LAW  139  –  INSURANCE  LAW    
 

C2017  MIDTERM  REVIEWER    

 
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando    
 
Sulit  |  Lopez  C.  |  Galvez    
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
Inside:    
De  Leon  and  Campos  annotations    
Case  summaries    
Class  lecture  notes    
   
 
 
 
   
   
 
   
   
Happy  studying!  J    
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CHAPTER  1  –  INTRODUCTION   those  who  were  willing  to  insure  the  venture  would  sign  this  slip,  indicating  
  the   amount   for   which   each   was   willing   to   be   liable   for   (giving   rise   to   the  
A. Origin  and  Growth  of  Insurance   “underwriter”).  
  • Fire  insurance  –  became  important  after  the  Great  London  Fire  (1966).  
1. Early  Maritime  or  Marine  Insurance   • Life   insurance   –   originally   prohibited   in   many   countries   as   immoral   wagers  
  on  life.  
Aboitiz  Shipping  v.  New  India  Assurance  (2006)   • Accident  insurance  –  derived  from  life  insurance.  
Facts:   A   vessel,   whose   cargo   was   insured   by   New   India,   sank   in   the   middle   of   a    
typhoon.   After   being   subrogated   to   the   consignee’s   rights   by   reason   of   payment,   3. The  Insurance  Business  in  the  Philippines  
New  India  is  now  claiming  from  Aboitiz  Shipping  (shipowner)  on  the  basis  of  the   • First  life  insurance  company  in  the  Philippines  –  Sun  Life  Assurance  Co.  of  
surveyor’s   investigation   that   found   that   the   vessel   sank   because   the   flooding   Canada  (1898).  
brought  about  by  the  ship’s  questionable  seaworthiness.  TC  ruled  in  favor  of  New   • First  domestic  non-­‐life  insurance  company  –  Yek  Tong  Lin  Fire  and  Marine  
India.  CA  and  SC  affirm.   Insurance  Co.  Ltd.  (1906).  
  • First   domestic   life   insurance   company   –   Insular   Life   Assurance   Co.   Ltd.  
Held:  The  limited  liability  doctrine,  or  the  doctrine  of  real  and  hypothecary  nature   (1910)  
of   maritime   law,   generally   applies   to   maritime   insurance,   with   the   effect   being   • Social  insurance  
that   the   damages   awarded   are   limited   to   the   pro-­‐rata   share.   However,   an   o CA   No.   186   –   created   the   Government   Service   Insurance   System,  
exception   to   its   applicability   is   when   the   damage   is   due   to   the   fault   of   the   covering   government   employees   (passed   into   law   in   1936,   came   into  
shipowner   or   to   the   concurrent   negligence   of   the   shipowner   and   captain.   When   effect  in  1937)  
the   vessel   is   found   unseaworthy,   the   shipowner   is   presumed   to   be   negligent.   And   o RA   No.   1161   –   provided   for   the   organization   of   the   Social   Security  
when   the   shipowner   fails   to   overcome   the   presumption   of   negligence,   the   doctrine   System,  covering  employees  of  the  private  sector  (1954)  
of  limited  liability  cannot  be  applied.    
  4. Office   of   the   Insurance   Commission   (OIC);   Administrative   and  
2. Development  of  Insurance   Adjudicatory  Powers  
• Greeks   –   benevolent   societies   organized   primarily   for   social   and   religious   • Insurance   Commissioner   –   given   wide   latitude   of   discretion,   to   regulate  
uses,   extended   aid   to   unfortunate   members   from   a   fund   formed   from   the   the  insurance  industry  so  as  to  protect  the  insuring  public.  
contributions  of  all  members.   • General   purpose   of   insurance   regulation   –   to   protect   the   public   against  
• Chinese   –   boatsmen   along   Yangtze   River   distributed   their   cargo   among   insolvency  or  unfair  treatment  by  insurers.  
several  boats  in  order  to  share  the  risks  of  loss.   • Basic  Methods  of  insurance  regulation:  
• Origin   of   modern   commercial   contract   of   insurance   –   bottomry   and   o Legislation  
respondentia  loans  and  the  practice  of  general  average  contribution.   o Administrative  action  –  where  Insurance  Commission  comes  in  
• Earliest  branch  of  insurance  –  marine  insurance.   § Licensing,  to  ensure  insurer’s  financial  condition  
• Italians  –  “poliza”;  earliest  known  policy  form  was  written  in  Genoa  (1347)   § Examination,  to  check  existing  assets  and  liabilities  
and  a  statutory  form  was  prescribed  in  Florence  (1523).   § Investigation,  to  determine  compliance  with  the  requirements  
• Law  merchant  –  earliest  form  of  regulations  in  insurance.   o Court  action  
• First  complete  code  of  insurance  law  –  Maritime  Ordinances  of  Louis  XIV   • Insurance   Commissioner   –   general   duty   and   function   is   to   regulate   and  
• First  English  Insurance  Act  –  passed  in  1601   supervise   the   transaction   of   insurance   business   so   as   to   protect   the   interest  
• Lord  Mansfield  –  “Father  of  English  Commercial  Law”;  he  was  the  first  to   of   the   public,   to   execute   the   insurance   laws,   and   to   see   that   violations   of   the  
recognize  the  importance  of  considering  customs  and  usages  of  merchants   insurance  laws  are  properly  death  with  or  punished.  
in   determining   their   rights   under   mercantile   contracts;   introduced   o Conferred   by   law   –   recognized   as   a   proper   delegation   of   administrative  
principles   of   the   law   merchant   which   would   render   the   common   law   or  ministerial  duties,  rather  than  of  legislative  powers.  
suitable  for  dispensing  justice  in  cases  involving  such  contracts.   o Exercise   generally   not   subject   to   judicial   review   –   court   will   refuse  
• Lloyd’s   Coffee   House   (England)   –   merchants   gathered   and   arranged   jurisdiction   while   matter   is   still   pending   before   the   board   or   official,  
mutual   contracts   to   insure   their   ventures   against   perils   of   the   sea;   since   the   administrative   remedy   has   not   been   fully   exhausted   at   that  
description   of   the   vessel   and   its   cargo   was   written   on   a   slip   of   paper   and   point.  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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• Insurance   Commission   –   administrative   agency   vested   with   regulatory   documents,  papers,  files  and  records,  tax  returns,  and  books  of  accounts  of  any  entity  or  person  
under   investigation   as   may   be   necessary   for   the   proper   disposition   of   the   cases   before   it,  
power  as  well  as  with  adjudicatory  authority.   subject  to  the  provisions  of  existing  laws;  
o Regulatory  or  non-­‐quasi  judicial  power   (j) Suspend  or  revoke,  after  proper  notice  and  hearing,  the  license  or  certificate  of  authority  of  any  
o Adjudicatory  or  quasi-­‐judicial  power   entity  or  person  under  its  regulation,  upon  any  of  the  grounds  provided  by  law;  
• Insurance  Commissioner’s  official  acts:   (k) Conduct   an   examination   to   determine   compliance   with   laws   and   regulations   if   the  
circumstances  so  warrant  as  determined  by  appropriate  rules  and  regulations;  
o Adjudications  or  decisions  in  individual  cases   (l) Investigate   not   oftener   than   once   a   year   from   the   last   date   of   examination   to   determine  
o Issuance  in  the  form  of  regulations,  rulings   whether  an  institution  is  conducting  its  business  on  a  safe  and  sound  basis:  Provided,  That,  the  
§ Formal  promulgation  of  official  regulations   deficiencies/  irregularities  found  by  or  discovered  by  an  audit  shall  be  immediately  addressed;  
§ Making   of   rulings   –   informal   advice   or   admonition;   often   asks   (m) Inquire   into   the   solvency   and   liquidity   of   the   institutions   under   its   supervision   and   enforce  
prompt  corrective  action;  
opinion  of  Sec.  of  Justice;  not  bound  by  precedents.   (n) To   retain   and   utilize,   in   addition   to   its   annual   budget,   all   fees,   charges   and   other   income  
• The  powers  and  duties  of  the  OIC,  which  are  conferred  by  law  and  generally   derived  from  the  regulation  of  insurance  companies  and  other  supervised  persons  or  entities;  
not  subject  to  judicial  review.   (o) To  fix  and  assess  fees,  charges  and  penalties  as  the  Commissioner  may  find  reasonable  in  the  
o To  insure  the  solvency  of  insurance  companies   exercise  of  regulation;  and  
(p) Exercise  such  other  powers  as  may  be  provided  by  law  as  well  as  those  which  may  be  implied  
o To  assure  fair  trade  practices  of  insurance  companies  and  their  agents   from,  or  which  are  necessary  or  incidental  to  the  express  powers  granted  the  Commission  to  
o To  assure  reasonable  insurance  service   achieve  the  objectives  and  purposes  of  this  Code.  
o To  promote  national  interest   The  Commission  shall  indemnify  the  Commissioner,  Deputy  Commissioner,  and  other  officials  
  of   the   Commission,   including   personnel   performing   supervision   and   examination   functions,   for   all  
costs   and   expenses   reasonably   incurred   by   such   persons   in   connection   with   any   civil   or   criminal  
SEC.  437.  The  Insurance  Commissioner  shall  be  appointed  by  the  President  of  the  Republic  of  the   actions,  suits  or  proceedings  to  which  they  may  be  made  a  party  to  by  the  reason  of  the  performance  
Philippines  for  a  term  of  six  (6)  years  without  reappointment  and  who  shall  serve  as  such  until  the   of  their  duties  and  functions,  unless  they  are  finally  adjudged  in  such  actions,  suits  or  proceedings  to  
successor  shall  have  been  appointed  and  qualified.  If  the  Insurance  Commissioner  is  removed  before   be  liable  for  negligence  or  misconduct.  
the  expiration  of  his  term  of  office,  the  reason  for  the  removal  must  be  published.   In  the  event  of  settlement  or  compromise,  indemnification  shall  be  provided  only  in  connection  
The   Insurance   Commissioner   shall   have   the   duty   to   see   that   all   laws   relating   to   insurance,   with   such   matters   covered   by   the   settlement   as   to   which   the   Commission   is   advised   by   external  
insurance   companies   and   other   insurance   matters,   mutual   benefit   associations,   and   trusts   for   counsel  that  the  persons  to  be  indemnified  did  not  commit  any  negligence  or  misconduct.  
charitable   uses   are   faithfully   executed   and   to   perform   the   duties   imposed   upon   him   by   this   Code,   The   costs   and   expenses   incurred   in   defending   the   aforementioned   action,   suit   or   proceeding  
and   shall,   notwithstanding   any   existing   laws   to   the   contrary,   have   sole   and   exclusive   authority   to   may  be  paid  by  the  Commission  in  advance  of  the  final  disposition  of  such  action,  suit  or  proceeding  
regulate  the  issuance  and  sale  of  variable  contracts  as  defined  in  Section  238  hereof  and  to  provide   upon  receipt  of  an  undertaking  by  or  on  behalf  of  the  Commissioner,  Deputy  Commissioner,  officer  
for   the   licensing   of   persons   selling   such   contracts,   and   to   issue   such   reasonable   rules   and   or  employee  to  repay  the  amount  advanced  should  it  ultimately  be  determined  by  the  Commission  
regulations  governing  the  same.   that  the  person  is  not  entitled  to  be  indemnified.  
The   Commissioner   may   issue   such   rulings,   instructions,   circulars,   orders   and   decisions   as   may    
be   deemed   necessary   to   secure   the   enforcement   of   the   provisions   of   this   Code,   to   ensure   the   SEC.  438.  In  addition  to  the  administrative  sanctions  provided  elsewhere  in  this  Code,  the  Insurance  
efficient  regulation  of  the  insurance  industry  in  accordance  with  global  best  practices  and  to  protect   Commissioner   is   hereby   authorized,   at   his   discretion,   to   impose   upon   insurance   companies,   their  
the   insuring   public.   Except   as   otherwise   specified,   decisions   made   by   the   Commissioner   shall   be   directors  and/or  officers  and/or  agents,  for  any  willful  failure  or  refusal  to  comply  with,  or  violation  
appealable  to  the  Secretary  of  Finance.   of   any   provision   of   this   Code,   or   any   order,   instruction,   regulation,   or   ruling   of   the   Insurance  
In  addition  to  the  foregoing,  the  Commissioner  shall  have  the  following  powers  and  functions:   Commissioner,   or   any   commission   or   irregularities,   and/or   conducting   business   in   an   unsafe   or  
(a) Formulate  policies  and  recommendations  on  issues  concerning  the  insurance  industry,  advise   unsound  manner  as  may  be  determined  by  the  Insurance  Commissioner,  the  following:  
Congress   and   other   government   agencies   on   all   aspects   of   the   insurance   industry   and   propose   (a) Fines  not  less  than  Five  thousand  pesos  (P5,000.00)  and  not  more  than  Two  hundred  thousand  
legislation  and  amendments  thereto;   pesos  (P200,000.00);  and  
(b) Approve,  reject,  suspend  or  revoke  licenses  or  certificates  of  registration  provided  for  by  this   (b) Suspension,  or  after  due  hearing,  removal  of  directors  and/or  officers  and/or  agents.  
Code;    
(c) Impose   sanctions   for   the   violation   of   laws   and   the   rules,   regulations   and   orders   issued   SEC.   439.   The   Commissioner   shall   have   the   power   to   adjudicate   claims   and   complaints   involving  
pursuant  thereto;   any   loss,   damage   or   liability   for   which   an   insurer   may   be   answerable   under   any   kind   of   policy   or  
(d) Prepare,   approve,   amend   or   repeal   rules,   regulations   and   orders,   and   issue   opinions   and   contract  of  insurance,  or  for  which  such  insurer  may  be  liable  under  a  contract  of  suretyship,  or  for  
provide  guidance  on  and  supervise  compliance  with  such  rules,  regulations  and  orders;   which  a  reinsurer  may  be  sued  under  any  contract  of  reinsurance  it  may  have  entered  into;  or  for  
(e) Enlist   the   aid   and   support   of,   and/or   deputize   any   and   all   enforcement   agencies   of   the   which   a   mutual   benefit   association   may   be   held   liable   under   the   membership   certificates   it   has  
government  in  the  implementation  of  its  powers  and  functions  under  this  Code;   issued   to   its   members,   where   the   amount   of   any   such   loss,   damage   or   liability,   excluding   interest,  
(f) Issue  cease  and  desist  orders  to  prevent  fraud  or  injury  to  the  insuring  public;   cost   and   attorney’s   fees,   being   claimed   or   sued   upon   any   kind   of   insurance,   bond,   reinsurance  
(g) Punish   for   contempt   of   the   Commissioner,   both   direct   and   indirect,   in   accordance   with   the   contract,   or   membership   certificate   does   not   exceed   in   any   single   claim   Five   million   pesos  
pertinent  provisions  of  and  penalties  prescribed  by  the  Rules  of  Court;   (P5,000,000.00).  
(h) Compel  the  officers  of  any  registered  insurance  corporation  or  association  to  call  meetings  of   The   power   of   the   Commissioner   does   not   cover   the   relationship   between   the   insurance  
stockholders  or  members  thereof  under  its  supervision;   company   and   its   agents/brokers   but   is   limited   to   adjudicating   claims   and   complaints   filed   by   the  
(i) Issue   subpoena   duces   tecum   and   summon   witnesses   to   appear   in   any   proceeding   of   the   insured  against  the  insurance  company.  
Commission   and,   in   appropriate   cases,   order   the   examination,   search   and   seizure   of   all  

LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  

Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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The   Commissioner   may   authorize   any   officer   or   group   of   officers   under   him   to   conduct   B. Laws  Governing  Insurance  
investigation,   inquiry   and/or   hearing   and   decide   claims   and   he   may   issue   rules   governing   the  
conduct   of   adjudication   and   resolution   of   cases.   The   Rules   of   Court   shall   have   suppletory  
• The   contract   of   insurance   is   governed   by   special   law,   but   matters   not  
application.   expressly  provided  therein  shall  be  governed  by  the  Civil  Code.  
The  party  filing  an  action  pursuant  to  the  provisions  of  this  section  thereby  submits  his  person    
to   the   jurisdiction   of   the   Commissioner.   The   Commissioner   shall   acquire   jurisdiction   over   the   1. The  Insurance  Code  
person  of  the  impleaded  party  or  parties  in  accordance  with  and  pursuant  to  the  provisions  of  the  
Rules  of  Court.  
• Code   of   Commerce   +   Old   Civil   Code   +   Corporation   Law   à   Insurance   Act  
The   authority   to   adjudicate   granted   to   the   Commissioner   under   this   section   shall   be   (Act   No.   2437;   copied   almost   verbatim   from   the   California   Insurance   Act;  
concurrent   with   that   of   the   civil   courts,   but   the   filing   of   a   complaint   with   the   Commissioner   shall   few   provisions   from   the   New   York   Law)   à   Insurance   Code   of   1978   (PD  
preclude  the  civil  courts  from  taking  cognizance  of  a  suit  involving  the  same  subject  matter.   1460)    +  Civil  Code  à  Insurance  Code  (RA  10607)  
Any   decision,   order   or   ruling   rendered   by   the   Commissioner   after   a   hearing   shall   have   the  
force   and   effect   of   a   judgment.   Any   party   may   appeal   from   a   final   order,   ruling   or   decision   of   the  
 
Commissioner  by  filing  with  the  Commissioner  within  thirty  (30)  days  from  receipt  of  copy  of  such   Gercio  v.  Sunlife  Assurance  (1925)  
order,  ruling  or  decision  a  notice  of  appeal  to  the  Court  of  Appeals  in  the  manner  provided  for  in  the   Facts:   Gercio   had   his   life   insured,   naming   then-­‐wife   Zialcita   as   a   beneficiary.  
Rules  of  Court  for  appeals  from  the  Regional  Trial  Court  to  the  Court  of  Appeals.   Zialcita   was   then   convicted   of   adultery   in   1919,   which   led   to   their   divorce.   Now,  
For  the  purpose  of  any  proceeding  under  this  section,  the  Commissioner,  or  any  officer  thereof  
designated  by  him  is  empowered  to  administer  oaths  and  affirmation,  subpoena  witnesses,  compel  
Gercio   wants   to   change   the   beneficiary   from   Zialcita   to   his   present   wife,   Adela  
their   attendance,   take   evidence,   and   require   the   production   of   any   books,   papers,   documents,   or   Garcia.  TC  allowed  him  to  change  the  beneficiary.  SC  reversed.  
contracts  or  other  records  which  are  relevant  or  material  to  the  inquiry.    
A  full  and  complete  record  shall  be  kept  of  all  proceedings  had  before  the  Commissioner,  or  the   Held:   No   specific   law   on   insurance   under   CC,   and   no   specific   provisions   on  
officers   thereof   designated   by   him,   and   all   testimony   shall   be   taken   down   and   transcribed   by   a  
stenographer  appointed  by  the  Commissioner.  
changing  of  beneficiary  under  the  Insurance  Act.  In  the  interpretation  of  insurance  
In   order   to   promote   party   autonomy   in   the   resolution   of   cases,   the   Commissioner   shall   laws,   the   Court   looked   at   jurisprudence   from   the   SC   of   California,   since   our  
establish  a  system  for  resolving  cases  through  the  use  of  alternative  dispute  resolution.   Insurance   Act   was   taken   from   the   Insurance   Code   of   California.   SC   of   California  
  ruled   that   the   insured   may   not   change   the   beneficiary   of   the   insurance   policy  
PHILAM  v.  Ansaldo  (1994)   without  the  latter’s  consent.  
Facts:   Paterno,   as   an   agent   of   Philam,   complained   of   certain   practices   of   the    
company  before  Ins.  Comm.  Ansaldo.  SC  sets  aside  IC  ruling.   Ang  Giok  Chip  v.  Springfield  (1931)  
  Facts:   AGC   was   an   owner   of   a   warehouse   engulfed   in   flames   whose   contents   were  
Held:   The   question   of   legality   of   a   contract   of   agency   between   an   insurance   insured.   Action   to   recover   part   of   the   loss   was   instituted.   Springfield   used   the  
company   and   its   agents   does   not   fall   under   the   jurisdiction   of   the   IC.   The   defense  of  AGC  violating  a  warranty  on  the  amount  (3%  of  the  total  value  of  the  
jurisdiction   for   these   claims   falls   under   the   NLRC   (for   salaried   employees)   and   the   whole   of   the   goods   stored   in   warehouse)   of   hazardous   goods   which   may   be   stored  
regular  courts  (for  registered  representatives  who  work  on  commission  basis).  The   in   the   building.   However,   this   warranty   was   reflected   only   in   a   rider,   which   AGK  
quasi-­‐judicial   power   of   the   IC   is   limited   to   claims   and   complaints   for   which   an   claims  is  not  part  of  the  policy.  TC  ruled  in  favor  of  AGK.  
insurer  may  be  answerable  under  any  kind  of  policy  or  contract  of  insurance.    
  Held:  Look  to  California  courts  to  fill  the  gap  of  missing  insurance  laws.  Our  law  
Republic  v.  Del  Monte  Motors  Inc.  (2006)   provides   that   an   express   warranty   must   be   contained   in   the   policy   itself.  
Facts:   RTC   rendered   a   decision   in   a   civil   case   finding   defendants   therein   jointly   “Contained”   was   interpreted   in   California   to   include   riders   and   warranties.  
and   severally   liable   to   pay   Del   Monte   Motors   P11.8M   and   ordered   the   execution   of   However,   also   in   California,   it   has   been   held   that   where   the   holder   of   a   policy  
the   decision   against   the   counterbond   issued   by   CISCO.   RTC   issued   a   notice   of   discovers   a   mistake   made   by   himself,   and   he   neither   request   the   issuance   of   a  
garnishment  on  several  depository  banks  and  on  the  IC  so  as  to  enforce  the  writ  on   different   one   nor   offers   to   pay   the   premium   requisite   to   insure   against   the   risk  
the  security  deposit  filed  by  CISCO.   which  he  believe  the  rider  to  cover,  he  accepts  the  policy.  
   
Held:   The   security   deposit   held   by   the   Ins.   Comm.   may   not   be   levied   upon   or   Philippine  Health  Care  Products  v.  Commissioner  of  Internal  Revenue  (2009)  
garnished   in   favor   of   only   one   insured.   The   securities   are   held   as   a   contingency   Facts:  PHCP  is  engaged  in  the  dispensation  of  preventive,  diagnostic  and  curative  
fund   to   answer   for   all   claims   of   all   insured.   A   single   claimant   is   not   allowed   to   medical  services  to  individuals  who  enter  into  health  care  agreements  with  it  and  
claim   to   the   exclusion   of   others.   Only   after   all   other   claimants   under   subsisting   who   pay   annual   membership   fee.   CIR   sent   PHCP   a   formal   demand   letter   and  
policies  have  been  heard  can  the  share  of  a  single  claimant  be  determined.   assessment   notices   demanding   the   payment   of   deficiency   taxes   (VAT   and   DST)  
 

LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  

Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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imposed  on  its  health  care  agreements  with  its  members  pursuant  to  Sec.  185  of   ART.  2026,  CC.  He  who  constitutes  an  annuity  by  gratuitous  title  upon  his  property,  may  provide  at  
the   time   the   annuity   is   established   that   the   same   shall   not   be   subject   to   execution   or   attachment   on  
the  1997  Tax  Code.  PHCP  protested  the  assessment.  
account  of  the  obligations  of  the  recipient  of  the  annuity.  If  the  annuity  was  constituted  in  fraud  of  
  creditors,  the  latter  may  ask  for  the  execution  or  attachment  of  the  property.  (1807a)  
Held:  PHCP  is  an  HMO  which  means  an  entity  that  provides,  offers  or  arranges  for    
coverage   of   designated   health   services   needed   by   plan   members   for   a   fixed   ART.  2027,  CC.  No  annuity  shall  be  claimed  without  first  proving  the  existence  of  the  person  upon  
whose  life  the  annuity  is  constituted.  (1808)  
prepaid  premium  (RA  7875).  HMOs  are  not  in  the  insurance  business,  as  held  in  US  
 
Courts  which  should  have  persuasive  effect  on  Philippine  decisions.  Our  Insurance   ART.  2186,  CC.  Every  owner  of  a  motor  vehicle  shall  file  with  the  proper  government  office  a  bond  
Code   was   based   on   California   and   New   York   laws.   When   a   statute   has   been   executed   by   a   government-­‐controlled   corporation   or   office,   to   answer   for   damages   to   third   persons.  
adopted   from   some   other   state   or   country   and   said   statute   has   previously   been   The  amount  of  the  bond  and  other  terms  shall  be  fixed  by  the  competent  public  official.  (n)  
 
construed   by   the   courts   of   such   state   or   country,   the   statute   is   deemed   to   have  
ART.   2207,   CC.   If   the   plaintiff's   property   has   been   insured,   and   he   has   received   indemnity   from   the  
been  adopted  with  the  construction  given.   insurance  company  for  the  injury  or  loss  arising  out  of  the  wrong  or  breach  of  contract  complained  
  of,   the   insurance   company   shall   be   subrogated   to   the   rights   of   the   insured   against   the   wrongdoer   or  
2. Civil  Code   the   person   who   has   violated   the   contract.   If   the   amount   paid   by   the   insurance   company   does   not  
fully  cover  the  injury  or  loss,  the  aggrieved  party  shall  be  entitled  to  recover  the  deficiency  from  the  
 
person  causing  the  loss  or  injury.  
ART.  739,  CC.  The  following  donations  shall  be  void:  
(1) Those   made   between   persons   who   were   guilty   of   adultery   or   concubinage   at   the   time   of   the    
donation;   3. Special  Laws  
(2) Those   made   between   persons   found   guilty   of   the   same   criminal   offense,   in   consideration   • GSIS  Act,  SSS  Act,  PDIC,  among  others.  
thereof;  
(3) Those  made  to  a  public  officer  or  his  wife,  descedants  and  ascendants,  by  reason  of  his  office.  
 
