SOTTO, PIA C.

JD III
July 4, 2018
2d. Representations
i. Definition and nature
Definition:
 A representation is an oral or written statement of a fact or condition, affecting the risk, made
by the insured to the insurer, tending to induce the insurer to assume the risk.
 A representation may be oral or written. (Chapter 1, Title 5, Section 36, RA 10607)
 A representation may be made at the time of, or before, issuance of the policy. (Chapter 1,
Title 5, Section 36, RA 10607)
 The language of a representation is to be interpreted by the same rules as the language of
contracts in general. (Chapter 1, Title 5, Section 38, RA 10607)

Nature:
 Information given concerning risk. — It is the duty of the person applying for insurance to
give to the insurer all such information concerning the risk as will be of use to the latter in
estimating its character and in determining whether or not to assume it.
 Forms basis of contract. — It describes, marks out, and defines the risk assumed.
 Intended as collateral inducements. — Representations are made to influence the insurer to
accept the risk.
ii. Promissory representation
 The language of a representation is to be deemed a promise, unless it appears that it was merely
a statement of belief or expectation. (Section 39)
iii. Affirmative representation
 An affirmative representation is any allegation as to the existence or non-existence of a fact
when the contract begins. It must be presumed to refer to the date on which the contract goes
into effect. (see Sec. 42.)
iv. Effect of falsity of representation
 A representation is to be deemed false when the facts fail to correspond with its assertions or
stipulations. (Section 44)

 Insular Life Ass. Ltd. vs. Feliciano, 73: 201

If an agent of the insurer, after obtaining from an applicant for insurance a correct and truthful
answer to interrogatories contained in the application for insurance, without knowledge of the
applicant fills in false answers, either fraudulently or otherwise, the insurer cannot assert the
falsity of such answers as a defense to liability on the policy, and this is true generally without

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 regard to the subject matter of the answers or the nature of the agent's duties or limitations
on his authority, at least if not brought to the attention of the applicant.

 Sison vs. Manufacturer’s Life, 37 OG 1663

After the insurance policy was issued to A, it was found out that a brother and sister of his
had previously died of pulmonary tuberculosis and that he was already spitting blood at the
time he filed his application. In this case, the misrepresentation was material and sufficient to
avoid the contract of insurance.
v. Rescission of insurance contracts
 Whenever a right to rescind a contract of insurance is given to the insurer by any provision of
this chapter, such right must be exercised previous to the commencement of an action on the
contract. (Section 47)

 Saura Import & Export vs. Phil. Int’l Co., GR No. L-15184, May 31, 1963
The purpose of provisions or stipulations in insurance policies for notice to the insured, is to
prevent the cancellation of the policy, without allowing the insured ample opportunity to
negotiate for other insurance in its stead.
vi. Effect of waiver and estoppel
 Waiver, made by acceptance of insurer of premium payments despite knowledge of the ground
for rescission will not entitle the injured party to rescind from the time when the representation
becomes false.
vii. Incontestable clause
 It is a clause stipulating that the policy shall be incontestable after a stated period are in general
use. They create a kind of contractual statute of limitations on certain defenses that may be
raised by the insurer.
 Incontestability means that after the requisites are shown to exist, the insurer shall be estopped
from contesting the policy or setting up any defense, except as is allowed, on the ground of
public policy.
 The requisites for incontestability are:
A. The policy is a life insurance policy;
B. It is payable on the death of the insured; and
C. It has been in force during the lifetime of the insured for at least two years from its date
of issue or of its last reinstatement.
viii. Preliminary contracts of insurance
 The insurer insures the subject matter usually by what is known as the "binding slip," or
"binder" or "cover note," the contract to be effective until the formal policy is issued or the
risk rejected. The binder is actually a temporary contract of insurance and is usually issued
after the applicant pays the first premium.

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ix. Informal writings to evidence insurance
 Insurance contracts are evidenced by writing. This writing may be informal, as a binding slip,
or a written application informally accepted; It contains a minimum of information.
x. The insurance policy
 The written instrument in which a contract of insurance is set forth, is called a policy of
insurance. (Section 49)
 De Lim vs. Life Ass. of Canada, 41:263
A contract of insurance, like other contracts, 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. The contract, to be binding
from the date of the application, must have been a completed contract, one that leaves nothing
to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall
take effect. There can be no contract of insurance unless the minds of the parties have met in
agreement.

