Case 1
Heirs of Maramag v. Maramag
G.R. No. 181132 , June 5, 2009
FACTS:
The case stems from a petition filed against respondents with the RTC for revocation
and/or reduction of insurance proceeds for being void and/or inofficious. The petition
alleged that: (1) petitioners were the legitimate wife and children of Loreto Maramag
(Loreto), while respondents were Loreto’s illegitimate family; (2) Eva de Guzman
Maramag (Eva) was a concubine of Loreto and a suspect in the killing of the latter, thus,
she is disqualified to receive any proceeds from his insurance policies from Insular Life
Assurance Company, Ltd. (Insular) and Great Pacific Life Assurance Corporation
(Grepalife) (3) the illegitimate children of Loreto—Odessa, Karl Brian, and Trisha
Angelie—were entitled only to one-half of the legitime of the legitimate children, thus,
the proceeds released to Odessa and those to be released to Karl Brian and Trisha
Angelie were inofficious and should be reduced; and (4) petitioners could not
be deprived of their legitimes, which should be satisfied first. Insular admitted that
Loreto misrepresented Eva as his legitimate wife and Odessa, Karl Brian, and Trisha
Angelie as his legitimate children, and that they filed their claims for the insurance
proceeds of the insurance policies; that when it ascertained that Eva was not
the legal wife of Loreto, it disqualified her as a beneficiary and divided the proceeds
among Odessa, Karl Brian, and Trisha Angelie, as the remaining designated
beneficiaries; and that it released Odessa’s share as she was of age, but withheld the
release of the shares of minors Karl Brian and Trisha Angelie pending submission of
letters of guardianship. Insular alleged that the complaint or petition failed to state a
cause of action insofar as it sought to declare as void the designation of Eva
as beneficiary, because Loreto revoked her designation as such in Policy No.
A001544070 and it disqualified her in Policy No. A001693029; and insofar as it sought
to declare as inofficious the shares of Odessa, Karl Brian, and Trisha Angelie,
considering that no settlement of Loreto’s estate had been filed nor had the respective
shares of the heirs been determined. Insular further claimed that it was bound to
honor the insurance policies designating the children of Loreto with Eva as beneficiaries
pursuant to Section 53 of the Insurance Code. Grepalife alleged that Eva was not
designated as an insurance policy beneficiary; that the claims filed by Odessa, Karl
Brian, and Trisha Angelie were denied because Loreto was ineligible for insurance due
to a misrepresentation in his application form that he was born on December 10, 1936
and, thus, not more than 65 years old when he signed it in September 2001; that the
case was premature, there being no claim filed by the legitimate family of Loreto; and
that the law on succession does not apply where the designation of insurance
beneficiaries is clear.
ISSUE:
Whether or not illegitimate children can be beneficiaries in an insurance contract.
RULING:
Yes. Section 53 of the Insurance Code states that the insurance proceeds shall be
applied exclusively to the proper interest of the person in whose name or for
whose benefit it is made unless otherwise specified in the policy. Pursuant thereto, it is
obvious that the only persons entitled to claim the insurance proceeds are either the
insured, if still alive; or the beneficiary, if the insured is already deceased, upon the
maturation of the policy.The exception to this rule is a situation where the insurance
contract was intended to benefit third persons who are not parties to the same in the
form of favorable stipulations or indemnity. In such a case, third parties may directly
sue and claim from the insurer.
Petitioners are third parties to the insurance contracts with Insular and Grepalife and,
thus, are not entitled to the proceeds thereof. Accordingly, respondents Insular
and Grepalife have no legal obligation to turn over the insurance proceeds to
petitioners. The revocation of Eva as a beneficiary in one policy and
her disqualification as such in another are of no moment considering that
the designation of the illegitimate children as beneficiaries in Loreto’s insurance
policies remains valid. Because no legal proscription exists in naming as beneficiaries
the children of illicit relationships by the insured, the shares of Eva in the insurance
proceeds, whether forfeited by the court in view of the prohibition on donations under
Article 739 of the Civil Code or by the insurers themselves for reasons based on the
insurance contracts, must be awarded to the said illegitimate children, the designated
beneficiaries, to the exclusion of petitioners. It is only in cases where the insured has
not designated any beneficiary, or when the designated beneficiary is disqualified by
law to receive the proceeds, that the insurance policy proceeds shall redound to the
benefit of the estate of the insured.
Case 2
DOCTRINE:
"The stipulation in a life insurance policy giving the insured the privilege to reinstate it
upon written application does not give the insured absolute right to such reinstatement
by the mere filing of an application. The insurer has the right to deny the reinstatement
if it is not satisfied as to the insurability of the insured and if the latter does not pay all
overdue premium and all other indebtedness to the insurer. After the death of the
insured the insurance Company cannot be compelled to entertain an application for
reinstatement of the policy because the conditions precedent to reinstatement can no
longer be determined and satisfied."
