INSURANCE (ATTY. QUIMSON) MA. ANGELA AGUINALDO ATENEO LAW 2010

These provisions would have been fatal to any attempt at recovery even byD. P. Dunn, if the ownership of the property had continued in him up to thetime of the loss; and as regards Harding, an additional insuperable obstacleis found in the fact that the ownership of the property had been charged,prior to the loss, without any corresponding change having been effected inthe policy of insurance. In section 19 of the Insurance Act we find it statedthat "a change of interest in any part of a thing insured unaccompanied bya corresponding change of interest in the insurance, suspends theinsurance to an equivalent extent, until the interest in the thing and theinterest in the insurance are vested in the same person." Again in section55 it is declared that "the mere transfer of a thing insured does not transferthe policy, but suspends it until the same person becomes the owner ofboth the policy and the thing insured."

Undoubtedly these policies of insurance might have been so framed as tohave been "payable to the Sane Miguel Brewery, mortgagee, as its interestmay appear, remainder to whomsoever, during the continuance of the risk,may become the owner of the interest insured." (Sec 54, Act No. 2427.)Such a clause would have proved an intention to insure the entire interestin the property, not merely the insurable interest of the San MiguelBrewery, and would have shown exactly to whom the money, in case ofloss, should be paid. But the policies are not so written.

GREPALIFE V. CA 316 SCRA 677

FACTS: 1. A contract of group life insurance was executed between petitioner GreatPacific Life Assurance Corporation (hereinafter Grepalife) and DevelopmentBank of the Philippines (hereinafter DBP). Grepalife agreed to insure thelives of eligible housing loan mortgagors of DBP. 2. Leuterio, a physician and a housing debtor of DBP applied formembership in the group life insurance plan. In an application form, Dr.Leuterio answered questions concerning his health condition as follows: 7. Have you ever had, or consulted, a physician for a heart condition, highblood pressure, cancer, diabetes, lung; kidney or stomach disorder or anyother physical impairment?

Answer: No. If so give details_ _ _ _ _ _ _ _ _ _ _ _ _.

8. Are you now, to the best of your knowledge, in good health?

Answer: [x] Yes [ ] NO. 4

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3. Grepalife issued Certificate No. B‐18558, as insurance coverage of Dr.Leuterio, to the extent of his DBP mortgage indebtedness amounting toeighty‐six thousand, two hundred (P86,200.00) pesos. 4. Dr. Leuterio died due to "massive cerebral hemorrhage." Consequently,DBP submitted a death claim to Grepalife. Grepalife denied the claimalleging that Dr. Leuterio was not physically healthy when he applied for aninsurance coverage. Grepalife insisted that Dr. Leuterio did not disclose hehad been suffering from hypertension, which caused his death. Allegedly,such non‐disclosure constituted concealment that justified the denial of theclaim. 5. The widow of the late Dr. Leuterio, respondent Medarda V. Leuterio, fileda complaint During the trial, Dr. Hernando Mejia, who issued the deathcertificate, was called to testify. Dr. Mejia's findings, based partly from theinformation given by the respondent widow, stated that Dr. Leuteriocomplained of headaches presumably due to high blood pressure. Theinference was not conclusive because Dr. Leuterio was not autopsied,hence, other causes were not ruled out. 6. The trial court rendered a decision in favor of respondent widow and against Grepalife.

HELD: The rationale of a group insurance policy of mortgagors, otherwise knownas the "mortgage redemption insurance," is a device for the protection ofboth the mortgagee and the mortgagor. On the part of the mortgagee, ithas to enter into such form of contract so that in the event of theunexpected demise of the mortgagor during the subsistence of themortgage contract, the proceeds from such insurance will be applied to thepayment of the mortgage debt, thereby relieving the heirs of the mortgagorfrom paying the obligation. 7 In a similar vein, ample protection is given tothe mortgagor under such a concept so that in the event of death; themortgage obligation will be extinguished by the application of the insuranceproceeds to the mortgage indebtedness. Consequently, where themortgagor pays the insurance premium under the group insurance policy,making the loss payable to the mortgagee, the insurance is on themortgagor's interest, and the mortgagor continues to be a party to thecontract. In this type of policy insurance, the mortgagee is simply anappointee of the insurance fund, such loss‐ payable clause does not makethe mortgagee a party to the contract.

Sec. 8 of the Insurance Code provides: Unless the policy provides, where a mortgagor of property effects insurancein his own name providing that the loss shall be payable to the mortgagee,or assigns a policy of insurance to a mortgagee, the insurance is deemed tobe upon the interest of the mortgagor, who does not cease to be a party tothe original contract, and any act of his, prior to the loss, which wouldotherwise avoid the insurance, will have the same effect, although theproperty is in the hands of the mortgagee, but any act which, under thecontract of insurance, is to be performed by the mortgagor, may be

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performed by the mortgagee therein named, with the same effect as if ithad been performed by the mortgagor. The insured private respondent did not cede to the mortgagee all his rightsor interests in the insurance, the policy stating that: "In the event of thedebtor's death before his indebtedness with the Creditor [DBP] shall havebeen fully paid, an amount to pay the outstanding indebtedness shall firstbe paid to the creditor and the balance of sum assured, if there is any, shallthen be paid to the beneficiary/ies designated by the debtor." When DBPsubmitted the insurance claim against petitioner, the latter denied paymentthereof, interposing the defense of concealment committed by the insured.Thereafter, DBP collected the debt from the mortgagor and took thenecessary action of foreclosure on the residential lot of private respondent. And since a policy of insurance upon life or health may pass by transfer, willor succession to any person, whether he has an insurable interest or not,and such person may recover it whatever the insured might haverecovered, the widow of the decedent Dr. Leuterio may file the suit againstthe insurer, Grepalife.

Sec. 9. If an insurer assents to the transfer of an insurance from amortgagor to a mortgagee, and, at the time of his assent, imposes furtherobligation on the assignee, making a new contract with him, the act of themortgagor cannot affect the rights of said assignee.

TRANSFER OF INSURANCE WITH APPROVAL OF INSURER

• Generally, where the mortgagor effects insurance in his own name payable to the mortgagee, or assigns in his policy to a mortgagee, the mortgagor doesn't cease to be a party to the insurance contract and his acts still affect the policy • Under this provision, where an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee, and at the time of his assent, imposes new obligations to the assignee, a new and distinct consideration passes from the mortgagee to the insurer and a new contract is created between them. In this scenario, the mortgagor cannot anymore affect the rights of the assignee‐mortgagee.

