Construction of Insurance Contract CALANOC v CA (G.R. L-8151): Melencio Basilio was a security guard who died while on duty.

The insurance company paid his widow, Virginia Calanoc, the face value of the policy, P2,000, but refused to give the additional sum of P2,000 in the supplementary contract covering death by accident. The insurance company said he was killed by someone participating in a robbery and while making an arrest, two contingencies expressly excluded in the contract. Basilio was killed as he stood outside the iron gate of Atty Ojeda, as they tried to get into the house where they suspected a robber had broken into. The Court of Appeals upheld the company, that said Basilios killing was not an accident, but rather an intentional act on the part of the robber. The Supreme Court ruled that there was no proof that it was intentional, that the robber had aimed for Basilio, because there was nothing on record that showed how the fatal shot was fired while it was an accident on the part of Basilio. The house being robbed was not the one he was guarding, and he had earlier refused to go to the house without a policeman. Insurer ordered to pay. FINMAN GENERAL ASSURANCE CORP v CA (G.R. 100970): Carlie Suposa was killed while on his way home from a party. When his family tried to collect on the insurance proceeds, the insurer denied the claim saying that murder and assault were not within the scope of coverage of the insurance policy, because it was not accidental but a deliberate and intentional act of the assailant. The Insurance Commission said the death was covered by the policy, a decision upheld by the CA. The CA pointed out that: 1. The record is barren of how the stab wound was inflicted 2. While the act may not exempt the unknown perpetrator from criminal liability, the happening was a pure accident on the part of the victim 3. The personal accident policy enumerated 10 circumstances wherein no liability attaches to insurer and murder and assault were not expressly mentioned. Failure of the insurer to include these leads to the conclusion that it did not intend to exempt itself from liability for such death. SUN INSURANCE OFFICE LTD v CA: Felix Lim Jr shot himself dead and the family tried to claim on the policy. The insurer refused, saying that when he put a gun to his head, though thinking it was not loaded, he willfully exposed himself to needless peril and removed himself from the coverage of the insurance policy. The family said that Lim had removed the magazine before and fully believed that the gun was not loaded. As such, it was an accident that should be covered by the policy. The court held that while Lim was unquestionably negligent, that should not prevent his widow from recovering from the insurance policy he obtained precisely against accident. There is nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed upon if the insured is shown to have contributed to his own accident. JEWEL VILLACORTA vs. THE INSURANCE COMMISSION G.R. No. L-54171, 28 October 1980 100 SCRA 467 FACTS: Villacorta had her Colt Lancer car insured with Empire Insurance Company against own damage, theft and 3rd party liability. While the car was in the repair shop, one of the employees of the said repair shop took it out for a joyride after which it figured in a vehicular accident. This resulted to the death of the driver and some of the passengers as well as to extensive damage to the car. Villacorta filed a claim for total loss with the said insurance company. However, it denied the claim on the ground that the accident did not fall within the provisions of the policy either for the Own Damage or Theft coverage, invoking the policy provision on Authorized Driver Clause. This was upheld by the Insurance Commission further stating that the car was not stolen and therefore not covered by the Theft Clause because it is not evident that the person who took the car for a joyride intends to permanently deprive the insured of his/ her car.

ISSUE: Whether or not the insurer company should pay the said claim HELD: Yes. Where the insureds car is wrongfully taken without the insureds consent from the car service and repair shop to whom it had been entrusted for check-up and repairs (assuming that such taking was for a joy ride, in the course of which it was totally smashed in an accident), respondent insurer is liable and must pay insured for the total loss of the insured vehicle under the Theft Clause of the policy. Assuming, despite the totally inadequate evidence, that the taking was temporary and for a joy ride, the Court sustains as the better view that which holds that when a person, either with the object of going to a certain place, or learning how to drive, or enjoying a free ride, takes possession of a vehicle belonging to another, without the consent of its owner, he is guilty of theft because by taking possession of the personal property belonging to another and using it, his intent to gain is evident since he derives therefrom utility, satisfaction, enjoymet and pleasure. ACCORDINGLY, the appealed decision is set aside and judgment is hereby rendered sentencing private respondent to pay petitioner the sum of P35,000.00 with legal interest from the filing of the complaint until full payment is made and to pay the costs of suit. Perla Compania de Seguro, Inc. vs court of Appeals208 SCRA 487; May 7, 1992Nocon, J. FACTS: Spouses Lim purchased a brand new red Ford Laser car from Supercars, Inc. in a saleby installment secured by a chattel mortgage. The same car is insured with PerlaCompania de Seguros (Perla). On the same day, Supercars, Inc. assigned its rights,title and interest to FCP Credit Corporation (FCP).On a later date, the vehicle was carnapped. Spouses Lim filed a claim for loss withPerla but this was denied on the ground that Evelyn Lim, who was using the vehiclebefore it was carnapped, was in possession of an expired drivers license at the time of the loss, in violation of the authorized driver clause of the insurance policy. ISSUE: Whether or not Perla is liable despite the alleged violation of the authorizeddriver clause in the insurance contractHELD: The Supreme Court held that Perla is liable to pay the insurance claim.The comprehensive motor car insurance policy issued by Perla covered loss or damageto the car: (a) xxx; (b) by fire, external explosion, self-ignition or lightning or burglary,housebreaking or theft; (c) xxx.Where a car is admittedly unlawfully and wrongfully taken without the owners consentor knowledge, such taking constitutes theft, and therefore, it is the THEFT clause, andnot the AUTHORIZED DRIVER clause that should apply.The Court of Appeals was correct in holding that:Theft is an entirely different legal concept from that of accident. Theft is committed bya person with the intent to gain or, to put it in another way, with the concurrence of thedoers will. On the other hand, accident, although it may proceed or result fromnegligence, is the happening of an event without the concurrence of the will of theperson by whose agency it was caused. (Bouviers Law Dictionary).Clearly, the risk against accident is distinct from the risk against theft. The authorizeddriver clause in a typicalinsurance policy is in contemplation or anticipation of accident in the legal sense in which it should be understood, and not in contemplation or anticipation of an event such as theft. The distinction often seized upon by insurancecompanies in resisting claims from their assureds between death occurring as a resultof accident and death occurring as a result of intent may, by analogy, apply to the caseat bar. Thus, if the insured vehicle had figured in an accident at the time she drove itwith an expired license, then, appellee Perla Compania could properly resistappellants claim for indemnification for the loss or destruction of the vehicle resultingfrom the accident. But in the present case, the loss of the insured vehicle did not resultfrom an accident where intent was involved; the loss in the present case was caused bytheft, the commission of which was attended by intent.There is no causal connection between the

