United Merchants v Country Bankers

Facts:
United Merchants was a manufacturer and retailer of Christmas lights. It insured (fire policy) its
Christmas lights stored in the warehouse with Country Bankers. The warehouse was burned
down hence United sought indemnity from Country. Country rejected the claim on the ground
of Condition 15 of the policy which states that “If the claim be in any respect fraudulent, or if
any false declaration be made or used in support thereof, or if any fraudulent means or devices
are used by the Insured or anyone acting in his behalf to obtain any benefit under this Policy; or
if the loss or damage be occasioned by the willful act, or with the connivance of the Insured, all
the benefits under this Policy shall be forfeited”. CBIC alleged that UMC’s claim was fraudulent
because UMC’s Statement of Inventory showed that it had no stocks in trade as of 31
December 1995, and that UMC’s suspicious purchases for the year 1996 did not even amount
to P25,000,000.00. UMC’s GIS and Financial Reports further revealed that it had insufficient
capital, which meant UMC could not afford the allegedP50,000,000.00 worth of stocks in trade.
United answered back saying that they have a certificate from the Bureau of Fire Protection
which states that : “The Bureau further certifies that no evidence was gathered to prove that
the establishment was willfully, feloniously and intentionally set on fire.”

Issue:
Whether UMC is entitled to claim from CBIC the full coverage of its fire insurance policy.

Held:
 No! If loss is proved apparently within a contract of insurance, the burden is upon the
insurer to establish that the loss arose from a cause of loss which is excepted or for
which it is not liable, or from a cause which limits its liability.
 In the present case, CBIC failed to discharge its primordial burden of establishing that
the damage or loss was caused by arson, a limitation in the policy. Nevertheless just
because the defense failed to prove arson does not mean that fraud does not exist. In
fact, fraud exists in this case.
 The Court ruled that the submission of false invoices to the adjusters establishes a clear
case of fraud and misrepresentation which voids the insurer’s liability as per condition
of the policy.
 A fraudulent discrepancy between the actual loss and that claimed in the proof of loss
voids the insurance policy.
 Mere filing of such a claim will exonerate the insurer. Considering that all the
circumstances point to the inevitable conclusion that UMC padded its claim and was
guilty of fraud, UMC violated Condition No. 15 of the Insurance Policy.
 Thus, UMC forfeited whatever benefits it may be entitled under the Insurance Policy,
including its insurance claim.

Pacific Timber v. CA
112 SCRA 199

Facts:
> On March 13, 1963, Pacific secured temporary insurance from the Workmen’s Insurance Co.
for its exportation of logs to Japan. Workmen issued on said date Cover Note 1010 insuring
said cargo.
> The regular marine policies were issued by the company in favor of Pacific on Apr 2,
1963. The 2 marine policies bore the number 53H01032 and 53H01033.
> After the issuance of the cover note but BEFORE the issuance of the 2 policies, some of the
logs intended to be exported were lost due to a typhoon.
> Pacific filed its claim with the company, but the latter refused, contending that said loss may
not be considered as covered under the cover note because such became null and void by
virtue of the issuance of the marine policies.

Issue:
Whether or not the cover note was without consideration,thus null and void.

Held:
It was with consideration.
SC upheld Pacific’s contention that said cover note was with consideration. The fact that no
separate premium was paid on the cover note before the loss was insured against occurred
does not militate against the validity of Pacific’s contention, for no such premium could have
been paid, since by the nature of the cover note, it did not contain, as all cover notes do not
contain, particulars of the shipment that would serve as basis for the computation of the
premiums. As a logical consequence, no separate premiums are required to be paid on a cover
note.

If the note is to be treated as a separate policy instead of integrating it to the regular policies
subsequently issued, its purpose would be meaningless for it is in a real sense a contract, not a
mere application.

