insurance edited 001-020

8/19/2019 Insurance Edited 001-020

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DLSU Commercial Law Review Digest G02(2015-2016)

01 and 14 Gaisano Cagayan, Inc. vs. Insurance Co. of North America

G.R. No. 1478!" #une 8, $00%

&'(IC) Interoretation of a contract" insura*+e interest" su*rogation('NN&) A-&RIA/AR&IN, J.

2'C&RIN:

* It is well-settled that when the words of a contract are plain and readily understood, there is no room for construction

* Section 13 of our Insurance Code defines insurable interest as “eery interest in property, whether real or personal,any relation thereto, or liability in respect thereof, of such nature that a contemplated peril mi!ht directly damnify insured." #arenthetically, under Section 1$ of the same Code, an insurable interest in property may consist in: %a& e'istin! interest( %b& an inchoate interest founded on e'istin! interest( or %c& an e'pectancy, coupled with an e'istiinterest in that out of which the e'pectancy arises.

* )nyone has an insurable interest in property who deries a benefit from its e'istence or would suffer loss from destruction.

3AC&) Intercapitol ar+etin! Corporation %IC& is the ma+er of ran!ler lue eans. /ei Strauss %#hils.& Inc. %/Sthe local distributor of products bearin! trademar+s owned by /ei Strauss 0 Co.

IC and /S#I separately obtained from respondent fire insurance policies with boo+ debt endorsements. he insupolicies proide for coera!e on 2boo+ debts in connection with ready-made clothin! materials which hae been sodeliered to arious customers and dealers of the Insured anywhere in the #hilippines.2 &he o+icies defined *oo5 as the 6unaid account sti++ aearing in the oo5 of Account of the Insured 4 days after the time of thecovered under this (o+icy.6 he policies also proide for the followin! conditions:

1. Warranted that the Company shall not be liable for any unpaid account in respect of the merchandise sold and delivered bInsured which are outstanding at the date of loss for a period in excess of six (6) months from the date of the covering inor actual delivery of the merchandise whichever shall first occur.

2. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of every calendar month all amshown in their books of accounts as unpaid and thus become receivable item from their customers and dealers. x x x

#etitioner aisano Ca!ayan, Inc. is a customer and dealer of the products of IC and /S#I. 4n 5ebruary 67, 188aisano Superstore Comple' in Ca!ayan de 4ro City, owned by petitioner, was consumed by fire. Included in the lost or destroyed in the fire were stoc+s of ready-made clothin! materials sold and deliered by IC and /S#I.

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9espondent insuranc company filed a complaint for dama!es a!ainst petitioner. It alle!es that IC and /S#I filedrespondent their claims under their respectie fire insurance policies with boo+ debt endorsements( that the u

accounts of petitioner on the sale and deliery of ready-made clothin! materials with IC was #6,118,67. while/S#I it was #737,;13.( that respondent paid the claims of IC and /S#I and, by irtue thereof, respondensubro!ated to their ri!hts a!ainst petitioner( that respondent made seeral demands for payment upon petitioner but went unheeded.

#etitioner contends that it could not be held liable because the property coered by the insurance policies were destdue to fortuitious eent or force mas complaint. C) reersed 9C>s decision.

I-:1. hether or not IC and /S#I>s fire insurance policies on boo+ debts coer the unpaid accounts of such companienot


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!". 1#$%. &nless otherwise a'reed the 'oods remain at the sellers risk until the ownership therein is transferred tbuyer but when the ownership therein is transferred to the buyer the 'oods are at the buyers risk whether actual dehas been made or not except that*

(1) Where delivery of the 'oods has been made to the buyer or to a bailee for the buyer in pursuance of the contracthe ownership in the 'oods has been retained by the seller merely to secure performance by the buyer of his obli'aunder the contract the 'oods are at the buyers risk from the time of such delivery+ %@mphasis supplied&

' ' ' '

&hus,


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oreoer, it must be stressed that the insurance in this case is not for +oss of goods *y fire *ut for etitioaccounts


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0$ 3IR& 3I9/IN 9N2ING C'R('RA&I'N, petitioner, vs. G9'RIA 2. (A2I99', respondent.G.R. No. 1%0 #anuary 1$, $00&oic) Interpretation of a contract or a!reement(onente) :NAR/AN&IAG', #.

2'C&RIN) hen the terms of the a!reement are clear and e'plicit that they do not


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ineBuitable or harsh. hey are applied by the court merely to resole doubts and ambi!uities within theframewor+ of the a!reement.

he lower court and the C) mistoo+ the /oan ransactions Summary for the Hisclosure Statement. he former was prepared e'clusiely by petitioner and merely summariFes the payments made by respondent and theincome earned by petitioner. here was no mention of any interest rates and hain! been prepared e'clusielyby petitioner, the same is self serin!. 4n the contrary, the Hisclosure Statements were si!ned by both partiesand cate!orically stated that interest rates were to be imposed annually, not monthly.

)s such, since the terms and conditions contained in the promissory notes and disclosure statements are clear and unambi!uous, the same must be !ien full force and effect. he e'pressed intention of the parties as laiddown on the loan documents controls.

Eotably, petitioner een admitted that it was solely responsible for the preparation of the loan documents, andthat it failed to correct the pro forma note p.a. to per month. Since the mista+e is e'clusiely attributed topetitioner, the same should be char!ed a!ainst it. his unilateral mista+e cannot be ta+en a!ainst respondentwho merely affi'ed her si!nature on the pro forma loan a!reements. )s between two parties to a written

a!reement, the party who !ae rise to the mista+e or error in the proisions of the same is estopped fromassertin! a contrary intention to that contained therein. he chec+s issued by respondent do not clearly andconincin!ly proe that the real intent of the parties is to apply the interest rates on a monthly basis. )bsent anyproof of ice of consent, the promissory notes and disclosure statements remain the best eidence to ascertainthe real intent of the parties.

he same promissory note proides that x x x any and all remainin' amount due on the principal upon maturity hereof shall earn interest at the rate of from date of maturity until fully paid . he C) thus properly imposedthe le!al interest of 16K per annum from the time the loans matured until the same has been fully paid on5ebruary 6, 1888. )s decreed in @astern Shippin! /ines, Inc. . Court of )ppeals, in the absence of stipulation,the rate of interest shall be 16K per annum to be computed from default.

2I('I&I) G@9@549@, in iew of the fore!oin!, the 4ctober 1;, 63 decision of the Court of )ppeals inC)-.9. C Eo. ?71J3 is )55I9@H with the 4HI5IC)I4E that the interest rates on the uly 66, 188? andSeptember ?, 188? loan obli!ations of respondent loria H. #adillo from petitioner 5irst 5il-Sin /endin!Corporation be imposed and computed on a per annum basis, and upon their respectie maturities, the interestrate of 16K per annum shall be imposed until full payment. In addition, the penalty at the rate of 16K per annumshall be imposed on the outstandin! obli!ations from date of default until full payment. S4 49H@9@H.

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0 a+ayan Insurance Cor. vs. CAG.R. No. 11!!!, arch $0, 1!!7&'(IC) Interpretation of the #roisions of an Insurance Contract( )ll 9is+ arine Insurance #olicy('NN&) 9omero .

2'C&RIN)* )ny construction of a marine policy renderin! it oid should be aoided. Such policies will, therefore, beconstrued strictly a!ainst the company in order to aoid a forfeiture, unless no other result is possible from thelan!ua!e used. If a marine insurance company desires to limit or restrict the operation of the !eneral proisionsof its contract by special proiso, e'ception, or e'emption, it should e'press such limitation in clear andunmista+able lan!ua!e.

* arine insurance deeloped as an all-ris+ coera!e usin! the phrase “perils of the sea" to encompass the wideand aried ran!e of ris+s that were coered.

* @'ceptions to the !eneral coera!e are construed most stron!ly a!ainst the company.