  CHAPTER  2  –  THE  CONTRACT  OF  INSURANCE  
ART.   2011,   CC.   The   contract   of   insurance   is   governed   by   special   laws.   Matters   not   expressly  
provided  for  in  such  special  laws  shall  be  regulated  by  this  Code.  (n)  
 
  A. Definitions  
ART.   2012,   CC.   Any   person   who   is   forbidden   from   receiving   any   donation   under   Article   739   cannot    
be  named  beneficiary  of  a  life  insurance  policy  by  the  person  who  cannot  make  any  donation  to  him,   “Contract  of  Insurance”  
according  to  said  article.  (n)    
 
 
ART.  2021,  CC.  The  aleatory  contract  of  life  annuity  binds  the  debtor  to  pay  an  annual  pension  or   • Insurance   Code   –   an   agreement   whereby   one   undertakes   for   a  
income  during  the  life  of  one  or  more  determinate  persons  in  consideration  of  a  capital  consisting  of   consideration  to  indemnify  another  against  loss,  damage  or  liability  arising  
money   or   other   property,   whose   ownership   is   transferred   to   him   at   once   with   the   burden   of   the   from  an  unknown  or  contingent  event,  either  past  or  future.  
income.  (1802a)  
  • De   Leon’s   “better   definition”   –   a   contract   of   insurance   is   an   agreement   by  
ART.   2022,   CC.   The   annuity   may   be   constituted   upon   the   life   of   the   person   who   gives   the   capital,   which  one  party  (insurer)  for  a  consideration  (premium)  paid  by  the  other  
upon  that  of  a  third  person,  or  upon  the  lives  of  various  persons,  all  of  whom  must  be  living  at  the   party  (insured),  promises  to  pay  money  or  its  equivalent  or  to  do  some  act  
time  the  annuity  is  established.   valuable   to   the   latter   (or   his   nominee),   upon   the   happening   of   a   loss,  
It   may   also   be   constituted   in   favor   of   the   person   or   persons   upon   whose   life   or   lives   the  
contract  is  entered  into,  or  in  favor  of  another  or  other  persons.  (1803)   damage,   liability,   or   disability,   arising   from   an   unknown   or   contingent  
  event.  
ART.  2023,  CC.  Life  annuity  shall  be  void  if  constituted  upon  the  life  of  a  person  who  was  already    
dead   at   the   time   the   contract   was   entered   into,   or   who   was   at   that   time   suffering   from   an   illness  
SEC.   2.   Whenever   used   in   this   Code,   the   following   terms   shall   have   the   respective   meanings  
which  caused  his  death  within  twenty  days  following  said  date.  (1804)  
hereinafter  set  forth  or  indicated,  unless  the  context  otherwise  requires:  
 
(a)   A   contract   of   insurance   is   an   agreement   whereby   one   undertakes   for   a   consideration   to  
ART.  2024,  CC.  The  lack  of  payment  of  the  income  due  does  not  authorize  the  recipient  of  the  life  
indemnify  another  against  loss,  damage  or  liability  arising  from  an  unknown  or  contingent  event.  
annuity   to   demand   the   reimbursement   of   the   capital   or   to   retake   possession   of   the   property  
A   contract   of   suretyship   shall   be   deemed   to   be   an   insurance   contract,   within   the   meaning   of  
alienated,  unless  there  is  a  stipulation  to  the  contrary;  he  shall  have  only  a  right  judicially  to  claim  
this   Code,   only   if   made   by   a   surety   who   or   which,   as   such,   is   doing   an   insurance   business   as  
the  payment  of  the  income  in  arrears  and  to  require  a  security  for  the  future  income,  unless  there  is  
hereinafter  provided.  
a  stipulation  to  the  contrary.  (1805a)  
(b)   The   term   doing   an   insurance   business   or   transacting   an   insurance   business,   within   the   meaning  
 
of  this  Code,  shall  include:  
ART.  2025,  CC.  The  income  corresponding  to  the  year  in  which  the  person  enjoying  it  dies  shall  be  
(1) Making  or  proposing  to  make,  as  insurer,  any  insurance  contract;  
paid  in  proportion  to  the  days  during  which  he  lived;  if  the  income  should  be  paid  by  installments  in  
(2) Making  or  proposing  to  make,  as  surety,  any  contract  of  suretyship  as  a  vocation  and  not  
advance,   the   whole   amount   of   the   installment   which   began   to   run   during   his   life   shall   be   paid.  
as  merely  incidental  to  any  other  legitimate  business  or  activity  of  the  surety;  
(1806)  

LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  

Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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(3) Doing   any   kind   of   business,   including   a   reinsurance   business,   specifically   recognized   as   • contingent  –  future;  not  certain  to  take  place  
constituting  the  doing  of  an  insurance  business  within  the  meaning  of  this  Code;  
(4) Doing  or  proposing  to  do  any  business  in  substance  equivalent  to  any  of  the  foregoing  in  a  
• unknown   –   past   or   future;   though   certain   to   happen,   the   time   of   its  
manner  designed  to  evade  the  provisions  of  this  Code.   happening   is   not   known,   or   when   it   has   already   happened,   but   the  
In   the   application   of   the   provisions   of   this   Code,   the   fact   that   no   profit   is   derived   from   the   parties  do  not  know  
making   of   insurance   contracts,   agreements   or   transactions   or   that   no   separate   or   direct   4. Consideration:   Premium   –   insurer   undertakes   to   assume   the   risk   of   loss  
consideration  is  received  therefor,  shall  not  be  deemed  conclusive  to  show  that  the  making  thereof  
does  not  constitute  the  doing  or  transacting  of  an  insurance  business.  
for   a   consideration;   premium   is   a   ratable   contribution   to   a   general  
(c)  As  used  in  this  Code,  the  term  Commissioner  means  the  Insurance  Commissioner.   insurance  fund.  
  5. Risk   Distributing   Scheme   –   the   assumption   of   risk   is   part   of   the   general  
“Contract  of  Suretyship”   scheme  to  distribute  actual  losses  among  a  large  group  of  persons  bearing  
  similar  risks.  
SEC.  177.  A  contract  of  suretyship  is  an  agreement  whereby  a  party  called  the  surety  guarantees  the  
 
performance  by  another  party  called  the  principal  or  obligor  of  an  obligation  or  undertaking  in  favor   C. Characteristics  /  Nature  of  Insurance  Contracts  
of   a   third   party   called   the   obligee.   It   includes   official   recognizances,   stipulations,   bonds   or    
undertakings   issued   by   any   company   by   virtue   of   and   under   the   provisions   of   Act   No.   536,   as   1. Aleatory  
amended  by  Act  No.  2206.  
  • Liability   of   the   insurer   is   dependent   on   the   happening   of   a   contingent   event  
SEC.  178.  The  liability  of  the  surety  or  sureties  shall  be  joint  and  several  with  the  obligor  and  shall   which   is   uncertain,   or   which   though   certain,   is   to   occur   at   some   future  
be   limited   to   the   amount   of   the   bond.   It   is   determined   strictly   by   the   terms   of   the   contract   of   undetermined  time.  
suretyship  in  relation  to  the  principal  contract  between  the  obligor  and  the  obligee.    
 
SEC.   179.   The   surety   is   entitled   to   payment   of   the   premium   as   soon   as   the   contract   of   suretyship   or   ART.  2010,  CC.  By  an  aleatory  contract,  one  of  the  parties  or  both  reciprocally  bind  themselves  to  
bond  is  perfected  and  delivered  to  the  obligor.  No  contract  of  suretyship  or  bonding  shall  be  valid   give  or  to  do  something  in  consideration  of  what  the  other  shall  give  or  do  upon  the  happening  of  an  
and   binding   unless   and   until   the   premium   therefor   has   been   paid,   except   where   the   obligee   has   event  which  is  uncertain,  or  which  is  to  occur  at  an  indeterminate  time.  (1790)  
accepted  the  bond,  in  which  case  the  bond  becomes  valid  and  enforceable  irrespective  of  whether  or    
not   the   premium   has   been   paid   by   the   obligor   to   the   surety:   Provided,   That   if   the   contract   of   2. Executory  and  Conditional  
suretyship   or   bond   is   not   accepted   by,   or   filed   with   the   obligee,   the   surety   shall   collect   only   a  
reasonable   amount,   not   exceeding   fifty   percent   (50%)   of   the   premium   due   thereon   as   service   fee   • Unilateral,  executor  and  conditional  on  the  part  of  the  insurer.  
plus  the  cost  of  stamps  or  other  taxes  imposed  for  the  issuance  of  the  contract  or  bond:  Provided,   • Usually   wholly   executed   on   the   part   of   the   insured   who   must   pay   the  
however,  That  if  the  nonacceptance  of  the  bond  be  due  to  the  fault  or  negligence  of  the  surety,  no   premium  before  the  contract  can  become  effective.  
such  service  fee,  stamps  or  taxes  shall  be  collected.  
In   the   case   of   a   continuing   bond,   the   obligor   shall   pay   the   subsequent   annual   premium   as   it  
• Insurer   has   no   obligation   to   pay   until   and   unless   the   peril   insured   against  
falls  due  until  the  contract  of  suretyship  is  cancelled  by  the  obligee  or  by  the  Commissioner  or  by  a   takes  place.  
court  of  competent  jurisdiction,  as  the  case  may  be.    
  3. Synallagmatic  
SEC.  180.  Pertinent  provisions  of  the  Civil  Code  of  the  Philippines  shall  be  applied  in  a  suppletory  
character  whenever  necessary  in  interpreting  the  provisions  of  a  contract  of  suretyship.   • A  highly  reciprocal  contract  where  the  rights  and  obligations  of  the  parties  
correlate   and   mutually   correspond.   The   insurer   assumes   the   risk   of   loss  
 
which  an  insured  might  suffer  in  consideration  of  premium  payments  under  
“Doing  an  insurance  business”  
a   risk-­‐distributing   device.   Such   assumption   of   risk   is   a   component   of  
 
general   scheme   to   distribute   actual   losses   among   a   group   of   persons,  
SEC.  2.  Supra  
bearing  similar  risks,  who  make  ratable  contributions  to  a  fund  from  which  
  the   losses   incurred   due   t   exposures   to   the   peril   insured   against   are   assured  
B. Elements   and   compensated.   (UCPB   General   Insurance   v.   Masagana   Telemart,  
  2001)  
1. Insurable   Interest   –   interest   in   the   life   or   thing   capable   of   pecuniary    
estimation.   4. Consensual  and  Voluntary  
2. Risk   of   Loss   or   Damage   –   insured   is   subjected   to   risk   through   the   • Perfected  by  the  meeting  of  the  minds  of  the  parties  
destruction  or  impairment  of  that  interest  by  the  happening  of  a  designated   • Unless   otherwise   stipulated,   the   policy   is   not   essential   to   the   existence   of  
peril.   the  contract.  
3. Designated  Peril  as  Cause  –  cause  of  damage  or  loss;  must  be  stated  in  the    
contract.  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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  planholders   and   other   costs   necessary   to   ensure   the   delivery   of  

ART.  1305,  CC.  A  contract  is  a  meeting  of  minds  between  two  persons  whereby  one  binds  himself,   benefits  or  services  to  planholders  as  provided  for  in  the  contracts.  
with  respect  to  the  other,  to  give  something  or  to  render  some  service.  (1254a)    
 
Philamcare  Health  Systems  v.  CA  (2002)  
ART.   1306,   CC.   The   contracting   parties   may   establish   such   stipulations,   clauses,   terms   and  
conditions   as   they   may   deem   convenient,   provided   they   are   not   contrary   to   law,   morals,   good   Facts:  Ernani  Trinos  applied  for  a  health  care  coverage  from  Philamcare,  saying  
customs,  public  order,  or  public  policy.  (1255a)   he   or   his   family   members   have   never   been   consulted   or   been   treated   for   certain  
  diseases,   including   heart   trouble.   Trinos   suffered   a   heart   attack   in   1990   and   when  
ART.  1308,  CC.  The  contract  must  bind  both  contracting  parties;  its  validity  or  compliance  cannot   his  wife  tried  to  claim,  she  was  denied  the  benefits  for  concealing  Ernani’s  medical  
be  left  to  the  will  of  one  of  them.  (1256a)  
history.  RTC  ruled  in  favor  of  Trinos.  SC  and  CA  affirm.  
   
5. Contract  of  Adhesion   Held:  Health  care  agreements  are  in  the  nature  of  non-­‐life  insurance,  a  contract  of  
• Policy  in  its  printed  form;  insured  either  takes  it  or  leave  it.   indemnity.   The   Insurance   Code   governs   when   it   comes   to   rescission   based   on  
• Ambiguity  is  resolved  in  favor  of  the  insured  and  against  the  insurer.   concealment.  This  means  that  the  right  to  rescind  should  be  exercised  previous  to  
  the  commencement  of  an  action  on  the  contract.  
6. Personal  and  of  Highest  Degree  of  Good  Faith    
• Good  faith  of  both  the  insurer  and  the  insured.   Requisites  for  the  cancellation  of  insurance  policies:  
  1. Prior  notice  of  cancellation  to  the  insured.  
7. Indemnity  (Non-­‐Life  or  Property)   2. Notice   must   be   based   on   the   occurrence   after   effective   date   of   the   policy   of  
• Non-­‐Life  Insurance  –  contract  of  indemnity.   one  or  more  of  the  grounds  mentioned.  
-­‐ insured   cannot   seek   to   make   a   profit   by   demanding   from   the   insurer   3. Must   be   in   writing,   mailed   or   delivered   to   the   insured   at   the   address   shown   in  
more  than  what  he  has  actually  lost  or  suffered.   the  policy.  
-­‐ liability   of   the   insurer   is   measured   by   the   extent   of   the   loss   suffered,   4. Must  state  the  grounds  relied  upon  provided  in  Sec.  64  of  the  Insurance  Code  
regardless   of   the   fact   that   the   face   value   of   the   policy   may   be   much   and   upon   request   of   the   insured,   to   furnish   facts   on   which   cancellation   is  
more.   based.  
• Life  Insurance  –  investment    
-­‐ life  policy  constitutes,  through  the  insured’s  savings  thus  invested  and   Blue  Cross  Health  Care  v.  Olivares  (2008)  
the   earnings   thereon,   a   measure   of   economic   security   for   the   insured   Facts:   Olivares   suffered   a   stroke,   and   wishes   to   reimburse   expenses   from   Blue  
during  his  lifetime,  or  for  his  beneficiary  after  his  death.   Cross.  But  insurance  policy  does  not  cover  pre-­‐existing  conditions,  and  Blue  Cross  
  requests   certification   from   physician   saying   that   stroke   was   not   due   to   pre-­‐
D. Contracts   for   Contingent   Services;   Pre-­‐Need   and   Similar   Arrangement;   existing   conditions.   Olivares   refused   to   allow   his   doctor   to   divulge   information  
Warranties   citing   patient-­‐physician   confidentiality.   Olivares   sued   for   damages.   MeTC  
  dismissed  for  lack  of  cause  of  action.  RTC  reverses.  CA  and  SC  affirm.  
• RA  9829:  An  Act  Establishing  the  Pre-­‐Need  Code  of  the  Philippines    
o What  is  a  pre-­‐need  plan?   Held:  Health  coverage  contract  is  a  non-­‐life  insurance  contract  and  a  contract  of  
§ Contracts,   agreements,   deeds   or   plans   for   the   benefit   of   the   adhesion,  therefore,  the  limits  on  their  liability  should  be  construed  strictly  against  
planholders   which   provide   for   the   performance   of   future   the  insurer.  The  burden  of  proving  that  the  stroke  was  excluded  from  the  coverage  
service/s,   payment   of   monetary   considerations   or   delivery   of   falls   under   the   healthcare   company.   The   physician’s   report   is   privileged  
other  benefits  at  the  time  of  actual  need  or  agreed  maturity  date,   communication,  and  the  patient  was  justified  in  refusing  to  divulge  it.  
as   specified   therein,   in   exchange   for   cash   or   installment   amounts    
with   or   without   interest   or   insurance   coverage   and   includes   life,   Philippine  Health  Care  Providers  v.  Commission  of  Internal  Revenue  (2008)  
pension,   education,   interment   and   other   plans,   instruments,   Facts:  PHCP  is  engaged  in  the  dispensation  of  preventive,  diagnostic  and  curative  
contracts   or   deeds   as   may   in   the   future   be   determined   by   the   medical  services  to  individuals  who  enter  into  health  care  agreements  with  it  and  
Commission.   who   pay   annual   membership   fee.   CIR   sent   PHCP   a   formal   demand   letter   and  
o What  is  a  trust  fund?   assessment   notices   demanding   the   payment   of   deficiency   taxes   (VAT   and   DST)  
§ It   refers   to   a   fund   set   up   from   the   planholders’   payments   to   pay   for   imposed  on  its  health  care  agreements  with  its  members  pursuant  to  Sec.  185  of  
the   cost   of   benefits   and   services,   termination   values   payable   to   the  1997  Tax  Code.  PHCP  protested  the  assessment.  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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Held:   Health   care   agreements   are   subject   to   documentary   stamp   tax.   It   is   in   the   SEC.  184.  A  policy  of  insurance  upon  life  or  health  may  pass  by  transfer,  will  or  succession  to  any  
person,   whether   he   has   an   insurable   interest   or   not,   and   such   person   may   recover   upon   it   whatever  
nature   of   an   insurance   contract,   and   not   simply   a   prepaid   contract   for   the  
the  insured  might  have  recovered.  
provision   of   medical   services.   Out-­‐patient   service   is   the   contingent   event   which    
gives  rise  to  liability.  Expenses  cannot  be  predicted  therefore,  ergo  not  a  contract   SEC.   185.   Notice   to   an   insurer   of   a   transfer   or   bequest   thereof   is   not   necessary   to   preserve   the  
for  prepaid  services.   validity  of  a  policy  of  insurance  upon  life  or  health,  unless  thereby  expressly  required.  
 
 
SEC.  186.  Unless  the  interest  of  a  person  insured  is  susceptible  of  exact  pecuniary  measurement,  the  
E. General  Classification  of  Insurance  Under  the  Code   measure  of  indemnity  under  a  policy  of  insurance  upon  life  or  health  is  the  sum  fixed  in  the  policy.  
• No   insurance   company   may   transact   concurrently   the   business   of   life   and    
non-­‐life  insurance,  unless  specifically  authorized  to  do  so  by  the  Insurance   b. Group  Life  
Commissioner.  
• Unlike   in   individual   life   policies,   there   is   usually   n   medical   examination  
  made  of  the  persons  insured.  
1. Life  
• Members  would  usually  be  a  cohesive  group  like  employees  of  a  particular  
• Insurance  on  human  lives  and  insurance  appertaining  thereto.   company.  
• May   be   made   payable   upon   the   death   of   the   person,   or   on   his   surviving   a   • Uniform  premium.  
specified  period,  or  otherwise  contingently  on  the  continuation  or  cessation  
• Death   of   any   member   will   give   rise   to   the   insurer’s   liability   to   pay   the  
of  life.  
beneficiary  of  the  particular  deceased.  
 
 
a. Individual  Life  
SEC.   50.   The   policy   shall   be   in   printed   form   which   may   contain   blank   spaces;   and   any   word,   phrase,  
  clause,   mark,   sign,   symbol,   signature,   number,   or   word   necessary   to   complete   the   contract   of  
SEC.   181.   Life   insurance   is   insurance   on   human   lives   and   insurance   appertaining   thereto   or   insurance  shall  be  written  on  the  blank  spaces  provided  therein.  
connected  therewith.   Any  rider,  clause,  warranty  or  endorsement  purporting  to  be  part  of  the  contract  of  insurance  
Every   contract   or   undertaking   for   the   payment   of   annuities   including   contracts   for   the   and  which  is  pasted  or  attached  to  said  policy  is  not  binding  on  the  insured,  unless  the  descriptive  
payment   of   lump   sums   under   a   retirement   program   where   a   life   insurance   company   manages   or   title   or   name   of   the   rider,   clause,   warranty   or   endorsement   is   also   mentioned   and   written   on   the  
acts   as   a   trustee   for   such   retirement   program   shall   be   considered   a   life   insurance   contract   for   blank  spaces  provided  in  the  policy.  
purposes  of  this  Code.   Unless   applied   for   by   the   insured   or   owner,   any   rider,   clause,   warranty   or   endorsement   issued  
  after   the   original   policy   shall   be   countersigned   by   the   insured   or   owner,   which   countersignature  
SEC.   182.   An   insurance   upon   life   may   be   made   payable   on   the   death   of   the   person,   or   on   his   shall  be  taken  as  his  agreement  to  the  contents  of  such  rider,  clause,  warranty  or  endorsement.  
surviving  a  specified  period,  or  otherwise  contingently  on  the  continuance  or  cessation  of  life.   Notwithstanding   the   foregoing,   the   policy   may   be   in   electronic   form   subject   to   the   pertinent  
Every  contract  or  pledge  for  the  payment  of  endowments  or  annuities  shall  be  considered  a  life   provisions  of  Republic  Act  No.  8792,  otherwise  known  as  the  ‘Electronic  Commerce  Act’  and  to  such  
insurance  contract  for  purposes  of  this  Code.   rules  and  regulations  as  may  be  prescribed  by  the  Commissioner.  
In   the   absence   of   a   judicial   guardian,   the   father,   or   in   the   latter’s   absence   or   incapacity,   the    
mother,   of   any   minor,   who   is   an   insured   or   a   beneficiary   under   a   contract   of   life,   health,   or   accident   SEC.   234.   No   policy   of   group   life   insurance   shall   be   issued   and   delivered   in   the   Philippines   unless   it  
insurance,   may   exercise,   in   behalf   of   said   minor,   any   right   under   the   policy,   without   necessity   of   contains   in   substance   the   following   provisions,   or   provisions   which   in   the   opinion   of   the  
court  authority  or  the  giving  of  a  bond,  where  the  interest  of  the  minor  in  the  particular  act  involved   Commissioner   are   more   favorable   to   the   persons   insured,   or   at   least   as   favorable   to   the   persons  
does  not  exceed  Five  hundred  thousand  pesos  (P500,000.00)  or  in  such  reasonable  amount  as  may   insured  and  more  favorable  to  the  policyholders:  
be   determined   by   the   Commissioner.   Such   right   may   include,   but   shall   not   be   limited   to,   obtaining   a   (a) A   provision   that   the   policyholder   is   entitled   to   a   grace   period   of   either   thirty   (30)   days   or   of  
policy   loan,   surrendering   the   policy,   receiving   the   proceeds   of   the   Policy,   and   giving   the   minor’s   one  (1)  month  for  the  payment  of  any  premium  due  after  the  first,  during  which  grace  period  
consent  to  any  transaction  on  the  policy.   the   death   benefit   coverage   shall   continue   in   force,   unless   the   policyholder   shall   have   given   the  
In  the  absence  or  in  case  of  the  incapacity  of  the  father  or  mother,  the  grandparent,  the  eldest   insurer   written   notice   of   discontinuance   in   advance   of   the   date   of   discontinuance   and   in  
brother   or   sister   at   least   eighteen   (18)   years   of   age,   or   any   relative   who   has   actual   custody   of   the   accordance  with  the  terms  of  the  policy.  The  policy  may  provide  that  the  policyholder  shall  be  
minor   insured   or   beneficiary,   shall   act   as   a   guardian   without   need   of   a   court   order   or   judicial   liable   for   the   payment   of   a   pro   rata   premium   for   the   time   the   policy   is   in   force   during   such  
appointment  as  such  guardian,  as  long  as  such  person  is  not  otherwise  disqualified  or  incapacitated.   grace  period;  
Payment   made   by   the   insurer   pursuant   to   this   section   shall   relieve   such   insurer   of   any   liability   (b) A   provision   that   the   validity   of   the   policy   shall   not   be   contested,   except   for   nonpayment   of  
under  the  contract.   premiums   after   it   has   been   in   force   for   two   (2)   years   from   its   date   of   issue;   and   that   no  
  statement   made   by   any   insured   under   the   policy   relating   to   his   insurability   shall   be   used   in  
SEC.   183.   The   insurer   in   a   life   insurance   contract   shall   be   liable   in   case   of   suicide   only   when   it   is   contesting  the  validity  of  the  insurance  with  respect  to  which  such  statement  was  made  after  
committed  after  the  policy  has  been  in  force  for  a  period  of  two  (2)  years  from  the  date  of  its  issue   such  insurance  has  been  in  force  prior  to  the  contest  for  a  period  of  two  (2)  years  during  such  
or   of   its   last   reinstatement,   unless   the   policy   provides   a   shorter   period:   Provided,   however,   That   person’s  lifetime  nor  unless  contained  in  a  written  instrument  signed  by  him;  
suicide   committed   in   the   state   of   insanity   shall   be   compensable   regardless   of   the   date   of   (c) A   provision   that   a   copy   of   the   application,   if   any,   of   the   policyholder   shall   be   attached   to   the  
commission.   policy  when  issued,  that  all  statements  made  by  the  policyholder  or  by  persons  insured  shall  
  be   deemed   representations   and   not   warranties,   and   that   no   statement   made   by   any   insured  

LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  

Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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shall   be   used   in   any   contest   unless   a   copy   of   the   instrument   containing   the   statement   is   or   has   require   group   life   policies   to   contain   the   same   non-­‐forfeiture   provisions   as   are   required   of  
been  furnished  to  such  person  or  to  his  beneficiary;   individual  life  policies.  
(d) A  provision  setting  forth  the  conditions,  if  any,  under  which  the  insurer  reserves  the  right  to  
 
require   a   person   eligible   for   insurance   to   furnish   evidence   of   individual   insurability  
satisfactory  to  the  insurer  as  a  condition  to  part  or  all  of  his  coverage;   Pineda  v.  CA  (1993)  
(e) A   provision   specifying   an   equitable   adjustment   of   premiums   or   of   benefits   or   of   both   to   be   Facts:   Prime   Marine   Services   (PMSI)   procured   Group   Policy   from   Insular   Life   to  
made   in   the   event   that   the   age   of   a   person   insured   has   been   misstated,   such   provision   to   provide  life  insurance  to  sea-­‐based  employees.  MV  Nemos  sank,  with  six  employees  
contain  a  clear  statement  of  the  method  of  adjustment  to  be  used;  
covered   by   the   policy   drowning.   PMSI   filed   formal   claims   in   behalf   of   the  
(f) A   provision   that   any   sum   becoming   due   by   reason   of   death   of   the   person   insured   shall   be  
payable  to  the  beneficiary  designated  by  the  insured,  subject  to  the  provisions  of  the  policy  in   beneficiaries   before   Insular,   on   the   basis   of   SPOAs,   and   checks   were   released   to  
the   event   that   there   is   no   designated   beneficiary,   as   to   all   or   any   part   of   such   sum,   living   at   the   PMSI.  Later,  the  beneficiaries  learned  they  were  entitled  to  life  insurance  benefits  
death  of  the  insured,  and  subject  to  any  right  reserved  by  the  insurer  in  the  policy  and  set  forth   from   Insular   Life,   but   later   denied   liability   since   it   already   gave   checks   to   the  
in   the   certificate   to   pay   at   its   option   a   part   of   such   sum   not   exceeding   Five   hundred   pesos  
beneficiaries.  
(P500.00)  to  any  person  appearing  to  the  insurer  to  be  equitably  entitled  thereto  by  reason  of  
having   incurred   funeral   or   other   expenses   incident   to   the   last   illness   or,   death   of   the   person    
insured;   Held:   In   group   insurance,   the   policyholder   (employer)   is   a   mere   agent   of   the  
(g) A  provision  that  the  insurer  will  issue  to  the  policyholder  for  delivery  to  each  person  insured  a   insured   (employees).   The   insurance   is   related   to   the   life   and   health   of   the   latter.  
statement   as   to   the   insurance   protection   to   which   he   is   entitled,   to   whom   the   insurance  
The  source  of  benefits  is  not  the  payment  of  the  premium  by  the  policyholder,  but  
benefits  are  payable,  and  the  rights  set  forth  in  paragraphs  (h),  (i)  and  (j)  following;  
(h) A   provision   that   if   the   insurance,   or   any   portion   of   it,   on   a   person   covered   under   the   policy   the  labor  of  the  employees.  
ceases   because   of   termination   of   employment   or   of   membership   in   the   class   or  classes  eligible    
for   coverage   under   the   policy,   such   person   shall   be   entitled   to   have   issued   to   him   by   the   c. Industrial  Life  
insurer,   without   evidence   of   insurability,   an   individual   policy   of   life   insurance   without  
disability  or  other  supplementary  benefits,  provided  application  for  the  individual  policy  and  
• Aimed  at  protecting  the  lower  income  group.  
payment  of  the  first  premium  to  the  insurer  shall  be  made  within  thirty  (30)  days  after  such   • Purpose   –   to   cover   the   expenses   for   the   last   sickness   of   the   insured   and  
termination,  and  provided  further  that:   those  for  his  burial.  
(1) The   individual   policy   shall   be   on   any   one   of   the   forms,   except   term   insurance,   then   • Premiums  are  payable  weekly,  bi-­‐weekly,  or  monthly,  and  the  face  amount  
customarily   issued   by   the   insurer   at   the   age   and   for   an   amount   not   in   excess   of   the  
coverage  under  the  group  policy;  and   is  relatively  small.  
(2) The   premium   on   the   individual   policy   shall   be   at   the   insurer’s   then   customary   rate    
applicable   to   the   form   and   amount   of   the   individual   policy,   to   the   class   of   risk   to   which   SEC.   235.   The   term   industrial   life   insurance   as   used   in   this   Code   shall   mean   that   form   of   life  
such  person  then  belongs,  and  to  his  age  attained  on  the  effective  date  of  the  individual   insurance  under  which  the  premiums  are  payable  either  monthly  or  oftener,  if  the  face  amount  of  
policy.   insurance  provided  in  any  policy  is  not  more  than  five  hundred  times  that  of  the  current  statutory  
(i) A  provision  that  if  the  group  policy  terminates  or  is  amended  so  as  to  terminate  the  insurance   minimum  daily  wage  in  the  City  of  Manila,  and  if  the  words  industrial  policy  are  printed  upon  the  
of   any   class   of   insured   persons,   every   person   insured   thereunder   at   the   date   of   such   policy  as  part  of  the  descriptive  matter.  
termination  whose  insurance  terminates  and  who  has  been  so  insured  for  five  (5)  years  prior   An   industrial   life   policy   shall   not   lapse   for   nonpayment   of   premium   if   such   nonpayment   was  
to   such   termination   date   shall   be   entitled   to   have   issued   to   him   by   the   insurer   an   individual   due   to   the   failure   of   the   company   to   send  its   representative   or   agent   to   the   insured   at   the   residence  
policy  of  life  insurance  subject  to  the  same  limitations  as  set  forth  in  paragraph  (h),  except  that   of  the  insured  or  at  some  other  place  indicated  by  him  for  the  purpose  of  collecting  such  premium:  
the   group   policy   may   provide   that   the   amount   of   such   individual   policy   shall   not   exceed   the   Provided,   That   the   provisions   of   this   paragraph   shall   not   apply   when   the   premium   on   the   policy  
amount  of  the  person’s  life  insurance  protection  ceasing;   remains   unpaid   for   a   period   of   three   (3)   months   or   twelve   (12)   weeks   after   the   grace   period   has  
(j) A   provision   that   if   a   person   insured   under   the   group   policy   dies   during   the   thirty   (30)-­‐day   expired.  
period   within   which   he   would   have   been   entitled   to   an   individual   policy   issued   to   him   in    
accordance   with   paragraphs   (h)   and   (i)   above   and   before   such   individual   policy   shall   have   SEC.  236.  In  the  case  of  industrial  life  insurance,  the  policy  shall  contain  in  substance  the  following  
become   effective,   the   amount   of   life   insurance   which   he   would   have   been   entitled   to   have   provisions:  
issued   to   him   as   an   individual   policy   shall   be   payable   as   a   claim   under   the   group   policy   (a) A   provision   that   the   insured   is   entitled   to   a   grace   period   of   four   (4)   weeks   within   which   the  
whether   or   not   application   for   the   individual   policy   or   the   payment   of   the   first   premium   has   payment  of  any  premium  after  the  first  may  be  made,  except  that  where  premiums  are  payable  
been  made;   monthly,   the   period   of   grace   shall   be   either   one   (1)   month   or   thirty   (30)   days;   and   that   during  
(k) In  the  case  of  a  policy  issued  to  a  creditor  to  insure  debtors  of  such  creditor,  a  provision  that   the  period  of  grace,  the  policy  shall  continue  in  full  force,  but  if  during  such  grace  period  the  
the  insurer  will  furnish  to  the  policyholder  for  delivery  to  each  debtor  insured  under  the  policy   policy   becomes   a   claim,   then   any   overdue   and   unpaid   premiums   may   be   deducted   from   any  
a  form  which  will  contain  a  statement  that  the  life  of  the  debtor  is  insured  under  the  policy  and   amount  payable  under  the  policy  in  settlement;  
that   any   death   benefit   paid   thereunder   by   reason   of   his   death   shall   be   applied   to   reduce   or   (b) A  provision  that  the  policy  shall  be  incontestable  after  it  has  been  in  force  during  the  lifetime  of  
extinguish  indebtedness.   the  insured  for  a  specified  period,  not  more  than  two  (2)  years  from  its  date  of  issue,  except  for  
The  provisions  of  paragraphs  (f)  to  (j)  shall  not  apply  to  policies  issued  to  a  creditor  to  insure   nonpayment   of   premiums   and   except   for   violation   of   the   conditions   of   the   policy   relating   to  
his   debtors.   If   a   group   life   policy   is   on   a   plan   of   insurance   other   than   term,   it   shall   contain   a   non-­‐ naval  or military  service,  or  services  auxiliary  thereto,  and  except  as  to  provisions  relating  to  
forfeiture   provision   or   provisions   which   in   the   opinion   of   the   Commissioner   is   or   are   equitable   to   benefits   in   the   event   of   disability   as   defined   in   the   policy,   and   those   granting   additional  
the  insured  or  the  policyholder:  Provided,  That  nothing  herein  contained  shall  be  so  construed  as  to   insurance   specifically   against   death   by   accident   or   by   accidental   means,   or   to   additional  
insurance  against  loss  of,  or  loss  of  use  of,  specific  members  of  the  body;  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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(c) A   provision   that   the   policy   shall   constitute   the   entire   contract   between   the   parties,   or   if   a   copy   than   thirty   (30)   days   after   the   death   of   the   insured,   or   if   the   beneficiary   is   the   estate   of   the  
of  the  application  is  endorsed  upon  and  attached  to  the  policy  when  issued,  a  provision  that  the   insured,   or   is   a   minor,   or   dies   before   the   insured,   or   is   not   legally   competent   to   give   valid  
policy  and  the  application  therefor  shall  constitute  the  entire  contract  between  the  parties,  and   release,  then  the  insurer  may  make  any  payment  thereunder  to  the  executor  or  administrator  
in  the  latter  case,  a  provision  that  all  statements  made  by  the  insured  shall,  in  the  absence  of   of   the   insured,   or   to   any   of   the   insured’s   relatives   by   blood   or   legal   adoption   or   connections   by  
fraud,  be  deemed  representations  and  not  warranties;   marriage  or  to  any  person  appearing  to  the  insurer  to  be  equitably  entitled  thereto  by reason  
(d) A   provision   that   if   the   age   of   the   person   insured,   or   the   age   of   any   person,   considered   in   of  having  incurred  expense  for  the  maintenance,  medical  attention  or  burial  of  the  insured;  and  
determining  the  premium,  or  the  benefits  accruing  under  the  policy,  has  been  misstated,  any   (n) A  provision  that  when  an  industrial  life  insurance  policy  is  issued  providing  for  accidental  or  
amount   payable   or   benefit   accruing   under   the   policy   shall   be   such   as   the   premium   paid   would   health  benefits,  or  both,  in  addition  to  life  insurance,  the  foregoing  provisions  shall  apply  only  
have  purchased  at  the  correct  age;   to  the  life  insurance  portion  of  the  policy.  
(e) A  provision  that  if  the  policy  is  a  participating  policy,  the  company  shall  periodically  ascertain   (a) Any  of  the  foregoing  provisions  or  portions  thereof  not  applicable  to  nonparticipating  or  term  
and   apportion   any   divisible   surplus   accruing   on   the   policy   under   the   conditions   specified   policies   shall   to   that   extent   not   be   incorporated   therein.   The   foregoing   provisions   shall   not  
therein;   apply   to   policies   issued   or   granted   pursuant   to   the   nonforfeiture   provisions   prescribed   in  
(f) A   provision   that   in   the   event   of   default   in   premium   payments   after   three   (3)   full   years’   provisions  of  paragraphs  (f)  and  (i)  of  this  section,  nor  shall  provisions  of  paragraphs  (f),  (g),  
premiums   have   been   paid,   the   policy   shall   be   converted   into   a   stipulated   form   of   insurance,   (h),   and   (i)   hereof   be   required   in   term   insurance   of   twenty   (20)   years   or   less   but   such   term  
and  that  in  the  event  of  default  in  premium  payments  after  five  (5)  full  years’  premiums  have   policies  shall  specify  the  mortality  table,  rate  of  interest,  and  method  of  computing  reserves.  
been  paid,  a  specified  cash  surrender  value  shall  be  available,  in  lieu  of  the  stipulated  form  of    
insurance,   at   the   option   of   the   policyholder.   The   net   value   of   such   stipulated   form   of   insurance   SEC.   237.   No   policy   of   industrial   life   insurance   shall   be   issued   or   delivered   in   the   Philippines   if   it  
and  the  amount  of  such  cash  value  shall  not  be  less  than  the  reserve  on  the  policy  and  dividend   contains  any  of  the  following  provisions:  
additions   thereto,   if   any,   at   the   end   of   the   last   completed   policy   year   for   which   premiums   shall   (a) A  provision  that  gives  the  insurer  the  right  to  declare  the  policy  void  because  the  insured  has  
have   been   paid   (the   policy   to   specify   the   mortality   table,   rate   of   interest   and   method   of   had   any   disease   or   ailment,   whether   specified   or   not,   or   because   the   insured   has   received  
valuation  adopted  to  compute  such  reserve),  exclusive  of  any  reserve  on  disability  benefits  and   institutional,   hospital,   medical   or   surgical   treatment   or   attention,   except   a   provision   which  
accidental  death  benefits,  less  an  amount  not  to  exceed  two  and  one-­‐  half  percent  (21⁄2%)  of   gives   the   insurer   the   right   to declare   the   policy   void   if   the   insured   has,   within   two   (2)   years  
the   maximum   amount   insured   by   the   policy   and   dividend  additions   thereto,   if   any,   when   the   prior   to   the   issuance   of   the   policy,   received   institutional,   hospital,   medical   or   surgical  
issue  age  is  under  ten  (10)  years,  and  less  an  amount  not  to  exceed  two  and  one-­‐half  percent   treatment  or  attention  and  if  the  insured  or  the  claimant  under  the  policy  fails  to  show  that  the  
(21⁄2%)  of  the  current  amount  insured  by  the  policy  and  dividend  additions  thereto,  if  any,  if   condition   occasioning   such   treatment   or   attention   was   not   of   a   serious   nature   or   was   not  
the  issue  age  is  ten  (10)  years  or  older,  and  less  any  existing  indebtedness  to  the  company  on   material  to  the  risk;  
or  secured  by  the  policy;   (b) A  provision  that  gives  the  insurer  the  right  to  declare  the  policy  void  because  the  insured  has  
(g) A   provision   that   the   policy   may   be   surrendered   to   the   company   at   its   home   office   within a   been   rejected   for   insurance,   unless   such   right   be   conditioned   upon   a   showing   by   the   insurer  
period   of   not   less   than   sixty   (60)   days   after   the   due   date   of   a   premium   in   default   for   the   that   knowledge   of   such   rejection   would   have   led   to   a   refusal   by   the   insurer   to   make   such  
specified  cash  value:  Provided,  That  the  insurer  may  defer  payment  for  not  more  than  six  (6)   contract;  
months  after  the  application  therefor  is  made;   (c) A   provision   that   allows   the   company   to   pay   the   proceeds   of   the   policy   at   the   death   of   the  
(h) A  table  that  shows  in  figures  the  nonforfeiture  benefits  available  under  the  policy  every  year   insured   to   any   person   other   than   the   named   beneficiary,   except   in   accordance   with   a   standard  
upon  default  in  payment  of  premiums  during  at  least  the  first  twenty  (20)  years  of  the  policy,   provision  as  specified  under  the  provisions  of  paragraph  (m)  of  the  preceding  section;  
such  table  to  begin  with  the  year  in  which  such  values  become  available,  and  a  provision  that   (d) A  provision  that  limits  the  time  within  which  any  action  at  law  or  in  equity  may  be  commenced  
the   company   will   furnish   upon   request   an   extension   of   such   table   beyond   the   year   shown   in   to  less  than  six  (6)  years  after  the  cause  of  action  shall  accrue;  and  
the  policy;   (e) A   provision   that   specifies   any   mode   of   settlement   at   maturity   of   less   value   than   the   amount  
(i) A   provision   that   specifies   which   one   of   the   stipulated   forms   of   insurance   provided   for   under   insured  by  the  policy  plus  dividend  additions,  if  any,  less  any  indebtedness  to  the  company  on  
the   provision   of   paragraph   (f)   of   this   section   shall   take   effect   in   the   event   of   the   insured’s   the   policy   and   less   any   premium   that   may   by   the   terms   of   the   policy   be   deducted,   payments   to  
failure,  within  sixty  (60)  days  from  the  due  date  of  the  premium  in  default,  to  notify  the  insurer   be  made  in  accordance  with  the  terms  of  the  policy.  
in  writing  as  to  which  one  of  such  forms  he  has  selected;   Nothing   contained   in   this   section   nor   in   the   provision   of   paragraph   (b)   of   the   preceding  
(j) A   provision   that   the   policy   may   be   reinstated   at   any   time   within   two   (2)   years   from   the   due   section,   relating   to   incontestability,   shall   be   construed   as   prohibiting   the   life   insurance   company  
date  of  the  premium  in  default  unless  the  cash  surrender  value  has  been  paid  or  the  period  of   from  placing  in  its  industrial  life  policies  provisions  limiting  its  liability  with  respect  to:  
extended   term   insurance   expired,   upon   production   of   evidence   of   insurability   satisfactory   to   (1) Death  resulting  from  aviation  other  than  as  a  fare-­‐paying  passenger  on  a  regularly  scheduled  
the   company   and   payment   of   arrears   of   premiums   with   interest   at   a   rate   not   exceeding   six   route  between  definitely  established  airports;  and  
percent  (6%)  per  annum  payable  annually;   (2) Military   or   naval   service:   Provided,   That   if   the   liability   of   the   company   is   limited   as   herein  
(k) A  provision  that  when  a  policy  shall  become  a  claim  by  death  of  the  insured,  settlement  shall  be   provided,   such   liability   shall   in   no   event   be   fixed   at   an   amount   less   than   the   reserve   on   the  
made  upon  receipt  of  due  proof  of  death,  or  not  later  than  two  (2)  months  after  receipt  of  such   policy   (excluding   the   reserve   for   any   additional   benefits   in   the   event   of   death   by   accident   or  
proof;   accidental  means  or  for  benefits  in  the  event  of  any  type  of  disability),  less  any  indebtedness  on  
(l) A  title  on  the  face  and  on  the  back  of  the  policy  correctly  describing  its  form;   or  secured  by  such  policy;  nor  shall  any  provision  of  this  section  apply  to  any  provision  in  an  
(m) A  space  on  the  front  or  the  back  of  the  policy  for  the  name  of  the  beneficiary  designated  by  the   industrial   life   insurance   policy   for   additional   benefits   in   the   event   of   death   by   accident   or  
insured   with   a   reservation   of   the   insured’s   right   to   designate   or   change   the   beneficiary   after   accidental.  
the   issuance   of   the   policy.   The   policy   may   also   provide   that   no   designation   or   change   of  
 
beneficiary  shall  be  binding  on  the  insurer  until  endorsed  on  the  policy  by  the  insurer,  and  that  
the  insurer  may  refuse  to  endorse  the  name  of  any  proposed  beneficiary  who  does  not  appear   2. Non-­‐Life  
to   the   insurer   to   have   an   insurable   interest   in   the   life   of   the   insured.   Such   policy   may   also   • Include   policies   covering   risks   to   which   property   may   be   exposed   (fire,  
contain   a   provision   that   if   the   beneficiary   designated   in   the   policy   does   not   surrender   the   those   relating   to   navigation,   typhoon,   earthquake,   etc.)   and   those   which  
policy   with   due   proof   of   death   within   the   period   stated   in   the   policy,   which   shall   not   be   less  

LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  

Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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cover   the   risk   of   liability   to   third   persons   (workmen’s   compensation   employer’s  liability  insurance,  motor  vehicle  liability  insurance,  plate  glass  insurance,  burglary  and  
theft   insurance,   personal   accident   and   health   insurance   as   written   by   non-­‐life   insurance   companies,  
insurance  and  some  types  of  automobile  insurance).  
and  other  substantially  similar  kinds  of  insurance.  
• Most  are  time  policies  –  they  have  a  definite  period  of  coverage.  
 
 
d. Suretyship  
a. Marine  
 
• May  be  either  time  or  voyage  policies,  or  both.  
SEC.  177.  Supra  
o Voyage  policy  –  covers  only  a  specified  voyage;  e.g.  “At  and  from  Manila    
to  Cebu  and  return.”   SEC.  178.  Supra  
o Time   and   voyage   policy   –   covers   all   specified   voyages   within   the   time    
designated;  e.g.  “At  and  from  Manila  to  Zamboanga,  from  June  1,  1978   SEC.  179.  Supra  
 
to  May  31,  1979.”   SEC.  180.  Supra  
 
 
SEC.  101.  Marine  Insurance  includes:  
(a)  Insurance  against  loss  of  or  damage  to:   3. Other  Modes  of  Classification  of  Insurance  Contracts  
(1) Vessels,   craft,   aircraft,   vehicles,   goods,   freights,   cargoes,   merchandise,   effects,    
disbursements,  profits,  moneys,  securities,  choses  in  action,  instruments  of  debts,  valuable   a. Private  and  Public  (Voluntary  and  Compulsory)  
papers,  bottomry,  and  respondentia  interests  and  all  other  kinds  of  property  and  interests   • GSIS  –  public;  compulsory  
therein,   in   respect   to,   appertaining   to   or   in   connection   with   any   and   all   risks   or   perils   of  
navigation,   transit   or   transportation,   or   while   being   assembled,   packed,   crated,   baled,   • SSS  –  private;  voluntary  
compressed  or  similarly  prepared  for  shipment  or  while  awaiting  shipment,  or  during  any    
delays,   storage,   transhipment,   or   reshipment   incident   thereto,   including   war   risks,   marine   b. First  Party  Insurance  and  Third  Party  Insurance  
builder’s  risks,  and  all  personal  property  floater  risks;  
 
(2) Person  or  property  in  connection  with  or  appertaining  to  a  marine,  inland  marine,  transit  or  
transportation   insurance,   including   liability   for   loss   of   or   damage   arising   out   of   or   in   SEC.  176.  Supra.  
connection   with   the   construction,   repair,   operation,   maintenance   or   use   of   the   subject    
matter   of   such   insurance   (but   not   including   life   insurance   or   surety   bonds   nor   insurance  
against   loss   by   reason   of   bodily   injury   to   any   person   arising   out   of   ownership,  maintenance,  
4. Some  Life  Insurance  Plans  in  the  Market  
or  use  of  automobiles);    
(3) Precious   stones,   jewels,   jewelry,   precious   metals,   whether   in   course   of   transportation   or   a. Whole  Life  Plan  
otherwise;  and   • Covers  only  risk  of  death.  
(4) Bridges,   tunnels   and   instrumentalities   of   transportation   communication   (excluding  
buildings,   furniture   and   furnishings,   fixed   contents   and   supplies   held   in   storage);   piers,   • Insured   agrees   to   pay   certain   fixed   (annual,   semi-­‐annual   or   quarterly_  
wharves,   docks   and   slips,   and   other   aids   to   navigation   and   transportation,   including   dry   premiums  while  he  lives.  
docks  and  marine  railways,  dams  and  appurtenant  facilities  for  the  control  of  waterways.   • Upon   his   death,   insurer   agrees   to   pay   the   face   value   of   the   policy   to   the  
(b)   Marine   protection   and   indemnity   insurance,   meaning   insurance   against,   or   against   legal   liability   designated  beneficiary.  
of   the   insured   for   loss,   damage,   or   expense   incident   to   ownership,   operation,   chartering,  
maintenance,   use,   repair,   or   construction   of   any   vessel,   craft   or   instrumentality   in   use   of   ocean   or   • Limited   payment:     premiums   are   payable   only   during   a   limited   period   of  
inland  waterways,  including  liability  of  the  insured  for  personal  injury,  illness  or  death  or  for  loss  of   years.   Higher   premiums   than   ordinary   life   policies   because   of   limited  
or  damage  to  the  property  of  another  person.   payments.  
   
b. Fire   b. Term  Plan  
  • Insurer’s   liability   arises   only   upon   the   insured’s   death   within   the   agreed  
SEC.  169.  As  used  in  this  Code,  the  term  fire  insurance  shall  include  insurance  against  loss  by  fire,   term.  
lightning,  windstorm,  tornado  or  earthquake  and  other  allied  risks,  when  such  risks  are  covered  by   • Should  the  insured  survive  the  period,  the  contract  terminates  and  all  rights  
extension  to  fire  insurance  policies  or  under  separate  policies.  
and  obligations  between  the  parties  also  cease.  
   
c. Casualty   c. Modified  Life  
  • Not  pure  life;  may  include  accident  insurance.  
SEC.  176.  Casualty  insurance  is  insurance  covering  loss  or  liability  arising  from  accident  or  mishap,    
excluding  certain  types  of  loss  which  by  law  or  custom  are  considered  as  falling  exclusively  within  
the   scope   of   other   types   of   insurance   such   as   fire   or   marine.   It   includes,   but   is   not   limited   to,    

LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  

Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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d. Pure  Endowment  Plan    

