Philamcare Health Systems, Inc.

vs CA & Julita Trinos Facts: Ernani Trinos applied for a health care coverage with Philamcare. During the period of his coverage, Ernani suffered a heart attack and was confined for 1 month. Whie her husband was in the hospital, Julita tried to claim the benefits from Philamcare but the latter refused alleging that the Agreement was void on the ground of concealment regarding Ernanis medica l history, Re: that Ernani was hypertensive, diabetic and asthmatic, contrary to his answers in the application form. Subsequently, Ernani died. Julita filed an action for damages against Philamcare. The TC favored Julita, approved by the CA. Issue: WON there had been material concealment on the part of Ernani. Held: NONE The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. This largely depends on opinion rather than fact, especially coming from respondents husband who was not a medical doctor. Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. Thus, although false, a representation of the expectation, intention, belief, opinion, or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk, or its acceptance at a lower rate of premium, and this is likewise the rule although the statement is material to the risk, if the statement is obviously of the foregoing character, since in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true, as a matter of expectation or belief, that which he then knows, to be actually untrue, or the impossibility of which is shown by the facts within his knowledge, since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. Concealment as a defense for the health care provider or 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 any case, with or without the authority to investigate, petitioner is liable for claims made under the contract. Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreed upon. In the end, the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid. Under Section 27 of the Insurance Code, concealment entitles the injured party to rescind a contract of insurance. The right to rescind should be exercised previous to the commencement of an action on the contract. In this case, no rescission was made.

Malayan Insurance Co., Inc. vs. Cruz Arnaldo Facts of the Case: On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent, P14,000.00 effectiveJuly 22, 1981, until July 22, 1982.On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent thecorresponding notice to Pinca.On December 24, 1981, payment of the premium for Pinca was received by Domingo Adora, agent of MICO.On January 15, 1982, Adora remitted this payment to MICO,together with other payments.On January 18, 1982, Pinca's property was completely burned.On February 5, 1982, Pinca's payment was returned by MICO to Adora on the ground that her policy had beencancelled earlier. But Adora refused to accept it.In due time, Pinca made the requisite demands for payment, which MICO rejected. She then went to the InsuranceCommission. It is because she was ultimately sustained by the public respondent that the petitioner has come to usfor relief. Issue of the Case: Whether or not petitioner liable, for it alleged that the insurance policy was already cancelled due to non-payment of premium. Ruling:

On the merits, it must also fail. MICO's arguments that there was no payment of premium and that the policy hadbeen cancelled before the occurence of the loss are not acceptable. Its contention that the claim was allowedwithout proof of loss is also untenable.The petitioner relies heavily on Section 77 of the Insurance Code providing that:SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed to the peril insuredagainst. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurancecompany is valid and binding unless and until the premium thereof has been paid, except in the case of a life or anindustrial life policy whenever the grace period provision applies.The above provision is not applicable because payment of the premium was in fact eventually made in this case.Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on June 7, 1981 was stamped"Payment Received" of the amoung of P930.60 on "12-24-81" by Domingo Adora. This is important because itsuggests an understanding between MICO and the insured that such payment could be made later, as agent Adorahad assured Pinca. In any event, it is not denied that this payment was actually made by Pinca to Adora, whoremitted the same to MICO. It is not disputed that the premium was actually paid by Pinca to Adora on December 24, 1981, who received it onbehalf of MICO, to which it was remitted on January 15, 1982. What is questioned is the validity of Pinca's paymentand of Adora's authority to receive it.MICO's acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive thepremium payment on its behalf. It is clearly provided in Section 306 of the Insurance Code that:SEC. 306. xxx xxx xxx Any insurance company which delivers to an insurance agant or insurance broker a policy or contract of insuranceshall be demmed to have authorized such agent or broker to receive on its behalf payment of any premium which isdue on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon.On the other hand Article 64 (except "nonpayment of premium") provided the cancellation was made in accordancetherewith and with Article 65.Section 64 reads as follows:SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof tothe insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effectivedate of the policy, of one or more of the following:(a) non-payment of premium;(b) conviction of a crime arising out of acts increasing the hazard insured against;(c) discovery of fraud or material misrepresentation;(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;(e) physical changes in the property insured which result in the property becoming uninsurable;or (f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code. As for the method of cancellation, Section 65 provides as follows:SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to thenamed insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixty-four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts on whichthe cancellation is based. A valid cancellation must, therefore, require concurrence of the following conditions:(1) There must be prior notice of cancellation to the insured;(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the groundsmentioned;(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address shown in thepolicy;(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request of the insured, the insurer will furnish the facts on which the cancellation is based. There is no proof that the notice, assuming it complied with the other requisites mentioned above, was actuallymailed to and received by Pinca. All MICO's offers to show that the cancellation was communicated to the insured isits employee's testimony that the said cancellation was sent "by mail through our mailing section." without more. Thepetitioner then says that its "stand is enervated (sic) by the legal presumption of regularity and due performance of duty." (not realizing perhaps that "enervated" means "debilitated" not "strengthened").On the other hand, there is the flat denial of Pinca, who says she never received the claimed cancellation and who,of course, did not have to prove such denial Considering the strict language of Section 64 that no insurance policyshall be cancelled except upon prior notice, it behooved MICO's to make sure that the cancellation was actually sentto and received by the insured. Adora. incidentally, had not been informed of the cancellation either and saw no reason not to accept the saidpayment.Petition denied. Malayan Insurance Co., Inc. is liable.