* Indemnity and liability insurance policies are construed in accordance with the !eneral rule of resolin! anyambi!uity therein in faor of the insured, where the contract or policy is prepared by the insurer. ) contract of insurance, bein! a contract of adhesion, par e'cellence, any ambi!uity therein should be resoled a!ainst theinsurer( in other words, it should be construed liberally in faor of the insured and strictly a!ainst the insurer./imitations of liability should be re!arded with e'treme


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R-9ING) he resolution of this controersy hin!es on the interpretation of the 2#erils2 clause of the sub


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It has *een he+d that a strained interretation


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04 RA3A9 ?RE@ RN2IA, etitioner, vs. CA F 3I29I&: F -R&: C'. '3 & (I9I((IN,resondents.G.R. No. 7%0 #anuary $$, 1!!&oic) Eature of an Insurance contract(onente) e+o, #.

2'C&RIN) asically a contract of indemnity, an insurance contract is the law between the parties. Its termsand conditions constitute the measure of the insurer>s liability and compliance therewith is a condition precedentto the insured>s ri!ht to recoery from the insurer. )s it is also a contract of adhesion, an insurance contractshould be liberally construed in faor of the insured and strictly a!ainst the insurer company, which usuallyprepares it.

3AC&) he 6 consolidated cases inoled herein stemmed from the issuance by respondent 5idelity andSurety Insurance Company of its 5ire Insurance #olicy effectie between une 63, 18J and une 63, 18J1

coerin! 9afael erendia=s residential buildin! in the amount of #3J7,.. Hesi!nated as beneficiary was theonte de #iedad 0 Sain!s an+. #etitioner erendia also insured the same buildin! with two other companies,namely, he Country an+ers Insurance for #7;,. under #olicy e'pirin! on ay 16, 18J1, and heHeelopment Insurance for #$,. under #olicy e'pirin! on une 3, 18Jl.

hile the 3 fire insurance policies were in force, the insured property was completely destroyed by fire onHecember 6J, 18J. 5idelity was accordin!ly informed of the loss and despite demands, refused payment under its policy. hus, erendia filed a complaint with C5I prayin! for payment of #3J7,., with le!al interest. hecomplaint was later amended to include onte de #iedad as an 2unwillin! defendant2.

5idelity aerred that the policy was aoided by reason of oer-insurance( that erendia maliciously representedthat the buildin! at the time of the fire was leased under a contract e'ecuted on une 67, 18J to a certain9oberto arcia, when actually it was a arcelo arcia who was the lessee.

he 9C ruled in faor of 5idelity. he trial court ruled that #ara!raph 3 of the policy was also iolated byerendia in that the insured failed to inform 5idelity of his other insurance coera!es with Country an+ersInsurance and Heelopment Insurance. he C) reersed the 9C decision for the followin! reasons: %a& therewas no misrepresentation concernin! the lease for the contract was si!ned by arcelo arcia in the name of 9oberto arcia( and %b& #ara!raph 3 of the policy contract reBuirin! erendia to !ie notice to 5idelity of other

contracts of insurance was waied by 5idelity as shown by its conduct in attemptin! to settle the claim of erendia.

I-)

1. hether the contract of lease submitted by erendia to support his claim on the fire insurance policyconstitutes a false declaration which would forfeit his benefits under Section 13 of the policy. Les.

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6. hether in submittin! the subro!ation receipt in eidence, 5idelity had in effect a!reed to settle erendia=sclaim in the amount stated in said receipt. Eo.

R-9ING)

1. Les. he contract of lease upon which erendia relies to support his claim for insurance benefits, was enteredinto between him and one 9obert arcia, a couple of days after the effectiity of the insurance policy. hen therented residential buildin! was raFed to the !round on Hecember 6J, 18J, it appears that 9obert arcia %or 9oberto arcia& was still within the premises. Goweer, accordin! to the inesti!ation report prepared by #at.@leuterio . uenia


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presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract, heforfeited all benefits therein by irtue of Section 13 of the policy in the absence of proof that 5idelity waied suchproision. orse yet, by presentin! a false lease contract, erendia, reprehensibly disre!arded the principle thatinsurance contracts are uberrimae fidae and demand the most abundant !ood faith.

here is also no reason to conclude that by submittin! the subro!ation receipt as eidence in court, 5idelitybound itself to a 2mutual a!reement2 to settle erendia=s claims in consideration of the amount of #1$6,;J7.??.hile the said receipt appears to hae been a filled-up form of 5idelity, no representatie of 5idelity had si!nedit. It is een incomplete as the blan+ spaces for a witness and his address are not filled up. ore si!nificantly, thesame receipt states that erendia had receied the aforesaid amount. Goweer, that erendia had not receiedthe amount stated therein, is proen by the fact that erendia himself filed the complaint for the full amount of #3J7,. stated in the policy. It mi!ht be that there had been efforts to settle erendia=s claims, but surely,the subro!ation receipt by itself does not proe that a settlement had been arried at and enforced. hus, tointerpret 5idelity=s presentation of the subro!ation receipt in eidence as indicatie of its accession to its 2terms2

is not only wantin! in rational basis but would be substitutin! the will of the Court for that of the parties.

2I('I&I ('R&I'N) G@9@549@, the petition in .9. Eo. ?7;7 is HISISS@H. he petition in .9. Eo.?;388 is 9)E@H and the decision of the then Intermediate )ppellate Court under reiew is 9@@9S@H andS@ )SIH@ and that of the trial court is hereby 9@IES)@H and A#G@/H.

0 and 1! NB 9I3 N&R(RI and #-9IAN :, etitioners, vs. CA, H-I&A9 IN-RANCC'R('RA&I'N, R9IANC -R&: AN2 IN-RANC C'., INC. and B&RN G-ARAN&:C'R('RA&I'N, resondents.

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G.R. No. !4071" arch 1, 1!!$&oic) Co-insuranceO 9ule on construction %Contract of Insurance&( theory of imputed +nowled!e(onente) 9@)/)H4,;*

2'C&RIN)* he insured is specifically reBuired to disclose to the insurer any other insurance and its particulars, which hemay hae effected on the same sub


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he terms of the contract are clear and unambi!uous. he insured is specifically reBuired to disclose to theinsurer any other insurance and its particulars which he may hae effected on the same sub


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0% 2I'2A2' C. &:, +aintiff/ae++ant, vs. 3I9I(INA C'(AIA 2 G-R', et a+., defendants/ae++ees.G.R. No. 9/$18$1/$$ and 9/$18$4/$7 " ay 1, 1!%%

&oic) Interpretation of an insurance contract( personal accident policies(onente) ARRRA, #.

2'C&RIN) he a!reement contained in the insurance policies is the law between the parties. )s the terms of the policies are clear, the Court cannot !o beyond the clear and e'press conditions of the insurance policies.

here the insurance policies define partial disability as loss of either hand by amputation throu!h the bones of

the wrist, the insured cannot recoer under said policies for temporary disability of his left hand caused by the

fractures of some fin!ers. he proision is clear enou!h to inform the party enterin! into that contract that the

loss to be considered a disability entitled to indemnity, must be seerance or amputation of that affected member

of the body of the insured.

3AC&)#etitioner Hiosdado y was an employee of roadway Cotton 5actory, wor+in! as mechanic operator. #etitioner too+ #ersonal )ccident #olicies from seeral insurance companies( amon! them were the 9espondents herein.

Hurin! the effectiity of these policies, a fire bro+e out in the factory where plaintiff was wor+in!. )s he was tryin!

to put out said fire with the help of a fire e'tin!uisher, a heay ob


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he a!reement contained in the insurance policies is the law between the parties. )s the terms of the policies

are clear, e'press and specific that only amputation of the left hand should be considered as a loss thereof, an

interpretation that would include the mere fracture or other temporary disability not coered by the policies would

certainly be unwarranted. he proision is clear enou!h to inform the party enterin! into that contract that theloss to be considered a disability entitled to indemnity, must be seerance or amputation of that affected member

from the body of the insured.

2I('I&I ('R&I'N) herefore, findin! no error in the decision appealed from, the same is herebyaffirmed, without costs. So ordered.

