein should be resolved against the insurer; in other words, it should
liberally in favor of the insured and strictly against the insurer. be construed liberally in favor of the insured and strictly against the insurer.

FACTS: If a marine insurance company desires to limit or restrict the operation of the general
Private respondent TKC Marketing Corp. was the owner/consignee of some provisions of its contract by special proviso, exception, or exemption, it should
3,189.171 metric tons of soya bean meal which was loaded on board the ship MV Al express such limitation in clear and unmistakable language. Obviously, the deletion
Kaziemah on or about September 8, 1989 for carriage from the port of Rio del of the F.C. & S. Clause and the consequent incorporation of subsection 1.1 of Section
Grande, Brazil, to the port of Manila. Said cargo was insured against the risk of loss 1 of the Institute War Clauses (Cargo) gave rise to ambiguity. If the risk of arrest
by petitioner Malayan Insurance Corporation for which it issued two (2) Marine occasioned by ordinary judicial process was expressly indicated as an exception in
Cargo Policy Nos. M/LP 97800305 amounting to P18,986,902.45 and M/LP 97800306 the subject policies, there would have been no controversy with respect to the
amounting to P1,195,005.45, both dated September 1989. interpretation of the subject clauses.

While the vessel was docked in Durban, South Africa on September 11, 1989 enroute Likewise, it must be borne in mind that such contracts are invariably prepared by the
to Manila, the civil authorities arrested and detained it because of a lawsuit on a companies and must be accepted by the insured in the form in which they are
question of ownership and possession. As a result, private respondent notified written. Any construction of a marine policy rendering it void should be avoided.
petitioner on October 4, 1989 of the arrest of the vessel and made a formal claim for Such policies will, therefore, be construed strictly against the, company in order to
the amount of US$916,886.66. avoid a forfeiture, unless no other result is possible from the language used.

Petitioner maintained its position that the arrest of the vessel by civil authorities on With the incorporation of subsection 1.1 of Section 1 of the Institute War Clauses,
a question of ownership was an excepted risk under the marine insurance policies. however, this Court agrees with the Court of Appeals and the private respondent
This prompted private respondent to file a complaint for damages praying that aside that "arrest" caused by ordinary judicial process is deemed included among the
from its claim, it be reimbursed the amount of P128,770.88 as legal expenses and covered risks. Petitioner cannot adopt the argument that the "arrest" caused by
the interest it paid for the loan it obtained to finance the shipment totaling ordinary Judicial process is not included in the covered risk simply because the F. C.
P942,269.30. In addition, private respondent asked for moral damages amounting to & S. Clause under the Institute War Clauses can only be operative in case of hostilities
P200,000.00, exemplary damages amounting to P200,000.00 and attorney's fees or warlike operations on account of its heading "Institute War Clauses." This Court
equivalent to 30% of what will be awarded by the court. agrees with the Court of Appeals when it held that ". . . Although the F.C. & S. Clause
may have originally been inserted in marine policies to protect against risks of war,
The lower court decided in favor of the private respondent. It was affirmed by the its interpretation in recent years to include seizure or detention by civil authorities
Court of Appeals, stating that arrests by civil authorities, such as what happened in seems consistent with the general purposes of the clause, . . ." In fact, petitioner
itself averred that subsection 1.1 of Section 1 of the Institute War Clauses included Diosdado Ty v Filipnas Compania de Seguuros, et. al.
"arrest" even if it were not a result of hostilities or warlike operations. In this regard, G.R. No. L-21821-22 and L-21824-27; 1966
since what was also excluded in the deleted F. C. & S. Clause was "arrest" occasioned Topic: Interpretation
by ordinary judicial process, logically, such "arrest" would now become a covered Ponente: Barrera
risk under subsection 1.1 of Section 1 of the Institute War Clauses, regardless of
whether or not said "arrest" by civil authorities occurred in a state of war. DOCTRINE
The insurance policy is the law between the parties.

FALLO
Wherefore, finding no error in the decision appealed from, the same is hereby
affirmed, without costs.

NATURE OF THE CASE

This is an appeal from the CFI dismissing 6 separate complaints filed by Ty against 6
insurance companies1 for the collection of his compensation for the disability of his
left hand.

FACTS
1. Ty was employed as a mechanic operator in Broadway Cotton Factory in
Caloocan.
2. 1953 (didn’t say which month) – he took Personal Accident Policies from
several insurance companies effective for 12 months.
3. 24 Dec 1953 – a fire broke out in the factory. A heavy object fell on his left
hand while he was trying to put out the fire with a fire extinguisher.
4. Dec 1953 – Feb 1954 – He received treatment from the National
Orthopedic Hospital for injuries he suffered.
5. According to the medical report, he suffered simple and compound
fractures in different fingers which would cause temporary disability of his
left hand.
6. The insurance companies refused to pay his claim.
7. Municipal Court: ordered the insurance companies to pay his claim.
8. CFI: dismissed the claim on the ground that the partial disability because
of loss of either hand must result in its amputation to be compensable.
9. PETITIONER: He avers that it is enough that the insured is disabled, not
amputated, to such extent that he cannot perform necessary acts in the
ordinary conduct of his business2 and that the definition of what
constitutes loss of hand is ambiguous and calls for interpretation.

1 Filipinas Compañia de Seguros, People's Surety & Insurance Co., Inc., South Sea Surety If the Insured sustains any Bodily Injury which is effected solely through violent,
& Insurance Co., Inc., The Philippine Guaranty Company, Inc., Universal Insurance & external, visible and accidental means, and which shall not prove fatal but shall result,
Indemnity Co., and Plaridel Surety & Insurance Co., Inc. independently of all other causes and within sixty (60) days from the occurrence,
2 The insurance contract reads: INDEMNITY FOR TOTAL OR PARTIAL DISABILITY: thereof, in Total or Partial Disability of the Insured, the Company shall pay, subject to
ISSUE: WON he is entitled to claim. Gulf Resorts, Inc. vs. Philippine Charter Insurance Corp.
G.R. No. 156167 | May 16, 2005
HELD
No. Doctrine: All 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
RATIO parties. The policy cannot be construed piecemeal. Certain stipulations cannot be
1. In the case at bar, the provision of the policy is clear enough to inform him that segregated and then made to control; neither do particular words or phrases
the loss, to be considered a disability entitled to indemnity, must be severance necessarily determine its character.
or amputation of that affected member from the body of the insured.
2. The SC held that it cannot go beyond the clear and express conditions of the Fallo: IN VIEW WHEREOF, the judgment of the Court of Appeals is affirmed. The
insurance policies, all of which define partial disability as loss of either hand petition for certiorari is dismissed. No costs.
by amputation through the bones of the wrist. He suffered injuries which
caused temporary total disability having been caused by fractures of the index, Facts:
the middle and the fourth fingers of the left hand. There was no such
amputation. • Petitioner Gulf Resorts, Inc. owns Plaza Hotel in Agoo, La Union and had its
3. As the terms of the policies are clear, express, and specific that only amputation properties in said resort insured originally with the American Home Assurance
would be considered as a loss, to rule that mere fracture would be covered is Company (AHAC-AIU) which includes loss or damage to shock to any of the
unwarranted. property insured by this Policy occasioned by or through or in consequence of
earthquake.
• On July 16, 1990, an earthquake struck Central and Northern Luzon resulting to
the damage of the properties and two swimming pools in Agoo Playa Resort.
• After the earthquake, petitioner advised respondent Philippine Charter
Insurance Corp. that the former would make a claim under its Insurance Policy
No. 31944 for damages on its properties.
• On August 11, 1990, petitioner filed its formal demand for settlement of the
damage to all its properties.
• Respondent denied petitioners claim on the ground that its insurance policy
only afforded earthquake shock coverage to the two swimming pools of the
resort.
• Petitioner contends that the policy’s earthquake shock endorsement clearly
covers all of the properties insured and not only the swimming pools. It used
the words any property insured by this policy, and it should be interpreted as
all inclusive.
• It also claims that the unqualified and unrestricted nature of the earthquake
shock endorsement is confirmed in the body of the insurance policy itself, which
states that it is subject to: Other Insurance Clause, Typhoon Endorsement,
Earthquake Shock Endt., Extended Coverage Endt., FEA Warranty & Annual
Payment Agreement on Long Term Policies.

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.
Issue: Whether the insurance policy earthquake shock coverage extends to other Simon De La Cruz vs. The Capital Ins. and Surety Inc.,
properties aside from the two swimming pools
Doctrine:
Ruling:
"Accident" and "Accidental", as used in insurance contracts is an event that takes
No. Petitioner cannot focus on the earthquake shock endorsement to the exclusion place without one's foresight or expectation — an event that proceeds from an
of the other provisions. All the provisions and riders, taken and interpreted together, unknown cause, or is an unusual effect of a known cause and, therefore, not
indubitably show the intention of the parties to extend earthquake shock coverage expected.
to the two swimming pools only.
When the death or injury is not the natural or probable result of the insured's
A careful examination of the premium recapitulation will show that it is the clear voluntary act, the resulting death is within the protection.
intent of the parties to extend earthquake shock coverage only to the two swimming
pools. Fallo: SC held for Capital Insurance to indemnify Simon for son’s death.

In the subject policy, no premium payments were made with regard to earthquake Facts:
shock coverage, except on the two swimming pools. There is no mention of any 1. Eduardo de la Cruz (Eduardo) is employed as a mucker in Itogon-Suyoc
premium payable for the other resort properties with regard to earthquake shock. Mines, Inc. and holds an accident insurance policy with respondent Capital
This is consistent with the history of petitioner’s previous insurance policies from Insurance & Surety Co., Inc. (Capital) from November 13, 1956 to
AHAC-AIU. November 12, 1957.
2. Under his insurance contract, he is insured "against death or disability
There is no ambiguity in the terms of the contract and its riders. Petitioner cannot caused by accidental means.”
rely on the general rule that insurance contracts are contracts of adhesion which 3. On January 1, 1957, Itogen sponsored a boxing contest to celebrate New
should be liberally construed in favor of the insured and strictly against the insurer Years Day.
company which usually prepares it. 4. Eduardo, as a non-pro boxer, participated in the match.
5. During the match, he slipped and was hit by his opponent causing him to
We cannot apply the general rule on contracts of adhesion to the case at bar. fall with his head hitting the rope of the ring.
Petitioner cannot claim it did not know the provisions of the policy. From the 6. He died with the cause of death being hemorrhage.
inception of the policy, petitioner had required the respondent to copy verbatim the 7. Petitioner Simon de la Cruz was the father and beneficiary of Eduardo and
provisions and terms of its latest insurance policy from AHAC-AIU. filed a claim with the insurance company which they refused.

