Insurance Case Digests

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Rizal Surety & Insurance Company vs. Court of Appeals
[GR 112360, 18 June 2000] Third Division, Purisima (J): 4 concur
Facts:
On 13 March 1980, Rizal Surety & Insurance Company (Rizal
Insurance) issued Fire Insurance Policy 45727 in favor of Transworld Knitting
Mills, Inc. (Transworld), initially for P1,000,000.00 and eventually increased to
P1,500,000.00, covering the period from 14 August 1980 to 13 March 1981. The
same pieces of property insured with Rizal Insurance were also insured with New
India Assurance Company, Ltd., (New India). On 12 January 1981, fire broke out
in the compound of Transworld, razing the middle portion of its four-span
building and partly gutting the left and right sections thereof. A two-storey
building (behind said four-span building) where fun and amusement machines
and spare parts were stored, was also destroyed by the fire. Transworld filed its
insurance claims with Rizal Insurance and New India but to no avail. On 26 May
1982, TransWorld brought against the said insurance companies an action for
collection of sum of money and damages (Civil Case 46106) before Branch 161
of the then Court of First Instance of Rizal; praying for judgment ordering Rizal
Insurance and New India to pay the amount of P2,747,867.00 plus legal interest,
P400,000.00 as attorney's fees, exemplary damages, expenses of litigation of
P50,000.00 and costs of suit. Rizal Insurance countered that its fire insurance
policy sued upon covered only the contents of the four-span building, which was
partly burned, and not the damage caused by the fire on the two-storey annex
building. On 4 January 1990, the trial court rendered its decision; dismissing the
case as against New India; ordering Rizal Insurance to pay Transworld the
amount of P826,500.00 representing the actual value of the losses suffered by
it; and with cost against Rizal Insurance. Both Rizal Insurance and TransWorld
went to the Courtof Appeals, which came out with its decision of 15 July 1993,
modifying the lower court's decision by requiring New India to pay Transworld
the amount of P1,818,604.19; and Rizal Surety to pay Transworld P470,328.67,
based on the actual losses sustained by Transworld in the fire, totalling
P2,790,376.00 as against the amounts of fire insurance coverages respectively
extended by New India in the amount of P5,800,000.00 and Rizal Surety and
Insurance Company in the amount of P1,500,000.00. On 20 August 1993, from
the aforesaid judgment of the Court of Appeals, New India appealed to the
Supreme Court theorizing inter alia that the TransWorld could not be
compensated for the loss of the fun and amusement machines and spare parts
stored at the two-storey building because it (Transworld) had no insurable
interest in said goods or items. On 2 February 1994, the Court denied the appeal
with finality in GR L-111118 (New India Assurance Company Ltd. vs. Court of
Appeals). Rizal Insurance and TransWorld, on the other hand, interposed a
Motion for Reconsideration before the Court of Appeals, and on 22 October
1993, the Court of Appeals reconsidered its decision of 15 July 1993, as regards
the imposition of interest on the assessment against New India on the amount

of P1,818,604.19 and that against Rizal Insurance on the amount of
P470,328.67, commences from 26 May 1982 when the complaint was filed until
payment is made. The rest of the said decision was retained in all other
respects. Rizal Insurance filed the petition for review on certiorari.
Issue [1]: Whether the fire insurance policy litigated upon protected only the
contents of the main building (four-span), and did not include those stored in the
two-storey annex building; or whether the so called "annex" was not an annex
but was actually an integral part of the four-span building and therefore, the
goods and items stored therein were covered by the same fire insurance policy.
Held [1]: INCLUDES 2-STORY ANNEX BUILDING. The stipulation in subject fire
insurance policy regarding its coverage, reads "contained and/or stored during
the currency of this Policy in the premises occupied by them forming part of the
buildings situated within own Compound." Therefrom, it can be gleaned
unerringly that the fire insurance policy in question did not limit its coverage to
what were stored in the fourspan building. The two-storey building involved a
permanent structure, which adjoins and intercommunicates with the "first right
span of the lofty storey building", formed part thereof, and meets the requisites
for compensability under the fire insurance policy sued upon. So also,
considering that the two-storey building aforementioned was already existing
when subject fire insurance policy contract was entered into on 12 January
1981, having been constructed sometime in 1978, Rizal Insurance should have
specifically excluded the said two-storey building from the coverage of the fire
insurance if minded to exclude the same but it did not, and instead, went on to
provide that such fire insurance policy covers the products, raw materials and
supplies stored within the premises of Transworld which was an integral part of
the four-span building occupied by Transworld, knowing fully well the existence
of such building adjoining and intercommunicating with the right section of the
four-span building.
Issue [2]: Whether the ambiguity in fire insurance policy should be resolved
against Rizal Surety.
Held [2]: YES. The stipulation as to the coverage of the fire insurance policy
under controversy has created a doubt regarding the portions of the building
insured thereby. Article 1377 of the New Civil Code provides that "The
interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity." Conformably, it stands to reason that the
doubt should be resolved against Rizal Insurance, whose lawyer or managers
drafted the fire insurance policy contract under scrutiny. Citing the aforecited
provision of law in point, the Court in Landicho vs. Government Service
Insurance System, ruled that "as regards insurance policies, in respect of which

it is settled that the 'terms in an insurance policy, which are ambiguous,
equivocal, or uncertain are to be construed strictly and most strongly against
the insurer, and liberally in favor of the insured so as to effect the dominant
purpose of indemnity or payment to the insured, especially where forfeiture is
involved' (29 Am. Jur., 181), and the reason for this is that the 'insured usually
has no voice in the selection or arrangement of the words employed and that
the language of the contract is selected with great care and deliberation by
experts and legal advisers employed by, and acting exclusively in the interest
of, the insurance company.' (44 C.J.S., p. 1174)." Equally relevant is the
following disquisition of the Court in Fieldmen's Insurance Company, Inc. vs.
Vda. De Songco, where it was held that the "rigid application of the rule on
ambiguities has become necessary in view of current business practices. The
courts cannot ignore that nowadays monopolies, cartels and concentration of
capital, endowed with overwhelming economic power, manage to impose upon
parties dealing with them cunningly prepared 'agreements' that the weaker
party may not change one whit, his participation in the 'agreement' being
reduced to the alternative to 'take it or leave it' labelled since Raymond Saleilles
'contracts by adherence' (contrats [sic] d'adhesion), in contrast to these entered
into by parties bargaining on an equal footing, such contracts (of which policies
of insurance and international bills of lading are prime example) obviously call
for greater strictness and vigilance on the part of courts of justice with a view to
protecting the weaker party from abuses and imposition, and prevent their
becoming traps for the unwary."

Philamcare Health Systems Inc. vs. Court of Appeals
[GR 125678, 18 March 2002] First Division, Ynares-Santiago (J): 3 concur
Facts:
Ernani Trinos, deceased husband of Julita Trinos, applied for a
health care coverage with Philamcare Health Systems, Inc. In the standard
application form, he answered no to the following question: "Have you or any of
your family members ever consulted or been treated for high blood pressure,
heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes,
give details). " The application was approved for a period of one year from 1
March 1988 to 1 March 1989. Accordingly, he was issued Health Care
Agreement P010194. Under the agreement, Trinos' husband was entitled to avail
of hospitalization benefits, whether ordinary or emergency, listed therein. He
was also entitled to avail of "out-patient benefits" such as annual physical
examinations, preventive health care and other out-patient services. Upon the
termination of the agreement, the same was extended for another year from 1
March 1989 to 1 March 1990, then from 1 March 1990 to 1 June 1990. The
amount of coverage was increased to a maximum sum of P75,000.00 per
disability. During the period of his coverage, Ernani suffered a heart attack and
was confined at the Manila Medical Center (MMC) for one month beginning 9
March 1990. While her husband was in the hospital, Trinos tried to claim the
benefits under the health care agreement. However, Philamcare denied her
claim saying that the Health Care Agreement was void. According to Philamcare,
there was a concealment regarding Ernani's medical history. Doctors at the MMC
allegedly discovered at the time of Ernani's confinement that he was
hypertensive, diabetic and asthmatic, contrary to his answer in the application
form. Thus, Trinos paid the hospitalization expenses herself, amounting to about
P76,000.00. After her husband was discharged from the MMC, he was attended
by a physical therapist at home. Later, he was admitted at the Chinese General
Hospital. Due to financial difficulties, however, Trinos brought her husband home
again. In the morning of 13 April 1990, Ernani had fever and was feeling very
weak. Trinos was constrained to bring him back to the Chinese General Hospital
where he died on the same day. On 24 July 1990, Trinos instituted with the
Regional Trial Court of Manila, Branch 44, an action for damages against
Philamcare and its president, Dr. Benito Reverente (Civil Case 90 53795). She
asked for reimbursement of her expenses plus moral damages and attorney's
fees. After trial, the lower court ruled against Philamcare and Reverente,
ordering them to pay and reimburse the medical and hospital coverage of the
late Ernani Trinos in the amount of P76,000.00 plus interest, until the amount is
fully paid to plaintiff who paid the same; the reduced amount of moral damages
of P10,000.00 to Trinos; the reduced amount of P10,000.00 as exemplary
damages to Trinos; and the attorney's fees of P20,000.00, plus costs of suit. On
appeal, the Court of Appeals affirmed the decision of the trial court but deleted
all awards for damages and absolved Reverente. Philamcare's motion for

