Escolar Documentos
Profissional Documentos
Cultura Documentos
After a policy of life insurance made payable on No policy of insurance other than life shall be
the death of the insured shall have been in force cancelled by the insurer except upon prior notice
during the lifetime of the insured for a period of thereof to the insured, and no notice of
two (2) years from the date of its issue or of its last cancellation shall be effective unless it is based on
reinstatement, the insurer cannot prove that the
the occurrence, after the effective date of the A contract of reinsurance is one by which an
policy, of one or more of the following: insurer procures a third person to insure him
against loss or liability by reason of such original
(a) Nonpayment of premium;
insurance.
(b) Conviction of a crime arising out of acts
MARINE INSURANCE
increasing the hazard insured against;
SECTION 101.
(c) Discovery of fraud or material
misrepresentation; Marine Insurance includes:
(d) Discovery of willful or reckless acts or (a) Insurance against loss of or damage to:
omissions increasing the hazard insured against;
REINSURANCE
(3) Precious stones, jewels, jewelry, precious
SECTION 97. metals, whether in course of transportation or
otherwise; and
(b) When necessary to comply with a
warranty, or to avoid a peril, whether or not the
(4) Bridges, tunnels and other
peril is insured against;
instrumentalities of transportation and
communication (excluding buildings, their (c) When made in good faith, and upon
furniture and furnishings, fixed contents and reasonable grounds of belief in its necessity to
supplies held in storage); piers, wharves, docks avoid a peril; or
and slips, and other aids to navigation and
(d) When made in good faith, for the purpose
transportation, including dry docks and marine
of saving human life or relieving another vessel in
railways, dams and appurtenant facilities for the
distress.
control of waterways.
SECTION 169.
THE VOYAGE AND DEVIATION As used in this Code, the term fire insurance shall
SECTION 126. include insurance against loss by fire, lightning,
windstorm, tornado or earthquake and other
A deviation is proper: allied risks, when such risks are covered by
(a) When caused by circumstances over extension to fire insurance policies or under
which neither the master nor the owner of the separate policies.
ship has any control;
CASUALTY INSURANCE
SECTION 176.
Casualty insurance is insurance covering loss or
liability arising from accident or mishap, excluding
certain types of loss which by law or custom are
considered as falling exclusivelywithin the scope
of other types of insurance such as fire or marine.
It includes, but is not limited to, employer’s Objective Questions
liability insurance, motor vehicle liability
insurance, plate glass insurance, burglary and
theft insurance, personal accident and health Who is the owner of the policy, insured or
insurance as written by non-life insurance beneficiary?
companies, and other substantially similar kinds of Suggested answer: Both. Insured holds the policy
insurance. as evidence of his right. When death occurs,
beneficiary has the right to claim for the proceeds
of the policy.
SURETYSHIP
SECTION 177.
4. Unilateral
5. As consideration for the insurer's promise, Note: The law does not authorize an insurance for
the insured makes a ratable contribution called or against the drawing of any lottery, or for or
"premium" against any chance or ticket in a lottery drawing a
prize. (Sec. 4)
SUGGESTED ANSWER:
Distinguish insurance from gambling. If the plaintiff's property has been insured, and he
Gambling Insurance has received indemnity from the insurance
company for the injury or loss arising out of the
wrong or breach of contract complained of, the
GR: Whether or not the policy reserves to the
insurance company shall be subrogated to the
insured the right to change the beneficiary, the
rights of the insured against the wrongdoer or the
insured has the power to so change the
person who has violated the contract. If the
beneficiary without the consent of the latter who
amount paid by the insurance company does not
acquires no vested right but only an expectancy of
flly cover the injury or loss, the aggrieved party
receiving the proceeds under the insurance.
shall be entitled to recover the deficiency from the
person causing the loss or injury. (Art. 2207 of
NCC)
It follows that the insured retains the right:
What is deviation?
Source: UST 2011 Commercial Law Reviewer
SUGGESTED ANSWER:
Deviation is:
Note: Concealment and misrepresentation
(a) a departure from the course of the voyage
compared:
insured;
What is representation?
(2) The materiality of a concealment is
determined by the same rules as applied in cases
of misrepresentation. SUGGESTED ANSWER:
(1) Additional binding stipulations between 3. Affirmative warranty – one which asserts
the parties. — Riders are usually attached to the the existence of a fact or condition at the time it is
policy because they constitute additional made
stipulations between the parties. Any rider, etc.,
4. Promissory warranty – one where the
properly attached to a policy is a part of the
insured stipulates that certain facts or conditions
contract to the same extent and with like effect as
pertaining to the risk shall exist or that certain
if actually embodied in the policy.
things with reference thereto shall be done or
(2) Necessity for riders, etc. — The necessity omitted
for riders, etc., is found in the fact that in the
conduct of insurance business, it often becomes
necessary to add a new provision to a policy, or to Source: Insurance Law by De Leon, page 226, 2014
modify or waive an existing provision, or to make ed.
any desired change in the policy. This saves the
trouble and expense of making an entirely new
contract. Distinguish warranty from representation
(3) Rule in case of conflict between a rider,
etc. and printed stipulations of a policy. — When
there is an inconsistency between a rider and the Warranties Representation
printed stipulations in the policy, the rider Part of the contract
prevails, as being a more deliberate expression of
the agreement of the contracting parties. This Collateral inducements to contract
principle applies to the interpretation of clauses, Written on the face of the
warranties, or indorsements which are attached to
policies to vary their terms. May be written in a totallypolicy, actually
or by disconnected paper or
Source: Insurance Law by De Leon, page 190, 2014
ed. reference may be oral
contract fraud
Source: Insurance Law by De Leon, page 229, 2014 not exceed the insurable
ed.
What is perils of the sea? An implied warranty is a warranty which from the
very nature of the contract or from the general
tenor of the words, although no express warranty
is mentioned, is necessarily embodied in the policy
as a part thereof and which binds the insured as
SUGGESTED ANSWER:
though expressed in the contract
Insurer is liable
Friendly Fire
B. Alien Enemy
2. The term “doing an insurance business” within
C. Kuratong Baleleng members
the meaning of the Insurance Code. Shall include:
D. Abu Sayyaf members
A. It was done before the loss provided with E. None of the above
approval from the insurer
D. The children of the first wife and second wife D. All of the above
D. To the Supreme Court because the Office of the F. None of the above
Insurance Commission is of the sale level within
the Court of Appeals
18. When unsecured creditor insurers the
E. All of the above
property of his debtor, the policy is:
F. None of the above
A. There is meeting of the minds B. Valid since unsecured creditor has an insurable
interest over the life and property of his debtor for
B. Acceptance of the policy contract by a minor
as long as the credit is no yet fully paid
insured (who is below 18 years old) must be with
parental consent C. Not valid and binding because his insurable
interest is limited upon the life of the debtor
C. Upon insurance of the policy by the insurance
company, the insured must make an express D – Not valid and binding because his insurable
acceptance interest is limited upon the life of the debtor
D. All of the above 3. When the damage of the vessel is 3/4 of its
value, the loss is considered constructive total
E. None of the above
loss. TRUE (please check)
II.TRUE OR FALSE
SUGGESTED ANSWER:
SUGGESTED ANSWER (PAST EXAM):
Suggested Answer:
SUGGESTED ANSWER:
No, my answer will be different. Perils of the ship
would include loss which in the ordinary course of
events, results from natural & inevitable action of
Yes, in life insurance, it is not required that the
the sea, from wear & tear of the ship, or from
beneficiary must have insurable interest in the life
negligent failure of the ship owner to provide
of the insured. It was the insured himself who took
vessel with proper equipment to convey cargo
the policy on his own life.
under ordinary conditions. Thus, if the ship was
insured against perils of the ship, the shipowner
can recover the value of the loss.