• Obliges  the  insured  to  pay  premiums  if  he  survives  for  a  specified  period.   ART.  1305,  CC.  Supra  
• Should  the  insured  survive  the  period,  the  insurer  pays  him  the  face  value  of    
ART.  1306,  CC.  Supra  
the  policy.    
• If   the   insured   should   die   within   the   period,   the   insurer   is   released   from   any   ART.  1308,  CC.  Supra  
liability   and,   unless   the   contract   otherwise   provides,   need   not   reimburse    
any  part  of  the  premiums  paid  by  the  insured.   ART.   1370,   CC.   If   the   terms   of   a   contract   are   clear   and   leave   no   doubt   upon   the   intention   of   the  
contracting  parties,  the  literal  meaning  of  its  stipulations  shall  control.  
  If   the   words   appear   to   be   contrary   to   the   evident   intention   of   the   parties,   the   latter   shall  
e. Endowment  Plan   prevail  over  the  former.  (1281)  
• Combination  of  term  and  pure  endowment.    
ART.   1371,   CC.   In   order   to   judge   the   intention   of   the   contracting   parties,   their   contemporaneous  
• One  of  the  most  popular  forms  of  life  insurance.   and  subsequent  acts  shall  be  principally  considered.  (1282)  
• If  the  insured  outlives  a  designated  period,  he  is  paid  the  face  value  of  the    
policy.   ART.   1372,   CC.   However   general   the   terms   of   a   contract   may   be,   they   shall   not   be   understood   to  
• If   the   insured   dies   with   the   period,   the   insurer   has   to   pay   the   proceeds   to   comprehend  things  that  are  distinct  and  cases  that  are  different  from  those  upon  which  the  parties  
intended  to  agree.  (1283)  
the  beneficiary.    
• Either  way,  whether  the  insured  dies  of  survives  the  period,  the  insurer  is   ART.   1373,   CC.   If   some   stipulation   of   any   contract   should   admit   of   several   meanings,   it   shall   be  
liable.   understood  as  bearing  that  import  which  is  most  adequate  to  render  it  effectual.  (1284)  
   
ART.   1374,   CC.   The   various   stipulations   of   a   contract   shall   be   interpreted   together,   attributing   to  
Annuity  contracts  are  different  from  ordinary  life  insurances.   the  doubtful  ones  that  sense  which  may  result  from  all  of  them  taken  jointly.  (1285)  
• In   exchange   for   premium,   purchaser   of   annuity   expects   his   insurer   to   pay    
him  a  periodic  income  as  long  as  he  lives   ART.  1375,  CC.  Words  which  may  have  different  significations  shall  be  understood  in  that  which  is  
most  in  keeping  with  the  nature  and  object  of  the  contract.  (1286)  
• Insurer  stops  paying  at  death    
  ART.   1376,   CC.   The   usage   or   custom   of   the   place   shall   be   borne   in   mind   in   the   interpretation   of   the  
Annuity   Ordinary  Life   ambiguities   of   a   contract,   and   shall   fill   the   omission   of   stipulations   which   are   ordinarily   established.  
Insures   against   economic   problems   Insures  against  early  death   (1287)  
 
resulting  from  a  long  life   ART.   1377,   CC.   The   interpretation   of   obscure   words   or   stipulations   in   a   contract   shall   not   favor   the  
Looks  to  transciency   Looks  to  longevity   party  who  caused  the  obscurity.  (1288)  
Lump   sum   is   paid   to   insurer   Insured   pays   to   insurer   an   annuity    
ART.   1378,   CC.   When   it   is   absolutely   impossible   to   settle   doubts   by   the   rules   established   in   the  
immediately   and   annuitant   receives   and  beneficiary  receives  at  insured’s  
preceding   articles,   and   the   doubts   refer   to   incidental   circumstances   of   a   gratuitous   contract,   the  
annual  payments  as  long  as  he  lives   death,  a  lump  sum   least  transmission  of  rights  and  interests  shall  prevail.  If  the  contract  is  onerous,  the  doubt  shall  be  
Investment   Indemnity     settled  in  favor  of  the  greatest  reciprocity  of  interests.  
Protection  from  substantial  risk.   If  the  doubts  are  cast  upon  the  principal  object  of  the  contract  in  such  a  way  that  it  cannot  be  
known  what  may  have  been  the  intention  or  will  of  the  parties,  the  contract  shall  be  null  and  void.  
  (1289)  
F. Construction  /  Interpretation  of  Insurance  Contracts    
• The  policy  evidencing  the  contract  of  insurance  is  required  by  law  to  be  in   ART.   1379,   CC.   The   principles   of   interpretation   stated   in   Rule   123   of   the   Rules   of   Court   shall  
likewise  be  observed  in  the  construction  of  contracts.  (n)  
printed  form  (as  approved  by  the  Insurance  Commission).  
• The  insured  sees  the  contract  already  in  its  final  form.  The  language  of  the    
contract   has   been   carefully   chosen   and   deliberated   upon   by   experts   and   Cebu  Shipyard  v.  William  Lines  (1999)  
legal  advisers  who  have  acted  exclusively  in  the  interest  of  the  insurer.   Facts:   Cebu   Shipyard   did   dry   docking   and   repairs   on   MV   Manila   City   (luxury  
• In   view   of   this,   terms   of   the   policy   which   are   ambiguous,   equivocal   or   passenger-­‐cargo   vessel).   After   it   was   transferred   to   the   docking   quay,   it   caught  
uncertain   should   be   construed   strictly   against   the   insurer   and   liberally   in   fire   and   sank.   William   Lines   filed   complaint   vs.   Cebu   Shipyard.   Prudential   paid  
favor  of  the  insured.   William   Lines,   and   joined   the   latter   in   the   case   vs.   Cebu   Shipyard.   TC   issued  
  judgment   against   Cebu   Shipyard.   Amicable   settlement   bet   WL   &   CSEW.   SC   and   CA  
  affirm  judgment  with  respect  to  claims  of  Prudential.  
 
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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Provision:  “Subject  to  the  conditions  of  the  Policy,  this  insurance  also  covers  loss  of   Held:   Liability   of   the   insurance   company   clear   in   the   contract.   Del   Rosario   can  
or   damage   to   Vessel   directly   caused   by   the   ff.:   xxx   negligence   of   charterers   and/or   only  claim  from  First  QC  up  to  P12,000  only.  
repairers,   provided   such   are   not   an   assured   hereunder   xxx   provided   such   loss   or    
damage  has  not  resulted  from  want  of  due  diligence  by  the  Assured,  the  Owners  or   Ty  v.  First  National  (1961)  
Managers   of   the   Vessel,   or   any   of   them.   Masters,   Officers,   Crew   or   Pilots   are   not   to   Facts:   Ty,   an   operator   mechanic   foreman,   insured   himself   with   18   insurance  
be  considered  Owners  within  the  meaning  of  this  Clause  should  they  hold  shares  in   companies;   the   beneficiary   being   his   employer,   Broadway   Cotton   Factory.   Fire  
the  Vessel.”   broke  out  in  the  factory  and  Ty  was  injured,  where  he  had  to  be  hospitalized  for  
  treatment  on  the  left  hand.  
Held:   Fire   was   not   caused   by   the   negligence   of   the   insured   or   its   employees.    
Prudential   can   subrogate   rights   as   it   paid   what   was   due   to   William   Lines.   Provision:  “If  the  Insured  sustains  any  Bodily  Injury  which…  shall  result…  in  Total  
Insurance   expressly   covers   the   loss   or   damage   caused   by   the   negligence   of   or   Partial   Disability   of   the   Insured,   the   Company   shall   pay,   subject   to   the  
charterers  and/or  repairers  who  are  not  considered  as  Assured  in  the  policy.   exceptions   as   provided   for   hereinafter,   the   amount   set   opposite   such   injury:  
  PARTIAL  DISABILITY  –  LOSS  OF:  xxx  Either  hand:  P650.00  xxx  The  loss  of  a  hand  
New  Life  Enterprises  v.  CA  (1992)   shall  mean  the  loss  by  amputation  through  the  bones  of  the  wrist...”  
Facts:  New  Life  Enterprises  stocks  were  insured  with  three  insurance  companies.    
Its  building  was  set  on  fire  due  to  electrical  misconnections.  When  he  was  claiming   Held:   No   amputation   in   this   case.   Injury   did   not   amount   to   total   or   partial  
insurance   benefits,   none   of   the   three   would   pay   up   because   all   contracts   did   not   disability   of   the   insured,   as   was   reflected   in   the   insurance   policy.   He   cannot  
indicate   that   they   were   co-­‐assured   with   other   insurers,   as   was   required   in   all   recover  from  these  policies.  
insurance  contracts.      
  Misamis  Lumber  v.  Capital  Inc.  (1966)  
Provision  (in  all  contracts):  “The  insured  shall  give  notice  to  the  Company  of  any   Facts:   Misamis   insured   its   Ford   Falcon   car.   Due   to   an   accident,   car   broke   down  
insurance  or  insurances  already  effected,  or  which  may  subsequently  be  effected,   after  passing  a  water  hole,  which  driver  did  not  see  because  the  oncoming  car  did  
covering   any   of   the   property   or   properties   consisting   of   stocks   in   trade,   goods   in   not   dim   his   headlights.   The   car   was   needed   to   be   towed   and   to   be   repaired  
process   and/or   inventories   only   hereby   insured,   and   unless   such   notice   be   given   amounting  to  P307.27.  
and  the  particulars  of  such  insurance  or  insurances  be  stated  therein  or  endorsed    
on  this  policy  pursuant  to  Section  50  of  the  Insurance  Code,  by  or  on  behalf  of  the   Provision:  “Estimated  cost  of  repair  does  not  exceed  Repair  Limit  of  P150.”  
Company   before   the   occurrence   of   any   loss   or   damage,   all   benefits   under   this    
policy   shall   be   deemed   forfeited,   provided   however,   that   this   condition   shall   not   Held:   Clear   and   express   conditions   of   insurance   policies.   Costs   of   repair   can   be  
apply  when  the  total  insurance  or  insurances  in  force  at  the  time  of  loss  or  damage   claimed  from  insurance  only  to  the  amount  of  P150.  The  insurance  contract  may  
not  more  than  P200,000.00.”   be  rather  “one-­‐sided"  (as  the  lower  court  put  it),  but  that  in  itself  does  not  justify  
  the  abrogation  of  its  express  terms.  
Held:  Terms  of  contract  are  clear.  The  words  and  language  of  documents  are  clear    
and   plain   or   readily   understandable   by   an   ordinary   reader   thereof.   There   is   no   Sun  Insurance  v.  CA  (1991)  
room  for  any  other  interpretation  or  construction.   Facts:   In   1983,   Tan   covered   his   brother’s   electrical   supply   store   with   a   property  
  insurance  policy.  Building  was  burned  4  days  after  issuance  of  the  policy.  Tan  filed  
First  Quezon  City  Insurance  v.  CA  (1993)   claim,   but   Sun   refused   with   a   letter   dated   Feb.   29,   1984   (which   Tan   received   on  
Facts:  Del  Rosario  fell  from  a  bus  owned  by  De  Dios  Marikina,  because  of  its  speed.   April   2).   On   April   3,   Tan   sent   a   request   for   reconsideration,   but   was   ultimately  
He   was   confined   at   a   hospital   for   40   days,   and   was   forced   to   receive   deducted   denied  with  a  letter  date  Oct.  11,  1985.  On  Nov.  20,  1985,  Tan  filed  a  civil  case  with  
salaries  in  order  to  pay  hospital  bills.  He  then  filed  case  vs.  De  Dios  and  First  QC  as   the  RTC  Iloilo.  
third   party   complaint   to   recover   P76,944   as   total   amount   of   damages.   TC   ruled   in    
favor  of  Del  Rosario.   Provision:   “If   a   claim   be   made   and   rejected   and   an   action   or   suit   be   not  
  commenced   either   in   the   Insurance   Commission   or   in   any   court   of   competent  
Provision:   The   insurance   company’s   liability   for   damages   arising   from   death   or   jurisdiction  within  12  months  from  receipt  of  notice  of  such  rejection,  or  in  case  or  
bodily  injury  is  limited  at  P12,000  per  passenger,  and  at  P50,000  per  accident.   arbitration  taking  place  as  provided  herein  within  12  months  after  due  notice  of  
  the   award   made   by   the   arbitrator   or   arbitrators   or   umpire,   then   the   claim   shall  

LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  

Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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for   all   purposes   be   deemed   to   have   been   abandoned   and   shall   not   thereafter   be   Held:   Even   if   more   than   ¾   of   the   barges   were   gone,   it   does   not   amount   to  
recoverable  hereunder.   constructive   loss.   Since   one   shipment   was   considered   insured,   the   loss   must   be  
  measured  to  totality  of  shipment.  Loss  of  the  497  does  not  exceed  75%  of  all  1208  
Held:  Clear  and  express  conditions  of  insurance  policies  bars  Tan  from  filing  a  civil   pieces  of  logs.  
action  against  Sun  Insurance.  Tan  admitted  he  received  letter  on  April  2,  1984  –    
that’s   when   12-­‐month   period   started   to   run.   Case   was   filed   in   RTC   on   Nov.   20,   Malayan  Insurance  v.  CA  (1997)  
1985,   7   months   after   prescription   has   set   it.   The   request   for   reconsideration   did   Facts:   TKC   is   the   owner   of   soya   bean   meals,   which   were   loaded   on   MV   Al  
not  constitute  interruption  of  prescriptive  period.   Kaziemah  for  carriage  from  Brazil  to  Manila.  While  vessel  was  in  South  Africa,  the  
  people   on   the   vessel   were   arrested   because   of   a   question   of   ownership   and  
Fortune  Insurance  v.  CA  (1995)   possession.  Shipment  was  then  delayed  and  the  insurance  coverage  was  extended  
Facts:  Bank’s  armored  car  was  robbed  and  charges  were  filed  against  the  driver   while   making   arrangements   for   shipment   from   South   Africa   back   to   Manila.  
and  the  security  guard  escorting  the  car.   However,  the  cargo  was  sold  in  Durban.  TKC  is  now  claiming  from  Malayan.  
   
Provision:   “The   [Insurance]   company   shall   not   be   liable   under   this   policy   in   report   Provision:   “The   risks   excluded   from   the   standard   form   of   English   marine   Policy   by  
of:  “any  loss  caused  by  any  dishonest,  fraudulent  or  criminal  act  of  the  insured  or   the  clause  warranted  free  of  capture,  seizure,  arrest,  restraint  or  detainment,  and  
any  officer,  employee,  partner,  director,  trustee  or  authorized  representative  of  the   the   consequences   thereof   of   hostilities   or   warlike   operations,   whether   there   be   a  
Insured  whether  acting  alone  or  in  conjunction  with  others…”   declaration  of  war  or  not...”  
   
Held:  Insurance  is  a  causalty  insurance.  “Employee”  is  any  person  who  qualifies  as   Held:  Arrests  from  ordinary  judicial  processes,  while  not  arising  from  hostilities  or  
that   under   the   four   standards   in   the   determination   of   employer-­‐employee   warlike  operations,  are  included  among  the  covered  risks.  
relationships.   Since   guards   are   under   “labor-­‐only”   contracts   to   Producers   Bank,    
Fortune   is   exempt   from   liability.   Also,   the   guard   and   the   driver   are   authorized   Western  Guaranty  v.  CA  (1990)  
representatives   in   the   sense   that   they   had   the   specific   duty   to   transfer   money   to   Facts:  Rodriguez  was  struck  by  a  De  Dios  Bus  when  driver  disregarded  stop  signal  
head   office.   “Representative”   is   one   who   represents   or   stands   in   the   place   of   to  allow  pedestrians  to  cross  road  (Rodriguez  being  one  of  them).  Rodriguez  had  
another  in  a  special  capacity.   to   be   hospitalized   because   her   face   was   permanently   disfigured.   She   filed   third  
  party  complaint  against  the  insurance  company.  
Perla  v.  CA  (1992)    
Facts:  Lim’s  Ford  Laser  was  insured  with  Perla.  This  vehicle  was  carnapped.  The   Provision:  Scope  of  liability  of  the  insured  (when  it  comes  to  a  third  party  caused  
last  known  driver  is  Evelyn  Lim,  who  was  using  an  expired  license.   by   or   arising   out   o   the   use   of   the   vehicle)   is   “all   sums   necessary   to   discharge  
  liability  of  insure  in  respect  of  the  precipitating  events”  
Provision:  “Authorized  driver:  any  of  the  following:  a.  the  insured,  or  b:  any  person    
driving   on   the   insured’s   order   or   with   his   permission,   Provided   that   the   person   Held:  As  long  as  the  events  fall  within  the  coverage  of  the  insurance  contract,  “all  
driving  is  permitted…”   sums”   are   not   limited   to   actual   damages.   These   may   include   loss   of   earnings,  
  moral  damages,  and  attorney’s  fees.  
Held:   When   cause   of   loss   is   theft,   authorized   driver   clause   does   not   apply.   There   is    
no  causal  connection  between  possession  of  a  valid  driver’s  license  and  the  loss  of   Qua  Chee  Gan  v.  Law  Union  (1955)  
a  vehicle.   Facts:   QCG   insured   warehouses   or   bodegas   in   Albay,   which   stocked   copra   and  
  hemp.  These  stocks  were  Insured  with  Law  Union  and  the  loss  was  made  payable  
Oriental  Assurance  v.  CA  (1991)   to  PNB  as  mortgage.  Fire  broke  out  and  engulfed  3  of  the  4  bodegas.  Law  Union  
Facts:   Apitong   logs   were   insured   when   they   were   transported   by   sea   to   Manila   resisted   payment,   claiming   violation   of   warranties   and   conditions,   for   having   only  
from  Palawan.  Logs  were  loaded  on  two  barges  (total  of  1208  pieces  of  logs),  but   2  fire  hydrants  near  the  building.  
due  to  rough  seas,  one  broke  and  lost  497  of  the  598  pieces  of  logs.  The  other  610    
arrived  in  good  condition.   Provision:   That   QCG   should   provide   an   ample   and   constant   water   supply   with  
  sufficient  pressure  available,  and  that  there  should  be  a  fire  hydrant  for  each  150  
Provision:  “Warranted  that  this  Insurance  is  against  total  loss  only.  Subject  to  the   feet  of  external  wall  measurement  of  building.  The  total  external  perimeter  of  the  
following  clauses:  CC  Art.  1250,  typhoon  warranty  clause,  omnibus  clause.”   buildings  being  1,640  meters.  QCG  was  expected  to  provide  11  hydrants.  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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Held:  Law  Union  is  estopped  from  resisting  payment  on  account  of  the  insufficient   when  he  was  playing  with  it.  Wife  claiming  for  payment,  but  Sun  refused,  since  it  
number  of  fire  hydrants.  It  knew  that  QCG  only  had  2  hydrants  when  it  issued  the   was  allegedly  not  an  accident.  SC  rules  in  favor  of  the  wife.  
contract  of  insurance,  and  it  did  so  without  asserting  the  requirements  provided  in    
the  contract.   Provision:   “Exceptions   –   suicide   or   willfully   exposing   himself   to   needless   peril  
  except  in  an  attempt.”  
Del  Rosario  v.  Equitable  Insurance  (1963)    
Facts:   Equitable   issued   life   insurance   for   Francisco   del   Rosario,   binding   to   pay   Held:   Accident   is   an   event   which   happens   without   any   human   agency,   or   that  
P1,000–P3,000  as  indemnity  for  death  of  the  insured.  Del  Rosario  drowned  when   which   is   unusual   to   and   not   expected   by   the   person   to   whom   it   happens,   or   an  
he  jumped  off  board  a  motor  launch  and  drowned.  Equitable  only  paid  P1,000  as  it   injury   by   reason   of   some   violence   or   causalty   to   the   injured   without   his   design,  
viewed  the  death  as  “an  injury  sustained  other  than  those  specified.”  While  policy   consent,   or   voluntary   co-­‐operation.   The   firing   of   the   gun   was   an   additional,  
does  not  generally  cover  death  by  drowning,  a  rider  in  the  contract  of  insurance   unexpected,  independent,  and  unforeseen  occurrence  that  led  to  Lim’s  death.  
provides  that  such  exception  is  waived.    
  Rizal  Surety  v.  CA  (2000)  
Provision:   “If   injury   sustained   other   than   those   specified   –   P1,000.   If   injury   by   Facts:   Rizal   Surety   issued   fire   insurance   policy   in   favor   of   Transworld   Knitting  
wrecking   or   disablement   of   a   railroad   passenger   car   –   P1,500.   If   sustained   by   Mills  “on  stocks  of  finished  and/or  unfinished  products,  raw  materials  and  supplies  
burning   of   church   theater,   etc.   –   P2,000.   If   sustained   by   wrecking   of   regular   of   every   kind   and   description,   properties   of   the   insured   and/or   held   by   them   in  
passenger  elevator  car  –  P2,500.”   trust,   on   commission   or   on   joint   account   with   others   and/or   for   which   they   are  
  responsible   in   case   of   loss…”   Same   properties   were   insured   by   New   India.   Fire  
Held:   Since   policy   does   not   definitively   state   how   much   one   is   entitled   if   drowning   broke   out   and   razed   the   middle   portion   of   its   four-­‐span   building   and   partly  
is   the   cause   of   death,   insurance   should   pay   P3,000   as   the   maximum   amount   of   gutting   the   left   and   right   sections   thereof.   TKM   files   claims   with   both   but   to   no  
damages   the   insured   can   claim,   as   the   contract   is   construed   strictly   in   favor   of   avail.   TC   dismissed   the   case   against   New   India,   ordered   Rizal   Surety   to   pay.   CA  
him.   modified,  ordered  New  India  to  pay.  
   
Geagonia  v.  CA  (1995)   Provision:   Covers   items   “…contained   and/or   stored   during   the   currency   of   this  
Facts:   Geagonia   (owner)   insured   Norman’s   Mart   under   fire   policy   of   Country   policy   in   the   premises   occupied   by   them   forming   part   of   the   buildings   situated  
Bankers   covering   stock-­‐in-­‐trade   consisting   principally   of   dry   goods.   Mercantile   within  own  compound…”  
Insurance   Co.   was   the   co-­‐insurer   for   P50K.   Stocks   amounted   to   P392K   were   in   the    
inventory,   P250K   of   which   were   on   credit   from   Cebu   Tesing   Textiles.   Fire   broke   Held:   Policy   did   not   limit   its   coverage   to   what   were   stored   in   the   four-­‐span  
down  by  accident.  Geagonia  tried  to  claim  from  CB  but  they  denied,  saying  it  found   building.   The   stipulation   as   to   coverage   has   created   a   doubt   regarding   the  
that  the  same  were  insured  by  PFIC.  Ins.  Comm.  favored  Geagonia,  Geagonia  was   portions   of   the   building   insured   thereby.   But   Art.   1377,   CC   provides   that   the  
not  aware  of  such  policies  since  CTT  was  the  one  who  procured  such  policies.  CA   interpretation   of   obscure   words   or   stipulations   in   a   contract   shall   not   favor   the  
reversed,   saying   it   was   evident   Geagonia   knew   of   them.   SC   reverses,   Ins.   Comm.   party  who  caused  the  obscurity.  
decision  reinstated.    
  CHAPTER  3  –  INSURABLE  INTEREST  
Provision:   The   PFIC   policy   had   a   mortgage   clause   that   read   “loss,   if   any   shall   be    
payable   to   Messrs   CTT   as   their   interest   may   appear   subject   to   the   terms   of   this   A. Definition  and  Purpose  
policy.”    
• Insurable   Interest   –   the   relation   between   the   insured   and   the   event  
 
insured   against   such   that   the   occurrence   of   the   event   will   cause   the  
Held:   The   FPIC   did   not   have   the   same   subject   matter   as   the   CB   insurance.   The  
substantial  loss  or  harm  of  some  kind  to  the  insured.  
mortgagor   and   mortgagee   have   each   an   independent   insurable   interest   therein.  
• Purpose  –  developed  to  meet  two  objections  that  insurance:  
The  mortgagor’s  insurable  interest  covers  the  full  value  of  the  property,  while  the  
a) is  a  wagering  contract;  and  
mortgagee’s  is  only  to  the  extent  of  his  debt.  
b) creates   the   temptation   of   bringing   about   the   event   insured   against   in  
 
order  to  collect  the  policy.  
Sun  Insurance  v.  CA  (1992)  
 
Facts:   Sun   insured   Lim   with   a   personal   accident   policy.   He   died   with   a   bullet  
 
wound,   when   he   shot   himself   just   trying   to   prove   that   the   gun   was   not   loaded  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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1. Contract  of  Insurance   -­‐ a  business  firm  can  take  out  a  policy  on  the  life  of  its  officers  or  
• Insurance  –  an  agreement  whereby  one  undertakes  for  a  consideration  to   employees   whose   services   have   proved   valuable   to   the  
indemnify   another   against   loss,   damage   or   liability   arising   from   an   business.  
unknown  or  contingent  event,  either  past  or  future.    
  SEC.  10.  Every  person  has  an  insurable  interest  in  the  life  and  health:  
2. May  Not  be  Waived   (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;  
SEC.   25.   Every   stipulation   in   a   policy   of   insurance   for   the   payment   of   loss   whether   the   person   (c) Of  any  person  under  a  legal  obligation  to  him  for  the  payment  of  money,  or  respecting  property  
insured  has  or  has  not  any  interest  in  the  property  insured,  or  that  the  policy  shall  be  received  as   or  services,  of  which  death  or  illness  might  delay  or  prevent  the  performance;  and  
proof  of  such  interest,  and  every  policy  executed  by  way  of  gaming  or  wagering,  is  void.   (d) Of  any  person  upon  whose  life  any  estate  or  interest  vested  in  him  depends.  
   