reconsideration was denied. Hence, Philamcare brought the petition for review,
raising the primary argument that a health care agreement is not an insurance
contract; hence the "incontestability clause" under the Insurance Code does not
apply
Issue [1]: Whether a health care agreement between Philamcare and Ernani
Trinos is an insurance contract.
Held [1]: YES. Section 2 (1) of the Insurance Code defines a contract of
insurance as an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or
contingent event. An insurance contract exists where the following elements
concur: (1) The insured has an insurable interest; (2) The insured is subject to a
risk of loss by the happening of the designated peril; (3) The insurer assumes
the risk; (4) Such assumption of risk is part of a general scheme to distribute
actual losses among a large group of persons bearing a similar risk; and (5) In
consideration of the insurer's promise, the insured pays a premium. Section 3 of
the Insurance Code states that any contingent or unknown event, whether past
or future, which may damnify a person having an insurable interest against him,
may be insured against. Every person has an insurable interest in the life and
health of himself. Section 10 provides that "Every person has an insurable
interest in the life and health: (1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in part for education or
support, or in whom he has a pecuniary interest; (3) of any person under a legal
obligation to him for the payment of money, respecting property or service, of
which death or illness might delay or prevent the performance; and (4) of any
person upon whose life any estate or interest vested in him depends." Herein,
the insurable interest of Trinos' husband in obtaining the health care agreement
was his own health. The health care agreement was in the nature of non-life
insurance, which is primarily a contract of indemnity. Once the member incurs
hospital, medical or any other expense arising from sickness, injury or other
stipulated contingent, the health care provider must pay for the same to the
extent agreed upon under the contract.
Issue [2]: Whether answers made in good faith, where matters of opinion or
judgment are called for, without intent to deceive will avoid a policy when they
were untrue.
Held [2]: NO. Where matters of opinion or judgment are called for, answers
made in good faith and without intent to deceive will not avoid a policy even
though they are untrue. Thus, although false, a representation of the
expectation, intention, belief, opinion, or judgment of the insured will not avoid
the policy if there is no actual fraud in inducing the acceptance of the risk, or its

acceptance at a lower rate of premium, and this is likewise the rule although the
statement is material to the risk, if the statement is obviously of the foregoing
character, since in such case the insurer is not justified in relying upon such
statement, but is obligated to make further inquiry. There is a clear distinction
between such a case and one in which the insured is fraudulently and
intentionally states to be true, as a matter of expectation or belief, that which
he then knows, to be actually untrue, or the impossibility of which is shown by
the facts within his knowledge, since in such case the intent to deceive the
insurer is obvious and amounts to actual fraud. The fraudulent intent on the part
of the insured must be established to warrant rescission of the insurance
contract. Concealment as a defense for the health care provider or insurer to
avoid liability is an affirmative defense and the duty to establish such defense
by satisfactory and convincing evidence rests upon the provider or insurer. In
any case, with or without the authority to investigate, Philamcare is liable for
claims made under the contract. Having assumed a responsibility under the
agreement, Philamcare is bound to answer the same to the extent agreed upon.
In the end, the liability of the health care provider attaches once the member is
hospitalized for the disease or injury covered by the agreement or whenever he
avails of the covered benefits which he has prepaid.
Issue [3]: Whether rescission must be exercised before commencement of an
action on the contract.
Held [3]: YES. Under Section 27 of the Insurance Code, "a concealment entitles
the injured party to rescind a contract of insurance." The right to rescind should
be exercised previous to the commencement of an action on the contract.
Herein, no rescission was made. Besides, the cancellation of health care
agreements as in insurance policies require the concurrence of the following
conditions: (1) Prior notice of cancellation to insured; (2) Notice must be based
on the occurrence after effective date of the policy of one or more of the
grounds mentioned; (3) Must be in writing, mailed or delivered to the insured at
the address shown in the policy; (4) Must state the grounds relied upon provided
in Section 64 of the Insurance Code and upon request of insured, to furnish facts
on which cancellation is based. None of the above pre-conditions was fulfilled in
this case. When the terms of insurance contract contain limitations on liability,
courts should construe them in such a way as to preclude the insurer from noncompliance with his obligation. Being a contract of adhesion, the terms of an
insurance contract are to be construed strictly against the party which prepared
the contract — the insurer. By reason of the exclusive control of the insurance
company over the terms and phraseology of the insurance contract, ambiguity
must be strictly interpreted against the insurer and liberally in favor of the
insured, especially to avoid forfeiture. This is equally applicable to Health Care
Agreements.

Issue [4]: Whether the membership of the late Trinos is now incontestable.
Held [4]: YES. Under the title Claim procedures of expenses, Philamcare had
twelve months from the date of issuance of the Agreement within which to
contest the membership of the patient if he had previous ailment of asthma,
and six months from the issuance of the agreement if the patient was sick of
diabetes or hypertension. The periods having expired, the defense of
concealment or misrepresentation no longer lie.

Gulf Resorts Inc. vs. Philippine Charter Insurance Corporation [G.R. No.
156167 May 16, 2005]
Facts: Gulf Resorts is the owner of the Plaza Resort situated at Agoo, La Union
and had its properties in said resort insured originally with the
American Home Assurance Company (AHAC). In the first 4 policies issued, the
risks of loss from earthquake shock was extended only to petitioner’s two
swimming pools. Gulf Resorts agreed to insure with Phil Charter the properties
covered by the AHAC policy provided that the policy wording and rates in said
policy be copied in the policy to be issued by Phil Charter. Phil Charter issued
Policy No. 31944 to Gulf Resorts covering the period of March 14, 1990 to March
14, 1991 for P10,700,600.00 for a total premium of P45,159.92. the break-down
of premiums shows that Gulf Resorts paid only P393.00 as premium against
earthquake shock (ES). In Policy No. 31944 issued by defendant, the shock
endorsement provided that “In consideration of the payment by the insured to
the company of the sum included additional premium the Company agrees,
notwithstanding what is stated in the printed conditions of this policy due to the
contrary, that this insurancecovers loss or damage to shock to any of the
property insured by this Policy occasioned by or through or in consequence of
earthquake (Exhs. "1-D", "2-D", "3-A", "4-B", "5-A", "6-D" and "7-C"). In Exhibit
"7-C" the word "included" above the underlined portion was deleted. On July 16,
1990 an earthquake struck Central Luzon and Northern Luzon and plaintiff’s
properties covered by Policy No. 31944 issued by defendant, including the two
swimming pools in its Agoo Playa Resort were damaged.
Petitioner advised respondent that it would be making a claim under
its Insurance Policy 31944 for damages on its properties. Respondent denied
petitioner’s claim on the ground that itsinsurance policy only afforded
earthquake shock coverage to the two swimming pools of the resort. The trial
court ruled in favor of respondent. In its ruling, the schedule clearly shows that
petitioner paid only a premium of P393.00 against the peril of earthquake shock,
the same premium it had paid against earthquake shock only on the two
swimming pools in all the policies issued by AHAC.
Issue: Whether or not the policy covers only the two swimming pools owned by
Gulf Resorts and does not extend to all properties damaged therein
Held: YES. All the provisions and riders taken and interpreted together,
indubitably show the intention of the parties to extend earthquake shock
coverage to the two swimming pools only. Aninsurance premium is the
consideration paid an insurer for undertaking to indemnify the insured against a
specified peril. In fire, casualty and marine insurance, the premium becomes a
debt as soon as the risk attaches. In the subject policy, no premium payments
were made with regard to earthquake shock coverage except on the two
swimming pools. There is no mention of any premium payable for the other
resort properties with regard to earthquake shock. This is consistent with
the history of petitioner’s insurance policies with AHAC.

PHIL. HEALTH CARE PROVIDERS, INC vs. COMMISSIONER OF INTERNAL
REVENUE
GR. NO. 1677330 September 18, 2009, SPECIAL FIRST DIVISION
(CORONA, J.)
FACTS:
Petitioner is a domestic corporation whose primary purpose is to establish,
maintain, conduct and operate a prepaid group practice health care delivery
system or a health maintenance organization to take care of the sick and
disabled persons enrolled in the health care plan and to provide for the
administrative, legal, and financial responsibilities of the organization. On
January 27, 2000, respondent CIR sent petitioner a formal deman letter and the
corresponding assessment notices demanding the payment of deficiency taxes,
including surcharges and interest, for the taxable years 1996 and 1997 in the
total amount of P224,702,641.18. The deficiency assessment was imposed on
petitioner’s health care agreement with the members of its health care program
pursuant to Section 185 of the 1997 Tax Code. Petitioner protested the
assessment in a letter dated February 23, 2000. As respondent did not act on
the protest, petitioner filed a petition for review in the Court of Tax Appeals
(CTA) seeking the cancellation of the deficiency VAT and DST assessments. On
April 5, 2002, the CTA rendered a decision, ordering the petitioner to PAY the
deficiency VAT amounting to P22,054,831.75 inclusive of 25% surcharge plus
20% interest from January 20, 1997 until fully paid for the 1996 VAT deficiency
and P31,094,163.87 inclusive of 25% surcharge plus 20% interest from January
20, 1998 until fully paid for the 1997 VAT deficiency. Accordingly, VAT Ruling No.
[231]-88 is declared void and without force and effect. The 1996 and 1997
deficiency DST assessment against petitioner is hereby CANCELLED AND SET
ASIDE. Respondent is ORDERED to DESIST from collecting the said DST
deficiency tax. Respondent appealed the CTA decision to the (CA) insofar as it
cancelled the DST assessment. He claimed that petitioner’s health care
agreement was a contract of insurance subject to DST under Section 185 of the
1997 Tax Code.
On August 16, 2004, the CA rendered its decision which held that petitioner’s
health care agreement was in the nature of a non-life insurance contract subject
to DST. Respondent is ordered to pay the deficiency Documentary Stamp Tax.
Petitioner moved for reconsideration but the CA denied it.
ISSUES:
(1) Whether or not Philippine Health Care Providers, Inc. engaged in insurance
business.
(2) Whether or not the agreements between petitioner and its members possess
all elements necessary in the insurance contract.
HELD:
NO. Health Maintenance Organizations are not engaged in the insurance
business. The SC said in June 12, 2008 decision that it is irrelevant that
petitioner is an HMO and not an insurer because its agreements are treated as
insurance contracts and the DST is not a tax on the business but an excise on
the privilege, opportunity or facility used in the transaction of the business.