possession of a valid drivers license andthe loss of a vehicle. To rule otherwise would render car insurance practically a shamsince an insurance company can easily escape liability by citing restrictions which are not applicable or germane to the claim, thereby reducing indemnity to a shadow. Geagonia vs. Court of Appeals [GR 114427, 6 February 1995] First Division, Davide Jr. (J): 4 concur Facts: Armando Geagonia is the owner of Normans Mart located in the public market of San Francisco, Agusan del Sur. On 22 December 1989, he obtained from Country Bankers Insurance Corporation fire insurance policy No. F14622 2 for P100,000.00. The period of the policy was from 22 December 1989 to 22 December 1990 and covered the following: Stock-in-trade consisting principally of dry goods such as RTWs for men and women wear and other usual to assureds business. Geagonia declared in the policy under the subheading entitled CO-INSURANCE that Mercantile Insurance Co., Inc. was the co-insurer for P50,000.00. From 1989 to 1990, Geagonia had in his inventory stocks amounting to P392,130.50, itemized as follows: Zenco Sales, Inc., P55,698.00; F. Legaspi Gen. Merchandise, 86,432.50; and Cebu Tesing Textiles, 250,000.00 (on credit); totalling P392,130.50. The policy contained the following condition, that the insured shall give notice to the Company of any insurance or insurances already effected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless notice be given and the particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00. On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at the public market of San Francisco, Agusan del Sur. Geagonias insured stocks-in-trade were completely destroyed prompting him to file with Country Bankers a claim under the policy. On 28 December 1990, Country Bankers denied the claim because it found that at the time of the loss Geagonias stocks-in-trade were likewise covered by fire insurance policies GA-28146 and GA-28144, for P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (PFIC). These policies indicate that the insured was Messrs. Discount Mart (Mr. Armando Geagonia, Prop.) with a mortgage clause reading MORTGAGEE: Loss, if any, shall be payable to Messrs. Cebu Tesing Textiles, Cebu City as their interest may appear subject to the terms of this policy. CO-INSURANCE DECLARED: P100,000. Phils. First CEB/F-24758 The basis of Country Bankers denial was Geagonias alleged violation of Condition 3 of the policy. Geagonia then filed a complaint against Country Bankers with the Insurance Commission (Case 3340) for the recovery of P100,000.00 under fire insurance policy F-14622 and for attorneys fees and costs of litigation. He attached his letter of 18 January 1991 which asked for the reconsideration of the denial. He admitted in the said letter that at the time he obtained Country Bankerss fire insurance policy he knew that the two policies issued by the PFIC were already in existence; however, he had no knowledge of the provision in Country Bankers policy requiring him to inform it of the prior policies; this requirement was not mentioned to him by Country Bankers agent; and had it been so mentioned, he would not have withheld such information. He further asserted that the total of the amounts claimed under the three policies was below the actual value of his stocks at the time of loss, which was P1,000,000.00. In its decision of 21 June 1993, the Insurance Commission found that Geagonia did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles which procured the PFIC policies without informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. These findings were based on Geagonias testimony that he came to know of the PFIC policies only when he filed his claim with Country Bankers and that Cebu Tesing Textile obtained them and paid for their premiums without informing him thereof. The Insurance Commission

ordered Country Bankers to pay Geagibua the sum of P100,000.00 with legal interest from the time the complaint was filed until fully satisfied plus the amount of P10,000.00 as attorneys fees. With costs. Its motion for the reconsideration of the decision having been denied by the Insurance Commission in its resolution of 20 August 1993, Country Bankers appealed to the Court of Appeals by way of a petition for review (CA-GR SP 31916). In its decision of 29 December 1993, the Court of Appeals reversed the decision of the Insurance Commission because it found that Geagonia knew of the existence of the two other policies issued by the PFIC. His motion to reconsider the adverse decision having been denied, Geagonia filed the petition for review on certiorari. Issue [1]: Whether the non-disclosure of other insurance policies violate condition 3 of the policy, so as to deny Geagonia from recovering on the policy. Held [1]: Condition 3 of Country Bankerss Policy F-14622 is a condition which is not proscribed by law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code, Such a condition is a provision which invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It is commonly known as the additional or other insurance clause and has been upheld as valid and as a warranty that no other insurance exists. Its violation would thus avoid the policy. However, in order to constitute a violation, the other insurance must be upon the same subject matter, the same interest therein, and the same risk. The fire insurance policies issued by the PFIC name Geagonia as the assured and contain a mortgage clause which reads: Loss, if any, shall be payable to MESSRS. TESING TEXTILES, Cebu City as their interest may appear subject to the terms of the policy. This is clearly a simple loss payable clause, not a standard mortgage clause. The Court concludes that (a) the prohibition in Condition 3 of the subject policy applies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. The first conclusion is supported by the portion of the condition referring to other insurance covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and the portion regarding the insureds declaration on the subheading COINSURANCE that the co-insurer is Mercantile Insurance Co., Inc. in the sum of P50,000.00. A double insurance exists where the same person is insured by several insurers separately in respect of the same subject and interest. Since the insurable interests of a mortgagor and a mortgagee on the mortgaged property are distinct and separate; the two policies of the PFIC do not cover the same interest as that covered by the policy of Country Bankers, no double insurance exists. The non-disclosure then of the former policies was not fatal to Geagonias right to recover on Country Bankers policy. Issue [2]: Whether the violation of Condition 3 of the policy renders the policy void. Held [2]: Unlike the other insurance clauses involved in General Insurance and Surety Corp. vs. Ng Hua, 106 Phil. 1117 [1960], or in Pioneer Insurance & Surety Corp. vs. Yap, 61 SCRA 426 [1974] which reads The insured shall give notice to the company of any insurance or insurances already effected, or which may subsequently be effected covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this Policy shall be forfeited; or in the 1930 case of Santa Ana vs. Commercial Union Assurance Co., 55 Phil. 329, 334 [1930], which provided that any outstanding insurance upon the whole or a portion of the objects thereby assured must be declared by the insured in writing and he must cause the company to add or insert it in the policy, without which such policy shall be null and void, and the insured will not be entitled to indemnity in case of loss, Condition 3 in Country Bankers policy F-14622 does not absolutely declare void any violation thereof. It expressly provides that the condition shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00. By stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed P200,000.00, Country Bankers was amenable to

