I.

INSURANCE (PRELIMS )
(Presidential Decree No. [PD] 612, as amended by RA 10607)
A. Basic Concepts – Section 2-9
"Section 2. Whenever used in this Code, the following terms shall have the respective meanings
hereinafter set forth or indicated, unless the context otherwise requires:

"(a) A contract of insurance is an agreement whereby one undertakes for a consideration

to indemnify another against loss, damage or liability arising from an unknown or
contingent event.

"A contract of suretyship shall be deemed to be an insurance contract, within the

meaning of this Code, only if made by a surety who or which, as such, is doing an
insurance business as hereinafter provided.

"(b) The term doing an insurance business or transacting an insurance business, within
the meaning of this Code, shall include:

"(1) Making or proposing to make, as insurer, any insurance contract;

"(2) Making or proposing to make, as surety, any contract of suretyship as a

vocation and not as merely incidental to any other legitimate business or activity
of the surety;

"(3) Doing any kind of business, including a reinsurance business, specifically

recognized as constituting the doing of an insurance business within the meaning
of this Code;

"(4) Doing or proposing to do any business in substance equivalent to any of the

foregoing in a manner designed to evade the provisions of this Code.

"In the application of the provisions of this Code, the fact that no profit is derived
from the making of insurance contracts, agreements or transactions or that no
separate or direct consideration is received therefor, shall not be deemed
conclusive to show that the making thereof does not constitute the doing or
transacting of an insurance business.

"(c) As used in this Code, the term Commissioner means the Insurance Commissioner.

"CHAPTER I
"THE CONTRACT OF INSURANCE

"TITLE 1
"WHAT MAY BE INSURED

"Section 3. Any contingent or unknown event, whether past or future, which may damnify a
person having an insurable interest, or create a liability against him, may be insured against,
subject to the provisions of this chapter.
"The consent of the spouse is not necessary for the validity of an insurance policy taken out by
a married person on his or her life or that of his or her children.

"All rights, title and interest in the policy of insurance taken out by an original owner on the life or
health of the person insured shall automatically vest in the latter upon the death of the original
owner, unless otherwise provided for in the policy.

"Section 4. The preceding section does not authorize an insurance for or against the drawing of
any lottery, or for or against any chance or ticket in a lottery drawing a prize.

"Section 5. All kinds of insurance are subject to the provisions of this chapter so far as the
provisions can apply.

"TITLE 2
"PARTIES TO THE CONTRACT

"Section 6. Every corporation, partnership, or association, duly authorized to transact insurance

business as elsewhere provided in this Code, may be an insurer.

"Section 7. Anyone except a public enemy may be insured.

"Section 8. Unless the policy otherwise provides, where a mortgagor of property effects
insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns
a policy of 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 have the same effect, although the
property is in the hands of the mortgagee, but any act which, under the contract of insurance, is
to be performed by the mortgagor, may be performed by the mortgagee therein named, with the
same effect as if it had been performed by the mortgagor.

"Section 9. If an insurer assents to the transfer of an insurance from a mortgagor to a

mortgagee, and, at the time of his assent, imposes further obligations on the assignee, making
a new contract with him, the acts of the mortgagor cannot affect the rights of said assignee.

i. Who is the Insured, Insurer, and Beneficiary

• Insured: The individual or entity whose life, health, or property is covered under the
policy. They must have an insurable interest—i.e., stand to suffer financial loss if the
insured event occurs.
- The person protected against a risk under an insurance contract.
• Insurer: A corporation, partnership, or association legally authorized to conduct
insurance business in the Philippines (Sec. 6, Insurance Code).
• Beneficiary: The person or party designated to receive policy proceeds upon the
insured event (e.g., death). The insured generally has the right to name or change the
beneficiary unless the designation has been expressly made irrevocable.
- The person entitled to receive the proceeds or benefits of the insurance policy
upon the happening of the insured event.
ii. Elements of an Insurance Contract

1. Legal Capacity – Parties must be legally capable of contracting.

2. Insurable Interest – Required in life, health, and property insurance (Code §§10–19)
3. Consideration (Premium) – Payment by insured in exchange for coverage.
4. Risk or Contingent Event – The subject matter relies on an uncertain event (e.g.,
damage, death).
5. Indemnity/Promise to Pay – Obligation by insurer to compensate or pay benefit upon
occurrence of the covered event

iii. Characteristics / Nature of Insurance Contracts

Based on both Code law and jurisprudence

1. Aleatory – Performance depends on an uncertain event; amounts exchanged may be

disproportionate.
2. Unilateral – Only insurer is bound to perform once premium is paid.
3. Conditional – Obligations activate only when conditions met (e.g., premium payment,
proof of loss).
4. Personal – Based on the insured's risk profile; cannot automatically transfer upon an
asset’s sale.
5. Contract of Adhesion – Standardized form drafted by insurer; ambiguities resolved in
favor of insured.
6. Consensual – Requires agreement; mere application doesn’t bind insurer until
acceptance.
7. Executory – Most terms yet to be performed until loss materializes.
8. Uberrimae Fidei (Utmost Good Faith) – Full disclosure of material facts required
during contracting.