B. Insurable  Interest  in  Life  /  Health   2. Insurable  Interest  in  Health  
  • Similar  to  life  insurance,  must  exist  at  inception.  
1. Insurable  Interest  of  the  Insured  in  His  Own  Life  compared  to  that  on    
the  Life  of  Others   Philamcare  Health  Systems  v.  CA  (2002),  supra  
• Must  exist  at  inception.    
• Where  the  insured  is  also  the  cestui  que  vie.   C. Insurable  Interest  in  Property  
o One  may  take  out  a  policy  on  his  own  life  and  make  it  payable  to  anyone    
he   chooses,   regardless   of   whether   or   not   such   a   beneficiary   has   an   1. Definition;  Enforceability  Where  No  Insurable  Interest  
insurable  interest  in  the  insured’s  life.   • Concept  –  that  the  insured  will  be  benefited  by  the  continuing  existence  of  
o Upon   the   insured’s   death,   his   beneficiary   will   be   entitled   to   the   full   face   the  thing  or  suffer  pecuniary  loss  by  its  destruction.  
value  of  the  policy.    
• Where  the  insured  is  not  the  cestui  que  vie  but  is  the  beneficiary.   SEC.  13.  Every  interest  in  property,  whether  real  or  personal,  or  any  relation  thereto,  or  liability  in  
o Where   a   person   names   himself   beneficiary   in   a   policy   he   takes   on   the   respect  thereof,  of  such  nature  that  a  contemplated  peril  might  directly  damnify  the  insured,  is  an  
life   of   another,   he   must   have   an   insurable   interest   in   the   life   of   the   insurable  interest.  
 
latter.   SEC.  18.  No  contract  or  policy  of  insurance  on  property  shall  be  enforceable  except  for  the  benefit  of  
o With   the   exception   of   the   policy   on   the   life   of   his   spouse   or   child,   his   some  person  having  an  insurable  interest  in  the  property  insured.  
interest  must  be  shown  to  be  of  some  pecuniary  nature.    
o The   requirement   of   insurable   interest   cannot   be   circumvented   by   an   2. In  What  It  May  Consist  Of;  cf.  Expectancy  
agreement   between   the   insured-­‐cestui   que   vie   and   a   third   person   who   • Existing  –  owner  or  lien  holder.  
has  no  such  interest,  whereby  the  latter,  having  induced  the  insured  to  
• Inchoate   (founded   on   an   existing   interest)   –   stockholder   in   a   corporate  
take   out   a   policy,   promises   to   pay   all   premiums   if   the   policy   is   assigned  
property.  
to  him.  
• Expectancy   (coupled   with   an   existing   interest,   out   of   which   expectancy  
§ Creditor   of   insured   as   beneficiary  –   a   creditor   may   name   himself   as  
arises)  –  shipper  of  goods  on  the  profits  he  would  make  from  the  sale.  
beneficiary  in  a  policy  he  undertakes  on  the  life  of  his  debtor.  
 
-­‐ death  of  the  debtor  may  either  prevent  payment  if  his  estate  is  
SEC.  14.  An  insurable  interest  in  property  may  consist  in:  
not   sufficient   to   pay   his   debts,   or   delay   such   payment   if   an   (a) An  existing  interest;  
administrator  has  to  be  appointed  to  settle  his  estate.   (b) An  inchoate  interest  founded  on  an  existing  interest;  or  
-­‐ creditor’s   recovery   shall   be   limited   to   the   amount   of   his   (c) An  expectancy,  coupled  with  an  existing  interest  in  that  out  of  which  the  expectancy  arises.  
interest  (the  amount  owing  to  him).    
SEC.  16.  A  mere  contingent  or  expectant  interest  in  any  thing,  not  founded  on  an  actual  right  to  the  
§ Business  associate  or  employer  of  the  insured  –  a  person  may  take   thing,  nor  upon  any  valid  contract  for  it,  is  not  insurable.  
out   a   policy   on   the   life   of   his   business   partner;   pecuniary   interest  
 
exists   because   the   latter’s   death   may   result   in   an   interruption   of  
Filipino  Merchants  Insurance  v.    CA  (1989)  
business  operations  which  can  in  turn  cause  financial  losses.  
Facts:   Choa   Tiek   Seng,   as   consignee,   insured   the   shipment   of   fishmeal   from  
Bangkok   to   Manila   with   Filipino   Merchants.   Upon   arrival   at   the   warehouse,   227  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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out  of  666  bags  were  in  bad  order  condition.  Choa  Tiek  Seng  made  a  formal  claim;   5. Change   of   Interest   in   Property;   Instances   of   Automatic   Transfer   of  
Filipino  Merchants  refused  to  pay.   Interest  
  • General   Rule   –   absolute   transfer   of   ownership   (change   of   interest   in   the  
Held:   A   consignee   has   insurable   interest   in   the   goods   shipped.   A   perfected   sales   thing)   without   transfer   of   interest   in   policy   suspends   the   insurance   until  
contract  is  enough  to  establish  an  insurable  interest  although  ownership  has  yet   ownership  of  the  thing  is  back  in  the  policyholder.  
to  be  transferred  through  delivery.   • Exceptions:  
  a) change  of  interest  after  the  loss  does  not  affect  the  policy;  
Gaisano  Cagayan  v.  Insurance  Co.  of  North  America  (2006)   b) change  of  interest  in  the  policy  insuring  several  things  separately;  
Facts:   Gaisano   Superstore   was   consumed   by   fire;   among   those   destroyed   were   c) change  of  interest  on  the  death  of  the  insured,  by  will  or  succession;  or  
stocks   of   ready-­‐made   clothing   materials   sold   and   delivered   by   the   maker   of   d) transfer  of  interest  by  one  of  several  partners  or  co-­‐owners.  
Wrangler  Jeans  and  the  distributor  of  Levi’s.  Both  policies  obtained  by  the  vendors    
contain   “book   debt”   endorsements.   Gaisano   refused   to   pay   ICNA   (who   paid   the   SEC.   20.   Except   in   the   cases   specified   in   the   next   four   sections,   and   in   the   cases   of   life,   accident,   and  
vendors  under  their  policies).   health   insurance,   a   change   of   interest   in   any   part   of   a   thing   insured   unaccompanied   by   a  
  corresponding  change  of  interest  in  the  insurance,  suspends  the  insurance  to  an  equivalent  extent,  
until  the  interest  in  the  thing  and  the  interest  in  the  insurance  are  vested  in  the  same  person.  
Held:   The   risk   insured   against   were   the   accounts   of   the   vendors   with   Gaisano    
which   remained   unpaid   45   days   after   the   loss   through   fire,   and   not   the   loss   or   SEC.  21.  A  change  of  interest  in  a  thing  insured,  after  the  occurrence  of  an  injury  which  results  in  a  
destruction   of   the   goods   delivered.   In   property   insurance,   one’s   interest   is   not   loss,  does  not  affect  the  right  of  the  insured  to  indemnity  for  the  loss.  
determined  by  concept  of  title,  but  whether  the  insured  has  substantial  economic    
SEC.   22.   A   change   of   interest   in   one   or   more   of   several   distinct   things,   separately   insured   by   one  
interest   in   the   property.   The   vendors   in   this   case   did   not   lose   complete   interest   policy,  does  not  avoid  the  insurance  as  to  the  others.  
over  the  goods;  they  have  an  insurable  interest  until  full  payment  of  the  value  of    
the  delivered  goods.   SEC.  23.  A  change  of  interest,  by  will  or  succession,  on  the  death  of  the  insured,  does  not  avoid  an  
  insurance;   and   his   interest   in   the   insurance   passes   to   the   person   taking   his   interest   in   the   thing  
insured.  
3. Measure  of  Insurable  Interest  in  Property    
• Being  a  contract  of  indemnity  –  the  extent  to  which  the  insured  might  be   SEC.  24.  A  transfer  of  interest  by  one  of  several  partners,  joint  owners,  or  owners  in  common,  who  
damnified  by  the  loss.   are  jointly  insured,  to  the  others,  does  not  avoid  an  insurance  even  though  it  has  been  agreed  that  
the  insurance  shall  cease  upon  an  alienation  of  the  thing  insured.  
• Indemnity   principle   –   the   insured   may   not   recover   a   greater   value   than  
 
that  of  his  actual  loss.   SEC.  53.  The  insurance  proceeds  shall  be  applied  exclusively  to  the  proper  interest  of  the  person  in  
  whose  name  or  for  whose  benefit  it  is  made  unless  otherwise  specified  in  the  policy.  
SEC.   15.   A   carrier   or   depository   of   any   kind   has   an   insurable   interest   in   a   thing   held   by   him   as   such,    
to  the  extent  of  his  liability  but  not  to  exceed  the  value  thereof.   SEC.   57.   A   policy   may   be   so   framed   that   it   will   inure   to   the   benefit   of   whomsoever,   during   the  
  continuance  of  the  risk,  may  become  the  owner  of  the  interest  insured.  
SEC.  16.  A  mere  contingent  or  expectant  interest  in  any  thing,  not  founded  on  an  actual  right  to  the    
thing,  nor  upon  any  valid  contract  for  it,  is  not  insurable.  
D. Double  Insurance  and  Over  Insurance  
 
SEC.  17.  The  measure  of  an  insurable  interest  in  property  is  the  extent  to  which  the  insured  might    
be  damnified  by  loss  or  injury  thereof.   SEC.   95.   A   double   insurance   exists   where   the   same   person   is   insured   by   several   insurers   separately  
  in  respect  to  the  same  subject  and  interest.  
 
4. When  Should  Insurable  Interest  Exist;  cf.  Life   SEC.  96.  Where  the  insured  in  a  policy  other  than  life  is  over  insured  by  double  insurance:  
• Must  exist  at  inception  and  at  time  of  loss,  although  it  need  not  exist  in  the   (a) The   insured,   unless   the   policy   otherwise   provides,   may   claim   payment   from   the   insurers   in  
meantime.     such  order  as  he  may  select,  up  to  the  amount  for  which  the  insurers  are  severally  liable  under  
their  respective  contracts;  
  (b) Where  the  policy  under  which  the  insured  claims  is  a  valued  policy,  any  sum  received  by  him  
SEC.  19.  An  interest  in  property  insured  must  exist  when  the  insurance  takes  effect,  and  when  the   under   any   other   policy   shall   be   deducted   from   the   value   of   the   policy   without   regard   to   the  
loss  occurs,  but  need  not  exist  in  the  meantime;  and  interest  in  the  life  or  health  of  a  person  insured   actual  value  of  the  subject  matter  insured;  
must  exist  when  the  insurance  takes  effect,  but  need  not  exist  thereafter  or  when  the  loss  occurs.   (c) Where  the  policy  under  which  the  insured  claims  is  an  unvalued  policy,  any  sum  received  by  
  him  under  any  policy  shall  be  deducted  against  the  full  insurable  value,  for  any  sum  received  
by  him  under  any  policy;  
 

LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  

Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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(d) Where  the  insured  receives  any  sum  in  excess  of  the  valuation  in   the  case  of  valued  policies,  or   1. Delay  in  Acceptance  
of  the  insurable  value  in  the  case  of  unvalued  policies,  he  must  hold  such  sum  in  trust  for  the  
insurers,  according  to  their  right  of  contribution  among  themselves;  
• Tort   Theory   –   Duty   of   an   insurance   company   to   act   with   reasonable  
(e) Each  insurer  is  bound,  as  between  himself  and  the  other  insurers,  to  contribute  ratably  to  the   promptness   to   accept   or   reject   an   application   for   insurance   so   that   if   it   is  
loss  in  proportion  to  the  amount  for  which  he  is  liable  under  his  contract.   rejected,  the  applicant  may  look  for  another  insurer  who  may  be  willing  to  
  accept  him  as  a  risk.  
E. Multiple  or  Several  Interests  on  Same  Property;  Special  Provisions  on    
Mortgagor  and  Mortgagee   ART.   2176,   CC.   Whoever   by   act   or   omission   causes   damage   to   another,   there   being   fault   or  
negligence,  is  obliged  to  pay  for  the  damage  done.  Such  fault  or  negligence,  if  there  is  no  pre-­‐existing  
  contractual  relation  between  the  parties,  is  called  a  quasi-­‐delict  and  is  governed  by  the  provisions  of  
SEC.  8.  Unless  the  policy  otherwise  provides,  where  a  mortgagor  of  property  effects  insurance  in  his   this  Chapter.  (1902a)  
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   to   be   upon   the   interest   of   the   mortgagor,   who   does   not  
 
cease   to   be   a   party   to   the   original   contract,   and   any   act   of   his,   prior   to   the   loss,   which   would   2. Delivery  of  Policy  
otherwise  avoid  the  insurance,  will  have  the  same  effect,  although  the  property  is  in  the  hands  of  the   • General   Rule   –   in   order   to   be   binding/effective,   the   policy   should   be  
mortgagee,  but  any  act  which,  under  the  contract  of  insurance,  is  to  be  performed  by  the  mortgagor,   delivered  to  the  insured  while  he  is  alive  and  in  good  health.  
may  be  performed  by  the  mortgagee  therein  named,  with  the  same  effect  as  if  it  had  been  performed  
by  the  mortgagor.   • Good   health   means   that   the   applicant   has   no   grave,   important   or   serious  
  disease   and   is   free   from   any   ailment   that   seriously   affects   the   general  
SEC.  9.  If  an  insurer  assents  to  the  transfer  of  an  insurance  from  a  mortgagor  to  a  mortgagee,  and,  at   soundness  and  healthfulness  of  the  system.  
the  time  of  his  assent,  imposes  further  obligations  on  the  assignee,  making  a  new  contract  with  him,  
the  acts  of  the  mortgagor  cannot  affect  the  rights  of  said  assignee.  
• Is  delivery  to  an  agent  delivery  to  the  insured?  
o The   Supreme   Court   has   held   that   delivery   to   the   insured   in   person   is  
  not   necessary   and   that   delivery   may   be   made   by   mail   or   to   a   duly  
Geagonia  v.  CA  (1995),  supra   authorized   agent,   but   it   refused   to   adopt   the   prevailing   view   in   the  
  American   decisions   that   delivery   of   the   policy   to   the   agent   completes  
Tai  Tong  Chuache  v.  Insurance  Commission  (1988)  
the  contract.  It  adopted  the  view  which  it  thought  was  more  consonant  
Facts:   Sps.   Palomo   acquired   land   and   building,   and   assumed   the   mortgage   in   with   the   well-­‐known   practice   of   life   insurance   companies   and   the  
favor   of   SSS;   building   was   insured   with   SSS   Accredited   Group   of   Insurers.   Mrs.   evidence  of  this  case,  that  an  insurance  agent  is  not  a  mere  automaton  
Palomo   obtained   a   loan   from   Tai   Tong   and   mortgaged   the   same   land   and   and  is  vested  with  some  discretion  in  deciding  whether  the  condition  as  
building.  Tai  Tong  (thru  its  managing  partner,  Arsenio  Chua)  insured  its  interest   to   the   health   of   the   applicant   has   been   complied   with   (Vda.   de  
with   Travellers.   Mr.   Palomo   secured   two   fire   insurances   over   the   building.   Sindayen  v.  Insular,  1935).  
Building  was  razed  by  fire.  All  insurers,  except  Travellers,  paid.  Sps.  Palomo  filed  a    
complaint.   Tai   Tong   filed   a   complaint   in   intervention   claiming   the   proceeds   of   the  
Perez  v.  CA  (2000)  
policy.  Travellers  answered  that  Tai  Tong  has  no  insurable  interest.   Facts:   Perez   (insured)   died   while   his   application   form   for   the   extension   of  
  insurance  coverage  was  still  in  the  Quezon  office,  prior  to  its  transmission  to  the  
Held:   Tai   Tong,   the   mortgage   creditor,   has   insurable   interest   in   the   policy   as   Manila   office   for   approval.   BF   Lifeman   (insurance   company)   approved   the  
evidenced   by   the   contract   of   mortgage   which   has   not   been   cancelled   nor   released;   extension  without  knowledge  of  Perez’s  death,  but  when  the  surviving  wife  tried  to  
loan  obtained  by  Sps.  Palomo  has  not  yet  been  paid.     claim   benefits,   BF   Lifeman   refused,   instead   refunding   her   the   premium   paid   and  
 
filing  action  for  rescission  of  the  extension  contract.  SC  ruled  that  the  new  contract  
CHAPTER   4   –   PERFECTION   OF   THE   CONTRACT   OF   was  not  perfected  as  it  was  merely  an  offer  to  propose.  
INSURANCE    
  Held:   Perfection   of   the   contract   was   conditioned   on   the   policy   only   being   effective  
A. Offer  and  Acceptance;  Consensuality   until   premium   has   been   made   and   policy   delivered   to   the   insured/beneficiary.  
Since   Perez   was   dead,   there   was   no   way   of   knowing   that   the   company   accepted  
• Mere   signing   of   the   application   form,   even   if   the   premium   has   been   paid,  
the   application   and   that   the   policy   was   delivered   to   him.   In   addition,   the   clause  
constitutes  a  mere  offer  on  the  part  of  the  applicant  and  does  not  bind  the  
that   the   policy   being   effective   only   upon   its   delivery   to   insured   in   good   health   is  
company   to   issue   a   policy,   unless   there   has   been   an   agreement   that   such    
not  potestative  because  Perez’  health  is  beyond  the  control  of  BF  Lifeman.  Finally,  
act  should  constitute  a  contract  for  insurance.  
the   insurer   may   not   be   penalized   for   delay   in   processing   application   papers,  
 

LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  

Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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especially   in   this   case   where   it   was   shown   that   the   application   was   actually   of  premium;  when  insurer  is  estopped;  when  nonpayment  is  caused  by  the  
expedited  for  Perez.   insurer.  
  • Time  for  payment  of  premiums  is  of  the  essence  of  the  contract.    
Vda.  de  Sindayen  v.  Insular  (1935)    
Facts:   Sindayen   made   an   application   on   for   life   insurance   with   the   agreement   SEC.  77.  An  insurer  is  entitled  to  payment  of  the  premium  as  soon  as  the  thing  insured  is  exposed  to  
that  the  policy  should  be  delivered  to  his  aunt  Felicidad  with  whom  he  left  P26.06   the  peril  insured  against.  Notwithstanding  any  agreement  to  the  contrary,  no  policy  or  contract  of  
to   complete   the   first   annual   premium.   Insular   issued   the   policy   and   mailed   it   to   insurance   issued   by   an   insurance   company   is   valid   and   binding   unless   and   until   the   premium  
thereof   has   been   paid,   except   in   the   case   of   a   life   or   an   industrial   life   policy   whenever   the   grace  
their  agent  in  Tarlac  for  delivery  to  Sindayen.  The  agent  then  delivered  of  policy  to   period  provision  applies,  or  whenever  under  the  broker  and  agency  agreements  with  duly  licensed  
aunt,   who,   when   asked,   affirmed   that   Sindayen   was   in   good   health.   However,   intermediaries,   a   ninety   (90)-­‐day   credit   extension   is   given.   No   credit   extension   to   a   duly   licensed  
unknown  to  her,  Sindayen  was  actually  suffering  from  acute  nephritis  and  uremia,   intermediary  should  exceed  ninety  (90)  days  from  date  of  issuance  of  the  policy.  
which  caused  his  death  the  day  after  his  aunt  received  the  policy.  SC  ruled  that  the    
SEC.   78.   Employees   of   the   Republic   of   the   Philippines,   including   its   political   subdivisions   and  
widow  can  claim  the  insurance  benefits  from  Insular.   instrumentalities,   and   government-­‐owned   or   -­‐   controlled   corporations,   may   pay   their   insurance  
  premiums   and   loan   obligations   through   salary   deduction:   Provided,   That   the   treasurer,   cashier,  
Held:   Personal   delivery   to   the   insured   is   not   necessary.   It   may   be   made   by   mail   or   paymaster   or   official   of   the   entity   employing   the   government   employee   is   authorized,  
to  a  duly  constituted  agent.  The  agent  was  authorized  by  the  company  to  make  the   notwithstanding  the  provisions  of  any  existing  law,  rules  and  regulations  to  the  contrary,  to  make  
deductions   from   the   salary,   wage   or   income   of   the   latter   pursuant   to   the   agreement   between   the  
delivery   of   the   policy   when   he   received   payment   of   the   first   premium   from   aunt,   insurer  and  the  government  employee  and  to  remit  such  deductions  to  the  insurer  concerned,  and  
and   was   satisfied   that   the   insured   was   in   good   health.   “The   power   in   the   local   collect  such  reasonable  fee  for  its  services.  
agent   to   withhold   the   policy   involves   the   power   to   deliver   it.   Should   the   agents    
accept   the   premium   and   deliver   the   policy,   their   act   binds   the   principal.”   Also,   SEC.   79.   An   acknowledgment   in   a   policy   or   contract   of   insurance   or   the   receipt   of   premium   is  
conclusive   evidence   of   its   payment,   so   far   as   to   make   the   policy   binding,   notwithstanding   any  
good   health   is   required   in   the   entering   of   the   insurance   contract,   not   in   the   stipulation  therein  that  it  shall  not  be  binding  until  the  premium  is  actually  paid.  
delivery  of  the  policy.    
  SEC.  64.  No  policy  of  insurance  other  than  life  shall  be  cancelled  by  the  insurer  except  upon  prior  
Enriquez  v.  Sun  Life  (1920)   notice  thereof  to  the  insured,  and  no  notice  of  cancellation  shall  be  effective  unless  it  is  based  on  the  
occurrence,  after  the  effective  date  of  the  policy,  of  one  or  more  of  the  following:  
Facts:  Herrer  applied  for  life  insurance  and  paid  P6K  to  manager  of  Manila  office   (a) Nonpayment  of  premium;  
who   issued   a   provisional   receipt.   After   a   month,   the   head   office   in   Canada   gave   (b) Conviction  of  a  crime  arising  out  of  acts  increasing  the  hazard  insured  against;  
notice   of   acceptance   by   cable   to   Manila.   However,   after   the   policy   was   issued   at   (c) Discovery  of  fraud  or  material  misrepresentation;  
Montreal,   Herrer’s   lawyer   sent   a   letter   expressing   Herrer’s   desire   to   withdraw   (d) Discovery  of  willful  or  reckless  acts  or  omissions  increasing  the  hazard  insured  against;  
(e) Physical  changes  in  the  property  insured  which  result  in  the  property  becoming  uninsurable;  
application.   Herrer   died,   and   it   was   only   a   day   after   when   his   lawyer   received   (f) Discovery  of  other  insurance  coverage  that  makes  the  total  insurance  in  excess  of  the  value  of  
word  from  the  Manila  office  that  the  policy  was  already  issued.  SC  ruled  that  there   the  property  insured;  or  
was  no  perfected  contract  of  insurance.   (g) A   determination   by   the   Commissioner   that   the   continuation   of   the   policy   would   violate   or  
  would  place  the  insurer  in  violation  of  this  Code.  
 
Held:  No  evidence  that  letter  of  acceptance  via  cablegram  was  actually  mailed  or   SEC.   66.   In   case   of   insurance   other   than   life,   unless   the   insurer   at   least   forty-­‐five   (45)   days   in  
received  by  Herrer.   CC  states  that  an  acceptance  made  by  letter  shall  not  bind  the   advance  of  the  end  of  the  policy  period  mails  or  delivers  to  the  named  insured  at  the  address  shown  
person   making   the   offer   except   from   the   time   it   came   to   his   knowledge.   Because   in   the   policy   notice   of   its   intention   not   to   renew   the   policy   or   to   condition   its   renewal   upon  
there   was   no   evidence   that   the   policy   was   deposited   in   the   post   office,   the   reduction   of   limits   or   elimination   of   coverages,   the   named   insured   shall   be   entitled   to   renew   the  
policy  upon  payment  of  the  premium  due  on  the  effective  date  of  the  renewal.  Any  policy  written  for  
presumption  of  receiving  the  policy  by  mail  does  not  arise  in  this  case.   a   term   of   less   than   one   (1)   year   shall   be   considered   as   if   written   for   a   term   of   one   (1)   year.   Any  
  policy  written  for  a  term  longer  than  one  (1)  year  or  any  policy  with  no  fixed  expiration  date  shall  be  
B. Premium  Payment   considered  as  if  written  for  successive  policy  periods  or  terms  of  one  (1)  year.  
 