Valenzuela V. CA (1990)

G.R. No. 83122 October 19, 1990

Lessons Applicable: Effect of Non-Payment (Insurance)

FACTS:

Valenzuela, General Agent of Philippine American General Insurance Company, Inc authorized
to sell in behalf of Philamgen solicited marine insurance from Delta Motors, Inc. amounting to
P4.4M entitling him to a 32% commission or P1.6M

1976-1978: premium payments of P1,946,886 were paid directly to Philamgen. Philamgen

wanted a 50% share of Valenzuela's commission but Valenzuela refused.

Because of his refusal, the officers of Philamgen reversed his commission due him, placed
agency transactions on a cash and carry basis thus removing the 60-day credit for premiums
due, threatened to cancel policies issued by his agency and leaked out the news that he has
substantial accounts with Philamgen.

December 27, 1978: His agency with Philamgen was terminated

Valenzuela sought relief from the RTC

RTC: favored Valenzuela with reinstatement, commission with interest, monthly compensatory
damages, moral damages, attorney's fees and cost of suit

CA modified by holding Philamgen and Valenzuela jointly and severally liable for the premium

ISSUE: W/N Valuenuela should be NOT be held liable since non-payment of the premium
renders the policy invalid
HELD: YES. petition is GRANTED. RTC reinstated with modification that upon satisfaction of the
judgment, contractual relationship is terminated

The principal may not defeat the agent's right to indemnification by a termination of the
contract of agency. Where the principal terminates or repudiates the agent's employment in
violation of the contract of employment and without cause ... the agent is entitled to receive
either the amount of net losses caused and gains prevented by the breach, or the reasonable
value of the services rendered. Thus, the agent is entitled to prospective profits which he would
have made except for such wrongful termination provided that such profits are not conjectural,
or speculative but are capable of determination upon some fairly reliable basis.

If a principal violates a contractual or quasi-contractual duty which he owes his agent, the agent
may as a rule bring an appropriate action for the breach of that duty. The agent may in a proper
case maintain an action at law for compensation or damages

question of whether or not the agency agreement is coupled with interest is helpful to the
petitioners' cause but is not the primary and compelling reason

Section 77 of the Insurance Code, the remedy for the non-payment of premiums is to put an
end to and render the insurance policy not binding

unless premium is paid, an insurance contract does not take effect

since admittedly the premiums have not been paid, the policies issued have lapsed

to sue Valenzuela for the unpaid premiums would be the height of injustice and unfair dealing

Under Article 2200 of the new Civil Code, "indemnification for damages shall comprehend not
only the value of the loss suffered, but also that of the profits which the obligee failed to
obtain."

112 SCRA 199 – Mercantile Law – Insurance Law – The Policy – Separate Premiums Not
Required for Cover Notes
In 1963, Pacific Timber Export Corporation (PTEC) applied for a temporary marine insurance
from Workmen’s Insurance Company (WIC) in order for the latter to insure 1,250,000 board
feet of logs to be exported to Japan. In March 1963, WIC issued a cover note to PTEC for the
said logs. On April 2, 1963, WIC issued two policies for the logs. However, the total board feet
covered this time is only 1,195,498. On April 4, 1963, while the logs were in transit to Japan,
bad weather prevailed and this caused the loss of 32 pieces of logs.
WIC then asked an adjuster to investigate the loss. The adjuster submitted that the logs lost
were not covered by the two policies issued on April 2, 1963 but said logs were included in the
cover note earlier issued.
WIC however denied the insurance claim of PTEC as it averred that the cover note became null
and void when the two policies were subsequently issued. The Court of Appeals ruled that the
cover note is void for lack of valuable consideration as it appeared that no premium payment
therefor was made by PTEC.
ISSUE: Whether or not a separate premium is needed for cover notes.
HELD: No. The Cover Note was not without consideration for which the Court of Appeals held
the Cover Note as null and void, and denied recovery therefrom. The fact that no separate
premium was paid on the Cover Note before the loss insured against occurred, does not
militate against the validity of PTEC’s contention, for no such premium could have been paid,
since by the nature of the Cover Note, it did not contain, as all Cover Notes do not contain
particulars of the shipment that would serve as basis for the computation of the premiums. As a
logical consequence, no separate premiums are intended or required to be paid on a Cover
Note.
At any rate, it is not disputed that PTEC paid in full all the premiums as called for by the
statement issued by WIC after the issuance of the two regular marine insurance policies,
thereby leaving no account unpaid by PTEC due on the insurance coverage, which must be
deemed to include the Cover Note. If the Note is to be treated as a separate policy instead of
integrating it to the regular policies subsequently issued, the purpose and function of the Cover
Note would be set at naught or rendered meaningless, for it is in a real sense a contract, not a
mere application for insurance which is a mere offer.