FACTS:
Eulogio the husband of plaintiff applied for an insurance policy with respondent
through malaluan its agent, which contained a 20-Year Endowment Variable Income
Package Flexi Plan worth P500,000.00 with two riders valued at P500,000.00 each,
wherein, the plaintiff is named as the primary beneficiary of the said policy. Under the
terms, Eulogio is required to pay the premiums on a quarterly basis in the amount of
8,062 of each year until the end of the 20-year period of the policy. Included in the
terms is a grace period of 31 days for the payment of each premium subsequent to the
first. If any premium was not paid on or before the due date, the policy would be in
default, and if the premium remained unpaid until the end of the grace period, the
policy would automatically lapse and become void.
Eulogio failed to pay the 3rd premium which was due on January even after the lapse
of the grace period. Hence, it became void. Eulogio as a remedy he filed an Application
for Reinstatement together with the amount of P8,062.00 to pay for the premium due
on 24 January 1998. However, this was not processed since he left unpaid the overdue
interest thereon amounting to P322.48. Thus, Insular Life instructed Eulogio to pay the
amount of interest and to file another application for reinstatement and Eulogio was
likewise advised by Malaluan to pay the premiums that subsequently became due on
24 April 1998 and 24 July 1998, plus interest. On 17 September 1998, eulogio
submitted his 2nd application for reinstatement in the amount of 17,500 which was
instead received by the husband of malaluan since she was on a business errand, A
receipt was issued for the amount deposited by eulogio.
On sept 17, 1998 eulogio died of cardio-respiratory arrest. Without knowing of
Eulogio’s death, Malaluan forwarded to the Insular Life the 2nd application of
reinstatement and the amount of 17,500. This application was not acted upon anymore
since insular life was already informed by the death on sept 21, 1998.
Plaintiff filed with Insular Life a claim for payment of the full proceeds of the Policy of
his husband. The respondent denied the claim on the ground that the policy has
already lapsed and there was failure to reinstate. Plaintiff requested for a
reconsideration of the disallowance over the claim. This was also denied. On august 11,
1999 Insular Life responded a demand letter of the plaintiff by agreeing to conduct a
re-evaluation of Violeta’s claim.
Without waiting for the re-evaluation the plaintiff filed a complaint in the RTC for death
claim benefit. The court however ruled in favor of respondent on the ground that the
Policy had indeed lapsed and Eulogio needed to have the same reinstated
ISSUE:
WON EULOGIO WAS ABLE TO REINSTATE THE LAPSED INSURANCE POLICY BEFORE HIS
DEATH
HELD:
No, The Policy had already lapsed is a fact beyond dispute. Eulogio’s filing of his
Application for Reinstatement with Insular Life constitutes an admission that Policy
had lapsed.
To reinstate a policy means to restore the same to premium-paying status after it has
been permitted to lapse. Both the Policy Contract and the Application for
Reinstatement provide for specific conditions for the reinstatement of a lapsed policy.
The Policy Contract between Eulogio and Insular Life identified the following conditions
for reinstatement should the policy lapse:
The policy may be reinstated at any time within three years after it lapsed if the
following conditions are met:
(1) the policy has not been surrendered for its cash value or the period of extension as
a term insurance has not expired;
(2) evidence of insurability satisfactory to [Insular Life] is furnished;
(3) overdue premiums are paid with compound interest at a rate not exceeding that
which would have been applicable to said premium and indebtedness in the policy
years prior to reinstatement; and
(4) indebtedness which existed at the time of lapsation is paid or renewed.
Additional conditions for reinstatement of a lapsed policy were stated in the
Application for Reinstatement which Eulogio signed and submitted, to wit:

I/We agree that said Policy shall not be considered reinstated until this application is
approved by the Company during my/our lifetime and good health and until all other
Company requirements for the reinstatement of said Policy are fully satisfied.
In the instant case, Eulogio’s death rendered impossible full compliance with the
conditions for reinstatement of the Policy. True, Eulogio, before his death, managed to
file his Application for Reinstatement and deposit the amount for payment of his
overdue premiums and interests thereon with Malaluan; but it could only be
considered reinstated after the Application for Reinstatement had been processed and
approved by Insular Life during Eulogio’s lifetime and good health.
It does not matter that when he died, Eulogio’s Application for Reinstatement and
deposits for the overdue premiums and interests were already with Malaluan. Insular
Life, through the Policy Contract, expressly limits the power or authority of its
insurance agents, thus:
Our agents have no authority to make or modify this contract, to extend the time limit
for payment of premiums, to waive any lapsation, forfeiture or any of our rights or
requirements, such powers being limited to our president, vice-president or persons
authorized by the Board of Trustees and only in writing. Malaluan did not have the
authority to approve Eulogio’s Application for Reinstatement. Malaluan still had to turn
over to Insular Life Eulogio’s Application for Reinstatement and accompanying deposits,
for processing and approval by the latter.
Eulogio’s death, just hours after filing his Application for Reinstatement and depositing
his payment for overdue premiums and interests with Malaluan, does not constitute a
special circumstance that can persuade this Court to already consider Policy No.