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07 and $ G-93 R'R&, INC., etitioner, vs. (I9I((IN CAR&R IN-RANC C'R('RA&I'N,resondent.G.R. No. 1%1%7 ay 1%, $00&oic) Interpretation of insurance policy( contract of insurance( contract of adhesion rule(onente) (uno, #.

2'C&RIN)JIt is basic that all the proisions of the insurance policy should be e'amined and interpreted in consonance witheach other. )ll its parts are reflectie of the true intent of the parties. he policy cannot be construed piecemeal.Certain stipulations cannot be se!re!ated and then made to control( neither do particular words or phrasesnecessarily determine its character. * ) contract of insurance is an a!reement whereby one underta+es for a consideration to indemnify another a!ainst loss, dama!e or liability arisin! from an un+nown or contin!ent eent.* )n insurance premium is the consideration paid an insurer for underta+in! to indemnify the insured a!ainst aspecified peril.* ) contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract,while the other party merely affi'es his si!nature or his “adhesion" thereto( ConseBuently, any ambi!uity thereinis resoled a!ainst the insurer, or construed liberally in faor of the insured. he Supreme Court will only rule outblind adherence to terms where facts and circumstances will show that they are basically one-sided.

PPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPP 3AC&) #etitioner ulf 9esorts Inc. is the owner of the #laFa 9esort. It had its properties in said resort insured ori!inallywith the )merican Gome )ssurance Company %)G)C-)IA&. In the first four insurance policies issued by )G)C-

)IA, the ris+ of loss from earthBua+e shoc+ was e'tended only to petitioner>s two swimmin! pools. #etitioner then a!reed to insure with respondent #hil. Charter Insurance Corp. %#CIC& the properties coered by )G)C%)IA& #olicy proided that the policy wordin! and rates in said policy be copied in the policy to be issued byrespondent. 9espondent then issued #olicy Eo. 318$$ to plaintiff coerin! the period of arch 1$, 188 toarch 1$, 1881.

he brea+-down of premiums shows that petitioner paid only #383. as premium a!ainst earthBua+e shoc+. In#olicy Eo. 318$$ issued by #CIC, the shoc+ endorsement proide: In consideration of the payment by the

insured to the company of the sum included additional premium the Company a'rees notwithstandin' what isstated in the printed conditions of this policy due to the contrary that this insurance covers loss or dama'e toshock to any of the property insured by this olicy occasioned by or throu'h or in conseuence of earthuake.

4n uly 1;, 188 an earthBua+e struc+ Central /uFon and Eorthern /uFon. #etitioner>s properties coered by#olicy Eo. 318$$ issued by #CIC includin! the two swimmin! pools in its )!oo #laya 9esort were dama!ed.

#etitioner then filed its claim or formal demand for settlement of the dama!e to all its properties in the )!oo#laya 9esort. Goweer, respondent denied petitioner>s claim on the !round that its insurance policy onlyafforded earthBua+e shoc+ coera!e to the two swimmin! pools of the resort. #etitioner and respondent failed toarrie at a settlement. hus, petitioner filed a complaint with the 9C.

he 9C ruled in faor of the respondent rulin! that that petitioner paid only a premium of #383. a!ainst the

peril of earthBua+e shoc+, the same premium it paid a!ainst earthBua+e shoc+ only on the two swimmin! poolsin all the policies issued by )G)C %)IA&. he endorsement rider means that only the two swimmin! pools wereinsured a!ainst earthBua+e shoc+. he C) affirmed the 9C decision.

#etitioner aers that, pursuant to its earthBua+e shoc+ endorsement rider %which states “this insurance coersloss or dama!e to any of the property insured by this #olicy occasioned by or throu!h or in conseBuence of @arthBua+e."&, Insurance #olicy Eo. 318$$ coers all dama!es to the properties within its resort caused byearthBua+e. 9espondent, howeer, contends that the rider limits its liability for loss to the two swimmin! pools of petitioner.

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I-) hether under respondent>s Insurance #olicy Eo. 318$$, only the two %6& swimmin! pools, rather thanall the properties coered thereunder, are insured a!ainst the ris+ of earthBua+e shoc+. Les.

R-9ING:It is basic that all the proisions of the insurance policy should be e'amined and interpreted in consonance witheach other. )ll its parts are reflectie of the true intent of the parties. he policy cannot be construed piecemeal.Certain stipulations cannot be se!re!ated and then made to control( neither do particular words or phrasesnecessarily determine its character. #etitioner cannot focus on the earthBua+e shoc+ endorsement to thee'clusion of the other proisions. )ll the proisions and riders, ta+en and interpreted to!ether, indubitably showthe intention of the parties to e'tend earthBua+e shoc+ coera!e to the two swimmin! pools only.

A carefu+ eamination of the remium recaitu+ation s preious insurance policiesfrom )G)C-)IA.

#etitioner also cited and relies on the attachment of the phrase ther Insurance Clause "yphoon:ndorsement :arthuake 9hock :ndorsement :xtended Covera'e :ndorsement ?: Warranty @ nnual

ayment 'reement on 5on' "erm oliciesL

to the insurance policy as proof of the intent of the parties to e'tendthe coera!e for earthBua+e shoc+. Goweer, this phrase is merely an enumeration of the descriptie titles of theriders, clauses, warranties or endorsements to which the policy is subs policy. ConseBuently, we cannot apply the 2f ine print2 or 2contract of adhesion2 rule in this case as the parties intent to limit the coera!e of the policy to the two swimmin! pools onlyis not ambi!uous.

2I('I&I) IE I@ G@9@45, the


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08 I'N 2 9A CR-, +aintiff/ae++ee v. & CA(I&A9 IN-RANC F -R&: C'. INC. defendant/ae++ant.G.R. No. 9/$174 #une 0, 1!%%&oic) eanin! of “accident" and “accidental2( 9ule as to death or ins foresi!ht or e'pectationQan eent that proceeds from an un+nown cause, or is an unusual effect of a +nown cause and,therefore, not e'pected.

* he !enerally accepted rule is that death or ins oluntary act, unaccompanied by anythin!unforeseen e'cept the death or in


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he terms 2accident2 and 2accidental2, as used in insurance contracts, hae not acBuired any technical meanin!,and are construed by the courts in their ordinary and common acceptation. hus, the terms hae been ta+en tomean that which happen by chance or fortuitously, without intention and desi!n, and which is une'pected,unusual, and unforeseen. )n accident is an eent that ta+es place without one=s foresi!ht or e'pectation Q aneent that proceeds from an un+nown cause, or is an unusual effect of a +nown cause and, therefore, note'pected.

Capital Insurance howeer, would li+e to ma+e a distinction between 2accident or accidental2 and 2accidentalmeans2, which is the term used in the insurance policy inoled here. It is ar!ued that to be considered within theprotection of the policy, what is reBuired to be accidental is the means that caused or brou!ht the death and notthe death itself. It may be mentioned in this connection, that the tendency of court decisions in the Anited Statesin recent years is to eliminate the fine distinction between the terms 2accidental2 and 2accidental means2 and toconsider them as le!ally synonymous. ut, een if we ta+e Capital Insurance=s theory, the death of the insured inthe case at bar would still be entitled to indemnification under the policy. &he genera++y acceted ru+e is that,death or in=ury does not resu+t from accident or accidenta+ means s vo+untary act, unaccomanied *y anything unforeseen ecet

the death or in=ury. &here is no accident


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0! eirs of 9oreto C. aramag vs. va erna 2e GuMmanG.R. No. 1811$, #une , $00!&oic) ho can be beneficiaries of an insurance policy( entitlement to insurance proceeds" insurable interest

(onente) NAC-RA, #.2'C&RIN)* )rticle 611 of the Ciil Code e'pressly proides that insurance contracts shall be !oerned by special laws(

i.e., the Insurance Code.

J #roceeds of an insurance policy belon! e'clusiely to the beneficiary and not to the estate of the person whoselife was insured. )ny person who is forbidden from receiin! any donation under )rticle ?38 cannot be named

beneficiary of a life insurance policy of the person who cannot ma+e any donation to him.

eneral 9ule: he only persons entitled to claim the insurance proceeds are either the insured, if still alie( or

the beneficiary, if the insured is already deceased, upon the maturation of the policy.