Grounds for refusal

• The death was caused by the voluntary participation of the victim in the
boxing match. Participation in the boxing contest was the "means” which
caused the injury. Hence, given the means used to cause the injury was
voluntary then the resulting injury is not accidental.

Issue: WON Eduardo’s injury is covered under his insurance plan notwithstanding his
voluntary participation in the boxing match. (YES)
Ratio: The Insular Life Ass. Co., Ltd. v. Paz Y. Khu

1. General rule is if the death or injury is a natural result of the insured's Case Doctrine: an insurance contract is a contract of adhesion which must be
voluntary act, unaccompanied by anything unforeseen then the resulting construed liberally in favor of the insured and strictly against the insurer in order to
death or injury is from an accident or accidental means within the terms of safeguard the latter’s interest. Limitations of liability should be regarded with
the accident-insurance policy. extreme jealousy and must be construed in such a way as to preclude the insurer
2. Here, the injury resulted when he slid during the boxing match and hit his from noncompliance with its obligations.
head along the ropes. Although boxing risks external injuries, it does not
make all injuries received not accidental. In addition, death is not ordinarily Fallo: WHEREFORE, the Petition is DENIED
anticipated in sports such as boxing.
3. Lastly, the contract expressed what was excluded from coverage Facts:
protection: March 1997 – Felipe Khu, Sr. (Felipe) applied for a life insurance policy with Insular
"(e) Death or disablement consequent upon the Insured Life under the latter’s Diamond Jubilee Insurance Plan. Felipe accomplished the
engaging in football, hunting, pigsticking, steeplechasing, polo- required medical questionnaire wherein he did not declare any illness or adverse
playing, racing of any kind, mountaineering, or motorcycling." medical condition. This took effect on June 22, 1997.

Failure to stipulate that death or injuries from boxing along those outside June 1999 - Felipe’s policy lapsed due to non-payment of the premium covering the
the coverage protection leads to the conclusion that such death falls within period from June 22, 1999 to June 23, 2000.
the insurance policy protection.
September 1999 - Felipe applied for the reinstatement of his policy and paid
P25,020.00 as premium. Except for the change in his occupation of being self-
employed to being the Municipal Mayor of Binuangan, Misamis Oriental, all the
other information submitted by Felipe in his application for reinstatement was
virtually identical to those mentioned in his original policy.

Oct 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.

Jan 2000 – Insular Life reinstated Felipe’s policy and issued an Endorsement stating:

This certifies that as agreed by the Insured, the reinstatement of this policy has been
approved by the Company on the understanding that the following changes are
made on the policy effective June 22, 1999…

Sept 2001 – Felipe died.

Paz Y. Khu, Felipe Y. Khu, Jr. and Frederick Y. Khu (Felipe’s beneficiaries or
respondents) filed with Insular Life a claim for benefit under the reinstated policy.
Insular Life denied the claim. It rescinded the reinstated policy on the grounds of the amount of P3,054.50 on December 27, 1999 in addition to the P25,020.00 he had
concealment and misrepresentation by Felipe since he did not disclose the ailments earlier paid on September 7, 1999, Khu had paid for the insurance coverage starting
(Type 2 Diabetes Mellitus, Diabetes Nephropathy and Alcoholic Liver Cirrhosis with June 22, 1999. At the very least, this circumstance has engendered a true lacuna.
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 In the Endorsement, the obscurity is patent. In the first sentence of the
disclosed the material information on his adverse health condition. It contended that Endorsement, it is not entirely clear whether the phrase "effective June 22, 1999"
when Felipe died, the policy was still contestable. refers to the subject of the sentence, namely "the reinstatement of this policy," or
to the subsequent phrase "changes are made on the policy."
Respondents instituted a complaint for specific performance with damages.
Given the obscurity of the language, the construction favorable to the insured will
RTC and CA: ruled in favor of respondents be adopted by the courts.

Issue: Whether Felipe’s reinstated life insurance policy is already incontestable at Accordingly, the subject policy is deemed reinstated as of June 22, 1999. Thus, the
the time of his death – YES. period of contestability has lapsed.

Ratio: Sec 48 of the Insurance Code provides:

…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 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 the fraudulent concealment or
misrepresentation of the insured or his agent.

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.

At least two (2) years from the issuance of the policy or its last reinstatement, the
beneficiary is given the stability to recover under the policy when the insured dies.
The provision also makes clear when the two-year period should commence in case
the policy should lapse and is reinstated, that is, from the date of the last
reinstatement’.

In the Letter of Acceptance, Khu declared that he was accepting "the imposition of
an extra/additional premium of P5.00 a year per thousand of insurance; effective
June 22, 1999". It is true that the phrase as used in this particular paragraph does
not refer explicitly to the effectivity of the reinstatement. But the Court notes that
the reinstatement was conditioned upon the payment of additional premium not
only prospectively, that is, to cover the remainder of the annual period of coverage,
but also retroactively, that is for the period starting June 22, 1999. Hence, by paying
Maramag vs De Guzman G.R. No. 181132 June 5, 2009 • that they filed their claims for the insurance proceeds of the insurance
policies;
Petitioners: HEIRS OF LORETO C. MARAMAG, represented by surviving spouse • that when it ascertained that Eva was not the legal wife of Loreto, it
VICENTA PANGILINAN MARAMAG disqualified her as a beneficiary and divided the proceeds among Odessa,
Respondents: EVA VERNA DE GUZMAN MARAMAG, ODESSA DE GUZMAN Karl Brian, and Trisha Angelie, as the remaining designated beneficiaries;
MARAMAG, KARL BRIAN DE GUZMAN MARAMAG, TRISHA ANGELIE MARAMAG, THE and
INSULAR LIFE ASSURANCE COMPANY, LTD., and GREAT PACIFIC LIFE ASSURANCE • that it released Odessas share as she was of age, but withheld the release
CORPORATION of the shares of minors Karl Brian and Trisha Angelie pending submission
Ponente: NACHURA of letters of guardianship.
• that the complaint or petition failed to state a cause of action insofar as it
FALLO: WHEREFORE, the petition is DENIED for lack of merit. Costs against sought to declare as void the designation of Eva as beneficiary, because
petitioners. Loreto revoked her designation as such in Policy No. A001544070 and it
disqualified her in Policy No. A001693029; and
FACTS: • insofar as it sought to declare as inofficious the shares of Odessa, Karl
Brian, and Trisha Angelie, considering that no settlement of Loretos estate
The case stems from a petition filed against respondents for revocation and/or had been filed nor had the respective shares of the heirs been determined.
reduction of insurance proceeds for being void and/or inofficious, with prayer for • that it was bound to honor the insurance policies designating the children
a TRO and a writ of preliminary injunction. of Loreto with Eva as beneficiaries pursuant to Section 53 of the
Insurance Code.
The petition alleged that:
1. petitioners were the legitimate wife and children of Loreto Maramag Grepalife’s Answer:
(Loreto), while respondents were Loretos illegitimate family; • alleged that Eva was not designated as an insurance policy beneficiary;
2. Eva de Guzman Maramag (Eva) was a concubine of Loreto and a suspect in • that the claims filed by Odessa, Karl Brian, and Trisha Angelie were denied
the killing of the latter, thus, she is disqualified to receive any proceeds because Loreto was ineligible for insurance due to a misrepresentation in
from his insurance policies from Insular Life Assurance Company, Ltd. his application form that he was born on December 10, 1936 and, thus, not
(Insular) and Great Pacific Life Assurance Corporation (Grepalife); more than 65 years old when he signed it in September 2001;
3. the illegitimate children of Loreto Odessa, Karl Brian, and Trisha • that the case was premature, there being no claim filed by the legitimate
Angeliewere entitled only to one-half of the legitime of the legitimate family of Loreto; and
children, thus, the proceeds released to Odessa and those to be released • that the law on succession does not apply where the designation of
to Karl Brian and Trisha Angelie were inofficious and should be reduced;
insurance beneficiaries is clear.
and
4. petitioners could not be deprived of their legitimes, which should be
Insular and Grepalife’s Reply:
satisfied first
• the insurance proceeds belong exclusively to the designated beneficiaries
5. that part of the insurance proceeds had already been released in favor
in the policies, not to the estate or to the heirs of the insured.
of Odessa, while the rest of the proceeds are to be released in favor of
• that it had disqualified Eva as a beneficiary when it ascertained that Loreto
Karl Brian and Trisha Angelie, both minors, upon the appointment of
was legally married to Vicenta Pangilinan Maramag.
their legal guardian.
RTC Resolution:
• MTD of Insular Life and Grepalife is granted with respect to
Insular’s Answer:
defendants Odessa, Karl Brian and Trisha Maramag. The action shall
• admitted that Loreto misrepresented Eva as his legitimate wife and
proceed with respect to the other defendants Eva Verna de Guzman,
Odessa, Karl Brian, and Trisha Angelie as his legitimate children, and
Insular Life and Grepalife.
 • The Insurance Code, as amended, contains a provision regarding to whom proceeds would be paid to the illegitimate children of Loreto with Eva
the insurance proceeds shall be paid. It is very clear under Sec. 53 thereof pursuant to Section 53 of the Insurance Code.
that the insurance proceeds shall be applied exclusively to the proper • It ruled that it is only in cases where there are no beneficiaries
interest of the person in whose name or for whose benefit it is made, designated, or when the only designated beneficiary is disqualified, that
unless otherwise specified in the policy. the proceeds should be paid to the estate of the insured.
• The rules on testamentary succession cannot apply here, for the • As to the claim that the proceeds to be paid to Loretos illegitimate children
insurance indemnity does not partake of a donation. should be reduced based on the rules on legitime, the trial court held that
• As such, the insurance indemnity cannot be considered as an advance of the distribution of the insurance proceeds is governed primarily by the
the inheritance which can be subject to collation Insurance Code, and the provisions of the Civil Code are irrelevant and
• With the finding of the trial court that the proceeds to the Life Insurance inapplicable.
Policy belongs exclusively to the defendant as his individual and separate
property, we agree that the proceeds of an insurance policy belong ISSUE: Whether or not the members of the legitimate family entitled to
exclusively to the beneficiary and not to the estate of the person whose the proceeds of the insurance for the concubine
life was insured, and that such proceeds are the separate and individual
property of the beneficiary and not of the heirs of the person whose life RULING: NO. Petition denied.
was insured
• One of the named beneficiary in the insurances taken by the late Loreto C. RATIO:
Maramag is his concubine Eva Verna De Guzman.
• Any person who is forbidden from receiving any donation under Article 739 In this case, it is clear from the petition filed before the trial court that, although
cannot be named beneficiary of a life insurance policy of the person who petitioners are the legitimate heirs of Loreto, they were not named as beneficiaries
cannot make any donation to him, according to said article (Art. 2012, Civil in the insurance policies issued by Insular and Grepalife.
Code).
• If a concubine is made the beneficiary, it is believed that the insurance The basis of petitioners’ claim is that Eva, being a concubine of Loreto and a suspect
contract will still remain valid, but the indemnity must go to the legal in his murder, is disqualified from being designated as beneficiary of the insurance
heirs and not to the concubine, for evidently, what is prohibited under policies, and that Evas children with Loreto, being illegitimate children, are entitled
Art. 2012 is the naming of the improper beneficiary. to a lesser share of the proceeds of the policies.
• Since the designation of defendant Eva Verna de Guzman as one of the
primary beneficiary in the insurances taken by the late Loreto C. They also argued that pursuant to Section 12 of the Insurance Code, Evas share in
Maramag is void under Art. 739 of the Civil Code, the insurance indemnity the proceeds should be forfeited in their favor, the former having brought about the
that should be paid to her must go to the legal heirs of the deceased death of Loreto.
which this court may properly take cognizance as the action for the
declaration for the nullity of a void donation falls within the general Thus, they prayed that the share of Eva and portions of the shares of Loretos
jurisdiction of this Court. illegitimate children should be awarded to them, being the legitimate heirs of Loreto
entitled to their respective legitimes.
Insular and Grepalife argued
• that the proceeds were divided among the three children as the remaining It is evident from the face of the complaint that petitioners are not entitled to a
named beneficiaries. favorable judgment in light of Article 2011 of the Civil Code which expressly provides
• that the premiums paid had already been refunded. that insurance contracts shall be governed by special laws, i.e., the Insurance
Code. Section 53 of the Insurance Code states
RTC’s Resolution: Granted MR of Insular and Grepalife
• Loreto revoked the designation of Eva in one policy and that Insular
disqualified her as a beneficiary in the other policy such that the entire
SECTION 53. The insurance proceeds shall be applied exclusively to the Southern Luzon Employees’ Ass. V. Golpeo, et al.
proper interest of the person in whose name or for whose benefit it is
made unless otherwise specified in the policy. DOCTRINE: The proceeds of an insurance policy belong exclusively to the beneficiary
and not to the estate of the person whose life was insured, and that such proceeds
Pursuant thereto, it is obvious that the only persons entitled to claim the insurance are the separate and individual property of the beneficiary and not of the heirs of
proceeds are either the insured, if still alive; or the beneficiary, if the insured is the person whose life was insured, is the doctrine in America.
already deceased, upon the maturation of the policy.
FALLO: Wherefore, the appealed decision is affirmed, and it is so ordered without
The exception to this rule is a situation where the insurance contract was intended costs.
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. FACTS:

• Plaintiff, Southern Luzon Employees' Association, is composed of laborers and

Petitioners are third parties to the insurance contracts with Insular and Grepalife
employees with respect to transportation companies. One of its purposes is
and, thus, are not entitled to the proceeds thereof. Accordingly, respondents Insular
mutual aid of its members and their dependents in case of death.
and Grepalife have no legal obligation to turn over the insurance proceeds to
• The association adopted the following resolution:
petitioners.
xxx. “…that a member may, if he chooses, put down
The revocation of Eva as a beneficiary in one policy and her disqualification as such
his common-law wife as his beneficiary and/or children had with her as the case may
in another are of no moment considering that the designation of the illegitimate
be.” xxx
children as beneficiaries in Loretos insurance policies remains valid. Because no
legal proscription exists in naming as beneficiaries the children of illicit relationships
xxx. That such person so named by the member will be the sole persons to be
by the insured, the shares of Eva in the insurance proceeds, whether forfeited by the
recognized by the Association regarding claims for condolence contributions." xxx
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
• Roman A. Concepcion was a member until his death on December 13, 1950.
awarded to the said illegitimate children, the designated beneficiaries, to the
Roman M. Concepcion, Jr., Estela M. Concepcion, Rolando M. Concepcion and
exclusion of petitioners.
Robin M. Concepcion. After the death of Roman A. Concepcion, the association
was able to collect voluntary contributions from its members amounting to
It is only in cases where the insured has not designated any beneficiary, or when
P2,505. Three sets of claimants presented themselves, namely, (1) Juanita
the designated beneficiary is disqualified by law to receive the proceeds, that the
Golpeo, legal wife of Roman A. Concepcion, and her children; (2) Aquilina
insurance policy proceeds shall redound to the benefit of the estate of the insured.
Maloles, common law wife of Roman A. Concepcion, and her children, named
beneficiaries by the deceased; and (3) Elsie Hicban, another common law wife
of Roman A. Concepcion, and her child.
• The plaintiff association was accordingly constrained to institute in the Court of
First Instance for interpleading against the three conflicting claimants as
defendants.
• Afterhearing, the court rendered a decision, declaring the defendants Aquilina
Maloles and her children the sole beneficiaries of the sum of P2,505.00. Juanita
Golpeo later on appealed to the Supreme Court.
ISSUE: Whether or not the contract between the association and its member, Roman VDA. DE CONSUEGRA V. GSIS, G.R. No. L-28093, January 30, 1971
Conception, was in the nature of an insurance, and therefore the amount in question
belonged exclusively to the beneficiaries? Petitioners-appellants: BASILIA BERDIN VDA. DE CONSUEGRA; JULIANA,
PACITA, MARIA LOURDES, JOSE, JR., RODRIGO, LINEDA and LUIS, all
RATIO: surnamed CONSUEGRA
• The trial court has not considered the plaintiff as a regular insurance company
but merely ruled that the death benefit in question is analogous to an insurance. Respondent-appellee: GOVERNMENT SERVICE INSURANCE SYSTEM,
Moreover, section 1628 of the Revised Administrative Code defines a mutual COMMISSIONER OF PUBLIC HIGHWAYS, HIGHWAY DISTRICT ENGINEER OF
benefit association as one, among others, "providing for any method of accident SURIGAO DEL NORTE, COMMISSIONER OF CIVIL SERVICE, and ROSARIO
or life insurance among its members out of dues or assessments collected from DIAZ
the membership."
• The contract of life insurance is a special contract and the destination of the Ponente: MAKALINTAL
proceeds thereof is determined by special laws which deal exclusively with that
DOCTRINE: GSIS offers two separate and distinct systems of benefits to its
subject. That subject is regulated exclusively by the Code of Commerce which
provides for the terms of the contract, the relations of the parties and the members: (1) life insurance; and (2) retirement insurance (refer to ruling portion
destination of the proceeds of the policy. for the detailed difference). These two distinct systems of benefits are paid out
• Appellants also argue that Aquillana Maloles and her children cannot avail of from two distinct and separate funds that are maintained by the GSIS.
the benefits due to the fact that they are the illegitimate children of Roman
The beneficiary named in the life insurance does not automatically become the
Conception. However, the fact that new Civil Code recognizes certain
successional rights of illegitimate children. (Article 287) diminishes that beneficiary in the retirement insurance unless the same beneficiary in the life
argument. insurance is so designated in the application for retirement insurance. There is
need for the employee to file an application for retirement insurance benefits
when he becomes a member of the GSIS, and he should state in his application
the beneficiary of his retirement insurance.

FALLO: “WHEREFORE, the decision appealed from is affirmed, with costs against
petitioners-appellants. It is so ordered.”

FACTS

The late Jose Consuegra, at the time of his death, was employed as a shop foreman
of the office of the District Engineer, Surigao del Norte.

In his lifetime, Consuegra contracted two marriages:

1. respondent Rosario Diaz, solemnized in the parish church in Surigao, on

July 15, 1937, with 2 children: Jose Consuegra, Jr. and Pedro Consuegra,
but both predeceased their father;
2. petitioner Basilia Berdin: contracted in good faith while the first marriage
was subsisting on May 1, 1957 in the same parish and municipality with 7
children: Juliana, Pacita, Maria Lourdes, Jose, Rodrigo, Lenida and Luz, all
surnamed Consuegra.
Being a member of the GSIS when Consuegra died on September 26, 1965, the ISSUE: WON the named beneficiary in the life insurance is automatically the
proceeds of his life insurance were paid to Berdin and her children, the beneficiaries beneficiary in the retirement insurance, when none is named
named in the policy.
RULING: NO. The contention of appellants is untenable.
Having been in the service of the government for 22.5028 years, Consuegra was
entitled to retirement insurance benefits in the sum of P6,304.47 pursuant to Sec. As originally approved, Commonwealth Act 186 which created the GSIS provided for
12(c) of Commonwealth Act 186 as amended by RA 1616 and 3836. Consuegra did life insurance only to all regularly and permanently appointed officials and
not designate any beneficiary who would receive the retirement insurance benefits employees of the government.
due to him. It was amended by Republic Act 660 (June 16, 1951), which provided that aside from
Diaz, the widow by the first marriage, filed a claim with the GSIS asking that the the system of life insurance under the GSIS, there was also established the system of
retirement insurance benefits be paid to her as the only legal heir of Consuegra, retirement insurance.
considering that the deceased did not designate any beneficiary with respect to his Subsection (c) of Section 12 of Commonwealth Act 186, as thus amended and
retirement insurance benefits. reamended, read as follows:
Berdin and her children, likewise, filed a similar claim with the GSIS, asserting that (c) Retirement is likewise allowed to a member, regardless of age, who has
being the beneficiaries named in the life insurance policy of Consuegra, they are the rendered at least twenty years of service. The benefit shall, in addition to
only ones entitled to receive the retirement insurance benefits due the deceased the return of his personal contributions plus interest and the payment of
Consuegra. the corresponding employer's premiums described in subsection (a) of
GSIS DECISION: The legal heirs of the late Consuegra were Diaz (1st marriage) who Section 5 hereof, without interest, be only a gratuity equivalent to one
is entitled to one-half, or 8/16; and Berdin (2nd marriage) and their 7 children for the month's salary for every year of service, based on the highest rate
remaining one-half, or 8/16, each of them to receive an equal share of 1/16. received, but not to exceed twenty-four months; Provided, That the
retiring officer or employee has been in the service of the said employer
Berdin and her children filed a petition for mandamus with preliminary injunction in or office for at least four years, immediately preceding his retirement.
the CFI against GSIS, the Commissioner of Public Highways, the Highway District
Engineer of Surigao del Norte, the Commissioner of Civil Service, and Rosario Diaz, xxx xxx xxx
praying that they be declared the legal heirs and exclusive beneficiaries of the The gratuity is payable by the employer or office concerned which is hereby
retirement insurance of the late Consuegra, and that a writ of preliminary injunction authorized to provide the necessary appropriation to pay the same from any
be issued restraining the implementation of the adjudication made by the GSIS. unexpended items of appropriations.
TRIAL COURT DECISION: Basilia Berdin and children are entitled to one-half (1/2) and Elective or appointive officials and employees paid gratuity under this subsection
Rosario Diaz to the other half of the retirement benefit of the late Consuegra from shall be entitled to the commutation of the unused vacation and sick leave, based on
GSIS. the highest rate received, which they may have to their credit at the time of
BERDIN’s CONTENTIONS: The system of life insurance and the system of retirement retirement.
insurance are complementary to each other, or that one is a part or an extension of Jose Consuegra, at the time of his death he had acquired rights under subsection
the other. Whoever is named the beneficiary in the life insurance is also the (c) of Section 12 of Com. Act 186, as amended by RA 3836.
beneficiary in the retirement insurance when no such beneficiary is named in the
retirement insurance. When Consuegra died on September 26, 1965, he had to his credit 22.5028 years of
service in the government, and pursuant to the above-quoted provisions of
subsection (c) of Section 12 of Com. Act 186, as amended, on the basis of the highest (a) Life insurance fund. — This shall consist of all premiums for life
rate of salary received by him which was P282.83 per month, he was entitled to insurance benefit and/or earnings and savings therefrom. It shall meet
receive retirement insurance benefits in the amount of P6,304.47. death claims as they may arise or such equities as any member may be
entitled to, under the conditions of his policy, and shall maintain the
If Consuegra had 22.5028 years of service in the government when he died on required reserves to the end of guaranteeing the fulfillment of the life
September 26, 1965, it follows that he started in the government service sometime insurance contracts issued by the System ...
during the early part of 1943, or before 1943 when the only benefits then provided
for were those that proceed from a life insurance. (b) Retirement insurance fund. — This shall consist of all
contributions for retirement insurance benefit and of earnings and savings
It cannot be said that because the appellants were designated beneficiaries in therefrom. It shall meet annuity payments and establish the required
Consuegra's life insurance, they automatically became the beneficiaries also of his reserves to the end of guaranteeing the fulfillment of the contracts issued
retirement insurance. by the System. ...
Upon entering the government service, Consuegra became a compulsory member of GSIS offers two separate and distinct systems of benefits to its members:
the GSIS, being automatically insured on his life. When Consuegra designated his
beneficiaries in his life insurance he could not have intended those beneficiaries of 1. life insurance
his life insurance as also the beneficiaries of his retirement insurance because the 2. retirement insurance
provisions on retirement insurance under the GSIS came about only when Com. Act 3.
186 was amended by RA 660. These two distinct systems of benefits are paid out from two distinct and separate
funds that are maintained by the GSIS.
Subsection (b) of Section 11 of Com. Act 186, as amended by Rep. Act 660:
Proceeds of a life insurance are paid to whoever is named the beneficiary in the life
(b) Survivors benefit. — Upon death before he becomes eligible for insurance policy. As in the case of a life insurance provided for in the Insurance Act
retirement, his beneficiaries as recorded in the application for retirement (Act 2427, as amended), the beneficiary in a life insurance under the GSIS may not
annuity filed with the System shall be paid his own premiums with interest necessarily be an heir of the insured. The insured in a life insurance may designate
of three per centum per annum, compounded monthly. If on his death he any person as beneficiary unless disqualified to be so under the provisions of the
is eligible for retirement, then the automatic retirement annuity or the Civil Code. And in the absence of any beneficiary named in the life insurance policy,
annuity chosen by him previously shall be paid accordingly. the proceeds of the insurance will go to the estate of the insured.

The beneficiary named in the life insurance does not automatically become the Retirement insurance is primarily intended for the benefit of the employee — to
beneficiary in the retirement insurance unless the same beneficiary in the life provide for his old age, or incapacity, after rendering service in the government for
insurance is so designated in the application for retirement insurance. There is a required number of years. If the employee reaches the age of retirement, he gets
need for the employee to file an application for retirement insurance benefits when the retirement benefits even to the exclusion of the beneficiary or beneficiaries
he becomes a member of the GSIS, and he should state in his application the named in his application for retirement insurance. The beneficiary of the retirement
beneficiary of his retirement insurance. insurance can only claim the proceeds of the retirement insurance if the employee
dies before retirement. If the employee failed or overlooked to state the beneficiary
Section 24 of Commonwealth Act 186, as amended by Rep. Act 660, provides for a
of his retirement insurance, the retirement benefits will accrue to his estate and will
life insurance fund and for a retirement insurance fund.
be given to his legal heirs in accordance with law, as in the case of a life insurance if
Subsections (a) and (b) of Section 24 of CA 186, as amended by RA 660: no beneficiary is named in the insurance policy.

CONCLUSION:
GSIS had correctly acted when it ruled that the proceeds of the retirement insurance The Insular Life Assurance Company, Ltd. vs. Carpiona T. Ebrado and Pascuala Vda.
of the late Consuegra should be divided equally between his first living wife and his De Ebrado, G.R. No. L-44059 October 28, 1977
second wife and his children by her.
DOCTRINE: Any person who is forbidden from receiving any donation under Article
739 cannot be named beneficiary of a life insurance policy by the person who cannot
donate to him. Common-law spouses are barred from receiving donations from each
Lower court did not commit error when it confirmed the action of the GSIS, it being
other.
accepted as a fact that the second marriage was contracted in good faith.

Since the defendant's first marriage has not been dissolved or declared void, the FALLO: ACCORDINGLY, the appealed judgment of the lower court is hereby affirmed.
Carponia T. Ebrado is hereby declared disqualified to be the beneficiary of the late
conjugal partnership established by that marriage has not ceased nor has the first
Buenaventura C. Ebrado in his life insurance policy. As a consequence, the proceeds
wife lost or relinquished her status as putative heir of her husband. Accordingly, she
of the policy are hereby held payable to the estate of the deceased insured. Costs
has an interest in the husband's share in the property here in dispute. Although the against Carponia T. Ebrado.
second marriage can be presumed to be void ab initio as it was celebrated while the
first marriage was still subsisting, still there is need for judicial declaration of such FACTS:
nullity. And inasmuch as the conjugal partnership formed by the second marriage
was dissolved before judicial declaration of its nullity, "[t]he only lust and equitable Cristor Ebrado was issued by The Life Assurance Co., Ltd., a policy for P5,882.00 with
solution in this case would be to recognize the right of the second wife to her share a rider for Accidental Death. He designated Carponia T. Ebrado as the
of one-half in the property acquired by her and her husband and consider the other revocable beneficiary in his policy. He referred to her as his wife.
half as pertaining to the conjugal partnership of the first marriage.
Cristor was killed when he was hit by a failing branch of a tree. Insular Life was made
liable to pay the coverage in the total amount of P11,745.73, representing the face
value of the policy in the amount of P5,882.00 plus the additional benefits
for accidental death.

Carponia T. Ebrado filed with the insurer a claim for the proceeds as
the designated beneficiary therein, although she admited that she and the insured
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.
Insular commenced an action for Interpleader before the trial court as to who should
be given the proceeds. The court declared Carponia as disqualified.

ISSUE: Whether or not a common-law wife named as beneficiary in the life insurance
policy of a legally married man can claim the proceeds in case of death of the latter?
– No.

RATIO: Section 50 of the Insurance Act which provides that "the insurance shall be
applied exclusively to the proper interest of the person in whose name it is made".
The word "interest" highly suggests that the provision refers only to the "insured"
and not to the beneficiary, since a contract of insurance is personal in character.
Otherwise, the prohibitory laws against illicit relationships especially on property Spouses Cha vs. Court of Appeals
and descent will be rendered nugatory, as the same could easily be circumvented by GR 124520, 18 August 1997
modes of insurance.
DOCTRINE
[1] No contract or policy of insurance on property shall be enforceable except for the
When not otherwise specifically provided for by the Insurance Law, the contract of benefit of some person having an insurable interest in the property insured
life insurance is governed by the general rules of the civil law regulating contracts. [2] The lessor cannot be validly a beneficiary of a fire insurance policy taken by a
And under Article 2012 of the same Code, any person who is forbidden from lessee over his merchandise, and the provision in the lease contract providing for
receiving any donation under Article 739 cannot be named beneficiary of a life such automatic assignment is void for being contrary to law and/or public policy—
insurance policy by the person who cannot make a donation to him. Common-law the insurer cannot be compelled to pay the proceeds of the policy to a person who
spouses are barred from receiving donations from each other. has no insurable interest in the property insured.