INSURABLE INTEREST Sec. 10. Every person has an insurable interest in the life and health: (a) Of himself, of his spouse and of his children; (b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest; (c) Of any person under a legal obligation to him for the payment ofmoney, or respecting property or services, of which death or illness mightdelay or prevent the performance; and (d) Of any person upon whose life any estate or interest vested in him depends.

INSURABLE INTEREST • A person has insurable interest in the subject matter insured where he has such a relation or connection with, or concern in, it that he will derive

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pecuniary benefit or advantage from its preservation and will suffer pecuniary loss or damage from its destruction, termination, or injury by thehappening of the event insured against

NECESSARY TO VALIDITY OF INSURANCE CONTRACT • Insurable interest essential to the validity and enforceability of the insurance contract • A policy issued to a person without interest in the subject matter is a mere wager policy or contract

• Insurable interest exists when there is reasonable ground, founded on therelations of the parties, either pecuniary or contractual or by blood or affinity, to expect some kind of benefit or advantage from the continuance of the life of the insured

IN ONE’S OWN LIFE • A person has an unlimited interest in his own life which will support a policy taken by him in favor of himself, his estate, or in favor of another person, regardless of whether or not the latter has an insurable interest provided, in case the beneficiary is without insurable interest, that there is no bad faith or fraud

IN ONE’S SPOUSES AND CHILDREN • The law presumes that a person has an insurable interest in the life of hisspouse and his children • The law makes no qualification

BASED ON PECUNIARY INTEREST • Mere blood relationship doesn't create an insurable interest in the life of another • The existence of relationship by affinity doesn't constitute insurable interest • The abovementioned persons may have insurable interest if there exists pecuniary interest between them • A person can have an insurable interest with any other person or strangeras long as he has come pecuniary interest in the latter’s life

BASED ON SOME LEGAL OBLIGATION • A person has an insurable interest in the life of another who is under a legal obligation to him for the payment of money, or respecting property or services an whose death or illness might delay or prevent the performance of the obligation • A person who has a commercial or contractual relationship with another has an insurable interest in the latter if his death will delay or prevent the performance by the latter of some legal obligation in favor of the former

WHERE ESTATE OR INTEREST IS DEPENDENT ON THE LIFE OF THE INSURED • Every person has an insurable interest in the life and health of any personupon whose life any estate or interest vested in the person taking the policy depends

WHEN DOES INSURABLE INTEREST MUST EXIST

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• When the insurance takes effect but need not exist after or when the loss occurs or at the time of the death of the insured—this is because life insurance is not a contract of indemnity but is meant to give financial security either to the insured himself or his beneficiaries

COL. C. CASTRO V. INSURANCE COMMISSIONER GR 55836, FEBRUARY 16, 1981

FACTS: Col. Castro was the employer of the deceased. While the deceased was stillliving, he worked as the family driver of Castro. Castro took a life insurancepolicy on behalf of the deceased and when the latter died, Castro tried toclaim the proceeds from the insurance company. The company denied theclaim, maintaining that the policy taken was null and void and thus, Castrois not entitled to any proceeds. This position was sustained by the courtand thus, Castro’s complaint was dismissed.

POINTS RAISED BY PETITIONER:1. An employer has an insurable interest in the life of his employee2. Insurance company cannot deny liability under the policy3. There is no legal effect on the act of the insurance company to remit arefund check

POSITION TAKEN BY INSURANCE COMPANY: Castro doesn't have any insurable interest on the life of Terrenal. • A life insurance policy was taken for Terrenal by Castro for a period of 20 years who was only his driver. Castro failed to establish that he had a legal claim over Terrenal for services during the period of 20 years. • Mere existence of employer‐employee relationship is not enough to establish insurable interest. The employer should show that he would suffereconomic loss in case the employee dies.

AN EXAMPLE WHEREIN THERE IS ECONOMIC LOSS TO THE EMPLOYER IF AN EMPLOYEE IS PLACED IN HARM’S WAY OR DIES…

Employer sends his employee abroad to take post‐graduate studies.Together with paying his tuition, the employer pays for the transportation,board and lodging, while still continuing to pay the employee’s salary.

LINCOLN NATIONAL LIFE V. SAN JUAN CA‐GR NO. 34586‐88, MAY 27, 1971

FACTS: Plaintiffs seek the rescission of five insurance policies of defendants on theground that there was concealment of material facts and falserepresentations. Lack of insurable interest was also cited as a ground forrescission by the plaintiffs. The defendants denied these allegationshowever. The trial court adjudged the case in favor of the plaintiffs,declaring the policies null and void.

HELD:

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The five insurance policies were in effect wagering or highly speculativecontracts of insurance, which are void for reasons of public policy and notbeing based on the existence of insurable interest on the part of appellantLuis Parco on the life of San Juan, the insurance having been brought aboutand procured through false affirmations or representations andconcealment of material points. The spouses didn't have any insurable interest on the life of Mysterioso SanJuan, who was just a farm laborer of the spouses. There is no evidenceshowing that there was economic loss to be incurred by the spouses in caseof death of San Juan. The beneficiaries named in the policies were not eventhe children of San Juan.

*Note:Insurance companies rescind extrajudicially. They just write a letterand then issue a check, to accompany the same. They can only do thisthough before a claim is filed.

Sec. 11. The insured shall have the right to change the beneficiary hedesignated in the policy, unless he has expressly waived this right in saidpolicy.

BENEFICIARY, DEFINED Person, whether natural or juridical, for whose benefit the policy is issued and is the recipient of the proceeds of the insurance

LIMITATIONS AND DISQUALIFICATIONS • A person may take a life insurance on his life payable to any person calleda beneficiary even though said beneficiary is a stranger and has noinsurable interest in the insured’s life • However, any person who is forbidden from receving any donation underArticle 739 CC cannot be named as beneficiary of a life insurance policy bythe person who cannot make any donation to him

WHEN NO BENEFICIARY DESIGNATED • In case of failure to designate a beneficiary or where such designation is void, the proceeds of the insurance will go the estate of the insured

INSULAR LIFE V. EBRADO NARIO V. PHILAMLIFE 20 SCRA 434

FACTS: Alejandra Nario took a life insurance policy on her life, designated herhusband and son as the irrevocable beneficiaries. She then applied for aloan on said policy which she was entitled to after the policy has been inforce for three years, for the purpose of using the proceeds to defray theschool expenses of her son. The application bore twice the signature of herhusband, one for being an irrevocable beneficiary and two, for being thelegal administrator of the son’s properties. The application was howeverdenied as it maintained that it must also be authorized by the court incompetent guardianship proceedings.