@'ception: situation where the insurance contract was intended to benefit third persons who are not parties to

the same in the form of faorable stipulations or indemnity. In such a case, third parties may directly sue and

claim from the insurer.

* Eo le!al proscription e'ists in namin! as beneficiaries the children of illicit relationships by the insured.

3AC&)#etitioners %wife and children& are the le!itimate heirs of /oreto %deceased&. hey were not named as

beneficiaries in the insurance policies issued by Insular and repalife. /oreto named @a %concubine of /oreto&

and 4dessa, Marl rian, and risha )n!elie %ille!itimate children& as the beneficiaries.

#etitioners filed a petition for reocation andOor reduction of insurance proceeds for bein! oid andOor inofficious,

with prayer for a 94 and a writ of preliminary in claim is that @a, bein! a concubine of /oreto

and a suspect in his murder, is disBualified from bein! desi!nated as beneficiary of the insurance policies, andthat @a>s children with /oreto, bein! ille!itimate children, are entitled to a lesser share of the proceeds of the

policies. hey also ar!ued that pursuant to Section 16 of the Insurance Code, @a>s share in the proceeds

should be forfeited in their faor, the former hain! brou!ht about the death of /oreto. hus, they prayed that the

share of @a and portions of the shares of /oreto>s ille!itimate children should be awarded to them, bein! the

le!itimate heirs of /oreto entitled to their respectie le!itimes.

In answer, Insular alle!ed the followin!: that the complaint or petition failed to state a cause of action because

/oreto reo+ed her desi!nation as such in #olicy Eo. )17$$? and it disBualified her in #olicy Eo.

)1;8368( and insofar as it sou!ht to declare as inofficious the shares of 4dessa, Marl rian, and risha

)n!elie, considerin! that no settlement of /oreto>s estate had been filed nor had the respectie shares of the

heirs been determined. Insular further claimed that it was bound to honor the insurance policies desi!natin! the

children of /oreto with @a as beneficiaries pursuant to Section 73 of the Insurance Code. It also alle!ed that

/oreto misrepresented @a %concubine of /oreto& as his le!itimate wife and 4dessa, Marl rian, and risha

)n!elie %ille!itimate children& as his le!itimate children on his Insular Insurance #olicy.

repalife alle!ed that @a was not desi!nated as an insurance policy beneficiary( that the claims filed by

4dessa, Marl rian, and risha )n!elie were denied because /oreto was ineli!ible for insurance due to a

misrepresentation in his application form that he was born on Hecember 1, 183; and, thus, not more than ;7

years old when he si!ned it in September 61( that the case was premature, there bein! no claim filed by the

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le!itimate family of /oreto( and that the law on succession does not apply where the desi!nation of insurance

beneficiaries is clear.

oth Insular and repalife countered that the insurance proceeds belon! e'clusiely to the desi!natedbeneficiaries in the policies, not to the estate or to the heirs of the insured. repalife also reiterated that it had

disBualified @a as a beneficiary when it ascertained that /oreto was le!ally married to icenta #an!ilinan

arama!.

I-) hether the petitioners %le!itimate heirs& can !et proceeds from the insurance policiesN Eo.#etitioners are third parties to the insurance contracts with Insular and repalife and, thus, are not entitled to the

proceeds thereof.

R-9ING) It is eident from the face of the complaint that petitioners are not entitled to a faorable


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010 '-&RN 9-'N (9':> A'CIA&I'N, +aintiff, vs. #-ANI&A G'9(', & A9.,defendantsG.R. No. 9/%114 'cto*er 0, 1!4&oic) Insurance-eneficiaries(onente) (ARA, C.J.

2'C&RIN) ) common law wife of the insured who has a le!al wife is disBualified as beneficiary. It is not reBuired that therebe a preious coniction for adultery or concubina!e for the prohibition to apply. his disBualification, howeer,certainly do not apply to the children of common law wife li+ewise named beneficiaries by the deceased. )s amatter of a fact the new Ciil Code reco!niFed certain successional ri!hts of ille!itimate children.

3AC&)Southern /uFon @mployees= )ssociation is composed of laborers and employees of /a!una tayabas us Co.,and atan!as ransportation Company, and one of its purposes is mutual aid of its members and their defendants in case of death. 9oman ). Concepcion was a member until his death on Hecember 13, 187. In theform reBuired by the association to be accomplished by its members, with reference to the death benefit, 9oman

). Concepcion listed as his beneficiaries )Builina aloles %common law wife&, 9oman . Concepcion, r., @stela

. Concepcion, 9olando . Concepcion and 9obin . Concepcion %ille!itimate children&.

)fter the death of 9oman ). Concepcion, the association was able to collect oluntary contributions from itsmembers amountin! to #6,77. hree sets of claimants presented themseles, namely, %1& uanita olpeo, le!alwife of 9oman ). Concepcion, and her children( %6& )Builina aloles, common law wife of 9oman ).Concepcion, and her children, named beneficiaries by the deceased( and %3& @lsie Gicban, another common lawwife of 9oman ). Concepcion, and her child.

he plaintiff association was accordin!ly constrained to institute in the C5I of /a!una the present action for interpleadin! a!ainst the three conflictin! claimants as defendants. arcelino and osefina Concepcion, childrenof the deceased 9oman ). Concepcion with uanita olpeo, interened in their own ri!hts, ali!nin! themseleswith the defendants, uanita olpeo and her minor children. )fter hearin!, the court rendered a decision,declarin! the defendants )Builina aloles and her children the sole beneficiaries of the sum of #6,77. , andorderin! the plaintiff to delier said amount to them. 5rom this decision only the defendants uanita olpeo andher minor children and the interenors arcelino and osefina Concepcion hae appealed to this court.

I-) ho are the lawful beneficiaries of 9oman, the deceasedN &he common +a<


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It is ar!ued for the appellants, howeer, that the Insurance /aw is not applicable because the plaintiff is a mutualbenefit association as defined in section 1;6J of the 9eised )dministratie Code. his ar!ument eidentlyi!nore the fact that the trial court has not considered the plaintiff as a re!ular insurance company but merelyruled that the death benefit in Buestion is analo!ous to an insurance. oreoer, section 1;6J of the 9eised

)dministratie Code defines a mutual benefit association as one, amon! others, 2proidin! for any method of accident or life insurance amon! its members out of dues or assessments collected from the membership.2 hecomparison made in the appealed decision is, therefore, well ta+en.

)ppellant also contend that the stipulation between the plaintiff and the deceased 9oman ). Concepcionre!ardin! the specification of the latter=s beneficiaries, and the resolution of September 1?, 18$8, are oid for thebein! contrary to law, moral or public policy. Specifically, the appellants cite article 616 of the new Ciil Codeproidin! that 2)ny person who is forbidden from receiin! any donation under article ?38 cannot be namedbeneficiary of a life insurance policy and by the person who cannot ma+e any donation to him, accordin! to saidarticle.2

Inasmuch as, accordin! to article ?38 of the new Ciil Code, a donation is oid when made 2between personswho are !uilty of adultery or concubina!e at the time of the donation,2 it is alle!ed that the defendant-appellee

)Builina aloles, cannot be named a beneficiary, een assumin! that the insurance law is applicable. ithoutconsiderin! the intimation in the brief for the defendant appellees that appellant uanita olpeo, by her silenceand actions, had acBuiesced in the illicit relations between her husband and appellee )Builina aloles,appellant>s ar!ument would certainly not apply to the children of )Builina li+ewise named beneficiaries by thedeceased 9oman ). Concepcion. )s a matter of a fact the new Ciil Code reco!niFed certain successional ri!htsof ille!itimate children. %)rticle 6J?.&

2I('I&I ('R&I'N) WH!"#!, the petition is hereby $ffirmed.

D -ote* he common law wife, )Builina, was held to be entitled also to the proceeds because appellant uanita

olpeo, by her silence and actions, had acBuiesced in the illicit relations between her husband and appellee

)Builina aloles. he SC also affirmed the C5I>s decision that defendants )Builina aloles and her children the

sole beneficiaries of the sum of #6,77..