iv. Policy

• A written instrument or integrated contract outlining the terms and conditions of

insurance
• Essential elements (Insurance Code & legal doctrine) include:
o Parties involved
o Subject matter & insurable interest
o Policy amount, covered risks, and period
o Premium and payment terms
o Conditions, warranties, exclusions, and endorsements
• It is only valid and enforceable upon delivery and acceptance, or after premium
payment
 A. Concept of Insurance
•Philippine Health Care Providers, Inc., vs. Commissioner of Internal
Revenue, G.R. No. 167330, September 18, 2009
Facts: This case involves a Motion for Reconsideration filed by Philippine Health Care
Providers (PHCP), a corporation operating as a health maintenance organization (HMO).
PHCP enters into agreements with members who pay an annual fee in exchange for
medical services. The Commissioner of Internal Revenue (CIR) assessed PHCP for
deficiency documentary stamp taxes (DST) and value-added tax (VAT), arguing that the
health care agreements are contracts of insurance subject to DST. Although the Court of
Tax Appeals (CTA) canceled the DST assessment, the Supreme Court reversed this,
ruling that the agreements functioned like non-life insurance—contracts of indemnity—
and were thus taxable under Section 185 of the Tax Code. The Court emphasized that
DST is imposed not on the business itself but on the privilege of entering into such
contracts. PHCP later disclosed that it had availed of tax amnesty under Republic Act
No. 9480.
Held: A Health Maintenance Organization (HMO) is not engaged in the insurance
business because its primary purpose is to provide health services rather than to
indemnify for loss. Applying the "principal object and purpose test," U.S. case law
supports that an HMO's focus on delivering medical care distinguishes it from insurance
companies, which are mainly concerned with risk coverage. HMOs aim to reduce the
cost of healthcare through service delivery, preventive care, and operational efficiency,
rather than covering unexpected financial losses. Unlike insurers, HMOs bring patients
and doctors together to directly provide treatment, not merely reimburse costs after the
fact.
Concept of Insurance
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement
whereby one undertakes for a consideration to indemnify another against loss, damage
or liability arising from an unknown or contingent event. An insurance contract exists
where the following elements concur: (a) The insured has an insurable interest; (b) The
insured is subject to a risk of loss by the happening of the designed peril; (c) The insurer
assumes the risk; (d) Such assumption of risk is part of a general scheme to distribute
actual losses among a large group of persons bearing a similar risk and (e) In
consideration of the insurer’s promise, the insured pays a premium.
Not all the necessary elements of a contract of insurance are present in petitioner’s
agreements. To begin with, there is no loss, damage or liability on the part of the
member that should be indemnified by petitioner as an HMO. Under the agreement, the
member pays petitioner a predetermined consideration in exchange for the hospital,
medical and professional services rendered by the petitioner’s physician or affiliated
physician to him.

• Land Bank of the Philippines v. Maria Josefina Miranda, G.R. No. 220706,
February 22, 2023.

Facts: Miranda and co-borrowers took a ₱2.4 M loan from LBP in 1998, secured by real estate
mortgage, with ₱5,700.82 deducted as “Mortgage Redemption Insurance (MRI)” premium. The
borrowers never submitted the MRI application, so no policy was issued. After co-borrower’s
death, Miranda stopped payments believing the loan was extinguished by insurance proceeds.
LBP foreclosed on the mortgaged property and sold it at public auction.

Issue: Whether a binding MRI insurance contract existed and, if not, whether LBP is liable for
moral damages as an agent acting beyond its authority.

Rule: The Court found no perfected MRI contract: Miranda never submitted the application and
insurer never issued a policy. LBP, however, deducted premiums and represented that the loan
would be settled by MRI, while knowing the loan was for business and ineligible for MRI
coverage. Acting as agent for LIBI, LBP exceeded its authority and misled Miranda, causing her
mental anguish by believing the loan was extinguished upon death of the co-borrower.

A valid insurance contract requires mutual consent—both parties must assent and the insurer
must issue a policy after acceptance of application and premium payment. MRI is a form of life
insurance that indemnifies the mortgagee and mortgagor upon death. An agent acting beyond
authority without proper disclosure may be liable for damages under Civil Code Articles 1897,
19, 20, and 21.

• Gonzales-Asdala v. Metropolitan Bank and Trust Company, G.R. No. 257982,

February 22, 2023.

Facts:
Fatima Asdala and her husband Wynne took out a loan of ₱1.5 million from Metrobank to
renovate their house. The loan documents required them to get a Mortgage Redemption
Insurance (MRI), which is a type of life insurance that pays off a loan if the borrower dies.

Metrobank later informed them of the MRI premium payment, which was debited from Fatima's
account. However, no insurance policy was ever issued in Wynne’s name, only in Fatima’s.

