15462122 Insurance Angel Aguinaldo Notes

INSURANCE(ATTY.QUIMSON) 1

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Sec.1.ThisDecreeshallbeknownas"TheInsuranceCode".LAWSGOVERNINGINSURANCE

1. PD14602. Articles2011and2012,CC3. Articles2021to2027,CC4. Article2186CC5. Article43,par.4,50,64FC6. LawsandrelatedactscreatingandgoverningtheSSSandGSIS

CONSTANTINOV.ASIALIFE87PHIL248

FACTS:Twocasesare involved in this case. Asia Life is anAmerican insurance companywhich issued two different insurance policies. On the first policy, after the firstpayment,nofurtherpaymentwasmadebytheinsured.Hediedlateron.Onthesecond policy, premiums were paid, nonetheless, at a certain period, he wasn'tabletocontinuepayment.BothinsurancepolicytransactionswereaffectedbytheJapaneseoccupationwherein theAmerican companywas forced to leave. Now,the beneficiaries are seeking the payment of proceeds minus all sums due forpremiumsinarrears.HELD:Americancasesmaybedividedintothreegroups,accordingastheysupportthesocalledConnecticutRule,theNewYorkRule,ortheUnitedStatesRule.Thefirstholdstheviewthat"therearetwoelementsintheconsiderationforwhichtheannualpremiumispaidFirst,themereprotectionfortheyear,andsecond,the privilege of renewing the contract for each succeeding year by paying thepremium for that year at the time agreed upon. According to this view of thecontract,thepaymentofpremiumsisaconditionprecedent,thenonperformancewouldbeillegalnecessarilydefeatstherighttorenewthecontract."Thesecondrule,apparentlyfollowedbythegreaternumberofdecisions,holdthat"warbetweenstatesinwhichthepartiesresidemerelysuspendsthecontractsofthelifeinsurance,andthat,upontenderofallpremiumsduebytheinsuredorhis

representatives after thewar has terminated, the contract revives and becomesfullyoperative."TheUnitedStates ruledeclares that thecontract isnotmerely suspended,but isabrogatedbyreasonofnonpaymentsispeculiarlyoftheessenceofthecontract.Itadditionallyholdsthatitwouldbeunjusttoallowtheinsurertoretainthereservevalueof thepolicy,which is theexcessof thepremiumspaidover theactual riskcarried during the years when the policy had been in force. This rule wasannounced in the wellknown Statham case which, in the opinion of ProfessorVance,isthecorrectrule.AfterperusingtheInsuranceAct,wearefirmlypersuadedthatthenonpaymentofpremiums is such a vital defense of insurance companies that since the verybeginning, said Act no. 2427 expressly preserved it, by providing that after thepolicyshallhavebeeninforcefortwoyears,itshallbecomeincontestable(i.e.theinsurer shall have no defense) except for fraud, nonpayment of premiums, andmilitary or naval service in time of war (sec. 184 [b], Insurance Act). And whenCongress recently amended this section (Rep.ActNo. 171), thedefenseof fraudwas eliminated, while the defense of nonpayment of premiums was preserved.Thusthefundamentalcharacteroftheundertakingtopaypremiumsandthehighimportanceofthedefenseofnonpaymentthereof,wasspecificallyrecognized.

In keepingwith such legislativepolicy,we feelnohesitation toadopt theUnitedStates Rule,which is in effect a variation of the Connecticut rule for the sake ofequity.Inthisconnection,itappearsthatthefirstpolicyhadnoreservevalue,andthat the equitable values of the second had been practically returned to theinsuredintheformofloanandadvanceforpremium.

INSULARLIFEV.EBRADO80SCRA181

FACTS:Buenaventurasecuredforhimselfalifeinsurancepolicy,namingthereinCarponiaas his revocable beneficiary. Thereafter, hemet his death through an accident.Carponiamoved to receive theproceeds and admitting therein that shewas thecommonlawwifeofinsured.Thetruewidowalsofiledfortheproceeds.HELD:


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Inessence,alifeinsurancepolicyisnodifferentfromacivildonationinsofarasthebeneficiaryisconcerned.Botharefoundeduponthesameconsideration:liberality.Abeneficiary is likeadonee,becausefromthepremiumsofthepolicywhichtheinsuredpaysoutofliberality,thebeneficiarywillreceivetheproceedsorprofitsofsaid insurance.Asaconsequence, theproscription inArticle739of thenewCivilCode should equally operate in life insurance contracts. The mandate of Article2012 cannotbe laid aside: anypersonwho cannot receive adonation cannotbenamedasbeneficiary in the life insurancepolicyof thepersonwhocannotmakethedonation.Policy considerations and dictates of morality rightly justify the institution of abarrierbetweencommonlawspousesinrecordtoPropertyrelationssincesuchhipultimately encroaches upon the nuptial and filial rights of the legitimate familyThereiseveryreasontoholdthatthebarindonationsbetweenlegitimatespousesand thosebetween illegitimateones shouldbeenforced in life insurancepoliciessince the same are based on similar consideration As above pointed out, abeneficiary in a fife insurance policy is no different from a donee. Both arerecipientsofpurebeneficence.Solongasmanageremainsthethresholdoffamilylaws, reason and morality dictate that the impediments imposed upon marriedcouple should likewise be imposed upon extramarital relationship. If legitimaterelationshipiscircumscribedbytheselegaldisabilities,withmorereasonshouldanillicitrelationshipberestrictedbythesedisabilities.INTERPRETATIONOFINSURANCECONTRACTS

Ambiguitiesandobscuritiesshouldbestrictlyconstruedagainstthepartywhocausedthem

QUACHEEGANV.LAWUNION52OG1982

FACTS:Plaintiffsoughttheproceedsofitsfireinsurancewiththecompany.theinsurancecompany denies payment due to many reasonsone, the violation of certainprovisionsofthepolicy.Itallegedthattheclaimantwasguiltyofarsonalso.HELD:Taking into account thewell known rule that ambiguities or obscuritiesmust bestrictly interpretedagaInstthepartythatcausedthem,1the"memoofwarranty"

invoked by appellant bars the latter from questioning the existence of theappliances called for in the insured premises, since its initial expression, "theundernotedappliancesfortheextinctionoffirebeingkeptonthepremisesinsuredhereby,...itisherebywarranted...",admistsofinterpretationasanadmissionoftheexistenceofsuchapplianceswhichappellantcannotnowcontradict,shouldtheparolevidenceruleapply.This rigidapplicationof the ruleonambiguitieshasbecomenecessary inviewofcurrent business practices. The courts cannot ignore that nowadaysmonopolies,cartels and concentrations of capital, endowed with overwhelming economicpower, manage to impose upon parties dealing with them cunningly prepared"agreements"thattheweakerpartymaynotchangeonewhit,hisparticipationinthe "agreement" being reduced to the alternative to take it or leave it" labelledsince Raymond Baloilles" contracts by adherence" (con tracts d'adhesion), incontrast to these entered into by parties bargaining on an equal footing, suchcontracts(ofwhichpoliciesofinsuranceandinternationalbillsofladingareprimeexamples)obviouslycallforgreaterstrictnessandvigilanceonthepartofcourtsofjusticewithaviewtoprotectingtheweakerpartyfromabusesandimposition,andpreventtheirbecomingtrapsfortheunwary.

TYV.FILIPINASCIA.DESEGUROS17SCRA364

FACTS:Tyfiledaclaimagainstseveral insurancecompaniesforcompensationduetotheinjuryheincurredtohislefthand.Hewasamachineoperatorinacompanyandhetookapersonalaccidentinsurancefromseveralcompanies.Inthesaidpolicies,for it to be considered disability, theremust be severance or amputation of theaffectedmember from thebodyof the insured. Whathappened inhis casewasthatduringafire,aheavyobjectcausedhishandtobefractured.HELD:Tycannotclaimtohavebeenmisledbythetermsofthecontract.Theprovisionisclear enough to inform the party entering into the contract that the loss to beconsidered a disability entitled to indemnity must be severance or amputationfromthebodyoftheinsured.

GULFRESORTSV.PHIL.CHARTERINSURANCECORP.


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458SCRA550

FACTS:GulfResortspropertieswaspreviouslyinsuredwithAmericanHomeAssurance.Inthe saidearthquake insurance,whatwerecoveredonlywere thecompanys twoswimmingpools.Thiswasincludedintheearthquakeendorsementclause.WhenthecompanydecidedtobeinsuredinsteadbyPCIC,itorderedthatthesamepolicywithAHACbecopied.Thereafter,anearthquakebrokeout,causingmagnanimousdamage to the properties. After assessment by PCIC, it denied claims of GulfResortsexcept to thosepertaining to the swimmingpoolsas itwasallegedlynotcoveredbytheearthquakeinsuranceclause.HELD:It is basic that all theprovisionsof the insurancepolicy shouldbeexaminedandinterpreted in consonancewitheachother.All itsparts are reflectiveof the trueintent of the parties. The policy cannot be construed piecemeal. Certainstipulationscannotbesegregatedandthenmadetocontrol;neitherdoparticularwords or phrases necessarily determine its character. Petitioner cannot focus ontheearthquakeshockendorsementtotheexclusionoftheotherprovisions.Alltheprovisions and riders, taken and interpreted together, indubitably show theintentionofthepartiestoextendearthquakeshockcoveragetothetwoswimmingpoolsonly.Acarefulexaminationof thepremiumrecapitulationwill showthat it is theclearintent of the parties to extend earthquake shock coverage only to the twoswimmingpools.Section2(1)oftheInsuranceCodedefinesacontractofinsuranceasanagreementwherebyoneundertakesforaconsiderationtoindemnifyanotheragainstloss,damageorliabilityarisingfromanunknownorcontingentevent.Thus,aninsurancecontractexistswherethefollowingelementsconcur:1.Theinsuredhasaninsurableinterest;2.Theinsuredissubjecttoariskoflossbythehappeningofthedesignatedperil;3.Theinsurerassumestherisk;4.Suchassumptionofriskispartofageneralschemetodistributeactuallossesamongalargegroupofpersonsbearingasimilarrisk;and

5.Inconsiderationoftheinsurer'spromise,theinsuredpaysapremium.An insurance premium is the consideration paid an insurer for undertaking toindemnify the insured against a specified peril. In fire, casualty, and marineinsurance,thepremiumpayablebecomesadebtassoonastheriskattaches.Inthesubjectpolicy,nopremiumpaymentsweremadewithregardtoearthquakeshockcoverage,exceptonthetwoswimmingpools.Thereisnomentionofanypremiumpayable for theother resort propertieswith regard to earthquake shock. This isconsistentwith thehistoryofpetitionersprevious insurancepolicies fromAHACAIU.Thereisnoambiguityinthetermsofthecontractanditsriders.Thegeneralrulethat insurance contracts are contracts of adhesion which should be liberallyconstrued in favorof the insuredandstrictlyagainst the insurercompanycannotbeapplied.Sec.2.WheneverusedinthisCode,thefollowingtermsshallhavetherespectivemeanings hereinafter set forth or indicated, unless the context otherwiserequires:(1) A "contract of insurance" is an agreement whereby one undertakes for aconsiderationtoindemnifyanotheragainstloss,damageorliabilityarisingfromanunknownorcontingentevent.Acontractofsuretyshipshallbedeemedtobeaninsurancecontract,withinthemeaningofthisCode,onlyifmadebyasuretywhoorwhich,assuch,isdoinganinsurancebusinessashereinafterprovided.(2) The term "doing an insurance business" or "transacting an insurancebusiness",withinthemeaningofthisCode,shallinclude:(a)makingorproposingtomake,asinsurer,anyinsurancecontract;(b) making or proposing to make, as surety, any contract of suretyship as avocationandnotasmerelyincidentaltoanyotherlegitimatebusinessoractivityofthesurety;