4. Mr. OBA, poor scientist from Manolo Fortich,
Bukidnon, is the only person who discovers a
medicine that can completely cure persons
Relevant Provision: See Sec. 124 & 125 of the
infected with AIDS in a just matter of 6 months
Insurance Code
medication. He was invited by Mr. BOS to
commercially manufacture the medicine that the
latter would provide for the building of elaborate
3. Mr. A obtains fire insurance on his house and as
laboratory, advertisements, marketing and hiring
a generous gesture names his neighbour (Mr. B) as
employees. The investment of Mr. BOS amounted
the beneficiary.
to 1000 million pesos. They estimated that the
1000 million pesos investment could be recovered
in the 5th year of their business operation. In
a. Question: If A’s house is destroyed by fire, can B order to protect the investment of Mr. BOS, he
successfully claim against this policy? Reason.
insures the life of Mr. OBA for 1000 million pesos, MV Dona Juana would traverse the storm’s path,
for a term of 5 years, premium payable annually, but decided to proceed with the voyage. True
and designated himself (Mr. BOS) as the lone enough, the vessel sailed into the storm. The
beneficiary. On the third year of their business captain ordered the jettison of the 10,000
operation they were able to recover the 1000 television sets, along with some other cargo, in
million investments, plus another similar amount order to lighten the vessel and make it easier to
as profit. On the fourth year, Mr. OBA was steer the vessel out of the path of the typhoon.
kidnapped and killed by Mrs. BOS Eventually, the vessel, with its crew intact, arrived
safely in Cebu.
without the knowledge and consent of her
husband (Mr. BOS).
Question: Would you allow Mr. BOS to recover the a. Will you characterize the jettison of Romualdo’s
insurance proceeds? Reason. TV sets as an average?
SUGGESTED ANSWER:
I would not allow Mr. BOS to recover on the
insurance proceeds. In the case at bar, although it Yes, the jettison of Romualdo’s TV sets will be
was denominated as life insurance, it actually characterized as an average. An average is any
partakes the nature of a contract of indemnity. extraordinary or accidental expense incurred
Mr. BOS should not be allowed to recover on the during the voyage for the preservation of the
insurance proceeds because at the time Mr. OBA vessel, cargo or both; and all damages to the
was killed, the former has already no insurable vessel and cargo from the time it is loaded and the
interest since his investment of 1000 million, voyage commenced, until it ends and the cargo is
which was the reason why he insured the life of unloaded. Given the peculiar circumstance of this
Mr. OBA was already recovered. Hence, Mr. BOS case, I would consider the average as simple
should not be allowed to recover on the insurance average for the same benefited only the owners of
policy for lack of insurable interest at the time the the ship and the cargoes. The gross negligence on
loss occurred. the part of the captain to continue the voyage
despite the warnings of PAGASA takes such loss
out of the ambit of general average. Had the
5. Global Transportation Services, Inc. (GTSI) captain taken heed on such warning, the jettison
operates a fleet of cargo vessel plying interisland would not be necessary. Necessity is a vital
routes. One of its vessels, MV Dona Juana, left the element in order to be considered a general
port of Manila for Cebu laden with, among other average.
goods, 10,000 television sets consigned to
Romualdo, a TV retailer in Cebu. When the vessel
was about ten nautical miles away from Manila, b. Against whom does Romualdo have a cause of
the ship captain heard on the radio that a typhoon action for indemnity of his
which, as announced by PAGASA, was on its way
lost TV sets? Explain. (5 points)
out of the country, had suddenly veered back into
the Philippine territory. The captain realized that
SUGGESTED ANSWER: insurable interest. Hence, the latter filed a
complaint against the Cha spouses and United.
Romualdo has a cause of action against the
shipowner, Global Tranpostation Services, Inc. The Can CKS claim the proceeds of the fire insurance?
shipowner of ship agent is solidarily liable on the
fault or negligence of the ship captain. And if the
cargoes are insured under an all-risks policy with SUGGESTED ANSWER:
special provision to include this kind of risk, he
may rightfully claim from the insurer. Sec. 18 of the Insurance Code provides: “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
6. Spouses Nilo Cha and Stella Uy-Cha, as lessees,
entered into a lease contract with CKS insured.” A non-life insurance policy such as the
Development Corporation (CKS), as lessor. One of fire insurance policy taken by petitioner-spouses
the stipulations of the one (1) year lease contract over their merchandise is primarily a contract of
states: indemnity. Insurable interest in the property
insure must exist at the time the insurance takes
effect and at the time the loss occurs. The basis of
“18…. The LESSEE shall not insure against fire the such requirement of insurable interest in property
chattels, merchandise textiles, goods and effects insured is based on sound public policy: to prevent
placed at any stall or store or space in the leased a person from taking out an insurance policy on
premises without first obtaining the written property upon which he has no insurable interest
consent and approval of the LESSOR. If the LESSEE and collecting the proceeds of said policy in case
obtain(s) the insurance thereof without the of loss of the property. In the present case, it
consent of the LESSOR then the policy is deemed cannot be denied that CKS has no insurable
assigned and transferred to the LESSOR for its own interest in the good and merchandise inside the
benefit; …” leased premises under the provisions of SECTION
17 of the Insurance Code which provides: “The
measure of an insurable interest in property is the
Notwithstanding the above stipulation, the Cha extent to which the insured might be damnified by
spouses insured against loss by fire their loss or injury thereof.”
merchandise inside the leased premises for Five
Therefore, CKS cannot, under the Insurance Code
Hundred Thousand (P500,000.00) with the United
- a special law - be validly a beneficiary of the fire
Insurance without the written consent CKS.On the
insurance policy taken by the petitioner-spouses
day that the lease contract was to expire, fire
over their merchandise. This insurable interest
broke out inside the leased premises. When CKS
over said merchandise remains with the insured,
learned of the insurance earlier procured by the
the Cha spouses. The automatic assignment of the
Cha spouses (without its consent), it wrote the
policy
United a demand letter asking that the proceeds
of the insurance contract (between the Cha to CKS under the provision of the lease contract
spouses and United) be paid directly to CKS, based previously quoted is void for being contrary to law
on its lease contract with the Cha spouses. United and/or public policy. The proceeds of the fire
refused to pay CKS, alleging that the latter had no insurance policy thus rightfully belong to the
spouses Nilo Cha and Stella Uy-Cha (herein co-
petitioners). The insurer (United) cannot be No one can collect from the insurer. In property
compelled to pay the insurance, the insured must have the insurable
interest over the property at the time of the
proceeds of the fire insurance policy to a person
perfection of the contract and at the time of the
(CKS) who has no insurable interest in the property
loss. “N” had insurable interest over the unit at the
insured.
time of the inception of the policy, he did not have
insurable interest on the insured property at the
time of the loss. “O” cannot also recover because
7. A marine insurance on cargo states that – the he is not a party to the insurance contract. The
insurer shall be liable for losses incident to perils transfer of the property does not include the
of the sea. During the voyage, seawater entered transfer of the insurance policy.
the compartment where the cargo was stored due
to the defective drainpipe of
the ship. The insured filed an action on the policy INSURANCE LAW PAST BAR QUESTIONS
for recovery of the damages caused to the cargo. COMPILATION WITH SUGGESTED ANSWERS AND
May the insured recover the damages? ADDED NOTES:
No. The proximate cause of the damage to the 1. What are the effects of an irrevocable
cargo insured was the defective drainpipe of the designation of a beneficiary under the Insurance
ship. This is peril of the ship, and not peril of the Code? Explain.
sea. The defect in the drainpipe was the result of
the ordinary use of the ship. To recover under a
marine insurance policy, the proximate cause of SUGGESTED ANSWER:
the
A. Was there “constructive total loss” to entitle 4. A) When does double insurance exist?
the ship owner to recover from the insurance
company? Explain.
SUGGESTED ANSWER:
Sec. 95 : A double insurance exist where the same
person is insured by several insurer in respect to
Formula: Amount of policy/total insurance taken x
the same subject and interest.
loss = liability of insurer
ADDITIONAL NOTE:
5. On a clear weather, M/V Sundo, carrying
A person insured by a contract of marine insured cargo, left the port of Manila bound for
insurance may abandon the thing insured and Cebu. While at sea, the vessel encountered a
recover for a total loss thereof, when the cause of strong typhoon forcing the captain to steer the
the loss is a peril insured against. vessel to the nearest island where it stayed for
seven days. The vessel ran out of provisions for its
The following are the requisites of double
passengers. Consequently, the vessel proceeded
insurance:
to Leyte to replenish its supplies.
a) The person insured is the same
SUGGESTED ANSWER:
B) What is the nature of the liability of the several
insurers in double insurance? Explain.
The insurer is not exonerated from liability for loss
happening after proper deviation. Such
SUGGESTED ANSWER: compulsory deviation are risks impliedly assumed
by the underwriter or insurer.