Insurance Case Digest: Rizal Commercial Banking Corporation V. CA (1998)

G.R.Nos. 128833 April 20, 1998

Lessons Applicable: Assignee (Insurance)

FACTS:

RCBC Binondo Branch initially granted a credit facility of P30M to Goyu & Sons, Inc. GOYU’s
applied again and through Binondo Branch key officer's Uy’s and Lao’s recommendation,
RCBC’s executive committee increased its credit facility to P50M to P90M and finally to P117M.
As security, GOYU executed 2 real estate mortgages and 2 chattel mortgages in favor of RCBC.
GOYU obtained in its name 10 insurance policy on the mortgaged properties from Malayan
Insurance Company, Inc. (MICO). In February 1992, he was issued 8 insurance policies in favor
of RCBC.
April 27, 1992: One of GOYU’s factory buildings was burned so he claimed against MICO for the
loss who denied contending that the insurance policies were either attached pursuant to writs
of attachments/garnishments or that creditors are claiming to have a better right
GOYU filed a complaint for specific performance and damages at the RTC
RCBC, one of GOYU’s creditors, also filed with MICO its formal claim over the proceeds of the
insurance policies, but said claims were also denied for the same reasons that MICO denied
GOYU’s claims
RTC: Confirmed GOYU’s other creditors (Urban Bank, Alfredo Sebastian, and Philippine Trust
Company) obtained their writs of attachment covering an aggregate amount of P14,938,080.23
and ordered that 10 insurance policies be deposited with the court minus the said amount so
MICO deposited P50,505,594.60.
Another Garnishment of P8,696,838.75 was handed down
RTC: favored GOYU against MICO for the claim, RCBC for damages and to pay RCBC its loan
CA: Modified by increasing the damages in favor of GOYU
In G.R. No. 128834, RCBC seeks right to intervene in the action between Alfredo C. Sebastian
(the creditor) and GOYU (the debtor), where the subject insurance policies were attached in
favor of Sebastian
RTC and CA: endorsements do not bear the signature of any officer of GOYU concluded that the
endorsements favoring RCBC as defective.

ISSUE: W/N RCBC as mortgagee, has any right over the insurance policies taken by GOYU, the
mortgagor, in case of the occurrence of loss

HELD: YES.
mortgagor and a mortgagee have separate and distinct insurable interests in the same
mortgaged property, such that each one of them may insure the same property for his own sole
benefit
although it appears that GOYU obtained the subject insurance policies naming itself as the sole
payee, the intentions of the parties as shown by their contemporaneous acts, must be given
due consideration in order to better serve the interest of justice and equity
8 endorsement documents were prepared by Alchester in favor of RCBC
MICO, a sister company of RCBC
GOYU continued to enjoy the benefits of the credit facilities extended to it by RCBC.
GOYU is at the very least estopped from assailing their operative effects.
The two courts below erred in failing to see that the promissory notes which they ruled should
be excluded for bearing dates which are after that of the fire, are mere renewals of previous
ones
RCBC has the right to claim the insurance proceeds, in substitution of the property lost in the
fire. Having assigned its rights, GOYU lost its standing as the beneficiary of the said insurance
policies
insurance company to be held liable for unreasonably delaying and withholding payment of
insurance proceeds, the delay must be wanton, oppressive, or malevolent - not shown
Sebastian’s right as attaching creditor must yield to the preferential rights of RCBC over the
Malayan insurance policies as first mortgagee.

