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B.

Insurance - Is an agreement whereby one undertakes


for a consideration to indemnify another against a loss,
damage or liability arising from an unknown or
contingent event.
C. Nature and Characteristics of Insurance Contracts
D. Requisities for validity in general Civil Code on
validity of contracts
ESSENTIAL REQUISITES OF CONTRACTS
GENERAL PROVISIONS

1. The application was forwarded to the head office of


the company at Montreal Canada. The head office gave
notice of acceptance by cable to manila. On Dec 4,
1917, The policy was issued in Montreal. On Dec 18,
1917, attorney Aurelio Torres wrote to the manila office
of the company stating that Herrer desired to withdraw
his application.
2. The company replied that it had already issued the
policy. The letter was received by Mr. Torres on the
morning of Dec 21, 1917.
3. Mr. Herrer died on Dec 20, 1917

Art. 1318. There is no contract unless the following


requisites concur:
(1) Consent of the contracting parties;

Issue: WON THERE WAS VALID INSURANCE CONTRACT


that was entered by Mr. Herrer and the company

(2) Object certain which is the subject matter of the


contract;

Ratio: No, the law prevailing in this case Art 1262 of the
C.C.

(3) Cause of the obligation which is established. (1261)

An acceptance made by letter shall not bind the person


making the offer except from the time it came to his
knowledge

SECTION 1. - Consent
Art. 1319. Consent is manifested by the meeting of the
offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be
certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer.
Enriquez vs Sun Life Insurance
Facts: On Sept 24, 1917, Joaquin Herrer made an
application to Assurance Company of Canada through
its office in Manila for a life annuity. Two days later he
paid the P 6000 to the manager of the companys
Manila office and was given a receipt.

The fact as to the letter of notification thus fails to


concur with the essential elements of the general rule
pertaining to the mailing and delivery of mail matter as
announced by the American courts, namely, when a
letter or other mail matter is addressed and mailed with
postage prepaid there is a rebuttable presumption of
fact that it was received by the addressee as soon as it
could have been transmitted to him in the ordinary
course of the mails. But if any one of these elemental
facts fails to appear, it is fatal to the presumption. For
instance, a letter will not be presumed to have been
received by the addressee unless it is shown that it was
deposited in the post-office, properly addressed and

stamped. (See 22 C.J., 96, and 49 L. R. A. [N. S.], pp.


458, et seq., notes.)
We hold that the contract for a life annuity in the case at
bar was not perfected because it has not been proved
satisfactorily that the acceptance of the application ever
came to the knowledge of the applicant.lawph!l.net
The pertinent fact is, that according to the provisional
receipt, three things had to be accomplished by the
insurance company before there was a contract: (1)
There had to be a medical examination of the applicant;
(2) there had to be approval of the application by the
head office of the company; and (3) this approval had in
some way to be communicated by the company to the
applicant.

Lalog forwarded the application of Perez together with


all of the supporting papers to the office of BF Lifeman
Insurance Corporation at Gumaca Quezon City.
On Nov 25, 1987, Perez died in an accident. At the time
of his death his application papers for the additional
insurance of 50,000 pesos were still with the Gumaca
Office.
Lalog testified that when he went to follow up the
paopers he found them still in the Gumaca office and so
he personally brough the papers to the manila office of
BF Lifeman Insurance Corporation.
It was only on November 27, 1987 BF Lifeman Insurance
Corporation approved the application and issued the
corresponding policy on December 2, 1987.

Held: judgment Reversed: Recover the 6000 pesos


Perez vs CA
Facts
Primitivo Perez has been insured with Bf Lifeman
Insurance Corporation since 1980 for P 20,000.
Sometime in Oct 1987, an agent of the insurance
corporation Rodolfo Lalog visited the Perez.

Petitioner went to Manila to claim the benefits under the


insurance policies.
Was paid 40,000 for the first insurance policy
The company refused to pay the claim under the
additional insurance policy.
Private respondent filed a complaint against Petitioner
Virginia Perez seeking the rescission and declaration of
nullity of the insurance contract in question.

Perez then accomplished an application form for the


additional insurance coverage of 50,000 PESOS. On the
same day, petitioner Virginia Perez Primitivos wife paid
P 2,075.00 to Lalog.