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(c) doing any kind of business, including a reinsurance business, specificallyrecognizedasconstitutingthedoingofaninsurancebusinesswithinthemeaningofthisCode;(d)doingorproposingtodoanybusiness insubstanceequivalenttoanyoftheforegoinginamannerdesignedtoevadetheprovisionsofthisCode.IntheapplicationoftheprovisionsofthisCodethefactthatnoprofitisderivedfrom themaking of insurance contracts, agreements or transactions or that noseparate or direct consideration is received therefore, shall not be deemedconclusive to show that the making thereof does not constitute the doing ortransactingofaninsurancebusiness.(3) As used in this code, the term "Commissioner" means the "InsuranceCommissioner".INSURANCECONTRACT

Agreement whereby one undertakes for a consideration to indemnifyanother against loss, damage, or liability arising from a an unknownorcontingentevent

ELEMENTSOFANINSURANCECONTRACT

1. The insurerpossessesan interestof somekindsusceptibleofpecuniaryestimationinsurableinterest

2. The insurer is subject to the risk of loss through the destruction orimpairmentofthatinterestbythehappeningofdesignatedperils

3. Theinsurerassumestheriskofloss4. Such assumption is part of a general scheme todistribute actual losses

amongalargegroupofpersonsbearingsomewhatsimilarrisks5. As consideration for the insurers promise, the insuredmakes a ratable

contributioncalledapremiumtoaninsurancefundNATUREANDCHARACTERISTICSOFANINSURANCECONTRACT

1. Itisaleatory2. Contractofindemnityfornonlifeinsuranceandacontractofinvestment

forlifeinsurance3. Itisapersonalcontract4. Itisexecutoryandconditionalonthepartoftheinsurer5. Itisoneofperfectgoodfaith

6. ItisacontractofadhesionDOINGANINSURANCEBUSINESS/TRANSACTINGANINSURANCEBUSINESS

1. Makingorproposingtomake,asinsurer,anyinsurancecontract2. Makingorproposingtomake,assurety,anycontractofsuretyshipasa

vocationandnotasincidentaltoanylegitimatebusinessoractivityofthesurety

3. Doinganykindofbusiness includinga reinsurancebusiness, specificallyrecognizedasconstitutingthedoingofaninsurancebusiness

4. DoingorproposingtodoanybusinessinsubstanceequivalenttoanyoftheforegoinginamannerdesignedtoevadetheprovisionsofthisCode

*The fact that no profit is derived from the contract or transaction or that noseparateanddistinctconsiderationisreceivedforsuchcontractortransactionshallnotbedeemedconclusivetoshowthatnoinsurancebusinesswastransacted.

PHILAMLIFEV.ANSALDO234SCRA509

FACTS:Paterno together with other complainants, wrote a lettercomplaint to theInsurance Commissioner with respect to the problems they were undergoing asagents,supervisors,consumersofPhilamlife.Specifyingtheirdemands,theystatedthatPhilamlifesprovisionson feesand charges stated in the contractof agency,etc.bedeclarednullandvoid.HELD:Theinsurancecommissionerhastheauthoritytoregulatetheinsurancebusiness.Nonetheless,thecruxofthecontroversy isacontractofagencyandisnotwithinthemeaningofwhat isdoingan insurancebusiness,Section2of the InsuranceCodecannotbeinvokedtogivejurisdictiontotheInsuranceCommissioner.It also doesn't help to say that Section 416 is applicable to plaintiffs case. Areading of the section shows that the quasijudicial power is limited by law tocomplaints involving loss, damage or liability for which an insurer may beanswerableunderanykindofpolicyorcontractof insurance. Hence, thispowerdoesn'tcovertherelationshipaffectingtheinsurancecompanyanditsagentsbutislimited to adjudicating claims and compliants filed by the insured against theinsurancecompany.


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THECONTRACTOFINSURANCE

Sec. 3. Any contingent or unknown event, whether past or future, whichmaydamnify apersonhavingan insurable interest, or createa liability againsthim,maybeinsuredagainst,subjecttotheprovisionsofthischapter.Theconsentofthehusbandisnotnecessaryforthevalidityofaninsurancepolicytakenoutbyamarriedwomanonherlifeorthatofherchildren.[Any minor of the age of eighteen years or more, may, notwithstanding suchminority, contract for life, health and accident insurance, with any insurancecompany duly authorized to do business in the Philippines, provided theinsurance is takenonhis own life and thebeneficiary appointed is theminor'sestateortheminor'sfather,mother,husband,wife,child,brotherorsister.]Themarriedwomanortheminorhereinallowedtotakeoutaninsurancepolicymayexercisealltherightsandprivilegesofanownerunderapolicy.All rights, title and interest in the policy of insurance taken out by an originalowneronthelifeorhealthofaminorshallautomaticallyvestintheminoruponthedeathoftheoriginalowner,unlessotherwiseprovidedforinthepolicy.WHATMAYBEINSUREDAGAINST

1. Any contingent or unknown event, past or future, which may causedamagetoapersonhavinganinsurableinterest

2. Any contingent or unknown event, past or future, which may cause aliabilityagainstapersoninsured

VALIDITYOFINSURANCEPOLICYTAKENOUTBYAMARRIEDWOMANORMINOR

1. Consentofhusbandnotnecessaryforvalidityof life insuranceonwifeslifeorthatofherchildren

2. Insuredmarriedwoman orminormay exercise rights and privileges ofownerunderalifepolicy

3. All rights, title, interest in the insurancepolicy takenout by an originalowner on the life of the minor automatically vests in the minor upondeathoforiginalownerunlessotherwiseprovidedforinthepolicy

TWOSCENARIOSCONTEMPLATEDINPAR.21. Themarriedwoman takes a life insurance on her own life. When she

dies,theproceedswillgotoherdesignatedbeneficiary.2. Themarriedwomantakesalifeinsuranceonthelifeofherminorchild.

When she dies, as the original owner, all rights and privileges shall bevestedontheminor

RELATEDLAWS

1. Article234FC2. Article1174CC3. Article110FC4. Article1327CC5. Article1390CC

PHILAMCAREV.CA379SCRA356(2002)

FACTS:Ernani Trinos applied for a health care coverage with petitioner and was dulyissuedone.Oneofthequestionsaskedintheapplicationformwaswhetherornothe had history of heart disease, diabetes, cancer, etc.? To this question, heanswered no. Months later after the issuance of the policy, he suffered from aheart attack and was confined in the hospital. His wife tried to claim from thehealth carepolicy but shewasdenied relief. TheMMCallegedly foundout thatlong before he applied for health care policy, he had history already ofhypertension,diabetes, etc. After thedischarge from thehospital, hewas takencareofbyaphysicaltherapist.Lateron,hewasconfinedagainbutduetofinancialdifficulties,hewastakenhome.Afewdaysafter,hedied.Thispromptedthewifetofileacomplaintagainsttheinsurancecompany.HELD:Section2(1)oftheInsuranceCodedefinesacontractofinsuranceasanagreementwhereby one undertakes for a consideration to indemnify another against loss,damage or liability arising from an unknown or contingent event. An insurancecontractexistswherethefollowingelementsconcur:1.Theinsuredhasaninsurableinterest;


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2.Theinsuredissubjecttoariskoflossbythehappeningofthedesignatedperil;3.Theinsurerassumestherisk;4. Suchassumptionof risk is partof a general scheme todistribute actual lossesamongalargegroupofpersonsbearingasimilarrisk;and5.Inconsiderationoftheinsurerspromise,theinsuredpaysapremium.8Section 3 of the Insurance Code states that any contingent or unknown event,whetherpastor future,whichmaydamnifyapersonhavingan insurable interestagainsthim,maybeinsuredagainst.Everypersonhasaninsurableinterestinthelifeandhealthofhimself.Section10provides:Everypersonhasaninsurableinterestinthelifeandhealth:(1)ofhimself,ofhisspouseandofhischildren;(2)ofanypersononwhomhedependswhollyorinpartforeducationorsupport,orinwhomhehasapecuniaryinterest;(3) of any person under a legal obligation to him for the payment of money,respectingpropertyorservice,ofwhichdeathorillnessmightdelayorpreventtheperformance;and(4)ofanypersonuponwhoselifeanyestateorinterestvestedinhimdepends.Inthecaseatbar,theinsurableinterestofrespondentshusbandinobtainingthehealthcareagreementwashisownhealth.Thehealthcareagreementwasinthenatureofnonlife insurance,which isprimarilyacontractof indemnity.Oncethememberincurshospital,medicaloranyotherexpensearisingfromsickness,injuryorotherstipulatedcontingent,thehealthcareprovidermustpayforthesametotheextentagreeduponunderthecontract.Withrespecttothecontentionofpetitionerthatinsuredconcealedamaterialfact,theanswerassailedwasinresponsetoaquestionrelatingtothemedicalhistoryofthe applicant. This relies largely on opinion rather than fact, especially that theapplicantwasnotadoctor.Wheremattersofopinionorjudgmentarecalledfor,

answers in good faith andwithout intent to deceivewill not avoid a policy eventhoughtheywereuntrue.Sec.4.Theprecedingsectiondoesnotauthorizean insurancefororagainstthedrawingofanylottery,orfororagainstanychanceorticketinalotterydrawingaprize.INSURANCEFORORAGAINSTLOTTERYISVOID

A person who purchases an instant sweepstake cannot insure himselfagainstthefailureofhistickettowinaprize

Acontractofinsuranceisacontractofindemnityandnotofsuretyship In a gambling contract, the parties contemplate gain through mere

chance,while in a contract for insurance, the parties seek to distributepossiblelawbyreasonofmischance

Sec.5.Allkindsofinsurancearesubjecttotheprovisionsofthischaptersofarastheprovisionscanapply.APPLICABILITYOFTHISCHAPTER

1. Marineinsurance2. Fire3. Casualty4. Suretyship5. Life6. Otherkindsofinsurance

PARTIESTOTHECONTRACT

Sec.6.Everyperson,partnership,association,orcorporationdulyauthorizedtotransact insurance business as elsewhere provided in this code, may be aninsurer.PARTIESTOANINSURANCECONTRACT

1. The insurerhe is thepartywhoagreesto indemnifyanotheruponthehappeningofaspecifiedcontingency

2. Theinsuredheispartytobeindemnifiedincaseofloss3. The beneficiaryhe is the person who receives the benefits of an

insurancepolicyuponitsmaturity


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WHOMAYBEANINSURER

Everyperson,partnership,association,orcorporationdulyauthorizedtotransactbusinessasprovidedinthiscode

This shall include all individuals, partnerships, associations, orcorporations including governmentowned or controlled corporationsand entities engaged as principals in the insurance business exceptingmutualbenefitassociations

INSURANCECORPORATION

Thoseformedandorganizedo Tosaveanypersonorpersonsorothercorporationsfromloss,

damage, liability, arising from any unknown or future orcontingentevent,or

o Toindemnifyortocompensateanypersonorpersonsorothercorporationsforanysuchloss,damage,orliability,or

o To guarantee the performance of or compliance withcontractualobligationsorthepaymentofdebtsofothers

Sec.7.Anyoneexceptapublicenemymaybeinsured.WHOMAYBEINSURED

1. Anyone2. Exceptapublicenemy

FILIPINASCIADESEGUROSV.HUENEFIELDANDCO.89PHIL54

FACTS:The respondent corporationwas operated by Germans andmajority of its stockwasownedby thesame. Theysecureda firepolicyafterpaying theappropriatepremium. During the Japanese military occupation, the warehouse was burnedand destroyed. Whatever was salvaged from the premises were sold in publicauction and the proceeds were deducted from the total loss. The insurancecompanydidnotindemnifythecorporation,allegingtherewiththattheAmericanshaddeclaredwaragainsttheGermansandthatthecorporationwasbeingrunbythesame.

