INSURANCE EXAMS

CASE DOCTRINES
MIDTERM

1. Philippine American Insurance Company vs. CA

Facts: Tried to revoke designation of beneficiaries which were already irrevocable per contract
Doctrine: The Contract does not provide for provisions for the conversion of an irrevocable
beneficiary to a revocable one. Also, the law applicable at the time, states that the beneficiary
designated in a life insurance contract cannot be changed without the consent of the beneficiary
because he has a vested interest in the policy.

The contract between the parties is the law binding on both of them and for so many times, this
court has consistently issued pronouncements upholding the validity and effectivity of contracts.
Where there is nothing in the contract which is contrary to law, good morals, good customs,
public policy or public order the validity of the contract must be sustained. Likewise, contracts
which are the private laws of the contracting parties should be fulfilled according to the literal
sense of their stipulations, if their terms are clear and leave no room for doubt as to the intention
of the contracting parties, for contracts are obligatory, no matter in what form they may be,
whenever the essential requisites for their validity are present.

2. Sps. Cha vs CA
Facts: CKS Dev Corp, lessor of the spouses Cha, designated themselves per lease contract as
beneficiaries of a fire insurance policy that the lessees have taken to insure chattels,
merchandise, textiles, goods and effects placed at any stall or store or space in the leased
premises.
Ruling: Violation of Public Policy. CKS has no insurable interest in the property.
Doctrine: Sec. 18. No contract or policy of insurance on property shall be enforceable except for
the benefit of some person having an insurable interest in the property insured.
Insurable interest in the property insured must exist at the time the insurance takes effect and at
the time the loss occurs. The basis of such requirement of insurable interest in property insured is
based on sound public policy: to prevent a person from taking out an insurance policy on property
upon which he has no insurable interest and collecting the proceeds of said policy in case of loss
of the property. In such a case, the contract of insurance is a mere wager which is void under
Section 25 of the Insurance Code.
Section 17. The measure of an insurable interest in property is the extent to which the insured
might be damnified by loss of injury thereof.

3. Qua Chee Gan vs. Law Union and Rock Insurance

It is usually held that where the insurer, at the time of the issuance of a policy of insurance, has
knowledge of existing facts which, if insisted on, would invalidate the contract from its very
inception, such knowledge constitutes a waiver of conditions in the contract inconsistent with the
facts, and the insurer is stopped thereafter from asserting the breach of such conditions.

Well known rule that ambiguities or obscurities must be strictly interpreted against the party that
caused them.
 By reason of the exclusive control of the insurance company over the terms and phraseology of
the contract, the ambiguity must be held strictly against the insurer and liberally in favor of the
insured, specially to avoid a forfeiture. An insurer should not be allowed, by the use of obscure
phrases and exceptions, to defeat the very purpose for which the policy was procured (Moore vs.
Aetna Life Insurance Co., LRA 1915D, 264).

4. Great Pacific Life Assurance Company vs. CA

Binding Slip in Life Insurance Policies - in life insurance, a "binding slip" or "binding receipt" does
not insure by itself (De Lim vs. Sun Life Assurance Company of Canada, 41 Phil. 264).

As to receipt of premium, without approval of Insurer - As held in De Lim vs. Sun Life Assurance
Company of Canada, supra, "a contract of insurance, like other contracts, must be assented to by
both parties either in person or by their agents ... The contract, to be binding from the date of the
application, must have been a completed contract, one that leaves nothing to be dione, 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.

As to Concealment - Concealment is a neglect to communicate that which a partY knows aDd

Ought to communicate (Section 25, Act No. 2427). Whether intentional or unintentional the
concealment entitles the insurer to rescind the contract of insurance.

The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute
and perfect candor or openness and honesty; the absence of any concealment or demotion,
however slight [Black's Law Dictionary, 2nd Edition], not for the insured alone but equally so for
the insurer.

5. Insular Life Assurance Co vs. Feliciano

As to the fraudulent procurement of policies - An agent, who colludes with the insured, in fraud of
the insurer cannot bind the Insurer as against the Policy for he ceases to represent his principal.
The policy being void ab initio.

6. Ng Gan zee vs Asian Crusader Life Assurance Corporation

As to the Imperfect answer of the insurer – that the concealment must, in the absence of
inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld.

While it may be conceded that, from the viewpoint of a medical expert, the information
communicated was imperfect, the same was nevertheless sufficient to have induced appellant to
make further inquiries about the ailment and operation of the insured.

Section 32. The right to information of material facts maybe waived either by the terms of
insurance or by neglect to make inquiries as to such facts where they are distinctly implied in
other facts of which information is communicated.

7. Saturnino vs Phil. American Life Insurance Corp.

As to unintentional concealment - In this jurisdiction a concealment, whether intentional or
unintentional, entitles the insurer to rescind the contract of insurance, concealment being defined
as "negligence to communicate that which a party knows and ought to communicate"
"The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives
the insurer into accepting the risk, or accepting it at the rate of premium agreed upon. The
insurer, relying upon the belief that the assured will disclose every material fact within his actual
or presumed knowledge, is misled into a belief that the circumstance withheld does not exist, and
he is thereby induced to estimate the risk upon a false basis that it does not exist."
8. Canilang Vs. CA
Test of Materiality - Sec. 31. Materially is to be determined not by the event, but solely by the
probable and reasonable influence of the facts upon the party to whom the communication is due,
in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries.

On Non-medical insurance policies - . . . if anything, the waiver of medical examination [in a non-
medical insurance contract] renders even more material the information required of the applicant
concerning previous condition of health and diseases suffered, for such information necessarily
constitutes an important factor which the insurer takes into consideration in deciding whether to
issue the policy or not . . .