HELD:

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The proposed transactions in question constitute acts of disposition oralienation of property rights and not merely of management oradministration because they involve the incurring or termination of thecontractual obligations. It appearing that the minor’s beneficiary’s vested interest or right on thepolicy exceeds P2000 and as there was no court petition and bond, theconsent given by the father for and in behalf of the minor son, withoutcourt authorization, to the policy loan application and the surrender of suchpolicy, was insufficient and ineffective, and Philamlife was justified indisapproving the proposed transactions in question.

Sec. 12. The interest of a beneficiary in a life insurance policy shall beforfeited when the beneficiary is the principal, accomplice, or accessory inwillfully bringing about the death of the insured; in which event, thenearest relative of the insured shall receive the proceeds of said insuranceif not otherwise disqualified.

WHEN BENEFICIARY FORFEITS INSURANCE PROCEEDS • When the beneficiary is the principal, accomplice or accessory in willfullybringing about the death of the insured, such beneficiary forfeits the rightto receive the proceeds of the life insurance policy

Sec. 13. Every interest in property, whether real or personal, or anyrelation thereto, or liability in respect thereof, of such nature that acontemplated peril might directly damnify the insured, is an insurableinterest.

INSURABLE INTEREST IN PROPERTY • Exists as long as such interest, whether real or personal, or any relationthereto or liability thereof, is of such a nature that a contemplated perilmight directly damnify the insured • Where the interest of the insured in, or his relation to, the property issuch that, he will be benefited by the continued existence or will suffer adirect pecuniary loss by its destruction, the contract of insurance will beupheld

HARVARDIAN COLLEGE V. COUNTRY BANKERS 1 CARA 1; 83 OG (NO. 31)

FACTS: Harvardian College is a family corporation owned by spouses Yap and theirchildren. They insured the school building, per advice of an insuranceagent. During the effectivity of the policy, the school building was totallyburned. They tried to claim from the insurance company but they weredenied on the ground that the building and land it was constructed on wasowned by Ildefonso Yap and not by Harvadian Colleges.

HELD: Any title to, or interest in property, legal or equitable, will support acontract of fire insurance, and even when the insured had no title thecontract will be upheld if his interest, or his relation to, the property is such

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that he will, or may be benefited by its continued existence or suffer adirect pecuniary loss from its destruction or injury. The plaintiff in this case has long been using and possessing the buildingfor several years with both the consent and knowledge of Ildefonso Yap. Assuch, it is reasonable to assume that had the building not been burned,plaintiff would have been allowed the continued use of the same in itsoperations of an educational institution.

FILIPINO MERCHANTS V. CA 179 SCRA 638

FACTS: A consignee of goods aboard a vessel insured the goods. Due to thedamage incurred by the goods during the voyage, consignee now seeksproceeds from the insurance company. This led to litigation as the companyfailed to pay him indemnity.

HELD: Contracts of insurance are contracts of indemnity upon the terms andconditions specified in the policy. The agreement has the force of lawbetween the parties. The terms of the policy constitute the measure of theinsurer’s liability. If such terms are clear and unambiguous, they must betaken and understood in their plain, ordinary and popular sense. Anent the issue of insurable interest, the consignee had an insurableinterest in insuring the goods. In principle, anyone has an insurable interestin property who derives a benefit from its existence or would suffer lossfrom its destruction whether he has or has not any title in, lien upon orpossession of the property. insurable interest in property may consist in anexisting interest, an inchoate interest founded on an existing interest, or anexpectancy, coupled with an existing interest in that out of which theexpentancy arises. Herein, the consignee has an existing interest in thegoods insured. This insurable interest was grounded on a valid contract ofsale. This contract vested an equitable interest on the property beingshipped.

Sec. 14. An insurable interest in property may consist in:

(a) An existing interest;

(b) An inchoate interest founded on an existing interest; or(c) An expectancy, coupled with an existing interest in that out of which theexpectancy arises.

LAMPANO V. JOSE 30 PHIL 537 FACTS: Barreto constructed a house for Jose. During the construction of the houseand Jose’s disposition of the same, Barreto took an insurance policy on thehouse. Subsequently, Jose sold the house to Lampano and there was still a

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remaining balance from the latter. On an unfortunate date however, thehouse was destroyed by fire. Lampano filed a complaint against Barreto and Jose. She asserted thatthere was a verbal agreement between her and Jose that upon sale of thehouse, the latter would deliver the insurance policy to her. She maintainedthat Barreto and Jose don't have any right to the insurance policy anymore.The trial court ruled in favor of Jose collectively. First, it ruled that Barretoowed Jose the balance between the proceeds of the insurance policy andthe premium paid by him. Second, it ruled that Lampano pay the remainingbalance for the sale of the house to Jose.

HELD: If Barreto had an insurable interest in the house, he could insure thisinterest for his sole protection. The policy was in his name alone. It was,therefore, a personal contract between him and the company and not acontract which ran with the property. According to this personal contract,the insurance policy was payable to the insured without regard to the extent and nature of his interest in theproperty, provided that he had an insurable interest at the time of themaking of the contract, and also at the time of the fire. Where differentpersons have different interests in the same property, the insurance takenby one in his known right and in his own interest doesn't in any way inureto the benefit of another. This is the general rule prevailing in the US, andthis is no different from our own jurisdiction. A contract of insurance made for insurer’s indemnity only, as where therewas no agreement, express or implied, that it shall be for the benefit of athird person, doesn't attach to or run with the title to the insured propertyon a transfer thereof personal as between the insurer and insured. In suchcase, strangers to the contract cannot acquire in their own right anyinterest in the insurance money, except through an assignment or somecontract with which they are connected. In the case at bar, Barreto assumed the responsibility for the insurance.The premiums were paid by him without any agreement or right to recoupthe amount paid therefore should no loss result to the property. It wouldnot, therefore, be in accordance with law and his contractual obligations tocompel him to account for the insurance money, or any part thereof, to theplaintiff, who assumed no risk whatsoever. That he had insurable interest in the house, there is no question. Barretoconstructed the house, furnished all materials and supplies, and insured itafter it had been completed.

Sec. 15. A carrier or depository of any kind has an insurable interest in athing held by him as such, to the extent of his liability but not to exceedthe value thereof.

LOPEZ V. DEL ROSARIO 44 PHIL 98

FACTS:

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Del Rosario was engaged in the business of warehouse keeping. She owneda bonded warehouse, wherein she stored copra and other merchandise.One of the people who stored copra in her warehouse was Lopez. DelRosario procured many insurance policies, covering the warehouse and themerchandise it stored. On an unfortunate date however, the warehousetogether with majority of the had transferred his insurable interest byconveying the insurance policy to another to secure certain debts due.Third, preceding immediately the fire, he willfully stored the gasoline barrelinside the building. Plaintiff denied this. He maintained that he has beenacquitted of the charges of arson earlier on and that he was able to proveloss due to the fire.