HELD:The Philippine Insurance Law (ActNo. 2427, as amended,) in section 8, providesthat"anyoneexceptapublicenemymaybe insured." It standstoreasonthataninsurance policy ceases to be allowable as soon as an insured becomes a publicenemy.Inthiscase,therespondentcorporationwasindeedanenemycorporation.Sec. 8. Unless the policy otherwise provides, where a mortgagor of propertyeffectsinsuranceinhisownnameprovidingthatthelossshallbepayabletothemortgagee, or assigns a policy of insurance to a mortgagee, the insurance isdeemed tobeupon the interestof themortgagor,whodoesnot cease tobeapartytotheoriginalcontract,andanyactofhis,prior tothe loss,whichwouldotherwiseavoidtheinsurance,willhavethesameeffect,althoughthepropertyisin the hands of the mortgagee, but any act which, under the contract ofinsurance, is to be performed by the mortgagor, may be performed by themortgagee thereinnamed,with thesameeffectas if ithadbeenperformedbythemortgagor.THREECONTRACTSCONTEMPLATEDINTHEAFOREMENTIONEDPROVISION

1. Loan:creditoranddebtor2. Mortgage: the debtor will be the one to mortgage the property

(mortgagor),infavorofthecreditor(mortgagee)3. Insurance:mortgagorbecomestheinsuredandtheinsurancecompanyis

the insurer (the bank shall be the first to receive the proceeds of theinsurancetotheextentoftheloan)

a. Loss payable clause which in effect says that there is a losspayabletothebankasitsinterestmayappear

WHOMAYINSUREMORTGAGEDPROPERTY

Both the mortgagor and mortgagee have each a separate and distinctinsurable interest in the mortgaged property and that they may takeseparatepolicieswiththesameordifferentinsurancecompanies

EXTENTOFMORTGAGORSANDMORTGAGEESINSURABLEINTEREST

1. Themortgagormayinsurethemortgagedpropertytoitsfullvaluewhilethemortgageecanonlyinsureittotheextentofthedebtsecured

2. Separate insurance covering different insurable interests may beobtainedbythemortgagorandthemortgagee


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INSURANCETAKENBYTHEMORTGAGOR

Amortgagormaytakeaninsurancepayableo Tohimselfo Tothemortgagee

Ifthemortgagortakesinsurancepayabletothemortgagee,orwherethemortgagorassignsthepolicytakenbyhimtothemortgagee,andunlessthepolicyotherwiseprovides,thelegaleffectsare:

o The insurance is still deemed to be upon the interest of themortgagor

o The mortgagor doesn't cease to be a party to the originalcontract

o Any act of the mortgagor, prior to the loss, which wouldotherwiserendertheinsurancenullandvoidstillrendersitnulland void although the property is in the hands of themortgageeandtheproceedsarepayabletothemortgagee

o Any act which, under the contract of insurance, is to beperformed by the mortgagor, may be performed by themortgageewiththesamelegaleffect

o Incaseofloss,themortgageeisentitledtotheproceedsintheextent of the debt secured while the excess will go to themortgagor

o Upontherecoveryofthemortgageetotheextentofhiscredit,hisdebtisextinguishedandthemortgagorisreleasedfromhisindebtedness

INSURANCETAKENBYTHEMORTGAGEE

If the mortgagee insures his own interest in the mortgaged propertywithoutreferencetotherightofthemortgagor,thelegaleffectsare:

o Themortgageeisentitledtotheproceedsofthepolicyincaseoflosstotheextentofhiscredit

o If theproceedsaremore than the total amountof the credit,themortgagorhasnorighttocollectthebalance

o Iftheproceedsareequaltothetotalamountofthecredit,themortgagee can no longer recover the mortgagorsindebtedness, since the insurer is subrogated to themortgageesrights

o Iftheproceedsarelessthanthetotalamountofthecredit,themortgageemaystillrecoverfromthemortgagorthedeficiency

o Upon payment, the insurer is subrogated to the rights of themortgageeagainstthemortgagortotheextentoftheamountpaid.

SANMIGUELV.LAWUNIONROCKINSURANCE40PHIL674

FACTS:San Miguel sought to recover from two insurance policies. It is maintainedhowever that San Miguels only interest in the property insured is that it is amortgagecreditor.ThepropertywasreallyownedbyHardingwhowasincludedasadefendant. Theinsurancecompaniesdon'tdenyliabilitybuttheymaintainthatSan Miguel is only entitled to the amount of the mortgage credit. They alsomaintain that Harding is not entitled to any proceeds in excess of themortgagecreditbecausehewasn'tprivytotheinsurancecontract.HELD:There is no cause of action inHenryHarding against the insurance companies isshow.Heisnotapartytothecontractsofinsuranceandcannotdirectlymaintainan action thereon.His claim ismerely of an equitable and subsidiary nature andmustbemadeeffective, ifatall,throughtheSanMiguelBrewery inwhosenamethecontractsarewritten.NowtheBrewery,asmortgageeoftheinsuredproperty,undoubtedly had an insurable interest therein; but it could not, in any event,recover upon these policies an amount in excess of its mortgage credit. In thisconnectionitwillberememberedthatAntonioBrias,uponmakingapplicationfortheinsurance,informedthecompanywithwhichtheinsurancewasplacedthattheBrewerywasinterestedonlyasamortgagee.Itwould,therefore,beimpossiblefortheBrewerymortgageontheinsuredproperty.This conclusion isnotonlydeducible fromtheprinciplesgoverning theoperationandeffectofinsurancecontractsingeneralbutthepointisclearlycoveredbytheexpressprovisionsofsections16and50oftheInsuranceAct(ActNo.2427).Inthefirstofthesectionscited,itisdeclaredthat"themeasureofaninsurableinterestinproperty is the extent towhich the insuredmight be damnified by loss or injurythereof"(sec.16);whileintheotheritisstatedthat"theinsuranceshallbeappliedexclusively to theproper interestof theperson inwhosename it ismadeunlessotherwisespecifiedinthepolicy"(sec.50).


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Theseprovisionswouldhavebeen fatal toanyattemptat recoveryevenbyD.P.Dunn,iftheownershipofthepropertyhadcontinuedinhimuptothetimeoftheloss;andasregardsHarding,anadditionalinsuperableobstacleisfoundinthefactthattheownershipofthepropertyhadbeencharged,priortotheloss,withoutanycorrespondingchangehavingbeeneffectedinthepolicyofinsurance.Insection19of the InsuranceActwe find it stated that "a changeof interest in anypart of athing insured unaccompanied by a corresponding change of interest in theinsurance,suspendstheinsurancetoanequivalentextent,untiltheinterestinthething and the interest in the insurance are vested in the sameperson." Again insection55itisdeclaredthat"themeretransferofathinginsureddoesnottransferthepolicy,butsuspends ituntil thesamepersonbecomestheownerofboththepolicyandthethinginsured."Undoubtedly these policies of insurancemight have been so framed as to havebeen"payabletotheSaneMiguelBrewery,mortgagee,asitsinterestmayappear,remainder towhomsoever, during the continuance of the risk,may become theownerof the interest insured." (Sec54,ActNo.2427.)Suchaclausewouldhaveproved an intention to insure the entire interest in theproperty, notmerely theinsurable interest of the SanMiguel Brewery, andwould have shown exactly towhom the money, in case of loss, should be paid. But the policies are not sowritten.

GREPALIFEV.CA316SCRA677

FACTS:

1. AcontractofgrouplifeinsurancewasexecutedbetweenpetitionerGreatPacific Life Assurance Corporation (hereinafter Grepalife) andDevelopmentBankofthePhilippines(hereinafterDBP).GrepalifeagreedtoinsurethelivesofeligiblehousingloanmortgagorsofDBP.

2. Leuterio, a physician and a housing debtor of DBP applied formembership inthegrouplife insuranceplan. Inanapplicationform,Dr.Leuterioansweredquestionsconcerninghishealthconditionasfollows:

7.Haveyoueverhad,orconsulted,aphysicianforaheartcondition,highbloodpressure,cancer,diabetes,lung;kidneyorstomachdisorderoranyotherphysicalimpairment?

Answer:No.Ifsogivedetails_____________.8.Areyounow,tothebestofyourknowledge,ingoodhealth?Answer:[x]Yes[]NO.4

3. Grepalife issued Certificate No. B18558, as insurance coverage of Dr.Leuterio, totheextentofhisDBPmortgage indebtednessamountingtoeightysixthousand,twohundred(P86,200.00)pesos.

4. Dr. Leuteriodieddue to "massive cerebralhemorrhage."Consequently,DBP submitted a death claim to Grepalife. Grepalife denied the claimallegingthatDr.Leuteriowasnotphysicallyhealthywhenheappliedforan insurance coverage. Grepalife insisted that Dr. Leuterio did notdisclose he had been suffering from hypertension, which caused hisdeath. Allegedly, such nondisclosure constituted concealment thatjustifiedthedenialoftheclaim.

5. ThewidowofthelateDr.Leuterio,respondentMedardaV.Leuterio,filedacomplaintDuring the trial,Dr.HernandoMejia,who issued thedeathcertificate,was called to testify. Dr.Mejia's findings, based partly fromtheinformationgivenbytherespondentwidow,statedthatDr.Leuteriocomplained of headaches presumably due to high blood pressure. Theinference was not conclusive because Dr. Leuterio was not autopsied,hence,othercauseswerenotruledout.

6. The trial court rendered a decision in favor of respondent widow andagainstGrepalife.

HELD:The rationaleofagroup insurancepolicyofmortgagors,otherwiseknownas the"mortgage redemption insurance," is a device for the protection of both themortgageeandthemortgagor.Onthepartofthemortgagee, ithastoenter intosuch form of contract so that in the event of the unexpected demise of themortgagor during the subsistence of the mortgage contract, the proceeds fromsuch insurance will be applied to the payment of the mortgage debt, therebyrelievingtheheirsofthemortgagorfrompayingtheobligation.7Inasimilarvein,ample protection is given to themortgagor under such a concept so that in theeventofdeath;themortgageobligationwillbeextinguishedbytheapplicationofthe insuranceproceeds to themortgage indebtedness. Consequently,where themortgagorpaysthe insurancepremiumunderthegroupinsurancepolicy,makingthe loss payable to themortgagee, the insurance is on themortgagor's interest,