Petitioner, however, submits that it is of critical importance to characterize the
business it is engaged in, that is, to determine whether it is an HMO or an
insurance company, as this distinction is indispensable in turn to the issue of
whether or not it is liable for DST on its health care agreements. Petitioner is
admittedly an HMO. Under RA 7878 an HMO is “an entity that provides, offers or
arranges for coverage of designated health services needed by plan members
for a fixed prepaid premium. The payments do not vary with the extent,
frequency or type of services provided. Section 2 (2) of PD 1460 enumerates
what constitutes “doing an insurance business” or “transacting an insurance
business”which are making or proposing to make, as insurer, any insurance
contract; making or proposing to make, as surety, any contract of suretyship as
a vocation and not as merely incidental to any other legitimate business or
activity of the surety; doing any kind of business, including a reinsurance
business, specifically recognized as constituting the doing of an insurance
business within the meaning of this Code; doing or proposing to do any business
in substance equivalent to any of the foregoing in a manner designed to evade
the provisions of this Code.
Overall, petitioner appears to provide insurance-type benefits to its members
(with respect to its curative medical services), but these are incidental to the
principal activity of providing them medical care. The “insurance-like” aspect of
petitioner’s business is miniscule compared to its noninsurance activities.
Therefore, since it substantially provides health care services rather than
insurance services, it cannot be considered as being in the insurance business.

Great Pacific Life Assurance Company vs. Court of Appeals [GR L31845, 30 April 1979]
Facts: On 14 March 1957, Ngo Hing filed an application with the Great Pacific
Life Assurance Company for a 20-year endowment policy in the amount of
P50,000.00 on the life of his one-year old daughter Helen Go. Ngo Hing supplied
the essential data which Lapulapu D. Mondragon, Branch Manager of the Pacific
Life in Cebu City wrote on the corresponding form in his own handwriting .
Mondragon finally type-wrote the data on the application form which was signed
by Ngo Hing. The latter paid the annual premium, the sum of P1,077.75 going
over to the Company, but he retained the amount of P1,317.00 as his
commission for being a duly authorized agent of Pacific Life. Upon the payment
of the insurance premium, the binding deposit receipt was issued to Ngo Hing.
Likewise, Mondragon handwrote at the bottom of the back page of the
application form his strong recommendation for the approval of the insurance
application. Then on 30 April 1957, Mondragon received a letter from Pacific Life
disapproving the insurance application. The letter stated that the said life
insurance application for 20-year endowment plan is not available for minors
below 7 years old, but Pacific Life can consider the same under the Juvenile
Triple Action Plan, and advised that if the offer is acceptable, the Juvenile NonMedical Declaration be sent to the Company. The non-acceptance of the
insurance plan by Pacific Life was allegedly not communicated by Mondragon to
Ngo Hing. Instead, on 6 May 1957, Mondragon wrote back Pacific Life again
strongly recommending the approval of the 20-year endowment life insurance
on the ground that Pacific Life is the only insurance company not selling the 20year endowment insurance plan to children, pointing out that since 1954 the
customers, especially the Chinese, were asking for such coverage. It was when
things were in such state that on 28 May 1957 Helen Go died of influenza with
complication of broncho-pneumonia. Thereupon, Ngo Hing sought the payment
of the proceeds of the insurance, but having failed in his effort, he filed the
action for the recovery of the same before the Court of First Instance of Cebu,
which rendered a decision against Pacific Life and Mondragon, orderig them to
solidarily pay Ngo Hing the amount of P50,000.00 with interest at 6% from the
date of the filing of the complaint, and the sum of P10,000.00 as attorney's fees
plus costs of suits. On appeal, the Court of Appeals set aside the appealed
decision of the Court of First Instance of Cebu, and absolved Pacific Life and
Mondragon from liability on the insurance policy, but ordered the
reimbursement to Ngo Hing the amount of P1,077.75, without interest. On
reconsideration, however, the appellate court affirmed in toto the decision of
the Court of First Instance of Cebu, ordering Pacific Life and Mondragon jointly
and severally to pay Ngo Hing. Two petitions for certiorari by way of appeal were
filed by Pacific Life and Mondragon. The petitons were consolidated by the
Supreme Court in a resolution dated 29 April 1970.
Issue: Whether the binding deposit receipt constituted a temporary contract of
the life insurance in question, and thus negate the claim that the insurance
contract was perfected.

Held: YES. The provisions printed on the binding deposit receipt show that the
binding deposit receipt is intended to be merely a provisional or temporary
insurance contract and only upon compliance of the following conditions: (1)
that the company shall be satisfied that the applicant was insurable on standard
rates; (2) that if the company does not accept the application and offers to issue
a policy for a different plan, the insurance contract shall not be binding until the
applicant accepts the policy offered; otherwise, the deposit shall be refunded;
and (3) that if the applicant is not insurable according to the standard rates, and
the company disapproves the application, the insurance applied for shall not be
in force at any time, and the premium paid shall be returned to the applicant.
Clearly implied from the aforesaid conditions is that the binding deposit receipt
in question is merely an acknowledgment, on behalf of the company, that the
latter's branch office had received from the applicant the insurance premium
and had accepted the application subject for processing by the insurance
company; and that the latter will either approve or reject the same on the basis
of whether or not the applicant is "insurable on standard rates." Since Pacific
Life disapproved the insurance application of Ngo Hing, the binding deposit
receipt in question had never become in force at any time. Upon this premise,
the binding deposit receipt is, manifestly, merely conditional and does not
insure outright. Where an agreement is made between the applicant and the
agent, no liability shall attach until the principal approves the risk and a receipt
is given by the agent. The acceptance is merely conditional, and is subordinated
to the act of the company in approving or rejecting the application. Thus, in life
insurance, a "binding slip" or "binding receipt" does not insure by itself. It bears
repeating that through the intra-company communication of 30 April 1957,
Pacific Life disapproved the insurance application in question on the ground that
it is not offering the 20-year endowment insurance policy to children less than 7
years of age. What it offered instead is another plan known as the Juvenile Triple
Action, which Ngo Hing failed to accept. In the absence of a meeting of the
minds between Pacific Life and Ngo Hing over the 20-year endowment life
insurance in the amount of P50,000.00 in favor of the latter's one-year old
daughter, and with the non-compliance of the abovequoted conditions stated in
the disputed binding deposit receipt, there could have been no insurance
contract duly perfected between them. Accordingly, the deposit paid by Ngo
Hing shall have to be refunded by Pacific Life.

Eternal Gardens Memorial Park Corporation v Philamlife (Insurance)
G.R. No. 166245
April 9, 2008
ETERNAL GARDENS MEMORIAL PARK CORPORATION, petitioner,
vs. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondent.
FACTS:
Philamlife) entered into an agreement denominated as Creditor Group Life
Policy No. P-19202 with petitioner Eternal Gardens Memorial Park Corporation
(Eternal). Under the policy, the clients of Eternal who purchased burial lots from
it on installment basis would be insured by Philamlife. The amount of insurance
coverage depended upon the existing balance of the purchased burial lots.
Eternal was required under the policy to submit to Philamlife a list of all new lot
purchasers, together with a copy of the application of each purchaser, and the
amounts of the respective unpaid balances of all insured lot purchasers. In
relation to the instant petition, Eternal complied by submitting a letter dated
December 29, 1982,4 containing a list of insurable balances of its lot buyers for
October 1982. One of those included in the list as "new business" was a certain
John Chuang. His balance of payments was PhP 100,000. On August 2, 1984,
Chuang died.
Eternal sent a letter dated August 20, 19845 to Philamlife, which served as an
insurance claim for Chuang's death.
After more than a year, Philamlife had not furnished Eternal with any reply to
the latter's insurance claim. This prompted Eternal to demand from Philamlife
the payment of the claim for PhP 100,000 on April 25, 1986.8
In response to Eternal's demand, Philamlife denied Eternal's insurance claim in a
letter dated May 20, 1986. Consequently, Eternal filed a case before the Makati
City Regional Trial Court (RTC).
DECISION OF LOWER COURTS:
(1) RTC : in favor of Eternal. due to Philamlife's inaction from the submission of
the requirements of the group insurance on December 29, 1982 to Chuang's
death on August 2, 1984, as well as Philamlife's acceptance of the premiums
during the same period, Philamlife was deemed to have approved Chuang's
application. The RTC said that since the contract is a group life insurance, once
proof of death is submitted, payment must follow.
(2) CA : in favor of Philamlife. there being no application form, Chuang was not
covered by Philamlife's insurance.
ISSUE: May the inaction of the insurer on the insurance application be
considered as approval of the application?
RULING:
YES. As earlier stated, Philamlife and Eternal entered into an agreement
denominated as Creditor Group Life Policy No. P-1920 dated December 10,
1980. In the policy, it is provided that:

EFFECTIVE DATE OF BENEFIT. The insurance of any eligible Lot Purchaser
shall be effective on the date he contracts a loan with the Assured. However,
there shall be no insurance if the application of the Lot Purchaser is not
approved by the Company.
An examination of the above provision would show ambiguity between its two
sentences. The first sentence appears to state that the insurance coverage of
the clients of Eternal already became effective upon contracting a loan with
Eternal while the second sentence appears to require Philamlife to approve the
insurance contract before the same can become effective.
It must be remembered that an insurance contract is a contract of adhesion
which must be construed liberally in favor of the insured and strictly against the
insurer in order to safeguard the latter's interest.
The fact of the matter is, the letter dated December 29, 1982, which Philamlife
stamped as received, states that the insurance forms for the attached list of
burial lot buyers were attached to the letter. Such stamp of receipt has the
effect of acknowledging receipt of the letter together with the attachments.
Such receipt is an admission by Philamlife against its own interest.13 The
burden of evidence has shifted to Philamlife, which must prove that the letter
did not contain Chuang's insurance application. However, Philamlife failed to do
so; thus, Philamlife is deemed to have received Chuang's insurance application.
The seemingly conflicting provisions must be harmonized to mean that upon a
party's purchase of a memorial lot on installment from Eternal, an insurance
contract covering the lot purchaser is created and the same is effective, valid,
and binding until terminated by Philamlife by disapproving the insurance
application. The second sentence of Creditor Group Life Policy No. P-1920 on the
Effective Date of Benefit is in the nature of a resolutory condition which would
lead to the cessation of the insurance contract. Moreover, the mere inaction of
the insurer on the insurance application must not work to prejudice the insured;
it cannot be interpreted as a termination of the insurance contract. The
termination of the insurance contract by the insurer must be explicit and
unambiguous.

Enriquez V. Sun Life Assurance Co. Of Canada (1920)
G.R. No. L-15895
November 29, 1920
Lessons Applicable: Perfection (Insurance)
FACTS:
September 24, 1917: Joaquin Herrer made application to the Sun Life Assurance
Company of Canada through its office in Manila for a life annuity
2 days later: he paid P6,000 to the manager of the company's Manila office and
was given a receipt
according to the provisional receipt, 3 things had to be accomplished by the
insurance company before there was a contract:
(1) There had to be a medical examination of the applicant; -check
(2) there had to be approval of the application by the head office of the
company; and - check
(3) this approval had in some way to be communicated by the company to the
applicant - ?
November 26, 1917: The head office at Montreal, Canada gave notice of
acceptance by cable to Manila but this was not mailed
December 4, 1917: policy was issued at Montreal
December 18, 1917: attorney Aurelio A. Torres wrote to the Manila office of the
company stating that Herrer desired to withdraw his application
December 19, 1917: local office replied to Mr. Torres, stating that the policy had
been issued, and called attention to the notification of November 26, 1917
December 21, 1917 morning: received by Mr. Torres
December 20, 1917: Mr. Herrer died
Rafael Enriquez, as administrator of the estate of the late Joaquin Ma. Herrer
filed to recover from Sun Life Assurance Company of Canada through its office in
Manila for a life annuity
RTC: favored Sun Life Insurance
ISSUE: W/N Mr. Herrera received notice of acceptance of his application thereby
perfecting his life annuity
HELD: NO. Judgment is reversed, and the Enriquez shall have and recover from
the Sun Life the sum of P6,000 with legal interest from November 20, 1918, until
paid, without special finding as to costs in either instance. So ordered.
Civil Code: Art. 1319 (formerly Art.1262)
Art. 1319. Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract.
The offer must be certain and the acceptance absolute. A qualified acceptance
constitutes a counter-offer.

Acceptance made by letter or telegram does not bind the offerer except from
the time it came to his knowledge. The contract, in such a case, is presumed to
have been entered into in the place where the offer was made.
Therefore, it was not perfected because it has not been proved satisfactorily
that the acceptance of the application ever came to the knowledge of the
applicant.
Enriquez vs. Sun Life Assurance Co. [GR No. 15895; November 29,
1920]
Facts: Plaintiff is estate administrator for late Joaquin Herrer. Herrer has
pending application with defendant Sun Life Assurance Co (sun Life) evidenced
by a provisional receipt. The provisional receipt reads payment of Php6, 000 for
life annuity received 26 September 1917. The application was received by Sun
Life head office a month after.
04 December 1917, the policy was issued in Montreal. A petition for withdrawal
of application was filed by Herrer’s lawyer 18 December 1917. Herrer died 20
December. A letter from Sun Life was received 21 December stating policy was
issued and reminds the party of a notification of acceptance of the application
dated 26 November.
Plaintiff testified that he had found no letter of notification from the Sun Life.
Lower Court decides in favor of respondent. Appeal was taken.
Issue: Whether or not the there has been a valid offer and acceptance.
Held: None. The Civil Code provides that the acceptance made by letter binds
the person making the offer only from the date it has came to its knowledge.
The contract of life annuity was not perfected. There was no satisfactory
evidence that the application acceptance came to the knowledge of Herrer.
Article 16 of the civil code provides that any deficiency in the special law shall
be supplied by the Code. The Insurance Code does not provide for law on the
principle of acceptance, thus the Civil Code shall govern.
Article 1262 provides that consent is shown by concurrence of offer and
acceptance with the thing and the consideration to the contract. The
acceptance by letter shall not bind the person making the offer except from the
time It came to his knowledge.
American Courts held that acceptance of offer not actually communicated does
not complete the contract but the mailing of the acceptance. Locus Poenitrntiae
is ended when acceptance has passed beyond party’s control.
Furthermore, the provisional receipt provides for conditions before a contract is
deemed final. 1. Medical examination. 2. Approval by head office of the
application. 3. the company communicates approval to the applicant.
In the case, there was no letter of notification. No evidence of knowledge.
Judgment reversed. Php6000 with interest is to be returned.

Enriquez vs. Sun Life Assurance Company of Canada [GR 15895, 29
November 1920]
Facts:
On 24 September 1917, Joaquin Herrer made application to the Sun Life Assurance
Company of Canada through its office in Manila for a life annuity. Two days later he paid
the sum of P6,000 to the manager of the company's Manila office and was given a
receipt. The application was immediately forwarded to the head office of the company
at Montreal, Canada. On 26 November 1917, the head office gave notice of acceptance
by cable to Manila. (Whether on the same day the cable was received notice was sent
by the Manila office to Herrer that the application had been accepted, is a disputed
point.) On 4 December 1917, the policy was issued at Montreal. On 18 December 1917,
attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer
desired to withdraw his application. The following day the local office replied to Mr.
Torres, stating that the policy had been issued, and called attention to the notification
of 26 November 1917. This letter was received by Mr. Torres on the morning of 21
December 1917. Mr. Herrer died on 20 December 1917. An action was brought by
Rafael Enriquez as administrator of the estate of the late Joaquin Ma. Herrer to recover
from Sun Life Assurance Company of Canada the sum of P6,000 paid by the deceased
for a life annuity. The trial court gave judgment for Sun Life. Enriquez appealed.
Issue: Whether Herrer received notice of acceptance of his application, to hold that the
contract for a life annuity was perfected.
Held: NO. The letter of 26 November 1917, notifying Mr. Ferrer that his application had
been accepted, was prepared and signed in the local office of the insurance company,
was placed in the ordinary channels for transmission, but was never actually mailed
and thus was never received by the applicant. The Civil Code rule, that an acceptance
made by letter shall bind the person making the offer only from the date it came to his
knowledge, may not be the best expression of modern commercial usage. Still it must
be admitted that its enforcement avoids uncertainty and tends to security. Not only
this, but in order that the principle may not be taken too lightly, it is identical with the
principles announced by a considerable number of respectable, courts in the United
States. The courts who take this view have expressly held that an acceptance of an
offer of insurance not actually or constructively communicated to the proposer does not
make a contract. Only the mailing of acceptance, it has been said, completes the
contract of insurance, as the locus poienitentise is ended when the acceptance has
passed beyond the control of the party. In resume, therefore, the law applicable to the
case is found to be the second paragraph of article 1262 of the Civil Code providing
that an acceptance made by letter shall not bind the person making the offer except
from the time it came to his knowledge. The pertinent fact is, that according to the
provisional receipt, three things had to be accomplished by the insurance company
before there was a contract: (1) There had to be a medical examination of the
applicant; (2) there had to be approval of the application by the head office of the
company; and (3) this approval had in some way to be communicated by the company
to the applicant. The further admitted facts are that the head office in Montreal did
accept the application, did cable the Manila office to that effect, did actually issue the
policy and did, through its agent in Manila, actually write the letter of notification and

place it in the usual channels for transmission to the addressee. The fact as to the
letter of notification thus fails to concur with the essential elements of the general rule
pertaining to the mailing and delivery of mail matter as announced by the American
courts, namely, when a letter or other mail matter is addressed and mailed with
postage prepaid there is a rebuttable presumption of fact that it was received by the
addressee as soon as it could have been transmitted to him in the ordinary course of
the mails. But if any one of these elemental facts fails to appear, it is fatal to the
presumption. For instance, a letter will not be presumed to have been received by the
addressee unless it is shown that it was deposited in the post-office, properly addressed
and stamped. The contract for a life annuity in the case at bar was not perfected
because it has not been proved satisfactorily that the acceptance of the application
ever came to the knowledge of the applicant.