9011992 reinstated. Said circumstance cannot override the clear and express
provisions of the Policy Contract and Application for Reinstatement, and operate to
remove the prerogative of Insular Life thereunder to approve or disapprove the
Application for Reinstatement. Even though the Court commiserates with Violeta, as
the tragic and fateful turn of events leaves her practically empty-handed, the Court
cannot arbitrarily burden Insular Life with the payment of proceeds on a lapsed
insurance policy. Justice and fairness must equally apply to all parties to a case. Courts
are not permitted to make contracts for the parties. The function and duty of the
courts consist simply in enforcing and carrying out the contracts actually made.
Eulogio’s death, just hours after filing his Application for Reinstatement and depositing
his payment for overdue premiums and interests with Malaluan, does not constitute a
special circumstance that can persuade this Court to already consider Policy No.
9011992 reinstated. Said circumstance cannot override the clear and express
provisions of the Policy Contract and Application for Reinstatement, and operate to
remove the prerogative of Insular Life thereunder to approve or disapprove the
Application for Reinstatement. Even though the Court commiserates with Violeta, as
the tragic and fateful turn of events leaves her practically empty-handed, the Court
cannot arbitrarily burden Insular Life with the payment of proceeds on a lapsed
insurance policy. Justice and fairness must equally apply to all parties to a case. Courts
are not permitted to make contracts for the parties. The function and duty of the
courts consist simply in enforcing and carrying out the contracts actually made.
THEREFORE, Policy No. 9011992 remained lapsed and void
Case 3
Facts:
IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from respondent fire
insurance policies with book debt endorsements. The insurance policies provide for
coverage on "book debts in connection with ready-made clothing materials which have
been sold or delivered to various customers and dealers of the Insured anywhere in the
Philippines."
The policies defined book debts as the "unpaid account still appearing in the Book of
Account of the Insured 45 days after the time of the loss covered under this Policy."
The policies also provide for the following conditions:
1. Warranted that the Company shall not be liable for any unpaid account in respect of
the merchandise sold and delivered by the Insured which are outstanding at the date of
loss for a period in excess of six (6) months from the date of the covering invoice or
actual delivery of the merchandise whichever shall first occur.
2. Warranted that the Insured shall submit to the Company within twelve (12) days
after the close of every calendar month all amount shown in their books of accounts as
unpaid and thus become receivable item from their customers and dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On February 25,
1991, the Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner,
was consumed by fire. Included in the items lost or destroyed in the fire were stocks of
ready-made clothing materials sold and delivered by IMC and LSPI.
Insurance of America filed a complaint for damages against Gaisano. It alleges that IMC
and LSPI were paid for their claims and that the unpaid accounts of petitioner on the
sale and delivery of ready-made clothing materials with IMC was P2,119,205.00 while
with LSPI it was P535,613.00.
The RTC rendered its decision dismissing Insurance's complaint. It held that the fire was
purely accidental; that the cause of the fire was not attributable to the negligence of
the petitioner. Also, it said that IMC and LSPI retained ownership of the delivered goods
and must bear the loss.
The CA rendered its decision and set aside the decision of the RTC. It ordered Gaisano
to pay Insurance the P 2 million and the P 500,000 the latter paid to IMC and Levi
Strauss.
Hence this petition.
Issues:
1. WON the CA erred in construing a fire insurance policy on book debts as one
covering the unpaid accounts of IMC and LSPI since such insurance applies to loss of
the ready-made clothing materials sold and delivered to petitioner
2. WON IMC bears the risk of loss because it expressly reserved ownership of the goods
by stipulating in the sales invoices that "[i]t is further agreed that merely for purpose of
securing the payment of the purchase price the above described merchandise remains
the property of the vendor until the purchase price thereof is fully paid."
3. WON petitioner is liable for the unpaid accounts
4. WON it has been established that petitioner has outstanding accounts with IMC and
LSPI.
Held: No. Yes. Yes. Yes but account with LSPI unsubstantiated. Petition partly granted.
Ratio:
1. Nowhere is it provided in the questioned insurance policies that the subject of the
insurance is the goods sold and delivered to the customers and dealers of the insured.
Thus, what were insured against were the accounts of IMC and LSPI with petitioner
which remained unpaid 45 days after the loss through fire, and not the loss or
destruction of the goods delivered.
2. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is
transferred to the buyer the goods are at the buyer's risk whether actual delivery has
been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the ownership in the goods has been retained
by the seller merely to secure performance by the buyer of his obligations under the
contract, the goods are at the buyer's risk from the time of such delivery
Thus, when the seller retains ownership only to insure that the buyer will pay its debt,
the risk of loss is borne by the buyer. Petitioner bears the risk of loss of the goods
delivered.
IMC and LSPI had an insurable interest until full payment of the value of the delivered
goods. Unlike the civil law concept of res perit domino, where ownership is the basis
for consideration of who bears the risk of loss, in property insurance, one's interest is
not determined by concept of title, but whether insured has substantial economic
interest in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest in
property, whether real or personal, or any relation thereto, or liability in respect
thereof, of such nature that a contemplated peril might directly damnify the insured."