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and themortgagor continues tobeaparty to the contract. In this typeofpolicyinsurance,themortgageeissimplyanappointeeoftheinsurancefund,suchlosspayableclausedoesnotmakethemortgageeapartytothecontract.Sec.8oftheInsuranceCodeprovides:Unlessthepolicyprovides,whereamortgagorofpropertyeffectsinsuranceinhisownnameprovidingthatthe lossshallbepayabletothemortgagee,orassignsapolicy of insurance to a mortgagee, the insurance is deemed to be upon theinterest of the mortgagor, who does not cease to be a party to the originalcontract, and any act of his, prior to the loss, which would otherwise avoid theinsurance,willhavethesameeffect,althoughtheproperty is inthehandsofthemortgagee,butanyactwhich,underthecontractofinsurance,istobeperformedby themortgagor,maybeperformedby themortgagee thereinnamed,with thesameeffectasifithadbeenperformedbythemortgagor.The insured private respondent did not cede to the mortgagee all his rights orinterests in the insurance, the policy stating that: "In the event of the debtor'sdeathbeforehis indebtednesswith theCreditor [DBP]shallhavebeen fullypaid,anamounttopaytheoutstanding indebtednessshall firstbepaidtothecreditorand the balance of sum assured, if there is any, shall then be paid to thebeneficiary/ies designated by the debtor." When DBP submitted the insuranceclaim against petitioner, the latter denied payment thereof, interposing thedefenseofconcealmentcommittedby the insured.Thereafter,DBPcollected thedebt from the mortgagor and took the necessary action of foreclosure on theresidentiallotofprivaterespondent.And since a policy of insurance upon life or healthmay pass by transfer, will orsuccession to any person,whether he has an insurable interest or not, and suchpersonmay recover itwhatever the insuredmighthave recovered, thewidowofthedecedentDr.Leuteriomayfilethesuitagainsttheinsurer,Grepalife.Sec.9.Ifaninsurerassentstothetransferofaninsurancefromamortgagortoamortgagee, and, at the time of his assent, imposes further obligation on theassignee,makinganewcontractwithhim,theactofthemortgagorcannotaffecttherightsofsaidassignee.TRANSFEROFINSURANCEWITHAPPROVALOFINSURER

Generally, where the mortgagor effects insurance in his own namepayable to themortgagee, or assigns in his policy to amortgagee, themortgagordoesn'tceasetobeapartytotheinsurancecontractandhisactsstillaffectthepolicy

Under this provision, where an insurer assents to the transfer of aninsurance from a mortgagor to a mortgagee, and at the time of hisassent, imposes new obligations to the assignee, a new and distinctconsideration passes from the mortgagee to the insurer and a newcontract is created between them. In this scenario, the mortgagorcannotanymoreaffecttherightsoftheassigneemortgagee.

INSURABLEINTEREST

Sec.10.Everypersonhasaninsurableinterestinthelifeandhealth:(a)Ofhimself,ofhisspouseandofhischildren;(b) Of any person on whom he depends wholly or in part for education orsupport,orinwhomhehasapecuniaryinterest;(c)Ofanypersonundera legalobligationtohimfor thepaymentofmoney,orrespectingpropertyorservices,ofwhichdeathorillnessmightdelayorpreventtheperformance;and(d)Ofanypersonuponwhoselifeanyestateorinterestvestedinhimdepends.iINSURABLEINTEREST

Apersonhas insurable interest in the subjectmatter insuredwherehehassucharelationorconnectionwith,orconcernin,itthathewillderivepecuniary benefit or advantage from its preservation and will sufferpecuniary lossordamage from itsdestruction, termination,or injurybythehappeningoftheeventinsuredagainst

NECESSARYTOVALIDITYOFINSURANCECONTRACT

Insurable interest essential to the validity and enforceability of theinsurancecontract

A policy issued to a person without interest in the subject matter is amerewagerpolicyorcontract


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INLIFEINSURANCE

Insurable interest exists when there is reasonable ground, founded ontherelationsoftheparties,eitherpecuniaryorcontractualorbybloodoraffinity, to expect some kind of benefit or advantage from thecontinuanceofthelifeoftheinsured

INONESOWNLIFE

A person has an unlimited interest in his own lifewhichwill support apolicytakenbyhiminfavorofhimself,hisestate,orinfavorofanotherperson,regardlessofwhetherornotthelatterhasaninsurableinterestprovided,incasethebeneficiaryiswithoutinsurableinterest,thatthereisnobadfaithorfraud

INONESSPOUSESANDCHILDREN

Thelawpresumesthatapersonhasaninsurableinterestinthelifeofhisspouseandhischildren

ThelawmakesnoqualificationBASEDONPECUNIARYINTEREST

Merebloodrelationshipdoesn'tcreateaninsurableinterestinthelifeofanother

The existence of relationship by affinity doesn't constitute insurableinterest

Theabovementionedpersonsmayhaveinsurableinterest ifthereexistspecuniaryinterestbetweenthem

Apersoncanhaveaninsurableinterestwithanyotherpersonorstrangeraslongashehascomepecuniaryinterestinthelatterslife

BASEDONSOMELEGALOBLIGATION

Apersonhasan insurable interest in the lifeofanotherwho isunderalegalobligationtohimforthepaymentofmoney,orrespectingpropertyor services an whose death or illness might delay or prevent theperformanceoftheobligation

Apersonwhohasacommercialorcontractualrelationshipwithanotherhasaninsurableinterestinthelatterifhisdeathwilldelayorpreventtheperformancebythelatterofsomelegalobligationinfavoroftheformer

WHEREESTATEORINTERESTISDEPENDENTONTHELIFEOFTHEINSURED

Everypersonhasaninsurableinterestinthelifeandhealthofanypersonuponwhose life any estate or interest vested in the person taking thepolicydepends

WHENDOESINSURABLEINTERESTMUSTEXIST

Whentheinsurancetakeseffectbutneednotexistafterorwhenthelossoccurs or at the time of the death of the insuredthis is because lifeinsurance is not a contract of indemnity but is meant to give financialsecurityeithertotheinsuredhimselforhisbeneficiaries

COL.C.CASTROV.INSURANCECOMMISSIONERGR55836,FEBRUARY16,1981

FACTS:Col.Castrowastheemployerofthedeceased.Whilethedeceasedwasstillliving,heworked as the family driver of Castro. Castro took a life insurance policy onbehalfofthedeceasedandwhenthelatterdied,Castrotriedtoclaimtheproceedsfromtheinsurancecompany.Thecompanydeniedtheclaim,maintainingthatthepolicytakenwasnullandvoidandthus,Castroisnotentitledtoanyproceeds.Thispositionwassustainedbythecourtandthus,Castroscomplaintwasdismissed.POINTSRAISEDBYPETITIONER:

1. Anemployerhasaninsurableinterestinthelifeofhisemployee2. Insurancecompanycannotdenyliabilityunderthepolicy3. There isno legaleffecton theactof the insurancecompany to remita

refundcheckPOSITION TAKEN BY INSURANCE COMPANY: Castro doesn't have any insurableinterestonthelifeofTerrenal.

AlifeinsurancepolicywastakenforTerrenalbyCastroforaperiodof20yearswhowasonly his driver. Castro failed to establish that hehad alegalclaimoverTerrenalforservicesduringtheperiodof20years.

Mere existence of employeremployee relationship is not enough toestablish insurable interest. The employer should show that hewouldsuffereconomiclossincasetheemployeedies.

AN EXAMPLE WHEREIN THERE IS ECONOMIC LOSS TO THE EMPLOYER IF ANEMPLOYEEISPLACEDINHARMSWAYORDIES


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Employersendshisemployeeabroadtotakepostgraduatestudies.Togetherwithpaying his tuition, the employer pays for the transportation, board and lodging,whilestillcontinuingtopaytheemployeessalary.

LINCOLNNATIONALLIFEV.SANJUANCAGRNO.3458688,MAY27,1971

FACTS:Plaintiffsseektherescissionoffiveinsurancepoliciesofdefendantsonthegroundthat therewas concealment ofmaterial facts and false representations. Lack ofinsurable interestwasalso citedas a ground for rescissionby theplaintiffs. Thedefendantsdeniedtheseallegationshowever.Thetrialcourtadjudgedthecaseinfavoroftheplaintiffs,declaringthepoliciesnullandvoid.HELD:Thefive insurancepolicieswere ineffectwageringorhighlyspeculativecontractsofinsurance,whicharevoidforreasonsofpublicpolicyandnotbeingbasedontheexistenceofinsurableinterestonthepartofappellantLuisParcoonthelifeofSanJuan, the insurance having been brought about and procured through falseaffirmationsorrepresentationsandconcealmentofmaterialpoints.Thespousesdidn'thaveanyinsurableinterestonthelifeofMysteriosoSanJuan,whowas just a farm laborer of the spouses. There is no evidence showing thattherewaseconomiclosstobeincurredbythespousesincaseofdeathofSanJuan.ThebeneficiariesnamedinthepolicieswerenoteventhechildrenofSanJuan.*Note: Insurance companies rescindextrajudicially. They justwrite a letter andthenissueacheck,toaccompanythesame.Theycanonlydothisthoughbeforeaclaimisfiled.Sec.11.Theinsuredshallhavetherighttochangethebeneficiaryhedesignatedinthepolicy,unlesshehasexpresslywaivedthisrightinsaidpolicy.BENEFICIARY,DEFINED

Person,whethernaturalorjuridical,forwhosebenefitthepolicyisissuedandistherecipientoftheproceedsoftheinsurance

LIMITATIONSANDDISQUALIFICATIONS

Apersonmaytakealifeinsuranceonhislifepayabletoanypersoncalleda beneficiary even though said beneficiary is a stranger and has noinsurableinterestintheinsuredslife

However,anypersonwhoisforbiddenfromrecevinganydonationunderArticle739CCcannotbenamedasbeneficiaryofa life insurancepolicybythepersonwhocannotmakeanydonationtohim

WHENNOBENEFICIARYDESIGNATED

Incaseoffailuretodesignateabeneficiaryorwheresuchdesignationisvoid,theproceedsoftheinsurancewillgotheestateoftheinsured

INSULARLIFEV.EBRADOSupra

NARIOV.PHILAMLIFE20SCRA434

FACTS:AlejandraNariotookalifeinsurancepolicyonherlife,designatedherhusbandandson as the irrevocable beneficiaries. She then applied for a loan on said policywhichshewasentitledtoafterthepolicyhasbeeninforceforthreeyears,forthepurpose of using the proceeds to defray the school expenses of her son. Theapplicationboretwicethesignatureofherhusband,oneforbeingan irrevocablebeneficiaryandtwo,forbeingthelegaladministratorofthesonsproperties.Theapplicationwashoweverdeniedasitmaintainedthatitmustalsobeauthorizedbythecourtincompetentguardianshipproceedings.HELD:Theproposedtransactionsinquestionconstituteactsofdispositionoralienationofproperty rights and not merely of management or administration because theyinvolvetheincurringorterminationofthecontractualobligations.It appearing that theminors beneficiarys vested interest or right on the policyexceedsP2000andastherewasnocourtpetitionandbond,theconsentgivenbythe father forand inbehalfof theminorson,withoutcourtauthorization, to thepolicy loan application and the surrender of such policy, was insufficient and


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ineffective,andPhilamlifewas justified indisapprovingtheproposedtransactionsinquestion.Sec.12.The interestofabeneficiary ina life insurancepolicy shallbe forfeitedwhenthebeneficiaryistheprincipal,accomplice,oraccessoryinwillfullybringingaboutthedeathoftheinsured;inwhichevent,thenearestrelativeoftheinsuredshallreceivetheproceedsofsaidinsuranceifnototherwisedisqualified.WHENBENEFICIARYFORFEITSINSURANCEPROCEEDS

Whenthebeneficiaryistheprincipal,accompliceoraccessoryinwillfullybringingaboutthedeathoftheinsured,suchbeneficiaryforfeitstherighttoreceivetheproceedsofthelifeinsurancepolicy

Sec. 13. Every interest in property, whether real or personal, or any relationthereto,or liability in respect thereof,of suchnature thata contemplatedperilmightdirectlydamnifytheinsured,isaninsurableinterest.INSURABLEINTERESTINPROPERTY

Existsas longassuch interest,whetherrealorpersonal,oranyrelationtheretoor liabilitythereof, isofsuchanaturethatacontemplatedperilmightdirectlydamnifytheinsured

Where the interest of the insured in, or his relation to, the property issuchthat,hewillbebenefitedbythecontinuedexistenceorwillsufferadirectpecuniarylossbyitsdestruction,thecontractofinsurancewillbeupheld

HARVARDIANCOLLEGEV.COUNTRYBANKERS1CARA1;83OG(NO.31)

FACTS:Harvardian College is a family corporation owned by spouses Yap and theirchildren. They insured the school building, per advice of an insurance agent.During theeffectivityof thepolicy, the schoolbuildingwas totallyburned. Theytried to claim from the insurance company but theywere denied on the groundthatthebuildingandlanditwasconstructedonwasownedbyIldefonsoYapandnotbyHarvadianColleges.HELD:

Anytitleto,orinterestinproperty,legalorequitable,willsupportacontractoffireinsurance,andevenwhentheinsuredhadnotitlethecontractwillbeupheldifhisinterest,orhisrelationto,thepropertyissuchthathewill,ormaybebenefitedbyits continued existence or suffer a direct pecuniary loss from its destruction orinjury.Theplaintiffinthiscasehaslongbeenusingandpossessingthebuildingforseveralyears with both the consent and knowledge of Ildefonso Yap. As such, it isreasonabletoassumethathadthebuildingnotbeenburned,plaintiffwouldhavebeen allowed the continued use of the same in its operations of an educationalinstitution.