Development Bank of the Philippines vs. Court of Appeals [GR 109937,
21 March 1994]
Facts:
In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law,
applied for a loan of P500,000.00 with the Development Bank of the Philippines (DBP),
Basilan Branch. As the principal mortgagor, Dans, then 76 years of age, was advised by
DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage
Redemption Insurance Pool (DBP MRI Pool). A loan, in the reduced amount of
P300,000.00, was approved by DBP on 4 August 1987 and released on 11 August 1987.
From the proceeds of the loan, DBP deducted the amount of P1,476.00 as payment for
the MRI premium. On 15 August 1987, Dans accomplished and submitted the "MRI
Application for Insurance" and the "Health Statement for DBP MRI Pool." On 20 August
1987, the MRI premium of Dans, less the DBP service fee of 10%, was credited by DBP
to the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised
of the credit. On 3 September 1987, Dans died of cardiac arrest. The DBP, upon notice,
relayed this information to the DBP MRI Pool. On 23 September 1987, the DBP MRI Pool
notified DBP that Dans was not eligible for MRI coverage, being over the acceptance
age limit of 60 years at the time of application. On 21 October 1987, DBP apprised
Candida Dans of the disapproval of her late husband's MRI application. The DBP offered
to refund the premium of P1,476.00 which the deceased had paid, but Candida Dans
refused to accept the same, demanding payment of the face value of the MRI or an
amount equivalent to the loan. She, likewise, refused to accept an ex gratia settlement
of P30,000.00, which the DBP later offered. On 10 February 1989, the Estate of the Late
Juan B. Dans, through Candida Dans as administratrix, filed a complaint with the
Regional Trial Court, Branch I, Basilan, against DBP and the insurance pool for collection
of Sum of Money with Damages. On 10 March 1990, the trial court rendered a decision
in favor of the Estate and against DBP. The DBP MRI Pool, however, was absolved from
liability, after the trial court found no privity of contract between it and the deceased.
The trial court declared DBP in estoppel for having led Dans into applying for MRI and
actually collecting the premium and the service fee, despite knowledge of his age
ineligibility. The court ordered DBP to return and reimburse the Estate the amount of
P139,500.00 plus legal rate of interest as amortization payment paid under protest; to
consider the mortgage loan of P300,000.00 including all interest accumulated or
otherwise to have been settled, satisfied or set-off by virtue of the insurance coverage
of the late Juan B. Dans; to pay the Estate the amount of P10,000.00 as attorney's fees;
to pay the Estate the amount of P10,000.00 as costs of litigation and other expenses,
and other relief just and equitable. The DBP appealed to the Court of Appeals. In a
decision dated 7 September 1992, the appellate court affirmed in toto the decision of
the trial court. The DBP's motion for reconsideration was denied in a resolution dated
20 April 1993. DBP filed the petition for review on certiorari.
Issue [1]: Whether there was a perfected contract of insurance for DBP MRI Pool to be
held liable.
Held [1]: NO. When Dans applied for MRI, he filled up and personally signed a "Health
Statement for DBP Pool" with the following declaration: "I hereby declare and agree
that all the statements and answers contained herein are true, complete and correct to

the best of my knowledge and belief and form part of my application for insurance. It is
understood and agreed that no insurance coverage shall be effected unless and until
this application is approved and the full premium is paid during my continued good
health." Under the aforementioned provisions, the MRI coverage shall take effect: (1)
when the application shall be approved by the insurance pool; and (2) when the full
premium is paid during the continued good health of the applicant. These two
conditions, being joined conjunctively, must concur. Undisputably, the power to
approve MRI applications is lodged with the DBP MRI Pool. The pool, however, did not
approve the application of Dans. There is also no showing that it accepted the sum of
P1,476.00, which DBP credited to its account with full knowledge that it was payment
for Dan's premium. There was, as a result, no perfected contract of insurance; hence,
the DBP MRI Pool cannot be held liable on a contract that does not exist.
Issue [2]: Whether DBP is liable for the entire value of the insurance policy, as it led
Dans to believe that he has fulfilled all the requirements for the MRI and that the
issuance of his policy was forthcoming.
Held [2]: It was DBP, as a matter of policy and practice, that required Dans, the
borrower, to secure MRI coverage. Instead of allowing Dans to look for his own
insurance carrier or some other form of insurance policy, DBP compelled him to apply
with the DBP MRI Pool for MRI coverage. When Dan's loan was released on 11 August
1987, DBP already deducted from the proceeds thereof the MRI premium. Four days
latter, DBP made Dans fill up and sign his application for MRI, as well as his health
statement. The DBP later submitted both the application form and health statement to
the DBP MRI Pool at the DBP Main Building, Makati Metro Manila. As service fee, DBP
deducted 10% of the premium collected by it from Dans. In dealing with Dans, DBP was
wearing two legal hats: the first as a lender, and the second as an insurance agent. As
an insurance agent, DBP made Dans go through the motion of applying for said
insurance, thereby leading him and his family to believe that they had already fulfilled
all the requirements for the MRI and that the issuance of their policy was forthcoming.
Apparently, DBP had full knowledge that Dan's application was never going to be
approved. The maximum age for MRI acceptance is 60 years as clearly and specifically
provided in Article 1 of the Group Mortgage Redemption Insurance Policy signed in
1984 by all the insurance companies concerned. The DBP is not authorized to accept
applications for MRI when its clients are more than 60 years of age. Knowing all the
while that Dans was ineligible for MRI coverage because of his advanced age, DBP
exceeded the scope of its authority when it accepted Dan's application for MRI by
collecting the insurance premium, and deducting its agent's commission and service
fee. The liability of an agent who exceeds the scope of his authority depends upon
whether the third person is aware of the limits of the agent's powers. There is no
showing that Dans knew of the limitation on DBP's authority to solicit applications for
MRI. If the third person dealing with an agent is unaware of the limits of the authority
conferred by the principal on the agent and he (third person) has been deceived by the
non-disclosure thereof by the agent, then the latter is liable for damages to him. The
DBP's liability, however, cannot be for the entire value of the insurance policy. To
assume that were it not for DBP's concealment of the limits of its authority, Dans would
have secured an MRI from another insurance company, and therefore would have been

fully insured by the time he died, is highly speculative. Considering his advanced age,
there is no absolute certainty that Dans could obtain an insurance coverage from
another company. It must also be noted that Dans died almost immediately, i.e., on the
nineteenth day after applying for the MRI, and on the twenty-third day from the date of
release of his loan.

CIR vs Lincoln Philippine Life Insurance Company, Inc. & CA
(now JARDINE-CMA LIFE INSURANCE COMPANY, INC.)
[G.R. No. 119176. March 19, 2002]
379 SCRA 423 – Mercantile Law – Insurance Law – The Policy – Automatic Increase in the Coverage –
Documentary Stamp Tax
Prior to 1984, Lincoln Philippine Life Insurance Company, Inc. (now called Jardine-CMA Life Insurance Company,
Inc.) used to issue policies called “Junior Estate Builder Policy”. A clause therein provides for an automatic increase
in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing
a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due on the policy were paid
by Lincoln Philippine only on the initial sum assured.
When the clause became effective in 1984, the Commissioner of Internal Revenue assessed an additional tax on
the increased amount of the coverage of the said policies. Said tax was to cover the deficiency documentary
stamps tax for said year. The Court of Appeals ruled that there is only one policy and the automatic increase is not a
separate policy; that said increase of coverage is not covered by another documentary stamp tax.
ISSUE: Whether or not there is only one policy.
HELD: Yes. Section 49, Title VI of the Insurance Code defines an insurance policy as the written instrument in
which a contract of insurance is set forth. Section 50 of the same Code provides that the policy, which is required to
be in printed form, may contain any word, phrase, clause, mark, sign, symbol, signature, number, or word
necessary to complete the contract of insurance. It is thus clear that any rider, clause, warranty or endorsement
pasted or attached to the policy is considered part of such policy or contract of insurance.
The subject insurance policy at the time it was issued contained an “automatic increase clause.” Although the
clause was to take effect only in 1984, it was written into the policy at the time of its issuance. The distinctive feature
of the “junior estate builder policy” called the “automatic increase clause” already formed part and parcel of the
insurance contract, hence, there was no need for an execution of a separate agreement for the increase in the
coverage that took effect in 1984 when the assured reached a certain age.
The said increase however is imposable with documentary stamp taxes. The original documentary stamps tax paid
by Lincoln Philippine covers the original amount of the policies without the projected increase. The said increase
was already definite at the time of the issuance of the policy. Thus, the amount insured by the policy at the time of
its issuance necessarily included the additional sum covered by the automatic increase clause because it was
already determinable at the time the transaction was entered into and formed part of the policy.
While tax avoidance schemes and arrangements are not prohibited, tax laws cannot be circumvented in order to
evade the payment of just taxes. In the case at bar, to claim that the increase in the amount insured (by virtue of the
automatic increase clause incorporated into the policy at the time of issuance) should not be included in the
computation of the documentary stamp taxes due on the policy would be a clear evasion of the law requiring that
the tax be computed on the basis of the amount insured by the policy.