HELD: With reference to the second assigned error, defendant contended that theexecution of the chattel mortgage without the knowledge and consent ofthe insurance company annulled the insurance policy. However, uponreading the policy, there was no provision prohibiting the plaintiff fromplacing a mortgage over the property insurance. And even if there was anintended alienation clause, it is to be noted that mere execution of a chattelmortgage and that alienation within the meaning of the insurance law untilthe mortgagee acquires a right to take possession by default under theterms of the mortgager. No right is claimed to have accrued in this case.

Sec. 21. A change in interest in a thing insured, after the occurrence of aninjury which results in a loss, does not affect the right of the insured toindemnity for the loss.

Sec. 22. A change of interest in one or more several distinct things, separately insured by one policy, does not avoid the insurance as to the others.

Sec. 23. A change on interest, by will or succession, on the death of theinsured, does not avoid an insurance; and his interest in the insurancepasses to the person taking his interest in the thing insured.

DEATH OF INSURED DOESN'T AVOID THE INSURANCE ON PROPERTY • An insurance policy on property taken by the insured who dies doesn't affect the property except that his interest passes to his heir or legal representative • The heir or legal representative may continue the insurance policy on the property of the decedent by paying the premiums thereof and will receive the proceeds of the insurance in case loss occurs

Sec. 24. A transfer of interest by one of several partners, joint owners, or owners in common, who are jointly insured, to the others, does not avoid an insurance even though it has been agreed that the insurance shall ceaseupon an alienation of the thing insured. Sec. 25. Every stipulation in a policy of insurance for the payment of losswhether the person insured has or has not any interest in the property

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insured, or that the policy shall be received as proof of such interest, andevery policy executed by way of gaming or wagering, is void.

VOID STIPULATIONS IN PROPERTY INSURANCE 1. The following stipulations in a contract are void— a. Stipulation for the payment of loss whether the person insured has or has no interest in the property insured b. Stipulation that the policy shall be received as proof of such interest 2. Every policy executed by way of gaining or wagering is likewise void

CHA V. CA 277 SCRA 690

FACTS: Petitioner‐spouses Nilo Cha and Stella Uy‐Cha, as lessees, entered into alease contract with private respondent CKS. One of the conditions of thelease was that the lessee wouldn't take any insurance policy on anychattels or merchandise placed in the stalls, etc. without first obtaining theconsent of the lessor. Notwithstanding this agreement, the spouses insuredtheir merchandise. Days before the expiration of the lease, a fire broke outand destroyed the goods. CKS upon knowing of the insurance policy, soughtthe proceeds of the same.

HELD: 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 bypetitioner‐ spouses over their merchandise is primarily a contract ofindemnity. Insurable interest in the property insured must exist at the timethe insurance takes effect and at the time the loss occurs. The basis of suchrequirement of insurable interest in property insured is based on soundpublic policy: to prevent a person from taking out an insurance policy onproperty upon which he has no insurable interest and collecting theproceeds of said policy in case of loss of the property. In such a case, thecontract of insurance is a mere wager which is void under Section 25 of theInsurance Code, which provides:

Sec. 25. Every stipulation in a policy of Insurance for the payment of loss,whether the person insured has or has not any interest in the propertyinsured, or that the policy shall be received as proof of such interest, andevery policy executed by way of gaming or wagering, is void. In the present case, it cannot be denied that CKS has no insurable interestin the goods and merchandise inside the leased premises under theprovisions of Section 17 of the Insurance Code which provide: Sec. 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, respondent CKS cannot, under the Insurance Code, a speciallaw, be validly a beneficiary of the fire insurance policy taken by thepetitioner‐spouses over their merchandise. This insurable interest over said

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merchandise remains with the insured, the Cha spouses. The automaticassignment of the policy to CKS under the provision of the lease contractpreviously quoted is void for being contrary to law and/or public policy. Theproceeds of the fire insurance policy thus rightfully belong to the spousesNilo Cha and Stella Uy‐Cha (herein co‐petitioners). The insurer (United)cannot be compelled to pay the proceeds of the fire insurance policy to aperson (CKS) who has no insurable interest in the property insured.

CONCEALMENT Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment.

PROVISIONS ON CONCEALMENT • The provisions on concealment, representation, and warranties are based on one of the fundamental characteristics of an insurance contract—that it be of perfect good faith on the part of both parties

CONCEALMENT • Neglect to communicate that which a party knows or ought to communicate, whether intentional or unintentional

WHEN IT EXISTS • Concealment exists where the assured had knowledge of a fact materialto the risk, and honesty, good faith, and fair dealing requires that he shouldcommunicate it to the assurer, but he designedly and intentionallywithholds the same Sec. 27. A concealment whether intentional orunintentional entitles the injured party to rescind a contract of insurance.(As amended by Batasang Pambansa Blg. 874)

ARGENTE V. WEST COAST LIFE 51 PHIL 725

FACTS: Bernardo Argente signed an application for joint insurance with his wife inthe sum of P2,000. The wife, Vicenta de Ocampo, signed a like applicationfor the same policy. Both applications, with the exception of the names andthe signatures of the applicants, were written by Jose Geronimo delRosario, an agent for the West Coast Life Insurance Co. But all theinformation contained in the applications was furnished the agent byBernardo Argente. The spouses were then medically examined by thedoctor. All information was written by the doctor with some being furnishedby Bernardo. The spouses then asked for the increase of the amount covered by thepolicy. They were issued a temporary insurance policy and the permanentone wasn't delivered until the first payment of premium of the spouses.Days after, Vicenta died of cerebral apoplexy. Bernardo sought the proceedsbut was denied on the ground of concealment. The court found from the evidence that the representations made byBernardo Argente and his wife in their applications to the defendant for lifeinsurance were false with respect to their estate of health during the period

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of five years preceding the date of such applications, and that they knewthe representations made by them in their applications were false. Thecourt further found from the evidence that the answers given by BernardoArgente and his wife at the time of the medical examination by Doctor Sta.Ana were false with respect to the condition of their health at that time andfor a period of several years prior thereto. Based on these findings whichmust here be accepted since the stenographic transcript is incomplete, thequestion arises as to the estate of the law in relation thereto.