Article 739 provides that void donations are those made between persons who were FALLO
guilty of adultery or concubinage at the time of donation. WHEREFORE, the decision of the Court of Appeals in CAG.R. CV No. 39328 is SET
ASIDE and a new decision is hereby entered, awarding the proceeds of the fire
There is every reason to hold that the bar in donations between legitimate spouses insurance policy to petitioners Nilo Cha and Stella Uy-Cha.
and those between illegitimate ones should be enforced in life insurance policies
since the same are based on similar consideration. So long as marriage remains the FACTS
threshold of family laws, reason and morality dictate that the impediments imposed Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease
upon married couple should likewise be imposed upon extra-marital relationship. contract with CKS Development Corporation, as lessor, on 5 October 1988. One of
the stipulations of the 1year lease contract states that "The LESSEE shall not insure
A conviction for adultery or concubinage isn’t required exacted before against fire the chattels, merchandise, textiles, goods and effects placed at any stall
the disabilities mentioned in Article 739 may effectuate. The article says that in the or store or space in the leased premises without first obtaining the written consent
case referred to in No. 1, the action for declaration of nullity may be brought by the and approval of the LESSOR. If the LESSEE obtain(s) the insurance thereof without
spouse of the donor or donee; and the guilty of the donee may be proved by the consent of the LESSOR then the policy is deemed assigned and transferred to the
preponderance of evidence in the same action. LESSOR for its own benefit"

The underscored clause neatly conveys that no criminal conviction for the offense is Notwithstanding the above stipulation in the lease contract, the Cha
a condition precedent. The law plainly states that the guilt of the party may be spouses insured against loss by fire their merchandise inside the leased premises for
proved “in the same acting for declaration of nullity of donation.” And, it would be P500,000.00 with the United Insurance Co., Inc. without the written consent of CKS.
sufficient if evidence preponderates. On the day that the lease contract was to expire, fire broke out inside the leased
premises. When CKS learned of the insurance earlier procured by the Cha spouses
The insured was married to Pascuala Ebrado with whom she has six legitimate (without its consent), it wrote the insurer (United) a demand letter asking that the
children. He was also living in with his common-law wife with whom he has two proceeds of the insurance contract (between the Cha spouses and United) be paid
children. directly to CKS, based on its lease contract with the Cha spouses. United refused to
pay CKS. Hence, the latter filed a complaint against the Cha spouses and United.

ISSUE/S
Whether or not the subject provision 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 (Cha spouses) over their merchandise inside the leased
premises is deemed assigned or transferred to the lessor (CKS) if said policy is Gaisano Cagayan, Inc. vs. Insurance Co. of North America
obtained without the prior written consent of the latter. G.R. No. 147839, June 8, 2006 J. AUSTRIA-MARTINEZ, J

RATIO DOCTRINE
NO. It is basic in the law on contracts that the stipulations contained in a Anyone has an insurable interest in property that derives a benefit from its existence
contract cannot be contrary to law, morals, good customs, public order or public or would suffer loss from its destruction. It is sufficient that the insured is so situated
policy. Section 18 of the Insurance Code provides that "No contract or policy of with reference to the property that he would be liable to loss should it be injured or
insurance on property shall be enforceable except for the benefit of some person destroyed by the peril against which it is insured an insurable interest in property
having an insurable interest in the property insured." A non-life insurance policy such does not necessarily imply a property interest in, or a lien upon, or possession of, the
as the fire insurance policy taken by the spouses over their merchandise is primarily subject matter of the insurance, and neither the title nor a beneficial interest is
a contract of indemnity. Insurable interest in the property insured must exist at the requisite to the existence of such an interest insurance.
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: FALLO
to prevent a person from taking out an insurance policy on property upon which he WHEREFORE, the petition is partly GRANTED. The assailed Decision dated October
has no insurable interest and collecting the proceeds of said policy in case of loss of 11, 2000 and Resolution dated April 11, 2001 of the Court of Appeals in CA-G.R. CV
the property. In such a case, the contract of insurance is a mere wager which is void No. 61848 are AFFIRMED with the MODIFICATION that the order to pay the amount
under Section 25 of the Insurance Code, which provides that "Every stipulation in a of P535,613.00 to respondent is DELETED for lack of factual basis. No
policy of Insurance for the payment of loss whether the person insured has or has pronouncement as to costs. SO ORDERED.
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." FACTS:
[Nature of the Case: Petition for review (Rule 45) assailing CA decision which
Herein, it cannot be denied that CKS has no insurable interest in the goods reversed RTC Manila (Br. 21) decision]
and merchandise inside the leased premises under the provisions of Section 17 of Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi
the Insurance Code which provides that "The measure of an insurable interest in Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks
property is the extent to which the insured might be damnified by loss of injury owned by Levi Strauss & Co.
thereof." Therefore, CKS cannot, under the Insurance Code — a special law — be
IMC and LSPI separately obtained from respondent fire insurance policies with
validly a beneficiary of the fire insurance policy taken by the spouses over their
book debt endorsements. The insurance policies provide for coverage on "book
merchandise. This insurable interest over said merchandise remains with the
debts in connection with ready-made clothing materials which have been sold or
insured, the Cha spouses. The automatic assignment of the policy to CKS under the
delivered to various customers and dealers of the Insured anywhere in the
provision of the lease contract previously quoted is void for being contrary to law
Philippines. The policies defined book debts as the "unpaid account still appearing
and/or public policy. The proceeds of the fire insurance policy thus rightfully belong
in the Book of Account of the Insured 45 days after the time of the loss covered
to the spouses Nilo Cha and Stella Uy-Cha. The insurer (United) cannot be compelled
under this Policy.
to pay the proceeds of the fire insurance policy to a person (CKS) who has no
insurable interest in the property insured. 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.

On February 4, 1992, Respondent filed a complaint for damages against petitioner.

Alleging that:
 • IMC and LSPI filed with respondent their claims under their respective thing and there is no stipulation holding him liable even in case of fortuitous event.
fire insurance policies with book debt endorsements; It does not apply when the obligation is pecuniary in nature.
• As of February 25, 1991, the unpaid accounts of petitioner on the sale
Thus, whether fire is a fortuitous event or petitioner was negligent are matters
and delivery of ready-made clothing materials with IMC
immaterial to this case. What is relevant here is whether it has been established
was P2,119,205.00 while with LSPI it was P535,613.00;
that petitioner has outstanding accounts with IMC and LSPI.
• Respondent paid the claims of IMC and LSPI and, by virtue thereof,
respondent was subrogated to their rights against petitioner; ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
• Respondent made several demands for payment upon petitioner but ownership therein is transferred to the buyer, but when the ownership therein is
these went unheeded. transferred to the buyer the goods are at the buyer's risk whether actual delivery
has been made or not, except that:
Petitioner’s contention:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the
• It could not be held liable because the property covered by the
buyer, in pursuance of the contract and the ownership in the goods has been
insurance policies were destroyed due to fortuities event or force
retained by the seller merely to secure performance by the buyer of his obligations
majeure;
under the contract, the goods are at the buyer's risk from the time of such
• Respondent's right of subrogation has no basis inasmuch as there was
delivery;
no breach of contract committed by it since the loss was due to fire
which it could not prevent or foresee; IMC and LSPI did not lose complete interest over the goods. They have an
• IMC and LSPI never communicated to it that they insured their insurable interest until full payment of the value of the delivered goods. Unlike
properties; that it never consented to paying the claim of the insured 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
RTC: the fire was purely accidental; that the cause of the fire was not attributable
not determined by concept of title, but whether insured has substantial economic
to the negligence of the petitioner; IMC and LSPI retained ownership of the
interest in the property.
delivered goods and must bear the loss. (res perit domino)
Section 13 of our Insurance Code defines insurable interest as "every interest in
CA: reversed the decision of RTC. Sales invoices is an exception under Article 1504
property, whether real or personal, or any relation thereto, or liability in respect
(1) of the Civil Code to res perit domino
thereof, of such nature that a contemplated peril might directly damnify the
ISSUE: Whether or not Insurance Company of North America can claim against insured." Parenthetically, under Section 14 of the same Code, an insurable interest
Gaisano Cagayan for the debt that was insured –Yes. 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
RATIO: out of which the expectancy arises.

The insurance in this case is not for loss of goods by fire but for petitioner's Anyone has an insurable interest in property that derives a benefit from its
accounts with IMC and LSPI that remained unpaid 45 days after the fire. existence or would suffer loss from its destruction. It is sufficient that the insured
Accordingly, petitioner's obligation is for the payment of money. As correctly is so situated with reference to the property that he would be liable to loss should
stated by the CA, where the obligation consists in the payment of money, the it be injured or destroyed by the peril against which it is insured an insurable
failure of the debtor to make the payment even by reason of a fortuitous event interest in property does not necessarily imply a property interest in, or a lien
shall not relieve him of his liability. The rationale for this is that the rule that an upon, or possession of, the subject matter of the insurance, and neither the title
obligor should be held exempt from liability when the loss occurs thru a fortuitous nor a beneficial interest is requisite to the existence of such an interest insurance
event only holds true when the obligation consists in the delivery of a determinate in this case is not for loss of goods by fire but for petitioner's accounts with IMC
and LSPI that remained unpaid 45 days after the fire - obligation is pecuniary in Ong Lim Sing Jr. vs. FEB Leasing & Finance Corporation
nature obligor should be held exempt from liability when the loss occurs thru a
fortuitous event only holds true when the obligation consists in the delivery of a DOCTRINE: A lessee has an insurable interest in the equipment and motor vehicle
determinate thing and there is no stipulation holding him liable even in case of leased, and the measure of its insurable interest is the extent to which it may be
fortuitous event. damnified by loss or injury thereof.

Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or FALLO: WHEREFORE, in the light of all the foregoing, the petition is DENIED.
destruction of anything of the same kind does not extinguish the obligation (Genus FACTS: FEB entered into a lease of equipment and motor vehicles with JVL with Lim
nunquan perit) as the guaranty. Under the contract, JVL was obliged to pay FEB monthly rental of
The subrogation receipt, by itself, is sufficient to establish not only the relationship P170,494.00. JVL defaulted in the payment. DEB send a letter to JVL demanding
of respondent as insurer and IMC as the insured, but also the amount paid to settle payment and upon failure to pay, FEB filed a complaint for sum of money against JVL,
the insurance claim Lim and John Doe.