D 9@L@S, . . /., ., concurrin!:

I concur in the result for the reason that the contract here invo+ved


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11 da. de Consuegra v. GIGR. No. 9/$80! P 0 #anuary 1!71&oic) /ife Insurance and 9etirement Insurance( eneficiaries (onente) a+divar, #.

2'C&RIN)

%1& Hesi!nation of beneficiaries in life insurance differs from that in retirement insurance.

%6& eneficiaries in life insurance.Q

In the case of the proceeds of a life insurance, the same are paid to whoeer is named the beneficiary inthe life insurance policy. )s in the case of life insurance proided for in the Insurance )ct %)ct 6$6?, asamended&, the beneficiary in a life insurance under the SIS may not necessarily be an heir of theinsured. he insured in a life insurance may desi!nate any person as beneficiary unless disBualified tobe so under the proisions of the Ciil Code. )nd in the absence of any beneficiary named in the life

insurance policy, the proceeds of the insurance will !o to the estate of the insured.

%3& eneficiaries in retirement insurance.Q

9etirement insurance is primarily intended for the benefit of the employeeQto proide for his old a!e, or incapacity, after renderin! serice in the !oernment for a reBuired number of years. If the employeereaches the a!e of retirement, he !ets the retirement benefits een to the e'clusion of the beneficiary or beneficiaries named in his application for retirement insurance. he beneficiary of the retirementinsurance can only claim the proceeds of the retirement insurance if the employee dies beforeretirement. If the employee failed or -oerloo+ed to state the beneficiary of his retirement insurance, theretirement benefits will accrue to his estate and will be !ien to his le!al heirs in accordance with law, asin the case of a life insurance if no beneficiary is named in the insurance policy.

3AC&)

ose Consue!ra was employed as a shop foreman of the office of the Histrict @n!ineer in the proince of Suri!ao del Eorte. In his lifetime, Consue!ra contracted two marria!es: %1& the first, with 9osario HiaF( and thesecond, which was contracted in !ood faith while the first marria!e was subsistin!, with asilia erdin. ein! amember of SIS, when Consue!ra died, the proceeds of his life insurance were paid by the SIS to asilia andher children who were the beneficiaries named in the policy. Gain! been in the serice of the !oernment for 66.76J years, Consue!ra was entitled to retirement insurance benefits in the sum of #;,3$.$? pursuant toSection 16%c& of Commonwealth )ct 1J; as amended by 9) 1;1; and 3J3;.

Goweer, Consue!ra did not desi!nate any beneficiary who would receie the retirement insurance benefits dueto him. oth 9osario and asilia filed conflictin! claims with the SIS as+in! that the retirement insurancebenefits be paid to one to the e'clusion of the other. he SIS resoled the conflictin! claims by awardin! one-half of the retirement insurance benefits %R& to each widow. Hissatisfied, asilia filed a petition for mandamusa!ainst the SIS, amon! others, prayin! that they be declared the le!al heirs and e'clusie beneficiaries of theretirement insurance of Consue!ra.

26


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I-) hether the beneficiaries under the life insurance policy is the same as that of in the retirementinsurance in the absence of any desi!nation of the beneficiaries on the latter. E4.

R-9ING)

If Consue!ra had 66.76J years of serice in the !oernment when he died on September 6;, 18;7, it followsthat he started in the !oernment serice sometime durin! the early part of 18$3, or before 18$3. In 18$3, Com.

)ct 1J; was not yet amended, and the only benefits then proided for in said Com. )ct 1J; were those thatproceed from a life insurance. Apon enterin! the !oernment serice Consue!ra became a compulsory member of the SIS, bein! automatically insured on his life, pursuant to the proisions of Com. )ct 1J; which was inforce at the time. Hurin! 18$3, the operation of the SIS was suspended because of the war, and the operationwas resumed sometime in 18$;. Bhen Consuegra designated his *eneficiaries in his +ife insurance hecou+d not have intended those *eneficiaries of his +ife insurance as a+so the *eneficiaries of hisretirement insurance *ecause the rovisions on retirement insurance under the GI came a*out on+y


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and will be !ien to his le!al heirs in accordance with law, as in the case of a life insurance if no beneficiary isnamed in the insurance policy.

-ote* "he court a'reed that onehalf should 'o to the first marria'e and the remainin' half should 'o to thesecond marria'e because the second marria'e even if contracted durin' the subsistence of the first marria'ewas entered in 'ood faith.

2I('I&I ('R&I'N)

WE:!:?>!: the decision appealed from is affirmed with costs a'ainst petitionersappellants. It is so ordered.

2!


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1$ & IN-9AR 9I3 A-RANC C'(AN:, 9&2., +aintiff/ae++ee, vs. CAR('NIA &. RA2' and(AC-A9A 2A. 2 RA2', defendants/ae++ants.G.R. No. 9/440! 'cto*er $8, 1!77&oic) eneficiary( /ife Insurance #olicy (onente) AR&IN, J .)

2'C&RIN) Common law wife cannot be a beneficiary in a life insurance policy

3AC&) Cristor @brado was issued by he /ife )ssurance Co., /td., a policy for #7,JJ6. with a rider for )ccidental Heath, namin! Carponia . @brado as the beneficiary in his policy. Ge referred to her as his wife.Cristor was +illed when he was hit by a failin! branch of a tree. Insular /ife was made liable to pay the coera!ein the total amount of #11,?$7.?3, representin! the face alue of the policy in the amount of #7,JJ6. plus theadditional benefits for accidental death. Carponia then filed with the insurer a claim for the proceeds as thedesi!nated beneficiary therein, althou!h she admited that she and the insured were merely liin! as husbandand wife without the benefit of marria!e.

#ascuala da. de @brado also filed her claim as the widow of the deceased insured. She asserts that she is theone entitled to the insurance proceeds.

Insular commenced an action for Interpleader before the trial court as to who should be !ien the proceeds. heC5I declared Carponia as disBualified from becomin! beneficiary of the insured uenaentura Cristor @bradoand directin! the payment of the insurance proceeds to the estate of the deceased insured. C) affirmed.

I-) Can a common-law wife named as beneficiary in the life insurance policy of a le!ally married man claimthe proceeds thereof in case of death of the latterN E4

R-9ING) Section 7 of the Insurance )ct which proides that “%t&he insurance shall be applied e'clusiely to theproper interest of the person in whose name it is made" cannot be alidly seiFed upon to hold that the sameincludes the beneficiary. he word “interest" hi!hly su!!ests that the proision refers only to the “insured" andnot the beneficiary, since a contract of insurance is personal in character. 4therwise, the prohibitory laws a!ainstillicit relationships especially on property and descent will be rendered nu!atory, as the same could easily becircumented by modes of insurance.

4n matters not otherwise specifically proided for by the Insurance /aw, the contract of life insurance is!oerned by !eneral rules of ciil law. 9ather the !eneral rules of ciil law should be applied to resole this oidin the Insurance /aw. )rticle 611 of the Eew Ciil Code states: “he contract of insurance is !oerned byspecial laws. 4atters not expressly provided for in such special laws shall be re'ulated by this Code. " hen nototherwise specifically proided for by the Insurance /aw, the contract of life insurance is !oerned by the !eneralrules of the ciil law re!ulatin! contracts.

)nd under )rticle 616 of the same Code, “any person who is forbiden from receiin! any donation under )rticle?38 cannot be named beneficiary of a life insurance policy by the person who cannot ma+e a donation to him."Common-law spouses are, definitely, barred from receiin! donations from each other.

