Cha v.

Cha - Insurable Interest 277 SCRA 690 (1997) Facts: > Spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with CKS Development Corporation (CKS), as lessor. > One of the stipulations of the one (1) year lease contract states: "18. . . . The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent and approval of the LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit; . . ." > Notwithstanding the above stipulation, the Cha spouses insured against loss by fire their merchandise inside the leased premises for Five Hundred Thousand (P500,000.00) with the United Insurance without the written consent CKS. > On the day that the lease contract was to expire, fire broke out inside the leased premises. When CKS learned of the insurance earlier procured by the Cha spouses (without its consent), it wrote the United a demand letter asking that the proceeds of the insurance contract (between the Cha spouses and United) be paid directly to CKS, based on its lease contract with the Cha spouses. > United refused to pay CKS, alleging that the latter had no insurable interest. Hence, the latter filed a complaint against the Cha spouses and United. Issue: Whether or not CKS can claim the proceeds of the fire insurance. Held: NO. CKS has no insurable interest. Sec. 18 of the Insurance Code provides: "Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured."

A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs. The basis of such requirement of insurable interest in property insured is based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property.

In the present case, it cannot be denied that CKS has no insurable interest in the goods and merchandise inside the leased premises under the provisions of Section 17 of the Insurance Code which provide: "Section 17. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof."

Therefore, CKS cannot, under the Insurance Code a special law be validly a beneficiary of the fire insurance policy taken by the petitioner-spouses over their merchandise. This insurable interest over said merchandise remains with the insured, the Cha spouses. The automatic assignment of the policy to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha (herein co-petitioners). The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured.

Great Pacific Life vs. CA 316 SCRA 677 (1999)

FACTS: Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life insurance with Development Bank of the Philippines (DBP) wherein Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr. Leuterio answered questions concerning his test, attesting among others that he does not have any heart conditions and that he is in good health to the best of his knowledge.

However, after about a year, Dr. Leuterio died due to massive cerebral hemorrhage. When DBP submitted a death claim to Grepalife, the latter denied the claim, alleging that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim. Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for Specific Performance with Damages. Both the trial court and the Court of Appeals found in favor of the widow and ordered Grepalife to pay DBP. ISSUE:

Whether the CA erred in holding Grepalife liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor

HELD: The rationale of a group of insurance policy of mortgagors, otherwise known as the mortgage redemption insurance, is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death, the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund. Such loss-payable clause does not make the mortgagee a party to the contract. The insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person, such as a mortgagee. And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife.

Harvardian Colleges v. Country Bankers Insurance Corp. 1 CARA 2

Facts: > Harvardian is a family corporation, the stockholders of which are Ildefonso Yap, Virginia King Yap and their children. > Prior to Aug. 9, 1979, an agent of Country Bankers proposed to Harvardian to insure its school building. Although at first reluctant, Harvardian agreed. > Country Banks sent an inspector to inspect the school building and agreed to insure the same for P500,000 for which Harvardian paid an annual premium of P2,500. > On Aug. 9, 1979, Country Bankers issued to Harvardian a fire insurance policy. On March 12, 1980, (39 days before I was born hehehehe )during the effectivity of said insurance policy, the insured property was totally burned rendering it a total loss. > A claim was made by plaintiff upon defendant but defendant denied it contending that plaintiff had no insurable interest over the building constructed on the piece of land in the name of the late Ildefonso Yap as owner. > It was contended that both the lot and the building were owned by Ildefonso Yap and NOT by the Harvardian Colleges. Issue: Whether or not Harvardian colleges has a right to the proceeds. Held: Harvardian has a right to the proceeds. Regardless of the nature of the title of the insured or even if he did not have title to the property insured, the contract of fire insurance should still be upheld if his interest in or his relation to the property is such that he will be benefited in its continued existence or suffer a direct pecuniary loss from its destruction or injury. The test in determining insurable interest in property is whether one will derive pecuniary benefit or advantage from its preservation, or will suffer pecuniary loss or damage from its destruction, termination or injury by the happening of the event insured against. Here Harvardian was not only in possession of the building but was in fact using the same for several years with the knowledge and consent of Ildefonso Yap. It is reasonably fair to assume that had the building not been burned, Harvardian would have been allowed the continued use of the same as the site of its operation as an educational institution. Harvardian therefore would have been directly benefited by the preservation of the property, and certainly suffered a pecuniary loss by its being burned.

Ang Ka Yu v. Phoenix Assurance - Insurable Interest 1 CARA 704 Facts: > Ang Ka Yu had a piece of property in his possession. He insured it with Phoenix. > The property was lost, so Ang Ka Yu sought to claim the proceeds. > Phoenix denied liability on the ground that Ang was not the owner but a mere possessor and as such, had no insurable interest over the property. Issue: Whether or not a mere possessor has insurable interest over the property. Held: Yes. A person having a mere right or possession of property may insure it to its full value and in his own name, even when he is not responsible for its safekeeping. The reason is that even if a person is NOT interested in the safety and preservation of material in his possession because they belong to 3rd parties, said person still has insurable interest, because he stands either to benefit from their continued existence or to be prejudiced by their destruction.