HELD: One ground for the rescission of a contract of insurance under theInsurance Act is "a concealment," which in section 25 is defined as "Aneglect to communicate that which a party knows and ought tocommunicate." In an action on a life insurance policy where the evidence conclusivelyshows that the answers to questions concerning diseases were untrue, thetruth of falsity of the answers become the determining factor. In the policywas procured by fraudulent representations, the contract of insuranceapparently set forth therein was never legally existent. It can fairly beassumed that had the true facts been disclosed by the assured, theinsurance would never have been granted. Concealment exists where the assured has knowledge of a fact material tothe risk, and honesty, good faith, and fair dealing requires that he shouldcommunicate it to the assured, but he designated and intentionally withholds the same. Another rule is that if the assured undertakes to state all the circumstancesaffecting the risk, a full and fair statement of all is required. The basis of the rule vitiating the contract in case of concealment is that itmisleads or deceives the insurer into accepting the risk, or accepting it atthe rate of premium agreed upon. The insurer, relying upon the belief thatthe assured will disclose every material within his actual or presumedknowledge, is misled into a belief that the circumstance withheld does notexist, and he is thereby induced to estimate the risk upon a false basis thatit does not exist. The principal question, therefore, must be, Was theassurer misled or deceived into entering a contract obligation or in fixingthe premium of insurance by a withholding of material information of factswithin the assured's knowledge or presumed knowledge? It therefore follows that the assurer in assuming a risk is entitled to knowevery material fact of which the assured has exclusive or peculiarknowledge, as well as all material facts which directly tend to increase thehazard or risk which are known by the assured, or which ought to be or arepresumed to be known by him. And a concealment of such facts vitiates thepolicy. "It does not seem to be necessary . . . that the . . . suppression ofthe truth should have been willful." If it were but an inadvertent omission,yet if it were material to the risk and such as the plaintiff should haveknown to be so, it would render the policy void. But it is held that if untrueor false answers are given in response to inquiries and they relate to

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material facts the policy is avoided without regard to the knowledge orfraud of assured, although under the statute statements arerepresentations which must be fraudulent to avoid the policy. So undercertain codes the important inquiries are whether the concealment waswillful and related to a matter material to the risk.

SATURNINO V. PHILAMLIFE 7 SCRA 316

FACTS: It appears that two months prior to the issuance of the policy to her,Saturnino was operated on for cancer, involving complete removal of theright breast, including the pectoral muscles and the glands found in theright armpit. She stayed in the hospital for a period of eight days, afterwhich she was discharged, although according to the surgeon who operatedon her she could not be considered definitely cured, her ailment being ofthe malignant type. Notwithstanding the fact of her operation Estefania A. Saturnino did notmake a disclosure thereof in her application for insurance. On the contrary,she stated therein that she did not have, nor had she ever had, amongother ailments listed in the application, cancer or other tumors; that shehad not consulted any physician, undergone any operation or suffered anyinjury within the preceding five years; and that she had never been treatedfor nor did she ever have any illness or disease peculiar to her sex,particularly of the breast, ovaries, uterus, and menstrual disorders. Theapplication also recites that the foregoing declarations constituted "afurther basis for the issuance of the policy." The policy sued upon is one for 20‐year endowment non‐medical insurance.This kind of policy dispenses with the medical examination of the applicantusually required in ordinary life policies. However, detailed information iscalled for in the application concerning the applicant's health and medicalhistory. The written application in this case was submitted by Saturnino andthe policy was issued on the same day, upon payment of the first year'spremium. On a later date, Saturnino died of pneumonia, secondary toinfluenza. Appellants here, who are her surviving husband and minor child,respectively, demanded payment of the face value of the policy. The claimwas rejected and this suit was subsequently instituted.

HELD: The question at issue is whether or not the insured made such falserepresentations of material facts as to avoid the policy. There can be nodispute that the information given by her in her application for insurancewas false, namely, that she had never had cancer or tumors, or consultedany physician or undergone any operation within the preceding period offive years. Are the facts then falsely represented material? The InsuranceLaw (Section 30) provides that "materiality is to be determined not by theevent, but solely by the probable and reasonable influence of the factsupon the party to whom the communication is due, in forming his estimate

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of the proposed contract, or in making his inquiries." It seems to be thecontention of appellants that the facts subject of the representation werenot material in view of the "non‐medical" nature of the insurance appliedfor, which does away with the usual requirement of medical examinationbefore the policy is issued. The contention is without merit. If anything, thewaiver of medical examination renders even more material the informationrequired of the applicant concerning previous condition of health anddiseases suffered, for such information necessarily constitutes an importantfactor which the insurer takes into consideration in deciding whether toissue the policy or not. It is logical to assume that if appellee had beenproperly apprised of the insured's medical history she would at least havebeen made to undergo medical examination in order to determine herinsurability.

INSULAR LIFE V. FELICIANO 74 PHIL 468

FACTS: Evaristo Feliciano, was suffering with advanced pulmonary tuberculosiswhen he signed his applications for insurance with the petitioner. On thatsame date Doctor Trepp, who had taken X‐ray pictures of his lungs,informed the respondent Dr. Serafin D. Feliciano, brother of Evaristo, thatthe latter "was already in a very serious ad practically hopeless condition."Nevertheless the question contained in the application� "Have you eversuffered from any ailment or disease of the lungs, pleurisy, pneumonia orasthma?"� appears to have been answered , "No" And above the signatureof the applicant, following the answers to the various questions propoundedto him, is the following printed statement:I declare on behalf of myself and of any person who shall have or claim anyinterest in any policy issued hereunder, that each of the above answers isfull, complete and true, and that to the best of my knowledge and belief Iam a proper subject for life insurance. (Exhibit K.) The false answer above referred to, as well as the others, was written bythe Company's soliciting agent Romulo M. David, in collusion with themedical examiner Dr. Gregorio Valdez, for the purpose of securing theCompany's approval of the application so that the policy to be issuedthereon might be credited to said agent in connection with the inter‐provincial contest which the Company was then holding among its solicitingagents to boost the sales of its policies. Agent David bribed MedicalExaminer Valdez with money which the former borrowed from theapplicant's mother by way of advanced payment on the premium, accordingto the finding of the Court of Appeals. Said court also found that before theinsured signed the application he, as well as the members of his family, toldthe agent and the medical examiner that he had been sick and coughing forsome time and that he had gone three times to the Santol Sanatorium andhad X‐ray pictures of his lungs taken; but that in spite of such informationthe agent and the medical examiner told them that the applicant was a fitsubject for insurance.