ADDITIONAL NOTE:
SUGGESTED ANSWER:
b) The building was totally razed by fire. If the
Under Sec. 12 of the Insurance Code. The interest
owner decides to claim from Eastern Insurance
of a beneficiary shall be forfeited when the
Corp. only P50 Million, will the claim prosper?
beneficiary is the principal, accomplice, or
accessory in willfully bringing about the death of
the insured. In which event, the nearest relative of
SUGGESTED ANSWER:
the insured shall receive the proceeds of said
insurance, if not otherwise disqualified. Thus, the Insured can recover from Eastern Insurance Corp.
insurance company must still pay out the proceed up to the extent of his loss. However, Eastern may
of the life insurance policy to the nearest qualified refuse to pay if the policy contains an “other
relative of the insured. insurance clause” stipulating that non-disclosure
of double insurance will avoid the policy
(Geagonia v. Country Bankers Insurance, G.R. No.
2. Terrazas de Patio Verde, a condominium 114427, 06 February 1995.) As there is no
building, has a value of P50 Million. The owner indication of a contractual prohibition on double
insured the building against fire with three (3) or other insurance, all insurance contracts over
insurance companies for the following amounts: the building are deemed valid and enforceable.
SUGGESTED ANSWER:
SUGGESTED ANSWER:
The insurer and all the other owners of the cargo,
if there is any, will contribute pro rata to the loss Ciriaco is entitled to receive the proceeds of the
incurred by Romualdo as a result of the jettison. In insurance policy. The law provides that No
a general average the loss will be proportionately contract or policy of insurance on property shall be
shared by the insurer, the owner of the cargo that enforceable except for the benefit of some person
was jettisoned and other cargo owner who having an insurable interest in the property
benefited from the jettison. The insurer’s liability insured. The stipulation that the policy is deemed
will be computed by dividing the amount of assigned and transferred to SBC is void, because
insurance over the total amount involved SBC has no insurable interest in the merchandise
multiplied by the General Average Loss. of Ciriaco (Cha v. Court of Appeals, 277 SCRA 690
(1997))
ADDITIONAL NOTES:
BAR 2010
BAR 2011
(A) Yes, because the insurance policy covered any 4. T, the captain of MV Don Alan, while asleep in
or all damage arising from perils of the sea. his cabin, dreamt of an Intensity 8 earthquake
(B) Yes, since there appears to have been no fault along the path of his ship. On waking up, he
on the part of the shipowner and shipcaptain. immediately ordered the ship to return to port.
True enough, the earthquake and tsunami struck
(C) No, since the proximate cause of the damage three days later and his ship was saved. Was the
was the breach of warranty of seaworthiness of deviation proper?
the ship.
(A) Yes, because the deviation was made in good
(D) No, since the proximate cause of the damage faith and on a reasonable ground for believing that
was due to ordinary usage of the ship, and thus it was necessary to avoid a peril.
not due to a peril of the sea.
(B) No, because no reasonable ground for avoiding
a peril existed at the time of the deviation.
2. X has been a long-time household helper of Z. (C) No, because T relied merely on his supposed
X's husband, Y, has also been Z's long-time driver. gift of prophecy.
May Z insure the lives of both X and Y with Z as
beneficiary?
(A) Yes, since X and Y render services to Z. 5. On June 1, 2011, X mailed to Y Insurance Co. his
application for life insurance company accepted
(B) No, since X and Y have no pecuniary interest on the application and mailed on the same day, its
the life of Z arising from their employment with acceptance plus the cover note. It reached X’s
him. residence on August 4, 2011. X figured in a car
accident. He died a day later. May X’s heirs recover
(C) No, since Z has no pecuniary interest in the
on the insurance policy?
lives of X and Y arising from their employment with
him. A) Yes, since under the Cognition Theory the
insurance contract was perfected upon
(D) Yes, since X and Y are Z’s employees.
acceptance by the insurer of X’s application.
B) The equitable assignment that results from the A) No, since an insurance company must
insurer’s payment of the insured. have at least Php75 Million paid-up capital.
C) The insured’s formal assignment of his right to B) Yes, since there is substantial compliance
indemnification to the insurer. with our nationalization laws respecting paid-up
capital and Filipino dominated Board of Directors.
D) The insured’s endorsement of its claim to the
insurer. C) Yes, since FIMA’s paid up capital more
than meets the country’s nationalization laws.
Answer:
No. The cause of action of Y is based on the
contract of carriage, while that of X and Z is based Yes. Carlo can claim the insurance benefit. If a
on torts. The court should not have dismissed the person insures the life or health of another person
suit against RM Travel. The court should have with himself as beneficiary, all his rights, title and
ordered Dragon Ins to pay each of X, Y, and Z to interests in the policy shall automatically vest in
the extent of the insurance coverage, but the person insured. Carlo, as the husband of
whatever amount is agreed upon in the policy Bianca, has an insurable interest in the life of the
should be answered first by RM Travel and the latter. Also, every person has an insurable interest
succeeding amount should be paid by Dragon in the life and health of any person on whom he
Insurance up to the amount of the insurance depends wholly or in part for support. The
coverage. The excess of the claims of X, Y, and Z, insurable interest in the life of the person insured
over and above such insurance coverage, if any, must exist when the insurance takes effect but
should be answered or paid by RM Travel. need not exist when the loss occurs. Thus, the
subsequent knowledge of Carlo, upon the death of
Bianca, that the latter is a transgender does not
As a rule, an insurance contract is consensual and destroy his insurable interest on the life of the
insured.
voluntary. The exception in the case of:
SUGGESTED ANSWER:
ALTERNATIVE ANSWER:
SUGGESTED ANSWER:
SUGGESTED ANSWER:
No Fault Indemnity
Yes. The life insurance policy in question was
issued on January 9, 1990. More than 2 years had
elapsed when Renato, the insured, died on March
The ―no fault indemnity in the Insurance Code
1, 1992. The incontestability clause applies.
provides that any claim for death or injury to a
passenger or to a third party should be paid
without the necessity of proving fault or
Incontestability Clause
negligence of any kind, subject to the following
rule: The total indemnity in respect of any person
shall not be less than P15,000; The following
proofs of loss, when submitted under oath, shall The insurer has two years from the date of
be sufficient evidence to substantiate the claim: issuance of the insurance contract or of its last
reinstatement within which to contest the policy,
b.1. Police report of accident; and whether or not, the insured still lives within such
period. After two years, the defenses of
b.2.Death certificate and evidence sufficient to
concealment or misrepresentation, no matter
establish
how patent or well founded, no longer lie.
the proper payee; or
SUGGESTED ANSWER:
SUGGESTED ANSWER:
3. Mr. Gonzales was the owner of a car insured After a month, the car was carnapped while
with Masagana Insurance Company for “Own parked in the parking space in front of the
Damage”, “Theft”, and “Third Party Liability” Intercontinental Hotel in Makati. HL’s wife who
effective May 14, 1986 to May 14, 1987. On May was driving the said car when it was carnapped
2, 1987, the car was brought to machine shop for was in possession of an expired driver’s license, a
repairs. On May 11, 1987, while in the custody of violation of the “authorized driver” clause of the
the machine shop, the car was taken by one of the insurance company.
employees of the machine shop to show off to his
girlfriend. While on the way to his girlfriend’s
house, the car smashed into a parked truck and 1. May the insurance company be held liable to
was extensively damaged. Mr. Gonzales filed a indemnify HL for the loss of the insured vehicle?
claim for recovery under the policy but was Explain.
refused payment. The insurance company averred
2. Supposing that the car was brought by HL on for reimbursement of the value of the vehicle
installment basis and there were installments due under the insurance policy. Jack refused to pay
and payable before the loss of the car, the vendor claiming that there is no theft as Jess gave Silat
demanded from HL the unpaid balance of the lawful possession of the car. Is Jack Insurance
promissory note. HL resisted the demand and correct?
claimed that he was only liable for the installments
due and payable before the loss of the car but no
longer liable for the other installments not yet due SUGGESTED ANSWER:
at the time of the loss of the car.