assume a co-insurers liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage overinsurance. Indeed, the rationale behind the incorporation of other insurance clause in fire policies is to prevent overinsurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the propertys value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured. Fortune Insurance and Surety Co. Inc. v. Court of AppealsGR No. 115278, May 23, 1995Facts:Producers Bank of the Philippines was insured by the Fortune Insurance and Surety Co. Inc. OnJune 29, 1987, an armoured car of Producers was robbed while travelling along Taft Avenue, to transfercase in the sum of Php 725,000 from its Pasay Branch to the Head Office. The said armoured car wasdriven by Benjamin Magalong and escorted by security guard Satunino Atiga. Magalong was assigned byPRC Management Systems while Atiga was assigned by Unicorn Security Services. After an investigation,Magalong and Atiga were charged, together with 3 others, for violation of the AntiHighway RobberyLaw. During the pendency of the criminal case, demands were made by Producers upon Fortune to paythe amount of the loss from the robbery, but the latter refused stating that the loss is excluded from theinsurance policy as provided in General Exceptions, section (b) of the policy that any loss caused bythe any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner, director,trustee or authorized representative of the insured whether acting alone on in conjunction withothers... producers opposed such contention stating that Atiga and Magalong are not included in thoseenumerated in the abovestated provision and thereafter, filed a complaint against the insurancecompany. The trial court rendered a decision in favour of the bank which the Court of Appeals affirmedwhen Fortune appealed such decision.Issue:Whether or not recovery by Producers is precluded under the general exception clause of the policy.Ruling:It has been aptly observed that in burglary, robbery and theft insurance, the opportunity todefraud the insurer the moral hazard is so great the insurers have found it necessary to fill up theirpolicies with countless restrictions, many designed to reduce this hazard. Seldom does the insurerassume the risk of all losses due to the hazards insured against. Persons frequently excluded undersuch provisions are those in the insureds service and employment. In such cases, the terms specifyingthe excluded classes are to be given their meaning as understood in common speech.The terms service and employment are generally associated with the idea of selection,control and compensation. Insofar as Fortune is concerned, it was its intention to exclude and exemptfrom protection and coverage losses arising from dishonest, fraudulent or criminal acts of personsgranted or having unrestricted access to Producers money or payroll. When it used then the termemployee, it must have had in mind any person who qualifies as such and generally and universallyunderstood or jurisprudentially established in the light of the four standards in the determination of theemployer-employee relationship. With these view, Producers, having entrusted the three the specificduty to safely transfer the money to it head office, has acted as agents of which it can be considered asrepresentative of the company. Edillon v. Manila Bankers Life Insurance Corp. - Concealment 117 SCRA 187 Facts: > In Apr. 1969, Carmen Lapuz applied for insurance with Manila Bankers. In the application she stated the date of her birth as July 11, 1904 (around 64 yrs old). The policy was thereafter issued. > Subsequently, in May 1969, Carmen died of a car accident. Her sister, as beneficiary claimed the proceeds of the insurance. > Manila Bankers refused to pay because the certificate of insurance contained a provision excluding its liability to pay claims to persons under 16 or over 60. Issue:

Whether or not the policy is void considering that the insured was over 60 when she applied. Held: NO. The age of Carmen was not concealed to the insurance company. Her application form indicated her true age. Despite such information, Manila Bankers accepted the premium and issued the policy. It had all the time to process the application and notice the applicants age. If it failed to act, it was because Manila Bankers was willing to waive such disqualifications or it simply overlooked such fact. It is therefore estopped from disclaiming any liability. White Gold Marine Services Inc. vs Pioneer Insurance and Surety Corporation White Gold owns several shipping vessels. Steamship Mutual Underwriting Association (based in Bermuda) is a protection and indemnity club which is an association composed of shipowners in general who band together for the specific purpose of providing insurance cover on a mutual basis against liabilities incidental to shipowning that the members incur in favor of third parties. White Gold, through Pioneer Insurance (agent of Steamship Mutual), procured a protection and indemnity coverage from Steamship Mutual. Steamship Mutual does not have authority from the Insurance Commission to conduct insurance business in the Philippines but its collection agent here (Pioneer Insurance) has been licensed to conduct insurance business. Later, Steamship Mutual filed a case for collection of sum of money against White Gold due to the latters failure to pay its balance with the former. White Gold averred that Steamship Mutual has no license [hence it cannot collect]. Nor can it collect through Pioneer Insurance because, though Pioneer Insurance is licensed as an insurance company, it is not licensed to be an insurance broker/agent. Steamship Mutual insisted it is not conducting insurance business here and is merely a protection and indemnity club. The Insurance Commission as well as the Court of Appeals ruled against White Gold. ISSUE: Whether or not Steamship mutual needs a license to operate in the Philippines HELD: Yes. The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act required to be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the performance becomes requisite. It is not by what it is called. If it is a contract of indemnity, it must be a contract of insurance. In fact, a protection and indemnity club is a form of insurance where the members are both the insurers and the insured. It is a mutual insurance company. The club indemnifies the member for whatever risks it may incur against a third party where the third party is other than the club and the members. Hence, Steamship Mutual needs to procure a license from the Insurance Commission in order to continue operating here. Pioneer Insurance also needs to secure another license as an insurance broker/agent of Steamship Mutual pursuant to Section 299 of the Insurance Code. G.R. No. 125678 March 18, 2002 Lessons Applicable: Elements (Insurance) Blood Relationship (Insurance) FACTS: Ernani Trinos, deceased husband of Julita Trinos, applied for a health care coverage with Philamcare Health Systems, Inc. He answered the standard application form: Have you or any of your family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give details). - NO the application was approved for a period of one year from March 1, 1988 to March 1, 1989. Accordingly, he was issued Health Care Agreement No. P010194 Under the agreement, respondents husband was entitled to avail of hospitalization benefits, whether ordinary or emergency, listed therein. He was also entitled to avail of "out-patient benefits" such as annual physical examinations, preventive health care and other out-patient services. Upon the termination of the agreement, the same was extended for another year 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 P75,000.00