Violeta R. Lalican v. Insular Life Assurance Co. Ltd.
Facts:
Eulogio Lalican applied for an insurance policy with the Insular
Life amounting to Php 1,500,000.Under the terms of the policy, Eulogio was to
pay the premiums on a quarterly basis, having a grace period of 31 days, for the
payment of each premium subsequent to the first. If any premium was not paid
on or before the due date, the policy would be in default and if the premium
remained unpaid until the end of the grace period, the policy would
automatically lapse and become void. Eulogio paid the premiums due on the
first two succeeding payment dates but failed to pay subsequent premiums
even after the lapse of the grace period thereby rendering the policy void. He
submitted an application for reinstatement of policy through Josephine
Malaluan, an agent of Insular Life, together with the payment of the unpaid
premiums. However, the Insular Life notified him that his application could not
be processed because he failed to pay the overdue interest of the unpaid
premiums. On Sept. 17, 1998, Eulogio submitted to Malaluans house a second
application for reinstatement including the payment for the overdue interest as
well as for the premiums due for April and July of that year, which was received
by Malaluans husband on her behalf and was thereby issued a receipt for the
amount Eulogio deposited. However, on that same day, Eulogio died of cardiorespiratory arrest secondary to electrocution. Violeta, Eulogio’s widow filed with
the Insular Life a claim for payment of the full proceeds of the policy but the
latter informed her that the claim could not be granted since at the time of
Eulogio’s death, his policy has already lapsed and he failed to reinstate the
same. Violeta requested are consideration of her claim but the same was also
rejected. Therefore, she filed a complaint for death claim benefits with the RTC
alleging the unfair claim settlement practice of Insular Life and its deliberate
failure to act with reasonable promptness on her insurance claim. The trial court
rendered a decision in favour of Insular Life and after the former denied her
motion for reconsideration, she directly elevated her case to the Supreme Court
via the petition for review on Certiorari.
Issue:
Whether or not the policy of Eulogio was reinstated before his death.
Ruling:
To reinstate a policy means to restore the same to premium-paying
status after it has been permitted to lapse. Both the policy contract and
application for reinstatement provide for specific conditions for the
reinstatement of a lapsed policy. According to the Application for Reinstatement,
the policy would only be considered reinstated upon the approval of the
application by Insular Life during the applicant’s lifetime and good health and
whatever amount the application paid in connection was considered to be a
deposit only until approval of said application. Eulogios death rendered
impossible full compliance with the conditions for reinstatement of policy even
though, before his death, he managed to file his application for reinstatement
and deposit the amount for payment of his overdue premiums and interest

thereon with Malaluan. As expressly provided on the policy contract, agents of
Insular Life have no authority to approve any application for reinstatement. They
still had to turn over to Insular Life the application for reinstatement and
accompanying deposit, for processing and approval of the latter.

Lalican v. Insular Life Assurance Company Limited (2009)
Summary: Eulogio applied for an insurance policy with Insular Life through its
agent Josephine Malaluan who issued him a 20-Year Endowment Variable Income
Package Flexi Plan worth P500,000 with 2 riders at P500,000 each with Violeta
as the primary beneficiary. However, he failed to pay and allowed the policy to
be void after the lapse of the 31-day grace period. Just when he was to pay the
default amount with interest, he died before Malaluan was able to submit his
application for reinstatement to Insular life for approval. Violeta filed a case
with the RTC and was not able to appeal due to the negligence of her lawyer so
he filed a petition for Certiorari. RTC, SC: denied.
The cardinal principle in Insurance Law is that a policy or contract of insurance
is to be construed liberally in favor of the insured and strictly as against the insurance
company, yet, contracts of insurance, like other contracts, are to be construed
according to the sense and meaning of the terms, which the parties themselves have
used. (Lalican vs. Insular Life Assurance Company, Ltd. 597 SCRA 159, 2009)
The existence of an insurance interest gives a person the legal right to insure the
subject matter of the policy of insurance. Section 19 of the Insurance Code states that
an interest in the life or health of a person insured must exist when the insurance takes
effect, but need not exist thereafter or when the loss occurs. (Lalican vs. Insular Life
Assurance Company Ltd, 597 SCRA 159, 2009)
Insurance; insurable interest. Insurable interest is one of the most basic and essential
requirements in an insurance contract. In general, an insurable interest is that interest
which a person is deemed to have in the subject matter insured, where he has a relation or
connection with or concern in it, such that the person will derive pecuniary benefit or
advantage from the preservation of the subject matter insured and will suffer pecuniary loss
or damage from its destruction, termination, or injury by the happening of the event insured
against. The existence of an insurable interest gives a person the legal right to insure the
subject matter of the policy of insurance. Section 10 of the Insurance Code indeed provides
that every person has an insurable interest in his own life. Section 19 of the same code also
states that an interest in the life or health of a person insured must exist when the
insurance takes effect, but need not exist thereafter or when the loss occurs.
Insurance; reinstatement. To reinstate a policy means to restore the same to premium-paying status after it
has been permitted to lapse. Both the Policy Contract and the Application for Reinstatement provide for
specific conditions for the reinstatement of a lapsed policy. In the instant case, Eulogio’s death rendered
impossible full compliance with the conditions for reinstatement of Policy No. 9011992. True, Eulogio,
before his death, managed to file his Application for Reinstatement and deposit the amount for payment of
his overdue premiums and interests thereon with Malaluan; but Policy No. 9011992 could only be
considered reinstated after the Application for Reinstatement had been processed and approved by Insular
Life during Eulogio’s lifetime and good health.

Eulogio’s death, just hours after filing his Application for Reinstatement and depositing his payment for
overdue premiums and interests with Malaluan, does not constitute a special circumstance that can
persuade this Court to already consider Policy No. 9011992 reinstated. Said circumstance cannot override
the clear and express provisions of the Policy Contract and Application for Reinstatement, and operate to
remove the prerogative of Insular Life thereunder to approve or disapprove the Application for
Reinstatement. Even though the Court commiserates with Violeta, as the tragic and fateful turn of events
leaves her practically empty-handed, the Court cannot arbitrarily burden Insular Life with the payment of
proceeds on a lapsed insurance policy. Justice and fairness must equally apply to all parties to a case.
Courts are not permitted to make contracts for the parties. The function and duty of the courts consist
simply in enforcing and carrying out the contracts actually made. Violeta R. Lalican vs. The Insular Life
Assurance Company Limited, as represented by the President Vicente R. Avilon, G.R. No. 183526, August
25, 2009.

Pineda v Insular G.R. No. 105562 September 27, 1993
Facts:
PMSI obtained a group insurance policy for its sailors. 6 of the sailors, during the
effectivity of the policy, perished while the ship sank in Morocco. The families of the
victims then wanted to claim the benefits of the insurance. Hence, under the advice of
Nuval, the president of PMSI, they executed a special power of attorney authorizing
Capt. Nuval to, "follow up, ask, demand, collect and receive" for their benefit the
indemnities.
Insular drew against its account 6 checks, four for P200,00.00 each, one for P50,000.00
and another for P40,00.00, payable to the order the families. The checks were given to
PMSI. Nuval, the PMSI president, pocketed the amounts in his bank account.
When the families went to insular to get the benefits, their request was denied because
Insular claimed that the checks were already given to PMSI.
The families filed a petition with the Insurance Commission. They won and Insular was
ordered to pay them 500 a day until the amount was furnished to them. The insurance
Commission held that the special powers of attorney executed by complainants do not
contain in unequivocal and clear terms authority to Nuval to obtain and receive from
respondent company insurance proceeds arising from the death of the seaman-insured;
also, that Insular Life did not convincingly refuted the claim of Mrs. Alarcon that neither
she nor her husband executed a special power of authority in favor of Capt. Nuval and
that it did not observe Sec 180(3), when it released the benefits due to the minor
children of Ayo and Lontok, when the said complainants did notpost a bond as requiredInsular Life appealed to the CA. CA modified the decision of the Insurance Commission,
eliminating the award to the minor children.
Hence, this petition by the beneficiary families.
Issues:
1. WON Insular Life should still be liable to the complainants when they relied on the
special powers of attorney, which Capt. Nuval presented as documents, when they
released the checks to the latter.
2. WON Insular Life should be liable to the complainants when they released the check
in favor of Ayo and Lontok, even if no bond was posted as required.
Held: Yes to both. Petition granted.
Ratio:
1. The special powers of attorney "do not contain in unequivocal and clear terms
authority to Capt. Nuval to obtain, receive, receipt from respondent company insurance
proceeds arising from the death of the seaman-insured.
Insular Life knew that a power of attorney in favor of Capt. Nuval for the collection and
receipt of such proceeds was a deviation from its practice with respect to group
policies.
They gave the proceeds to the policyholder instead of the beneficiaries themselves.
Even the Isnular rep admitted that he gave the checks to the policyholder.
Insular Life recognized Capt. Nuval as the attorney-in-fact of the petitioners. However, it
acted imprudently and negligently in the premises by relying without question on the
special power of attorney.

Strong vs. Repide- third persons deal with agents at their peril and are bound to inquire
as to the extent of the power of the agent with whom they contract.
Harry E. Keller Electric Co. vs. Rodriguez- The person dealing with an agent must also
act with ordinary prudence and reasonable diligence. Obviously, if he knows or has
good reason to believe that the agent is exceeding his authority, he cannot claim
protection… the party dealing with him may not shut his eyes to the real state of the
case, but should either refuse to deal with the agent at all, or should ascertain from the
principal the true condition of affairs.
Insular delivered the checks to a party not the agent of the beneficiaries.
2. Art. 225. The father and the mother shall jointly exercise legal guardianship over the
property of their unemancipated common child without the necessity of a court
appointment. In case of disagreement, the father's decision shall prevail, unless there is
judicial order to the contrary.
Where the market value of the property or the annual income of the child exceeds
P50,000, the parent concerned shall be required to furnish a bond in such amount as
the court may determine, but not less than ten per centum (10%) of the value of the
property or annual income, to guarantee the performance of the obligations prescribed
for general guardians.
“If the market value of the property or the annual income of the child exceeds
P50,000.00, a bond has to be posted by the parents concerned to guarantee the
performance of the obligations of a general guardian.”
On group insurance :
Group insurance is essentially a single insurance contract that provides coverage for
many individuals, particularly for the employees of one employer.
There is a master agreement issued to an employer. The employer acts as the collector
of the dues and premiums. Disbursement of insurance payments by the employer is
also one of his duties.
They require an employee to pay a portion of the premium, which the employer
deducts from wages while the remainder is paid by the employer. This is known as a
contributory plan as compared to a non-contributory plan where the premiums are
solely paid by the employer.
Although the employer may be the policyholder, the insurance is actually for the
benefit of the employee. In a non-contributory plan, the payment by the employer of
the entire premium is a part of the total compensation paid for the services of the
employee.
The primary aim of group insurance is to provide the employer with a means of
procuring insurance protection for his employees at a low cost and thereby retain their
loyalty and efficiency.