FILIPINOMERCHANTSV.CA179SCRA638

FACTS:A consignee of goods aboard a vessel insured the goods. Due to the damageincurredbythegoodsduringthevoyage,consigneenowseeksproceedsfromtheinsurance company. This led to litigation as the company failed to pay himindemnity.HELD:Contractsof insurancearecontractsof indemnityupon the termsandconditionsspecified in thepolicy. Theagreementhas the forceof lawbetweentheparties.The terms of the policy constitute themeasure of the insurers liability. If suchterms are clear and unambiguous, they must be taken and understood in theirplain,ordinaryandpopularsense.Anent the issue of insurable interest, the consignee had an insurable interest ininsuringthegoods.Inprinciple,anyonehasaninsurableinterestinpropertywhoderives a benefit from its existence or would suffer loss from its destructionwhether he has or has not any title in, lien upon or possession of the property.insurable interest in property may consist in an existing interest, an inchoateinterestfoundedonanexistinginterest,oranexpectancy,coupledwithanexistinginterestinthatoutofwhichtheexpentancyarises.


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Herein,theconsigneehasanexistinginterestinthegoodsinsured.Thisinsurableinterestwasgroundedonavalidcontractofsale.Thiscontractvestedanequitableinterestonthepropertybeingshipped.Sec.14.Aninsurableinterestinpropertymayconsistin:(a)Anexistinginterest;(b)Aninchoateinterestfoundedonanexistinginterest;or(c) An expectancy, coupled with an existing interest in that out of which theexpectancyarises.

LAMPANOV.JOSE30PHIL537

FACTS:Barreto constructed a house for Jose. During the constructionof the house andJoses disposition of the same, Barreto took an insurance policy on the house.Subsequently, Jose sold the house to Lampano and there was still a remainingbalance from the latter. On an unfortunate date however, the house wasdestroyedbyfire.LampanofiledacomplaintagainstBarretoandJose.Sheassertedthattherewasaverbal agreement between her and Jose that upon sale of the house, the latterwoulddeliver the insurancepolicy toher. Shemaintained thatBarretoand Josedon'thaveanyrighttotheinsurancepolicyanymore.Thetrialcourtruled infavorofJosecollectively. First, itruledthatBarretoowedJose thebalancebetweentheproceedsof the insurancepolicyand thepremiumpaidbyhim.Second,itruledthatLampanopaytheremainingbalanceforthesaleofthehousetoJose.HELD:IfBarretohadan insurable interest in thehouse,hecould insurethis interest forhissoleprotection.Thepolicywasinhisnamealone.Itwas,therefore,apersonalcontract between him and the company and not a contract which ran with theproperty.Accordingtothispersonalcontract,theinsurancepolicywaspayableto

theinsuredwithoutregardtotheextentandnatureofhisinterestintheproperty,provided that he had an insurable interest at the time of the making of thecontract,andalsoatthetimeofthefire. Wheredifferentpersonshavedifferentinterestsinthesameproperty,theinsurancetakenbyoneinhisknownrightandinhis own interest doesn't in anyway inure to the benefit of another. This is thegeneralruleprevailingintheUS,andthisisnodifferentfromourownjurisdiction.Acontractofinsurancemadeforinsurersindemnityonly,aswheretherewasnoagreement, express or implied, that it shall be for the benefit of a third person,doesn'tattachtoorrunwiththetitletotheinsuredpropertyonatransferthereofpersonal as between the insurer and insured. In such case, strangers to thecontract cannot acquire in their own right any interest in the insurancemoney,exceptthroughanassignmentorsomecontractwithwhichtheyareconnected.In the case at bar, Barreto assumed the responsibility for the insurance. Thepremiumswerepaidbyhimwithoutanyagreementorrighttorecouptheamountpaidthereforeshouldnolossresulttotheproperty.Itwouldnot,therefore,beinaccordancewithlawandhiscontractualobligationstocompelhimtoaccountforthe insurancemoney, or any part thereof, to the plaintiff, who assumed no riskwhatsoever.That he had insurable interest in the house, there is no question. Barretoconstructedthehouse,furnishedallmaterialsandsupplies,andinsureditafter ithadbeencompleted.Sec. 15.A carrier or depositoryof any kindhas an insurable interest in a thingheld by him as such, to the extent of his liability but not to exceed the valuethereof.

LOPEZV.DELROSARIO44PHIL98

FACTS:Del Rosario was engaged in the business of warehouse keeping. She owned abondedwarehouse,whereinshestoredcopraandothermerchandise.OneofthepeoplewhostoredcoprainherwarehousewasLopez.DelRosarioprocuredmanyinsurancepolicies,coveringthewarehouseandthemerchandiseitstored. Onanunfortunate date however, the warehouse together with majority of the


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merchandise stored in it,was destroyed by fire. Del Rosariowas able to collectfromtheinsurancecompaniestheproceedsoftheinsurancepolicies.Shewasableto satisfy obligations to her clients except Lopez who was running after also tosomemoreproceedsfromthepolicies.HELD:Underanyaspect,DelRosariowouldbeliable.Thelawisthatapolicyeffectedbya bailee and covering by its terms his own property and property held in trust,insures, inaneventofaloss,equallyandproportionatelytothebenefitofalltheownersof theproperty insured. Even ifone secured insurancecoveringhisowngoodsandgoodsstoredwithhim,andeveniftheownerofthestoredgoodsdidn'trequestorknowofthe insurance,anddidnotratify itbeforethepaymentoftheloss, yet it has been held that thewarehouseman is liable to the owner of suchstoredgoodsforhisshare.Lopezs rightwas not forfeited by his failure to pay the interest indicated in thewarehousereceipts. Apreponderanceoftheproofdoesn'tdemonstratethattheplaintiffeverorderedthecancellationoftheinsurancewiththedefendant.Norisitshownthebillswerepresentedtohim,andthatnoticeofanintentiontocanceltheinsurancewasevergiventotheplaintiff.The remaining contention that Lopez cannot claim the benefits of the agencywithoutsharingintheexpensesiswelltaken.DelRosariowasactingashisagentin securing insurance, while he benefits from the amicable adjustment of theinsuranceclaims.Sec.16.Amerecontingentorexpectantinterestinanything,notfoundedonanactualrighttothething,noruponanyvalidcontractforit,isnotinsurable.Sec.17.Themeasureofan insurable interest inproperty istheextenttowhichtheinsuredmightbedamnifiedbylossorinjurythereof.

SANMIGUELV.LAWUNIONROCKINSURANCESupra

HELD:Thatthebrewerycompanyhadaninsurableinterestbutcouldonlyrecoveronthepolicyonlytotheextentofthecreditsecuredbythemortgage.

Sec. 18. No contract or policy of insurance on property shall be enforceableexceptforthebenefitofsomepersonhavinganinsurableinterestinthepropertyinsured.INSURANCE IS UNENFORCEABLE IF TAKEN FOR THE BENEFIT OF SOME PERSONWITHOUTINSURABLEINTEREST

Aninsurancepolicyonpropertyforthebenefitofsomepersonwithoutinsurableinterestinthepropertyinsuredisunenforceable

GARCIAV.HONGKONGFIREANDMARINEINSURANCE45PHIL122

FACTS:Garciawasamerchantwhoownedabazaar. His friendassistedhim in takingafire insurancepolicy forhismerchandise. However, itwas indicated inthepolicythatwhatwasinsuredwasthebuildingwhereitwasstoredinwhichdidn'tshowthe true intent of theparties. Itwas foundout that the insurancepolicywas inEnglish,whichisinalanguagethatGarciawasignorantof.Later,hedecidedtomortgagethe insuredmerchandise to thebank. Hewrotealettertotheinsurancecompany,askingforanindorsementsothathecanproperlymortgagehismerchandise. Inhis letter,hewrote therein thatwhatwas insuredwasthemerchandiseandnotthebuilding.Onarelevantdate,afirebrokeoutandthemerchandisewasdestroyed.HELD:Although the policy was in possession of the bank, the insurance company hadamongitsownrecordsallofthedataandinformationuponwhichthepolicywasissued, as a matter of fact, its agents knew or should have known the kind ofpropertyinsured.In the final analysis, Garcia wanted insurance upon a stock of goods, which heowned,andhereceivedandpaidforapolicyonabuilding,whichhedidn'town,andwhile the policywas in force and effect, both the building and the stock ofmerchandise,werecompletelydestroyedbyfire.Garciasmerchandisewasinthebuildingdescribedinthepolicy.


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Sec. 19. An interest in property insured must exist when the insurance takeseffect,andwhenthe lossoccurs,butnotexist inthemeantime;and interest inthelifeorhealthofapersoninsuredmustexistwhentheinsurancetakeseffect,butneednotexistthereafterorwhenthelossoccurs.TIMEWHENINSURABLEINTERESTMUSTEXIST

1. Property insuranceat time insurance takes place and at time of loss,neednotexistinthemeantime

2. Life insuranceonly at time insurance takes effect, need not existthereafterorwhenlossoccurs

INSURABLEINTERESTINLIFE INSURABLEINTERESTINPROPERTY

UnlimitedExceptonetakenbycreditoronthelifeofthedebtor

Limited to the actual value of theinterestontheproperty

It is sufficient that insurable interestexists at the time the insurance takeseffectbutnotwhenthelossoccurs

Must exist both at the time theinsurance takes effect and at the timeofloss

Expectancyofbenefitmaybesufficientevenifthereisnolegalbasis

The expentancy must be coupled withanexisting legalbasis tobeasufficientinsurableinterest

TAITONGCHUACHEV.INSURANCECOMMISSION158SCRA366

FACTS:Complainantsacquiredacertainbuildingandland.Hethenobtainedaloanfrompetitioner.Hesecuredthisthroughamortgage.Themortgageetheninsuredthelandandbuilding.Thereafter,PalomosecuredtwofireinsurancepoliciesfromtwodifferentcompaniesZenithInsuranceandPhilippineBritishAssuranceCompany.Thebuildingthenonalaterdatewasdestroyedbyfire.Basedonastandardassessmentprogram,theinsurancecompanieswereassessedforthelosstheyshouldpayfor.Only1ofthemdidn'twanttopay.Thispromptedthecomplainanttodemandpaymentfromthemthebalanceoftheclaim.TaiTongthensoughttointervenebutwasdeniedasitdidn'tallegedlyhavecauseofactionasameremortgagee.