Art. 2207. If the plaintiff's property has been insured, and he has received JVL and Lim admitted the existence of the lease agreement but asserted that it is in
indemnity from the insurance company for the injury or loss arising out of the reality a sale of equipment on installment basis, with FEB acting as the financier. JVL
wrong or breach of contract complained of, the insurance company shall be and Lim claimed that this intention was apparent from the fact that they were made
subrogated to the rights of the insured against the wrongdoer or the person who to believe that when full payment was effected, a Dead of Sale will be executed by
has violated the contract. FEB as vendor in favor of JVL and Lim as vendees. They also contended that the lease
agreement is a contract of adhesion and should, therefore, be construed against the
As to LSPI, no subrogation receipt was offered in evidence. Failure to substantiate party who prepared it.
the claim of subrogation is fatal to petitioner's case for recovery of the amount of
P535,613 RTC upheld JVL and Lim’s stance stressing the contradictory terms it found on the
lease agreement. The said contract disclaimed warranty of product and that the
lessor does not guarantee any feature or aspect of the object of the contract as to
its merchantability. Merchantability is a term applied in a contract of sale of goods
where conditions and warranties are made to apply. Also, the alleged lessee was
required to insure the thing against loss, damage or destruction which would not be
possible if there is no right, title, or interest that he will be benefited by its
preservation and continued existence or suffer a direct pecuniary loss from its
destruction or injury by peril insured against. If the defendants were to be regarded
as only a lessee, logically the lessor who asserts ownership will be the one directly
benefited or injured and therefore the lessee is not supposed to be the assured as
he has no insurable interest.

On appeal, CA issued a decision declaring the transaction between the parties as a

financial lease agreement under RA 8556.

ISSUE: W/N the petitioner is a lessee with insurable interest over the subject
personal properties. – YES.
RATIO: The stipulation that the equipment shall be insured at the cost and expense Great Pacific Life Ass. Corp. vs. CA and Leuterio, G.R. No. 113899. Oct. 13, 1999
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. INSURABLE INTEREST
Petitioner, as a lessee, has an insurable interest in the equipment and motor vehicles FACTS
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 • A contract of group life insurance was executed between petitioner Great
injury thereof. It cannot be denied that HVL will be directly damnified in case of loss, Pacific Life Assurance Corporation and Development Bank of the
damage, or destruction of any of the properties leased. Philippines. Grepalife agreed to insure the lives of eligible housing loan
mortgagors of DBP.
Likewise, the stipulation is Sec. 9.1 of the ease contract that the lessor does not
• On November 11, 1983, Dr. Wilfredo Leuterio, a physician and a housing
warrant the merchantability of the equipment is a valid stipulation. In the financial
debtor of DBP applied for membership in the group life insurance plan. In
lease agreement, FEB did not assume responsibility as to the quality,
an application form, Dr. Leuterio answered that he had no high blood and
merchantability, or capacity of the equipment. This stipulation provides that in case
to the best of his knowledge was in good health.
of defect, recourse should be made to the manufacturer. “The financial lessor, being
• On November 15, 1983, Grepalife issued Certificate No. B-18558, as
a financing company, i.e., an extender of credit rather than an ordinary equipment
insurance coverage of Dr. Leuterio.
for any particular use. Thus, the financial lessee was precisely in a position to enforce
• On August 6, 1984, Dr. Leuterio died due to massive cerebral hemorrhage.
such warranty directly against the supplier of the equipment and not against the
• Consequently, DBP submitted a death claim to Grepalife.
financial lessor.
• 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 non-disclosure
constituted concealment that justified the denial of the claim.
• On October 20, 1986, the widow of the late Dr. Leuterio, respondent
Medarda V. Leuterio, filed a complaint with the RTC against Grepalife for
Specific Performance with Damages.
• Dr. Hernando Mejia, who issued the death certificate, was called to testify.
He stated that Dr. Leuterio complained of headaches presumably due to
high blood pressure. The inference was not conclusive because Dr.
Leuterio was not autopsied, hence, other causes were not ruled out.

GREPALife Contention:

• That MEDARDA V. LEUTERIO was not the real party in interest therefore
the case should be dismissed for the court had no juirsidiction over the
case.
• GREPALife claims that it falls to the DBP to file the case.

ISSUE:
 • Whether or not MEDARDA V. LEUTERIO has an insurable interest that • if there is any, shall then be paid to the beneficiary/ies designated by the
qualifies her to be a real party in interest? debtor.

HELD: The Insured may be regarded as the real party in interest, although he has When DBP submitted the insurance claim against GREPALife, the latter denied
assigned the policy for the purpose of collection, or has assigned as collateral payment thereof, interposing the defense of concealment committed by the insured.
security any judgment he may obtain. Thereafter, DBP collected the debt from the mortgagor and took the necessary
action of foreclosure on the residential lot of private respondent.
The Group insurance policy (how the policy worked)
DBP has no longer an interest in the insurance, but the insurance policy remained
• The rationale of a group insurance policy of mortgagors, otherwise known active, leaving the “insured” a right over the insurance.
as the mortgage redemption insurance, is a device for the protection of
both the mortgagee and the mortgagor. On the part of the mortgagee, it Insured, being the person with whom the contract was made, is primarily
has to enter into such form of contract so that in the event of the the proper person to bring suit thereon. * * * Subject to some exceptions,
unexpected demise of the mortgagor during the subsistence of the insured may thus sue, although the policy is taken wholly or in part for the
mortgage contract, the proceeds from such insurance will be applied to benefit of another person named or unnamed, and although it is expressly
the payment of the mortgage debt, thereby relieving the heirs of the made payable to another as his interest may appear or otherwise. * * *
mortgagor from paying the obligation. 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
RATIONALE: The Insurable Interest of the Spouse thereon in his own name, especially where the mortgagees interest is less
than the full amount recoverable under the policy, (Gonzales La O vs. Yek
Section 8 of the Insurance Code provides:
Tong Lin Fire & Marine Ins. Co)
Unless the policy provides, where a mortgagor of property
Insured may be regarded as the real party in interest, although he has assigned the
effects insurance in his own name providing that the loss
policy for the purpose of collection, or has assigned as collateral security any
shall be payable to the mortgagee, or assigns a policy of
judgment he may obtain.
insurance to a mortgagee, the insurance is deemed to be
upon the interest of the mortgagor, who does not cease to
be a party to the original contract, and any act of his, prior to
the loss, which would otherwise avoid the insurance, will And since a policy of insurance upon life or health may pass by transfer, will or
have the same effect, although the property is in the hands succession to any person, whether he has an insurable interest or not, and such
of the mortgagee, but any act which, under the contract of person may recover it whatever the insured might have recovered, the widow of the
insurance, is to be performed by the mortgagor, may be decedent Dr. Leuterio may file the suit against the insurer, Grepalife.
performed by the mortgagee therein named, with the same
effect as if it had been performed by the mortgagor.

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 [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,
New Life Enterprises v. Hon. Court of Appeals G.R. No. L-16163. February 28, 1963 insured to give notice of any insurances already effected which petitioner in fact,
did not. In their response, Petitioner alleged that they are not to be blamed for
Petitioners: NEW LIFE ENTERPRISES and JULIAN SY the omissions, considering that Insurance Agents of Respondents knew about the
Respondents: HON. COURT OF APPEALS, EQUITABLE INSURANCE existence of the additional insurance and that he was not informed of such, as he
CORPORATION, RELIANCE SURETY AND INCURANCE CO., INC. and did not even read the policies.
WESTERN GUARANTY CORPORATION
Ponente: REGALADO ISSUE: Whether or not the Insurance Policy should be construed in favor of the
Insured No.
DOCTRINE: It is a cardinal principle of insurance law that a policy or contract of
insurance is to be construed liberally and heavily in favor of the insured, and RATIO: The court did not excuse the petitioners, as the terms of the contract are
strictly against the insurer, however, like all contracts, such is to be construed clear and unambiguous. The Insured is required to disclose. The court related
according to the sense and meaning of the terms. If such terms are clear, they herein that the insured must conform to the terms of the policy, and such lapse is
must be taken and understood according to plain, ordinary, and popular sense. cannot excuse his negligence, being a business man for quite some time. The
Supreme Court, pronounced in Pioneer Insurance and Surety Corporation v. Yap
FALLO: “WHEREFORE, finding no cogent reason to disturb the judgement of that the terms of the Policy herein required the declaration of other insurances is
respondent Court of Appeals, the same is hereby AFFIRMED.” a statement binding on both parties ensuring that there was no other insurance
in effect, and that it upheld the validity of such provision to prevent “over-
FACTS: Julian Sy and Jose Sy Bang formed a business named New Life Enterprises, insurance” and to avoid the perpetuation of fraud. Subsequently, the court
wherein the former engaged the Insurance services of Western Guaranty reiterated in Pacific Banking Corporation v. Court of Appeals et. al.: the failure of
Corporation, Reliance Surety and Insurance Co., Inc., and Equitable Insurance the insured therein to declare the existence of other insurances, where the same
Corporation. Subsequently, Respondents issued the following: was guilty of false declaration since it was required to declare but elected not to.
• On May 15th 1981, Western Guaranty Corporation issued Fire Insurance
Policy No. 27201 in the amount of php350,000.00 which was renewed on
May 13, 1982 Additionally, Policy No. 15 states that “ xxx if any false declaration be made or used
• On July 30th, Reliance Surety and Insurance Co., Inc. issued Fire Insurance in support thereof, xxx all benefits under this Policy shall be forfeited xxx “, and in
Policy No. 69135 in the amount of php300,000.00, with an additional so far as the liability of Respondent Reliance¸ the complaint for recovery was filed
insurance of php700,000.00 under Fire Insurance Policy No. 71547. in court by petitioners only on January 31, 1984, after more than one year after
• On February 8th 1982, Equitable Insurance Corporation issued Fire Insurance Petitioners received the letter of denial on November 29, 1982 where Policy
Policy No. 39328 in the amount of php200,000.00. Condition No. 27 requires that: “If a claim be made and rejected and an action or
suit not be commenced either in the insurance commission or any court of
Subsequently thereafter; the building being occupied by New Life Enterprises was competent jurisdiction of notice of such rejection, or in case of arbitration taking
unfortunately gutted by fire, where the stocks in the trade inside the said building place as provided herein, within twelve months after due notice of the award
were insured against the total amount of php1,550,000.00. The cause of the fire made by the arbitrator xxx then such claim shall for all purposes be deemed to
was said to be electrical in nature. Thereafter, Petitoner Julian Sy immediately have been abandoned and shall not thereafter be recoverable hereunder.”
went to Respondent Reliance Insurance and attempted to claim, and in
conjunction, he was following up his claim with Respondent Equitable Insurance.
The latter said that if the former would pay, they would also agree. (It is important
to note that in a testimony, Julian Sy admitted that the three respondent
companies are sister companies). All three ultimately denied.