• Premium  –  amount  paid  to  an  insurer  as  consideration  for  undertaking  to  
SEC.   315.   The   premium,   or   any   portion   thereof,   which   an   insurance   agent   or   insurance   broker  
indemnify  the  insured  against  a  specified  peril.   collects  from  an  insured  and  which  is  to  be  paid  to  an  insurance  company  because  of  the  assumption  
• General  Rule  –  in  order  for  the  policy  to  be  binding/effective,  premium  has   of  liability  through  the  issuance  of  policies  or  contracts  of  insurance,  shall  be  held  by  the  agent  or  
to  be  paid   broker   in   a   fiduciary   capacity   and   shall   not   be   misappropriated   or   converted   to   his   own   use   or  
illegally  withheld  by  the  agent  or  broker.  
• Exceptions   –   stipulated   agreement   (grace   period   provision   in   life   or   Any  insurance  company  which  delivers  to  an  insurance  agent  or  insurance  broker  a  policy  or  
industrial   policies,   90-­‐day   extension   for   broker   and   agency   agreements,   contract   of   insurance   shall   be   deemed   to   have   authorized   such   agent   or   broker   to   receive   on   its  
credit  extension  agreements);  when  there  is  an  acknowledgment  of  receipt   behalf  payment  of  any  premium  which  is  due  on  such  policy  or  contract  of  insurance  at  the  time  of  
its  issuance  or  delivery  or  which  becomes  due  thereon.  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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In   order   to   ensure   faithful   performance   by   the   insurance   agent   or   insurance   broker   of   these   Fortune   on   the   same   day.   Fortune   rejected   claims,   saying   insurance   was   not  
fiduciary   responsibilities,   the   Insurance   Commissioner   shall   prescribe   the   minimum   terms   and  
binding  because  of  partial  payment.  SC  agreed  with  Fortune.  
conditions  on  such  matters  in  the  standard  agency  or  brokers  agreement  between  the  agents  and/or  
the  broker  with  the  insurance  companies.    
  Held:   Policy   states   that   it   be   “deemed   effective   only   when   premiums   have   been  
made  in  full.”  No  full  payment,  no  effect  of  insurance  contract.  Partial  payment  of  
Velasco  v.  Apostol  (1989)  
Facts:  On  Nov  27,  1973,  Velasco’s  car  got  hit  by  a  taxicab  along  Quezon  Blvd.  and   premium  must  be  taken  as  a  deposit  to  be  held  in  trust  by  the  insurer.  Exceptions  
a   jeep.   Third   party   complaint   filed   against   Maharlika,   as   it   insured   taxicab.   only   when   insurance   coverage   relates   to   life   or   industrial   life   when   grace   period  
Maharlika  said  insurance  not  in  force  because  of  premium  was  only  paid  on  Dec.   applies,   or   when   insurer   makes   a   written   acknowledgement   of   receipt   of   premium  
11,  1973  (after  the  accident).  SC  affirms  TC  judgment  that  exonerated  Maharlika   as  conclusive  evidence  of  premium  payment.  
from  liability.    
Vitug’s   Dissent:   The   law   neither   requires   nor   measures   the   strength   of   the  
 
vinculum   by   any   specific   amount   of   premium   payment.   It   is   either   a   juridical   tie  
Held:  Under  former  insurance  law,  non-­‐payment  of  premium  nullifies  policy  unless  
credit  extension  was  granted.  Here,  there  was  no  proof  of  implied  agreement  for   exists  or  it  is  not  extant  at  all.  Acceptance  of  insurer  of  partial  payment  creates  the  
credit   extension   between   Maharlika   and   owners   of   the   taxi.   The   policy   was   tie.  Insurance  company  should  not  be  allowed  to  continue  accept  payment  without  
delivered   and   accepted   by   the   owners   of   the   taxicab   without   mentioning   the   assuming   the   risk.   If   not   fully   paid   when   loss   occurs,   legal   compensation   takes  
accident.   If   there   was   indeed   credit   extension,   no   reason   for   the   insured   not   to   place  ipso  jure.  
inform  Maharlika  of  the  accident.    
Makati  Tuscany  v.  CA  (1992)  
 
Valenzuela  v.  CA  (1990)   Facts:  American  Home  insured  Makati  Tuscany  from  Mar.  1  1982  to  1983,  with  a  
Facts:  Valenzuela,  an  agent  of  Philamgen,  was  able  to  solicit  insurance  from  Delta   total   premium   of   P466,103.05,   paid   in   installments.   In   1983,   they   renewed   the  
and  was  entitled  to  a  P632K  commission,  but  was  not  paid  the  amount  because  the   policy   with   the   same   modes   of   payment.   In   1984,   the   policy   was   again   renewed,  
premiums  were  paid  directly  to  Philamgen.  Philamgen  proposed  a  50-­‐50  sharing   but  after  2  payments  Makati  Tuscany  then  refused  to  pay  balance,  amounting  to  
scheme  in  the  commission  due  Valenzuela,  but  the  latter  refused.  Philamgen  then   P314K.   American   Home   filed   recovery   case,   with   Tuscany   claiming   that   they  
reversed  the  Delta  Motors  commission,  threatened  cancellation  of  policies,  placed   refused  payment  because  of  the  stipulation  that  acceptance  of  payments  does  not  
waive   denial   of   liability   and   that   no   liability   arises   prior   to   full   premium   payment.  
transactions   on   a   cash   and   carry   basis,   and   leaked   news   of   Valenzuela’s   alleged  
account  with  Philamgen,  who  also  terminated   the  agency  contract  between  them.   SC  orders  Tuscany  to  pay  American  Home.  
SC  rules  in  favor  of  Valenzuela.    
  Held:  Policies   are   valid   even   if   premiums   were   paid   on   installments.   Intention   of  
Held:   Soliciting   clients   to   buy   insurance   policies   is   most   difficult   period   in   the   parties   suggests   that   the   policies   are   binding   notwithstanding   the   staggered  
insurance   period,   therefore   commission   must   be   due   to   agents.   Termination   of   the   payment   of   premiums.   The   acceptance   of   payments   for   three   years   speaks   of  
insurer’s   intention   to   honor   policies.   Sec.   77   merely   precludes   the   parties   from  
agency   agreement   would   deprive   agent   of   the   commission   of   his   clients.   There   are  
exceptions   to   principal’s   right   to   terminate   agency,   that   is   when   the   agency   has   stipulating   that   the   policy   is   valid   even   in   premiums   are   not   paid,   but   does   not  
been  given  not  only  for  the  principal’s  interest,  but  for  the  interest  of  third  persons   expressly  prohibit  an  agreement  granting  credit  extension.  
(clients)   or   for   the   mutual   interest   of   the   principal   (more   clients)   and   the   agent    
(commission).  Furthermore,  agents  should  not  be  held  liable  for  the  nonpayment   South  Sea  Surety  v.  CA  (1995)  
of   premiums   of   the   clients.   In   fact,   non-­‐payment   does   not   merely   suspend   but   Facts:  Jan.  20,  1984:  Valenzuela  Hardwood  insured  the  logs  which  they  will  ship  
terminates  insurance  contract  since  the  time  of  payment  is  peculiarly  the  essence   under   South   Sea   Surety   for   P2M.   Jan.   24:   VH   gave   the   check   in   payment   of  
premium   to   a   Mr.   Chua.   Jan.   25:   the   ship   sank.   Jan.   30:   VH   issued   check   to   cover  
of  the  contract;  ergo,  the  policies  issued  have  lapsed.  
  balance   of   premium   and   tax;   South   Sea   did   not   accept   and   instead   cancelled  
Tibay  v.  CA  (1996)   policy.  VH  filed  payment  of  proceeds  of  policy.  SC  favored  VH.  
Facts:  Building  owned  by  Tibays  and/or  Roraldos  was  insured  for  P600K  covering    
the  period  from  Jan.  23  1987  to  1988  under  Fortune.  By  Jan.  23  1987,  only  P600  of   Held:   Payment   of   premium   is   a   condition   precedent   to   efficaciousness   of   the  
total  P2,983.50  premium  was  paid.  Mar.  8  1987,  building  caught  on  fire.  Mar.  10,   contract.  Chua  had  received  the  check,  and  is  considered  as  an  insurance  broker.  
Sec.  306  says  that  any  insurance  company  which  delivers  to  an  insurance  broker  a  
1987,   Tibay   paid   remaining   balance   of   premium,   and   then   filed   to   claims   from  
policy   shall   be   deemed   to   have   authorized   such   to   receive   payment   of   premium   on  

LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  

Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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its   behalf.   Therefore,   when   the   logs   were   lost,   the   insured   had   already   paid   the   no  clear  and  definite  agreement  between  petitioner  and  respondent  on  the  grant  
premium  to  an  agent  of  South  Sea.   of   a   credit   extension;   neither   was   there   partial   payment   of   premiums   for  
  petitioner  to  invoke  the  exceptional  doctrine  in  Tuscany.  
Areola  v.  CA  (1994)    
Facts:   Areola’s   accident   insurance   was   unilaterally   cancelled   by   Prudential   due   to   American  Home  Assurance  v.  Chua  (1999)  
alleged   non-­‐payment   of   premiums,   which   was   not   true   since   he   already   paid   the   Facts:   Chua   insured   his   Moonlight   Enterprises   in  Bukidnon   under   a   fire   insurance  
premium  to  an  agent,  but  was  issued  only  a  provisional  receipt.  Areola  demanded   from   American   Home,   expiring   on   March   25,   1990.   April   5:   Chua   issued   check   to  
from   agent   an   official   receipt,   but   was   not   able   to   get   one   from   Prudential.   agent   Uy   for   payment   of   policy   (P2,983.50),   which   was   deposited   in   AHAC’s   CDO  
Prudential   realized   the   mistake,   and   offered   to   reinstate   and   extend   for   1   year   the   bank   account;   receipt   was   issued   on   April   10.   New   policy   was   issued   covering  
contract   because   premiums   paid   by   him   was   not   remitted   by   the   Baguio   branch   March  25,  1990  –  March  25,  1991.  April  6:  Moonlight  caught  on  fire.  Chua  claimed  
manager,   and   Prudential   concluded   that   no   payment   was   made   based   on   the   non-­‐ insurance,   but   American   Home   refused,   saying   no   insurance   when   fire   occurred  
issuance   of   the   official   receipt.   Areola   sued   for   breach   of   contract.   SC   favored   due  to  nonpayment.  SC  but  affirms  validity  of  insurance  claims.  
Areola,  saying  there  was  bad  faith  in  the  unilateral  cancellation  of  policy.    
  Held:   Renewal   certificate   issued   to   Chua   contained   acknowledgement   that  
Held:   The   branch   manager’s   act   in   misappropriating   premiums   is   imputable   to   premium  has  been  paid.  Agent  accepted  and  honored  check  when  Chua  presented  
Prudential,  since  he  represented  Prudential’s  interest  and  acted  in  his  behalf.  His   it   to   him   one   day   before   the   fire   occurred.   It   should   be   the   acknowledgement   of  
receipt   of   the   premiums   is   deemed   as   receipt   by   Prudential.   Since   insurance   is   a   receipt  of  payment.  
reciprocal   obligation,   injured   party   can   choose   between   rescission   or   fulfillment,    
or   damages.   Prudential   cannot   say   reinstatement   of   policy   is   equivalent   to   C. Non-­‐Default  Options  in  Life  Insurance  
fulfillment  of  obligation.    
  1. Cash  Surrender  Value  
UCPB  General  Insurance  v.  Masagana  Telamart  (1999)   • A   portion   of   the   reserve   on   a   life   policy;   accumulated   premiums   minus  
Facts:  Masagana  Telemart  in  Pasay  caught  on  fire  on  June  13,  1992,  but  insurance   outstanding  accounts.  
only  covered  until  May  22,  1992.  Tender  of  payment  on  premium  was  received  on    
June  13,  1992  (same  day  of  fire).  UCPB  says  it  was  not  renewed  because  of  the  late   2. Extended  Insurance  
payment   of   premiums.   But   evidence   shows   that   1)   renewal   is   automatic   unless   • In   effect,   policy   is   converted   into   a   term   insurance,   instead   of   terminating  
notice   not   to   renew   was   sent   within   45   days,   and   2)   payments   for   past   policies   the  same  upon  default  in  premium  payment.  The  contract  remains  in  force  
were  accepted  even  after  the  insured  period  has  commenced  (60-­‐90  day  credit).   for   such   a   period   of   time   only   as   the   cash   surrender   value,   applied   as   a  
  single  premium,  can  purchase.  
Held:   Insurer   may   grant   credit   extension   for   payment   of   premium   and   insured    
may  recover  on  policy  even  if  premium  is  paid  after  the  loss  but  within  credit  term.   3. Paid-­‐Up  Insurance  
Evidence   shows   that   the   long-­‐term   practice   for   the   parties   was   to   accept   credit   • Such   amount   of   insurance   as   the   cash   surrender   value,   applied   as   a   single  
extension.   premium,   can   purchase.   Insurance   protection   will   continue   for   such   a  
  period  of  time  and  under  such  conditions  as  the  original  contract  provided.  
Vitug’s   Dissent:   Insurance   is   synallagmatic,   a   highly   reciprocal   contract   where   The   difference   lies   in   the   amount   recoverable   at   maturity,   which   would  
rights   and   obligations   of   the   parties   correlate   and   mutually   correspond.   usually  be  much  less  than  the  original  amount  agreed  upon.  
Calculations   and   estimations   are   predicated   on   the   basis   on   the   payment   of    
premiums,   which   is   the   vital   element   that   establishes   the   juridical   relation   4. Automatic  Premium  Loan  
between   insured   and   insurer.   The   premium   payment   is   essential   to   the   creation   of   • If   no   option   is   elected,   this   will   automatically   apply.   Upon   default,   the  
the  vinculum  that  it  would  be  doubtful  to  have  that  payment  validly  excused  for  a   insurer  lends  to  the  insured  without  any  need  of  application  such  amount  as  
fortuitous  event.   may  be  necessary  to  pay  his  overdue  premium,  but  not  to  exceed  the  cash  
  surrender   value.   Since   premium   is   deemed   paid,   the   insurance   continues   to  
Pardo’s  Dissent:  Masagana’s  acts  were  fraudulent,  as  shown  when  it  tried  to  pay   be  in  force.  
premiums  before  even  giving  notice  to  UCPB  of  the  occurrence  of  fire  and  when  it    
paid   directly   to   UCPB,   instead   of   the   usual   brokers   it   paid   premiums   to.   If   there   SEC.  233.  In  the  case  of  individual  life  or  endowment  insurance,  the  policy  shall  contain  in  substance  
was  indeed  credit  extension,  there  was  no  need  to  conceal  fact  of  fire.  There  was   the  following  conditions:  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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(f)  A  provision  specifying  the  options  to  which  the  policyholder  is  entitled  to  in  the  event  of  default   Andres  v.  Crown  Life  Insurance  (1958)  
in  a  premium  payment  after  three  (3)  full  annual  premiums  shall  have  been  paid.  Such  option  shall  
Facts:  Spouses  Andres’  life  insurance  policy  lapsed  for  non-­‐payment  of  the  balance  
consist  of:  
(1)  A  cash  surrender  value  payable  upon  surrender  of  the  policy  which  shall  not  be  less  than   of   the   premium   at   P165.15.   They   applied   for   reinstatement   with   the   tender   of  
the   reserve   on   the   policy,   the   basis   of   which   shall   be   indicated,   for   the   then   current   policy   year   P100.00  and  Crown  Life  approved,  subject  to  the  payment  of  the  P65.15,  and  the  
and   any   dividend   additions   thereto,   reduced   by   a   surrender   charge   which   shall   not   be   more   semi-­‐annual   premiums   for   the   new   year   of   effectivity   of   the   policy.   Mrs.   Andres’  
than  one-­‐fifth  (1/5)  of  the  entire  reserve  or  two  and  one-­‐half  percent  (21⁄2%)  of  the  amount  
died,   and   two   days   after,   Mr.   Andres   sent   the   P65.00   balance.   He   then   presented  
insured  and  any  dividend  additions  thereto;  and  
(2)  One  or  more  paid-­‐up  benefits  on  a  plan  or  plans  specified  in  the  policy  of  such  value  as  may   the  death  claim.  Crown  Life’s  agent  informed  him  of  the  company’s  refusal  to  pay  
be  purchased  by  the  cash  surrender  value.   and  sent  refund  of  P165.  SC  absolved  Crown  Life.  
(h)   A   table   showing   in   figures   cash   surrender   values   and   paid-­‐up   options   available   under   the   policy    
each   year   upon   default   in   premium   payments,   during   at   least   twenty   (20)   years   of   the   policy  
Held:  Original  policy  lapsed  for  non-­‐payment  upon  expiration  of  grace  period.  But  
beginning   with   the   year   in   which   the   values   and   options   first   become   available,   together   with   a  
provision  that  in  the  event  of  the  failure  of  the  policyholder  to  elect  one  of  the  said  options  within   conditions   for   reinstatement   include   that   all   overdue   premiums   and   other  
the   time   specified   in   the   policy,   one   of   said   options   shall   automatically   take   effect   and   no   indebtedness  in  respect  of  the  policy,  together  with  6%  interest  p.a.  should  be  paid  
policyholder  shall  ever  forfeit  his  right  to  same  by  reason  of  his  failure  to  so  elect.   first.   Andres   did   not   comply   with   this   as   he   only   remitted   P65   2   days   after   his   wife  
  died.  Crown  Life  allowing  him  to  “send  as  large  an  amount  as  possible  and  advise  
Manufacturer’s  Life  Insurance  v.  Meer  (1951)   us   how   soon   you   expect   to   pay   the   balance”   is   not   waiver,   as   it   is   not   clear   and  
Facts:   During   WWII,   Manufacturer   issued   life   insurances   to   people   with   non-­‐ convincing   to   be   such.   In   fact,   evidence   shows   that   Crown   Life   insisted   on   full  
forfeiture   clauses,   providing   that   if   policy   has   been   in   force   for   three   full   years,   payment  before  policy  was  reinstated.  Stipulations  that  allow  reinstatement  upon  
non-­‐payment  of  premium  shall  not  cause  contract  to  lapse  if  cash  value  of  policy   written  application  do  not  give  the  insured  absolute  right  to  such  reinstatement  by  
shall   exceed   amount   of   the   premium;   company   will   then   treat   premium   as   paid   mere  filing  of  an  application.  
with   interest   of   6%   p.a.   If   cash   value   be   less   than   the   premium,   and   that   the    
insurance  will  automatically  continue.  Because  of  this  provision,  the  net  amount  of   E. Refund  of  Premiums  
premiums  advanced  or  loaned  totaled  P1.06M.  The  Collector  of  Internal  Revenue   • When  available:    
assessed   P17K   of   taxes   to   be   paid   pursuant   to   Sec.   255   of   NIRC,   which   is   1%   of   1. When  no  part  of  the  thing  insured  has  been  exposed  to  any  of  the  perils  
premiums   collected.   Manufacturers   assail   assessment   since   there   was   no   insured  against;    
“collection”  as  in  the  law.   2. When   insurance   is   for   a   definite   period   of   time   and   the   insured  
  surrenders  his  policy  before  its  termination;  
Held:  The  act  of  allocating  the  portion  of  the  “loan”  to  be  paid  to  the  premium  is   3. When   the   contract   is   voidable   and   subsequently   annulled   because   of  
the   “collection”   intended   by   the   law.   Cash   surrender   value   is   the   amount   of   money   the  fraud  or  misrepresentation  on  the  part  of  the  insurer;  
the   company   agrees   to   pay   the   holder   of   the   policy   if   he   surrenders   it   and   releases   4. When  the  contract  is  voidable  because  of  the  existence  of  facts  of  which  
his  claims  upon  it,  therefore  it  is  an  amount  the  company  holds  in  trust,  therefore   the  insured  was  ignorant  without  his  fault;  
a  liability  of  the  company  to  the  insured.  Because  of  the  decrease  in  his  liabilities   5. When  the  insurer  never  incurred  any  liability  because  of  the  default  of  
(by  lessening  cash  value  vis-­‐à-­‐vis  appropriation  of  it  to  premium),  it  inures  to  the   the  insured  other  than  actual  fraud;  
benefit  of  the  assets,  and  it  taxable.   6. When  there  is  over-­‐insurance;  
  7. When  rescission  is  granted  due  to  the  insurer’s  breach  of  the  contract  
D. Reinstatement  of  a  Lapsed  Policy  of  Life  Insurance   • When  not  available:    
  1. In  cases  contrary  to  the  above  conditions;  
SEC.  233.  In  the  case  of  individual  life  or  endowment  insurance,  the  policy  shall  contain  in  substance   2. When  the  insured  surrenders  his  life  insurance  policy;  
the  following  conditions:   3. When  the  insurance  is  illegal.  
(j)  A  provision  that  the  policyholder  shall  be  entitled  to  have  the  policy  reinstated  at  any  time  within  
three  (3)  years  from  the  date  of  default  of  premium  payment  unless  the  cash  surrender  value  has  
 
been   duly   paid,   or   the   extension   period   has   expired,   upon   production   of   evidence   of   insurability   SEC.  80.  A  person  insured  is  entitled  to  a  return  of  premium,  as  follows:  
satisfactory   to   the   company   and   upon   payment   of   all   overdue   premiums   and   any   indebtedness   to   (a)   To   the   whole   premium   if   no   part   of   his   interest   in   the   thing   insured   be   exposed   to   any   of   the  
the   company   upon   said   policy,   with   interest   rate   not   exceeding   that   which   would   have   been   perils  insured  against;  
applicable  to  said  premiums  and  indebtedness  in  the  policy  years  prior  to  reinstatement.   (b)   Where   the   insurance   is   made   for   a   definite   period   of   time   and   the   insured   surrenders   his   policy,  
to  such  portion  of  the  premium  as  corresponds  with  the  unexpired  time,  at  a  pro  rata  rate,  unless  a  
  short  period  rate  has  been  agreed  upon  and  appears  on  the  face  of  the  policy,  after  deducting  from  
  the   whole   premium   any   claim   for   loss   or   damage   under   the   policy   which   has   previously   accrued:  
 
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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Provided,   That   no   holder   of   a   life   insurance   policy   may   avail   himself   of   the   privileges   of   this    
paragraph  without  sufficient  cause  as  otherwise  provided  by  law.  
SEC.   50.   The   policy   shall   be   in   printed   form   which   may   contain   blank   spaces;   and   any   word,   phrase,  
 
clause,   mark,   sign,   symbol,   signature,   number,   or   word   necessary   to   complete   the   contract   of  
SEC.   81.   If   a   peril   insured   against   has   existed,   and   the   insurer   has   been   liable   for   any   period,  
insurance  shall  be  written  on  the  blank  spaces  provided  therein.  
however   short,   the   insured   is   not   entitled   to   return   of   premiums,   so   far   as   that   particular   risk   is  
Any  rider,  clause,  warranty  or  endorsement  purporting  to  be  part  of  the  contract  of  insurance  
concerned.  
and  which  is  pasted  or  attached  to  said  policy  is  not  binding  on  the  insured,  unless  the  descriptive  
 
title   or   name   of   the   rider,   clause,   warranty   or   endorsement   is   also   mentioned   and   written   on   the  
SEC.  82.  A  person  insured  is  entitled  to  a  return  of  the  premium  when  the  contract  is  voidable,  and  
blank  spaces  provided  in  the  policy.  
subsequently   annulled   under   the   provisions   of   the   Civil   Code;   or   on   account   of   the   fraud   or  
Unless   applied   for   by   the   insured   or   owner,   any   rider,   clause,   warranty   or   endorsement   issued  
misrepresentation  of  the  insurer,  or  of  his  agent,  or  on  account  of  facts,  or  the  existence  of  which  the  
after   the   original   policy   shall   be   countersigned   by   the   insured   or   owner,   which   countersignature  
insured  was  ignorant  of  without  his  fault;  or  when  by  any  default  of  the  insured  other  than  actual  
shall  be  taken  as  his  agreement  to  the  contents  of  such  rider,  clause,  warranty  or  endorsement.  
fraud,  the  insurer  never  incurred  any  liability  under  the  policy.  
Notwithstanding   the   foregoing,   the   policy   may   be   in   electronic   form   subject   to   the   pertinent  
A   person   insured   is   not   entitled   to   a   return   of   premium   if   the   policy   is   annulled,   rescinded   or   if   a  
provisions  of  Republic  Act  No.  8792,  otherwise  known  as  the  ‘Electronic  Commerce  Act’  and  to  such  
claim  is  denied  by  reason  of  fraud.  
rules  and  regulations  as  may  be  prescribed  by  the  Commissioner.  
 
 
SEC.  83.  In  case  of  an  over  insurance  by  several  insurers  other  than  life,  the  insured  is  entitled  to  a  
SEC.  51.  A  policy  of  insurance  must  specify:  
ratable  return  of  the  premium,  proportioned  to  the  amount  by  which  the  aggregate  sum  insured  in  
(a) The  parties  between  whom  the  contract  is  made;  
all  the  policies  exceeds  the  insurable  value  of  the  thing  at  risk.  
(b) The  amount  to  be  insured  except  in  the  cases  of  open  or  running  policies;  
  (c) The   premium,   or   if   the   insurance   is   of   a   character   where   the   exact   premium   is   only  
CHAPTER   5   –   THE   POLICY,   PARTIES   THERETO   AND   determinable   upon   the   termination   of   the   contract,   a   statement   of   the   basis   and   rates   upon  
which  the  final  premium  is  to  be  determined;  
RIGHTS  THEREON   (d) The  property  or  life  insured;  
(e) The  interest  of  the  insured  in  property  insured,  if  he  is  not  the  absolute  owner  thereof;  
  (f) The  risks  insured  against;  and  
A. Policy   (g) The  period  during  which  the  insurance  is  to  continue.  
   