per disability. During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for 1 month beginning March 9, 1990. While her husband was in the hospital, Julina Trinos tried to claim the benefits under the health care agreement. Philamcare denied her claim saying that the Health Care Agreement was void for concealing Ernanis medical history so she paid the hospitalization expenses of P76,000.00 herself. Doctors at the MMC allegedly discovered at the time of Ernanis confinement that he was hypertensive, diabetic and asthmatic, contrary to his answer in the application form. After being discharged from the MMC, he was attended by a physical therapist at home. Later, he was admitted at the Chinese General Hospital. Due to financial difficulties, however, he was brought home again. April 13, 1990 morning: Ernani had fever and was feeling very weak He was brought to Chinese General Hospital where he died July 24, 1990: She brought action for damages against Philamcare Health Systems Inc. and its president, Dr. Benito Reverente RTC: Philamcare and Dr. Benito Reverent to pay and reimburse P76k plus interest, moral damages, exemplary damages, attorney's fees and cost of suit CA: affirmed the decision of RTC but deleted all awards for damages and absolved Philamcare Philamcare brought an instant petition for review arguing that: health care agreement is not an insurance contract; hence the "incontestability clause" under the Insurance Code does not apply. grants "living benefits," such as medical check-ups and hospitalization which a member may immediately enjoy so long as he is alive upon effectivity of the agreement until its expiration one-year thereafter only medical and hospitalization benefits are given under the agreement without any indemnification, unlike in an insurance contract where the insured is indemnified for his loss since Health Care Agreements are only for a period of one year, as compared to insurance contracts which last longer; incontestability clause does not apply, as the same requires an effectivity period of at least two years insurance company is governed by the Insurance Commission, but a Health Maintenance Organization under the authority of the Department of Health ISSUE: W/N the health care agreement is a contract of insurance. YES W/N the spouse being "not" legal wife can claim - YES HELD: Petition is DENIED. CA AFFIRMED. 1. YES. P.D. 612 Insurance Code Sec. 2 (1) (1) 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. Sec. 3 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's husband in obtaining the health care agreement was his own health. 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. The answer in response to the question relating to the medical history of the applicant largely depends on opinion rather than fact, especially coming from respondent's 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. 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. P.D. 612 Insurance Code Sec. 27 Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance. cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: - none of these was made 1. Prior notice of cancellation to insured; 2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned; 3. Must be in writing, mailed or delivered to the insured at the address shown in the policy; 4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based. When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation. Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against the party which prepared the contract - the insurer. (U)nder the title Claim procedures of expenses, the defendant Philamcare Health Systems Inc. had twelve months from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. The periods having expired, the defense of concealment or misrepresentation no longer lie. 2. YES. P.D. 612 Insurance Code Sec. 10 Sec. 10. Every person has an insurable interest in the life and health: (1) of himself, of his spouse and of his children; (2) of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest; (3) 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 (4) of any person upon whose life any estate or interest vested in him depends. not the legal wife (deceased was previously married to another woman who was still alive) health care agreement is in the nature of a contract of indemnity. payment should be made to the party who incurred the expenses CIR v. Lincoln Phil Life - Automatic Increase Clause 379 SCRA 423 (2002) Facts: > In the years prior to 1984, Lincoln issued a special kind of life insurance policy known as the "Junior Estate Builder Policy," the distinguishing feature of which is a clause providing for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. The clause was to take effect in the year 1984. > Documentary stamp taxes due on the policy were paid to the petitioner only on the initial sum assured. > Subsequently, petitioner issued deficiency documentary stamps tax assessment for the year 1984, corresponding to