The Insular Life Assurance Company Ltd. vs. Ebrado [GR L-44059, 28
October 1977] First Division, Martin (J): 5 concur
Facts: On 1 September 1968, Buenaventura Cristor Ebrado was issued by the
Insular Life Assurance Co., Ltd., Policy 009929 on a whole-life plan for P5,882.00
with a rider for Accidental Death Benefits for the same amount. Buenaventura
C. Ebrado designated Carponia T. Ebrado as the revocable beneficiary in his
policy. He referred to her as his wife. On 21 October 1969, Buenventura C.
Ebrado died as a result of an accident when he was hit by a falling branch of a
tree. As the insurance policy was in force, Insular Life stands liable to pay the
coverage of the policy in an amount of P11,745.73, representing the face value
of the policy in the amount of P5,882.00 plus the additional benefits for
accidental death also in the amount of P5,882.00 and the refund of P18.00 paid
for the premium due November, 1969, minus the unpaid premiums and interest
thereon due for January and February, 1969, in the sum of P36.27. Carponia T.
Ebrado filed with the insurer a claim for the proceeds of the policy as the
designated beneficiary therein, although she admits that she and the insured
Buenaventura C. Ebrado were merely living as husband and wife without the
benefit of marriage. Pascuala Vda. de Ebrado also filed her claim as the widow
of the deceased insured. She asserts that she is the one entitled to the
insurance proceeds, not the common-law wife, Carponia T. Ebrado. In doubt as
to whom the insurance proceeds shall be paid, the insurer commenced an
action for Interpleader before the Court of First Instance of Rizal on 29 April
1970. On 25 September 1972, the trial court rendered judgment declaring,
among others, Carponia T. Ebrado disqualified from becoming beneficiary of the
insured Buenaventura Cristor Ebrado and directing the payment of the
insurance proceeds to the estate of the deceased insured. From this judgment,
Carponia T. Ebrado appealed to the Court of Appeals, but on 11 July 1976, the
Appellate Court certified the case to the Supreme Court as involving only
questions of law.
Issue [1]: Whether a common-law wife named as beneficiary in the life
insurance policy of a legally married man can claim the proceeds thereof in case
of death of the latter.
Held[1]: NO. It is quite unfortunate that the Insurance Act (RA 2327, as
amended) or even the new Insurance Code (PD 612, as amended) does not
contain any specific provision grossly resolutory of the prime question at hand.
Section 50 of the Insurance Act which provides that "(t)he insurance shall be
applied exclusively to the proper interest of the person in whose name it is
made" cannot be validly seized upon to hold that the same includes the
beneficiary. The word "interest" highly suggests that the provision refers only to
the insured and not to the beneficiary, since a contract of insurance is personal
in character. Otherwise, the prohibitory laws against illicit relationships
especially on property and descent will be rendered nugatory, as the same
could easily be circumvented by modes of insurance. Rather, the general rules

of civil law should be applied to resolve this void in the Insurance Law. Article
2011 of the New Civil Code states: "The contract of insurance is governed by
special laws. Matters not expressly provided for in such special laws shall be
regulated by this Code." When not otherwise specifically provided for by the
Insurance Law, the contract of life insurance is governed by the general rules of
the civil law regulating contracts. And under Article 2012 of the same Code,
"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 a donation to him."
Common-law spouses are, definitely, barred from
receiving donations from each other. Article 739 of the new Civil Code provides
that "the following donations shall be void: (1) Those made between persons
who were guilty of adultery or concubinage at the time of donation; (2) Those
made between persons found guilty of the same criminal offense, in
consideration thereof; (3) Those made to a public officer or his wife,
descendants or ascendants by reason of his office. In the case referred to in No.
1, the action for declaration of nullity may be brought by the spouse of the
donor or donee; and the guilt of the donee may be proved by preponderance of
evidence in the same action." In essence, a life insurance policy is no different
from a civil donation insofar as the beneficiary is concerned. Both are founded
upon the same consideration: liberality. A beneficiary is like a donee, because
from the premiums of the policy which the insured pays out of liberality, the
beneficiary will receive the proceeds or profits of said insurance. As a
consequence, the proscription in Article 739 of the new Civil Code should
equally operate in life insurance contracts. The mandate of Article 2012 cannot
be laid aside: any person who cannot receive a donation cannot be named as
beneficiary in the life insurance policy of the person who cannot make the
donation. Under American law, a policy of life insurance is considered as a
testament and in construing it, the courts will, so far as possible treat it as a will
and determine the effect of a clause designating the beneficiary by rules under
which wills are interpreted. Policy considerations and dictates of morality rightly
justify the institution of a barrier between common-law spouses in regard to
property relations since such relationship ultimately encroaches upon the
nuptial and filial rights of the legitimate family. There is every reason to hold
that the bar in donations between legitimate spouses and those between
illegitimate ones should be enforced in life insurance policies since the same are
based on similar consideration. As pointed out, a beneficiary in a life insurance
policy is no different from a donee. Both the recipients of pure beneficence. So
long as marriage remains the threshold of family laws, reason and morality
dictate that the impediments imposed upon married couple should likewise be
imposed upon extra-marital relationship. If legitimate relationship is
circumscribed by these legal disabilities, with more reason should an illicit
relationship be restricted by these disabilities.

Issue [2]: Whether a conviction for adultery or concubinage is exacted before
the disabilities mentioned in Article 739 may effectuate.
Held [2]: NO. A conviction for adultery or concubinage is not exacted before
the disabilities mentioned in Article 739 may effectuate. More specifically, with
regard to the disability on "persons who were guilty of adultery or concubinage
at the time of the donation," Article 739 itself provides that "In the case referred
to in No. 1, the action for declaration of nullity may be brought by the spouse of
the donor or donee; and the guilt of the donee may be proved by
preponderance of evidence in the same action." The underscored clause neatly
conveys that no criminal conviction for the disqualifying offense is a condition
precedent. In fact, it cannot even be gleaned from the aforequoted provision
that a criminal prosecution is needed. On the contrary, the law plainly states
that the guilt of the party may be proved "in the same action" for declaration of
nullity of donation. And, it would be sufficient if evidence preponderates upon
the guilt of the consort for the offense indicated. The quantum of proof in
criminal cases is not demanded. Herein, the requisite proof of common- law
relationship between the insured and the beneficiary has been conveniently
supplied by the stipulations between the parties in the pre-trial conference of
the case. It was agreed upon and stipulated therein that the deceased insured
Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she has six
legitimate children; that during his lifetime, the deceased insured was living
with his common-law wife, Carponia Ebrado, with whom he has two children.
These stipulations are nothing less than judicial admissions which, as a
consequence, no longer require proof and cannot be contradicted. A fortiori, on
the basis of these admissions, a judgment may be validly rendered without
going through the rigors of a trial for the sole purpose of proving the illicit liaison
between the insured and the beneficiary.

Filipino Merchants Insurance Co. Inc. vs. Court of Appeals [GR 85141,
28 November 1989]
Facts: In December 1976, Choa Tiek Seng insured said shipment with Filipino
Merchants Insurance Company (FMICI) under cargo Policy M-2678 for the sum of
P267,653.59 for the goods described as 600 metric tons of fishmeal in new
gunny bags of 90 kilos each from Bangkok, Thailand to Manila against all risks
under warehouse to warehouse terms. Actually, what was imported was 59.940
metric tons not 600 tons at $395.42 a ton CNF Manila. The fishmeal in 666 new
gunny bags were unloaded from the ship on 11 December 1976 at Manila unto
the arrastre contractor E. Razon, Inc. and FMICI's surveyor ascertained and
certified that in such discharge 105 bags were in bad order condition as jointly
surveyed by the ship's agent and the arrastre contractor. The condition of the
bad order was reflected in the turn over survey report of Bad Order cargoes
120320 to 120322, consisting of 3 pages. The cargo was also surveyed by the
arrastre contractor before delivery of the cargo to the consignee and the
condition of the cargo on such delivery was reflected in E. Razon's Bad Order
Certificates 14859, 14863 and 14869 covering a total of 227 bags in bad order
condition. FMICI's surveyor has conducted a final and detailed survey of the
cargo in the warehouse for which he prepared a survey report with the findings
on the extent of shortage or loss on the bad order bags totalling 227 bags
amounting to 12,148 kilos. Based on said computation, Choa made a formal
claim against FMICI for P51,568.62 the computation of which claim is contained
therein. A formal claim statement was also presented by the Choa against the
vessel dated 21 December 1976, but FMICI refused to pay the claim.
Consequently, an action was brought by the consignee (Choa Tiek Seng) of the
shipment of fishmeal loaded on board the vessel SS Bougainville and unloaded
at the Port of Manila on or about 11 December 1976 and seeks to recover from
FMICI the amount of P51,568.62 representing damages to said shipment which
has been insured by FMICI under Policy M-2678. FMICI brought a third party
complaint against third party defendants Compagnie Maritime Des Chargeurs
Reunis and/or E. Razon, Inc. seeking judgment against the third party
defendants in case judgment is rendered against FMICI. The court below, after
trial on the merits, rendered judgment in favor of Choa, ordering FMICI to pay
Choa the sum of P51,568.62 with interest at legal rate from the date of the filing
of the complaint; and, on the third party complaint, the third party defendant
Compagnie Maritime Des Chargeurs Reunis and third party defendant E. Razon,
Inc. are ordered to pay FMICI jointly and severally reimbursement of the
amounts paid by FMICI with legal interest from the date of such payment until
the date of such reimbursement; without pronouncement as to costs. On appeal,
and on 18 July 1988, the Court of Appeals affirmed the decision of the lower
court insofar as the award on the complaint is concerned and modified the same
with regard to the adjudication of the third-party complaint. A motion for