In essence, a life insurance policy is no different from a ciil donation insofar as the beneficiary is concerned.oth are founded upon the same consideration: liberality. ) beneficiary is li+e a donee, because from thepremiums of the policy which the insured pays out of liberality, the beneficiary will receie the proceeds or profitsof said insurance. )s a conseBuence, the proscription in )rticle ?38 of the new Ciil Code should eBually operatein life insurance contracts. he mandate of )rticle 616 cannot be laid aside: any person who cannot receie adonation cannot be named as beneficiary in the life insurance policy of the person who cannot ma+e the

2"


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donation. Ander )merican law, a policy of life insurance is considered as a testament and in construin! it, thecourts will, so far as possible treat it as a will and determine the effect of a clause desi!natin! the beneficiary byrules under which wills are interpreted.

e do not thin+ that a coniction for adultery or concubina!e is e'acted before the disabilities mentioned in )rticle ?38 may effectuate. ore specifically, with re!ard to the disability on “persons who were !uilty of adulteryor concubina!e at the time of the donation," ' ' ' he underscored clause neatly coneys that no criminalconiction for the disBualifyin! offense is a condition precedent. In fact, it cannot een be !leaned from theaforeBuoted proision that a criminal prosecution is needed. 4n the contrary, the law plainly states that the !uiltof the party may be proed “in the same action" for declaration of nullity of donation. )nd, it would be sufficient if eidence preponderates upon the !uilt of the consort for the offense indicated. he Buantum of proof in criminalcases is not demanded.

In the case before As, the reBuisite proof of common-law relationship between the insured and the beneficiaryhas been coneniently supplied by the stipulations between the parties in the pre-trial conference of the case. Itwas a!reed upon and stipulated therein that the deceased insured uenaentura C. @brado was married to

#ascuala @brado with whom she has si' le!itimate children( that durin! his lifetime, the deceased insured wasliin! with his common-law wife, Carponia @brado, with whom he has two children. hese stipulations arenothin! less than


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1 ouses NI9' CA and &99A -: CA, and -NI&2 IN-RANC C'., INC., etitioners, vs. C'-R&'3 A((A9 and C 29'(N& C'R('RA&I'N, resondents.G.R. No. 1$4$0 August 18, 1!!7&oic) Insurable Interest(onente) (adi++a, #.

2'C&RIN)J Eo contract or policy of insurance on property shall be enforceable e'cept for the benefit of some personhain! an insurable interest in the property insured. * ) non-life insurance policy such as the fire insurance policy ta+en by petitioner-spouses oer their merchandiseis primarily a contract of indemnity. Insura*+e interest in the roerty insured must eist at the time theinsurance ta5es effect and at the time the +oss occurs. he basis of such reBuirement of insurable interest inproperty insured is based on sound public policy: to preent a person from ta+in! out an insurance policy onproperty upon which he has no insurable interest and collectin! the proceeds of said policy in case of loss of theproperty. In such a case, the contract of insurance is a mere wa!er which is oid under Section 67 of theInsurance Code.

* he lessor cannot be alidly a beneficiary of a fire insurance policy ta+en by a lessee oer his merchandise,and the proision in the lease contract proidin! for such automatic assi!nment is oid for bein! contrary to lawandOor public policy( the insurer cannot be compelled to pay the proceeds of the policy to a person who has noinsurable interest in the property insured.

3AC&) #etitioner-spouses Eilo Cha and Stella Ay-Cha, as lessees, entered into a lease contract with priaterespondent CMS Heelopment Corporation, as lessor.

4ne of the stipulations of the one %1& year lease contract states:

1A. . . . "he 5:99:: shall not insure a'ainst fire the chattels merchandise textiles 'oods and effects placed at any stall or store or space in the leased premises without first obtainin' the writtenconsent and approval of the 5:99>!. If the 5:99:: obtain(s) the insurance thereof without the

consent of the 5:99>! then the policy is deemed assi'ned and transferred to the 5:99>! for its ownbenefit+ . . .

Eotwithstandin! said prohibition in the lease contract, the Cha spouses insured a!ainst loss by fire themerchandise inside the leased premises for 5ie Gundred housand %#7,.& with the Anited InsuranceCo., Inc. without the written consent of priate respondent CMS.

4n the day the lease contract was about to e'pire, a fire bro+e out.

hen CMS learned of the insurance earlier procured by the Cha spouses %without its consent&, it wrote Anited ademand letter as+in! that the proceeds of the insurance contract be paid directly to CMS, based on its leasecontract with the Cha spouses. Anited refused to pay CMS.

I-) hether or not para!raph 1J of the lease contract entered into between CMS and the Cha spouses isalid insofar as it proides that any fire insurance policy obtained by the lessee %Cha spouses& oer their merchandise inside the leased premises is deemed assi!ned or transferred to the lessor %CMS& if said policy isobtained without the prior written consent of the latterN

Eo. he automatic assi!nment of the policy to CMS under the proision of the lease contractpreiously Buoted is oid for bein! contrary to law andOor public policy.

hether or not CMS has insurable interest oer the !oods to alidly claim insuranceN Eo.

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92) It is, of course, basic in the law on contracts that the stipulations contained in a contract cannot becontrary to law, morals, !ood customs, public order or public policy.

Sec. 1J of the Insurance Code proides:

Sec. 1J. No contract or policy of insurance on property shall be enforceable e'cept for the benefit of some person hain! an insurable interest in the property insured.

) non-life insurance policy such as the fire insurance policy ta+en by petitioner-spouses oer their merchandiseis primarily a contract of indemnity. Insura*+e interest in the roerty insured must eist at the time theinsurance ta5es effect and at the time the +oss occurs. he basis of such reBuirement of insurable interest inproperty insured is based on sound public policy: to preent a person from ta+in! out an insurance policy onproperty upon which he has no insurable interest and collectin! the proceeds of said policy in case of loss of theproperty. In such a case, the contract of insurance is a mere wa!er which is oid under Section 67 of theInsurance Code, which proides:

C&I'N $. @ery stipulation in a policy of Insurance for the payment of loss, whether the personinsured has or has not any interest in the property insured, or that the policy shall be receied as proof of suchinterest, and eery policy e'ecuted by way of !amin! or wa!erin!, is oid.

In the present case, it cannot be denied that C has no insura*+e interest in the !oods and merchandiseinside the leased premises under the proisions of Section 1? of the Insurance Code which proide:

Section 1?. he measure of an insurable interest in property is the e'tent to which the insured mi!ht bedamnified by loss of in


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D case 1% is a supra case see case F1

33


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1 and 18 GRA& (ACI3IC 9I3 A-RANC C'R(., petitioner vs. CA F 2AR2A . 9-&RI',respondents.

G.R. No. 118!! 'cto*er 1, 1!!!

&oic) insurable interest" real party in interest( concealment( mort!a!e redemption insurance(onente) H-I-ING, J .

2'C&RIN)* Insured may be re!arded as the real party in interest, althou!h he has assi!ned the policy for the purpose of

collection, or has assi!ned as collateral security any s interest, and the mort!a!or continues to be a party to the

contract.

* here the mort!a!ee under a mort!a!e redemption insurance has already foreclosed on the mort!a!e, itcannot collect the insurance proceedsQthe proceeds then ri!htly belon! to the heirs of the mort!a!or.

3AC&) ) contract of !roup life insurance was e'ecuted between petitioner reat #acific /ife )ssurance Corporation andHeelopment an+ of the #hilippines %hereinafter H#&. repalife a!reed to insure the lies of eli!ible housin!loan mort!a!ors of H#.

4n Eoember 11, 18J3, Hr. ilfredo /euterio, a physician and a housin! debtor of H# applied for membershipin the !roup life insurance plan. In an application form, Hr. /euterio answered Buestions concernin! his healthcondition as follows:

?. Gae you eer had, or consulted, a physician for a heart condition, hi!h blood pressure, cancer, diabetes, lun!, +idney or stomachdisorder or any other physical impairmentN

)nswer: Eo. If so !ie details PPPPPPPPPPP.

J. )re you now, to the best of your +nowled!e, in !ood healthN

)nswer: ' D Les D Eo

4n Eoember 17, 18J3, repalife issued Certificate Eo. -1J77J, as insurance coera!e of Hr. /euterio, to thee'tent of his H# mort!a!e indebtedness amountin! to #J;,6..