Petitioner averred that the deceased had fulfilled all his


prestations under the contract and all the elements of a
valid contract are present. She then filed a
counterclaim, against private respondent for collection
of P 150,000 as actual damages.

The receipt issued by Lalog indicated the amount


received was a deposit.

TC Ruled in favor of petitioner


CA Reversed

Issue:
WON THE CONTRACT OF INSURANCE WAS
PERFECTED
RATIO: The husband of the petitioner was never able to
receive the policy and accept it thus there was no
perfection of contract.

Luis Lim died on Aug 23, 1917 after the issuance of the
provisional policy but before the approval of the
application by the home office of the insurance
company.
Case was brought by the beneficiary.

A contract of insurance must be assented to by both


parties either in person or by their agents. So long as an
application for insurance has not been either accepted
or rejected it is merely an offer or proposal to make a
contract.
Held: Petition is Denied

ISSUE: WON the contract of Insurance was perfected


Ratio: NO, the contract of insurance was not
consummated by the parties and that consequently, the
widow of the deceased cannot recover the amount of
the unsrance from the insurance company
There was no meeting of the minds because upon
reading the provisional receipt there was a need for the
insurance company to approval of the application
through the issuance of the policy before the contract is
perfected.

De Lim vs Sun Life Assurance Co. of Canada

Musngi vs West Coast Life Insurance Co.

Nature of the Case: Appeal from an order of the CFI

Facts

Facts

Arsenio T. Garcia was insured by West Coast life


Inusrance Company in the sum of P 5000.

Luis Lim y Garcia of Zamboanga made application to the


Sun Life Assurance Company for a police of insurance
on his life in the sum of P 5000..

Arsenio T. Garcia was again insured by the defendant


company in the sum of P 10,000.

Lim designated his wife, Pilar De Lim, the plaintiff


herein, as beneficiary.

The two policies were valid and subsiting at the time of


the death of the insured on Dec 30, 1932.

The first premiums of P 433 pesos was paid by LIM and


upon such payment the company issued a provisional
policy.

A demand was made upon the defendant by the


beneficiaries.

In both application, the insured had to answer inquiries


as to his state of health and that of his family whiche he
did voluntarily

The two answers being the consideration of the policies


and it appearing that they are false and fraudulent it is
evident that insurance contract is null and void

The answers to these policites


were one of the
considerations for the issuance of the policies.

One ground for rescission is a concealment Sec 25.


Insurance Code - A neglect to communicate that which
a party knows and ought to communicate
Essential Elements

After the death of the insured and as a result of the


demand made by the beneficiaries upon the defendant
to pay the value of the policies and they so positively
It was found that on May 13 and 19 1929, the insured
had entered the General Hospital in Manila and was
treared for peptic ulcer and chronic catarhhal naso
phyryngitis
The defendants contended that the two policies did not
create any valid obligations
ISSUE: WON there was valid INSURANCE Contract?
Ratio: No, the insured knew that he had suffered from a
number of ailments, including incipient pulmonary
tuberculosis before subscribing the application yet he
concealed them and omitted the hospital where he was
confined as well the name of the physician whop
treatment
That acts of concealment and false statements
constituted fraud is likewise clear because the
defendant by reason thereof accepted the rish which it
would otherwise have flatly refused.
Art 1276 Provides that the statement of a false
consideration shall render the contract void.

Gulf

Resorts Inc.
Corporation

vs

Philippine

Charter

Insurance

Nature of the Case: Petition for Certiorari


Facts
Plaintiff is the owner of the Plaza Resor situated in La
Union and
had its properties in said resort insured originally with
(AHACAIU) The first four insurance policies was extend only to
plaintiffs swimming pool
Petitioners avers to its earthquake shock endorsement
rider (INSURANCE POLICY) covers all DAMAGES TO
THE PROPERTIES within its resor caused by the
earthquake.
Respondent contends that rider limits its liability for loss
to the two swimming pools of petitioner
Plaintiff is the owner of the Plaza Resort situated at
Agoo, La Union and had its properties in said
resort insured originally with the American Home
Assurance Company (AHAC-AIU).
2. In the first four insurance policies issued by AHACAIU, the risk of loss from earthquake shock was
extended only to plaintiffs two swimming pools,
thus, earthquake shock endt.