HELD:Respondentcompanyisboundbythepolicyitissuedtopetitionerthatwasstillinlegalforceandeffectwhenthefiretranspired.When the firehappened, thepetitioner stillhadan insurable interest in the landand building subject of the insurance. Hewasn't paid yet for the loan obtainedfromhim.Heremainedamortgagee.Andfurthermore,itispresumedthathestillholds credit as he presented the document of credit evincing the loan obtainedfromhim.Sec.20.Exceptinthecasesspecifiedinthenextfoursections,andinthecasesoflife, accident, and health insurance, a change of interest in any part of a thinginsuredunaccompaniedbya corresponding change in interest in the insurance,suspendstheinsurancetoanequivalentextent,untiltheinterestinthethingandtheinterestintheinsurancearevestedinthesameperson.EFFECTOFCHANGEOFINTERESTINSUREDONCONTRACTOFINSURANCE

GeneralruleifnotaccompaniedBYcorrespondingchangeofinterestininsurance, insurance coverage suspended until interest in thing insuredandinterestintheinsurancecontractarevestedinthesameperson

Exceptionso Life,accident,andhealthinsuranceo Changeofinterestinthinginsuredafteroccurrenceoflosso Changeofinterestinthingsseparatelyinsuredo Transferofinterestbywillorsuccessionupondeathofinsuredo Transfer of interest by one of the partners joint owners, or

commonownersjointlyinsured,totheotherso An insurance policy framed to inure to the benefit of

whomsoeverbecomestheownerofthethinginsured

BACHRACHV.BRITISHAMERICANASSURANCECO.17PHIL555

FACTS:Bachrachsought to recover theproceedsofanearlier taken fire insurancepolicyfrom defendant. As a matter of defense, the defendant raised that first,complainantmaintainedapaintandvarnishshopinthebuilding.Second,thathe


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hadtransferredhisinsurableinterestbyconveyingtheinsurancepolicytoanotherto secure certain debts due. Third, preceding immediately the fire, he willfullystoredthegasolinebarrelinsidethebuilding.Plaintiffdeniedthis.Hemaintainedthathehasbeenacquittedofthechargesofarsonearlieronandthathewasabletoprovelossduetothefire.HELD:With reference to the second assigned error, defendant contended that theexecution of the chattel mortgage without the knowledge and consent of theinsurance company annulled the insurance policy. However, upon reading thepolicy, there was no provision prohibiting the plaintiff from placing a mortgageoverthepropertyinsurance.Andeveniftherewasanintendedalienationclause,it is to be noted thatmere execution of a chattel mortgage and that alienationwithin themeaning of the insurance law until themortgagee acquires a right totakepossessionbydefaultunderthetermsofthemortgager. Norightisclaimedtohaveaccruedinthiscase.Sec.21.Achangeininterestinathinginsured,aftertheoccurrenceofaninjurywhichresults ina loss,doesnotaffect therightof the insuredto indemnity fortheloss.Sec. 22. A change of interest in one ormore several distinct things, separatelyinsuredbyonepolicy,doesnotavoidtheinsuranceastotheothers.Sec.23.Achangeoninterest,bywillorsuccession,onthedeathoftheinsured,does not avoid an insurance; and his interest in the insurance passes to thepersontakinghisinterestinthethinginsured.DEATHOFINSUREDDOESN'TAVOIDTHEINSURANCEONPROPERTY

An insurancepolicy onproperty takenby the insuredwhodies doesn'taffect the property except that his interest passes to his heir or legalrepresentative

Theheirorlegalrepresentativemaycontinuetheinsurancepolicyontheproperty of the decedent by paying the premiums thereof and willreceivetheproceedsoftheinsuranceincaselossoccurs

Sec.24.Atransferofinterestbyoneofseveralpartners,jointowners,orownersincommon,whoare jointly insured, totheothers,doesnotavoidan insurance

eventhoughithasbeenagreedthattheinsuranceshallceaseuponanalienationofthethinginsured.Sec.25.Everystipulationinapolicyofinsuranceforthepaymentoflosswhetherthepersoninsuredhasorhasnotanyinterestinthepropertyinsured,orthatthepolicy shall be receivedasproofof such interest, andeverypolicyexecutedbywayofgamingorwagering,isvoid.VOIDSTIPULATIONSINPROPERTYINSURANCE

1. Thefollowingstipulationsinacontractarevoida. Stipulationforthepaymentoflosswhetherthepersoninsured

hasorhasnointerestinthepropertyinsuredb. Stipulation that the policy shall be received as proof of such

interest2. Everypolicyexecutedbywayofgainingorwageringislikewisevoid

CHAV.CA277SCRA690

FACTS:Petitionerspouses Nilo Cha and Stella UyCha, as lessees, entered into a leasecontractwithprivaterespondentCKS.Oneoftheconditionsoftheleasewasthatthe lessee wouldn't take any insurance policy on any chattels or merchandiseplaced in the stalls, etc. without first obtaining the consent of the lessor.Notwithstanding this agreement, the spouses insured their merchandise. Daysbeforetheexpirationofthelease,afirebrokeoutanddestroyedthegoods.CKSuponknowingoftheinsurancepolicy,soughttheproceedsofthesame.HELD:Sec.18oftheInsuranceCodeprovides:Sec.18.Nocontractorpolicyofinsuranceonpropertyshallbeenforceableexceptforthebenefitofsomepersonhavinganinsurableinterestinthepropertyinsured.A nonlife insurance policy such as the fire insurance policy taken by petitionerspouses over their merchandise is primarily a contract of indemnity. Insurableinterest in theproperty insuredmustexistat the time the insurance takeseffectand at the time the loss occurs. 4 The basis of such requirement of insurable


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interest inproperty insured isbasedon soundpublicpolicy: toprevent apersonfrom takingout an insurancepolicyonpropertyuponwhichhehasno insurableinterestandcollectingtheproceedsofsaidpolicyincaseoflossoftheproperty.Insuchacase,thecontractofinsuranceisamerewagerwhichisvoidunderSection25oftheInsuranceCode,whichprovides:Sec.25.EverystipulationinapolicyofInsuranceforthepaymentofloss,whetherthepersoninsuredhasorhasnotanyinterestinthepropertyinsured,orthatthepolicyshallbereceivedasproofofsuchinterest,andeverypolicyexecutedbywayofgamingorwagering,isvoid.In thepresentcase, itcannotbedeniedthatCKShasno insurable interest in thegoodsandmerchandiseinsidetheleasedpremisesundertheprovisionsofSection17oftheInsuranceCodewhichprovide:Sec.17.Themeasureofaninsurableinterestinpropertyistheextenttowhichtheinsuredmightbedamnifiedbylossofinjurythereof.Therefore, respondent CKS cannot, under the Insurance Code, a special law, bevalidly a beneficiary of the fire insurance policy taken by the petitionerspousesovertheirmerchandise.Thisinsurableinterestoversaidmerchandiseremainswiththeinsured,theChaspouses.TheautomaticassignmentofthepolicytoCKSundertheprovisionofthe leasecontractpreviouslyquotedisvoidforbeingcontrarytolawand/orpublicpolicy. Theproceedsof the fire insurancepolicy thus rightfullybelong to the spouses Nilo Cha and Stella UyCha (herein copetitioners). Theinsurer (United) cannot be compelled to pay the proceeds of the fire insurancepolicytoaperson(CKS)whohasnoinsurableinterestinthepropertyinsured.

CONCEALMENT

Sec. 26. A neglect to communicate that which a party knows and ought tocommunicate,iscalledaconcealment.PROVISIONSONCONCEALMENT

Theprovisionsonconcealment,representation,andwarrantiesarebasedononeofthefundamentalcharacteristicsofaninsurancecontractthatitbeofperfectgoodfaithonthepartofbothparties

CONCEALMENT Neglect to communicate that which a party knows or ought to

communicate,whetherintentionalorunintentionalWHENITEXISTS

Concealmentexistswheretheassuredhadknowledgeofafactmaterialto the risk, and honesty, good faith, and fair dealing requires that heshouldcommunicateittotheassurer,buthedesignedlyandintentionallywithholdsthesame

Sec.27.Aconcealmentwhetherintentionalorunintentionalentitlestheinjuredpartytorescindacontractofinsurance.(AsamendedbyBatasangPambansaBlg.874)

ARGENTEV.WESTCOASTLIFE51PHIL725

FACTS:BernardoArgentesignedanapplicationforjointinsurancewithhiswifeinthesumof P2,000. The wife, Vicenta de Ocampo, signed a like application for the samepolicy.Bothapplications,withtheexceptionofthenamesandthesignaturesoftheapplicants,werewrittenbyJoseGeronimodelRosario,anagentfortheWestCoastLife Insurance Co. But all the information contained in the applications wasfurnished the agent by Bernardo Argente. The spouses were then medicallyexamined by the doctor. All information was written by the doctor with somebeingfurnishedbyBernardo.Thespousesthenaskedfortheincreaseoftheamountcoveredbythepolicy.Theywereissuedatemporaryinsurancepolicyandthepermanentonewasn'tdelivereduntil the first payment of premium of the spouses. Days after, Vicenta died ofcerebralapoplexy.Bernardosoughttheproceedsbutwasdeniedonthegroundofconcealment.The court found from the evidence that the representations made by BernardoArgenteandhiswifeintheirapplicationstothedefendantforlifeinsurancewerefalsewithrespecttotheirestateofhealthduringtheperiodoffiveyearsprecedingthe date of such applications, and that they knew the representationsmade bythem in their applicationswere false. The court further found from theevidence


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thattheanswersgivenbyBernardoArgenteandhiswifeatthetimeofthemedicalexaminationbyDoctor Sta.Anawere falsewith respect to the conditionof theirhealthatthattimeandforaperiodofseveralyearspriorthereto.Basedonthesefindings which must here be accepted since the stenographic transcript isincomplete,thequestionarisesastotheestateofthelawinrelationthereto.HELD:OnegroundfortherescissionofacontractofinsuranceundertheInsuranceActis"aconcealment,"whichinsection25isdefinedas"Aneglecttocommunicatethatwhichapartyknowsandoughttocommunicate."Inanactiononalifeinsurancepolicywheretheevidenceconclusivelyshowsthattheanswers toquestionsconcerningdiseaseswereuntrue, the truthof falsityofthe answers become the determining factor. In the policy was procured byfraudulentrepresentations, thecontractof insuranceapparentlyset forththereinwas never legally existent. It can fairly be assumed that had the true facts beendisclosedbytheassured,theinsurancewouldneverhavebeengranted.Concealmentexistswheretheassuredhasknowledgeofafactmaterialtotherisk,andhonesty,goodfaith,andfairdealingrequiresthatheshouldcommunicateittotheassured,buthedesignatedandintentionallywithholdsthesame.Another rule is that if the assured undertakes to state all the circumstancesaffectingtherisk,afullandfairstatementofallisrequired.Thebasisoftherulevitiatingthecontractincaseofconcealmentisthatitmisleadsor deceives the insurer into accepting the risk, or accepting it at the rate ofpremium agreed upon. The insurer, relying upon the belief that the assuredwilldiscloseeverymaterialwithinhisactualorpresumedknowledge, ismisled intoabeliefthatthecircumstancewithhelddoesnotexist,andheistherebyinducedtoestimate the riskupona falsebasis that itdoesnotexist.Theprincipalquestion,therefore,must be,Was the assurermisled or deceived into entering a contractobligation or in fixing the premium of insurance by a withholding of materialinformationoffactswithintheassured'sknowledgeorpresumedknowledge?It therefore follows that the assurer in assuming a risk is entitled to knoweverymaterialfactofwhichtheassuredhasexclusiveorpeculiarknowledge,aswellasallmaterialfactswhichdirectlytendtoincreasethehazardorriskwhichareknownbytheassured,orwhichoughttobeorarepresumedtobeknownbyhim.Anda

concealmentofsuchfactsvitiatesthepolicy."Itdoesnotseemtobenecessary...that the . . . suppressionof the truth shouldhavebeenwillful." If itwerebutaninadvertent omission, yet if itwerematerial to the risk and such as the plaintiffshouldhaveknowntobeso, itwouldrenderthepolicyvoid.But it isheldthat ifuntrue or false answers are given in response to inquiries and they relate tomaterial facts the policy is avoidedwithout regard to the knowledge or fraud ofassured,althoughunderthestatutestatementsarerepresentationswhichmustbefraudulenttoavoidthepolicy.Soundercertaincodesthe important inquiriesarewhethertheconcealmentwaswillfulandrelatedtoamattermaterialtotherisk.