When Wynne died in 2008, Fatima asked Metrobank to apply the MRI to pay off the remaining
loan. Metrobank refused, saying the MRI was taken out only in Fatima’s name, not Wynne’s.
Metrobank then demanded payment and threatened foreclosure. Fatima sued Metrobank,
arguing that her husband was the one meant to be insured since the property was in his name.

Issue:
Was Wynne Asdala covered by the MRI, and should the loan have been paid off by insurance
upon his death?

Ruling:
The Supreme Court ruled in favor of Metrobank.

• The MRI was only in Fatima’s name, and she was the only one who applied and
paid for it. Therefore, only her death would trigger the insurance to cover the loan.
• Even though Fatima claimed the property was her husband’s alone, the Court ruled that
it was conjugal property (shared by the spouses), since it was acquired during their
marriage.
• As a co-mortgagor, Fatima could validly get MRI on her own life without needing her
husband to do the same.
• Because Wynne was not insured, his death did not activate the MRI, and the
mortgage and loan obligations remained.
Legal Principle:
MRI is a contract of insurance that applies only to the person insured. The death of
someone not covered by the policy does not entitle the surviving party to claim benefits under
that insurance. The insured must be clearly identified, and only their death extinguishes the
loan under an MRI.

B. Insurable Interest
• Philamcare Health System vs. Court of Appeals (379 SCRA 356 [2002])
Facts:

Ernani Trinos applied for health care coverage from Philamcare and answered "No" to a question
about his medical history, denying any past illnesses such as heart trouble. His application was
approved, and he was later hospitalized for a heart attack. When his wife Julita tried to claim the
benefits, Philamcare denied the claim, saying Ernani had concealed his heart condition. After
Ernani’s death, Julita sued Philamcare. The RTC ruled in her favor, and the CA affirmed with
slight modifications.

Issue:

Was Philamcare justified in denying the health care claim based on alleged concealment of a pre-
existing condition?

Ruling:

No. The Supreme Court ruled against Philamcare. It held that health care agreements are
contracts of insurance and must be interpreted strictly against the insurer. Since the question
in the application was one of opinion, not medical fact, and no fraudulent intent was proven, the
contract remained valid. Thus, Philamcare was liable to pay the benefits, as it had assumed
responsibility under the agreement once Ernani was hospitalized.

Insurable Interest

Every person has an insurable interest in the life and health: (a) of himself, of his spouse and of
his children; (b) of any person on whom he depends wholly or in part for education or support, or
in whom he has a pecuniary interest; (c) of any person under a legal obligation to him for the
payment of money, respecting property or service, of which death or illness might delay or
prevent the performance; and (d) of any person upon whose life any estate or interest vested in
him depends.

In the case at bar, the insurable interest of respondent’s husband in obtaining the health care
agreement was his own health. The health care agreement was in the nature of non-life
insurance, which is primarily a contract of indemnity. Once the member incurs hospital, medical
or any other expense arising from sickness, injury or other stipulated contingent, the health care
provider must pay for the same to the extent agreed upon under the contract.
 • Lalican vs. Insular Life Assurance Company Ltd (597 SCRA 159
[2009])
Facts:

Eulogio Lalican was insured under Insular Life’s 20-Year Endowment Policy worth ₱500,000
with two riders of equal value. After failing to pay the January 1998 premium—even after the
31-day grace period—the policy lapsed. In September 1998, Eulogio submitted an Application
for Reinstatement and paid overdue premiums and interest, but died on the same day due to
electrocution. The insurer received the application without knowing about Eulogio’s death but
later denied the reinstatement upon learning of it, refunding the payments. Violeta, Eulogio’s
widow, filed a claim, which the RTC dismissed. Violeta's late appeal was denied, and she filed a
Petition for Review on Certiorari.

Issue:

Whether Violeta Lalican may still recover under the lapsed policy despite her husband's
Application for Reinstatement and payment being submitted before his death.

Ruling:

No. The Supreme Court held that the policy had already lapsed and was not validly reinstated.
Reinstatement is not automatic upon application and payment; the insurer must approve it based
on the insured's continued insurability. Since Eulogio died the same day the application was
submitted, Insular Life could no longer evaluate his health and thus validly refused
reinstatement. Procedurally, the Court also ruled that Violeta's failure to file a timely appeal
made the RTC’s decision final and immutable. The negligence of her lawyer bound her as the
client.

Insurable Interest Defined

An insurable interest is one of the most basic and essential requirements in an insurance contract.
In general, an insurable interest is that interest which a person is deemed to have in the subject
matter insured, where he has a relation or connection with or concern in it, such that the person
will derive pecuniary benefit or advantage from the preservation of the subject matter insured
and will suffer pecuniary loss or damage from its destruction, termination, or injury by the
happening of the event insured against.