PERFECTION OF CONTRACT

Great Pacific Life Assurance Co. v Court of Appeals 89 SCRA 543April 30, 1979 Facts:Respondent Ngo Hing filed an application with petitioner Great Pacific Life Assurance Company(Pacific Life) for a twenty-year endowment policy in the life of Helen Go, his one year olddaughter. Petitioner Lapulapu D. Mondragon, the branch manager, prepared application formusing the essential data supplied by respondent. The latter paid the annual premium andMondragon retained a portion of it as his commission. The binding deposit receipt was issued torespondent.Mondragon wrote his strong recommendation for the approval of the insurance application.However, Pacific Life disapproved the application since the plan was not available for minorsbelow 7 years old but it can consider the same under another plan. The non-acceptance of theinsurance plan was allegedly not communicated by Mondragon to

respondent. Mondragon againasserted his strong recommendation.Helen Go died of influenza. Thereupon, respondent sought the payment of the proceeds of theinsurance, but having failed in his effort, he filed an action for the recovery of the same. Hencethe case at bar. Issue:Whether or not the insurance contract has been perfected on the ground that a binding receipthas been issued? Held: NO, it was not perfected. The binding deposit receipt is merely an acknowledgement, on behalf of the company, that the latters branch office had received from the applicant the insurancepremium and had accepted the application subject for processing by the insurance company; andthat the latter will either approve or reject the same on the basis of whether or not the applicant isinsurable on standard rates.The binding deposit receipt is merely conditional and does not insure outright. Where anagreement is made between the applicant and the agent, no liability shall attach until the principalapproves the risk and a receipt is given by the agent. The acceptance is merely conditional, andis subordinated to the act of the company in approving or rejecting the application. Thus, in lifeinsurance, a binding slip or binding receipt does not insure by itself. CONSTRUCTION

Vda. De Maglana v. Consolacion 212 SCRA 268 FACTS: Lope Maglana met an accident while driving a motorcycle owned b y B u r e a u o f Customs which resulted to his death. The jeep in which his motorcycle collided was operated ando w n e d b y D e s t r a j o . H i s w i d o w f i l e d a n a c t i o n f o r d a m a g e s against Destrajo and AFISCOInsurance Corporation. The RTC held AFISCO t o b e s e c o n d a r i l y l i a b l e f o r t h e a w a r d e d damages. Petitioner asserted the lower courts decision and provided that the Insurance Codeexpressly provides that the insurers liability is direct and primary and or jointly and severally with the operator of the vehicle. ISSUE: Whether or not the insured is solidarily liable with Destrajo. HELD: No. The liability of the inusred is primary and direct but not solidarily with Destrajo.Where the insurer directly insures liability, the liability accrues immediately upon theconcurrence of the injury or even upon which the liability depends and does not depend on ther e c o v e r y o f t h e j u d g m e n t b y t h e i n j u r e d p a r t y a g a i n s t t h e i n s u r e d , T h e r e f o r e , t h e i n s u r e r s liability is direct and primary, but its liability is only up to the extent of the amount insured

Perla Cia. De Seguros, Inc. v. CA

208 SCRA 487 (1992)
FACTS: Spouses Lim purchased a brand new red Ford Laser car from Supercars, Inc. in a sale by installment secured by a chattel mortgage. The same car is insured with Perla Compania de Seguros (Perla). On the same day, Supercars, Inc. assigned its rights, title and interest to FCP Credit Corporation (FCP). On a later date, the vehicle was carnapped. Spouses Lim filed a claim for loss with Perla but this was denied on the ground that Evelyn Lim, who was using the vehicle before it was carnapped, was in possession of an expired drivers license at the time of the loss, in violation of the authorized driver clause of the insurance policy. ISSUE:

Whether or not Perla is liable despite the alleged violation of the authorized driver clause in the insurance contract

HELD: The Supreme Court held that Perla is liable to pay the insurance claim. The comprehensive motor car insurance policy issued by Perla covered loss or damage to the car: (a) xxx; (b) by fire, external explosion, self-ignition or lightning or burglary, housebreaking or theft; (c) xxx. Where a car is admittedly unlawfully and wrongfully taken without the owners consent or knowledge, such taking constitutes theft, and therefore, it is the THEFT clause, and not the AUTHORIZED DRIVER clause that should apply. The Court of Appeals was correct in holding that: Theft is an entirely different legal concept from that of accident. Theft is committed by a person with the intent to gain or, to put it in another way, with the concurrence of the doers will. On the other hand, accident, although it may proceed or result from negligence, is the happening of an event without the concurrence of the will of the person by whose agency it was caused. (Bouviers Law Dictionary). Clearly, the risk against accident is distinct from the risk against theft. The authorized driver clause in a typical insurance policy is in contemplation or anticipation of accident in the legal

sense in which it should be understood, and not in contemplation or anticipation of an event such as theft. The distinction often seized upon by insurance companies in resisting claims from their assureds between death occurring as a result of accident and death occurring as a result of intent may, by analogy, apply to the case at bar. Thus, if the insured vehicle had figured in an accident at the time she drove it with an expired license, then, appellee Perla Compania could properly resist appellants claim for indemnification for the loss or destruction of the vehicle resulting from the accident. But in the present case, the loss of the insured vehicle did not result from an accident where intent was involved; the loss in the present case was caused by theft, the commission of which was attended by intent. There is no causal connection between the possession of a valid drivers license and the loss of a vehicle. To rule otherwise would render car insurance practically a sham since an insurance company can easily escape liability by citing restrictions which are not applicable or germane to the claim, thereby reducing indemnity to a shadow.