4n )u!ust ;, 18J$, Hr. /euterio died due to massie cerebral hemorrha!e. ConseBuently, H# submitted adeath claim to repalife. repalife denied the claim alle!in! that Hr. /euterio was not physically healthy when heapplied for an insurance coera!e on Eoember 17, 18J3. repalife insisted that Hr. /euterio did not disclose hehad been sufferin! from hypertension, which caused his death. )lle!edly, such non-disclosure constitutedconcealment that


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he 9C rendered a decision in faor of respondent widow and a!ainst repalife. he C) sustained the trial

court=s decision. Gence, the present petition.

I-)1. hether petitioner repalife was liable to H# as beneficiary in a !roup life insurance contract from acomplaint filed by the widow of the decedentOmort!a!or Les, a policy of insurance upon life or health maypass by transfer, will or succession to any person, whether he has an insurable interest or not, and such personmay recoer it whateer the insured mi!ht hae recoered.

6. hether Hr. /euterio concealed that he had hypertension, which would itiate the insurance contract. Eo.

3. Is repalife liable in the amount of #J;,6. without proof of the actual outstandin! mort!a!e payable bythe mort!a!or to H#N Les. he proceeds now ri!htly belon! to Hr. /euterio>s heirs.

R-9ING)1. #etitioner alle!es that the complaint was instituted by the widow of Hr. /euterio, not the real party in interest,hence the trial court acBuired no


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6. Eo. )ppellant insurance company had failed to establish that there was concealment made by the insured(hence, it cannot refuse payment of the claim. he fraudulent intent on the part of the insured must beestablished to entitle the insurer to rescind the contract. isrepresentation as a defense of the insurer to aoidliability is an affirmatie defense and the duty to establish such defense by satisfactory and conincin! eidencerests upon the insurer. In the case at bar, the petitioner failed to clearly and satisfactorily establish its defense,and is therefore liable to pay the proceeds of the insurance.

3. Les. ) life insurance policy is a alued policy. Anless the interest of a person insured is susceptible of e'actpecuniary measurement, the measure of indemnity under “policy of insurance upon life or health is the sum fi'edin the policy." he policy states that upon receipt of due proof of the Hebtors death durin! the terms of thisinsurance, a death benefit in the amount of #J;,6. shall be paid. H# foreclosed in 1887 their residentiallot, in satisfaction of mort!a!ors outstandin! loan. Considerin! this superenin! eent, the insurance proceedsshall inure to the benefit of the heirs of the deceased person or his beneficiaries. @Buity dictates that H# shouldnot un


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that this intention was apparent from the fact that they were made to beliee that when full payment waseffected, a Heed of Sale will be e'ecuted by 5@ as endor in faor of / and /im as endees. 5@purportedly assured them that documentin! the transaction as a lease a!reement is ! 9 "> I"9 ?I"-:99 9&I"3I5I"H CCI"H C>-/I"I>- >! 4:!CE-"3I5I"H ->! 9 "> WE:"E:! "E: :G&I4:-" WI55 4::" "E: !:G&I!:4:-"9 >? -H 5W !&5:9:CI?IC"I>-9 >! C>-"!C" WEICE !>I/: ?>! 9:CI?IC 4CEI-:!H >! !"&9 >! 9:CI54:"E>/9.

In the financial lease a!reement, 5@ did not assume responsibility as to the Buality, merchantability, or capacityof the eBuipment. his stipulation proides that, in case of defect of any +ind that will be found by the lessee in

any of the eBuipment, recourse should be made to the manufacturer.

"he financial lessor bein' a financin' company i.e. an extender of credit rather than an ordinary euipment rental company does not extend a warranty of the fitness of the euipment for any particular use . hus, thefinancial lessee was precisely in a position to enforce such warranty directly a!ainst the supplier of theeBuipment and not a!ainst the financial lessor. e find nothin! contra le!em or contrary to public policy in sucha contractual arran!ement

3


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2I('I&I ('R&I'N) G@9@549@, in the li!ht of all the fore!oin!, the petition is H@EI@H. he Hecision of the C) in C)-.9. C Eo. ??$8J dated arch 17, 67 and 9esolution dated ay 63, 67 are )[email protected] a!ainst petitioner.

17 NG GAN , +aintiff/ae++ee,v. AIAN CR-A2R 9I3 A-RANC C'R('RA&I'N, defendant/ae++ant.G.R. No. 9/0%8 ay 0, 1!8&oic) Concealment( isrepresentation( Huty of Insurance Company to a+e InBuiry(onente) @SC4/IE, .

2'C&RIN) Concealment e'ists where the assured had +nowled!e of a fact material to the ris+, and honesty,!ood faith, and fair dealin! reBuires that he should communicate it to the assurer, but he desi!nedly and

3!


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intentionally withholds the same. he concealment must, in the absence of inBuiries, be not only material, butfraudulent, or the fact must hae been intentionally withheld.

isrepresentation as a defense of the insurer to aoid liability is an =affirmatie= defense. he duty to establishsuch a defense by satisfactory and conincin! eidence rests upon the defendant.

5ailure of insurer to underta+e a further inBuiry on insurance application on the Buestion of the insured>s ailmentand operation which is important in determination of !rant of insurance or not, constitutes waier by insurer of imperfection in the answer and renders omission to answer more fully immaterial

3AC&) Mwon! Eam applied for a 6-year endowment policy with )sian Crusader /ife )ssurance Corporation. )sian Crusader as+ed the followin! Buestion: Eas any life insurance company ever refused your application for insurance or for reinstatement of a lapsed policy or offered you a policy different from that applied forJ If soname company and date.

Mwon! Eam answered “Eo" to the aboe Buestion. Mwon! Eam was also e'amined by )sian Crusader>s medicale'aminer to whom he disclosed that he was once operated and a tumor was remoed from his stomach andsuch was “associated with ulcer of the stomach."

Mwon! Eam>s application was approed. In ay 18;3, he died. Gis widow, E! an ee, filed an insurance claimbut )sian Crusader refused her claim as it insisted that Mwon! Eam concealed material facts from them when hewas applyin! for the insurance( that he misrepresented the fact that he was actually denied application by Insular /ife when he was renewin! his application with them( that Mwon! Eam was actually operated for peptic ulcer.

I-) as appellant )sian Crusader, because of insured=s aforesaid representation, misled or deceied intoenterin! the contract or in acceptin! the ris+ at the rate of premium a!reed upon Eo.

R-9ING) Section 6? of the Insurance /aw proides: 9uch party a contract of insurance must communicate tothe other in 'ood faith all facts within his knowled'e which are material to the contract and which the other has

not the means of ascertainin' and as to which he makes no warranty.

hus, 2concealment e'ists where the assured had +nowled!e of a fact material to the ris+, and honesty, !oodfaith, and fair dealin! reBuires that he should communicate it to the assurer, but he desi!nedly and intentionallywithholds the same.2 It has also been held 2that the concealment must, in the absence of inBuiries, be not onlymaterial, but fraudulent, or the fact must hae been intentionally withheld.2

)ssumin! that the aforesaid answer !ien by the insured is false, as claimed by the appellant. Sec. 6? of theInsurance /aw, aboe-Buoted, neertheless reBuires that fraudulent intent on the part of the insured beestablished to entitle the insurer to rescind the contract. )nd as correctly obsered by the lower court,2misrepresentation as a defense of the insurer to aoid liability is an =affirmatie= defense. he duty to establishsuch a defense by satisfactory and conincin! eidence rests upon the defendant. he eidence before theCourt does not clearly and satisfactorily establish that defense.2

It bears emphasis that Mwon! Eam had informed the appellant=s medical e'aminer that the tumor for which hewas operated on was 2associated with ulcer of the stomach.2 In the absence of eidence that the insured hadsufficient medical +nowled!e as to enable him to distin!uish between 2peptic ulcer2 and 2a tumor2, his statementthat said tumor was 2associated with ulcer of the stomach, 2 should be construed as an e'pression made in !oodfaith of his belief as to the nature of his ailment and operation. Indeed, such statement must be presumed tohae been made by him without +nowled!e of its incorrectness and without any deliberate intent on his part tomislead the appellant. hile it may be conceded that, from the iewpoint of a medical e'pert, the informationcommunicated was imperfect, the same was neertheless sufficient to hae induced appellant to ma+e further inBuiries about the ailment and operation of the insured.