 Enriquez vs. Sun Life of Canada, 41:269

An acceptance of an offer of insurance not actually or constructively communicated to the
proposer does not make a contract. Only the mailing of acceptance completes the contract of
insurance, as the locus poenitentiae is ended when the acceptance has passed beyond the
control of the party.

 Bonifacio Bros. vs. Mora, 20 SCRA 261

A policy of insurance is a distinct and independent contract between the insured and insurer.
A third person has no right in law or equity to the proceeds of an insurance unless there is a
contract or trust, expressed or implied, between the insured and third person.

 Ty vs. First National Surety, 1 SCRA 1324

The insurance contract is the law between the parties. As the terms of the policies are clear,
express and specific, that only amputation of the left hand should be considered as a loss
thereof, an interpretation that would include the mere fracture or other temporary disability,
not covered by the policies, would be unwarranted.

 Ty vs. Filipinas Compania de Seguros, 17 SCRA 365

Where the insurance policies define partial disability as loss of either hand by amputation
through the bones of the wrist, the insured cannot recover under said policies for temporary
disability of his left hand caused by the fractures of some fingers. The provision is clear enough
to inform the party entering into that contract that the loss to be considered a disability entitled
to indemnity, must be severance or amputation of that affected member of the body of the
insured.

 Ang Giop Chip vs. Springfield, 56:275

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 The receipt of a policy of insurance by the insured without objection binds the acceptor and
the insured to the terms thereof.
xi. Construction and reformation of insurance policy

 Sindayen vs. Ins. Life Ass., 62:9

When the policy is issued and delivered, in the absence of fraud or other grounds for
rescission, it is plainly not within the intention of the parties that there should be any questions
held in abeyance or reserved for future determination that leave the very existence of the
contract in suspense and doubt. If this were not so, the entire business world which deals so
voluminously in insurance would be affected by this uncertainty.

 Young vs. Midland Textile, Inc., 30: 617

The terms of the contract constitute the measure of the insurer's liability. If the contract has
been terminated, by a violation of its terms on the part of the insured, there can be no recovery.
Compliance with the terms of the contract is a condition precedent to the right of recovery.
While contracts of insurance are construed most favorably to the insured, yet they must be
construed according to the sense and meaning of the terms which the parties themselves have
used.

 Misamis Lumber vs. Capital Ind. & Surety, 17 SCRA 228

The fact that the insurance contract is onerous does not in itself justify the abrogation of its
express terms which the insured accepted or adhered to and which is the law between the
contracting parties.

 Tuarus Taxi Co. vs. Capital Ass. & Surety, 24 SCRA 254
Courts are to regard "with extreme jealousy" limitations of liability found in insurance policies
and to construe them in such a way as to preclude the insurer from noncompliance with his
obligation. In other words, a contract of insurance couched in language chosen by the insurer
is, if open to the construction contended for by the insured, to be construed most -strongly,
or strictly, against the insurer and liberally in favor of the contention of the insured, which
means in accordance with the rule contra proferentem.

 Jarque vs. Union Fire, 56: 758

It follows that in case repugnance exists between written and printed portions of a policy, the
written portion prevails, and there can be no question that as far as any inconsistency exists, a
typed "rider" prevails over the printed clause it covers.

 Phil. Mfg. vs. Union Ins. Society of Canada, 42: 378

Where an insurance policy for the loss of a vessel is issued "warranted trading between Bitas,
Tondo, or Pasig River and steamers in the Bay of Manila or harbor," under the rule of
construction the physical conditions then and there existing should be read into and become
a part of the policy.

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xii. Matters to be stated in the policy
 A policy of insurance must specify:
1. The parties between whom the contract is made;
2. The amount to be insured except in the cases of open or running policies;
3. The premium, or if the insurance is of a character where the exact premium is only
determinable upon the termination of the contract, a statement of the basis and rates upon
which the final premium is to be determined;
4. The property or life insured;
5. The interest of the insured in property insured, if he is not the absolute owner thereof;
6. The risks insured against it; and
7. The period during which the insurance is to continue. (Section 51)

 Paris Manila Perfume Co. vs. Phoenix Ass., 49: 753

Where a fire insurance company issued a policy insuring certain property against loss by fire,
and the insured property was destroyed by fire during the life of the policy, and the company
contended that the fire was the result of an explosion, which was the primary cause of the fire,
the burden of proof of that fact is on the company, and for want of such proof, the company
is liable.