SUGGESTED ANSWER:
3. On July 14, 1985, X, a homosexual, took an
insurance policy on the life of his boyfriend, Y. In
Alpha can recover against Mutual Life Insurance the insurance applications, X misrepresented that
Co. in the life insurance policy as its insurable Y was in perfect health although he knew all the
interest in the life of the person insured, Mr. P, time that Y was afflicted with AIDS. On October 18,
existed when the insurance took effect. In life 1987, Y died in a motor accident. Shortly
insurance, insurable interest need not exist thereafter, X filed his insurance claim. Should the
thereafter or when the loss occurred. (BAR 1984) insurer pay? Reasons.
SUGGESTED ANSWER:
The contention of the executor is incorrect
because it was Blanco himself who took out the
Yes. In life insurance, it is required that the interest in the life of Jose. It was Jose himself who
beneficiary must have insurable interest in the life took the insurance on his own life. (BAR 2000)
of the insured. It was the insured himself who took
the policy on his own life. (BAR 1997)
6. Distinguish insurable interest in property
insurance from insurable interest in life insurance.
5. Jose is an elderly bachelor with no known
relatives, obtained life insurance coverage for
P250,000 from Starbrite Insurance Corporation, SUGGESTED ANSWER:
an entity licensed to engage in the insurable
business under the Insurance Code of the
Philippines. He also insured his residential house In property insurance, the expectation of benefit
for twice that amount with the same corporation. must have a legal basis. In life insurance, the
He immediately assigned al his right to the expectation of benefit to be derived from the
insurance proceeds to John, a friend-companion continued existence of a life need not have any
living with him. Three years later, Jose died in a fire legal basis.
that gutted his insured house, two days after he
sold it. There is no evidence of suicide or arson or
involvement of John in these events. John In property insurance, the actual value of the
demanded payment of the insurance proceeds interest therein is the limit of the insurance that
from the two policies, the premiums for which can validly be placed thereon. In life insurance,
Jose had been faithfully paying during all the time there is no limit to the amount of insurance that
he was alive. Starbrite refused payment, may be taken upon life.
contending that Jose had no insurable interest and
therefore was not entitled to receive the proceeds
from Jose’s insurance coverage on his life and also
In property insurance, an interest insured must
on his property. Is Starbrite’s contention valid?
exist when the insurance takes effect and when
Explain.
the loss occurs but need not exist in the meantime.
In life insurance, it is enough that insurable
interest exists at the time when the contract is
SUGGESTED ANSWER: made but it need not exist at the time of the loss.
(BAR 2002)
9. For both the Life Insurance and Property a. Yes, because his wife has an insurable interest
Insurance, the insurable interest is required to on his life
be— b. No, because Benjelani has been officially
declared a public enemy
a. Existing at the time of perfection of the contract c. Yes, because it has been in force for more than
and at the time of loss; two years
b. Existing at the time of perfection and at the time d. No, since the spouses’ estrangement removed
of loss for property insurance; the wife’s insurable interest in Benjelani’s life
13. A person is said to have an insurable interest For the above reasons and claiming fraud, Ilocos
in the subject matter insured where he has a denied Aban’s claim, but refunded the premium
relation or connection with, or concern in it that paid on the policy. May Sotero validly designate
he will derive pecuniary benefit or advantage from her niece as beneficiary?
its preservation. Which among the following
subject matters is not considered insurable?
SUGGESTED ANSWER:
2) No. While at the time of the loss he had a) Yes. The businessman, as owner, and the
insurable interest in the building, as he was the creditor, as mortgagee, have separate insurable
owner thereof, Nat did not have any interest in the interests in the same stocks-in-trade. Each may
policy. There was no automatic transfer clause in insure such interest to protect his own separate
the policy that would give him such interest in the interest.
policy.
b) The contention of First Insurance that double
8. A obtains a fire insurance on his house and as a insurance is contrary to law is untenable. There is
generous gesture names his neighbor as the no law providing that double insurance is illegal
beneficiary. If A’s house is destroyed by fire, can B per se.
successfully claim against the policy?
Moreover, in the problem at hand, there is no
SUGGESTED ANSWER: double insurance because the insured with the
First Insurance is different from the insured with
No. in property insurance, the beneficiary must
the Second Insurance Company. The same is true
have insurable interest in the property insured. B
with respect to the interests insured in the two
does not have insurable interest in the house
policies.
insured.
10. IS, an elderly bachelor with no known relatives,
9. A businessman in the grocery business obtained
obtained life insurance coverage for P250,000.00
from First Insurance an insurance policy for P5M
from Starbrite Insurance Corporation, an entity
licensed to engage in the insurable business under LESSOR, the insurance policy is deemed assigned
the Insurance Code of the Philippines (PD1460). and transferred to the LESSOR for the latter’s
He also insured his residential house for twice that benefit.”
amount within the same corporation. He
Notwithstanding the stipulation in the contract,
immediately assigned all his rights to the
without the consent of SBC, Ciriaco insured the
insurance proceeds to BX, a friend- companion
merchandise inside the leased premises against
living with him. Three years later, IS died in a fire
loss by fire in the amount of P500, 000 with First
that gutted his insured house two days after he
United Insurance Corporation (FUIC). A day before
had sold it. There is no evidence of suicide or arson
the lease contract expired, fire broke out inside
or involvement of BX in these events. BX
the leased premises, damaging Ciriaco’s
demanded payment of the insurance proceeds
merchandise. Having learned of the insurance
from the two policies, the premiums for which IS
earlier procured by Ciriaco, SBC demanded from
had been faithfully paying during all the time he
FUIC that the proceeds of the insurance policy be
was alive. Starbrite refused payment, contending
paid directly to it, as provided in the lease
that BX had no insurable interest and therefore
contract. Who is legally entitled to receive the
was not entitled to receive the proceeds from IS’s
insurance proceeds? Explain.
insurance coverage on his life and also on his
property. Is Starbrite’s contention valid? Explain? SUGGESTED ANSWER:
(5%)
Ciriaco is entitled to receive the proceeds of the
SUGGESTED ANSWER: insurance policy. The stipulation that the policy is
deemed assigned and transferred to SBC is void,
Starbrite is correct with respect to the insurance
because SBC has no insurable interest in the
coverage on the property of IS. The beneficiary in
merchandise of Ciriaco (Cha v. Court of Appeals,
the property insurance policy or the assignee
277 SCRA 690 (1997))
thereof must have insurable interest in the
property insured. BX, a mere friend-companion of 12. X owned a house and lot. X insured the house.
IS, has no insurable interest in the residential The house got burned. Then he sold the partially
house of IS. BX is not entitled to receive the burnt house and the lot to Y. Which statement is
proceeds from IS‘s insurance on his property. most accurate?
As to the insurance coverage on the life of IS, BX is (b) X is not anymore entitled to the proceeds
entitled to receive the proceeds. There is no of the insurance policy because he already sold the
requirement that BX should have insurable partially burnt house and lot;
interest in the life of IS. It was IS himself who took
the insurance on his own life. (c) X is still entitled to the proceeds of the
insurance policy because what is material is that at
11. Ciriaco leased a commercial apartment from the time of the loss, X is the owner of the house
Supreme Building Corporation (SBC). One of the and lot;
provisions of the one-year lease contract states:
(d) No one is entitled to the proceeds because
“18.xxx The LESSEE shall not insure against fire the ownership over the house and lot was already
chattels, merchandise, textiles, goods and effects transferred;
placed at any stall or store or space in the leased
premises without first obtaining the written (e) Y will be the one entitled to the proceeds
consent of the LESSOR. If the LESSEE obtains fire because he now owns the partially burnt house
insurance coverage without the consent of the and lot.
13. For both the Life Insurance and Property insurance being applied for. (New Life Ent v CA 207
Insurance, the insurable interest is required to s 669)
be—
2) No, because she is guilty of violation of a
a. Existing at the time of perfection of the contract warranty/ condition.
and at the time of loss;
5. A) When does double insurance exist? Insured can recover from Eastern Insurance Corp.
up to the extent of his loss. However, Eastern may
B) What is the nature of the liability of the several
refuse to pay if the policy contains an ―other
insurers in double insurance? Explain.
insurance clause‖ stipulating that non-disclosure
of double insurance will avoid the policy
(Geagonia v. Country Bankers Insurance, G.R. No.