3. In consideration of the payment by the insured to the


company of the sum included additional premium
the Company agrees, notwithstanding what is
stated in the printed conditions of this policy due
to the contrary, that this insurance covers loss or
damage to shock to any of the property insured by
this Policy occasioned by or through or in
consequence of earthquake.
4. Luzon and Northern Luzon and plaintiffs properties
covered by Policy No. 31944 issued by defendant,
including the two swimming pools in its Agoo
Playa Resort were damaged.
5. After the earthquake, petitioner advised respondent
that it would be making a claim under its
Insurance Policy No. 31944 for damages on its
properties.
6. Respondent instructed petitioner to file a formal
claim, then assigned the investigation of the claim
to an independent claims adjuster, Bayne
Adjusters and Surveyors, Inc.
7. On July 30, 1990, respondent, through its adjuster,
requested petitioner to submit various documents
in support of its claim.
8. On August 7, 1990, Bayne Adjusters and Surveyors,
Inc., through its Vice-President A.R. de Leon,4
rendered a preliminary report finding extensive
damage caused by the earthquake to the
clubhouse and to the two swimming pools.
9. Mr. de Leon stated that except for the swimming
pools, all affected items have no coverage for
earthquake shocks.
10. On August 11, 1990, petitioner filed its formal
demand for settlement of the damage to all its
properties in the Agoo Playa Resort.
11. On August 23, 1990, respondent denied petitioners
claim on the ground that its insurance policy only
afforded earthquake shock coverage to the two
swimming pools of the resort.

12. Petitioner and respondent failed to arrive at a


settlement.
13. Petitioner contends the following
a. First, that the policys 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.
b. Second, 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 [s]ubject
to:
Other Insurance Clause, Typhoon Endorsement,
Earthquake Shock
Endt., Extended Coverage Endt., FEA Warranty & Annual
Payment
Agreement On Long Term Policies.
c. Third, that the qualification referring to the two
swimming pools
had already been deleted in the earthquake shock
endorsement.
d. Fourth, it is unbelievable for respondent to claim that
it only
made an inadvertent omission when it deleted the said
qualification.
)
e. Fifth, that the earthquake shock endorsement rider
should be given precedence over the wording of
the insurance policy, because the rider is the
more deliberate expression of the agreement of
the contracting parties.

f. Sixth, that in their previous insurance policies, limits


were placed on the endorsements/warranties
enumerated at the time of issue.
g. Seventh, any ambiguity in the earthquake shock
endorsement should be resolved in favor of
petitioner and against respondent. It was
respondent which caused the ambiguity when it
made the policy in issue.
h. Eighth, the qualification of the endorsement limiting
the earthquake shock endorsement should be
interpreted as a caveat on the standard fire
insurance policy, such as to remove the two
swimming pools from the coverage for the risk of
fire. It should not be used to limit the respondents
liability for earthquake shock to the two swimming
pools only.
i. Ninth, there is no basis for the appellate court to hold
that the additional premium was not paid under
the extended coverage. The premium for the
earthquake shock coverage was already included
in the premium paid for the policy.
j. Tenth, the parties contemporaneous and subsequent
acts show that they intended to extend
earthquake shock coverage to all insured
properties
Issue:
Should the insurer be liable of the damages due to
earthquake?
Held:
NO
- A careful examination of the premium recapitulation
will show
that it is the clear intent of the parties to extend
earthquake shock
coverage only to the two swimming pools.
- 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.
Thus, an insurance contract exists where the
following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the
happening of the
designated peril;
3. The insurer assumes the risk
4. 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
5. In consideration of the insurers promise, the insured
pays a
premium.26 (Emphasis ours)
- An insurance premium is the consideration paid an
insurer for undertaking to indemnify the insured
against a specified peril.
while the other party merely affixes his signature or his
adhesion thereto.
- We cannot apply the general rule on contracts of
adhesion to
the case at bar. Petitioner cannot claim it did not know
the
provisions of the policy.
- From the inception of the policy, petitioner had
required the
respondent to copy verbatim the provisions and terms
of its
latest insurance policy from AHAC-AIU
- Respondent, in compliance with the condition set by
the

petitioner, copied AIU Policy No. 206-4568061-9 in


drafting its Insurance Policy No. 31944. It is true
that there was variance in some terms,
specifically in the replacement cost endorsement,
but the principal provisions of the policy remained
essentially similar to AHAC-AIUs policy.
Decision: IN VIEW WHEREOF, the judgment of the Court
of Appeals is affirmed. The petition for certiorari is
dismissed