the amount of automatic increase of the sum assured on the policy issued by respondent. > Lincoln questioned the deficiency assessments and sought their cancellation in a petition filed in the Court of Tax Appeals. CTA found no basis for the assessment. CA affirmed. Issue: Whether or not the automatic increase of the sum assured on the policy is taxable. Held: YES. CIR claims that the "automatic increase clause" in the subject insurance policy is separate and distinct from the main agreement and involves another transaction; and that, while no new policy was issued, the original policy was essentially re-issued when the additional obligation was assumed upon the effectivity of this "automatic increase clause" in 1984; hence, a deficiency assessment based on the additional insurance not covered in the main policy is in order. The SC agreed with this contention. The subject insurance policy at the time it was issued contained an "automatic increase clause." Although the clause was to take effect only in 1984, it was written into the policy at the time of its issuance. The distinctive feature of the "junior estate builder policy" called the "automatic increase clause" already formed part and parcel of the insurance contract, hence, there was no need for an execution of a separate agreement for the increase in the coverage that took effect in 1984 when the assured reached a certain age. It is clear from Section 173 of the NIRC that the payment of documentary stamp taxes is done at the time the act is done or transaction had and the tax base for the computation of documentary stamp taxes on life insurance policies under Section 183 of NIRC is the amount fixed in policy, unless the interest of a person insured is susceptible of exact pecuniary measurement. Logically, we believe that the amount fixed in the policy is the figure written on its face and whatever increases will take effect in the future by reason of the "automatic increase clause" embodied in the policy without the need of another contract. Here, although the automatic increase in the amount of life insurance coverage was to take effect later on, the date of its effectivity, as well as the amount of the increase, was already definite at the time of the issuance of the policy. Thus, the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy. The "automatic increase clause" in the policy is in the nature of a conditional obligation under Article 1181, 8 by which the increase of the insurance coverage shall depend upon the happening of the event which constitutes the obligation. In the instant case, the additional insurance that took effect in 1984 was an obligation subject to a suspensive obligation, 9 but still a part of the insurance sold to which private respondent was liable for the payment of the documentary stamp tax. Insurance Case Digest: Enriquez v. Sun Life Assurance Co. of Canada (1920) November 29, 1920 Lessons Applicable: Perfection (Insurance) FACTS: September 24, 1917: Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its office in Manila for a life annuity 2 days later: he paid P6,000 to the manager of the company's Manila office and was given a receipt according to the provisional receipt, 3 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; -check (2) there had to be approval of the application by the head office of the company; and - check (3) this approval had in some way to be communicated by the company to the applicant - ? November 26, 1917: The head office at Montreal, Canada gave notice of acceptance by cable to Manila but this was not mailed December 4, 1917: policy was issued at Montreal December 18, 1917: attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired to withdraw his application December 19, 1917: local office replied to Mr. Torres, stating that the policy had been issued, and called attention to the notification of November 26, 1917 December 21, 1917 morning: received by Mr. Torres December 20, 1917: Mr. Herrer died Rafael Enriquez, as administrator of the estate of the late Joaquin Ma. Herrer filed to recover from Sun Life Assurance Company of Canada through its office in Manila for a life annuity RTC: favored Sun Life Insurance ISSUE: W/N Mr. Herrera received notice of acceptance of his application thereby perfecting his life annuity HELD: NO. Judgment is reversed, and the Enriquez shall have and recover from the Sun Life the sum of P6,000 with legal interest from November 20, 1918, until paid, without special finding as to costs in either instance. So ordered. Civil Code Art. 1319 (formerly Art.1262) 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. Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. not perfected because it has not been proved satisfactorily that the acceptance of the application ever came to the knowledge of the applicant Great Pacific Life Assurance Co. vs Court of Appeals GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner, vs. HONORABLE COURT OF APPEALS, respondents. G.R. No. L-31845 April 30, 1979 LAPULAPU D. MONDRAGON, petitioner, vs. HON. COURT OF APPEALS and NGO HING, respondents. G.R. No. L-31878 April 30, 1979 Facts: Respondent Ngo Hing filed an application with petitioner Great Pacific Life Assurance Company (Pacific Life) for a twenty-year endowment policy in the life of Helen Go, his one year old daughter. Petitioner Lapulapu D. Mondragon, the branch manager, prepared application form using the essential data supplied by respondent. The latter paid the annual premium and Mondragon retained a portion of it as his commission. The binding deposit receipt was issued to respondent. Mondragon wrote his strong recommendation for the approval of the insurance application. However, Pacific Life disapproved the application since the plan was not available for minors below 7 years old but it can consider the same under another plan. The nonacceptance of the insurance plan was allegedly not communicated by Mondragon to respondent. Mondragon again asserted his strong recommendation. Helen Go died of influenza. Thereupon, respondent sought the payment of the proceeds of the insurance, but having failed in his effort, he filed an action for the recovery of the same. Hence the case at bar. Issue: Whether the binding deposit receipt constituted a temporary contract of the life insurance in question, and thus negate the claim that the insurance contract was perfected. Held: YES. The provisions printed on the binding deposit receipt show that the binding deposit receipt is intended to

be merely a provisional or temporary insurance contract and only upon compliance of the following conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates; (2) that if the company does not accept the application and offers to issue a policy for a different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise, the deposit shall be refunded; and (3) that if the applicant is not insurable according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant. Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely an acknowledgment, on behalf of the company, that the latter's branch office had received from the applicant the insurance premium and had accepted the application subject for processing by the insurance company; and that the latter will either approve or reject the same on the basis of whether or not the applicant is "insurable on standard rates." Since Pacific Life disapproved the insurance application of Ngo Hing, the binding deposit receipt in question had never become in force at any time. Upon this premise, the binding deposit receipt is, manifestly, merely conditional and does not insure outright. Where an agreement is made between the applicant and the agent, no liability shall attach until the principal approves the risk and a receipt is given by the agent. The acceptance is merely conditional, and is subordinated to the act of the company in approving or rejecting the application. Thus, in life insurance, a "binding slip" or "binding receipt" does not insure by itself. It bears repeating that through the intra-company communication of 30 April 1957, Pacific Life disapproved the insurance application in question on the ground that it is not offering the 20-year endowment insurance policy to children less than 7 years of age. What it offered instead is another plan known as the Juvenile Triple Action, which Ngo Hing failed to accept. In the absence of a meeting of the minds between Pacific Life and Ngo Hing over the 20-year endowment life insurance in the amount of P50,000.00 in favor of the latter's one-year old daughter, and with the non-compliance of the abovequoted conditions stated in the disputed binding deposit receipt, there could have been no insurance contract duly perfected between them. Accordingly, the deposit paid by Ngo Hing shall have to be refunded by Pacific Life.