SATURNINO V. PHILAMLIFE - FALSE REPRESENTATION Facts: > 2 months prior to the insurance of the policy, Saturnino was operated on for cancer, involving complete removal of the right breast, including the pectoral muscles and the glands, found in the right armpit. > Notwithstanding the fact of her operation, Saturnino did not make a disclosure thereof in her application for insurance. > She stated therein that she did not have, nor had she ever had, among others listed in the application, cancer or other tumors; that she had not consulted any physician, undergone any operation or suffered any injury within the preceding 5 years.

> She also stated that she had never been treated for, nor did she ever have any illness or disease peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual disorders. > The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy. Issue: Whether or not the insured made such false representation of material facts as to avoid the policy. Held: YES. There can be no dispute that the information given by her in the application for insurance was false, namely, that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5 years. The question to determine is: Are the facts then falsely represented material? The Insurance Law provides that materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the proposed contract, or making his inquiries. The contention of appellants is that the facts subject of the representation were not material in view of the non-medical nature of the insurance applied for, which does away with the usual requirement of medical examination before the policy is issued. The contention is without merit. If anything, the waiver of medical examination renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself did not know, since her doctor never told her, that the disease for which she had been operated on was cancer. In the first place, concealment of the fact of the operation itself was fraudulent, as there could not have been any mistake about it, no matter what the ailment. Secondly, in order to avoid a policy, it is not necessary to show actual fraud on the part of the insured. In this jurisdiction, concealment, whether intentional or unintentional entitled the insurer to rescind the contract of insurance, concealment being defined as negligence to communicate that which a party knows and ought to communicate. The basis of the rule vitiating th e contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk, or accepting it at a rate of premium agreed upon. The insurer, relying upon the belief that the insured will disclose every material fact within his actual or presumed knowledge, is misled into a belief that the circumstances withheld does not exist, and he is thereby induced to estimate the risk upon a false basis that it does not exist.

Sunlife Assurance Company of Canada vs. CA and Bacani Facts: Robert Bacani procured a life insurance contract for himself from petitioner; her mother, the beneficiary. Robert died in a plane crash. Roberts mother filed a claim from petitioner but the latter refused, alleging that there had been concealment, by Roberts failure to disclose some material facts regarding the insurance policy, Re: that 2 weeks prior to his application fo r insurance policy, he had been hospitalized The TC favored Roberts mother ruling that (1) the concealment was made in good faith and (2) the health history was immaterial since the insurance policy was non-medical. The CA agreed adding that the cause of death was unrelated to the facts concealed. SC Ruling: The decision of the CA should be reversed. Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining.

MATERIALITY is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. The information which the insured failed to disclose were material and relevant to the approval and issuance of the insurance policy. The matters concealed would have definitely affected petitioners action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured by petitioner in order for it to reasonably assess the risk involved in accepting the application. Thus, "good faith" is no defense in concealment. The insureds failure to disclose the fact that he was hospitalized for two weeks prior to filing his application for insurance, raises grave doubts about his bonafides. It appears that such concealment was deliberate on his part. the waiver of a medical examination [in a non-medical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not Moreover, such argument of private respondents would make Section 27 of the Insurance Code, which allows the injured party to rescind a contract of insurance where there is concealment, ineffective. Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries.