Parenthetically, under Section 14 of the same Code, an insurable interest in property
may consist in: (a) an existing interest; (b) an inchoate interest founded on existing
interest; or (c) an expectancy, coupled with an existing interest in that out of which the
expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its existence or
would suffer loss from its destruction. Indeed, a vendor or seller retains an insurable
interest in the property sold so long as he has any interest therein, in other words, so
long as he would suffer by its destruction, as where he has a vendor's lien. In this case,
the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their
Books of Account 45 days after the time of the loss covered by the policies.
3. Petitioner's argument that it is not liable because the fire is a fortuitous event under
Article 117432 of the Civil Code is misplaced. As held earlier, petitioner bears the loss
under Article 1504 (1) of the Civil Code.
Moreover, it must be stressed that the insurance in this case is not for loss of goods by
fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45 days after
the fire. Accordingly, petitioner's obligation is for the payment of money. As correctly
stated by the CA, where the obligation consists in the payment of money, the failure of
the debtor to make the payment even by reason of a fortuitous event shall not relieve
him of his liability. The rationale for this is that the rule that an obligor should be held
exempt from liability when the loss occurs thru a fortuitous event only holds true when
the obligation consists in the delivery of a determinate thing and there is no stipulation
holding him liable even in case of fortuitous event. It does not apply when the
obligation is pecuniary in nature.
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the
loss or destruction of anything of the same kind does not extinguish the obligation."
This rule is based on the principle that the genus of a thing can never perish. An
obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any
specific property of the debtor.
4. With respect to IMC, the respondent has adequately established its claim. The P 3 m
claim has been proven. The subrogation receipt, by itself, is sufficient to establish not
only the relationship of respondent as insurer and IMC as the insured, but also the
amount paid to settle the insurance claim. The right of subrogation accrues simply
upon payment by the insurance company of the insurance claim Respondent's action
against petitioner is squarely sanctioned by Article 2207 of the Civil Code which
provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach of
contract complained of, the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract.
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action.
There was no evidence that respondent has been subrogated to any right which LSPI
may have against petitioner. Failure to substantiate the claim of subrogation is fatal to
petitioner's case for recovery of P535,613.00.
Case 4
Insular Life vs. Ebrado
Facts:
> Buenaventura Ebrado was issued al life plan by Insular Company. He designated
Capriona as his beneficiary, referring to her as his wife.
> The insured then died and Carponia tried to claim the proceeds of the said plan.
> She admitted to being only the common law wife of the insured.
> Pascuala, the legal wife, also filed a claim asserting her right as the legal wife. The
company then filed an action for interpleader.
Issue:
Whether or not the common law wife named as beneficiary can collect the proceeds.
Held:
NO.
The civil code prohibitions on donations made between persons guilty of adulterous
concubinage applies to insurance contracts. On matters not specifically provided for by
the Insurance Law, the general rules on Civil law shall apply. A life insurance policy is
no different from a civil donation as far as the beneficiary is concerned, since both are
founded on liberality.
Case 5
FACTS:
FEB Leasing and Finance Corporation (FEB) leased equipment and motor vehicles to JVL
Food Products with a monthly rental of P170,494
At the same date, Vicente Ong Lim Sing, Jr. (Lim) an executed an Individual Guaranty
Agreement with FEB to guarantee the prompt and faithful performance of the terms
and conditions of the lease agreement
JVL defaulted in the payment of the monthly rentals resulting to arrears of
P3,414,468.75 and refused to pay despite demands
FEB filed a complaint for damages and replevin against JVL, Lim and John Doe
JVL and Lim admitted the existence of the lease agreement but asserted that it is in
reality a sale of equipment on installment basis, with FEB acting as the financier
RTC: Sale on installment and the FEB elected full payment of the obligation so for the
unreturned units and machineries the JVL and Lim are jointly and severally liable to pay
CA: granted FEB appeal that it is a financial lease agreement under Republic Act (R.A.)
No. 8556 and ordered JVL and Lim jointly and severally to pay P3,414,468.75
ISSUE: W/N JVL and Lim should jointly and severally be liable for the insured financial
lease
HELD: YES. CA affirmed.
contract of adhesion is as binding as any ordinary contract
The Lease Contract with corresponding Lease Schedules with Delivery and Acceptance
Certificates is, in point of fact, a financial lease within the purview of R.A. No. 8556
FEB leased the subject equipment and motor vehicles to JVL in consideration of a
monthly periodic payment of P170,494.00. The periodic payment by petitioner is
sufficient to amortize at least 70% of the purchase price or acquisition cost of the said
movables in accordance with the Lease Schedules with Delivery and Acceptance
Certificates.
JVL entered into the lease contract with full knowledge of its terms and conditions.
Lim, as a lessee, has an insurable interest in the equipment and motor vehicles leased.