114427, 06 February 1995.) As there is no Bank, the lender, also has an insurable interest in
indication of a contractual prohibition on double the house as mortgagee thereof.
or other insurance, all insurance contracts over
(C)In case of damage, can X and CCC Bank
the building are deemed valid and enforceable.
separately claim for the insurance proceeds? (4%)
The law prohibits double or over-recovery, not
SUGGESTED ANSWER:
double insurance. Since Eastern insured the
property up 50% of the total coverage, it is liable Yes. If X obtained an open policy then she could
for only 50% of the total actual loss. Eastern claim an amount corresponding to the extent of
insurance Corp. is liable to the extent of its the damage based on the value of the house
coverage but may recover one-half of the total determined as of the date the damage occurred,
indemnity from the co-insurers in the proportion but not to exceed the face value of the insurance
of 60% (Southern Insurance) – 40% (Northern policy; however, if she obtained a valued policy
Insurance). then she could claim an amount corresponding to
the extent of the damage based on the agreed
7. If an insurance policy prohibits additional
upon valuation of the house. As for CCC Bank, it
insurance on the property insured without the
could claim an amount corresponding to the
insurer’s consent, such provision being valid and
extent of the damage but not to exceed the
reasonable, a violation by the insured
amount of the loan it extended to X or so much
a. Reduces the value of the policy.
thereof as may remain unpaid.
b. Avoids the policy. 9. X insured the building she owns with 2 insurance
companies for the same amount. In case of
c.
Offsets the value of the policy with the damage—
additional insurance’s value.
a. X cannot claim from any of the 2 insurers
d. Forfeits premiums already paid. because with the double insurance, the insurance
8. X borrowed from CCC Bank. She mortgaged her coverage becomes automatically void;
house and lot in favor of the bank. X insured her b. The 2 insurers will be solidarily liable to the
house. The bank also got the house insured. extent of the loss;
(A) Is this double insurance? Explain your answer. c. The 2 insurers will be proportionately liable;
(3%)
d. X can choose who he wants to claim against.
Answer: No, there is no double insurance. Double
insurance exists where the same person is insured Multiple or Several Interest on Same Property
by several insurers separately with respect to the
1. To secure a loan of P10 M, O mortgaged his
same subject and interest. (Sec. 93, Insurance
building to C. in accordance with the loan
Code)
arrangements, O had the property insured with
(B) Is this legally valid? Explain your answer. (3%) Acme Insurance Company for P10 M with C as the
beneficiary. C also took an insurance on the
SUGGESTED ANSWER: building upon his own interest with Beta Insurance
Yes, X and CCC Bank can both insure the house as Co. for P5 M.
they have different insurable interest therein. X, The building was totally destroyed by fire, a peril
the borrower mortgagor, has an insurable interest insured against in both insurance policies. It was
in the house being the owner thereof while CCC
subsequently determined that the fire had been 2. A businessman in the grocery business obtained
intentionally started by O and that, in violation of from First Insurance an insurance policy for P5M
the loan agreement, O had been storing to fully cover his stocks-in-trade from the risk of
inflammable materials in the building. fire.
How much can C recover from either or both Three months thereafter, a fire of accidental origin
insurance companies? What happens to the P10 broke out and completely destroyed the grocery
M debt of O to C? including his stocks-in-trade. This prompted the
businessman to file with First Insurance a claim for
SUGGESTED ANSWER:
five million pesos representing the full value of his
C cannot recover from Acme Insurance Co. unless goods.
the policy otherwise provides, where a mortgagor
First Insurance denied the claim because it
of property effects insurance in his own name
discovered that at the time of the loss, the stocks-
providing that the loss shall be payable to the
in-trade were mortgaged to a creditor who
mortgagee, the insurance is deemed to be upon
likewise obtained from Second Insurance
the interest of the mortgagor. Any act of the
Company fire insurance coverage for the stocks at
mortgagor prior to the loss which would otherwise
their full value of P5M.
avoid the insurance will have the same effect.
Apart from the storing of the inflammable a) May the businessman and the creditor obtain
materials, the act of the owner-mortgagor, O, separate insurance coverages over the same
caused the peril insured against. stocks- in-trade? Explain (3%)
With respect to the Beta Insurance Co., C can b) First Insurance refused to pay claiming that
recover the full amount of P5 M since the act of O double insurance is contrary to law. Is this
in contention tenable? (3%)
C. Endorsement of the Insurance Policy in any The cover note is a receipt whereby the company
form is not legally allowed; agrees to insure the insured for 60 days pending
the issuance of a regular policy. No separate
D. Endorsement of the Insurance Policy must be in premium is to be paid on a cover note. It is not a
a formal document to be valid. separate policy but is integrated in the regular
policy to be subsequently issued.
Perfection of the Contract of Insurance
2. Armando, a resident of Manila, borrowed P3 M
1. Antarctica Life Assurance Corporation (ALAC)
from Bernardo, offering as security his 500 shares
publicly offered a specially designed insurance
of stock worth P1.5 M in Xerxes Corporation, and
policy covering persons between the ages of 50 to
his 2007 BMW sedan, valued at P2 M. the
75 who may be afflicted with serious and
mortgage on the shares of stock was registered in
debilitating illnesses. Quirco applied for insurance
the Office of the Register of Deeds of Makati City
coverage, stating that he was already 80 years old.
Nonetheless, ALAC approved his application. where Xerxes Corporation has its principal office.
The mortgage on the car was registered in the
Quirco then requested ALAC for the issuance of a
Office of the Register of Deeds of Manila.
cover note while he was trying to raise funds to
Armando executed a single Affidavit of Good Faith,
pay the insurance premium. ALAC granted the
covering both mortgages.
request. 10 days after he received the cover note,
Quirco had a heart seizure and had to be Armando defaulted on the payment of his
hospitalized. He then filed a claim on the policy. obligation; thus, Bernardo foreclosed on the two
chattel mortgages.
Can ALAC validly deny the claim on the ground
that the insurance coverage, as publicly offered
Armando filed suit to nullify the foreclosure and Yes. Bernardo can recover the deficiency. Chattels
the mortgages, raising the following issues: are given as mere security, and not as payment or
pledge.
The execution of only one Affidavit of Good Faith
for both mortgages invalidated the two 3. P filed an application with an insurance
mortgages; and company for a 20-year endowment policy in the
amount of P50,000.00 on the life of his one-year-
SUGGESTED ANSWER:
old daughter, supplying all the essential data in the
The execution of only one Affidavit of Good Faith application form, but without disclosing that his
for both mortgages is not a ground to nullify the daughter was a mongoloid child. Upon ―P’s‖
said mortgages and the foreclosure thereof. Said payment of the annual premium, a binding deposit
mortgages are valid as between immediate receipt was issued to ―P‖ by the insurance agent,
parties, although they cannot bind third parties. subject to processing by the company. The
insurance company disapproved the insurance
The mortgage on the shares of stocks should have application stating that the plan applied for was
been registered in the Office of the Register Deeds not available for minors below seven years old,
of Manila where he resides, as well as in the stock and offered another plan. The insurance agent did
and transfer book of Xerxes Corporation. not inform P of the disapproval nor of the
Rule on the foregoing issues with reasons. alternative plan offered, and instead, strongly
recommended that the company reconsider and
SUGGESTED ANSWER: approve the insurance application.
The mortgage on the shares of stock should be As fate would have it, P’s daughter died. P sought
registered in the chattel mortgage registry in the payment of the proceeds of the insurance but the
register of Deeds of Makati City where the company refused on the grounds that there was
corporation has its principal office and also in the concealment of a material fact in the insurance
Register of Deeds of Manila where the mortgagor application form and that it had rejected the
resides. Registration of chattel mortgage in the application. P contended, on the other hand, that
stock and transfer book is not required to make the binding deposit receipt constituted a
the chattel mortgage valid. Registration of temporary contract of life insurance.
dealings in the stock and transfer book under
Section 63 of the Corporation Code applies only to How would you resolve the issue?
sale or disposition of shares, and has no SUGGESTED ANSWER:
application to mortgages and other forms of
encumbrances. The insurance company is not liable. The binding
deposit receipt is merely conditional and does not
Assume that Bernardo extrajudicially foreclosed insure outright. Where an agreement is made
on the mortgages, and both the car and the shared between the applicant and the agent, no liability
of stock were sold at public auction. If the shall attach until the principal (insurance
proceeds from such public sale should be 1- company) approves the risk. The binding deposit
million short of Armando’s total obligation, can receipt is subordinated to the act of the insurance
Bernardo recover the deficiency? Why or why not? company in approving or rejecting the application;
SUGGESTED ANSWER: thus, in life insurance, a ―binding slip‖ or
―binding receipt‖ does not insure by itself; and,
when as in this case the application was
disapproved, before the death of the insured,
there was no perfected contract of insurance in No. RN is not correct. After the issuance of the
order to make the company liable. (Great Pacific check by Danny for the full amount of the
Life Ass. Co. v. C.A., April 30, 1979; 89 SCRA 549.) premium, the unconditional delivery of an
insurance policy of RN to Danny corresponding to
4. On June 1, 2011, X mailed to Y Insurance, Co. his
the terms of the application ordinarily
application for life insurance, with payment for 5
consummates the contract, and the policy as
years of premium enclosed in it. On July 21, 2011,
delivered becomes the final contract between the
the insurance company accepted the application
parties. Where the parties, so intend, the
and mailed, on the same day, its acceptance plus
insurance becomes effective at the time of the
the cover note. It reached X’s residence on August
delivery of the policy notwithstanding the fact that
11, 2011. But, as it happened, on August 4, 2011,
the check was not yet encashed. My answer will
X figured in a car accident. He died a day later. May
still be the same even if the check is dated October
X’s heir recover on the insurance policy?