3"


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Section 36 of Insurance /aw proides as follows: "he ri'ht to information of material facts maybe waived either by the terms of insurance or by ne'lect to make inuiries as to such facts where they are distinctly implied inother facts of which information is communicated.

It has been held that where, upon the face of the application, a Buestion appears to be not answered at all or tobe imperfectly answered, and the insurers issue a policy without any further inBuiry, they waie the imperfectionof the answer and render the omission to answer more fully immaterial.

)s aptly noted by the lower court, 2if the ailment and operation of Mwon! Eam had such an important bearin! onthe Buestion of whether the defendant would underta+e the insurance or not, the court cannot understand whythe defendant or its medical e'aminer did not ma+e any further inBuiries on such matters from the Chineseeneral Gospital or reBuire copies of the hospital records from the appellant before actin! on the application for insurance. he fact of the matter is that the defendant was too ea!er to accept the application and receie theinsured=s premium. It would be ineBuitable now to allow the defendant to aoid liability under the circumstances.2

PPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPP

PPPPPPPP 2I('I&I ('R&I'N) 5indin! no reersible error committed by the trial court, the


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* case T1J is supra, see case T17

41


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1! 4supra E@ /I5@ @E@9#9IS@S and A/I)E SL s. G4E. C4A9 45 )##@)/S, @UAI)/@IESA9)EC@ C49#49)I4E, 9@/I)EC@ SA9@L )EH IESA9)EC@ C4., IEC. and @S@9E A)9)ELC49#49)I4E.9. Eo. 8$?1 arch 31, 1886&oic) heory of imputed +nowled!e( Insurance a!ent is-V-is Insurance Companies(onente) 9e!alado, .

2'C&RIN) he terms of the contract are clear and unambi!uous. he insured is specifically reBuired todisclose to the insurer any other insurance and its particulars which he may hae effected on the same sub


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he policy issued by respondent estern uaranty Corporation%estern& did not declare respondent 9elianceSurety and Insurance Co., Inc. %9eliance& and respondent @Buitable Insurance Corporation %@Buitable& as co-insurers on the same stoc+s, while 9eliance=s #olicies coerin! the same stoc+s did not li+ewise declareestern and @Buitable as such co-insurers. It is further admitted by petitioners that @Buitable=s policy stated 2nil2in the space thereon reBuirin! indication of any co-insurance althou!h there were three %3& policies subsistin! onthe same stoc+s in trade at the time of the loss, namely, that of estern in the amount of #37,. and two%6& policies of 9eliance in the total amount of #1,,..

In other words, the coera!e by other insurance or co-insurance effected or subseBuently arran!ed bypetitioners were neither stated nor endorsed in the policies of the three %3& priate respondents, warrantin!forfeiture of all benefits thereunder if we are to follow the e'press stipulation in the aforeBuoted #olicy ConditionEo. 3.

hus, it points out that while petitioner ulian Sy claimed that he had informed insurance a!ent )lareF re!ardin!the co-insurance on the property, he contradicted himself by ine'plicably claimin! that he had not read the termsof the policies( that Lap Ham Chuan could not li+ewise hae obtained such +nowled!e for the same reason,aside from the fact that the insurance with estern was obtained before those of 9eliance and @Buitable( and

that the conclusion of the trial court that 9eliance and @Buitable are 2sister companies2 is an unfoundedcon


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circumstances2 sufficient to rela' the enforcement of the one-year prescriptie period and we, therefore, holdthat petitioners= claim was definitely filed out of time.

2I('I&I ('R&I'N) G@9@549@, findin! no co!ent reason to disturb the


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$0 a. 9ourdes . 3+orendo vs. (hi+am (+ans, Inc., et. a+., G.R. No. 18%!8, 3e*. $$, $01$&oic) Concealment of illness( incontestability clause( theory of imputed +nowled!e#onente: #ustice A*ad2octrine)J Insured persons may accept policies without readin! them, and that this is not ne!li!ence per se. ut, this isnot without any e'ception.* anuel had been ta+in! medicine for his heart condition and diabetes when he submitted his pension planapplication( these clearly fell within the fie-year period. ore, een if #erla>s +nowled!e of anuel>s pacema+er may be applied to #hilam #lans under the theory of imputed +nowled!e, it is not claimed that #erla was aware of his two other afflictions that needed medical treatments. #ursuant to Section 6? of the Insurance Code, anuel>sconcealment entitles #hilam #lans to rescind its contract of insurance with him.* )n incontestability clause precludes the insurer from disownin! liability under the policy it issued on the !roundof concealment or misrepresentation.

3AC&) 5lorendo filed an application for comprehensie pension plan with respondent (hi+am (+ans, after some conincin! by respondent #erla )bcede. anuel si!ned the application and left to #erla the tas+ of supplyin! the information needed in the application. 9espondent a. Celeste )bcede, #erlas dau!hter, si!nedthe application as sales counselor.

)side from pension benefits, the comprehensie pension plan also proided life insurance coera!e to 5lorendo.his was coered by a roup aster #olicy that (hi+am 9ife issued to #hilam #lans. Ander the master policy,#hilam /ife was to automatically proide life insurance coera!e, includin! accidental death, to all who si!ned upfor #hilam #lans comprehensie pension plan. If the plan holder died before the maturity of the plan, hisbeneficiary was to instead receie the proceeds of the life insurance, eBuialent to the pre-need price. 5urther,the life insurance was to ta+e care of any unpaid premium until the pension plan matured, entitlin! thebeneficiary to the maturity alue of the pension plan.

#hilam #lans issued #ension #lan )!reement to anuel, with petitioner a. /ourdes S. 5lorendo, his wife, asbeneficiary. @leen months later, anuel died of blood poisonin!. SubseBuently, /ourdes filed a claim with#hilam #lans for the payment of the benefits under her husband>s plan. ecause anuel died before his pension

plan matured and his wife was to !et only the benefits of his life insurance, #hilam #lans forwarded her claim to#hilam /ife.

#hilam #lans declined her claim. #hilam /ife found that anuel was on maintenance medicine for his heart andhad an implanted pacema+er. 5urther, he suffered from diabetes mellitus and was ta+in! insulin. Gence, /ourdesfiled an action a!ainst the pension plan company before the 9C.

I-) 1. hether or not anuel is !uilty of concealin! his illness when he +ept blan+ and did not answerBuestions in his pension plan application re!ardin! the ailments he suffered from. Les.6. hether or not anuel was bound by the failure of respondents #erla and a. Celeste to declare thecondition of anuel>s health in the pension plan application. Les.3. hether or not #hilam #lan>s approal of anuel>s pension plan application and acceptance of his premiumpayments precluded it from denyin! /ourdes>s claim. Eo.

R-9ING) 'ne. /ourdes points out that, seein! the unfilled spaces in anuel>s pension plan application relatin!to his medical history, #hilam #lans should hae returned it to him for completion. Since #hilam #lans chose toapproe the application s part. 5urther, /ourdes adds that#hilam #lans neer Bueried anuel directly re!ardin! the state of his health. ConseBuently, it could not blamehim for not mentionin! it.

ut /ourdes is shiftin! to #hilam #lans the burden of puttin! on the pension plan application the true state of anuel>s health. She for!ets that since #hilam #lans waied medical e'amination for anuel, it had to rely

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he same may be said of anuel, a ciil en!ineer and mana!er of a construction company. Ge could bee'pected to +now that one must read eery document, especially if it creates ri!hts and obli!ations affectin! him,before si!nin! the same. anuel is not unschooled that the Court must come to his succor. It could reasonablybe e'pected that he would not trifle with somethin! that would proide additional financial security to him and tohis wife in his twili!ht years. &hree. he Court cannot a!ree. he comprehensie pension plan that #hilam #lans issued contains a one-year incontestability period. It states:

insurance edited 001-020

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