Palileo V. Cosio (1955)

G.R. No. L-7667 November 28, 1955

Lessons Applicable: Mortgagor (Insurance)

Laws Applicable:

FACTS:

Cherie Palileo (debtor-mortgagor) filed a complaint against Beatriz Cosio (creditor-mortgagee)

praying that their transaction be one of a loan with an equitable mortgage to secure the
payment of the loan. The original counsel of Cosio Atty. Guerrero being appointed
Undersecretary of Foreign Affairs so she forgot the date of the trial and she was substituted.
it is a loan of P12,000 secured by a "Conditional Sale of Residential Building" with right to
repurchase. After the execution of the contract, Cosio insured in her name the building with
Associated Insurance & Surety Co. against fire.
The building was partly destroyed by fire so she claimed an indemnity of P13,107
Palileo demanded that the amount of insurance proceeds be credited to her loan
RTC: it is a loan with equitable mortgage so the insurance proceeds should be credited to the
loan and refund the overpayment.

ISSUE: W/N Cosio as mortgagee is entitled to the insurance proceeds for her own benefit

HELD: YES. Modify. collection of insurance proceeds shall not be deemed to have
compensated the obligation of the Palileo to Cosio, but bars the Cosio from claiming its
payment from the Palileo; and Cosio shall pay to Palileo P810 representing the overpayment
made by Palileo by way of interest on the loan.
When the the mortgagee may insure his interest in the property independently of the
mortgagor , upon the destruction of the property the insurance money paid to the mortgagee
will not inure to the benefit of the mortgagor, and the amount due under the mortgage debt
remains unchanged. The mortgagee, however, is not allowed to retain his claim against the
mortgagor, but it passes by subrogation to the insurer, to the extent of the insurance money
paid
It is true that there are authorities which hold that "If a mortgagee procures insurance on his
separate interest at his own expense and for his own benefit, without any agreement with the
mortgagor with respect thereto, the mortgagor has no interest in the policy, and is not entitled
to have the insurance proceeds applied in reduction of the mortgage debt" But these
authorities merely represent the minority view.

GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner, vs.

HONORABLE COURT OF APPEALS, respondents. G.R. No. L-31845 April 30, 1979
LAPULAPU D. MONDRAGON, petitioner,
vs.
HON. COURT OF APPEALS and NGO HING, respondents.
G.R. No. L-31878 April 30, 1979 FIRST DIVISION DECISION
J. DE CASTRO

The Case:
The two above-entitled cases were ordered consolidated by the Resolution of SC, because the
petitioners in both cases sought similar relief, through these petitions for certiorari by way of
appeal, from the amended decision of the CA which affirmed in toto the decision of the CFI of
Cebu, ordering Great Pacific Life Assurance Company and Mondragon jointly and severally to
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 P1,077.75, without interest.

Facts:
Ngo Hing filed an application with the Great Pacific Assurance Company (Grepalife) for a
twenty-year endowment policy in the amount of P50,000.00 on the life of his one-year old
daughter Helen Go. Said respondent supplied the essential data which petitioner Lapulapu D.
Mondragon, Branch Manager of the Grepalife 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 private respondent Ngo Hing. The latter paid the annual premuim to the Company,
but he retained a certain amount as his
commission for being a duly authorized agent of Grepalife. Upon the payment of the insurance
premium, the binding deposit receipt was issued to private respondent Ngo Hing. Likewise,
petitioner Mondragon handwrote at the bottom of the back page of the application form his
strong recommendation for the approval of the insurance application.
Then Mondragon received a letter from Grepalife disapproving the insurance application. The
letter stated that the said life insurance application for 20-year endowment plan is not available
for minors below seven years old, but Grepalife can consider the same under the Juvenile Triple
Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be
sent to the company.
The non-acceptance of the insurance plan by Grepalife was allegedly not communicated by
Mondragon to Ngo Hing. Instead, Mondragon wrote back Grepalife again strongly
recommending the approval of the 20-year
Commercial Law; Insurance; Perfection of contract
 Northwestern University, College of Law 2 Digest - Great Pacific Life Assurance Corp. vs.. CA, 89
SCRA 543
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 May 28, 1957 Helen Go died of influenza with
complication of bronchopneumonia. 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 CFI of Cebu, which rendered the adverse decision.