SEC.   232.   No   policy,   certificate   or   contract   of   insurance   shall   be   issued   or   delivered   within   the  
1. Definition  
Philippines  unless  in  the  form  previously  approved  by  the  Commissioner,  and  no  application  form  
• Policy   of   insurance   –   the   written   instrument   in   which   a   contract   of   shall   be   used   with,   and   no   rider,   clause,   warranty   or   endorsement   shall   be   attached   to,   printed   or  
insurance  is  set  forth.   stamped  upon  such  policy,  certificate  or  contract  unless  the  form  of  such  application,  rider,  clause,  
-­‐ the  policy  is  not  essential  to  the  existence  of  a  valid  contract,  as  long  as   warranty  or  endorsement  has  been  approved  by  the  Commissioner.  
all  the  essential  elements  for  the  existence  of  a  contract  are  present.    
  Group  Insurance  
SEC.   49.   The   written   instrument   in   which   a   contract   of   insurance   is   set   forth,   is   called   a   policy   of   • The  Insurance  Code  requires  the  policy  to  contain  additional  matters.  
insurance.   o If   policy   fails   to   include   the   special   matters   required   –   the   insurer  
  cannot   avoid   liability   by   claiming   that   the   policy   is   void   as   not   having  
2. Form  and  Endorsements;  Rules  on  Formality  and  Effectivity   complied   with   the   law;   missing   provisions   will   be   read   into   the   policy  
• The   Insurance   Code   contains   no   provision   requiring   a   particular   form   for   and  will  substitute  those  which  are  in  conflict  with  the  law.  
the   validity   of   the   insurance   contract.   But   it   must   be   in   a   form   previously   o If  stipulations  are  not  in  the  exact  terms  of  the  statute  –  if  they  are  more  
approved   by   the   Insurance   Commissioner,   and   must   at   least   contain   the   favorable  to  the  insured,  they  may  be  enforced.  
following:    
a) Names  of  the  parties;   SEC.  234.  Supra  
b) Amount  to  be  insured,  except  in  open  and  running  policies;    
c) Premium  to  be  paid;   3. Riders  and  Endorsements;  Rules  on  Formalities  and  Effectivity  
d) Property  or  life  insured;   • Riders   –   small   printed/typed   stipulation   contained   on   a   slip   of   paper  
e) Interest  of  the  insured  in  the  property  covered  by  the  insurance,  if  he  is   attached   to   the   policy   and   forming   an   integral   part   thereof.   In   case   of   doubt  
not  the  absolute  owner  thereof;   between  the  policy  itself  and  its  riders,  the  latter  prevails.  
f) Risks  insured  against;  and   • Endorsements  –  any  provision  added  to  an  insurance  contract  altering  its  
g) Period  during  which  the  insurance  is  to  continue.   scope  or  application;  a  general  term  
  o A  rider  is  a  kind  of  endorsement,  but  not  vice  versa.  
   
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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SEC.  50.  Supra   the   act   of   the   company   in   approving   or   rejecting;   so   in   life   insurance   a   "binding  
  slip"  or  "binding  receipt"  does  not  insure  of  itself.  
4. Cover  Notes    
• Gives  temporary  insurance  pending  the  issuance  of  the  policy.   Great  Pacific  Life  v.  CA  (1979)  
Facts:   Ngo   Hing   applied   for   a   20-­‐year   endowment   policy   for   the   life   of   his   one-­‐
• Although   of   a   temporary   nature,   it   is   a   binding   contract   and   has   full   force  
year  old  daughter  Helen  with  Grepalife.  He  paid  annual  premium  of  P1,077.75,  but  
and  effect  for  its  duration.  
retained   for   himself   retained   amount   of   P1,317.00   as   commission   for   being   a  
o Regulations  issued  by  the  Insurance  Commission  provides  that  it  shall  
be   binding   for   a   period   not   exceeding   60   days   from   its   issuance,   Grepalife   agent.   A   binding   deposit   receipt   was   given   by   Branch   Manager  
whether   or   not   the   premium   therefor   has   been   paid,   but   is   may   be   Mondragon,   who   forwarded   application   to   Grepalife   with   recommendation   for  
cancelled  by  either  party  upon  at  least  7days  notice  to  the  other  party   approval.   Grepalife   rejected   the   application,   saying   the   20-­‐year   endowment   policy  
is   not   available   to   minors,   and   offered   another   plan,   the   Juvenile   Triple   Action  
(Memo  Circular  No.  3-­‐75  approved  on  October  21,  1975).  
Plan.   However,   the   non-­‐acceptance   of   Grepalife   was   allegedly   not   communicated  
• Sometimes  called  “binding  receipt”  or  “binder”  in  life  insurance.  
to   Ngo   Hing,   because   Mondragon   instead   re-­‐sent   the   application   to   Grepalife,  
• Purpose  –  to  give  the  applicant  immediate  protection  from  the  date  of  the  
pointing  out  that  Chinese  customers  asked  for  such  coverage.  While  in  this  state  of  
application  so  that  the  insurer  can  inspect  the  risk  in  question.  
the   application   process,   Helen   died   of   influenza.   Ngo   Hing   then   tried   to   collect  
• Usually   contain   only   the   bare   essentials   of   the   insurance   contract   like   the  
from   insurance,   but   then   filed   a   case   against   Mondragon   and   Grepalife.   SC  
names  of  the  parties,  the  risk  insured  against,  the  amount  of  insurance,  the  
exonerated  the  two  from  liability,  as  there  was  no  binding  contract.  
premium  to  be  paid  and  the  property  or  life  insured.  
 
  Held:  When  the  provisions  of  the  receipt  show  that  it  is  intended  to  be  a  binding  
SEC.   52.   Cover   notes   may   be   issued   to   bind   insurance   temporarily   pending   the   issuance   of   the  
contract   only   upon   approval   of   the   application,   the   insurance   shall   not   be   in   force  
policy.   Within   sixty   (60)   days   after   issue   of   a   cover   note,   a   policy   shall   be   issued   in   lieu   thereof,  
including   within   its   terms   the   identical   insurance   bound   under   the   cover   note   and   the   premium   at  any  time.  The  receipt  only  acknowledges  fact  of  payment  subject  to  processing  
therefor.   by  the  company.  The  agent’s  failure  to  communicate  rejection  to  insured  does  not  
Cover   notes   may   be   extended   or   renewed   beyond   such   sixty   (60)   days   with   the   written   affect  liability  if  there  was  no  contract  at  all.  
approval  of  the  Commissioner  if  he  determines  that  such  extension  is  not  contrary  to  and  is  not  for  
 
the  purpose  of  violating  any  provisions  of  this  Code.  The  Commissioner  may  promulgate  rules  and  
regulations   governing   such   extensions   for   the   purpose   of   preventing   such   violations   and   may   by   Pacific  Timber  Export  v.  CA  (1982)  
such  rules  and  regulations  dispense  with  the  requirement  of  written  approval  by  him  in  the  case  of   Facts:   Pacific   Timber   temporarily   insured   logs   to   be   shipped   from   Quezon  
extension  in  compliance  with  such  rules  and  regulations.   Province  to  Japan.  Cover  Note  was  issued  with  the  condition  “subject  to  the  terms  
  and   conditions   of   the   Workmen’s   printed   Marine   Policy   form   as   filed   with   and  
Lim  v.  Sun  Life  Assurance  (1920)   approved  by  the  Office  of  the  Insurance  Commissioner.”  Bad  weather  caused  pieces  
Facts:   On   July   6,   1917,   Luis   Lim   applied   for   life   insurance   to   Sun   Life   with   Pilar   of   logs   to   break   loose   from   each   other,   leading   45   to   be   damaged,   and   30   to   be  
Lim   as   beneficiary.   Upon   payment   of   the   first   premium,   Sun   Life   issued   a   completely  lost.  Two  marine  cargo  polices  were  then  issued  after  the  loss/damage,  
provisional  policy,  to  the  effect  that  the  terms  and  conditions  of  the  life  insurance   covering  the  total  shipment.  Pacific  Timber  claimed  the  value  of  approximately  32  
policy   is   subject   to   the   condition   that   Sun   Life   Montreal   shall   issue   a   policy   on   pieces   of   logs   lost   from   Workmen’s,   who   asked   First   Philippine   Adjustment  
Lim’s  application.  Should  Sun  Life  not  issue  such  a  policy,  then  the  agreement  shall   Corporation  to  inspect  damages,  and  found  that  the  logs  were  insured  only  under  
be  null  and  void  ab  initio.  Luis  died  before  the  approval  of  the  application  for  the   the  Cover  Note.  Workmen’s  then  claimed  that  the  Cover  Note  had  become  null  and  
life   insurance.   Pilar   files   action   to   recover   from   policy.   SC   affirms   the   CFI’s   void   by   the   subsequent   issuance   of   the   marine   policies.   Pacific   Timber   then   filed  
dismissal  of  the  case.   case.  The  SC  ruled  that  the  Cover  Note  is  valid.  
   
Held:   The   provisional   policy   is   nothing   but   an   acknowledgement   of   receipt   of   Held:   Cover   Note   was   issued   with   consideration,   even   though   there   was   no  
payment   of   premium.   The   policy   will   only   be   issued   upon   acceptance,   which   has   separate   premium   paid..   No   separate   premiums   are   intended   or   required   to   be  
not   happened   when   Luis   died.   Only   thing   to   do   is   return   the   premium   paid   to   Lim.   paid  on  a  Cover  Note.  And  at  any  rate,  the  issuance  of  the  policies  proved  the  full  
Joyce  on  Insurance:  Where  an  agreement  is  made  between  the  applicant  and  the   payment  of  the  premium.  Where  a  policy  is  delivered  without  requiring  payment  
agent  whether  by  signing  an  application  containing  such  condition,  or  otherwise,   of   the   premium,   the   presumption   is   that   a   credit   was   intended   and   the   policy   is  
that  no  liability  shall  attach  until  the  principal  approves  the  risk  and  a  receipt  is   valid.  
given   buy   the   agent,   such   acceptance   is   merely   conditional,   and   it   subordinated   to    
 
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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B. Types  of  Non-­‐Life  Insurance  Policies   SEC.  163.  In  estimating  a  loss  under  an  open  policy  of  marine  insurance  the  following  rules  are  to  be  
observed:  
 
(a) The   value   of   a   ship   is   its   value   at   the   beginning   of   the   risk,   including   all   articles   or   charges  
1. Open   which  add  to  its  permanent  value  or  which  are  necessary  to  prepare  it  for  the  voyage  insured;  
• The  fair  market  value  (FMV)  of  the  thing  insured  is  not  agreed  upon  but  is   (b) The   value   of   the   cargo   is   its   actual   cost   to   the   insured,   when   laden   on   board,   or   where   the   cost  
left  to  be  ascertained  in  case  of  loss.   cannot   be   ascertained,   its   market   value   at   the   time   and   place   of   lading,   adding   the   charges  
incurred  in  purchasing  and  placing  it  on  board,  but  without  reference  to  any  loss  incurred  in  
• Parties   will   set   the   limit   on   the   maximum   amount   of   the   insurer’s   liability   raising  money  for  its  purchase,  or  to  any  drawback  on  its  exportation,  or  to  the  fluctuation  of  
(face   value)   on   which   the   amount   of   premium   will   be   partly   based.   If   the   the  market  at  the  port  of  destination,  or  to  expenses  incurred  on  the  way  or  on  arrival;  
FMV  exceeds  the  face  value,  the  latter  will  control.   (c) The  value  of  freightage  is  the  gross  freightage,  exclusive  of  primage,  without  reference  to  the  
• There  is  usually  a  stipulation  requiring  appraisal  of  loss  by  competent  and   cost  of  earning  it;  and  
(d) The  cost  of  insurance  is  in  each  case  to  be  added  to  the  value  thus  estimated.  
disinterested  persons  should  the  insurer  and  insured  fail  to  agree  as  to  its    
value.   SEC.  173.  If  there  is  no  valuation  in  the  policy,  the  measure  of  indemnity  in  an  insurance  against  fire  
  is   the   expense   it   would   be   to   the   insured   at   the   time   of   the   commencement   of   the   fire   to   replace   the  
2. Valued   thing   lost   or   injured   in   the   condition   in   which   it   was   at   the   time   of   the   injury;   but   if   there   is   a  
valuation  in  a  policy  of  fire  insurance,  the  effect  shall  be  the  same  as  in  a  policy  of  marine  insurance.  
• Expresses   on   its   face   an   agreement   that   the   thing   insured   shall   be   valued   at  
a  specified  sum.    
Development  Insurance  v.  IAC  (1986)  
• In  the  absence  of  fraud,  the  agreed  value  is  conclusive  on  the  parties  in  case  
Facts:  Fire  consumed  a  portion  of  the  7th  floor  of  Phil  Union  (PURDC)’s  building  
of  wither  partial  or  total  loss.  
and   the   loss   was   valued   at   P508,867.   The   building   (not   just   the   elevator)   was  
• There  are  two  values  in  this  policy  –  the  face  value  (maximum  amount  for  
insured   against   fire   for   P2.5M,   and   contained   the   provision:   “If   the   property  
which  the  insurer  will  be  liable  in  case  of  loss)  and  the  value  of  the  property  
hereby   insured   shall,   at   the   breaking   out   of   any   fire,   be   collectively   of   greater  
insured  (as  agreed  upon  by  the  parties).  
value  than  the  sum  insured  thereon,  then  the  insured  shall  be  considered  as  being  
• In  life  insurances,  the  liability  of  the  insurer  is  measured  by  the  face  value  of  
his  own  insurer  for  the  difference,  and  shall  bear  a  ratable  proportion  of  the  loss  
the  policy.  
accordingly.  Every  item,  if  more  than  one,  of  the  policy  shall  be  separately  subject  
 
to   this   condition.”   SC   ruled   that   Development   Ins.   is   liable   for   the   full   amount   of  
3. Running  
P508,867.  
• Contemplates  successive  insurances;  object  of  the  policy  may  be  from  time  
 
to   time   defined,   especially   as   to   subjects   of   insurance,   by   additional  
Held:   The   policy   states   that   the   building   is   insured   for   P2.5M,   so   it   should   be  
statements  or  indorsements.  
considered  that  this  is  the  actual  value  of  the  property  insured  at  the  time  of  the  
 
loss.   The   insurance   company   alleges   that   the   building   has   greater   value   at   the  
SEC.  59.  A  policy  is  either  open,  valued  or  running.  
time  of  the  fire,  but  did  not  offer  proof  of  this  valuation.  The  contract  is  an  open  
 
SEC.  60.  An  open  policy  is  one  in  which  the  value  of  the  thing  insured  is  not  agreed  upon,  and  the   policy,  wherein  “the  amount  of  the  loss  shall  be  subject  to  appraisal”  at  the  time  of  
amount   of   the   insurance   merely   represents   the   insurer’s   maximum   liability.   The   value   of   such   thing   loss,  and  that  the  company  shall  be  liable  for  the  full  amount  so  apprised.  
insured  shall  be  ascertained  at  the  time  of  the  loss.    
 
Harding  v.  Commercial  Union  Assurance  (1918)  
SEC.  61.  A  valued  policy  is  one  which  expresses  on  its  face  an  agreement  that  the  thing  insured  shall  
be  valued  at  a  specific  sum.   Facts:   Harding   insured   her   pre-­‐owned   Studebaker   car   through   Smith   Bell   &   Co.  
  The   car   caught   on   fire.   When   Harding   tried   to   claim   from   Commercial,   the  
SEC.  62.  A  running  policy  is  one  which  contemplates  successive  insurances,  and  which  provides  that   company   alleged   misrepresentation   of   the   price   paid   by   Hardin   for   the   car,   the  
the  object  of  the  policy  may  be  from  time  to  time  defined,  especially  as  to  the  subjects  of  insurance,  
actual   value   of   the   car,   and   the   ownership   of   the   car   at   time   of   the   application   for  
by  additional  statements  or  indorsements.  
  insurance.   However,   evidence   shows   that   an   agent   of   the   insurance   company  
SEC.  158.  A  valuation  in  a  policy  of  marine  insurance  is  conclusive  between  the  parties  thereto  in   examined   the   car   and   appraised   its   value   at   P3K,   which   became   the   basis   of   the  
the  adjustment  of  either  a  partial  or  total  loss,  if  the  insured  has  some  interest  at  risk,  and  there  is  no   insurance   policy.   SC   ruled   that   Commercial   Union   is   liable   for   the   full   amount   of  
fraud   on   his   part;   except   that   when   a   thing   has   been   hypothecated   by   bottomry   or   respondentia,  
damages.  
before  its  insurance,  and  without  the  knowledge  of  the  person  actually  procuring  the  insurance,  he  
may   show   the   real   value.   But   a   valuation   fraudulent   in   fact,   entitles   the   insurer   to   rescind   the    
contract.   Held:   Insurance   company   is   bound   by   the   estimated   value   of   the   automobile   upon  
  which   the   policy   was   issued.   It   is   estopped   from   asserting   a   different   value   since  
their  agent  was  the  one  who  set  the  value  of  the  policy  at  P3K.  The  ordinary  test  of  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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the  value  of  property  is  the  price  it  will  commend  in  the  market  if  offered  for  sale.   further   condition   precedent   to   the   transaction   of   insurance   business   in   the   Philippines,   make   and  
file  with  the  Commissioner  an  agreement  or  stipulation,  executed  by  the  proper  authorities  of  said  
But  that  test  cannot  be  applied  at  the  time  of  the  application  for  insurance,  as  this  
company  in  form  and  substance  as  follows:  
is   subject   to   difference   of   opinions.   Thus   the   applicant   could   do   no   more   than   The   (name   of   company)   does   hereby   stipulate   and   agree   in   consideration   of   the   permission  
estimate   such   value   in   good   faith.   It   is   presumed   that   the   insurance   company,   granted  by  the  Insurance  Commissioner  to  transact  business  in  the  Philippines,  that  if  at  any  time  
when  it  issues  a  policy,  does  not  make  the  absolute  correctness  of  such  estimated   said  company  shall  leave  the  Philippines,  or  cease  to  transact  business  therein,  or  shall  be  without  
any  agent  in  the  Philippines  on  whom  any  notice,  proof  of  loss,  summons,  or  legal  process  may  be  
value  a  condition  precedent  to  any  insurance.  The  valuation  in  a  policy  of  marine  
served,  then  in  any  action  or  proceeding  arising  out  of  any  business  or  transaction  which  occurred  
insurance  is  conclusive  if  the  insured  had  an  insurable  interest  and  was  not  guilty   in   the   Philippines,   service   of   any   notice   provided   by   law,   or   insurance   policy,   proof   of   loss,  
of  fraud.   summons,   or   other   legal   process   may   be   made   upon   the   Insurance   Commissioner,   and   that   such  
  service  upon  the  Insurance  Commissioner  shall  have  the  same  force  and  effect  as  if  made  upon  the  
company.  
C. Parties  
Whenever  such  service  of  notice,  proof  of  loss,  summons,  or  other  legal  process  shall  be  made  
  upon  the  Commissioner,  he  must,  within  ten  (10)  days  thereafter,  transmit  by  mail,  postage  paid,  a  
1. Insurer   copy   of   such   notice,   proof   of   loss,   summons,   or   other   legal   process   to   the   company   at   its   home   or  
• The  party  who  agrees  to  indemnify.   principal   office.   The   sending   of   such   copy   by   the   Commissioner   shall   be   a   necessary   part   of   the  
service  of  the  notice,  proof  of  loss,  or  other  legal  process.  
• Any   person,   partnership,   association   or   corporation   duly   authorized   to    
transact  the  insurance  business  may  be  an  insurer.   SEC.   299.   The   prior   written   approval   of   the   Commissioner   shall   be   required   for   the   following  
  transactions   between   a   controlled   insurer   and   any   person   in   its   holding   company   system:   sales,  
SEC.   6.   Every   corporation,   partnership,   or   association,   duly   authorized   to   transact   insurance   purchases,  exchanges,  loans  or  extensions  of  credit,  or  investments,  involving  five  percent  (5%)  or  
business  as  elsewhere  provided  in  this  Code,  may  be  an  insurer.   more  of  the  insurer’s  admitted  assets  as  of  the  thirty-­‐first  day  of  December  next  preceding.  
   
SEC.  195.  Every  company  must,  before  engaging  in  the  business  of  insurance  in  the  Philippines,  file   Agents  and  Brokers  
with  the  Commissioner  the  following:  
(a) A   certified   copy   of   the   last   annual   statement   or   a   verified   financial   statement   exhibiting   the    
condition  and  affairs  of  such  company;   SEC.  309.  Any  person  who  for  compensation  solicits  or  obtains  insurance  on  behalf  of  any  insurance  
(b) If   incorporated   under   the   laws   of   the   Philippines,   a   copy   of   the   articles   of   incorporation   and   company   or   transmits   for   a   person   other   than   himself   an   application   for   a   policy   or   contract   of  
bylaws,  and  any  amendments  to  either,  certified  by  the  Securities  and  Exchange  Commission  to   insurance  to  or  from  such  company  or  offers  or  assumes  to  act  in  the  negotiating  of  such  insurance  
be  a  copy  of  that  which  is  filed  in  its  Office;   shall  be  an  insurance  agent  within  the  intent  of  this  section  and  shall  thereby  become  liable  to  all  the  
(c) If   incorporated   under   any   laws   other   than   those   of   the   Philippines,   a   certificate   from   the   duties,  requirements,  liabilities  and  penalties  to  which  an  insurance  agent  is  subject.  
Securities   and   Exchange   Commission   showing   that   it   is   duly   registered   in   the   mercantile   An   insurance   agent   is   an   independent   contractor   and   not   an   employee   of   the   company  
registry  of  that  Commission  in  accordance  with  the  Corporation  Code.  A  copy  of  the  articles  of   represented.  ‘Insurance  agent’  includes  an  agency  leader,  agency  manager,  or  their  equivalent.  
incorporation   and   bylaws,   and   any   amendments   to   either,   if   organized   or   formed   under   any   Since   the   insurance   industry   is   imbued   with   public   interest,   the   insurance   companies   upon  
law   requiring   such   to   be   filed,   duly   certified   by   the   officer   having   the   custody   of   same,   or   if   not   approval   of   the   Commissioner   may   exercise   wide   latitude   in   supervising   the   activities   of   their  
so   organized,   a   copy   of   the   law,   charter   or   deed   of   settlement   under   which   the   deed   of   insurance  agents  to  ensure  the  protection  of  the  insuring  public.  
organization  is  made,  duly  certified  by  the  proper  custodian  thereof,  or  proved  by  affidavit  to    
be   a   copy;   also,   a   certificate   under   the   hand   and   seal   of   the   proper   officer   of   such   state   or   SEC.   310.   Any   person   who   for   any   compensation,   commission   or   other   thing   of   value   acts   or   aids   in  
country   having   supervision   of   insurance   business   therein,   if   any   there   be,   that   such   any  manner  in  soliciting,  negotiating  or  procuring  the  making  of  any  insurance  contract  or  in  placing  
corporation   or   company   is   organized   under   the   laws   of   such   state   or   country,   with   the   amount   risk  or  taking  out  insurance,  on  behalf  of  an  insured  other  than  himself,  shall  be  an  insurance  broker  
of  capital  stock  or  assets  and  legal  reserve  required  by  this  Code;   within   the   intent   of   this   Code,   and   shall   thereby   become   liable   to   all   the   duties,   requirements,  
(d) If  not  incorporated  and  of  foreign  domicile,  aside  from  the  certificate  mentioned  in  paragraph   liabilities  and  penalties  to  which  an  insurance  broker  is  subject.  
(c)   of   this   section,   a   certificate   setting   forth   the   nature   and   character   of   the   business,   the    
location  of  the  principal  office,  the  name  of  the  individual  or  names  of  the  persons  composing   SEC.   315.   The   premium,   or   any   portion   thereof,   which   an   insurance   agent   or   insurance   broker  
the   partnership   or   association,   the   amount   of   actual   capital   employed   or   to   be   employed   collects  from  an  insured  and  which  is  to  be  paid  to  an  insurance  company  because  of  the  assumption  
therein,  and  the  names  of  all  officers  and  persons  by  whom  the  business  is  or  may  be  managed.   of  liability  through  the  issuance  of  policies  or  contracts  of  insurance,  shall  be  held  by  the  agent  or  
The  certificate  must  be  verified  by  the  affidavit  of  the  chief  officer,  secretary,  agent,  or  manager   broker   in   a   fiduciary   capacity   and   shall   not   be   misappropriated   or   converted   to   his   own   use   or  
of  the  company;  and  if  there  are  any  written  articles  of  agreement  of  the  company,  a  copy  thereof   illegally  withheld  by  the  agent  or  broker.  
must  accompany  such  certificate.   Any  insurance  company  which  delivers  to  an  insurance  agent  or  insurance  broker  a  policy  or  
  contract   of   insurance   shall   be   deemed   to   have   authorized   such   agent   or   broker   to   receive   on   its  
SEC.  196.  The  Commissioner  must  require  as  a  condition  precedent  to  the  transaction  of  insurance   behalf  payment  of  any  premium  which  is  due  on  such  policy  or  contract  of  insurance  at  the  time  of  
business   in   the   Philippines   by   any   foreign   insurance   company,   that   such   company   file   in   his   office   a   its  issuance  or  delivery  or  which  becomes  due  thereon.  
written  power  of  attorney  designating  some  person  who  shall  be  a  resident  of  the   Philippines   as   its   In   order   to   ensure   faithful   performance   by   the   insurance   agent   or   insurance   broker   of   these  
general   agent,   on   whom   any   notice   provided   by   law   or   by   any   insurance   policy,   proof   of   loss,   fiduciary   responsibilities,   the   Insurance   Commissioner   shall   prescribe   the   minimum   terms   and  
summons  and  other  legal  processes  may  be  served  in  all  actions  or  other  legal  proceedings  against   conditions  on  such  matters  in  the  standard  agency  or  brokers  agreement  between  the  agents  and/or  
such  company,  and  consenting  that  service  upon  such  general  agent  shall  be  admitted  and  held  as   the  broker  with  the  insurance  companies.  
valid  as  if  served  upon  the  foreign  company  at  its  home  office.  Any  such  foreign  company  shall,  as  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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White  Gold  Marine  Services  v.  Pioneer  Insurance  (2005)   2. Insured  (cf.  cestui  que  vie  in  life  insurance)  
Facts:   White   Gold   insured   vessels   under   Steamship   Mutual   through   Pioneer   (as   • The  party  to  be  indemnified  in  case  of  loss.  
agent).  When  White  Gold  could  not  pay  its  accounts,  Steamship  Mutual  refused  to   • Anyone  except  a  public  enemy  may  be  an  insured.  
renew   the   coverage.   Steamship   Mutual   then   filed   collection   case   vs.   White   Gold.   o Public   enemy   –   a   citizen   or   subject   of   a   nation   at   war   with   the  
White   Gold,   then   filed   complaint   before   Insurance   Commissioner   saying   that   Philippines;  does  not  include  robbers,  thieves  and  other  criminals.  
Steamship  Mutual  violated  sections  of  the  Insurance  Code  by  not  having  a  license.   • Cestui  que  vie  –  the  person  on  whose  life  the  policy  is  taken.  
The  Insurance  Commissioner  ruled  that  there  was  no  need  for  Steamship  Mutual   o Must  be  a  risk  acceptable  to  the  insurer.  
to   secure   license   because   it   was   a   protection   and   indemnity   club,   and   not   engaged   o Example  –  a  husband  may  take  out  a  policy  on  his  wife’s  life,  proceeds  
in  the  insurance  business,  and  that  Pioneer  need  not  obtain  a  license  as  agent  of   payable   to   their   son   à   insured   –   husband;   cestui   que   vie   –   wife;  
Steamship   Mutual,   as   it   already   has   an   insurance   license   of   its   own.   SC   reverses   beneficiary  –  son.  
this  decision,  and  found  that  P&I  clubs  are  engaged  in  the  insurance  business  (thus    
needing  licenses).   SEC.  7.  Anyone  except  a  public  enemy  may  be  insured.  
   