In fire, casualty, and marine insurance, the premium


payable becomes a debt as soon as the risk
attaches
In the subject policy, no premium payments were made
with regard to earthquake shock coverage, except
on the two swimming pools.
There is no mention of any premium payable for the
other resort properties with regard to earthquake
shock. This is consistent with the history of
petitioners previous insurance policies from
AHAC-AIU. As borne out by petitioners witnesses.
- No significance can be placed on the deletion of the
qualification limiting the coverage to the two
swimming
pools.
The
earthquake
shock
endorsement cannot stand alone.
- The Court also rejects petitioners contention that
respondents contemporaneous and subsequent
acts to the issuance of the insurance policy falsely
gave the petitioner assurance that the coverage
of the earthquake shock endorsement included all
its properties in the resort.
General Rule on Contract of Adhesion not applicable
- Petitioner cannot rely on the general rule that
insurance contracts are contracts of adhesion
which should be liberally construed in favor of the
insured and strictly against the insurer company
which usually prepares it.

A contract of adhesion is one wherein a party, usually a


corporation, prepares the stipulations in the
contract,

The same was extended from March 1, 1989 to March 1,


1990
then from March 1, 1990 to June 1, 1990. The amount of
coverage
was increased to a maximum sum of P 75,000.
Philamcare Health Systems Inc vs CA
Facts
Ernani Trinos , deceased husband of respondent Julita
Trinos
applied for a health care coverage with petitioner
Philamcare
Health Systems Inc. In the standard application form, he
answered
no to the following question
Have you or any of your family members ever
consulted or been treated for high blood pressure,
heart trouble, diabetes, cancer, liver disease,
asthma or petic ulcer?
The application was approived for a period of one year
from
March 1, 1998 to March 1, 1989.
Under the agreement, respondents husband was
entitled to avail
of hospitalization benefits whether ordinary or
emergency is listed
therein . He was also entitled to avail of out patients
benefits such
as annual physical examination preventive health care
and other
out of patient services.

During the period of his coverage, Ernani suffered a


heart attack
and was confined at MMC for one month beginning
March 9, 1990 .
While her husband was in the hospital respondent tried
to claim
the benefits under the health care agreement.
Petitioner denied her claim saying that the Health Care
Agreement was void.
Thus respondent paid the
hospitalization
expenses herself amounting to about P 76,000.
After her husband was discharged from the MMC he was
attended
by a physical therapist at home
Her husband died on April 13, 1990.
RTC ruled in favor of Respondent
CA: AFFIRMED
ISSUE:
WON THE
Insurance
Contract?

HEATLCARE

AGREEMENT

is

ISSUE: WON THE THE CONTRACT OF INSURANCE was


invalidated due to the wrong opinion given by the
husband of the respondent

RATIO: YES,
contract

The following requisites of insurance

1. The insured has an insurable interest


2. The insured is subject to a risk of loss by the
happening of the
designated peril
3. The insurer assumes the risk
4. Such assumption of risk is part of a general scheme
to distribute
the actual losses among a large group of persons bering
a similar
risk;
5. In consideration of the insurers promise the insured
pays a
premium.

WHAT MAY BE INSURED


Sec. 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 husband is not necessary for the
validity of an insurance policy taken out by a
married woman on her life or that of her children.
Any minor of the age of eighteen years or more, may,
notwithstanding such minority, contract for life,
health and accident insurance, with any insurance
company duly authorized to do business in the
Philippines, provided the insurance is taken on his
own life and the beneficiary appointed is the
minor's estate or the minor's father, mother,
husband, wife, child, brother or sister.