Issues:
(1) whether the binding deposit receipt constituted a temporary contract of the life insurance in
question; and
(2) whether private respondent Ngo Hing concealed the state of health and physical condition
of Helen Go, which rendered void the aforesaid deposit receipt.

Held:
The provisions printed on the deposit receipt provide 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 able 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 petitioner Grepalife disapproved the insurance application of respondent
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. As held by this Court, 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

Northwestern University, College of Law 3 Digest - Great Pacific Life Assurance Corp. vs.. CA, 89
SCRA 543
insurance, a "binding slip" or "binding receipt" does not insure by itself (De Lim
vs. Sun Life Assurance Company of Canada, 41 Phil. 264).
As held in De Lim vs. Sun Life Assurance Company of Canada, supra,
"a contract of insurance, like other contracts, must be assented to by both parties either in
person or by their agents ... The contract, to be binding from the date of the application, must
have been a completed contract, one that leaves nothing to be dione, nothing to be completed,
nothing to be passed upon, or determined, before it shall take effect. There can be no contract
of insurance unless the minds of the parties have met in agreement."

2. Relative to the second issue of alleged concealment, the Court is of

the firm belief that private respondent had deliberately concealed the state of health and
physical condition of his daughter Helen Go. Where private respondent supplied the required
essential data for the insurance application form, he was fully aware that his one-year old
daughter is typically a mongoloid child. Such a congenital physical defect could never be
ensconced nor disguised. Nonetheless, private respondent, in apparent bad faith, withheld the
fact material to the risk to be assumed by the insurance company. As an insurance agent of
Grepalife, he ought to know, as he surely must have known. his duty and responsibility to such
a material fact. Had he diamond said significant fact in the insurance application form Grepalife
would have verified the same and would have had no choice but to
disapprove the application outright.
The contract of insurance is one of perfect good faith uberrima fides
meaning good faith, absolute and perfect candor or openness and honesty; the absence of any
concealment or demotion, however slight [Black's Law Dictionary, 2nd Edition], not for the
alone but equally so for the insurer (Field man's Insurance Co., Inc. vs. Vda de Songco, 25 SCRA
70). Concealment is a neglect to communicate that which a party knows and ought to
communicate (Section 25, Act No. 2427). Whether intentional or unintentional the concealment
entitles the insurer to rescind the contract of insurance (Section 26, Id.: Yu Pang Cheng vs. Court
of Appeals, et al, 105 Phil 930; Satumino vs. Philippine American Life Insurance Company, 7
SCRA 316).
Private respondent appears guilty thereof.
The SC held that no insurance contract was perfected between the
parties with the noncompliance of the conditions provided in the binding receipt, and
concealment, as legally defined, having been committed by
herein private respondent.
Disposition:
The decision appealed from was SET ASIDE, and in lieu thereof, one
was entered which absolved petitioners Lapulapu D. Mondragon and Great Pacific Life
Assurance Company from their civil liabilities as found by respondent Court and ordered the
aforesaid insurance company to reimburse the amount of P1,077.75, without interest, to
private respondent,
Ngo Hing. Costs against private respondent.