In the financial lease agreement, FEB did not assume responsibility as to the quality,
merchantability, or capacity of the equipment. This stipulation provides that, in case of
defect of any kind that will be found by the lessee in any of the equipment, recourse
should be made to the manufacturer. “The financial lessor, being a financing company,
i.e., an extender of credit rather than an ordinary equipment rental company, does not
extend a warranty of the fitness of the equipment for any particular use. Thus, the
financial lessee was precisely in a position to enforce such warranty directly against the
supplier of the equipment and not against the financial lessor. We find nothing contra
legem or contrary to public policy in such a contractual arrangement
CONCEALMENT
Case 6
Vda. De Canilang v. CA - Concealment
Facts:
> Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus
tachycardia." Mr. Canilang consulted the same doctor again on 3 August 1982 and this
time was found to have "acute bronchitis."
> On the next day, 4 August 1982, Canilang applied for a "non-medical" insurance
policy with Grepalife naming his wife, as his beneficiary. Canilang was issued ordinary
life insurance with the face value of P19,700.
> On 5 August 1983, Canilang died of "congestive heart failure," "anemia," and
"chronic anemia." The wife as beneficiary, filed a claim with Grepalife which the
insurer denied on the ground that the insured had concealed material information
from it.
> Vda Canilang filed a complaint with the Insurance Commissioner against Grepalife
contending that as far as she knows her husband was not suffering from any disorder
and that he died of kidney disorder.
> Grepalife was ordered to pay the widow by the Insurance Commissioner holding that
there was no intentional concealment on the Part of Canilang and that Grepalife had
waived its right to inquire into the health condition of the applicant by the issuance of
the policy despite the lack of answers to "some of the pertinent questions" in the
insurance application. CA reversed.
Issue:
Whether or not Grepalife is liable.
Held:
SC took note of the fact that Canilang failed to disclose that hat he had twice consulted
Dr. Wilfredo B. Claudio who had found him to be suffering from "sinus tachycardia" and
"acute bronchitis. Under the relevant provisions of the Insurance Code, the
information concealed must be information which the concealing party knew and
"ought to [have] communicate[d]," that is to say, information which was "material to
the contract.
The information which Canilang failed to disclose was material to the ability of
Grepalife to estimate the probable risk he presented as a subject of life insurance. Had
Canilang disclosed his visits to his doctor, the diagnosis made and the medicines
prescribed by such doctor, in the insurance application, it may be reasonably assumed
that Grepalife would have made further inquiries and would have probably refused to
issue a non-medical insurance policy or, at the very least, required a higher premium
for the same coverage.
The materiality of the information withheld by Canilang from Grepalife did not depend
upon the state of mind of Jaime Canilang. A man's state of mind or subjective belief is
not capable of proof in our judicial process, except through proof of external acts or
failure to act from which inferences as to his subjective belief may be reasonably
drawn. Neither does materiality depend upon the actual or physical events which
ensue. Materiality relates rather to the "probable and reasonable influence of the
facts" upon the party to whom the communication should have been made, in
assessing the risk involved in making or omitting to make further inquiries and in
accepting the application for insurance; that "probable and reasonable influence of the
facts" concealed must, of course, be determined objectively, by the judge ultimately.
SC found it difficult to take seriously the argument that Grepalife had waived inquiry
into the concealment by issuing the insurance policy notwithstanding Canilang's failure
to set out answers to some of the questions in the insurance application. Such failure
precisely constituted concealment on the part of Canilang. Petitioner's argument, if
accepted, would obviously erase Section 27 from the Insurance Code of 1978.
Case 7
Sun Life v. CA - Concealment in Insurance
Facts:
> On April 15, 1986, Bacani procured a life insurance contract for himself from Sun Life.
He was issued a life insurance policy with double indemnity in case of accidental death.
The designated beneficiary was his mother, Bernarda.
> On June 26, 1987, the insured died in a plane crash. Bernarda Bacani filed a claim
with Sun Life, seeking the benefits of the insurance. Sun Life conducted an investigation
and its findings prompted it to reject the claim.
> Sun Life discovered that 2 weeks prior to his application, Bacani was examined and
confined at the Lung Center of the Philippines, where he was diagnosed for renal
failure. During his confinement, the deceased was subjected to urinalysis, ultra-
sonography and hematology tests. He did not reveal such fact in his application.
> In its letter, Sun Life informed Berarda, that the insured did not disclosed material
facts relevant to the issuance of the policy, thus rendering the contract of insurance
voidable. A check representing the total premiums paid in the amount of P10,172.00
was attached to said letter.
> Bernarda and her husband, filed an action for specific performance against Sun Life.
RTC ruled for Bernarda holding that the facts concealed by the insured were made in
good faith and under the belief that they need not be disclosed. Moreover, it held that
the health history of the insured was immaterial since the insurance policy was "non-
medical." CA affirmed.
Issue:
Whether or not the beneficiary can claim despite the concealment.
Held:
NOPE.