medical history. Doctors at the MMC allegedly discovered at the time of his confinement, he was hypertensive, diabetic and asthmatic. Julita then paid the hospitalization expenses herself, amounting to about P76T. - After her husband died, Julita instituted action for damages against Philamcare and its Pres. After trial, the lower court ruled in her favor and ordered Philamcare to reimburse medical and hospital coverage amounting to P76T plus interest, until fully paid; pay moral damages of P10T; pay exemplary damages of P10T; attys fees of P20T. - CA affirmed the decision of the trial court but deleted all awards for damages and absolved petitioner Reverente. Petitioners Claims (1) Agreement grants living benefits such as medical check-ups and hospitalization which a member may immediately enjoy so long as he is alive upon effectivity of the agreement until its expiration. (2) Only medical and hospitalization benefits are given under the agreement without any indemnification, unlike in an insurance contract where the insured is indemnified for his loss. (3) HCAs are only for a period of one year; therefore, incontestability clause does not apply, as it requires effectivity period of at least 2 yrs. (4) It is not an insurance company, governed by Insurance Commission, but a Health Maintenance Organization under the authority of DOH. (5) Trinos concealed a material fact in his application. (6) Julita was not the legal wife since at the time of their marriage, the deceased was previously married to another woman who was still alive.* ISSUES 1. WON a health care agreement is an insurance contract (If so, incontestability clause under the Insurance Code is applicable) 2. WON the HCA can be invalidated on the basis of alleged concealment HELD YES Ratio Every person has an insurable interest in the life and health of himself[1]. 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. Reasoning - A contract of insurance[2] is 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 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 insurers promise, the insured pays a premium. 2. NO Ratio 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; since in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry. Reasoning - The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. The right to rescind should be exercised previous to the commencement of an action on the contract. No rescission was made. Besides, the cancellation of health care agreements as in insurance policies requires: (a) Prior notice of cancellation to insured; (b) Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned; (c) Must be in writing, mailed or delivered to the insured at the address shown in the policy;

PHILAMCARE HEALTH SYSTEMS, INC. V CA (TRINOS) 379 SCRA 357 YNARES-SANTIAGO; March 18, 2002 NATURE Petition for review of CA decision FACTS - Ernani TRINOS, deceased husband of respondent Julita, applied for a health care coverage with Philamcare Health Systems, Inc. In the standard application form, he answered no to the question: Have you or any of your family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give details). - The application was approved for period of one year; upon termination, it was extended for another 2 years. Amount of coverage was increased to a maximum sum of P75T per disability. - During this period, Ernani suffered a HEART ATTACK and was confined at the Manila Medical Center (MMC) for one month. While her husband was in the hospital, Julita tried to claim the hospitalization benefits. - Petitioner treated the Health Care Agreement (HCA) as void since there was a concealment regarding Ernanis

(d) Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based. - These conditions have not been met. When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as to preclude insurer from non-compliance of obligation. Being a contract of adhesion, terms of an insurance contract are to be construed strictly against the party which prepared it the insurer. - Also, Philamcare had 12 months from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. * The health care agreement is in the nature of a contract of indemnity. Hence, payment should be made to the party who incurred the expenses. It is clear that respondent paid all the hospital and medical bills; thus, she is entitled to reimbursement. Disposition Petition DENIED. Insurance Case Digest: Gulf Resorts Inc. v. Philippine Charter Insurance Corp. (2005) G.R. No. 156167 May 16, 2005 Lessons Applicable: Stipulations Cannot Be Segregated (Insurance) FACTS: Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance Company which includes loss or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the properties and 2 swimming pools in its Agoo Playa Resort were damaged August 23, 1990: Gulf's claim was denied on the ground that its insurance policy only afforded earthquake shock coverage to the two swimming pools of the resort Petitioner contends that pursuant to this rider, no qualifications were placed on the scope of the earthquake shock coverage. Thus, the policy extended earthquake shock coverage to all of the insured properties. RTC: Favored American Home - endorsement rider means that only the two swimming pools were insured against earthquake shock CA: affirmed RTC ISSUE: W/N Gulf can claim for its properties aside from the 2 swimming pools HELD: YES. Affirmed. It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with each other. All its parts are reflective of the true intent of the parties. Insurance Code Section 2(1) 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 premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. In the subject policy, no premium payments were made with regard to earthquake shock coverage, except on the two swimming pools. III. SUBROGATION Insurance Case Digest: Malayan Insurance Co, Inc. v CA (1986) G.R. No. L-59919 November 26, 1986 Lessons Applicable: Motor Vehicle Liability Insurance Authorized Driver Cause (Insurance) Laws Applicable: FACTS: Aurelio Lacson ,owner of a Toyota NP Land Cruiser, Model 1972, bearing Plate No. NY-362 and with engine Number F374325 insured with Malayan Insurance Co Dec. 1, 1975: Aurelio brought it to the shop of Carlos Jamelo for repair Dec. 2, 1975: Rogelio Mahinay, together with Johnny Mahinay, Rogelio Macapagong and Rogelio Francisco took and drove the Toyota Land Cruiser and it met an accident with Bo Carlos reported the incident to the police and instituted a criminal case for Qualified Theft against his employees Rogelio Mahinay pleaded guilty and was

convicted of theft Aurelio was not allowed to claim on the ground that the claim is not covered by the policy inasmuch as the driver of the insured vehicle at the time of the accident was not a duly licensed driver Trial Court: favored Aurelio CA: Affirmed ISSUE: W/N the taking of the vehicle by another person without permission or authority from the owner or person-in-charge thereof is sufficient to place it within the ambit of the word theft in the policy HELD: YES. The damages therefore were sustained in the course of the unlawful taking Bacolod IFCs interest in the insured vehicle was in the amount of P2,000.00 only compared to plaintiff's P26,000.00 it is well to presume that Bacolod IFC did not deem it wise to be impleaded as party-plaintiff in this case. This inaction on the part of BIFC will only show that it was not really interested to intervene.