The married woman or the minor herein allowed to take


out an insurance policy may exercise all the rights
and privileges of an owner under a policy.
All rights, title and interest in the policy of insurance
taken out by an original owner on the life or health
of a minor shall automatically vest in the minor
upon the death of the original owner, unless
otherwise provided for in the policy.
In the case at bar , the insurable interest of
respondent 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.

NO! 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 not untrue..
Held: PETITION IS DENIED
F. Applicability of the Civil Code
Art. 739. The following donations shall be void:
(1) Those made between persons who were guilty of
adultery or concubinage at the time of the
donation;

(2) Those made between persons found guilty of the


same criminal offense, in consideration thereof;
(3) Those made to a public officer or his wife,
descedants and ascendants, by reason of his
office.
In the case referred to in No. 1, the action for
declaration of
nullity may be brought by the spouse of the donor or
donee;
and the guilt of the donor and donee may be proved by
preponderance of evidence in the same action.
INSURANCE
Art. 2011. The contract of insurance is governed by
special laws. Matters not expressly provided for in
such special laws shall be regulated by this Code.
(n)
Art. 2012. 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 make any donation to him, according
to said article. (n)

Damages resulting from the refusal of Zenith to pay the


amount
claimed.
TC: ruled in favor of respondent
CA: affirmed the decision of the RTC
ISSUE: WON THE AWARD OF DAMAGES by THE RTC is
correct
Ratio NO
It is clear that under the Insurance Code, in case of
unreasonable delay in the payment of the
proceeds of an insurance policy, the damages that
may be awarded are: 1) attorney's fees; 2) other
expenses incurred by the insured person by
reason of such unreasonable denial or withholding
of payment; 3) interest at twice the ceiling
prescribed by the Monetary Board of the amount
of the claim due the injured; and 4) the amount of
the claim
As regards the award of moral and exemplary damages,
the rules
under the Civil Code of the Philippines shall govern.

Zenith Insurance Corporation vs CA


Private respondent insured his car for own damage
under private
car Policy with Petitioner Zenith Insurance Corporation.
The car figured in an accident
damages in the
amount of P 3640.

and suffered actual

Fernandez filed a complaint with the RTC for sum of


money and

"The purpose of moral damages is essentially indemnity


or
reparation, not punishment or correction. Moral
damages are
emphatically not intended to enrich a complainant at
the expense
of a defendant, they are awarded only to enable the
injured party
to obtain means, diversions or amusements that will
serve to

alleviate the moral suffering he has undergone by


reason of the
defendant's culpable action."
It is equally true that in awarding moral damages in
case of breach
of contract, there must be a showing that the breach
was wanton
and deliberately injurious or the one responsible acted
fraudently
or in bad faith (Perez v. Court of Appeals, G.R. No. L20238,
January 30,1965; 13 SCRA 137; Solis v. Salvador, G.R.
No. L-17022,
August 14, 1965; 14 SCRA 887).
In the instant case, there was a finding that private
respondent
was given a "run-around" for two months, which is the
basis for
the award of the damages granted under the Insurance
Code for
unreasonable delay in the payment of the claim.
However, the act of petitioner of delaying payment for
two months cannot be considered as so wanton or
malevolent to
justify an award of P20,000.00 as moral damages,
taking into
consideration also the fact that the actual damage on
the car was
only P3,460. In the pre-trial of the case, it was shown
that there
was no total disclaimer by respondent.

The reason for petitioner's failure to indemnify private


respondent
within the two-month period was that the parties could
not come
to an agreement as regards the amount of the actual
damage on
the car.
On the other hand, exemplary or corrective damages
are imposed
by way of example or correction for the public good (Art.
2229,
New Civil Code of the Philippines).
In the case of Noda v. Cruz-Arnaldo, G.R. No. 57322,
June 22,1987;
151 SCRA 227, exemplary damages were not awarded
as the
insurance company had not acted in wanton, oppressive
or
malevolent manner. The same is true in the case at bar.
Held: The amount of P10,000.00 prayed for by private
respondent
as moral damages is equitable.
Exemplary damages is deleted
Insular vs Ebrado

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