The existence of an insurable interest gives a person the legal right to insure the subject matter of
the policy of insurance. Section 10 of the Insurance Code indeed provides that every person has
an insurable interest in his own life. Section 19 of the same code also states that an interest in the
life or health of a person insured must exist when the insurance takes effect, but need not exist
thereafter or when the loss occurs.
 • Spouses Nilo Cha and Stella Uy Cha vs. Court of Appeals, G.R. No.
124520, August 18, 1997
Facts:

Spouses Nilo Cha and Stella Uy-Cha leased a commercial space from CKS Development
Corporation with a clause prohibiting tenants from insuring merchandise on the premises without
written consent from CKS. Despite this, the spouses obtained a fire insurance policy from United
Insurance Co. for ₱500,000 covering their merchandise. On the last day of the lease, a fire
destroyed the goods. CKS, upon learning of the insurance, asked United to pay the proceeds
directly to them, but United refused. CKS filed suit.

The RTC ordered United to pay CKS and the Cha spouses to pay damages.
The CA affirmed but deleted the exemplary damages and attorney’s fees.

Issue:

Whether CKS had an insurable interest in the merchandise and is entitled to the insurance
proceeds.

Held:

No. CKS had no insurable interest in the merchandise of the Cha spouses. Under Section 18 of
the Insurance Code, a contract of insurance is not enforceable unless the insured has an
insurable interest at the time the policy takes effect and at the time of loss. The Cha spouses
owned the merchandise and would suffer the loss, thus had insurable interest under Section 17.
The stipulation in the lease contract barring tenants from taking insurance without CKS’s
consent does not transfer insurable interest to CKS, and automatic assignment of insurance
proceeds to CKS is void under Section 25. The Supreme Court reinstated the trial court’s
decision awarding the proceeds to the Cha spouses, and ruled that their violation of the lease
contract is a separate matter from the validity of the insurance contract.

• Malayan Insurance Company vs. PAP Co. (PHIL. BRANCH), G.R. No.
200784, August 07, 2013
Facts:

PAP Co. obtained a ₱15M fire insurance policy from Malayan Insurance for equipment located
at the Sanyo Building in PEZA, Cavite, for the benefit of RCBC as mortgagee. The policy was
later renewed “as is.” During the renewal period, the equipment was destroyed by fire after
being transferred to a different location (Pace Building) without Malayan’s consent. Malayan
denied the claim, citing unauthorized transfer, increased risk, and lack of notice.
Issue:
Whether Malayan is liable under the fire insurance policy despite the unauthorized transfer of
the insured property to a new location.
Ruling:

No. The Supreme Court ruled that Malayan validly denied the claim. The policy expressly
prohibited removal without consent. There was no clear proof Malayan was notified, and RCBC
was not its agent. The transfer increased the risk (higher fire tariff) and occurred after renewal,
constituting concealment and breach of warranty. Under Sections 26, 27, and 168 of the
Insurance Code, Malayan was entitled to rescind the contract.

• UCPB General, Insurance Co., Inc. v. Asgard Corrugated Box

Manufacturing Corporation, G.R. No. 244407, January 26, 2021,
Facts:

Asgard Corrugated Manufacturing Corp. (Asgard) and Milestone Paper Products, Inc.
(Milestone) entered into a Toll Manufacturing Agreement (TMA) under which Milestone
installed parts and managed operations in Asgard’s plant. Later, Milestone withdrew and
allegedly damaged Asgard’s corrugating machines.

At the time of the incident, Asgard and Milestone were named co-insureds under an Industrial
All Risk Policy issued by UCPB Insurance, which included a Malicious Damage Endorsement.
Asgard filed an insurance claim, but UCPB denied it, arguing that Milestone—being a co-
insured—committed the malicious act, and under Section 89 of the Insurance Code, an insurer is
not liable for willful acts of the insured.

Asgard argued that Milestone had no insurable interest in the damaged machinery at the time of
loss, and was merely named in the policy as a matter of convenience.

Issue:

Whether Milestone had insurable interest in the damaged property at the time of the loss, and
whether UCPB Insurance can validly deny Asgard’s claim based on the willful act exclusion
under Section 89 of the Insurance Code.

Ruling:

The Supreme Court ruled in favor of Asgard, affirming that Milestone had no insurable interest in the
property at the time of the loss. The Court held that a party must have a legal or equitable relation to
the subject matter of the insurance such that they would suffer loss if the insured peril occurs. Since
Milestone had already withdrawn and no longer had any proprietary or operational control over the
damaged machinery, it no longer had any insurable interest. Consequently, Milestone's status as a co-
insured was only nominal, and its alleged willful act could not be attributed to Asgard to defeat the
insurance claim. Thus, the exclusion under Section 89 did not apply, and UCPB Insurance was held
liable.

C. Concealment
• Great Pacific Life Assurance Company vs. Court of Appeals, G.R. No. L-
31845. April 30, 1979
Facts:

Ngo Hing applied for a ₱50,000 life insurance policy for his one-year-old daughter with
Grepalife in March 1957. He filled out the forms, paid the premium, and received a binding
deposit receipt, which only confirmed the payment and application—not an approved policy.
Unknown to Ngo Hing, Grepalife did not allow this type of policy for children under seven
years old, and the company rejected the application. However, the insurance agent, instead of
informing Ngo Hing, tried to convince Grepalife to make an exception.