9. Philam care health systems vs CA

Defense of Concealment - The fraudulent intent on the part of the insured must be established to
warrant rescission of the insurance contract.[16] 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.

10. Edillon vs. Manila Bankers Life Insurance Corporation

On promissory notes - is that although one of conditions of an insurance policy is that "it shall not
be valid or binding until the first premium is paid", if it is silent as to the mode of payment,
promissory notes received by the company must be deemed to have been accepted in payment
of the premium. In other words, a requirement for the payment of the first or initial premium in
advance or actual cash may be waived by acceptance of a promissory note...

11. James Stokes vs. Malayan Insurance

MERCANTILE LAW; INSURANCE CONTRACT; COMPLIANCE WITH TERMS THEREOF, A
CONDITION PRECEDENT TO RECOVERY. — A contract of insurance is a contract of indemnity
upon the terms and conditions specified therein. When the insurer is called upon to pay in case of
loss or damage, he has the right to insist upon compliance with the terms of the contract. If the
insured cannot bring himself within the terms and conditions of the contract, he is not entitled as a
rule to recover for the loss or damage suffered. For the terms of the contract constitute the
measure of the insurer’s liability, and compliance therewith is a condition precedent to the right of
recovery.

ACCEPTANCE OF PREMIUM WITHIN THE STIPULATED PERIOD FOR PAYMENT DOES NOT
ESTOP INSURER FROM INTERPOSING ANY VALID DEFENSE. — Acceptance of premium
within the stipulated period for payment thereof, including the agreed period of grace, merely
assures continued effectivity of the insurance policy in accordance with its terms. Such
acceptance does not estop the insurer from interposing any valid defense under the terms of the
insurance policy.

12. Emilio Tan vs CA

Contestability Clause - The insurer has two years from the date of issuance of the insurance
contract or of its last reinstatement within which to contest the policy, whether or not, the insured
still lives within such period. After two years, the defenses of concealment or misrepresentation,
no matter how patent or well founded, no longer lie.

13. Tang vs. CA

Enforcement of contracts and fraud - It should be noted that under Art. 1332 above quoted, the
obligation to show that the terms of the contract had been fully explained to the party who is
unable to read or understand the language of the contract, when fraud or mistake is alleged,
devolves on the party seeking to enforce it.

Even if we were to say that the insurer is the one seeking the performance of the contracts by
avoiding paying the claim, it has to be noted as above stated that there has been no imputation of
 mistake or fraud by the illiterate insured whose personality is represented by her beneficiary the
petitioner herein.

14. Pacific Timber export corporation vs CA

Cover notes can operate even prior to the payment of the premium and is supported by the
doctrine that where a policy is delivered without requiring payment of the premium, the
presumption is that a credit was intended and policy is valid.

On Consideration for Cover Notes - The fact that no separate premium was paid on the Cover
Note before the loss insured against occurred, does not militate against the validity of petitioner's
contention, for no such premium could have been paid, since by the nature of the Cover Note, it
did not contain, as all Cover Notes do not contain particulars of the shipment that would serve as
basis for the computation of the premiums.

At any rate, it is not disputed that petitioner paid in full all the premiums as called for by the
statement issued by private respondent after the issuance of the two regular marine insurance
policies, thereby leaving no account unpaid by petitioner due on the insurance coverage, which
must be deemed to include the Cover Note.

15. Ang vs. Fulton fire insurance

As to the condition that an action be commenced within 1 year - The condition contained in the
insurance policy that claims must be presented within one year after rejection is not merely a
procedural requirement.

The rights of the parties flow from the contract of insurance, hence they are not bound by the
statute of limitations nor by exemptions thereto. In the words of our own law, their contract is the
law between the parties, and their agreement that an action on a claim denied by the insurer must
be brought within one year from the denial, governs, not the rules on the prescription of actions.

16. Sun insurance office vs CA

When cause of action accrues - Since "cause of action" requires as essential elements not only a
legal right of the plaintiff and a correlated obligation of the defendant in violation of the said legal
right, the cause of action does not accrue until the party obligated (surety) refuses, expressly or
impliedly, to comply with its duty (in this case to pay the amount of the bond).

(used as basis for prescription in the enforcement of a right in the insurance contract)

17. Mayer Steel Pipe vs CA

Carriage of Goods by Sea Act – governs two relationships: the carrier on the one hand and the
shipper, the consignee and/or the insurer on the other hand. It defines the obligations of the
carrier under the contract of carriage. It does not, however, affect the relationship between the
shipper and the insurer. The latter case is governed by the Insurance Code.

18. Malayan Insurance vs Arnaldo

Payment to Agent - Payment to an agent having authority to receive or collect payment is
equivalent to payment to the principal himself; such payment is complete when the money
delivered is into the agent's hands and is a discharge of the indebtedness owing to the principal.

Valid Cancellation -

A valid cancellation must, therefore, require concurrence of the following conditions:

(1) There must be prior notice of cancellation to the insured;
(2) The notice must be based on the occurrence, after the effective date of the policy, of one or
more of the grounds mentioned;
(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the
address shown in the policy;
(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon
written request of the insured, the insurer will furnish the facts on which the cancellation is based.

Grounds for cancellation –

SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior
notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on
the occurrence, after the effective date of the policy, of one or more of the following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;
(e) physical changes in the property insured which result in the property becoming uninsurable;or
(f) a determination by the Commissioner that the continuation of the policy would violate or would
place the insurer in violation of this Code.