15, 2013 since an acknowledgment in a policy of
A. Yes, since under the Cognition Theory, the the receipt of premium is conclusive evidence of
insurance contract was perfected upon its payment for the purpose of making the policy
acceptance by the insurer of X’s application. binding.
2) Where the insurance is made for a definite B. The insurance policy will automatically be
period of time and the insured surrenders his changed;
policy, to such portion of the premium as
C. The insurance policy need not be changed;
corresponds with the unexpired time at a pro rata
rate, unless a short period rate has been agreed D. The insurance policy is fixed regardless of the
upon and appears on the face of the policy, after changes in the use.
deducting from the whole premium any claim for
loss or damage under the policy which has E. All of the above.
previously accrued. Concealment
3) When the contract is voidable on account of the 1. In a non-medical insurance contract (one where
fraud or misrepresentation of the insurer or of his the company waives medical examination) the
agent or on account of facts the existence of which insured failed to disclose that she had once been
the insured was ignorant without his fault; or operated on, although the information on this
when, by any default of the insured other than matter was supposed to have been supplied the
actual fraud, the insurer never incurred any company. Within the proper period, may the
liability under the policy. Insurance Company have the contract rescinded?
Rescission of Insurance Contracts Reasons.
No, she is not entitled to any indemnity. Although The beneficiary of X cannot collect on the policy.
Juan did not die of a liver ailment, the fact of his Concealment, as a defense against liability by the
concealment vitiated the insurer‘s consent to the insurer, may either be intentional or
contract of insurance. Under the Insurance Code, unintentional. Lack of knowledge on the part of
concealment of a material fact is a ground for the insured about her ailment will not preclude
rescission. And materiality is determined not by the insurer from raising the defense. The insurer
the event which caused the death but by the may be held in estoppel only if, having known of
probable and reasonable influence of the fact the concealed or misrepresented fact, still accepts
concealed upon the other party in forming his the payment of premium which is not the situation
estimate of the disadvantages of the proposed in this case.
contract, or in making inquiries. If the insurer had 7. Juan procured a ―non-medical‖ life insurance
known of Juan‘s previous liver ailment, it would in from Good Life Insurance. He designated his wife,
all probabilities have at least made more detailed Petra, as the beneficiary. Earlier, in his application
inquiries about it or make a special examination of in response to the question as to whether or not
his liver function, or perhaps even charge a higher he had ever been hospitalized, he answered in the
premium because of the greater risk involved. The negative. He forgot to mention his confinement at
concealment was therefore of a material fact, the Kidney Hospital.
relieving the insurer from any liability on the
After Juan died in a plane crash, Petra filed a claim On September 7, 1991, the assured is killed in a
with Good Life. Discovering Juan’s previous plane crash. The insurance company denies the
hospitalization, Good Life rejected Petra’s claim on claim for insurance proceeds and returns the
the ground of concealment and premium paid.
misrepresentation. Petra sued Good Life, invoking
Is the decision of the insurance company justified?
good faith on part of Juan.
SUGGESTED ANSWER:
Will Petra’s suit prosper? Explain.
Assuming that the incontestability clause does not
SUGGESTED ANSWER:
apply because the policy has not been in force for
No, Petra‘s suit will not prosper (assuming that the 2 years from date of issue, during the lifetime of
policy of life insurance has been in force for a the insured, the decision of the insurance
period of less than 2 years from the date of its company not to pay is justified. There was
issue). The matters which Juan failed to disclose fraudulent concealment. It is not material that the
was material and relevant to the approval and insured died of a different cause than the fact
issuance of the insurance policy. They would have concealed. The fact concealed, that is the heart
affected Good Life‘s action on his application, ailment, is material to the determination by the
either by approving it with the corresponding insurance company whether or not to accept the
adjustment for a higher premium or rejecting the application for insurance and to require the
same. Moreover, a disclosure may have warranted medical examination of the insured.
a medical examination of Juan by Good Life in
However, of the incontestability clause applies t
order for it to reasonably assess the risk involved
the insurance policy covering the life of the
in accepting the application. In any case, good
insured had been in force for 2 years from the
faith is no defense in concealment. The waiver of
issuance thereof, the insurance company would
a medical examination in the n ̳ on-medical‘ life
not be justified in denying the claim for the
insurance from Good Life makes it even more
proceeds of the insurance and in returning the
necessary that Juan supply complete information
premium paid. In that case, the insurer cannot
about his previous hospitalization for such
prove the policy void ab initio or rescindable by
information constitutes an important factor which
reason of fraudulent concealment or
Good Life takes into consideration in deciding
misrepresentation of the insured.
whether to issue the policy or not. (See Sunlife
Assurance Co of Canada v CA GR 105135, June 22, 9. Renato was issued a life insurance policy on
1995 245 s 268) January 2, 1990. He concealed the fact that 3 years
prior to the issuance of his life insurance policy, he
If the policy of life insurance has been in force for
had been seeing a doctor about his heart ailment.
a period of 2 years or more from the date of its
issue (on which point the given facts are vague) On March 1, 1992, Renato died of heart failure.
then Good Life can no longer prove that the policy May the heirs file a claim on the proceeds of the
is void ab initio or is rescindible by reason of the life insurance policy of Renato? (5%)
fraudulent concealment or misrepresentation of
Juan ( Sec 48 Ins Code) SUGGESTED ANSWER:
8. The assured answers ―No‖ to the question in Yes. The life insurance policy in question was
the application for a life policy. ―Are you suffering issued on January 9, 1990. More than 2 years had
from any form of heart illness?‖ In fact, the elapsed when Renato, the insured, died on March
assured has been a heart patient for many years. 1, 1992. The incontestability clause applies.
Incontestability Clause C. Yes, it would constitute concealment that
amounts to misrepresentation on X’s part.
The insurer has two years from the date of
issuance of the insurance contract or of its last D. No, since the previous illness is not a material
reinstatement within which to contest the policy, fact to the insurance coverage.
whether or not, the insured still lives within such
12. An insured, who gains knowledge of a material
period. After two years, the defenses of
fact already after the effectivity of the insurance
concealment or misrepresentation, no matter
policy, is not obliged to divulge it. The reason for
how patent or well founded, no longer lie.
this is that the test of concealment of material fact
10. A applied for a non-medical life insurance. The is determined.
insured did not inform the insurer that one week
A. At the time of the issuance of the policy.
prior to his application for insurance, he was
examined and confined at St. Luke’s Hospital B. At any time before the payment of
premium.
where he was diagnosed for lung cancer. The
insured soon thereafter died in a plane crash. Is C. At the time of the payment of the premium.
the insurer liable considering that the fact D. At any time before the policy becomes
concealed had no bearing with the cause of death effective.