In May 1957, the child sadly died. Ngo Hing filed a claim, but Grepalife denied it, saying the
policy was never approved. It also found that Ngo Hing failed to disclose his daughter’s
congenital illness, a serious health condition.

Issue:

Should Grepalife pay the insurance claim?

Ruling:

No, Grepalife is not liable. The Supreme Court said that:

1. There was no perfected insurance contract since Grepalife never accepted the
application.
2. Ngo Hing concealed his daughter’s illness, which is considered bad faith.

In insurance, both sides must act with “uberrima fides” or utmost good faith. Even if the
concealment was not intentional, the insurer has the right to cancel or reject the contract.
Because Ngo Hing did not disclose the child’s health condition, Grepalife had valid reason to
deny the claim.

• Ng Gan Zee vs.

Asian Crusader Life Assurance Corporation, G.R. No. L-30685, May
30, 1983
Facts:

Kwong Nam applied for a life insurance policy with Asian Crusader Life Assurance Corporation,
naming his wife, Ng Gan Zee, as beneficiary. He later died of liver cancer. When Ng filed a
claim, the insurance company denied it, alleging that Kwong had committed material
concealment and misrepresentation. Specifically, they claimed he falsely answered “No” when
asked if any insurance company had ever denied him coverage, and that he misrepresented a past
operation by saying it was for a peptic ulcer instead of a tumor.

Issue:

Did Kwong Nam commit material concealment or misrepresentation that would justify the
rescission of the insurance contract?

Ruling:

No. The Supreme Court ruled that there was no material concealment or fraudulent
misrepresentation. It found no clear evidence that another insurance company had denied
Kwong's application. It also held that Kwong’s statement about his operation was made in good
faith, as there was no proof he had sufficient medical knowledge to distinguish between a tumor
and a peptic ulcer. The Court emphasized that concealment must be both material and
fraudulent to justify rescission. Since Asian Crusader failed to prove fraud and issued the policy
without further inquiry despite the allegedly incomplete answers, it was deemed to have waived
any objection. The insurance company was thus held liable to pay the claim.

• New Life Enterprises and Julian Sy vs. Court of Appeals, et al., G.R. No.
94071, March 31, 1992
Facts:

Julian Sy, on behalf of New Life Enterprises, secured three fire insurance policies from Western
Guaranty Corporation, Reliance Surety and Insurance Co., Inc., and Equitable Insurance
Corporation, totaling ₱1.55 million. After a fire destroyed the insured property, Sy filed claims
with all three insurers. However, the insurers denied liability, citing Sy’s failure to disclose the
existence of the other policies—violating the "Other Insurance" clause—and his failure to file
suit within the 12-month period provided in the policy conditions. Sy argued that the insurers
knew of the other policies and that he had not been made aware of the disclosure requirement.
The RTC ruled in favor of Sy, but the CA reversed, and the Supreme Court affirmed the CA's
decision.

Issues:

1. Did Sy and New Life Enterprises violate the "Other Insurance" clause (Condition No. 3)
of the policies, thereby forfeiting their right to recover?
 2. Did they also violate the 12-month period for filing an action (Condition No. 27),
resulting in the loss of their claim?

Ruling:

Yes to both issues. The Supreme Court held that the "Other Insurance" clause was clear and
unambiguous, requiring the insured to declare the existence of any other insurance coverage.
Sy’s failure to do so constituted a material breach of the contract. His defenses—such as lack of
knowledge, failure to read the policy, and alleged knowledge of the agents—were rejected. The
Court emphasized that clear contractual terms bind the parties and that even experienced
businessmen are expected to read and understand policies, especially when it involves significant
financial protection. The Court also ruled that the 12-month filing period is a substantive
requirement meant to ensure prompt resolution and that the reckoning point is the denial of the
claim—not any reconsideration request. Because Sy filed the complaint beyond this period, the
insurers were absolved from liability.

• Sunlife Assurance Company of Canada vs. Court of Appeals, et al., G.R.

No. 105135, June 22, 1995
Facts:

Robert John Bacani applied for a non-medical life insurance policy with Sunlife Assurance,
naming his mother Bernarda Bacani as beneficiary. Two weeks before applying, he had been
confined at the Lung Center of the Philippines and diagnosed with renal failure. However, he did
not disclose this in his insurance application. Less than a year later, he died in a plane crash.
When his parents filed a claim, Sunlife denied it, citing concealment of material health
information.

Issue:

Can Sunlife deny the insurance claim on the ground that the insured concealed a material health
condition, even though the cause of death was unrelated?