Section 26 of the Insurance Code is explicit in requiring a party to a contract of
insurance to communicate to the other, in good faith, all facts within his knowledge
which are material to the contract and as to which he makes no warranty, and which
the other has no means of ascertaining.
Materiality is to be determined not by the event, but solely by the probable and
reasonable influence of the facts upon the party to whom communication is due, in
forming his estimate of the disadvantages of the proposed contract or in making his
inquiries (The Insurance Code, Sec 31)
The terms of the contract are clear. The insured is specifically required to disclose to
the insurer matters relating to his health. The information which the insured failed to
disclose were material and relevant to the approval and the issuance of the insurance
policy. The matters concealed would have definitely affected petitioner's action on his
application, either by approving it with the corresponding adjustment for a higher
premium or rejecting the same. Moreover, a disclosure may have warranted a medical
examination of the insured by petitioner in order for it to reasonably assess the risk
involved in accepting the application.

Thus, "good faith" is no defense in concealment. The insured's failure to disclose the
fact that he was hospitalized for two weeks prior to filing his application for insurance,
raises grave doubts about his bonafides. It appears that such concealment was
deliberate on his part.
Case 8
Facts:
Kwong Nam applied for a 20-year endowment insurance on his life for the sum of
P20,000.00, with his wife, appellee Ng Gan Zee as beneficiary. On the same date, Asian
Crusader, upon receipt of the required premium from the insured, approved the
application and issued the corresponding policy. Kwong Nam died of cancer of the liver
with metastasis. All premiums had been paid at the time of his death.
Ng Gan Zee presented a claim for payment of the face value of the policy. On the same
date, she submitted the required proof of death of the insured. Appellant denied the
claim on the ground that the answers given by the insured to the questions in his
application for life insurance were untrue.
Appellee brought the matter to the attention of the Insurance Commissioner. The
latter, after conducting an investigation, wrote the appellant that he had found no
material concealment on the part of the insured and that, therefore, appellee should
be paid the full face value of the policy. The company refused to settle its obligation.
Appellant alleged that the insured was guilty of misrepresentation when he answered
"No" to the following question appearing in the application for life insurance-
Has any life insurance company ever refused your application for insurance or for
reinstatement of a lapsed policy or offered you a policy different from that applied for?
If, so, name company and date.
The lower court ruled against the company on lack of evidence.
Appellant further maintains that when the insured was examined in connection with
his application for life insurance, he gave the appellant's medical examiner false and
misleading information as to his ailment and previous operation. The company
contended that he was operated on for peptic ulcer 2 years before the policy was
applied for and that he never disclosed such an operation.
Issue: WON Asian Crusader was deceived into entering the contract or in accepting the
risk at the rate of premium agreed upon because of insured's representation?
Held: No. Petition dismissed.
Ratio:
Section 27 of the Insurance Law:
Sec. 27. Such party a contract of insurance must communicate to the other, in good
faith, all facts within his knowledge which are material to the contract, and which the
other has not the means of ascertaining, and as to which he makes no warranty.
"Concealment exists where the assured had knowledge of a fact material to the risk,
and honesty, good faith, and fair dealing requires that he should communicate it to the
assurer, but he designedly and intentionally withholds the same."
It has also been held "that the concealment must, in the absence of inquiries, be not
only material, but fraudulent, or the fact must have been intentionally withheld."
Fraudulent intent on the part of the insured must be established to entitle the insurer
to rescind the contract. And as correctly observed by the lower court,
"misrepresentation as a defense of the insurer to avoid liability is an 'affirmative'
defense. The duty to establish such a defense by satisfactory and convincing evidence
rests upon the defendant. The evidence before the Court does not clearly and
satisfactorily establish that defense."
It bears emphasis that Kwong Nam had informed the appellant's medical examiner of
the tumor. His statement that said tumor was "associated with ulcer of the stomach"
should be construed as an expression made in good faith of his belief as to the nature
of his ailment and operation.
While the information communicated was imperfect, the same was sufficient to have
induced appellant to make further inquiries about the ailment and operation of the
insured.
Section 32 of Insurance Law:
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.
Where a question appears to be not answered at all or to be imperfectly answered, and
the insurers issue a policy without any further inquiry, they waive the imperfection of
the answer and render the omission to answer more fully immaterial.
The company or its medical examiner did not make any further inquiries on such
matters from the hospital before acting on the application for insurance. The fact of the
matter is that the defendant was too eager to accept the application and receive the
insured's premium. It would be inequitable now to allow the defendant to avoid
liability under the circumstances
Case No 9
Saturnino v. Philamlife - False Representation
Facts:
> 2 months prior to the insurance of the policy, Saturnino was operated on for cancer,
involving complete removal of the right breast, including the pectoral muscles and the
glands, found in the right armpit.
> Notwithstanding the fact of her operation, Saturnino did not make a disclosure
thereof in her application for insurance.
> She stated therein that she did not have, nor had she ever had, among others listed
in the application, cancer or other tumors; that she had not consulted any physician,
undergone any operation or suffered any injury within the preceding 5 years.