of the insured? Why? (5%)
13. Benny applied for life insurance for Php 1.5
SUGGESTED ANSWER: Million. The insurance company approved his
No. The concealed fact is material to the approval application and issued an insurance policy
and issuance of the insurance policy. It is well effective Nov, 6, 2008. Benny named his children
settled that the insured need not die of the as his beneficiaries. On April 6, 2010, Benny died
disease he failed to disclose to the insurer. It is of hepatoma, a liver ailment. The insurance
sufficient that his nondisclosure misled the insurer company denied the children’s claim for the
in forming his estimate of the risks of the proposed proceeds of the insurance policy on the ground
insurance policy or in making inquiries. that Benny failed to disclose in his application two
previous consultations with his doctors for
11. X, in the hospital for kidney dysfunction, was diabetes and hypertension, and that he had been
about to be discharged when he met his friend Y. diagnosed to be suffering from hepatoma. The
X told Y the reason for his hospitalization. A month insurance company also rescinded the policy and
later, X applied for an insurance covering serious refunded the premiums paid. Was the insurance
illness from ABC Insurance, Co., where Y was company correct?
working as Corporate Secretary. Since X had
already told Y about his hospitalization, he no SUGGESTED ANSWER:
longer answered a question regarding it in the The insurance company correctly rescinded the
application form. Would this constitute policy because of concealment (Section 27 of
concealment? Insurance Code). Benny did not disclose that he
A. Yes, since the previous hospitalization would was suffering from diabetes, hypertension, and
influence the insurer in deciding whether to grant hepatoma. The concealment is material, because
X’s application. these are serious ailments (Florendo v. Philam
Plans, Inc., 666 SCRA 618, 2012). Benny died less
B. No, since Y may be regarded as ABC’s agent and than two years from the date of the issuance of
he already knew of X’s previous hospitalization. the policy (Section 48 of Insurance Code).
14. On May 13, 1996, PAM, Inc. obtained a P15 M insured, and increasing the risks, entitles the
fire insurance policy from Ilocano Insurance insurer to rescind the contract of fire insurance.
covering its machineries and equipment effective
Misrepresentation/Omissions
for 1 year or until May 14, 1997. The policy
expressly stated that the insured properties were 1. A, an agent of life insurance company X, induced
located at ―Sanyo Precision Phils. Building, Phase B who has been suffering from advance
III, Lots 4 and 6, Block 15, PEZA, Rosario Cavite.‖ tuberculosis to apply for P10,000.00 life insurance
Before its expiration, the policy was renewed on which B did and he (B) requested A to fill the
―as is‖ basis for another year until May, 13, 1998. application form. Thru the connivance of the
The subject properties were later transferred to physician, it was made to appear in the application
Pace Factory also in PEZA. On October 12, 1997, that B is in good health and the P10,000.00 life
during the effectivity of the renewed policy, a fire insurance policy was issued by X to B. If B dies of
broke out at the Pace Factory which totally burned tuberculosis, may his beneficiaries recover?
the insured properties.
SUGGESTED ANSWER:
The policy forbade the removal of the insured
properties unless sanctioned by Ilocano. Condition It depends. The insurer is bound when its agent
9(c) of the policy provides that ―the insurance writes a false answer into the application without
ceases to attach as regards the property affected the knowledge of the insured, in which case his
unless the insured, before the occurrence of any (insured) beneficiaries may recover, but a
loss or damage, obtains the sanction of the collusion between the agent and the insured in
company signified by endorsement upon the misrepresenting the facts will vitiate the policy;
policy x x x (c) if the property insured is removed thus, in the instant case, if A obtained from B a
to any building or place other than in that which is correct and truthful answer to interrogatories
herein stated to be insured.‖ PAM claims that it contained in the application but without the
has substantially complied with notifying Ilocano knowledge of B filed in false answer and thru the
for the insurance coverage. Is Ilocano liable under connivance with the company physician, it was
the policy? made to appear that B is in good health, the
insurer cannot assert the falsity of such answers as
SUGGESTED ANSWER: a defense to liability on the policy
Ilocano is not liable under the policy. With the 2. On October 18, 1980, P, took out a life insurance
transfer of the location of the subject properties, policy and named his only son Q as beneficiary.
without notice and without insurer‘s consent, The policy was silent with regard to any change of
after the renewal of the policy, the insured clearly beneficiary. P later learned that Q was hooked on
committed concealment, misrepresentation and a drugs and immediately notified the insurance
breach of material warranty. The Insurance Code company in writing that he is substituting his
provides that a neglect to communicate that sister, R, as his beneficiary in place of Q. P later
which a party knows and ought to communicate, died of advanced tuberculosis. In the application
is called concealment. A concealment entitles the form filled up by the agent of the insurance
injured party to rescind a contract of insurance in company prior to the issuance of the life insurance
case of an alteration in the use or condition of the policy by the insurance company, the agent,
thing insured. An alteration in the use or condition without the knowledge of P, filled in a false answer
of a thing insured from that to which it is limited and made it appear that P was in good health.
by the policy made without the consent of the Upon P’s death, Q claimed the proceeds of the
insurer, by means within the control of the insurance policy contending that as designated
beneficiary, he cannot be changed without his partnership engaged in a sale of construction
consent, he having acquired a vested right to the materials. Julie insured the stocks in trade of Pino
proceeds of the policy. Shop with WGC Insurance Co for P350th.
Subsequently, she again got an insurance contract
Is Q’s contention correct? Reasons.
with RSI for P1m and then from EIC for P200th. A
SUGGESTED ANSWER: fire of unknown origin gutted the store of the
partnership. Julie filed her claims with the three
No, the designation of the beneficiary is revocable insurance companies. However, her claims were
unless the right to revoke is waived. denied separately for breach of policy condition
ANOTHER ANSWER: which required the insured to give notice of any
insurance effected covering the stocks in trade.
No, the insurer cannot escape liability. The Julie went to court and contended that she should
insurance agent is an agent not of the insured but not be blamed for the omission, alleging that the
of the insurer and the latter must thus suffer for insurance agents for WGC, RSI and EIC knew of the
the misconduct of the agent. The result would existence of the additional insurance coverages
have been different had the false answer been and that she was not informed about the
made by the agent in connivance with the insured. requirement that such other or additional
Breach of Warranties insurance should be stated in the policy.
1. Pabaya paid for a fire insurance policy on his Is the contention of Julie tenable? Explain.
multi storey building. At the time he applied for May she recover on her fire insurance policies?
the insurance, he told the representative of the Explain.
insurance company that he planned to assign a
security guard on every floor of the building right SUGGESTED ANSWER:
away. Except for the ground floor, no security 1) No. An insured is required to disclose the other
guards were assigned. 11 months after the policy insurances covering the subject matter of the
was issued, the building was gutted by fire which insurance being applied for. (New Life Ent v CA 207
started on the third floor. Unknown to Pabaya, the s 669)
insurance company had incorporated his planned
undertaking in the policy. 2) No, because she is guilty of violation of a
warranty/ condition.
Can Pabaya recover on the fire insurance policy?
3. To secure a loan of P10 million, Mario
SUGGESTED ANSWER: mortgaged his building to Armando. In accordance
Pabaya can recover under the insurance policy. with the loan arrangements, Mario had the
The statement of Pabaya that he planned to assign building insured with First Insurance Company for
a security guard on every floor of the insured P10 million, designating Armando as the
building, whether incorporated in the policy or beneficiary. Armando also took an insurance of
not, did not amount to firm commitment so as to the building upon his own interest with Second
constitute an express warranty or representation. Insurance Company for P5 million. The building
The facts indicate that it was simply planned, not was totally destroyed by fire, a peril insured
obligatory or promissory, undertaking. against under both insurance policies. It was
subsequent determined that the fire had been
2. Julie and Alma formed a business partnership. intentionally started by Mario and that in violation
Under the business name Pino Shop, the
of the loan agreement, he had been storing filed within one year after the rejection of the
inflammable materials in the building. claim.
(A) How much, if any, can Armando recover from After his building burned down, Robin filed his
either or both insurance companies? (2%) claim for fire loss with EFG. On Feb 28, 1994, EFG
denied Robin’s claim. On April 3, 1994, Robin
SUGGESTED ANSWER:
sought reconsideration of the denial, but EFG
Armando can receive P5 million from Second reiterated its position. On March 20, 1995, Robin
Insurance Company. As mortgagee, he had an commenced judicial action against EFG.
insurable interest in the building (Panlileo v. Cosio,
Should Robin’s action be given due course?