Thelma Vda. De Canilang vs. CA & Pacific Life Facts: Jaime Canilang applied for a non-medical insurance policy with Pacific Life which the latter granted. Prior to such application, Jaime consulted a doctor and was diagnosed as suffering from sinus tachycardia and later on acute bronchitis. Jaime later on died of congestive heart failure. His wife, Thelma, as beneficiary, filed a claim with Pacific Life but the latter denied alleging that the insured had concealed material information from it. The Insurance Commissioner favored Thelma Canilang and ruled: (1) Jaimes illness was not so serious that even if it were disclosed it would not have affected Pacific Lifes decision; Pacific Life waived its right to inquire into the health condition of Jaime when it granted the application despite some of the questions were left unanswered; (3) no intentional concealment on Jaimes part as he was thinking that he had been suffering merely from a minor ailment and simple cold. The CA reversed the Insurance Commissioners decision. SC Ruling: SC agreed with CA. We agree with the Court of Appeals that the information which Jaime Canilang failed to disclose was material to the ability of Great Pacific to estimate the probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great Pacific would have made further inquiries and would have probably refused to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage. The materiality of the information withheld by Great Pacific did not depend upon the state of mind of Jaime Canilang. A mans state of mind or subjective belief is not capable of proof in our judicial process, except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality depend upon the actual or physical events which ensue. MATERIALITY RELATES rather to the probable and reasonable influence of the facts upon the party to whom the communication should have been made, in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance; that probable and reasonable influence of the facts concealed must, of course, be determined objectively, by the judge ultimately. The restoration in 1985 by B.P. Blg. 874 of the phrase whether intentional or unintentional merely underscored the fact tha t all throughout (from 1914 to 1985), the statute did not require proof that concealment must be intentional in order to authorize rescission by the injured party.

In any case, in the case at bar, the nature of the facts not conveyed to the insurer was such that the failure to communicate must have been intentional rather than merely inadvertent. For Jaime Canilang could not have been unaware that his heart beat would at times rise to high and alarming levels and that he had consulted a doctor twice in the two (2) months before applying for non-medical insurance. We find it difficult to take seriously the argument that Great Pacific had waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilangs failure to set out answers to some of the questio ns in the insurance application. Such failure precisely constituted concealment on the part of Canilang.

UCPB Gen. Insurance Co. (Insurer) vs Masagana Telemart (Insured) Facts: Insurer issued 5 fire insurance policies covering various properties of the Insured (covering the period May 22, 1991-May 22, 1992). Before the expiration of the policy (March 1992), Insurer evaluated the policy and decided not to renew them. Thus, Insurer issued a notice of non-renewal to Insureds broker Zuellig (on April 1992). After the expiration of the policy (or on June 13, 2012), fire razed Insureds property covered by 3 policies. A month later, Insured presented 5 checks to the Insurers ca shier as payment for the renewal of the policy (from May 1192-May 1993), however, no notice of loss was ever filed by Insured. Insurer refused to pay on the ground that the policies had already expired and were not renewed, and that the fire occurred before payment of the premium (for renewal). RTC: Insured fully complied with its duty to pay premium. CA: following previous practice, Insured was allowed a 60-90 day credit term for the renewal of its policy, and that the acceptance of the late premium payment suggested an understanding that payment could be made later, and that no timely notice of non-renewal was sent. Issue: Whether the fire insurance policies issued by Insurer to Insured had expired on May 1992 or had been extended or renewed by an implied credit arrangement (even though actual tender of payment was made after the occurrence of the fire). Held: No, the insurance policies had not been renewed.

An insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual payment of the premium. Any agreement to the contrary is void.
The parties may not agree expressly or impliedly on the extension of creditor time to pay the premium and consider the policy binding before actual payment. Here, the payment of the premium for renewal of the policies was tendered on July 13, 1992, a month after the fire occurred on June 13, 1992. The assured did not even give the insurer a notice of loss within a reasonable time after occurrence of the fire.