Ruling:

Yes. The Supreme Court ruled in favor of Sunlife. The Court held that materiality of
information in insurance does not depend on the actual cause of death. What matters is
whether the concealed information would have influenced the insurer’s decision to accept the
risk or adjust the terms of the policy. Even though Sunlife waived the medical examination, the
applicant was still required to truthfully disclose all relevant medical history. Because Robert
John Bacani failed to disclose his recent confinement and illness, Sunlife was justified in
rescinding the policy due to concealment under Section 27 of the Insurance Code.
This case emphasizes that full disclosure is required in insurance applications, especially
when no medical exam is conducted. Concealment of material facts gives the insurer the right to
cancel the policy, regardless of whether the undisclosed illness caused the death.

• Thelma Vda. De Canilang vs. Court of Appeals and Grepalife (223 SCRA
443 [1993])
Facts:

Jaime Canilang took out a non-medical life insurance policy with Great Pacific Life Assurance
Corporation, naming his wife Thelma as beneficiary. A year later, he died of congestive heart
failure and chronic anemia. When Thelma filed a claim, Great Pacific denied it, citing
material concealment—Jaime had declared in his insurance application that he had not
consulted a doctor or received medical treatment in the last five years. In truth, Jaime had been
diagnosed with sinus tachycardia and acute bronchitis shortly before applying for insurance.
The Insurance Commission ruled in favor of Thelma, but the Court of Appeals reversed. The
case was elevated to the Supreme Court.

Issue:

Did Jaime Canilang commit material concealment in his insurance application, and does such
concealment justify the insurer’s rescission of the contract even if it was not made intentionally?

Ruling:

Yes. The Supreme Court held that Jaime Canilang committed material concealment by failing
to disclose relevant health information that directly impacted the insurer's risk assessment. It
emphasized that materiality is determined not by the insured’s intent, but by whether the
concealed fact would likely influence the insurer’s decision to accept or reject the application.
The Court clarified that under Section 27 of the Insurance Code, concealment—whether
intentional or not—entitles the insurer to rescind the contract. Since Jaime's diagnosis related
to heart disease, a serious matter for life insurance underwriting, Great Pacific was justified in
denying the claim and rescinding the policy.

• The Insular Life Assurance Co., Ltd. v. Heirs of Alvarez, G.R. Nos.
207526 & 210156, October 3, 2018
Facts:

Jose Alvarez obtained a housing loan from UnionBank, secured by a promissory note, a real
estate mortgage, and a Mortgage Redemption Insurance (MRI) issued by Insular Life, with
UnionBank as the beneficiary. After Alvarez died, UnionBank filed a claim under the MRI.
Insular Life denied the claim, alleging that Alvarez was ineligible for insurance because he was
over 60 years old at the time of the loan and had misrepresented his age by writing “1942” as his
birth year in a Health Statement Form. Due to the denial, the loan amortizations remained
unpaid, leading to the foreclosure and auction of the property. The heirs of Alvarez filed a
complaint for specific performance against Insular Life and sought the nullification of the
foreclosure against UnionBank.

Issues:

1. Whether Insular Life is liable to pay UnionBank under the MRI despite Alvarez’s alleged
misrepresentation of his age.
2. Whether the foreclosure of the mortgaged property by UnionBank was valid.

Ruling:

1. Yes, Insular Life is liable. The Supreme Court held that the alleged misrepresentation
involved a false representation, not concealment, and thus falls under Section 45 of the
Insurance Code, which requires proof of fraudulent intent through clear and
convincing evidence. Insular Life failed to provide such evidence, relying only on a
single document (the Health Statement Form), and did not present the main insurance
application or other supporting documents to prove intent to defraud.
2. No, the foreclosure was not valid. The Court ruled that UnionBank failed to exercise the
high degree of diligence required of banks. It knew or should have known Alvarez’s real
age through its background checks but still processed the insurance. Since UnionBank
helped cause the situation that led to the denial and foreclosure, it could not benefit from
the wrongful foreclosure, which was declared null and void.

• UCPB General Insurance Company v. Frabelle Fishing Corporation, G.R.

No. 25287. July 5, 2023

Facts:
Masagana Telamart, Inc. obtained five fire insurance policies from UCPB General Insurance
Co., Inc., all expiring on 22 May 1992. On 13 June 1992, a fire razed Masagana’s properties.
One month later, on 13 July 1992, Masagana tendered premium payments for renewal of the
policies, which UCPB initially accepted but returned the next day, claiming the policies had
expired and were not renewed. UCPB further alleged that Masagana was properly notified of the
non-renewal, while Masagana argued that they were granted a customary 60- to 90-day credit
term for payment and that no valid notice of non-renewal was given. Masagana also claimed
estoppel, citing UCPB’s longstanding practice of accepting late payments.