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HELD: When Evaristo Feliciano, the applicant for insurance, signed the applicationin blank and authorized the soliciting agent and/or medical examiner of theCompany to write the answers for him, he made them his own agents forthat purpose, and he was responsible for their acts in that connection. Ifthey falsified the answers for him, he could not evade the responsibility forhe falsification. He was not supposed to sign the application in blank. Heknew that the answers to the questions therein contained would be "thebasis of the policy," and for that every reason he was required with hissignature to vouch for truth thereof. Moreover, from the facts of the case we cannot escape the conclusion thatthe insured acted in connivance with the soliciting agent and the medicalexaminer of the Company in accepting the policies in question. Above thesignature of the applicant is the printed statement or representation: " . . .I am a proper subject for life insurance." In another sheet of the sameapplication and above another signature of the applicant was also printedthis statement: "That the said policy shall not take effect until he firstpremium has been paid and the policy as been delivered to and acceptedby me, while I am in good health." When the applicant signed theapplication he was "having difficulty in breathing, . . . with a very highfever." He had gone three times to the Santol Sanatorium and had X‐raypictures taken of his lungs. He therefore knew that he was not "a propersubject for life insurance." When he accepted the policy, he knew that hewas not in good health. Nevertheless, he not only accepted the first policyof P20,000 but then and there applied for and later accepted another policyof P5,000.

It is unbelievable that the insured did not take the trouble to read theanswers contained in the photostatic copy of the application attached toand made a part of the policy before he accepted it and paid the premiumthereon. He must have notice that the answers to the questions thereinasked concerning his clinical history were false, and yet he accepted thefirst policy and applied for another.

Sec. 28. Each party to a contract of insurance must communicated to theother, in good faith, all facts within his knowledge which are material to thecontract and as to which he makes no warranty, and which the other hasnot the means of ascertaining.

FACTS TO BE COMMUNICATED: REQUISITES • Each party to an insurance contract must communicate to the other in good faith o Which are within his knowledge o Which are material to the contract o Which the other party has not the means of ascertaining o As to which the party with the duty to communicate makes no warranty

MUST BE WITHIN PARTY’S KNOWLEDGE

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• Concealment requires knowledge of the fact concealed by the partycharged with concealment • This must be proven by the party claiming the concealment

MUST BE MATERIAL TO THE CONTRACT • If the fact concealed is of such nature that had the insurer known of it, itwouldn't have accepted the risk or would have demanded a higherpremium, or could have laid down different terms, or at least would havemade further inquiries before assuming the risk

NO MEANS OF ASCERTAINMENT BY THE OTHER PARTY • If such other party has means of ascertaining the non‐disclosed fact likepublic events under Section 32 or when the insurer had every means toascertain the non‐disclosed fact the other facts already communicated butneglects to make inquiries, the right of information is deemed waived underSection 33

FIELDMAN’S INSURANCE V. SONGCO 25 SCRA 70

FACTS:

HELD: Sec. 29. An intentional and fraudulent omission, on the part of one insured,to communicate information of matters proving or tending to prove thefalsity of a warranty, entitles the insurer to rescind. FACTS WHICH PROVE OR TEND TO PROVE FALSITY OF WARRANTY TO BE DISCLOSED • Although facts or matters concerning which the insured has made awarranty need not to be disclosed, the facts which prove or tend to prove afalsity of the warrant must be communicated or disclosed • An intentional and fraudulent omission to communicate said facts which proves or tends to prove the falsity of the warranty entitles the insurer to rescind Sec. 30. Neither party to a contract of insurance is bound to communicate information of the matters following, except in answer to the inquiries of the other: (a) Those which the other knows; (b) Those which, in the exercise of ordinary care, the other ought to know, and of which the former has no reason to suppose him ignorant; (c) Those of which the other waives communication;

(d) Those which prove or tend to prove the existence of a risk excluded by a warranty, and which are not otherwise material; and

(e) Those which relate to a risk excepted from the policy and which are not otherwise material.

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 theproposed contract, or in making his inquiries.

TEST OF MATERIALITY

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• Materiality is determined not by the event but by the probable or reasonable influence of the facts on the judgment of the parties in entering into an insurance contract

SUN LIFE V. COURT OF APPEALS 245 SCRA 268 FACTS: Bacani took an insurance policy on his life. He was issued Policy No. 3‐903‐766‐X valued at P100,000.00, with double indemnity in case of accidentaldeath. The designated beneficiary was his mother, respondent BernardaBacani. Insured Bacani died on a plane crash and his mother sought tocollect the proceeds of the policy but was denied on alleged concealmentdone by her son. Petitioner discovered that two weeks prior to insured’sapplication for insurance, he was diagnosed with renal failure and wassubject to dialysis, etc.

HELD: Section 26 of The Insurance Code is explicit in requiring a party to acontract of insurance to communicate to the other, in good faith, all factswithin his knowledge which are material to the contract and as to which hemakes no warranty, and which the other has no means of ascertaining. SaidSection provides: A neglect to communicate that which a party knows and ought to communicate, is called concealment. Materiality is to be determined not by the event, but solely by the probableand reasonable influence of the facts upon the party to whomcommunication is due, in forming his estimate of the disadvantages of theproposed contract or in making his inquiries (The Insurance Code, Sec. 31).The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his health. The information which the insured failed to disclose were material andrelevant to the approval and issuance of the insurance policy. The mattersconcealed would have definitely affected petitioner's action on hisapplication, either by approving it with the corresponding adjustment for ahigher premium or rejecting the same. Moreover, a disclosure may havewarranted a medical examination of the insured by petitioner in order for itto reasonably assess the risk involved in accepting the application. Anent the finding that the facts concealed had no bearing to the cause ofdeath of the insured, it is well settled that the insured need not die of thedisease he had failed to disclose to the insurer. It is sufficient that his non‐disclosure misled the insurer in forming his estimates of the risks of theproposed insurance policy or in making inquiries.

Sec. 32. Each party to a contract of insurance is bound to know all thegeneral causes which are open to his inquiry, equally with that of the other,and which may affect the political or material perils contemplated; and allgeneral usages of trade.

CONSTRUCTIVE NOTICE TO BOTH PARTIES OF ALL GENERAL CAUSES AND GENERAL USAGES OF TRADE

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1. The insured need not disclose public events such as that of a nation is atwar, or the laws and political conditions in other countries 2. He likewise need not communicate the general usages of trade like the customs pertaining to maritime matters Sec. 33. The right to information of material facts may be waived, either bythe terms of the insurance or by neglect to make inquiry as to such facts,where they are distinctly implied in other facts of which information iscommunicated.

WAIVER OF DISCLOSURE OF MATERIAL FACTS

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Sec. 83. An agreement not to transfer the claim of the insured against theinsurer after the loss has happened, is void if made before the loss exceptas otherwise provided in the case of life insurance.