 Lim Cuan Sy vs. Northern Ass. o., 55:248

A policy insuring merchandise against fire is not invalidated by the fact that the name of the
insured policy is incorrectly written "Lim Cuan Sy" instead of "Lim Cuan Sy & Co.," the latter
being the proper legal designation of the firm, where it appears that the designation "Lim Cuan
Sy" was commonly used as the name of the firm in its business dealings and that the error in
the designation of the insured in the policy was not due to any fraudulent intent on the part
of the latter and did not mislead the insurer as to the extent of the liability assumed.

 Sharruf & Co. vs. Baloise Fire Ins., 64: 258

When the partners of a general partnership doing business under the firm name of "Sharruf
& Co." obtain insurance policies issued to said firm and the latter is afterwards changed to
"Sharruf & Eskenazi", which are the names of the same and only partners of said firm "Sharruf
& Co.", continuing the same business, the new firm acquires the rights of the former under
the same policies.
xiii. To whom proceeds of policy payable
 The insurance proceeds shall be applied exclusively to the proper interest of the person in
whose name or for whose benefit it is made unless otherwise specified in the policy. (Section
53)
xiv. Open, valued and running policy

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  An open policy is one in which the value of the thing insured is not agreed upon, and the
amount of the insurance merely represents the insurer’s maximum liability. The value of such
thing insured shall be ascertained at the time of the loss. (Section 60)
 A valued policy is one which expresses on its face an agreement that the thing insured shall be
valued at a specific. (Section 61)
 A running policy is one which contemplates successive insurances, and which provides that
the object of the policy may be from time to time defined, especially as to the subjects of
insurance, by additional statements or indorsements. (Section 62)
xv. Effect of certain stipulations in policy
 A condition, stipulation, or agreement in any policy of insurance, limiting the time for
commencing an action thereunder to a period of less than 1 year from the time when the cause
of action accrues, is void. (Section 63)
 Paulino vs. Capital Ins., No. L-11728, May 9, 1959
The contract in question could be terminated, "at any time", upon the unilateral act of either
party. Whichever party exercised the "option", did not need the approval, consent or
concurrence of the other thereto. That consent was given at the time of the making of the
contract.
e. Warranties
i. Definition and nature
 A warranty is a statement or promise set forth in the policy or by reference incorporated
therein, the untruth or non-fulfillment of which in any respect, and without reference to
whether the insurer was in fact prejudiced by such untruth or non-fulfillment, renders the
policy voidable. (Vance, 1951)
ii. Warranties vs. representations, conditions, etc.

 Harding vs. Commercial Union Ass. Co., 38:454

Where it appears that the proposal form, while signed by the insured, was made out by the
person authorized to solicit the insurance, the facts stated in the proposal, even if incorrect,
will not be regarded as warranted by the insured, in the absence of willful misstatement. Under
such circumstances the proposal is to be regarded as the act of the insurer.

 Pioneer Insurance & Surety vs. Yap, 61 SCRA 426

By the plain terms of the policy, other insurance without the consent of petitioner would ipso
facto avoid the contract. It required no affirmative act of election on the part of the company
to make operative the clause avoiding the contract, wherever the specified conditions should
occur. Its obligations ceased, unless, being informed of the fact, it consented to the additional
insurance

 Filipinas Life Assurance vs. Nava, 17 SCRA (1966)

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 A life insurance policy involves a contractual obligation wherein the insured becomes duty
bound to pay the premiums agreed upon, lest he runs the risk of having his insurance policy
lapse if he fails to pay such premiums. The fact that the insurance policy contains an automatic
premium payment clause cannot divest such policy of its contractual nature, for the result of
such failure would only be for him to pay the premium plus the corresponding interest
depending upon the condition of the policy. In effect, therefore, the payment of premiums on
the life insurance policies were made by a debtor to a creditor
iii. Effects of violation of warranty
 General rule: The violation of a material warranty, or other material provision of a policy, on
the part of either party thereto, entitles the other to rescind. (Section 74); A policy may declare
that a violation of specified provisions thereof shall avoid it, otherwise the breach of an
immaterial provision does not avoid the policy. (Section 75)
 Exceptions:
A. When, before the time arrives for the performance of a warranty relating to the future, a
loss insured against happens;
B. Performance becomes unlawful at the place of the contract, or impossible.
 A breach of warranty without fraud merely exonerates an insurer from the time that it occurs,
or where it is broken in its inception, prevents the policy from attaching to the risk. (Section
76)