SATURNINOV.PHILAMLIFE7SCRA316

FACTS:Itappearsthattwomonthspriortotheissuanceofthepolicytoher,Saturninowasoperatedon for cancer, involvingcomplete removalof the rightbreast, includingthepectoralmuscles and the glands found in the right armpit. She stayed in thehospital for a period of eight days, after which she was discharged, althoughaccording to the surgeon who operated on her she could not be considereddefinitelycured,herailmentbeingofthemalignanttype.Notwithstanding the fact of her operation EstefaniaA. Saturninodid notmake adisclosure thereof in her application for insurance. On the contrary, she statedthereinthatshedidnothave,norhadsheeverhad,amongotherailmentslistedintheapplication,cancerorothertumors;thatshehadnotconsultedanyphysician,undergone any operation or suffered any injury within the preceding five years;and that she had never been treated for nor did she ever have any illness ordisease peculiar to her sex, particularly of the breast, ovaries, uterus, andmenstrual disorders. The application also recites that the foregoing declarationsconstituted"afurtherbasisfortheissuanceofthepolicy."Thepolicy suedupon isone for20yearendowmentnonmedical insurance. Thiskind of policy dispenses with the medical examination of the applicant usuallyrequiredinordinarylifepolicies.However,detailedinformationiscalledforintheapplication concerning the applicant's health and medical history. The writtenapplication in this casewas submittedbySaturninoand thepolicywas issuedonthesameday,uponpaymentofthefirstyear'spremium.Onalaterdate,Saturninodiedofpneumonia,secondarytoinfluenza.Appellantshere,whoarehersurviving


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husbandandminorchild,respectively,demandedpaymentofthefacevalueofthepolicy.Theclaimwasrejectedandthissuitwassubsequentlyinstituted.HELD:The question at issue is whether or not the insured made such falserepresentations ofmaterial facts as to avoid thepolicy. There canbenodisputethat the information given by her in her application for insurance was false,namely, that she hadnever had cancer or tumors, or consulted any physician orundergoneanyoperationwithin theprecedingperiodof fiveyears.Are the factsthen falsely representedmaterial? The Insurance Law (Section 30) provides that"materiality istobedeterminednotbytheevent,butsolelybytheprobableandreasonable influence of the facts upon the party towhom the communication isdue,informinghisestimateoftheproposedcontract,orinmakinghisinquiries."Itseems to be the contention of appellants that the facts subject of therepresentation were not material in view of the "nonmedical" nature of theinsurance applied for, which does away with the usual requirement of medicalexamination before the policy is issued. The contention is without merit. Ifanything, the waiver of medical examination renders even more material theinformationrequiredoftheapplicantconcerningpreviousconditionofhealthanddiseasessuffered,forsuchinformationnecessarilyconstitutesanimportantfactorwhichthe insurertakes intoconsideration indecidingwhetherto issuethepolicyor not. It is logical to assume that if appellee had beenproperly apprised of theinsured'smedicalhistoryshewouldat leasthavebeenmadetoundergomedicalexaminationinordertodetermineherinsurability.

INSULARLIFEV.FELICIANO74PHIL468

FACTS:Evaristo Feliciano, was sufferingwith advanced pulmonary tuberculosis when hesignedhisapplicationsforinsurancewiththepetitioner.OnthatsamedateDoctorTrepp, who had taken Xray pictures of his lungs, informed the respondent Dr.Serafin D. Feliciano, brother of Evaristo, that the latter "was already in a veryseriousadpracticallyhopelesscondition."Neverthelessthequestioncontained inthe application "Have you ever suffered from any ailment or disease of thelungs,pleurisy,pneumoniaorasthma?"appearstohavebeenanswered,"No"And above the signature of the applicant, following the answers to the variousquestionspropoundedtohim,isthefollowingprintedstatement:1awphil.net

Ideclareonbehalfofmyselfandofanypersonwhoshallhaveorclaimanyinterestin any policy issued hereunder, that each of the above answers is full, completeandtrue,andthattothebestofmyknowledgeandbeliefIamapropersubjectforlifeinsurance.(ExhibitK.)The false answer above referred to, as well as the others, was written by theCompany's soliciting agent Romulo M. David, in collusion with the medicalexaminerDr.GregorioValdez,forthepurposeofsecuringtheCompany'sapprovaloftheapplicationsothatthepolicytobeissuedthereonmightbecreditedtosaidagentinconnectionwiththeinterprovincialcontestwhichtheCompanywasthenholding among its soliciting agents to boost the sales of its policies. AgentDavidbribedMedicalExaminerValdezwithmoneywhichtheformerborrowedfromtheapplicant'smotherbywayofadvancedpaymentonthepremium,accordingtothefinding of the Court of Appeals. Said court also found that before the insuredsignedtheapplicationhe,aswellasthemembersofhisfamily,toldtheagentandthemedicalexaminerthathehadbeensickandcoughingforsometimeandthathe had gone three times to the Santol Sanatorium and had Xray pictures of hislungs taken; but that in spite of such information the agent and the medicalexaminertoldthemthattheapplicantwasafitsubjectforinsurance.HELD:WhenEvaristoFeliciano,theapplicantforinsurance,signedtheapplicationinblankand authorized the soliciting agent and/ormedical examiner of the Company towritetheanswersforhim,hemadethemhisownagentsforthatpurpose,andhewas responsible for theiracts in that connection. If they falsified theanswers forhim,hecouldnotevadetheresponsibilityforhefalsification.Hewasnotsupposedtosigntheapplicationinblank.Heknewthattheanswerstothequestionsthereincontained would be "the basis of the policy," and for that every reason he wasrequiredwithhissignaturetovouchfortruththereof.Moreover, from the facts of the casewe cannot escape the conclusion that theinsuredactedinconnivancewiththesolicitingagentandthemedicalexaminerofthe Company in accepting the policies in question. Above the signature of theapplicantistheprintedstatementorrepresentation:"...Iamapropersubjectforlife insurance." In another sheet of the same application and above anothersignature of the applicant was also printed this statement: "That the said policyshallnot takeeffectuntilhe firstpremiumhasbeenpaidand thepolicyasbeendeliveredtoandacceptedbyme,whileIamingoodhealth."Whentheapplicant


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signedtheapplicationhewas"havingdifficulty inbreathing, . . .withaveryhighfever."Hehadgonethreetimesto theSantolSanatoriumandhadXraypicturestaken of his lungs. He therefore knew that hewas not "a proper subject for lifeinsurance."Whenheacceptedthepolicy,heknewthathewasnotingoodhealth.Nevertheless,henotonlyacceptedthefirstpolicyofP20,000butthenandthereappliedforandlateracceptedanotherpolicyofP5,000.It is unbelievable that the insured did not take the trouble to read the answerscontainedinthephotostaticcopyoftheapplicationattachedtoandmadeapartofthe policy before he accepted it and paid the premium thereon. He must havenotice that the answers to the questions therein asked concerning his clinicalhistorywerefalse,andyetheacceptedthefirstpolicyandappliedforanother.Sec.28.Eachpartytoacontractofinsurancemustcommunicatedtotheother,ingoodfaith,allfactswithinhisknowledgewhicharematerialtothecontractandas towhich hemakes nowarranty, andwhich the other has not themeans ofascertaining.FACTSTOBECOMMUNICATED:REQUISITES

Each party to an insurance contractmust communicate to the other ingoodfaith

o Whicharewithinhisknowledgeo Whicharematerialtothecontracto Whichtheotherpartyhasnotthemeansofascertainingo Astowhichthepartywiththedutytocommunicatemakesno

warrantyMUSTBEWITHINPARTYSKNOWLEDGE

Concealment requires knowledge of the fact concealed by the partychargedwithconcealment

ThismustbeprovenbythepartyclaimingtheconcealmentMUSTBEMATERIALTOTHECONTRACT

Ifthefactconcealedisofsuchnaturethathadtheinsurerknownofit,itwouldn't have accepted the risk or would have demanded a higherpremium,orcouldhavelaiddowndifferentterms,oratleastwouldhavemadefurtherinquiriesbeforeassumingtherisk

NOMEANSOFASCERTAINMENTBYTHEOTHERPARTY

Ifsuchotherpartyhasmeansofascertainingthenondisclosedfact likepubliceventsunderSection32orwhenthe insurerhadeverymeanstoascertain the nondisclosed fact the other facts already communicatedbutneglectstomakeinquiries,therightofinformationisdeemedwaivedunderSection33

FIELDMANSINSURANCEV.SONGCO25SCRA70

FACTS:HELD:Sec. 29.An intentional and fraudulentomission, on thepartof one insured, tocommunicateinformationofmattersprovingortendingtoprovethefalsityofawarranty,entitlestheinsurertorescind.FACTS WHICH PROVE OR TEND TO PROVE FALSITY OF WARRANTY TO BEDISCLOSED

Although facts or matters concerning which the insured has made awarrantyneednottobedisclosed,thefactswhichproveortendtoproveafalsityofthewarrantmustbecommunicatedordisclosed

Anintentionalandfraudulentomissiontocommunicatesaidfactswhichprovesortendstoprovethefalsityofthewarrantyentitlestheinsurertorescind

Sec. 30. Neither party to a contract of insurance is bound to communicateinformation of thematters following, except in answer to the inquiries of theother:(a)Thosewhichtheotherknows;(b)Thosewhich,intheexerciseofordinarycare,theotheroughttoknow,andofwhichtheformerhasnoreasontosupposehimignorant;(c)Thoseofwhichtheotherwaivescommunication;


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(d) Those which prove or tend to prove the existence of a risk excluded by awarranty,andwhicharenototherwisematerial;and(e) Those which relate to a risk excepted from the policy and which are nototherwisematerial.Sec. 31. Materiality is to be determined not by the event, but solely by theprobable and reasonable influence of the facts upon the party to whom thecommunication is due, in forming his estimate of the disadvantages of theproposedcontract,orinmakinghisinquiries.TESTOFMATERIALITY

Materiality is determined not by the event but by the probable orreasonable influence of the facts on the judgment of the parties inenteringintoaninsurancecontract

SUNLIFEV.COURTOFAPPEALS245SCRA268

FACTS:Bacanitookan insurancepolicyonhis life. Hewas issuedPolicyNo.3903766Xvalued at P100,000.00, with double indemnity in case of accidental death. Thedesignatedbeneficiarywashismother,respondentBernardaBacani.InsuredBacanidiedonaplanecrashandhismothersoughttocollecttheproceedsofthepolicybutwasdeniedonallegedconcealmentdonebyherson. Petitionerdiscovered that two weeks prior to insureds application for insurance, he wasdiagnosedwithrenalfailureandwassubjecttodialysis,etc.HELD:Section 26 of The Insurance Code is explicit in requiring a party to a contract ofinsurancetocommunicatetotheother,ingoodfaith,allfactswithinhisknowledgewhich arematerial to the contract and as to which hemakes no warranty, andwhichtheotherhasnomeansofascertaining.SaidSectionprovides:Aneglecttocommunicatethatwhichapartyknowsandoughttocommunicate,iscalledconcealment.