Makati Tuscany Condo Corp. vs. CA, American Home Assurance Co. (AHAC) Facts: Insurer, AHAC, issued an insurance policy on Tuscanys building and premises covering a one-year period. Payment was agreed by both parties to be staggered (5 installments). The 1982 and 1983 policies had been fully paid. For the 1984 policy, Insured paid only 2 installments and refused to pay the balance on the ground that the policy did not contain a credit clause in its favor, that it was not binding and risk never attached, thus, demanded for refund of the premiums paid. But insurer wants to recover the unpaid balances. Trial Court: Dismissed Insurers action to recover as well as Insureds counterclaim for refund. CA: The insurance contract became valid and binding upon payment of the first premium, and the Insurer could not have denied liability on the ground that payment was not made in full, for the reason that it agreed to accept installment payment.

Tuscany appealed to SC on the ground: There cannot be a perfected contract of insurance upon mere partial payment of the premiums because under Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the premium thereof has been paid, notwithstanding any agreement to the contrary. Issue: Whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance, in view of Sec. 77 of the Insurance Code, as amended. Held: The subject policies are valid even if the premiums were paid on installments. The records clearly show that petitioner and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984. In those three (3) years, the insurer accepted all the installment payments. Such acceptance of payments speaks loudly of the insurers intention to honor the policies it issued to petitioner. Certainly, basic principles of equity and fairness would not allow the insurer to continue collecting and accepting the premiums, although paid on installments, and later deny liability on the lame excuse that the premiums were not prepared in full. While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract, We are not prepared to rule that the request to make installment payments duly approved by the insurer, would prevent the entire contract of insurance from going into effect despite payment and acceptance of the initial premium or first installment. Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good customs, public order or public policy. So is an understanding to allow insured to pay premiums in installments not so proscribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. Petitioner may not be allowed to renege on its obligation to pay the balance of the premium after the expiration of the whole term of the third policy in March 1985. Moreover, as correctly observed by the appellate court, where the risk is entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary.

EDILLON vs MANILA BANKERS In April 1969, Carmen Lapuz filled out an application form for insurance under Manila Banker Life Assurance Corporation. She stated that her date of birth was July 11, 1904. Upon payment of the Php 20.00 premium, she was issued the insurance policy in April 1969. In May 1969, Carmen Lapuz died in a vehicular accident. Regina Edillon, who was named a beneficiary in the insurance policy sought to collect the insurance claim but Manila Banker denied the claim. Apparently, it is a rule of the insurance company that they were not to issue insurance policies to persons who are under the age of sixteen (16) years of age or over the age of sixty (60) years Note, that Lapuz was already 65 years old when she was applying for the insurance policy. ISSUE: Whether or not Edillon is entitled to the insurance claim as a beneficiary. HELD: Yes. Carmen Lapuz did not conceal her true age. Despite this, the insurance company still received premium from Lapuz and issued the corresponding insurance policy to her. When the accident happened, the insurance policy has been in force for 45 days already and such time was already sufficient for Manila Banker to notice the fact that Lapuz is already over 60 years old and thereby cancel the insurance policy. If Manila Banker failed to act, it is either because it was willing to waive such disqualification; or, through the negligence or incompetence of its employees for which it has only itself to blame, it simply overlooked such fact. Under the circumstances, Manila Banker is already deemed in estoppel.

CONSTANTINO V. ASIA LIFE- NON-PAYMENT OF INSURANCE PREMIUMS Facts:

> Appeal consolidates two cases. > Asia life insurance Company (ALIC) was incorporated in Delaware. > For the sum of 175.04 as annual premium duly paid to ALIC, it issued Policy No. 93912 whereby it insured the life of Arcadio Constantino for 20 years for P3T with Paz Constantino as beneficiary. First premium covered the period up to Sept. 26, 1942. No further premiums were paid after the first premium and Arcadio died on Sept. 22, 1944. > Due to Jap occupation, ALIC closed its branch office in Manila from Jan. 2 1942-1945. > On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the lives of Spouses Tomas Ruiz and Agustina Peralta for the sum of P3T for 20 years. The annual premium stipulated was regularly paid from Aug. 1, 1938 up to and including Sept. 30, 1940. Effective Aug. 1, 1941, the mode of payment was changed from annually to quarterly and such quarterly premiums were paid until Nov. 18, 1941. Last payment covered the period until Jan. 31, 1942. Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his beneficiary. > Due to Jap occupation, it became impossible and illegal for the insured to deal with ALIC. Aside from this the insured borrowed from the policy P234.00 such that the cash surrender value of the policy was sufficient to maintain the policy in force only up to Sept. 7, 1942. > Both policies contained this provision: All premiums are due in advance and any unpunctuality in making such payment shall cause this policy to lapse unless and except as kept in force by the grace period condition. > Paz Constantino and Agustina Peralta claim as beneficiaries, that they are entitled to receive the proceeds of the policies less all sums due for premiums in arrears. They also allege that non-payment of the premiums were caused by the closing of ALICs offices during the war and the impossible circumstances by the war, therefore, they should be excused and the policies should not be forfeited. > Lower court ruled in favor of ALIC. Issue: May a beneficiary in a life insurance policy recover the amount thereof although the insured died after repeatedly failing to pay the stipulated premiums, such failure being caused by war? Held: NO. Due to the express terms of the policy, non-payment of the premium produces its avoidance. In Glaraga v. Sun Life, it was held that a life policy was avoided because the premium had not been paid within the time fixed; since by its express terms, nonpayment of any premium when due or within the 31 day grace period ipso fact caused the policy to lapse. When the life insurance policy provides that non-payment of premiums will cause its forfeiture, war does NOT excuse nonpayment and does not avoid forfeiture. Essentially, the reason why punctual payments are important is that the insurer calculates on the basis of the prompt payments. Otherwise, malulugi sila. It should be noted that the parties contracted not only as to peace time conditions but also as to war-time conditions since the policies contained provisions applicable expressly to wartime days. The logical inference therefore is that the parties contemplated the uninterrupted operation of the contract even if armed conflict should ensue.

Constantino vs. Asia Life Insurance Co. Facts: FIRST CASE: Respondent Corporation was paid P 176.04 as annual premium by Arcadio Constantino in exchange for policy no. 93212 on 1941 for P 3,000 which lasted for 20 years. Petitioner Paz Constantino was made beneficiary. However after the first payment, no further premiums were made. Thereafter the insured died on 1944. Later, due to the war (Japanese occupation) Respondent Corporation had to close down its branch in the country. SECOND CASE: Similarly, Respondent Corporation issued on 1938 another insurance policy no. 78145 for Spouses Ruiz and Peralta also for P 3,000, lasting for 20 years. Regular payments were made however due also to the war, it became impossible to transact further payments. The insured nevertheless was able to borrow P 234 from the policy. Ruiz died on 1945. Peralta was the beneficiary. In both cases the plaintiffs demanded payment but was refused due to Respondent Corporations refusal on the ground of non payment of the premiums. The lower court favored Respondent. Issues: (1) Whether or not the beneficiaries are entitled to recover the amount insured despite non-payment caused by the Japanese occupation. (2) Whether or not the periodic payments of the premiums, those after the first, is not an obligation of the insured so that it is not a debt enforceable by the action of the insurer. Held: (1) The beneficiaries are not entitled to recover for non-payment despite the presence of war. Contracts of insurance are contracts of indemnity within the terms and condition found therein. An insurance company for certain considerations guarantee the insured against loss or damage as may be stipulated, and when called to pay, the insurer may insist on the fulfillment of said stipulations. Failure of the insured to do so disqualifies recovery for the loss. Thus the terms of the policy determines the insurers liability. Compliance to the terms of the policy is a must as it is a condition preced ent to the right of recovery. Therefore, from the terms of the policy it is clear that non-payment of premium produces avoidance (forfeiture of the policy). Moreover, since act 2427, Philippine law on insurance and the Civil Code) are mostly based from the Civil Code of California, An intention to supplement our laws with the prevailing principles of the US arises. Thus, Prof. Vance of Yaled declares that the United States Rule must be followed, where the contract is not merely suspended but is abrogated by re ason of non-payment of premiums since the time of payments is peculiar to the essence of the contract. Further it would be unjust to permit the insurer to retain the reserve value of the policy or the excess of premiums paid over the actual risk when the policy was still effective as held in the Statham Case which was more logical and juridically sound. In said case it was hold that promptness of payment is essential in the business of life insurance since all calculations of the company is based on the hypothesis of prompt payments. Forfeiture for non-payment is necessary to protect said business from embarrassment otherwise confusion would abound. And that delinquency cannot be tolerated nor redeemed except at the option of the company. Lastly parties contracted both for peace and war times since the policies contained also wartime days. It follows that the parties contemplated uninterrupted operation of the contract even if armed conflict ensues. (2) The annual premium is not a debt, nor is it an obligation which the insurer can maintain an action against the insured; nor its settlement governed by the rules on payment of debts. A contract of insurance is sui generis. This means though the insured may hold the insurer to the contract by the fulfillment of the condition, the latter has no power or right to compel the insured to maintain the contract relation longer than the insured may desire. It is optional upon the insured.