Issue:
Whether the insurance policies had been validly renewed or extended despite the lack of prior
payment of premiums at the time of loss, and whether UCPB could invoke Section 77 of the
Insurance Code, barring recovery due to non-payment, even if it had consistently allowed late
premium payments.
Ruling:
The Supreme Court ruled in favor of Masagana, reinstating the appellate court’s decision which
held that the policies were renewed and effective when the fire occurred. The Court recognized
multiple exceptions to the strict application of Section 77 of the Insurance Code, including:

1. Custom and practice of granting credit terms.

2. Implied agreements to extend payment deadlines.
3. Estoppel, due to UCPB’s consistent practice of accepting late payments, leading
Masagana to reasonably rely on the credit term.
4. No clear and timely notice of non-renewal was proven.
5. Section 78, which allows a policy acknowledgment of payment to serve as conclusive
proof thereof.

While the case primarily involves premium payment issues, it touches upon concealment
indirectly in that UCPB's failure to disclose its decision not to renew in a timely and verifiable
manner—despite longstanding dealings—was interpreted against it. The Court emphasized that
equitable principles like estoppel and the insurer's conduct could override strict statutory
requirements.

D. Representation
•
Ma. Lourdes s. Florendo vs. Philam Plans, Inc., et al., G.R. No. 1869
83, February 22, 2012
Facts:

Manuel Florendo applied for a comprehensive pension plan from Philam Plans, Inc., which
included a life insurance component. The application was facilitated by Perla Abcede, a sales
agent, and her daughter Ma. Celeste Abcede, who acted as the sales counselor. Manuel signed
the application form but left Perla to fill in the health-related details. He failed to disclose
material health conditions—specifically, that he had a pacemaker and was undergoing treatment
for a heart condition and diabetes. Manuel later died less than a year after the issuance of the
plan. His wife and beneficiary, Lourdes Florendo, filed a claim, which was denied due to
concealment of material facts. She sued, and the RTC ruled in her favor, but the Court of
Appeals reversed the decision, prompting this appeal.

Issue:

Whether the insured, Manuel Florendo, is bound by the health information (or lack
thereof) provided in the application form that was filled up by an agent, and whether such
representation constitutes concealment.

Ruling:
The Supreme Court affirmed the CA's decision, ruling against Lourdes Florendo.

1. Representation by the Insured:

Manuel is bound by the representations and declarations in the application form,
which he signed. The form explicitly stated that all information was written by him or
under his direction. Therefore, even if Perla filled out the application, she did so as his
representative, not as Philam Plans’ agent for that purpose.
2. Concealment and Misrepresentation:
The Court found that Manuel intentionally concealed material health conditions,
including ongoing treatments for heart disease and diabetes, which were within the 5-year
disclosure period. His failure to disclose these in the signed application constituted
material concealment under the Insurance Code, allowing Philam Plans to rescind the
insurance contract.
3. Responsibility over Agent’s Acts:
Since Manuel certified that the form was filled out under his direction, any omission or
misstatement by Perla binds him. He cannot evade responsibility by claiming that the
agent filled it out independently.
4. No Waiver by Insurer:
The one-year incontestability clause did not apply because Manuel died within 11
months of the plan’s issuance. Therefore, Philam Plans was still entitled to contest the
claim due to misrepresentation.

• Emilio Tan vs. Court of Appeals, G.R. No. 48049, June 29, 1989
Facts:

Tan Lee Siong obtained a life insurance policy from Philippine American Life Insurance Co.
(Philam Life) on November 6, 1973. About 17 months later, on April 26, 1975, he died of
hepatoma. His heirs (petitioners) filed a claim, but Philam Life denied it, alleging that Tan had
concealed material health information—specifically, that he had previously been diagnosed as
diabetic and hypertensive. The insurer rescinded the contract and refunded the premiums. The
petitioners challenged this, arguing that rescission could not be done after Tan’s death and that
he only signed the application under pressure from aggressive sales agents. The Insurance
Commission and the Court of Appeals ruled in favor of the insurer. The case was elevated to the
Supreme Court.

Issue:

1. Can the insurer validly rescind the insurance policy on the ground of concealment even
after the death of the insured, provided it is still within the two-year incontestability
period?
2. Was there concealment or misrepresentation by the insured?

Ruling:
Yes, the insurer may still rescind the insurance contract even after the insured has died, as long
as it is within the two-year incontestability period provided under Section 48 of the Insurance
Code. The Court clarified that the phrase "during the lifetime" in the provision does not mean
rescission must occur before death, but simply that the two-year period begins from the date of
issuance or last reinstatement and applies so long as the policy has been in force. The
incontestability clause only bars rescission after two years have passed while the insured was
still alive, which was not the case here.

Yes, there was concealment and misrepresentation. The insured had failed to disclose material
facts about his diabetes and hypertension, known through prior medical consultations. These
facts would have significantly influenced the insurer’s decision on whether to accept the risk or
adjust the premium. The Court held that signing the insurance application created a presumption
that the insured understood its contents, especially as he was a businessman. The insurer had
no obligation to explain the terms word for word. The defense that he was pressured into signing
the contract did not excuse the misrepresentation.

• Manila Bankers Life Insurance Corporation vs. Cresencia P. Aban, G.R.