The grounds of denial of all three insurance companies were founded on the
grounds that they had violated the “Policy Condition No. 3” which requires the
Florendo v. Philam Plans However, when Manuel signed the pension plan, he adopted as his own the written
representations and declarations embodied in it. It is clear from these
Doctrine: By signing the application, Manuel adopted as his own the written representations that he concealed his chronic heart ailment and diabetes. He
representations and declarations embodied in it. represented that he has never been treated for a heart condition, diabetes, etc. also
Fallo: Wherefore, the Court AFFIRMS in its entirely the decision of the Court of that he is in good health and physical condition.
Appeals in CA-G.R. CV 87085 dated December 18, 2007. Since he signed the application without filling the details regarding his continuing
Facts: This case is about an insureds alleged concealment in his pension plan treatments, the assumption is that he has never been treated for the said illness in
application of his true state of health and its effect on the life insurance portion of the last 5 years preceding his application. Moreover, Manuel had the responsibility
that plan in case of death. for preparing the application, not Perla, the soliciting agent. If he furnished Perla the
needed information and delegated the filling up, then she acted on his instruction.
Oct 1997, Manuel Florendo, deceased husband of petitioner, filed an application for As Manuel was still taking medicine for his continuing illness, this should have been
comprehensive pension plan respondent Philam Plans after convincing by made known in the application as required. Also, that he had been using a
respondent Perla Abcede. That had a pre-need price of Php997,060, payable in 10 pacemaker since the 70’s that falls within the use of medical attention 5 years
years and had a maturity value of Php 2.8 million after 20 years. Manuel signed the preceding the application in 1997.
application and left to Perla the task of supplying the information needed in the
application. Is Manuel bound to the failure of his agents to declare the health condition:

Under its master policy, Philam was to provide life insurance coverage, including Lourdes argues that Manuel signed the application in blank and that the fault of the
accidental death. So, if the plan holder died before the maturity of the plan, his agent must be considered solely her own and cannot prejudice Manuel.
beneficiary was to instead receive the proceeds of the insurance, equivalent to the Manuel, however, in signing the pension plan certified that he wrote all the
pre-need price. information stated in it or had someone do it under his direction. The plan included
11 months after the issuance of the pension plan, on Sept 15, 1998, Petitioner died a provision that it was signed by Manuel and it was filled up either by him or someone
of blood poisoning. Petitioner subsequently filed her claim, but it was declined else under his direction.
because they found that Manuel was on maintenance medicine for his heart and had Lastly, Lourdes points out that any defect or insufficiency in the application should
an implanted pacemaker. be deemed waived after the same has been approved and the premiums have been
Lourdes filed an action to recover the claim. RTC ordered respondents, to pay all the collected.
benefits from the plan. However the CA reversed the decision, holding that insurance The Court disagrees. The plan contains a one year incontestability period which
policies are traditionally contracts uberrimae fidae or contracts of utmost good faith. states that:
As such, Manuel was required to disclose his sickness,
After this Agreement has remained in force for one (1) year, we can no longer contest
Issue: Whether or not petitioner is entitled to the benefits of the plan despite the for health reasons any claim for insurance under this Agreement, except for the
concealment of the true state of health of the plan holder. – NO. reason that installment has not been paid (lapsed), or that you are not insurable at
Ratio: Is Manuel Guilty of Concealment? the time you bought this pension program by reason of age. If this Agreement lapses
but is reinstated afterwards, the one (1) year contestability period shall start again
Lourdes argues that unfilled spaces relating to his medical history should have been on the date of approval of your request for reinstatement.
returned rather than choosing to approve it. She says that since Philam never
queried Manuel regarding his health, he could not be blamed for not filling it up. The clause precludes the insurer from disowning liability under the policy it used on
the ground of concealment or misrepresentation regarding the health of the insured
after a year of its issuance. Since Manuel died on the 11th month, the incontestability Great Pacific Life Ass. Corp. vs CA; Mondragon vs CA and Ngo Hing
period has not yet set in.
Doctrine: The contract of insurance is one of perfect good faith uberrima fides
meaning good faith, absolute and perfect candor or openness and honesty; the
absence of any concealment or demotion, however slight.

Concealment is a neglect to communicate that which a party knows he ought to

communicate. Whether intentional or unintentional, the concealment entitles the
insurer to rescind the contract of insurance.

Fallo: WHEREFORE, the decision appealed from is hereby set aside, and in lieu
thereof, one is hereby entered absolving petitioners Lapulapu D. Mondragon and
Great Pacific Life Assurance Company from their civil liabilities as found by
respondent Court and ordering the aforesaid insurance company to reimburse the
amount of P1,077.75 without interest, to private respondent Ngo Hing. Costs against
private respondent.

Facts:

• Ngo Hing filed an application with Great Pacific Life Assurance for a twenty-
year endowment policy in the amount of P50,000 on the life of his one-
year old daughter Helen Go.
• Ngo Hing supplied the essential data to Lapulapu Mondragon, Branch
Manager of Pacific Life. Ngo Hing paid the annual premium of P1,077 to
the company. Upon payment, a binding deposit receipt was issued to Ngo
Hing.
• Mondragon received a letter from Pacific Life disapproving the insurance
application because the said life insurance for 20-year endowment plan is
not available for minors below seven years old, but Pacific Life can consider
the same under the Juvenile Triple Action Plan, and advised that if the offer
is acceptable, the Juvenile Non-Medical Declaration can be sent to the
company.
• The non-acceptance was allegedly not communicated by Mondragon to
Ngo Hing.
• Helen Go died of influenza with complication of bronchopneumonia.
• Ngo Hing failed in his effort in seeking payment of the proceeds of the
insurance, hence, he filed an action for recovery before CFI which granted
his claim.

Issue #1: WON The binding deposit receipt constituted a temporary contract of the
life insurance in question
Held: No. Saturnino vs Phil Am Life G.R. No. L-16163. February 28, 1963

The binding deposit receipt in question is merely an acknowledgment on behalf of Plaintiffs-appellants: IGNACIO SATURNINO, in his own behalf and as the
the company, that the latter’s branch office had received from the applicant the JUDICIAL GUARDIAN OF CARLOS SATURNINO, minor
insurance premium and had accepted the application subject for processing by the
insurance company; and that the latter will either approve or reject the same on the Defendant-appellee: THE PHILIPPINE AMERICAN LIFE INSURANCE
basis of whether or not the applicant is “insurable on standard rates”. COMPANY (PALIC)

A contract of insurance, like other contracts, must be assented to by both parties Ponente: MAKALINTAL
either in person or by their agents. The contract, to be binding from the date of DOCTRINE: In this jurisdiction, a concealment, whether intentional or
application, must have been a completed contract, one that leaves nothing to be unintentional, entitles the insurer to rescind the contract of insurance,
done, nothing to be completed, nothing to be passed upon, or determined, before it concealment being defined as "negligence to communicate that which a party
shall take effect. There can be no contract of insurance unless the minds of the knows and ought to communicate" (Sections 25 & 26, Act No. 2427)
parties have met in agreement.
FALLO: “The judgment appealed from, dismissing the complaint and awarding the
Issue #2: WON Ngo Hing concealed the state of health and physical condition of return to appellants of the premium already paid, with interest at 6% up to January
Helen Go 29, 1959, is affirmed, with costs against appellants.”
Held: Yes. FACTS
When Ngo Hing supplied the required essential data for the insurance application Saturnino filed this action to recover the sum of P5,000.00, corresponding to the
form, he was fully aware that his one year old daughter is typically a mongoloid child. face value of an insurance policy issued by defendant on the life of Estefania A.
Such a congenital physical defect could never be ensconced nor disguised. Saturnino, and the sum of P1,500.00 as attorney's fees.
The contract of insurance is one of perfect good faith uberrima fides meaning good Saturnino was declared entitled to the return of the premium already paid, plus
faith, absolute and perfect candor or openness and honesty; the absence of any interest at 62 up to January 8, 1959, when a check for the corresponding amount
concealment or demotion, however slight. — P359.65 — was sent to them by PALIC.
Concealment is a neglect to communicate that which a party knows he ought to The policy sued upon is one for 20-year endowment non-medical insurance. This
communicate. Whether intentional or unintentional, the concealment entitles the kind of policy dispenses with the medical examination of the applicant usually
insurer to rescind the contract of insurance. required in ordinary life policies.

However, detailed information is called for in the application concerning the

applicant's health and medical history.
• The written application in this case was submitted by Saturnino to PALIC on
November 16, 1957, witnessed by PALIC's agent Edward A. Santos.
• The policy was issued on the same day, upon payment of the first year's
premium of P339.25.
September 19, 1958: Saturnino died of pneumonia, secondly to influenza. Are the facts thus falsely represented material? The Insurance Law (Section 30)
provides that "materiality is to be determined not by the event, but solely by the
• Appellants here, who are her surviving husband and minor child, respectively, probable and reasonable influence of the in forming his estimate of the proposed
demanded payment of the face value of the policy. contract, or in facts upon the party to whom the communication is due, making
• The claim was rejected and this suit was subsequently instituted.
his inquiries."