> She also stated that she had never been treated for, nor did she ever have any illness
or disease peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual
disorders.
> The application also recited that the declarations of Saturnino constituted a further
basis for the issuance of the policy.
Issue:
Whether or not the insured made such false representation of material facts as to
avoid the policy.
Held:
YES.
There can be no dispute that the information given by her in the application for
insurance was false, namely, that she never had cancer or tumors or consulted any
physician or undergone any operation within the preceding period of 5 years.
The question to determine is: Are the facts then falsely represented material? The
Insurance Law provides that “materiality 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 proposed contract, or making
his inquiries.
The contention of appellants is that the facts subject of the representation were not
material in view of the non-medical nature of the insurance applied for, which does
away with the usual requirement of medical examination before the policy is issued.
The contention is without merit. If anything, the waiver of medical examination
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.
Appellants also contend that there was no fraudulent concealment of the truth
inasmuch as the insured herself did not know, since her doctor never told her, that the
disease for which she had been operated on was cancer. In the first place,
concealment of the fact of the operation itself was fraudulent, as there could not have
been any mistake about it, no matter what the ailment.
Secondly, in order to avoid a policy, it is not necessary to show actual fraud on the part
of the insured. In this jurisdiction, concealment, whether intentional or unintentional
entitled 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 a rate of premium agreed
upon. The insurer, relying upon the belief that the insured will disclose every material
fact within his actual or presumed knowledge, is misled into a belief that the
circumstances withheld does not exist, and he is thereby induced to estimate the risk
upon a false basis that it does not exist.
Case 10
Edilon case
Carmen O, Lapuz applied with Manila Bankers for insurance coverage against accident
and injuries. She gave the date of her birth as July 11, 1904. She paid the sum of P20.00
representing the premium for which she was issued the corresponding receipt. The
policy was to be effective for 90 days.
During the effectivity, Carmen O. Lapuz died in a vehicular accident in the North
Diversion Road.
Petitioner Regina L. Edillon, a sister of the insured and the beneficiary in the policy,
filed her claim for the proceeds of the insurance. Her claim having been denied, Regina
L. Edillon instituted this action in the trial court.
The insurance corporation relies on a provision contained in the contract excluding its
liability to pay claims under the policy in behalf of "persons who are under the age of
sixteen (16) years of age or over the age of sixty (60) years" They pointed out that the
insured was over sixty (60) years of age when she applied for the insurance coverage,
hence the policy became void.
The trial court dismissed the complaint and ordered edillon to pay P1000. The reason
was that a policy of insurance being a contract of adhesion, it was the duty of the
insured to know the terms of the contract he or she is entering into.
The insured could not have been qualified under the conditions stated in said contract
and should have asked for a refund of the premium.
Issue:
Whether or not the acceptance by the insurance corporation of the premium and the
issuance of the corresponding certificate of insurance should be deemed a waiver of
the exclusionary condition of coverage stated in the policy.
Held: Yes. Petition granted.
Ratio:
The age of Lapuz was not concealed to the insurance company. Her application clearly
indicated her age of the time of filing the same to be almost 65 years of age. Despite
such information which could hardly be overlooked, the insurance corporation received
her payment of premium and issued the corresponding certificate of insurance without
question.
There was sufficient time for the private respondent to process the application and to
notice that the applicant was over 60 years of age and cancel the policy.
Under the circumstances, the insurance corporation is already deemed in estoppel. It
inaction to revoke the policy despite a departure from the exclusionary condition
contained in the said policy constituted a waiver of such condition, similar to Que
Chee Gan vs. Law Union Insurance.
The insurance company was aware, even before the policies were issued, that in the
premises insured there were only two fire hydrants contrary to the requirements of
the warranty in question.
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 known facts, and the insurer is stopped thereafter
from asserting the breach of such conditions.
To allow a company to accept one's money for a policy of insurance which it then
knows to be void and of no effect, though it knows as it must, that the assured
believes it to be valid and binding, is so contrary to the dictates of honesty and fair
dealing.
Capital Insurance & Surety Co., Inc. vs. - involved a violation of the provision of the
policy requiring the payment of premiums before the insurance shall become
effective. The company issued the policy upon the execution of a promissory note for
the payment of the premium. A check given subsequent by the insured as partial
payment of the premium was dishonored for lack of funds. Despite such deviation
from the terms of the policy, the insurer was held liable.
“... 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...”
Case 11
Philamcare Health Systems, Inc. v. Court of Appeals
G.R. No. 125678, 18 March 2002, 379 SCRA 356
FACTS:
In 1988, Ernani Trinos applied for a health care insurance under the Philamcare Health
Systems, Inc. He was asked if he was ever treated for high blood, heart trouble,
diabetes, cancer, liver disease, asthma, or peptic ulcer; he answered no. His application
was approved and it was effective for one year. His coverage was subsequently
renewed twice for one year each. While the coverage was still in force in 1990, Ernani
suffered a heart attack for which he was hospitalized. The cost of the hospitalization
amounted to P76,000.00. Julita Trinos, wife of Ernani, filed a claim before Philamcare
for the latter to pay the hospitalization cost. Philamcare refused to pay as it alleged
that Ernani failed to disclose the fact that he was diabetic, hypertensive, and asthmatic.