TRANSFER OF INSURANCE CLAIM • A prohibition against the transfer of the claim after the loss is against public policy and therefore void because the rights of the parties are fixed after the loss, and the assignment is merely a transfer of a chose of action against the insurer • An exception to this is found in Section 173 which prohibits the transfer ofa fire insurance policy to any person or company who acts as an agent or otherwise represents the issuing company and declares such transfer void insofar as it may affect other creditors of the insured • Another exception is what is provided for in life insurance Sec. 84. Unless otherwise provided by the policy, an insurer is liable for aloss of which a peril insured against was the proximate cause, although aperil not contemplated by the contract may have been a remote cause ofthe loss; but he is not liable for a loss which the peril insured against wasonly a remote cause.

CAUSE OF LOSS OF INSURANCE • Take note that insurer is not liable if the peril insured against is just the remote cause

PROXIMATE CAUSE • In a natural and continuous sequence, unbroken by any efficient intervening cause, produces an injury and without which the injury would not have occurred • It is the efficient cause that others into motion, to which the loss is to be attributed although other and incidental causes may be nearer in time to the result and operate more immediately in producing the loss

Sec. 85. An insurer is liable where the thing insured is rescued from a perilinsured against that would otherwise have caused a loss, if, in the course ofsuch rescue, the thing is exposed to a peril not insured against, whichpermanently deprives the insured of its possession, in whole or in part; orwhere a loss is caused by efforts to rescue the thing insured from a perilinsured against.

PRINCIPLE OF PROXIMATE CAUSE EXTENDED TO LOSS INCURRED WHILE SAVING THE THING INSURED • An insurer is liable where while saving the property from the peril insuredagainst that would otherwise cause the loss, the thing insured is damaged • However where the loss took place not in the course of such rescue from the peril insured against, the insurer is not liable

Sec. 86. Where a peril is especially excepted in a contract of insurance, aloss, which would not have occurred but for such peril, is thereby exceptedalthough the immediate cause of the loss was a peril which was notexcepted.

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WHEN EXCEPTED PERIL IS THE PROXIMATE CAUSE • The insurer isn’t liable if the proximate cause is an excepted peril although the immediate peril is a peril not excepted • An immediate cause is the cause or condition nearest to the time and place of injury • Proximate cause is not equivalent to immediate cause • The insurer has the burden of proof is proving that cause is excepted

PARIS MANILA PERFUME V. PHOENIX ASSURANCE 45 PHIL 753 FACTS: Phoenix issued a fire insurance policy covering the properties of insured. Ona relevant date, a fire broke out and destroyed the properties of theinsured. The insured duly made a claim against Phoenix and was denied.One of the grounds asserted by Phoenix is that the policy was not in thename of the company but in Peril insured against Proximate cause of theloss Insurer is liable the name of one Peter Johnson. Another ground raisedis that the policy doesn't cover explosions. The trial court howeveroverruled its defenses and ruled in favor of the insured.

HELD: The factory where the fire occurred was filed with numerous kinds ofessences and oils used in the manufacture of perfumery and with aquantity of alcohol and manufactured perfumes, all of which were of ahighly inflammable nature, and the fire may have started from any one of anumber of reasons. But in the final analysis, the fact remains that therewas a fire, and that the plaintiffs property was destroyed. It is true that itmay be that the explosion was the primary cause of the fire, but that isonly a matter of conjecture, and upon that point, the burden of proof wasupon the defendant. It will be noted that section 5 of the subject policy excludes not only thedamages which may immediately result from an earthquake, but also anydamage which may follow the earthquake, and that section 6 excludes onlythe damages which are the direct result of the explosion itself, and that itdoes not except damages which occurred from the fire occuring after the

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explosion, even though the explosion may have been the primary cause ofthe fire. But assuming, without deciding, that if it be a fact that the fireresulted from an explosion that fact, if proven, would be a completedefense, the burden of the proof of that fact is upon the defendant, andupon that point, there is a failure of proof. There is no competent evidenceas to whether the explosion caused the fire or the fire caused theexplosion.

Sec. 87. An insurer is not liable for a loss caused by the willful act orthrough the connivance of the insured; but he is not exonerated by thenegligence of the insured, or of the insurance agents or others.

PRATS V. PHOENIX ASSURANCE 52 PHIL 807

FACTS: Prats and Company purchased a building on which it stored itsmerchandise. The building and merchandise were covered by severalinsurance policies and one of them was issued by Phoenix. A fire broke outand destroyed the building. Prats duly filed its claim but was denied on theground that the fire was caused by connivance of the insured with others aswell as the claim wasn't in good faith.

HELD: The insurance policy which was the subject of action in this case was heldto have been avoided by the connivance of the insured in setting fire to theinsured goods and the submission of the insured of fraudulent proof of loss.The finding of the trial court in the effect that the plaintiff had submittedfalse proof in the support of his claim is also well founded. That conclusionappears to have been based upon three items of proof. These two facts are,first, that the plaintiff had submitted a claim for jewelry lost in the fire as ofa value of P12,800 when the true value of said jewelry was about P600;and, secondly, that the plaintiff had sought to recover from the insurancecompany the value of goods which had been surreptitiously withdrawn by itfrom the bodega prior to the fire. Neither of these two facts are consistentwith good faith on the part of the plaintiff, and each constituted a breach ofthe stipulations of the policy against the use of fraudulent devices and falseproof with respect to the loss. The other point relied upon to support conclusion that the plaintiff hadattempted to deceive the defendant with respect to the extent of the losswas at least competent in its general bearing on the good faith of theplaintiff, even if, as is probably true, not alone sufficient to constitute abreach of the same stipulations. The point is this: After the fire the plaintiffpresented to the adjuster certain cost sheets and copies of supposedinvoices in which the prices and expenses of importation of a quantity ofgoods were stated at double the true amount. The adjuster soon discoveredthe artificial nature of these documents, and, with his consent, they werewithdrawn by Prats and subsequently destroyed. At the hearing Pratsstated that these documents had been fabricated in order that they might

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be exhibited to intending purchasers of the goods, thereby making itappear to them that the cost of the merchandise had been much greaterthan it in fact was a ruse which is supposed to have been entirely innocentor at least not directed against the insurer. But a question naturally arisesas to the purpose which these documents might have been made to serve ifthe fire, as doubtless intended by its designers, had been so destructive asto remove all vestiges of the stock actually involved. Upon the whole weare forced to state the conclusion, not only that the plaintiff caused the fireto be set, or connived therein, but also that it submitted fraudulent proof asthe trial judge found.

Sec. 88. In case of loss upon an insurance against fire, an insurer isexonerated, if notice thereof be not given to him by an insured, or someperson entitled to the benefit of the insurance, without unnecessary delay.