No. 175666, July 29, 2013

Facts:
Delia Sotero, an illiterate woman, obtained a life insurance policy from Manila Bankers Life
Insurance Corporation on August 30, 1993, designating her niece Cresencia Aban as the
beneficiary. She passed away in April 1996, over two years after the policy's issuance. Aban
filed a claim, which the insurer denied, alleging that Aban misrepresented herself as the applicant
and concealed the fact that Sotero had long-standing health issues and could not afford the
premiums. Bankers Life then filed a case for rescission based on fraud and misrepresentation.
The trial and appellate courts dismissed the case, ruling that the insurer’s claim was already
barred by the two-year incontestability clause under Section 48 of the Insurance Code.

Issue:
Can the insurer still rescind the life insurance policy on the ground of fraudulent
misrepresentation or concealment after the two-year incontestability period under Section 48 of
the Insurance Code?

Ruling:
No. The Supreme Court held that after the two-year incontestability period has lapsed during the
lifetime of the insured, the insurer is barred from rescinding the life insurance policy on grounds
of misrepresentation or concealment. The Court found no conclusive evidence of fraud or
misrepresentation by Sotero, and reiterated that Section 48 of the Insurance Code was meant to
protect policyholders and beneficiaries from belated denials of claims. Since the insurer had
more than two years to verify the application and failed to act diligently, it could no longer
invoke misrepresentation to deny the claim.

• Florendo vs. Philam Plans, G.R. No. 186983, February 22, 2012
Facts:

Delia Sotero took out a life insurance policy from Manila Bankers Life Insurance Corporation
(Bankers Life) on July 3, 1993, naming her niece, Cresencia Aban, as beneficiary. The policy,
worth ₱100,000, was issued on August 30, 1993, after the required medical examination and
premium payment. When Sotero died in April 1996, Aban filed a claim. Bankers Life
investigated and alleged that Aban misrepresented herself as Sotero in applying for the policy
because Sotero was illiterate and sickly. It also claimed Sotero lacked the financial means to pay
the premiums. Bankers Life denied the claim and filed a case for annulment of the policy due to
fraud and misrepresentation. Aban moved to dismiss, citing Section 48 of the Insurance Code—
the “incontestability clause”—since the policy had been in force for more than two years. Both
the RTC and Court of Appeals ruled in favor of Aban.

Issue:

Whether Bankers Life can annul the insurance policy on the ground of fraudulent representation,
despite the policy having been in force for more than two years.

Ruling:

No. The Supreme Court ruled that Bankers Life cannot annul the policy due to fraudulent
representation after the two-year period under the incontestability clause (Section 48, Insurance
Code).

1. The courts found that Sotero herself applied for the policy, not Aban pretending to be
her. Therefore, no fraudulent representation was proven.
2. Under Section 48, once a life insurance policy has been in force for two years during
the lifetime of the insured, the insurer can no longer contest the validity of the policy
based on concealment or misrepresentation.
3. The law aims to protect the insured and beneficiaries from insurers who might delay or
deny claims by belatedly alleging misrepresentation.
4. Since Bankers Life failed to prove actual fraud and did not question the policy within
the two-year period, it was barred from denying the claim based on representation
issues.

• The Insular Life Assurance Co., Ltd. v. Heirs of Alvarez, G.R. Nos.
207526 & 210156, [October 3, 2018]
E. Policy
• Malayan Insurance Co., Inc. vs. Gregoria Cruz Arnaldo, in her capacity
as the Insurance Commissioner, et al., G.R. No. L-67835, October 12,
1987
Facts:

On June 7, 1981, Malayan Insurance Company (MICO) issued a fire insurance policy to
Coronacion Pinca for ₱100,000, effective from July 22, 1981 to July 22, 1982. On October 15,
1981, MICO allegedly cancelled the policy for non-payment of premium and claimed to have
sent notice of cancellation to Pinca. However, on December 24, 1981, Pinca’s premium payment
was received by Domingo Adora, an agent of MICO, and was remitted to MICO on January 15,
1982. On January 18, 1982, Pinca’s property was destroyed by fire. On February 5, 1982, MICO
returned the payment to Adora, citing the earlier cancellation of the policy. Pinca filed a claim,
which MICO rejected. The Insurance Commission ruled in favor of Pinca, prompting MICO to
elevate the case to the Supreme Court.

Issue:

Was there a valid and existing insurance policy at the time of loss?

Ruling:

Yes. The Supreme Court held that there was a valid insurance policy in force at the time of the
loss.

1. MICO failed to prove that the alleged cancellation was actually communicated to Pinca.
Mere testimony that a notice was sent through the mailing section is insufficient proof of
delivery or receipt.
2. Even assuming MICO intended to cancel the policy on October 15, 1981, such
cancellation is ineffective without proper notice to the insured. The law and
jurisprudence require that notice of cancellation must be actually received by the insured
to be binding.
3. The receipt of premium payment by MICO’s agent before the fire further affirmed the
policy’s continued validity. MICO’s acceptance of the payment and its delay in rejecting
it until after the loss occurred weakens its claim of effective cancellation.