reconsideration of the aforesaid decision was denied, hence FMICI filed the
petition for review.
Issue [1]: Whether an "all risks" marine policy has a technical meaning in
insurance in that before a claim can be compensable it is essential that there
must be "some fortuity," "casualty" or "accidental cause" to which the alleged
loss is attributable.
Held [1]: NO. The "all risks clause" of the Institute Cargo Clauses read as
follows "5. This insurance is against all risks of logs or damage to the subjectmatter insured but shall in no case be deemed to extend to cover loss, damage,
or expense proximately caused by delay or inherent vice or nature of the
subject-matter insured. Claims recoverable hereunder shall be payable
irrespective of percentage." An "all risks policy" should be read literally as
meaning all risks whatsoever and covering all losses by an accidental cause of
any kind. The terms "accident" and "accidental", as used in insurance contracts,
have not acquired any technical meaning. They are construed by the courts in
their ordinary and common acceptance. Thus, the terms have been taken to
mean that which happens by chance or fortuitously, without intention and
design, and which is unexpected, unusual and unforeseen. An accident is an
event that takes place without one's foresight or expectation; an event that
proceeds from an unknown cause, or is an unusual effect of a known cause and,
therefore, not expected. The very nature of the term "all risks" must be given a
broad and comprehensive meaning as covering any loss other than a wilful and
fraudulent act of the insured. This is pursuant to the very purpose of an "all
risks" insurance to give protection to the insured in those cases where
difficulties of logical explanation or some mystery surround the loss or damage
to property. An "all risks" policy has been evolved to grant greater protection
than that afforded by the "perils clause," in order to assure that no loss can
happen through the incidence of a cause neither insured against nor creating
liability in the ship; it is written against all losses, that is, attributable to external
causes. The term "all risks" cannot be given a strained technical meaning, the
language of the clause under the Institute Cargo Clauses being unequivocal and
clear, to the effect that it extends to all damages/losses suffered by the insured
cargo except (a) loss or damage or expense proximately caused by delay, and
(b) loss or damage or expense proximately caused by the inherent vice or
nature of the subject matter insured.
Issue [2]: Whether the failure of Choa to adduce evidence, showing that the
alleged loss to the cargo in question was due to a fortuitous event, precludes his
right to recover from the insurance policy.
Held [2]: NO. Although generally, the burden of proof is upon the insured to
show that a loss arose from a covered peril, under an "all risks" policy the
burden is not on the insured to prove the precise cause of loss or damage for

which it seeks compensation. The insured under an "all risks insurance policy"
has the initial burden of proving that the cargo was in good condition when the
policy attached and that the cargo was damaged when unloaded from the
vessel; thereafter, the burden then shifts to the insurer to show the exception to
the coverage. As held in Paris-Manila Perfumery Co. vs. Phoenix Assurance Co.,
Ltd. the basic rule is that the insurance company has the burden of proving that
the loss is caused by the risks excepted and for want of such proof, the
company is liable. Coverage under an "all risks" provision of a marine insurance
policy creates a special type of insurance which extends coverage to risks not
usually contemplated and avoids putting upon the insured the burden of
establishing that the loss was due to the peril falling within the policy's
coverage; the insurer can avoid coverage upon demonstrating that a specific
provision expressly excludes the loss from coverage. A marine insurance policy
providing that the insurance was to be "against all risks" must be construed as
creating a special insurance and extending to other risks than are usually
contemplated, and covers all losses except such as arise from the fraud of the
insured. The burden of the insured, therefore, is to prove merely that the goods
he transported have been lost, destroyed or deteriorated. Thereafter, the
burden is shifted to the insurer to prove that the loss was due to excepted
perils. To impose on the insured the burden of proving the precise cause of the
loss or damage would be inconsistent with the broad protective purpose of "all
risks" insurance.
Issue [3]: Whether the insurer is liable
Held [3]: There being no showing that the loss was caused by any of the
excepted perils, the insurer is liable under the policy. It is believed that in the
absence of any showing that the losses/damages were caused by an excepted
peril, i.e. delay or the inherent vice or nature of the subject matter insured, and
there is no such showing, the loss was covered by the policy. Herein, there is no
evidence presented to show that the condition of the gunny bags in which the
fishmeal was packed was such that they could not hold their contents in the
course of the necessary transit, much less any evidence that the bags of cargo
had burst as the result of the weakness of the bags themselves. Had there been
such a showing that spillage would have been a certainty, there may have been
good reason to plead that there was no risk covered by the policy (See Berk vs.
Style [1956] cited in Marine Insurance Claims, p. 125). Under an “all risks”
policy, it was sufficient to show that there was damage occasioned by some
accidental cause of any kind, and there is no necessity to point to any particular
cause. Contracts of insurance are contracts of indemnity upon the terms and
conditions specified in the policy. The agreement has the force of law between
the parties. The terms of the policy constitute the measure of the insurer's
liability. If such terms are clear and unambiguous, they must be taken and
understood in their plain, ordinary and popular sense.

Issue [4]: Whether the consignee (Choa) has an insurable interest in said
goods.
Held [4]: Choa, as consignee of the goods in transit under an invoice
containing the terms under "C & F Manila," has insurable interest in said goods.
Section 13 of the Insurance Code defines insurable interest in property as every
interest in property, whether real or personal, or any relation thereto, or liability
in respect thereof, of such nature that a contemplated peril might directly
damnify the insured. In principle, anyone has an insurable interest in property
who derives a benefit from its existence or would suffer loss from its destruction
whether he has or has not any title in, or lien upon or possession of the property.
Insurable interest in property may consist in (a) an existing interest; (b) an
inchoate interest founded on an existing interest; or (c) an expectancy, coupled
with an existing interest in that out of which the expectancy arises. As
vendee/consignee of the goods in transit has such existing interest therein as
may be the subject of a valid contract of insurance. His interest over the goods
is based on the perfected contract of sale. The perfected contract of sale
between him and the shipper of the goods operates to vest in him an equitable
title even before delivery or before he performed the conditions of the sale. The
contract of shipment, whether under F.O.B., C.I.F., or C. & F. as in the present
case, is immaterial in the determination of whether the vendee has an insurable
interest or not in the goods in transit. The perfected contract of sale even
without delivery vests in the vendee an equitable title, an existing interest over
the goods sufficient to be the subject of insurance. Further, Article 1523 of the
Civil Code provides that where, in pursuance of a contract of sale, the seller is
authorized or required to send the goods to the buyer, delivery of the goods to a
carrier, whether named by the buyer or not, for, the purpose of transmission to
the buyer is deemed to be a delivery of the goods to the buyer, the exceptions
to said rule not obtaining in the present case. The Court has heretofore ruled
that the delivery of the goods on board the carrying vessels partake of the
nature of actual delivery since, from that time, the foreign buyers assumed the
risks of loss of the goods and paid the insurance premium covering them. C & F
contracts are shipment contracts. The term means that the price fixed includes
in a lump sum the cost of the goods and freight to the named destination. It
simply means that the seller must pay the costs and freight necessary to bring
the goods to the named destination but the risk of loss or damage to the goods
is transferred from the seller to the buyer when the goods pass the ship's rail in
the port of shipment.

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

Harvardian Colleges v. Country Bankers Insurance Corp. 1 CARA 2
Facts:
> Harvardian is a family corporation, the stockholders of which are Ildefonso
Yap, Virginia King Yap and their children.
> Prior to Aug. 9, 1979, an agent of Country Bankers proposed to Harvardian to
insure its school building. Although at first reluctant, Harvardian agreed.
> Country Banks sent an inspector to inspect the school building and agreed to
insure the same for P500,000 for which Harvardian paid an annual premium of
P2,500.
> On Aug. 9, 1979, Country Bankers issued to Harvardian a fire insurance
policy. On March 12, 1980, (39 days before I was born… hehehehe )during the
effectivity of said insurance policy, the insured property was totally burned
rendering it a total loss.
> A claim was made by plaintiff upon defendant but defendant denied it
contending that plaintiff had no insurable interest over the building constructed
on the piece of land in the name of the late Ildefonso Yap as owner.
> It was contended that both the lot and the building were owned by Ildefonso
Yap and NOT by the Harvardian Colleges.
Issue:
Whether or not Harvardian colleges has a right to the proceeds.
Held:
Harvardian has a right to the proceeds.
Regardless of the nature of the title of the insured or even if he did not have title
to the property insured, the contract of fire insurance should still be upheld if his
interest in or his relation to the property is such that he will be benefited in its
continued existence or suffer a direct pecuniary loss from its destruction or
injury. The test in determining insurable interest in property is whether one will
derive pecuniary benefit or advantage from its preservation, or will suffer
pecuniary loss or damage from its destruction, termination or injury by the
happening of the event insured against.
Here Harvardian was not only in possession of the building but was in fact using
the same for several years with the knowledge and consent of Ildefonso Yap. It
is reasonably fair to assume that had the building not been burned, Harvardian
would have been allowed the continued use of the same as the site of its
operation as an educational institution. Harvardian therefore would have been
directly benefited by the preservation of the property, and certainly suffered a
pecuniary loss by its being burned.

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