NOTICE OF LOSS MUST BE GIVEN WITHOUT UNNECESSARY DELAY • A notice of loss apprises the insurer of the occurence of the loss • Purpose is to enable the insurer to make proper investigation and takesuch action as may be necessary to protect its interest • No particular form is prescribed by law • There is no unnecessary delay if the notice is given as soon as thecircumstances permitted the insured, in the exercise of reasonable diligenceto communicate

BACHRACH V. BRITISH AMERICAN ASSURANCE HELD: Where the terms of an insurance policy require that notice of loss be given,a denial of liability by the insurers under the policy operates as a waiver ofnotice of loss because if the policy is null and void the furnishing of suchnotice would be vain and useless. Immediate notice means reasonabletime.

Sec. 89. When a preliminary proof of loss is required by a policy, theinsured is not bound to give such proof as would be necessary in a court ofjustice; but it is sufficient for him to give the best evidence which he has inhis power at the time.

Sec. 90. All defects in a notice of loss, or in preliminary proof thereof,which the insured might remedy, and which the insurer omits to specify tohim, without unnecessary delay, as grounds of objection, are waived.

MALAYAN INSURANCE V. ARNALDO Supra HELD: The last point raised by the petitioner should not pose much difficulty. Thevaluation fixed in fire insurance policy is conclusive in case of total loss inthe absence of fraud, which is not shown here. Loss and its amount may bedetermined on the basis of such proof as may be offered by the insured,

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which need not be of such persuasiveness as is required in judicialproceedings. If, as in this case, the insured files notice and preliminaryproof of loss and the insurer fails to specify to the former all the defectsthereof and without unnecessary delay, all objections to notice and proof ofloss are deemed waived under Section 90 of the Insurance Code. The certification issued by the Integrated National Police, Lao‐ang, Samar,as to the extent of Pinca's loss should be considered sufficient. Notably,MICO submitted no evidence to the contrary nor did it even question theextent of the loss in its answer before the Insurance Commission. It is alsoworth observing that Pinca's property was not the only building bumed inthe fire that razed the commercial district of Lao‐ang, Samar, on January18, 1982. There is nothing in the Insurance Code that makes theparticipation of an adjuster in the assessment of the loss imperative orindespensable, as MICO suggests.

PACIFIC BANK V. CA 168 SCRA 1

FACTS: 1. Paramount Shirts insured its properties against fire with Oriental Assurance. 2. Paramount was indebted to petitioner for a long time already. It washolding the same properties in trust in favor of petitioner under a trustagreement. 3. Oriental was duly furnished notice of this fact. It knew that the insuranceproceeds were payable to petitioner. 4. On a relevant date, a fire broke out and destroyed Paramount’s properties. 5. Petitioner filed with Oriental Assurance its claim but it was informed to wait as the latter was waiting for the assessor’s report on the matter. 6. The assessor reported that no claim was filed by Paramount which was allegedly a clear violation of the policy.

HELD: In the case at bar, policy condition No. 11 specifically provides that theinsured shall on the happening of any loss or damage give notice to thecompany and shall within fifteen (15) days after such loss or damagedeliver to the private respondent (a) a claim in writing giving particularaccount as to the articles or goods destroyed and the amount of the loss ordamage and (b) particulars of all other insurances, if any. Likewise, insuredwas required "at his own expense to produce, procure and give to thecompany all such further particulars, plans, specifications, books, vouchers,invoices, duplicates or copies thereof, documents, proofs and informationwith respect to the claim". The evidence adduced shows that twenty‐four (24) days after the fire,petitioner merely wrote letters to private respondent to serve as a notice ofloss, thereafter, the former did not furnish the latter whatever pertinentdocuments were necessary to prove and estimate its loss. Instead,petitioner shifted upon private respondent the burden of fishing out thenecessary information to ascertain the particular account of the articles

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destroyed by fire as well as the amount of loss. It is noteworthy thatprivate respondent and its adjuster notified petitioner that insured had notyet filed a written claim nor submitted the supporting documents incompliance with the requirements set forth in the policy. Despite the notice,the latter remained unheedful. Since the required claim by insured,together with the preliminary submittal of relevant documents had not beencomplied with, it follows that private respondent could not be deemed tohave finally rejected petitioner's claim and therefore the latter's cause ofaction had not yet arisen. Compliance with condition No. 11 is arequirement sine qua non to the right to maintain an action as prior theretono violation of petitioner's right can be attributable to private respondent.This is so, as before such final rejection, there was no real necessity forbringing suit. Petitioner should have endeavored to file the formal claim andprocure all the documents, papers, inventory needed by private respondentor its adjuster to ascertain the amount of loss and after compliance awaitthe final rejection of its claim. Indeed, the law does not encourageunnecessary litigation. It appearing that insured has violated or failed to perform the conditionsunder No. 3 and 11 of the contract, and such violation or want ofperformance has not been waived by the insurer, the insured cannotrecover, much less the herein petitioner.

Sec. 91. Delay in the presentation to an insurer of notice or proof of loss iswaived if caused by any act of him, or if he omits to take objectionpromptly and specifically upon that ground.

PACIFIC TIMBER V. CA Supra HELD: The defense of delay as raised by private respondent in resisting the claimcannot be sustained. The law requires this ground of delay to be promptlyand specifically asserted when a claim on the insurance agreement ismade. The undisputed facts show that instead of invoking the ground ofdelay in objecting to petitioner's claim of recovery on the cover note, ittook steps clearly indicative that this particular ground for objection to theclaim was never in its mind. The nature of this specific ground for resistinga claim places the insurer on duty to inquire when the loss took place, sothat it could determine whether delay would be a valid ground upon whichto object to a claim against it. In the proceedings that took place later in the Office of the InsuranceCommissioner, private respondent should then have raised this ground ofdelay to avoid liability. It did not do so. It must be because it did not findany delay, as this Court fails to find a real and substantial sign thereof. Buteven on the assumption that there was delay, this Court is satisfied andconvinced that as expressly provided by law, waiver can successfully beraised against private respondent. Thus Section 84 of the Insurance Actprovides: Section 84. Delay in the presentation to an insurer of notice orproof of loss is waived if caused by any act of his or if he omits to takeobjection promptly and specifically upon that ground.

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Sec. 92. If the policy requires, by way of preliminary proof of loss, thecertificate or testimony of a person other than the insured, it is sufficientfor the insured to use reasonable diligence to procure it, and in case of therefusal of such person to give it, then to furnish reasonable evidence to theinsurer that such refusal was not induced by any just grounds of disbelief inthe facts necessary to be certified or testified.

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