ETERNAL GARDENS MEMORIAL PARK VS. PHILAMLIFE

FACTS: Respondent Philamlife entered into an agreement denominated as Creditor Group Life Policy with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. The relevant provisions of the policy are: ELIGIBILITY. xx EVIDENCE OF INSURABILITY. xx LIFE INSURANCE BENEFIT. xx EFFECTIVE DATE OF BENEFIT. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company. xx Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together with a copy of the application of each purchaser, and the amounts of the respective unpaid balances of all insured lot purchasers. Eternal complied by submitting a letter dated December 29, 1982, containing a list of insurable balances of its lot buyers for October 1982. One of those included in the list as new business was a certain John Chuang. His balance of payments was 100K. on August 2, 1984, Chuang died. Eternal sent a letter dated to Philamlife, which served as an insurance claim for Chuangs death. Attached to the claim were certain documents. In reply, Philamlife wrote Eternal a letter requiring Eternal to submit the additional documents relative to its insurance claim for Chuangs death. Eternal transmitted the required documents through a letter which was received by Philamlife. After more than a year, Philamlife had not furnished Eternal with any reply to the latters insurance claim. This prompted Et ernal to demand from Philamlife the payment of the claim for PhP 100,000. In response to Eternals demand, Philamlife denied Eternals insurance claim in a letter a portion of which reads: The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal Gardens Memorial Park in October 1982 for the total maximum insurable amount of P100,000.00 each. No application for Group Insurance was submitted in our office prior to his death on August 2, 1984 Eternal filed a case with the RTC for a sum of money against Philamlife, which decided in favor of Eternal, ordering Philamlife to pay the former 100K representing the proceeds of the policy. CA reversed. Hence this petition. ISSUE: WON Philamlife should pay the 100K insurance proceeds HELD: petition granted. YES

An examination of the provision of the POLICY under effective date of benefit, would show ambiguity between its two sentences. The first sentence appears to state that the insurance coverage of the clients of Eternal already became effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same can become effective. It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latters interest On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a partys purchase of a memorial lot on installment from Eternal, an insurance contract covering the lot purchaser is created and the same is effective, valid, and binding until terminated by Philamlife by disapproving the insurance application. The second sentence of the Creditor Group Life Policy on the Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of the insurance contract. Moreover, the mere inaction of the insurer on the insurance application must not work to prejudice the insured; it cannot be interpreted as a termination of the insurance contract. The termination of the insurance contract by the insurer must be explicit and unambiguous.

Pacific Life vs CA; Mondragon vs CA & Ngo Hing Facts: Ngo Hing filed an application with Pacific Life for a 20-year endowment policy on the life of his 1yr old daughter Helen Go. Ngo Hing supplied the required data which Mondragon (Branch Manager of Pacific Life) wrote on the corresponding form and subsequently filed the same to Pacific Life. Ngo HIng also paid the annual premium. The latter however disapproved the application on the ground that the policy being applied for is not available for minors below 7 years of age and recommended another policy. Helen Go died of influenza with complication of bronchopneumonia. Ngo Hing sought the payment of the proceeds. Pacific Life refused alleging that the contract was void though the concealment (by Ngo HIng) of the health and physical conditions of Helen Go. SC Ruling: Relative to issue of alleged concealment, this Court is of the firm belief that private respondent (Ngo Hing) had deliberately concealed the state of health and physical condition of his daughter Helen Go. When private respondent supplied the required essential data for the insurance application form, he was fully aware that his one-year old daughter is typically a mongoloid child. Such a congenital physical defect could never be ensconced nor disguised. Nonetheless, private respondent, in apparent bad faith, withheld the fact material to the risk to be assumed by the insurance company. As an insurance agent of Pacific Life, he ought to know, as he surely must have known his duty and responsibility to such a material fact. Had he diamond said significant fact in the insurance application form Pacific Life would have verified the same and would have had no choice but to disapprove the application outright. 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 not for the alone but equally so for the insurer. Concealment is a neglect to communicate that which a party knows and ought to communicate. Whether intentional or unintentional the concealment entitles the insurer to rescind the contract of insurance. Private respondent (Ngo Hing) appears guilty thereof.