Insurance Case Digest: El Oriente, Fabrica De Tabacos, Inc., V. Posadas (1931)

G.R. No. 34774 September 21, 1931

Lessons Applicable: Pecuniary Interest (Insurance)

FACTS:

 March 18, 1925: El Oriente, Fabrica de Tabacos, Inc. in order to protect itself against the
loss that it might suffer by reason of the death of its manager, A. Velhagen, who had more
than 35 years of experience in the manufacture of cigars in the Philippine Islands, and
whose death would be a serious loss procured from the Manufacturers Life Insurance Co.,
of Toronto, Canada, thru its local agent E.E. Elser, an insurance policy on the life of A.
Velhagen for $50,000
 designated itself as the sole beneficiary
 Upon the death of A. Velhagen in the year 1929, El Oriente received all the proceeds of the
life insurance policy, together with the interests and the dividends accruing thereon,
aggregating P104,957.88
 Collector of Internal Revenue assessed and levied the sum of P3,148.74 as income tax on
the proceeds of the insurance policy which tax El Oriente paid
ISSUE: W/N proceeds of life insurance policies paid to corporate beneficiaries upon the death of
the insured are also exempted

HELD: YES. reversed and favoring El Oriente

 In reality, what the plaintiff received was in the nature of an indemnity for the loss which it
actually suffered because of the death of its manager and not taxable income

INSULAR LIFE ASSURANCE COMPANY, LTD. vs. CARPONIA T. EBRADO

July 2, 2014 § Leave a comment

G.R. No. L-44059, October 28, 1977, FIRST DIVISION (MARTIN, J.)

FACTS:

On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd.,
on a whole-life for P5,882.00 with a rider for Accidental Death for the same amount. He
designated Carponia T. Ebrado, his common-law wife as the revocable beneficiary in his policy.
He referred to her as his wife in the policy. On October 21, 1969, He died as a result of an
accident when he was hit by a failing branch of a tree. As the policy was in force, the insurance
company was liable to pay the coverage in the total 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 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. Pascual T. Ebrado, also filed a claim to the insurance company, this time claiming to
be the legal wife Buenaventura. She asserts that she has a better right over the proceeds than
Carponia who is a common-law wife. As the insurance company is at a loss as to whom to give
the proceeds, it commenced an action for interpleader in court. After the issues have been
joined, a pre-trial conference was held on July 8, 1972, that there is no possibility of amicable
settlement. The Court proceeded to have the parties submit their evidence for the purpose of
the pre-trial and make admissions for the purpose of pretrial. On September 25, 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 July 11, 1976, the Appellate Court certified the
case to Us as involving only questions of law.

ISSUE:

Whether or not a common-law wife named as beneficiary in the life insurance policy of a legally
married man claim the proceeds thereof in case of death of the latter.

HELD:
The appealed judgment of the lower court is hereby affirmed.

Carponia T. Ebrado is hereby declared disqualified to be the beneficiary of the late

Buenaventura C. Ebrado in his life insurance policy. As a consequence, the proceeds of the
policy are hereby held payable to the estate of the deceased insured. Costs against Carponia T.
Ebrado.

A common-law wife named as a beneficiary in the life insurance policy of a legally married man
cannot claim the proceeds thereof in case the death of the latter. The contract of insurance is
govern by the provisions of the new civil code on matters not specifically provided for in the
insurance code. 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 fife insurance policy by the person
who cannot make a donation to him. Common-law spouses are, definitely, barred from
receiving donations from each other. Also conviction for adultery or concubinage is not
required as only preponderance of evidence is necessary. “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 the premiums of
the policy which the insured pays out of liberality, the beneficiary will receive the proceeds or
profits of said insurance.”

Philam v Pineda G.R. No. L-54216 July 19, 1989

J. Paras

Facts:

Pineda procured an ordinary life insurance policy from the petitioner company and designated
his wife and children as irrevocable beneficiaries.

He then filed a petition to amend the designation of the beneficiaries in his life policy from
irrevocable to revocable.

The judge granted the request.

Petitioner promptly filed a motion but was denied. Hence, this petition.

Issues:

1. WON the designation of the irrevocable beneficiaries could be changed or amended without
the consent of all the irrevocable beneficiaries.