FIRST CONTENTION
September 9, 1957: It appears that the months prior to the issuance of the policy,
Saturnino was operated on for cancer That the facts subject of the representations were not material in view of the
"non-medical" nature of the insurance applied for, which does away with the usual
• involving complete removal of the right breast, including the pectoral
requirement of medical examination before the policy is issued.
muscles and the glands found in the right armpit.
• She stayed in the hospital for a period of eight days, after which she was Supreme Court: The contention is without merit.
discharged
• although according to the surgeon who operated on her she could not be • If anything, the waiver of medical examination renders even more material
considered definitely cured, her ailment being of the malignant type. the information required of the applicant concerning previous condition of
health and diseases suffered.
• WHY? Such information necessarily constitutes an important factor which
Notwithstanding the fact of her operation Estefania A. Saturnino did not make a the insurer takes into consideration in deciding whether to issue the policy or
disclosure thereof in her application for insurance. not.
It is logical to assume that if appellee had been properly apprised of the insured's
• On the contrary, she stated therein that she did not have, nor had she ever
medical history she would at least have been made to undergo medical
had, among other ailments listed in the application, cancer or other tumors;
examination in order to determine her insurability.
• that she had not consulted any physician, undergone any operation or
suffered any injury within the preceding five years; and SECOND CONTENTION
• 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 • that due information concerning the insured's previous illness and operation
menstrual disorders. had been given to appellee's agent Edward A. Santos, who filed the
• The application also recites that the foregoing declarations constituted "a application form after it was signed in blank by Estefania A. Saturnino.
further basis for the issuance of the policy." • This was denied by Santos in his testimony

Supreme Court: It is not necessary to consider appellee's additional argument,

ISSUE: Whether or not the insured made such false representations of material which was upheld by the trial court, that in signing the application form in blank
facts as to avoid the policy. (YES) and leaving it to Edward A. Santos to fill (assuming that to be the truth) the insured
RATIO in effect made Santos her agent for that purpose and consequently was
responsible for the errors in the entries made by him in that capacity.
There can be no dispute that the information given by her in her application for
insurance was false, namely, that she had never had cancer or tumors, or THIRD CONTENTION
consulted any physician or undergone any operation within the preceding period In the application for insurance signed by the insured in this case, Estefania agreed
of five years. to submit to a medical examination by a duly appointed examiner of appellee if in
the latter's opinion such examination was necessary as further evidence of
insurability. In not asking her to submit to a medical examination, appellants
maintain, appellee was guilty of negligence, which precluded it from finding about MANILA BANKERS LIFE INSURANCE CORPORATION v. ABAN
her actual state of health.
Supreme Court: No such negligence can be imputed to appellee. It was precisely DOCTRINE: The insurer has two years from the date of issuance of the insurance
because the insured had given herself a clean bill of health that appellee no longer contract or of its last reinstatement within which to contest the policy, whether, the
considered an actual medical checkup necessary. insured still lives within such period. After two years, the defenses of concealment
or misrepresentation, no matter how patent or well founded, no longer lie.
FOURTH CONTENTION
FALLO: WHEREFORE, the Petition is DENIED. The assailed September 28, 2005
Appellants also contend there was no fraudulent concealment of the truth as Decision and the November 9, 2006 Resolution of the Court of Appeals in CA-G.R. CV
much as the insured herself did not know, since her doctor never told her, that No. 62286 are AFFIRMED.
the disease for which she had been operated on was cancer.
FACTS:
Supreme Court: Concealment of the fact of the operation itself was fraudulent, • Delia Sotero took out a life insurance policy from Manila Bankers Life Insurance
as there could not have been any mistake about it, no matter what the ailment. Corporation, designating respondent Cresencia P. Aban, her niece, as her
In order to avoid a policy it is not necessary to show actual fraud on the part of the beneficiary.
insured. • Manila Bankers issued Insurance Policy with a face value of P 100,000.00, in
Sotero’s favor 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. Aban filed a claim for the insurance
proceeds on July 9, 1996.
• Manila Bankers conducted an investigation into the claim, and came out with
the following findings:
o Sotero did not personally apply for insurance coverage, as she was illiterate
and Sotero was sickly since 1990;
o Sotero did not have the financial capability to pay the insurance premiums
on Insurance Policy No. 747411;
o Sotero did not sign the July 3, 1993 application for insurance; and
o Aban was the one who filed the insurance application and designated
herself as the beneficiary.
• Manila Bankers denied respondent’s claim on April 16, 1997 and refunded the
premiums paid on the policy. Manila Bankers filed a civil case for Rescission/
Annulment of the Policy alleging that the policy was obtained through Fraud,
Concealment and/or Misrepresentation under the Insurance Code, which
renders it voidable under Art. 1390 of the NCC.
• Aban filed a Motion to Dismiss claiming that the cause of action was barred by
prescription pursuant to Sec. 48 of the Insurance Code.
• During the proceedings on the Motion to Dismiss, Manila Banker’s investigator
testified in court that the insurance underwriter who solicited the insurance is
 a cousin of respondent's husband, Dind Aban, and that it was the respondent discrimination ultimately work to the detriment of bona fide takers of insurance
who paid the annual premiums on the policy. and the public in general.
• RTC granted the Motion to Dismiss concluding that Sotero, and not Aban, was
the one who procured the insurance; thus, Sotero could legally take out
insurance on her own life and validly designate — as she did — Aban as the
beneficiary. It held further that under Section 48, petitioner had only two years
from the effectivity of the policy to question the same; since the policy had been
in force for more than two years, petitioner is now barred from contesting the
same or seeking a rescission or annulment thereof.

ISSUE: Whether or not Manila Bankers is barred from denying the insurance claims
based on fraud or concealment? - YES.

RATIO:

• Yes. While Manila Bankers insists that its independent investigation on the
claim reveals that it was Aban, posing as Sotero, who obtained the insurance,
this claim is no longer feasible in the wake of the courts' finding that it was
Sotero who obtained the insurance for herself. The finding of fact binds the
court. 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
Sun Life of Canada (Phils), Inc. vs. Ma. Daisy's. Sibya, et. al. further into his medical history for verification purposes. According to
G.R. No. 211212, June 08, 2016 J. Reyes them, the complaint is just a ploy to avoid the payment of insurance claims.

DOCTRINE: The intent to defraud on the part of the insured must be ascertained to RTC:
merit rescission of the insurance contract. Concealment as a defense for the insurer • Sun Life violated Sections 241, paragraph l (b), (d), and (e) and 242 of the
to avoid liability is an affirmative defense and the duty to establish such defense by Insurance Code when it refused to pay the rightful claim of the
satisfactory and convincing evidence rests upon the provider or insurer. respondents.
• Ordered Sun Life to pay death benefits and damages.
FALLO: • Atty. Jesus Jr. did not commit material concealment and misrepresentation
WHEREFORE, the petition for review is DENIED. The Decision dated November 18, when he applied for life insurance with Sun Life. Given the disclosures and
2013 and Resolution dated February 13, 2014 of the Court of Appeals in CA-G.R. CV. the waiver and authorization to investigate executed by Atty. Jesus Jr. to
No. 93269 are hereby AFFIRMED. Sun Life, the latter had all the means of ascertaining the facts allegedly
concealed by the applicant.
FACTS: CA:
• On January 10, 2001, Atty. Jesus Sibya, Jr. (Atty. Jesus Jr.) applied for life • Ordered Sun Life to pay death benefits and damages.
insurance with Sun Life Canada (Philippines), Inc. In his Application for • Modified the RTC decision by absolving Sun Life from the charges of
Insurance, he indicated that he had sought advice for kidney problems. violation of Sections 241 and 242 of the Insurance Code.
• On February 5, 2001, Sun Life approved Atty. Jesus Jr.'s application and • Evidence on records show that there was no fraudulent intent on the part
issued Insurance Policy. The Policy indicated the respondents as of Atty. Jesus Jr. in submitting his insurance application. Instead, Atty. Jesus
beneficiaries and entitles them to a death benefit of Pl,000,000.00 should Jr. admitted in his application that he had sought medical treatment for
Atty. Jesus Jr. dies on or before February 5, 2021, or a sum of money if Atty. kidney ailment.
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 ISSUE: Whether or not there was concealment or misrepresentation when Atty.
Joaquin, Iloilo. Thus, Ma. Daisy filed a Claimant's Statement with Sun Life Jesus Jr. submitted his insurance application with Sun Life –No.
to seek the death benefits indicated in his insurance policy.
• Sun Life denied the claim on the ground that the details on Atty. Jesus Jr. RATIO:
's medical history were not disclosed in his application. Simultaneously, As correctly observed by the CA, Atty. Jesus Jr. admitted in his application his medical
Sun Life tendered a check representing the refund of the premiums paid treatment for kidney ailment. Moreover, he executed an authorization in favor of
by Atty. Jesus Jr. Sun Life to conduct investigation in reference with his medical history.
• Despite demands of Ma. Daisy, Sun Life refused to heed the requests and
instead filed a Complaint for Rescission of Atty. Jesus Jr. 's insurance policy It also appears that Atty. Jesus Jr. also signed the Authorization, which gave Sun Life
Sun Life alleges in the complaint that: the opportunity to obtain information on the facts disclosed by Atty. Jesus Jr. in his
• Atty. Jesus Jr. did not disclose in his insurance application his previous insurance application. Given the express language of the Authorization, it cannot be
medical treatment at the National Kidney Transplant Institute in May and said that Atty. Jesus Jr. concealed his medical history since Sun Life had the means of
August of 1994. ascertaining Atty. Jesus Jr.'s medical record.
• The undisclosed fact suggested that the insured was in "renal failure" and
at a high-risk medical condition. Consequently, had it known such fact, it As to allegations of misrepresentation
would not have issued the insurance policy in favor of Atty. Jesus Jr. Atty. Jesus Jr. was not a medical doctor, and his answer "no recurrence" may be
Respondent’s defense: construed as an honest opinion. Where matters of opinion or judgment are called
• Atty. Jesus Jr. did not commit misrepresentation in his application for for, answers made in good faith and without intent to deceive will not avoid a policy
insurance. They averred that Atty. Jesus Jr. was in good faith when he even though they are untrue.
signed the insurance application and even authorized Sun Life to inquire
Indeed, the intent to defraud on the part of the insured must be ascertained to merit
rescission of the insurance contract. Concealment as a defense for the insurer to
avoid liability is an affirmative defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon the provider or insurer. In the
present case, Sun Life failed to clearly and satisfactorily establish its allegations, and
is therefore liable to pay the proceeds of the insurance.