Julita ended up paying the hospital expenses. Ernani eventually died. In July 1990, Julita
sued Philamcare for damages. Philamcare alleged that the health coverage is not an
insurance contract; that the concealment made by Ernani voided the agreement.
ISSUE:
Whether or not Philamcare can avoid the health coverage agreement.
HELD:
No.
The health coverage agreement (health care agreement) entered upon by Ernani with
Philamcare is a non-life insurance contract and is covered by the Insurance Law. It is
primarily a contract of indemnity. Once the member incurs hospital, medical or any
other expense arising from sickness, injury or other stipulated contingent, the health
care provider must pay for the same to the extent agreed upon under the contract.
There is no concealment on the part of Ernani. He answered the question with good
faith. He was not a medical doctor hence his statement in answering the question
asked of him when he was applying is an opinion rather than a fact. Answers made in
good faith will not void the policy.
Further, Philamcare, in believing there was concealment, should have taken the
necessary steps to void the health coverage agreement prior to the filing of the suit by
Julita. Philamcare never gave notice to Julita of the fact that they are voiding the
agreement. Therefore, Philamcare should pay the expenses paid by Julita.
Case 12
MA. LOURDES S. FLORENDO, Petitioner,
vs.
PHILAM PLANS, INC., PERLA ABCEDE MA. CELESTE ABCEDE, Respondents.
FACTS:
Manuel Florendo filed an application for comprehensive pension plan with respondent
Philam Plans, Inc. (Philam Plans) Manuel signed the application and left to Perla the
task of supplying the information needed in the application. Respondent Ma. Celeste
Abcede, Perla’s daughter, signed the application as sales counselor. Philam Plans issued
Pension Plan Agreement to Manuel, with petitioner Ma. Lourdes S. Florendo, his wife,
as beneficiary. In time, Manuel paid his quarterly premiums. Eleven months later,
Manuel died of blood poisoning. Subsequently, Lourdes filed a claim with Philam Plans
for the payment of the benefits under her husband’s plan but Philam Plans declined her
claim prompting her to file the present action against the pension plan company before
the Regional Trial Court (RTC) of Quezon City and ruled in favor of Ma. Lourdes.
However, the Court of Appeals then reversed the RTC decision. Hence this appeal.
ISSUE:
Whether or not Ma. Lourdes could claim benefits as the beneficiary of her husband
under the insurance plan despite consideration that her husband Manuel concealed
the true condition of his health.
RULING:
The Supreme Court answers this to the negative and the AFFIRMED in its entirety the
decision of the Court of Appeals.
The comprehensive pension plan that Philam Plans issued contains a one-year
incontestability period. It states:
VIII. INCONTESTABILITY
After this Agreement has remained in force for one (1) year, we can no longer contest
for health reasons any claim for insurance under this Agreement, except for the reason
that installment has not been paid (lapsed), or that you are not insurable at the time
you bought this pension program by reason of age. If this Agreement lapses but is
reinstated afterwards, the one (1) year contestability period shall start again on the
date of approval of your request for reinstatement.
The above incontestability clause precludes the insurer from disowning liability under
the policy it issued on the ground of concealment or misrepresentation regarding the
health of the insured after a year of its issuance.
Since Manuel died on the eleventh month following the issuance of his plan, the one
year incontestability period has not yet set in. Consequently, Philam Plans was not
barred from questioning Lourdes’ entitlement to the benefits of her husband’s pension
plan.
REPRESENTATION
Case 13 who drafted and accepted the policy and consummated the contract. It seems
reasonable that as between the two of them, the one who employed and gave
Insular Life v. Feliciano - Concealment character to the third person as its agent should be the one to bear the loss. Hence,
Insular is liable to the beneficiaries.
Facts:
> Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of
its agents.

> It appears that during that time, Evaristo was already suffering from tuberculosis.
Such fact appeared during the medical exam, but the examiner and the company’s
agent ignored it.

> After that, Evaristo was made to sign an application form and thereafter the blank
spaces were filled by the medical examiner and the agent making it appear that
Evaristo was a fit subject of insurance. (Evaristo could not read and understand English)

> When Evaristo died, Insular life refused to pay the proceeds because of concealment.

Issue:
Whether or not Insular Life was bound by their agent’s acts.

Held:
Yes.

The insurance business has grown so vast and lucrative within the past century.
Nowadays, even people of modest means enter into insurance contracts. Agents who
solicit contracts are paid large commissions on the policies secured by them. They act
as general representatives of insurance companies.

IN the case at bar, the true state of health of the insured was concealed by the agents
of the insurer. The insurer’s medical examiner approved the application knowing
fully well that the applicant was sick. The situation is one in which of two innocent
parties must bear a loss for his reliance upon a third person. In this case, it is the one