2. WON the irrevocable minor beneficiaries could give consent to the change in designation

Held: No to both. Petition dismissed.

Ratio:
Under the Insurance Act, the beneficiary designated in a life insurance contract cannot be
changed without the consent of the beneficiary because he has a vested interest in the policy.

There was an express stipulation to this effect: “It is hereby understood and agreed that,
notwithstanding the provisions of this policy to the contrary, inasmuch as the designation of
the primary/contingent beneficiary/beneficiaries in this Policy has been made without reserving
the right to change said beneficiary/ beneficiaries, such designation may not be surrendered to
the Company, released or assigned; and no right or privilege under the Policy may be exercised,
or agreement made with the Company to any change in or amendment to the Policy, without
the consent of the said beneficiary/beneficiaries.”

The alleged acquiescence of the six (6) children beneficiaries of the policy cannot
be considered an effective ratification due to the fact that they were minors. Neither could
they act through their father insured since their interests are quite divergent from one
another.

Therefore, the parent-insured cannot exercise rights and/or privileges pertaining to the
insurance contract, for otherwise, the vested rights of the irrevocable beneficiaries would be
rendered inconsequential.

Of equal importance is the well-settled rule that the contract between the parties is the law
binding on both of them and for so many times, this court has consistently issued
pronouncements upholding the validity and effectivity of contracts. Likewise, contracts which
are the private laws of the contracting parties should be fulfilled according to the literal sense
of their stipulations, for contracts are obligatory, no matter in what form they may be,
whenever the essential requisites for their validity are present

The change in the designation of was not within the contemplation of the parties. The lower
court instead made a new contract for them. It acted in excess of its authority when it did so.

Heirs of Maramag v. Maramag

G.R. No. 181132 , June 5, 2009

FACTS:

The case stems from a petition filed against respondents with the RTC for revocation and/or
reduction of insurance proceeds for being void and/or inofficious. The petition alleged that: (1)
petitioners were the legitimate wife and children of Loreto Maramag (Loreto), while
respondents were Loreto’s illegitimate family; (2) Eva de Guzman Maramag (Eva) was a
concubine of Loreto and a suspect in the killing of the latter, thus, she is disqualified to receive
any proceeds from his insurance policies from Insular Life Assurance Company, Ltd. (Insular)
and Great Pacific Life Assurance Corporation (Grepalife) (3) the illegitimate children of Loreto—
Odessa, Karl Brian, and Trisha Angelie—were entitled only to one-half of the legitime of the
legitimate children, thus, the proceeds released to Odessa and those to be released to Karl
Brian and Trisha Angelie were inofficious and should be reduced; and (4) petitioners could not
be deprived of their legitimes, which should be satisfied first. Insular admitted that Loreto
misrepresented Eva as his legitimate wife and Odessa, Karl Brian, and Trisha Angelie as his
legitimate children, and that they filed their claims for the insurance proceeds of the insurance
policies; that when it ascertained that Eva was not the legal wife of Loreto, it disqualified her as
a beneficiary and divided the proceeds among Odessa, Karl Brian, and Trisha Angelie, as the
remaining designated beneficiaries; and that it released Odessa’s share as she was of age, but
withheld the release of the shares of minors Karl Brian and Trisha Angelie pending submission
of letters of guardianship. Insular alleged that the complaint or petition failed to state a cause
of action insofar as it sought to declare as void the designation of Eva as beneficiary, because
Loreto revoked her designation as such in Policy No. A001544070 and it disqualified her in
Policy No. A001693029; and insofar as it sought to declare as inofficious the shares of Odessa,
Karl Brian, and Trisha Angelie, considering that no settlement of Loreto’s estate had been filed
nor had the respective shares of the heirs been determined. Insular further claimed that it was
bound to honor the insurance policies designating the children of Loreto with Eva as
beneficiaries pursuant to Section 53 of the Insurance Code. Grepalife alleged that Eva was not
designated as an insurance policy beneficiary; that the claims filed by Odessa, Karl Brian, and
Trisha Angelie were denied because Loreto was ineligible for insurance due to a
misrepresentation in his application form that he was born on December 10, 1936 and, thus,
not more than 65 years old when he signed it in September 2001; that the case was premature,
there being no claim filed by the legitimate family of Loreto; and that the law on succession
does not apply where the designation of insurance beneficiaries is clear.