97 Phil. 919 (1955)). Armando cannot collect
Explain.
anything from First Insurance Company. First
Insurance Company is not liable for the loss of the SUGGESTED ANSWER:
building. First, it was due to a willful act of Mario,
No, Robin‘s action should not be given due course.
who committed arson (Section 87 of the Insurance
Is filing of the request for reconsideration did not
Code; East Furnitures, Inc. v. Globe & Rutgers Fire
suspend the running of the prescriptive period of
Insurance Company, 57 Phil. 576 (1932)). Second,
one year stipulated in the insurance policy. Thus,
fire insurance policies contain a warranty that the
when robin commenced judicial action against
insured will not store hazardous materials within
EFG Assurance on March 20, 1995, his ability to do
the insured premises. Mario breached this
so had already prescribed. The one-year period is
warranty when he stored inflammable materials in
counted from Feb 28, 1994 when EFG denied
the building. (Young v. Midland Textile Insurance
Robin‘s claim, not from the date (presumably after
Company, 30 Phil. 617 (1915)).These two factors
April 3, 1994) when EFG reiterated its position
exonerate First Insurance Company from liability
denying Robin‘s claim. The reason for this rule is
to Armando as mortgagee even though it was
to insure that claims against insurance companies
Mario who committed them (Section 8 of the
are promptly settled and that insurance suits are
Insurance Code).
brought by the insured while the evidence as to
(B) What happens to the P10 million debt of Mario the origin and cause of the destruction has not yet
to Armando? Explain. (3%) disappeared. (See Sun Ins Office Ltd v CA gr 89741,
Mar 13 91 195s193)
SUGGESTED ANSWER:
Subrogation
Since Armando would have collected P5 million
from Second Insurance Company, this amount 1. A helicopter of ABC Co. collided with XYZ’s
should be considered as partial payment of the tramway steel cables in its logging area in Surigao
loan. Armando can only collect the balance of P5 resulting in the destruction of the helicopter and
million (Panlileo v. Cosio, supra). Second Insurance death of two pilots. ABC Co. insured at its expense
Company can recover from Mario the amount of the helicopter and death of two pilots. ABC Co.
P5 million it paid, because it became subrogated insured at its expense the helicopter for
to the rights of Armando (Panlileo v. Cosio, supra). P80,000.00 and the two pilots (life insurance) for
P50,000.00 each, and as a result of the crash, the
Claims Settlement and Subrogation
insurer paid ABC Co. a total indemnity of
1. Robin insured his building against fire with EFG P180,000.00. Nevertheless, ABC Co sustained
Assurance. The insurance policy contained the additional damages of about P100,000.00 which
usual stipulation that any action or suit must be were not covered by insurance.
ABC Co. sued XYZ to recover not only the He further contends that it is bad enough to lose a
additional damages, but also the P180,000 which house but it is worse if one has to pay off a paid
was already compensated by the insurer. Decide. obligation to somebody who has not extended any
Give reasons. loan to him. Besides, he states, that the insurance
payment should inure to his benefit because he
What right/recourse, if any, has the insurer in
owns the house.
order to be reimbursed for the amount it paid to
ABC Co? Give reasons. Pass upon the merits of L’s contentions.
ABC Co may bring the action against XYZ for its Neither the loan of L was extinguished by the
claim for the additional damages not covered by insurance payment which M received from the
insurance, but not for the P180,000 covered by the insurance company; nor the insurance payment
insurance. If a property is insured and the owner inures to L‘s benefit; what was then insured was
received indemnity from the insurer, the latter is the interest of M, the secured creditor, and not
deemed subrogated to the rights of the insured the interest of L, so the proceeds shall be applied
against the wrongdoer, and if the amount paid by exclusively to the proper interest of M.
the insurer does not fully cover the loss, then the
L‘s argument that he has not entered into any loan
aggrieved party is the one entitled to recover the
or contract of whatever nature with the insurance
deficiency.
company is also untenable. When the secured
The insurer is deemed subrogated to the rights of creditor‘s interest in the mortgaged property of
ABC Co against XYZ to the extent of P80,000 the mortgagor, L, was insured and said property
insurance paid for the helicopter only, but not for would be burned, the insurance company had to
the life insurance of the two dead pilots, since pay the insured, M, and payment by the insurer to
subrogation in the New Civil Code refers only to the insured creates legal subrogation and makes
property, and not to the life insurance. (Philippine the insurer an assignee on equity to run after the
Air Lines, Inc. v. Herald Lumber Co., G.R. L-11497, mortgagor, L. Said right of the insurer is not
August 16, 1957; for both 1 and 2 answers.) dependent upon nor does it grow out of, any
privity of contract, or upon written assignment of
2. L borrows P50,000 from M payable 360 days
claim, and payment to insured makes the insurer
after date, at 12% interest per annum. To secure
an assignee in equity; thus, L‘s consent to said
the loan, L mortgages his house and lot in favor of
subrogation is not necessary. (Art. 2207, N.C.C.;
M. To protect himself from certain contingencies,
Fireman‘s Fund Insurance Co. v. Jamila & Co., April
M insures the house for the full amount of the loan
7, 1976; 70 SCRA 323)
with Rock Insurance Company. A fire breaks out
and burns the house and M collects from the 3. Raul’s truck bumped the car owned by Luz. The
insurance company the full value of the insurance. car was insured by Cala Insurance. For the damage
caused, Cala paid Luz P5,000.00 in amicable
Upon maturity of the loan, the insurance company
settlement. Luz executed a release of claim,
demands payment from L. The latter refuses to
subrogating Cala to all her rights against Raul.
pay on the ground that the loan had been
When Cala demanded reimbursement from Raul,
extinguished by the insurance payment which M
the latter refused saying that he had already paid
received from the insurance company. He argues
that he has not entered into any loan or contract
of whatever nature with the insurance company.
Luz P4,500 for the damage to the car as evidenced board the vessel ―M/V Menchu‖ from Leyte to
by a release of claim executed by Luz discharging Pier 10, North Harbor, Manila.
Raul.
Upon arrival, FCL Corp. engaged the services of
So Cala demanded reimbursement from Luz, who CGM, Inc. for the release and withdrawal of the
refused to pay, saying that the total damage to the cargoes from the pier and the subsequent delivery
car was P9,500.00 Since Cala paid P5,000 only, Luz to its warehouses/plants in Valenzuela City. The
contends that she was entitled to go after Raul to goods were loaded on board 12 trucks owned by
claim the additional P4,500.00 CGM, Inc., driven by its employed drivers and
accompanied by its employed truck helpers. Of the
1) Is Cala, as subrogee of Luz, entitled to
12 trucks en route to Valenzuela City, only 11
reimbursement from Raul?
reached the destination. One truck, loaded with
2) May Cala recover what it has paid Luz? 11 bundles of copper cathodes, failed to deliver its
cargo.
SUGGESTED ANSWER:
Because of this incident, FCL Corp. filed with ELP
1) No. Luz executed a release in favor of Raul Insurance, Inc. a claim for insurance indemnity in
(Manila Mahogany Mfg Corp v CA GR 52756, 12 the amount of P1.5 M. After the requisite
Oct 1987) investigation and adjustment, ELP Insurance, Inc.
2) Yes. Cala lost its right against Raul because of paid FCL Corp. the amount of P1,350,000.00 as
the release executed by Luz. Since the release was insurance indemnity.
made without the consent of Cala, Cala may ELP Insurance, Inc., thereafter, filed a complaint
recover the amount of P5,000 form Luz (Manila for damages against CGM, Inc. before the RTC,
Mahogany Mfg Corp v CA GR 52756, 12 Oct 1987). seeking reimbursement of the amount it had paid
4. Where the insurer was made to pay the insured to FCL Corp. for the loss of the subject cargo. CGM,
for a loss covered by the insurance contract, such Inc. denied the claim on the basis that it is not
insurer can run after the third person who caused privy to the contract entered into by and between
the loss through subrogation. What is the basis for FCL Corp. and ELP Insurance, Inc., and hence, it is
conferring the right of subrogation to the insurer? not liable therefor. If you are the judge, how will
you decide the case?
a) Their express stipulation in the contract of
insurance. SUGGESTED ANSWER:
b) The equitable assignment that results from the CGM, Inc. should be held liable for damages
insurer’s payment of the insured. against ELP Insurance, Inc. The insurer, upon
happening of the risk insured against and after
c) The insured’s formal assignment of his right to payment to the insured is subrogated to the rights
indemnification to the insurer. and cause of action of the latter. As such, the
d) The insured’s endorsement of its claim to the insurer has the right to seek reimbursement for all
insurer. the expenses paid.