Held:  The  test  to  determine  if  a  contract  is  an  insurance  contract  or  not,  depends   SEC.   54.   When   an   insurance   contract   is   executed   with   an   agent   or   trustee   as   the   insured,   the   fact  
that   his   principal   or   beneficiary   is   the   real   party   in   interest   may   be   indicated   by   describing   the  
on   the   nature   of   the   promise,   the   act   required   to   be   performed,   and   the   exact   insured  as  agent  or  trustee,  or  by  other  general  words  in  the  policy.  
nature   of   the   agreement   in   the   light   of   the   occurrence,   contingency,   or    
circumstances   under   which   the   performance   becomes   requisite.   In   an   insurance   SEC.   55.   To   render   an   insurance   effected   by   one   partner   or   part-­‐owner,   applicable   to   the   interest   of  
contract,   one   undertakes   for   a   consideration   to   indemnify   another   against   loss,   his  co-­‐partners  or  other  part-­‐owners,  it  is  necessary  that  the  terms  of  the  policy  should  be  such  as  
are  applicable  to  the  joint  or  common  interest.  
damage   or   liability   arising   from   an   unknown   or   contingent   event.   A   P&I   Club   is   “a    
form   of   insurance   against   third   party   liability,   where   the   third   party   is   anyone   SEC.  56.  When  the  description  of  the  insured  in  a  policy  is  so  general  that  it  may  comprehend  any  
other   than   the   P&I   Club   and   the   members.”   By   definition   then,   a   P&I   Club   is   a   person   or   any   class   of   persons,   only   he   who   can   show   that   it   was   intended   to   include   him,   can   claim  
mutual   insurance   association   engaged   in   the   marine   insurance   business.   Thus,   it   the  benefit  of  the  policy.  
 
needs   a   license   from   the   Insurance   Commissioner.   In   addition,   under   Sec.   299,   RA  6809  (An  Act  Lowering  the  Age  of  Majority  from  21  to  18  Years,  Amending  EO  209  or  the  Family  
agents   and   brokers   are   required   to   have   a   separate   license   to   be   an   agent   of   a   Code  of  the  Philippines)  
specific  company.  Pioneer,  even  if  it  has  its  own  insurance  license,  needs  to  procure    
a  license  to  be  an  agent  for  Steamship  Mutual.   ART.  110,  FC.  The  spouses  retain  the  ownership,  possession,  administration  and  enjoyment  of  their  
exclusive  properties.  
  Either  spouse  may,  during  the  marriage,  transfer  the  administration  of  his  or  her  exclusive  property  
Pandiman  v.  Marine  Manning  Management  (2005)   to  the  other  by  means  of  a  public  instrument,  which  shall  be  recorded  in  the  registry  of  property  of  
Facts:  Benito  Singhid  was  a  cook  on  board  MV  Sun  Richie  Five  for  12  months.  He   the  place  the  property  is  located.  (137a,  168a,  169a)  
was  hired  by  Fullwin  Maritime  through  agent  Marine  Manning  and  Management    
ART.   111,   FC.   A   spouse   of   age   may   mortgage,   encumber,   alienate   or   otherwise   dispose   of   his   or   her  
Corp.   The   vessel   and   crew   were   insured   with   OMMIAL,   a   P&I   Club.   OMMIAL  
exclusive   property,   without   the   consent   of   the   other   spouse,   and   appear   alone   in   court   to   litigate  
transacts  business  in  the  Philippines  through  correspondent  Pandiman  Philippines   with  regard  to  the  same.  (n)  
Inc.   Benito   suffered   a   heart   attack   and   died.   When   his   widow   for   death   benefits    
with  MMMC,  she  was  referred  to  Pandiman,  which  only  collected  application  and   ART.   1390,   CC.   The   following   contracts   are   voidable   or   annullable,   even   though   there   may   have  
been  no  damage  to  the  contracting  parties:  
payment   fees,   but   did   not   pay   death   claims.   Rosita   filed   complaint   for   recovery   (1) Those  where  one  of  the  parties  is  incapable  of  giving  consent  to  a  contract;  
before   Labor   Arbiter.   LA   ruled   in   favor   of   Rosita,   against   MMMC/OMMIAL,   and   (2) Those   where   the   consent   is   vitiated   by   mistake,   violence,   intimidation,   undue   influence   or  
dismissed  claim  against  Pandiman,  as  it  was  not  an  agent.  SC  affirmed  this  ruling.   fraud.  
  These   contracts   are   binding,   unless   they   are   annulled   by   a   proper   action   in   court.   They   are  
susceptible  of  ratification.  (n)  
Held:   P&I   agreements   are   insurance   contracts.   The   Club   P&I   Club   is   the   insurer,  
the   member   is   the   insured,   and   the   crew   is   the   beneficiary.   There   is   nothing   to    
indicate   that   insurance   contract   was   procured   via   Pandiman   as   agent.   Mere   Filipinas  Cia  de  Seguros  v.  Huenefeld  (1951)  
reference   to   OMMIAL   as   “principal”   instead   of   “client”   is   not   proof   of   agency   Facts:   During   the   American   occupation,   a   fire   policy   was   issued   in   favor   of  
relationship.  Either  way,  even  if  it  was  an  agent,  agents  are  not  liable  for  claims  of   Christern   Huenefeid   (CHCI)   from   Filipinas   covering   merchandise   in   a   building   in  
beneficiaries,  since  Pandiman  was  not  a  party  of  the  insurance  contract/policy.   Binondo.   CHCI   was   a   Philippine   company   whose   majority   of   stockholders   were  
  German   subjects.   Then,   the   USA   declared   war   against   Germany.   During   the  
  Japanese  occupation,  building  was  burned,  and  CHCI  tried  to  claim  from  Filipinas  
LAW  139  –  INSURANCE  LAW                                              C2017  Midterm  Reviewer  
Prof.  Ernestine  CJ  Desiderio  Villareal-­‐Fernando                                  Sulit  |  Lopez  C.  |  Galvez  
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the  damages  caused  by  the  fire.  Filipinas  refused,  saying  that  CHCI  is  considered  as   Held:  A  life  insurance  is  no  different  from  a  civil  donation  because  they  are  both  
an   enemy   company.   The   Director   of   Bureau   of   Financing   then   ordered   Filipinas   to   founded  upon  the  consideration  of  liberality.  Policy  considerations  and  dictates  of  
pay  CHCI,  which  it  did,  but  then  filed  a  suit  for  recovery  of  what  it  paid  CHCI.  SC   morality  justify  the  barrier  between  common  law  spouses  since  such  relationship  
ruled  in  favor  of  Filipinas.   encroaches  upon  rights  of  the  legitimate  family.  Art  739  provides  that  donations  
  made  between  persons  who  were  guilty  of  adultery  or  concubinage  at  the  time  of  
Held:   Philippine   Insurance   Law   (Act   No.   2427),   Sec   8   –   anyone   except   a   public   donation  are  void.  Any  person  forbidden  from  receiving  donations  under  cannot  be  
enemy   may   be   insured.   An   existing   insurance   policy   ceases   to   be   enforceable   as   named  a  beneficiary  of  a  life  insurance  policy.  
soon   as   an   insured   becomes   a   public   enemy,   which   CHCI   became   when   USA    
declared   war   on   Germany.   All   goods   burned   after   this   date   is   no   longer   entitled   to   Consuerga  v.  GSIS  (1971)  
any   indemnity   under   the   fire   insurance   policy.   However,   Filipinas   is   required   to   Facts:   Jose   Consuerga   was   married   to   Rosario   Diaz.   He,   in   good   faith,   then  
return  the  premium  paid  by  CHCI  for  the  period  beyond  the  declaration  of  war.   contracted   marriage   with   Basilia   Berdin.   When   Consuerga   died,   proceeds   of  
  retirement   insurance   were   paid   to   Berdin,   even   if   he   actually   didn’t   name   a  
3. Beneficiaries  (Life  Insurance)   beneficiary.  The  GSIS  awarded  the  proceeds  to  Berdin  on  the  basis  of  her  being  the  
• Chosen   exclusively   by   the   insured,   who   may   designate   anyone   he   wished   as   beneficiary   of   Consuarga’s   life   insurance.   Diaz   then   filed   a   claim   with   GSIS.   GSIS  
long  as  the  person  he  appoints  is  not  disqualified  by  law.   ruled   to   divide   proceeds.   Berdin   filed   a   case   before   CFI   Surigao,   who   ruled   that  
• Public  enemy  may  not  be  a  beneficiary.   they  are  both  beneficiaries  and  Berdin  and  heirs  will  get  ½  of  the  proceeds,  while  
  Diaz  will  get  the  other  half.  SC  affirmed.  
a. Designation  and  Right  to  Change    
• In   designating   his   beneficiary,   the   insured   must   make   sure   that   his   Held:  It  is  not  true  that  beneficiaries  of  life  and  retirement  policies  are  the  same,  
intention  is  made  clear.   because   when   life   insurance   was   issued   in   1943,   there   were   no   provisions   yet   on  
  retirement  insurance  (1951).  This  is  shown  by  the  fact  that  a  member  has  to  apply  
SEC.   11.   The   insured   shall   have   the   right   to   change   the   beneficiary   he   designated   in   the   policy,   to   designate   beneficiaries   of   retirement   insurance,   and   if   no   beneficiary   is  
unless   he   has   expressly   waived   this   right   in   said   policy.   Notwithstanding   the   foregoing,   in   the   event   designated,   retirement   benefits   go   to   the   estate.   Decision   to   divide   proceeds   is  
the   insured   does   not   change   the   beneficiary   during   his   lifetime,   the   designation   shall   be   deemed   proper   since   both   marriages   were   contracted   in   good   faith,   and   both   conjugal  
irrevocable.  
properties  are  affected  by  the  issuance  of  the  proceeds  of  the  policy.  
   
b. Statutory  Limitations   SSS  v.  Davac  (1966)  
• Under   the   Civil   Code,   the   persons   who   cannot   receive   donations   from   those   Facts:   Petronilo   Davac   was   a   member   of   SSS   and   he   designated   Candelaria   Davac  
who  cannot  make  donations  to  them  are  the  same  persons  who  cannot  be   as   beneficiary   and   indicated   relationship   to   be   “wife.”   However   Candelaria   was  
named  beneficiaries  in  a  life  policy.   actually   his   second   wife,   and  his  first  wife  was  Lourdes   Tuplano.   When   Petronilo  
  died,   both   wives   are   claiming   from   the   proceeds.   SC   ruled   that   Candelaria   is   the  
ART.  739,  CC.  Supra   rightful  beneficiary.  
   
ART.  2011,  CC.  Supra  
  Held:  Sec.  13  of  RA  1161  is  clear  that  the  beneficiary  recorded  by  employer  will  be  
ART.  2012,  CC.  Supra   the  one  entitled  to  the  benefits.  Art.  739  does  not  apply  because  when  there  was  no  
  proof   that   the   alleged   adulterer   actually   had   knowledge   of   the   man’s   existing  
Insular  v.  Ebrado  (1977)   marriage.  Also,  the  benefits  derived  from  SSS  membership  do  not  form  part  of  the  
Facts:   Buenaventura   Ebrado   was   insured   by   Insular   on   a   whole   life   plan   with   conjugal  partnership.  The  sources  of  this  membership  are  the  contributions  from  
Carponia  Ebrado  as  the  beneficiary.  He  designated  her  to  be  his  wife  on  the  policy,   the  employee,  the  employer,  and  the  government.  It  is  a  special  privilege,  and  not  
but   in   truth,   Carponia   was   just   a   common   law   spouse;   and   Buenaventura   had   a   property  earned  by  the  member  in  his  lifetime.  
pre-­‐existing   marriage   with   Pascuala.   When   Buenaventura   died,   both   Carponia    
and   Pascuala   also   claimed   insurance   proceeds.   SC   ruled   in   favor   of   Pascuala,   Del  Val  v.  Del  Val  (1915)  
disqualifying  Carponia  to  become  beneficiary  of  Buenaventura.   Facts:   Plaintiffs   and   defendant   are   brothers   and   sisters,   who   are   the   heirs   of  
  Gregorio  del  Val,  who  died  intestate  in  Manila  in  August  1910.  It  was  revealed  that  
Gregorio   insured   his   life   and   made   Andres   Del   Val   the   only   beneficiary   of   P40K  
which  he  sued  to  redeem  real  estate  properties  for  the  benefit   of  his  siblings.  His  
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siblings   claim   that   the   proceeds   of   the   insurance   belong   to   the   estate   and   not   to   • Notice  to  insurer  of  transfer  not  required  unless  stipulated  
Andres  alone.  Andres  now  asks  that  he  be  declared  sole  owner  of  the  real  estate  he   • If   the   assignment   is   made   with   the   consent   of   the   insurer,   it   is   a   novation.  
redeemed.  SC  rules  that  Andres  is  the  sole  owner  of  the  proceeds  of  the  insurance,   Assignee  takes  new  contract  free  of  defenses  available  to  insurer  against  the  
to  the  exclusion  of  his  siblings.   insured  under  the  old  contract.  
   
Held:   The   proceeds  of   an   insurance   policy   belong   exclusively   to   the   beneficiary   Grepalife  v.  CA  (1999)  
and  not  to  the  estate  of  the  person  whose  life  was  insured.  Such  proceeds  are  the   Facts:   Group   life   insurance   was   executed   between   Grepalife   and   DBP,   with   former  
separate   and   individual   property   of   the   beneficiary,   and   not   of   the   heirs   of   the   insuring  lives  of  eligible  housing  loan  mortgagors  of  DBP.  Dr.  Leuterio,  a  physician,  
person  whose  life  was  insured.  Property  bought  from  these  proceeds  would  have  to   applied  for  eligibility,  who  answered  in  his  forms  that  he  is  indeed  in  good  health.  
be  proven  to  have  been  gratuitous  before  it  can  be  said  that  they  were  bought  to   Grepalife   issued   insurance   coverage   to   the   extent   of   his   indebtedness   of   his   DBP  
be  given  as  gifts  to  the  other  heirs.   mortgagee   (P86,200).   Less   than   a   year   from   the   issuance   of   his   certificate,   Dr.  
  Leuterio   died   of   massive   cerebral   hemorrhage.   DBP   then   tried   to   recover   from  
Gercio  v.  Sun  Life  Assurance  (1925),  supra   Grepalife,   but   the   latter   refused   on   account   of   Leuterio   alleged   non-­‐disclosure   of  
  hypertension.  SC  favored  Leuterio,  and  ordered  orders  Grepalife  to  pay  Leuterio’s  
Philippine  American  Life  Insurance  v.  Pineda  (1989)   heirs  upon  proof  of  settlement  of  Leuterio’s  debt  with  DBP.  
Facts:  Jan.  15,  1968:  Dimayuga  insured  his  life  with  PhilAm,  designating  wife  and    
children   as   irrevocable   beneficiaries.   Feb.   22,   1980:   Dimayuga   files   petition   to   Held:   Group   insurance   contract   for   mortgage   aka   mortgage   redemption  
amend   beneficiaries   from   irrevocable   to   revocable.   Judge   Pineda   granted   petition.   insurance   is   a   device   for   protection   of   both   mortgagee   (so   that   upon   untimely  
SC  reverses  and  nullifies  decision.   death,   proceeds   of   insurance   will   go   to   the   payment   of   outstanding   debt   –  
  relieving   heirs   of   inherited   obligation)   and   mortgagor   (in   event   of   death,  
Held:   Under   Insurance   Act   and   Gercio   v.   Sun   Life,   beneficiary   designated   cannot   mortgage  obligation  will  be  extinguished).  In  such  policy,  the  insurance  is  on  the  
be   changed   without   consent   of   the   beneficiary   because   of   the   latter’s   vested   interest   of   the   mortgager,   but   the   mortgagee   is   a   mere   appointee   of   insurance  
interest  in  the  policy.  By  designating  beneficiaries  as  irrevocable,  it  is  understood   fund,  thus,  not  making  the  latter  a  party  to  the  contract.  Leuterio  did  not  cede  all  
that   no   right   may   be   exercised   or   changed   without   the   consent   of   all   the   rights   or   interests   in   the   insurance   to   DBP.   But   since   DBP   already   foreclosed  
beneficiaries.   Even   if   the   wife   is   already   dead   and   all   other   beneficiaries   are   still   mortgage,   proceeds   of   insurance   should   go   directly   to   heirs.   Heirs   will   have   the  
minors.   “…because   the   vested   rights   of   the   irrevocable   beneficiaries   would   be   cause  of  action,  as  the  contract  was  made  for  Leuterio’s  benefit  –  and  this  policy  
rendered  inconsequential.”   may  transfer  by  succession.  
   
c. Forfeiture  of  Benefits  by  the  Beneficiary   Sun  Life  Assurance  of  Canada  v.  Ingersoll  (1922)  
• Interest  being  referred  to  in  Sec.  12  is  NOT  the  insurable  interest     Facts:   Apr.   16,   1918:   Sun   Life   issued   life   policy   in   favor   of   Dy   Poco   for   $12,500  
  payable  to  the  Poco  or  his  assigns  on  Feb.  21,  1938,  and  if  he  should  die  before  that  
SEC.   12.   The   interest   of   a   beneficiary   in   a   life   insurance   policy   shall   be   forfeited   when   the   date,  to  his  legal  representatives.  Policy  states  that  after  three  full  payments  of  the  
beneficiary   is   the   principal,   accomplice,   or   accessory   in   willfully   bringing   about   the   death   of   the   premium,   Poco   can   surrender   the   policy   to   Sun   Life   for   a   cash   surrender   value.  
insured.   In   such   a   case,   the   share   forfeited   shall   pass   on   to   the   other   beneficiaries,   unless   otherwise  
disqualified.   In   the   absence   of   other   beneficiaries,   the   proceeds   shall   be   paid   in   accordance   with   the  
Poco  was  adjudged  insolvent;  Ingersoll  was  appointed  assignee.  Poco  died,  having  
policy  contract.  If  the  policy  contract  is  silent,  the  proceeds  shall  be  paid  to  the  estate  of  the  insured.   paid  only  two  full  premiums.  Tan  Sit  was  appointed  as  administratix  of  intestate  
  estate.  Both  Sy  and  Ingersoll  filed  to  claim  proceeds  from  the  insurance  company.  
D.       Rights  of  Insured  over  a  Life  Insurance  Policy   SC  ruled  that  Tan  Sit  had  the  better  right  to  the  proceeds  of  the  insurance.  
   
1. Right  to  Assign  (cf.  Change  of  Beneficiary)   Held:  Burlingham  v.  Crouse  set  the  doctrine  that  even  those  policies  without  cash  
surrender  value  would  not  vest  in  the  trustee  in  bankruptcy  the  rights  under  the  
• Before  the  Insurance  Code,  the  insured  could  not  change  the  beneficiary  if  
he  had  not  expressly  reserved  in  the  policy  the  right  to  do  so.   insurance   policy   of   the   insolvent.   The   assignee   acquires   no   beneficial   interest   in  
life  insurance  except  to  the  extent  that  such  insurance  contains  assets  which  can  
• Now,   under   the   present   law,   the   insured   is   presumed   to   have   the   right   to  
be  realized  upon  as  of  the  date  when  the  petition  of  insolvency  is  filed.  The  courts  
change  his  beneficiary,  even  if  the  policy  is  silent  on  the  matter.  
refuse  to  permit  the  assignee  in  insolvency  to  wrest  from  the  insolvent  a  policy  of  
• Insurable  interest  of  assignee  not  required.  
insurance  which  contains  in  it  no  present  realizable  assets.  
• Not  allowed  if  the  assignment  is  used  as  a  cloak  to  hide  an  illegal  scheme  
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Great  Pacific  Life  v.  CA  (1999),  supra    

 
SEC.  184.  A  policy  of  insurance  upon  life  or  health  may  pass  by  transfer,  will  or  succession  to  any  
person,   whether   he   has   an   insurable   interest   or   not,   and   such   person   may   recover   upon   it   whatever  
the  insured  might  have  recovered.  
 
SEC.   185.   Notice   to   an   insurer   of   a   transfer   or   bequest   thereof   is   not   necessary   to   preserve   the  
validity  of  a  policy  of  insurance  upon  life  or  health,  unless  thereby  expressly  required.  
 
2. Right  to  Borrow  
• Every   individual   life   or   endowment   policy   must   contain   a   provision  
granting  the  insured  the  right  to  borrow  on  the  sole  security  of  his  policy  an  
amount   not   exceeding   its   cash   surrender   value,   at   a   specified   rate   of  
interest  which  should  not  be  more  than  is  allowed  by  law.  
• The   insurance   company   will   advance   on   the   security   of   the   contract   an  
amount   that,   with   interest   as   specified   in   the   contract,   will   not   exceed   the  
guaranteed  cash  value  
• Since   this   is   an   express   provision,   an   unjustified   refusal   of   the   insurer   to  
grant  the  loan  is  a  violation  of  a  material  warranty  and  will  give  the  insured  
the  right  to  demand  the  rescission  of  the  contract.  
 
SEC.  233.  In  the  case  of  individual  life  or  endowment  insurance,  the  policy  shall  contain  in  substance  
the  following  conditions:  
(g)  A  provision  that  at  any  time  after  a  cash  surrender  value  is  available  under  the  policy  and  while  
the  policy  is  in  force,  the  company  will  advance,  on  proper  assignment  or  pledge  of  the  policy  and  on  
sole  security  thereof,  a  sum  equal  to,  or  at  the  option  of  the  owner  of  the  policy,  less  than  the  cash  
surrender  value  on  the  policy,  at  a  specified  rate  of  interest,  not  more  than  the  maximum  allowed  by  
law,   to   be   determined   by   the   company   from   time   to   time,   but   not   more   often   than   once   a   year,  
subject  to  the  approval  of  the  Commissioner;  and  that  the  company  will  deduct  from  such  loan  value  
any   existing   indebtedness   on   the   policy   and   any   unpaid   balance   of   the   premium   for   the   current  
policy   year,   and   may   collect   interest   in   advance   on   the   loan   to   the   end   of   the   current   policy   year,  
which   provision   may   further   provide   that   such   loan   may   be   deferred   for   not   exceeding   six   (6)  
months  after  the  application  therefor  is  made;  
 
3. Right  to  Dividends  
• Dividend  –  a  refund  of  the  portion  of  the  premium  that  is  in  excess  of  the  
amount   necessary   for   current   benefit   payments,   expenses,   and   reserves  
required  to  cover  future  policy  guarantees.  
• Individual   or   industrial   life   policy   may   be   expressed   to   be   a   participating  
one,  i.e.,  that  the  insured  shall  have  a  right  to  share  in  the  surplus  profits  of  
the   insurer   under   the   conditions   specified   in   the   policy.   In   the   absence   of  
such   express   provision,   the   insured   has   no   right   to   participate   in   the  
dividends.  
 
SEC.  233.  In  the  case  of  individual  life  or  endowment  insurance,  the  policy  shall  contain  in  substance  
the  following  conditions:  
(e)   If   the   policy   is   participating,   a   provision   that   the   company   shall   periodically   ascertain   and  
apportion  any  divisible  surplus  accruing  on  the  policy  under  conditions  specified  therein;  
 
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