Materiality is tobedeterminednotby theevent,but solelyby theprobableandreasonableinfluenceofthefactsuponthepartytowhomcommunicationisdue,informinghisestimateof thedisadvantagesof theproposedcontractor inmakinghisinquiries(TheInsuranceCode,Sec.31).Thetermsofthecontractareclear.Theinsuredisspecificallyrequiredtodisclosetotheinsurermattersrelatingtohishealth.Theinformationwhichtheinsuredfailedtodisclosewerematerialandrelevanttothe approval and issuance of the insurance policy. Thematters concealedwouldhavedefinitelyaffectedpetitioner'sactiononhisapplication,eitherbyapprovingitwith the corresponding adjustment for a higher premium or rejecting the same.Moreover,adisclosuremayhavewarrantedamedicalexaminationoftheinsuredbypetitionerinorderforittoreasonablyassesstheriskinvolvedinacceptingtheapplication.Anentthefindingthatthefactsconcealedhadnobearingtothecauseofdeathofthe insured, it iswell settledthat the insuredneednotdieof thediseasehehadfailed todisclose to the insurer. It is sufficient that his nondisclosuremisled theinsurerinforminghisestimatesoftherisksoftheproposedinsurancepolicyorinmakinginquiries.Sec. 32. Eachparty to a contractof insurance is bound to knowall the generalcauseswhichareopentohis inquiry,equallywith thatof theother,andwhichmayaffectthepoliticalormaterialperilscontemplated;andallgeneralusagesoftrade.CONSTRUCTIVE NOTICE TO BOTH PARTIES OF ALL GENERAL CAUSES ANDGENERALUSAGESOFTRADE

1. Theinsuredneednotdisclosepubliceventssuchasthatofanationisatwar,orthelawsandpoliticalconditionsinothercountries

2. He likewiseneednot communicate thegeneralusagesof trade like thecustomspertainingtomaritimematters

Sec.33.Therightto informationofmaterial factsmaybewaived,eitherbythetermsoftheinsuranceorbyneglecttomakeinquiryastosuchfacts,wheretheyaredistinctlyimpliedinotherfactsofwhichinformationiscommunicated.WAIVEROFDISCLOSUREOFMATERIALFACTS


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Apartyisnotboundtodisclosematerialfactsthedisclosureofwhichiswaived

o Expresslybythetermsofthecontracto Impliedly,byneglecttomakeinquiriesonsuchfactswhichcan

bedistinctlyimpliedintheotherfactsalreadycommunicated

NGGANZEEV.ASIANCRUSADER122SCRA461

FACTS:KwongNamappliedfora20yearendowmentinsuranceonhislifeforthesumofP20,000.00,withhiswife,appelleeNgGanZeeasbeneficiary.Onthesamedate,appellant,upon receiptof the requiredpremium fromthe insured,approved theapplication and issued the correspondingpolicy. After a yearor so, KwongNamdiedofcanceroftheliverwithmetastatis. Hiswifesoughttheproceedsbutwasdeniedherclaimonallegedconcealmentofherhusbandofanyknownillness.HELD:Section27oftheInsuranceLaw[Act2427]provides:Sec.27.Suchpartyacontractofinsurancemustcommunicatetotheother,ingoodfaith,allfactswithinhisknowledgewhicharematerialtothecontract,andwhichthe other has not the means of ascertaining, and as to which he makes nowarranty.Thus,"concealmentexistswheretheassuredhadknowledgeofafactmaterialtothe risk, and honesty, good faith, and fair dealing requires that he shouldcommunicate it to theassurer,buthedesignedlyand intentionallywithholds thesame."Ithasalsobeenheld"that theconcealmentmust, in theabsenceof inquiries,benot only material, but fraudulent, or the fact must have been intentionallywithheld."Assumingthattheaforesaidanswergivenbytheinsuredisfalse,asclaimedbytheappellant.Sec.27oftheInsuranceLaw,abovequoted,neverthelessrequiresthatfraudulentintentonthepartoftheinsuredbeestablishedtoentitletheinsurertorescind the contract. And as correctly observed by the lower court,

"misrepresentationasadefenseof the insurer toavoid liability isan 'affirmative'defense. The duty to establish such a defense by satisfactory and convincingevidencerestsuponthedefendant.TheevidencebeforetheCourtdoesnotclearlyandsatisfactorilyestablishthatdefense."ItbearsemphasisthatKwongNamhadinformedtheappellant'smedicalexaminerthat the tumor forwhich hewas operated onwas "associatedwith ulcer of thestomach." In the absence of evidence that the insured had sufficient medicalknowledgeastoenablehimtodistinguishbetween"pepticulcer"and"atumor",hisstatementthatsaidtumorwas"associatedwithulcerofthestomach,"shouldbeconstruedasanexpressionmadeingoodfaithofhisbeliefastothenatureofhisailmentandoperation.Indeed,suchstatementmustbepresumedtohavebeenmade by himwithout knowledge of its incorrectness andwithout any deliberateintentonhisparttomisleadtheappellant.While it may be conceded that, from the viewpoint of a medical expert, theinformationcommunicatedwasimperfect,thesamewasneverthelesssufficienttohaveinducedappellanttomakefurtherinquiriesabouttheailmentandoperationoftheinsured.Section32ofInsuranceLaw[ActNo.24271providesasfollows:Section32.Therightto informationofmaterial factsmaybewaivedeitherbythetermsofinsuranceorbyneglecttomakeinquiriesastosuchfactswheretheyaredistinctlyimpliedinotherfactsofwhichinformationiscommunicated.Ithasbeenheldthatwhere,uponthefaceoftheapplication,aquestionappearstobe not answered at all or to be imperfectly answered, and the insurers issue apolicywithoutanyfurtherinquiry,theywaivetheimperfectionoftheanswerandrendertheomissiontoanswermorefullyimmaterial.Asaptlynotedbythelowercourt,"iftheailmentandoperationofKwongNamhadsuch an important bearing on the question of whether the defendant wouldundertaketheinsuranceornot,thecourtcannotunderstandwhythedefendantoritsmedicalexaminerdidnotmakeanyfurtherinquiriesonsuchmattersfromtheChinese General Hospital or require copies of the hospital records from theappellantbeforeactingontheapplicationfor insurance.Thefactofthematter isthat the defendant was too eager to accept the application and receive the


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insured's premium. Itwouldbe inequitablenow to allow thedefendant to avoidliabilityunderthecircumstances."Sec.34.Informationofthenatureoramountoftheinterestofoneinsuredneednot be communicated unless in answer to an inquiry, except as prescribed bysectionfiftyone.GENERALRULEONCOMMUNICATIONOFINSURABLEINTEREST

Insuredisnotrequiredtocommunicatethenatureortheamountofhisinsurableinterestinthelifeorpropertyinsuredtotheinsurer

EXCEPTIONS

1. When the insurer makes an inquiry from the insured of the nature oramountofthelattersinsurableinterest,whetherinlifeorproperty

2. Under Section 51, the insurance policymust specify, among others theinterestoftheinsuredinpropertyinsured,ifheisnottheabsoluteownerthereof

Sec.35.Neitherpartytoacontractofinsuranceisboundtocommunicate,evenuponinquiry,informationofhisownjudgmentuponthemattersinquestion.

REPRESENTATION

Sec.36.Arepresentationmaybeoralorwritten.REPRESENTATION

Oralorwrittenstatementofafactoraconditionaffectingtheriskmadeby the insuredto the insurancecompany, tendingto inducethe insurertoassumetherisk

PositivemanifestationMISREPRESENTATION

In insurance, isa statementofamaterialpointormatterwhich is falseand made by the insured to deceive the insurer into entering into aninsurancecontract

Sec.37.Arepresentationmaybemadeatthetimeof,orbefore,issuanceofthepolicy.

Sec.38.Thelanguageofarepresentationistobeinterpretedbythesamerulesasthelanguageofcontractsingeneral.CONSTRUCTIONOFREPRESENTATION

Representationneednotbe literally trueandaccurate inevery respect,ratheritissufficientifitissubstantiallyormateriallytrueandincaseofpromissory representation, it is sufficient if it is substantially compliedwith

Sec. 39.A representationas to the future is tobedeemedapromise,unless itappearsthatitwasmerelyastatementofbelieforexpectation.KINDOFREPRESENTATION

1. Affirmativewhich is an affirmationof a fact existingwhen the contractbegins

2. Promissory which is a statement by the insured concerning what is tohappenduringthetermoftheinsurance

Sec. 40. A representation cannot qualify an express provision in a contract ofinsurance,butitmayqualifyanimpliedwarranty.REPRESENTATION QUALIFIES IMPLIED WARRANTY BUT NOT EXPRESSPROVISIONSINTHECONTRACT

Representationisamerecollateralinducementtoacontractanddoesn'tformpartofacontract

Thus,arepresentationcannotqualifyanexpressprovisioninacontract,butmayqualifyanimpliedwarranty

Sec. 41.A representationmaybe alteredorwithdrawnbefore the insurance iseffected,butnotafterwards.RULEONALTERATIONORWITHDRAWALOFREPRESENTATION

Arepresentation isallowedtobealteredandwithdrawnso longas theinsurance has not been effected because the insurer has not been yetinducedtoissuethepolicy

Iftherepresentationhasbeenalteredorwithdrawnbeforetheissuanceofthepolicyandtheinsurerstillissuesthesame,thenthepolicyshallnotberescissibleanymore


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It is a different story when the representation has been altered orwithdrawn after the policy has been issued. It cannot anymore bewithdrawnoraltered.Thecontractwillremainrescissible.

Sec. 42.A representationmust bepresumed to refer to thedateonwhich thecontractgoesintoeffect.DATETHEREPRESENTATIONREFERS

Representation must be presumed to refer to the date on which thecontractgoesintoeffect

Even though a representation that no other insurance exists on thepropertyinsuredistrueatthetimeitismade,yetitisuntrueatthetimetheapplication isacceptedandthepolicy issuedthe insured isguiltyofmisrepresentationthatvitiatesthepolicy

Sec. 43.When a person insured has no personal knowledge of a fact, hemaynevertheless repeat informationwhich he has upon the subject, andwhich hebelievestobetrue,withtheexplanationthathedoessoonthe informationofothers;orhemaysubmittheinformation,initswholeextent,totheinsurer;andinneithercaseisheresponsibleforitstruth,unlessitproceedsfromanagentoftheinsured,whosedutyitistogivetheinformation.WHEN IS THE INSURED BOUND TO DISCLOSE INFORMATION RECEIVED FROMANOTHERPERSON

1. When the information material to the transaction was acquired by anagentof the insuredsinceknowledgeof theagent isalsoknowledgeoftheprincipal

2. In marine insurance, the information of the belief or expectation of athird person, in reference to material fact, is material and must becommunicatedbytheinsured

HARDINGV.COMMERCIALUNION38PHIL469

FACTS:HardinginsuredherStudebakercarandonalaterdate,thecarwasdestroyedbyfire. She sought the proceeds of the

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