MANILA MAHOGANY MANUFACTURING CORPORATION vs. COURT OF APPEALS ANDZENITH INSURANCE CORPORATION (G.R. No. L-52756 (October 12, 1987) FACTS: Petitioner Manila Mahogany Manufacturing Corporation insured its Mercedes Benz 4-door sedan withrespondent Zenith Insurance Corporation. The insured vehicle was bumped and damaged by a truck owned bySan Miguel Corporation. For the damage caused, respondent company paid petitioner five thousand pesos(P5,000.00) in amicable settlement. Petitioner's general manager executed a Release of Claim, subrogatingrespondent company to all its right to action against San Miguel Corporation.Thereafter, respondent company wrote Insurance Adjusters, Inc. to demand reimbursement from SanMiguel Corporation of the amount it had paid petitioner. Insurance Adjusters, Inc. refused reimbursement,alleging that San Miguel Corporation had already paid petitioner P4,500.00 for the damages to petitioner'smotor vehicle, as evidenced by a cash voucher and a Release of Claim executed by the General Manager of petitioner discharging San Miguel Corporation from "all actions, claims, demands the rights of action that nowexist or hereafter develop arising out of or as a consequence of the accident."Respondent insurance company thus demanded from petitioner reimbursement of the sum of P4,500.00 paid by San Miguel Corporation. Petitioner refused; hence, the instant case. ISSUE: Whether or not the respondent insurance company is subrogated to the rights of the petitioner against San Miguel Corporation. HELD: YES RULING: The Supreme Court held that if a property is insured and the owner receives the indemnity from theinsurer, it is provided in [Article 2207 of the New Civil Code] that the insurer is deemed subrogated to therights of the insured against the wrongdoer and if the amount paid by the insurer does not fully cover the loss,then the aggrieved party is the one entitled to recover the deficiency. Under this legal provision, the real partyin interest with regard to the portion of the indemnity paid is the insurer and not the insured. Hence, petitioner is entitled to keep the sum of P4,500.00 paid by San Miguel Corporation under itsclear right to file a deficiency claim for damages incurred, against the wrongdoer, should the insurancecompany not fully pay for the injury caused (Article 2207, New Civil Code). However, when petitioner released San Miguel Corporation from any liability, petitioner's right to retain the sum of P5,000.00 no longer existed, thereby entitling private respondent to recover the same

.The right of subrogation can only exist after the insurer has paid the insured otherwise the insured will be deprived of his right to full indemnity. If the insurance proceeds are not sufficient to cover the damagessuffered by the insured, then he may sue the party responsible for the damage for the remainder. To the extentof the amount he has already received from, the insurer enjoys the right of subrogation.Since the insurer can be subrogated to only such rights as the insured may have, should the insured,after receiving payment from the insurer, release the wrongdoer who caused the loss, the insurer loses hisrights against the latter. But in such a case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless the release was made with the consent of the insurer. Pan Malayan Ins. Corp. v. Court of Appeals 184 SCRA 54 CORTES, J.: Facts: On December 10, 1985, PANMALAY filed a complaint for damages with the RTC of Makati against private respondents Erlinda Fabie and her driver. PANMALAY averred the following: that it insured a Mitsubishi Colt Lancer car with plate No. DDZ-431 and registered in the name of Canlubang Automotive Resources Corporation [CANLUBANG]; that on May 26, 1985, due to the "carelessness, recklessness, and imprudence" of the unknown driver of a pick-up with plate no. PCR-220, the insured car was hit and suffered damages in the amount of P42,052.00; that PANMALAY defrayed the cost of repair of the insured car and, therefore, was subrogated to the rights of CANLUBANG against the driver of the pick-up and his employer, Erlinda Fabie; and that, despite repeated demands, defendants, failed and refused to pay the claim of PANMALAY. On February 12, 1986, private respondents filed a Motion to Dismiss alleging that PANMALAY had no cause of action against them. They argued that payment under the "own damage" clause of the insurance policy precluded subrogation under Article 2207 of the Civil Code, since indemnification thereunder was made on the assumption that there was no wrongdoer or no third party at fault. Issue: Whether or not the insurer PANMALAY may institute an action to recover the amount it had paid its assured in settlement of an insurance claim against private respondents as the parties allegedly responsible for the damage caused to the insured vehicle. Held: It cannot be said that the meaning given by PANMALAY and CANLUBANG to the phrase "by accidental collision or overturning" found in the first paint of subparagraph (a) is untenable. Although the terms "accident" or "accidental" as used in insurance contracts have not acquired a technical meaning, the Court has on several occasions defined these terms to mean that which takes place "without one's foresight or expectation, an event that proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, not expected" [De la Cruz v. The Capital Insurance & Surety Co., Inc.,]. Certainly, it cannot be inferred from jurisprudence that these terms, without qualification, exclude events resulting in damage or loss due to the fault, recklessness or negligence of third parties. The concept "accident" is not necessarily synonymous with the concept of "no fault". It may be utilized simply to distinguish intentional or malicious acts from negligent or careless acts of man. It must be reiterated that in this present case, the insurer PANMALAY as subrogee merely prays that it be allowed to institute an action to recover from third parties who allegedly caused damage to the insured vehicle, the amount which it had paid its assured under the insurance policy. Having thus shown from the above discussion that PANMALAY has a cause of action against third parties whose negligence may have caused damage to CANLUBANG's car, the Court holds that there is no legal obstacle to the filing by PANMALAY of a complaint for damages against private respondents as the third parties allegedly responsible for the damage.

Respondent Court of Appeals therefore committed reversible error in sustaining the lower court's order which dismissed PANMALAY's complaint against private respondents for no cause of action. Hence, it is now for the trial court to determine if in fact the damage caused to the insured vehicle was due to the "carelessness, recklessness and imprudence" of the driver of private respondent Erlinda Fabie. WHEREFORE, in view of the foregoing, the present petition is GRANTED. Petitioner's complaint for damages against private respondents is hereby REINSTATED. Let the case be remanded to the lower court for trial on the merits. DELSAN TRANSPORT LINES, INC. VS. CA ET.AL. G.R. No.127897, November 15, 2001 Facts: Caltex Phil. entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc. for a period of one year whereby the petitioner agreed to transport Caltex industrial fuel oil from Batangas refinery to different parts of the country. On August 14, 1986, MT Maysun set sail for Zamboanga City but unfortunately the vessel in the early morning of August 16, 1986 near Panay Gulf. The shipment was insured with the private respondent, American Home Assurance Corporation. Subsequently, private respondent paid Caltex the sum of Php.5,096,635.57. Exercising its right of subrogation under Art. 2207, NCC, the private respondent demanded from the petitioner the same amount paid to Caltex. Due to its failure to collect from the petitioner, private respondent filed a complaint with the RTC of Makati City but the trial court dismissed the complaint, finding the vessel to be seaworthy and that the incident was due to a force majeure, thus exempting the petitioner from liability. However, the decision of the trial court was reversed by the CA, giving credence to the report of PAGASA that the weather was normal and that it was impossible for the vessel to sink. Issue: Whether or not the payment made by private respondent for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner. Held: The payment by the private respondent for the insured value of the lost cargo operates as waiver of its right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessels seaworthiness by the private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as common carrier. The fact of payment grants the private respondent subrogatory right which enables it to exercise legal remedies that otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier. INSURABLE INTEREST Great Pacific Life Assurance Corporation vs Court of Appeals On November 20, 2011 00 Insurance Code Parties to an Insurance Contract Group Life Insurance Concealment There was an existing group life insurance executed between Great Pacific Life Assurance (Grepalife) and the Development Bank of the Philippines (DBP). Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. In November 1983, Wilfredo Leuterio, mortgagor of DBP applied to be a member of the group life insurance. He filled out a form where he indicated he never consulted any physician regarding any illness (heart condition etc) and that he is in good health. He was eventually included in the group life insurance and he was covered for the amount of his indebtedness (P86,200.00). In August 1984, Wilfredo died. DBP submitted a death claim but it was denied by Grepalife as it insisted that Wilfredo actually concealed that he was suffering from hypertension at the time of his insurance application. Grepalife relied on the statement made by the doctor who issued Wilfredos

death certificate wherein it was stated that Wilfredos immediate cause of death was massive cerebral hemorrhage secondary to hypertension or hypertension as a possible cause of death. Since Grepalife refused to pay the insurance claim filed by DBP, Medarda Leuterio (widow) sued Grepalife. Grepalife assailed the suit and insisted that Medarda is not a proper party in interest. The lower court ruled in favor of Medarda and the court ordered Grepalife to pay the amount of the insurance to DBP. The Court of Appeals affirmed this decision in 1993. Grepalife appealed to the Supreme Court. In 1995, pending resolution of the case in the SC, DBP foreclosed the property of Medarda. ISSUE: Whether or not Grepalife is liable to pay the insurance claim. HELD: Yes. Grepalife is liable to pay the insurance claim. Medarda is a proper party in interest (note that it was Wilfredo who has been paying the premium, as the insured, he is the real party in interest and this status was transferred to his widow). The group life insurance or mortgage redemption insurance between provides that DBP as the mortgagee is merely an assignee of Wilfredo; and that in the event of Wilfredos death before his indebtedness to DBP is paid, proceeds from the insurance shall first be applied to the sum of the balance insured. But this does not cease Wilfredo to be a party to the insurance contract. Grepalife failed to prove that Wilfredo concealed that he was suffering from hypertension at the time of his application. The doctors finding as to the cause of death is not conclusive because no autopsy was conducted. The doctor who issued the death certificate has no knowledge of Wilfredos hospital confinement [if there are any]. The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. Grepalife must however pay the claim to Medarda considering that DBP already foreclosed the property. Harvardian Colleges v. Country Bankers Insurance Corp. 1 CARA 2 Facts: > Harvardian is a family corporation, the stockholders of which are Ildefonso Yap, Virginia King Yap and their children. > Prior to Aug. 9, 1979, an agent of Country Bankers proposed to Harvardian to insure its school building. Although at first reluctant, Harvardian agreed. > Country Banks sent an inspector to inspect the school building and agreed to insure the same for P500,000 for which Harvardian paid an annual premium of P2,500. > On Aug. 9, 1979, Country Bankers issued to Harvardian a fire insurance policy. On March 12, 1980, (39 days before I was born hehehehe )during the effectivity of said insurance policy, the insured property was totally burned rendering it a total loss. > A claim was made by plaintiff upon defendant but defendant denied it contending that plaintiff had no insurable interest over the building constructed on the piece of land in the name of the late Ildefonso Yap as owner. > It was contended that both the lot and the building were owned by Ildefonso Yap and NOT by the Harvardian Colleges. Issue: Whether or not Harvardian colleges has a right to the proceeds. Held: Harvardian has a right to the proceeds. Regardless of the nature of the title of the insured or even if he did not have title to the property insured, the contract of fire insurance should still be upheld if his interest in or his relation to the property is such that he will be benefited in its continued existence or suffer a direct pecuniary loss from its destruction or injury. The test in determining insurable interest in property is whether one will derive pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss or damage from its destruction, termination

or injury by the happening of the event insured against. Here Harvardian was not only in possession of the building but was in fact using the same for several years with the knowledge and consent of Ildefonso Yap. It is reasonably fair to assume that had the building not been burned, Harvardian would have been allowed the continued use of the same as the site of its operation as an educational institution. Harvardian therefore would have been directly benefited by the preservation of the property, and certainly suffered a pecuniary loss by its being burned. Ang Ka Yu v. Phoenix Assurance - Insurable Interest 1 CARA 704 Facts: > Ang Ka Yu had a piece of property in his possession. He insured it with Phoenix. > The property was lost, so Ang Ka Yu sought to claim the proceeds. > Phoenix denied liability on the ground that Ang was not the owner but a mere possessor and as such, had no insurable interest over the property. Issue: Whether or not a mere possessor has insurable interest over the property. Held: Yes. A person having a mere right or possession of property may insure it to its full value and in his own name, even when he is not responsible for its safekeeping. The reason is that even if a person is NOT interested in the safety and preservation of material in his possession because they belong to 3rd parties, said person still has insurable interest, because he stands either to benefit from their continued existence or to be prejudiced by their destruction.

[1] Sec.10. Every person has an insurable interest in the life and health: (1) of himself, of his spouse and of his children; (2) of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest; (3) 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 (4) of any person upon whose life any estate or interest vested in him depends. [2] Section 2 (1) of the Insurance Code