ISSUE:

Whether or not illegitimate children can be beneficiaries in an insurance contract.

RULING:

Yes. Section 53 of the Insurance Code states that the insurance proceeds shall be applied
exclusively to the proper interest of the person in whose name or for whose benefit it is made
unless otherwise specified in the policy. Pursuant thereto, it is obvious that the only persons
entitled to claim the insurance proceeds are either the insured, if still alive; or the beneficiary, if
the insured is already deceased, upon the maturation of the policy.The exception to this rule is
a situation where the insurance contract was intended to benefit third persons who are not
parties to the same in the form of favorable stipulations or indemnity. In such a case, third
parties may directly sue and claim from the insurer.

Petitioners are third parties to the insurance contracts with Insular and Grepalife and, thus, are
not entitled to the proceeds thereof. Accordingly, respondents Insular and Grepalife have no
legal obligation to turn over the insurance proceeds to petitioners. The revocation of Eva as a
beneficiary in one policy and her disqualification as such in another are of no moment
considering that the designation of the illegitimate children as beneficiaries in Loreto’s
insurance policies remains valid. Because no legal proscription exists in naming as beneficiaries
the children of illicit relationships by the insured, the shares of Eva in the insurance proceeds,
whether forfeited by the court in view of the prohibition on donations under Article 739 of the
Civil Code or by the insurers themselves for reasons based on the insurance contracts, must be
awarded to the said illegitimate children, the designated beneficiaries, to the exclusion of
petitioners. It is only in cases where the insured has not designated any beneficiary, or when
the designated beneficiary is disqualified by law to receive the proceeds, that the insurance
policy proceeds shall redound to the benefit of the estate of the insured.

Insurance Case Digest: Lampano V. Jose (1915)

G.R. No. L-9401 March 30, 1915

Lessons Applicable: Existing Interest (Insurance)

Laws Applicable:
FACTS:

 Mariano R. Barretto, constructed a house for Placida A. Jose sold the house to Antonina
Lampano for P6,000
 The house was destroyed by fire during which Lampano still owed Jose P2,000 as evidenced
by a promissory note. Jose also owed Barretto P2,000 for the construction.
 After the completion of the house and before it was destroyed, Mariano R. Barretto took
out an insurance policy upon it in his own name, with the consent of Placida A. Jose, for the
sum of P4,000. After its destruction, he collected P3,600 from the insurance company,
having paid in premiums the sum of P301.50
 Lampano filed a complaint against Barreto and Jose alleging that Jose in a verbal agreement
told her that the policy will be delivered to her so she should collected P3,600 from each of
them
 RTC: favored Jose ordering Barreto to pay him P1,298.50 and offsetting the P2,000
 Barreto alone appealed
ISSUE: W/N Barreto had insurable interest in the house and could insure it for his it for his own
protection

HELD: YES. reversed and Barretto is absolved

 Where different persons have different interests in the same property, the insurance taken
by one in his own right and in his own interest does not in any way insure to the benefit of
another
 A contract of insurance made for the insurer's (insured) indemnity only, as where there is
no agreement, express or implied, that it shall be for the benefit of a third person, does not
attach to or run with the title to the insured property on a transfer thereof personal as
between the insurer and the insured.
 Barretto had an insurable interest in the house. He construed the building, furnishing all the
materials and supplies, and insured it after it had been completed

Tai Tong Chuache & Co. V. Insurance Commission (1988)

G.R. No. L-55397 February 29, 1988
Lessons Applicable: When Insurable Interest Must Exist (Insurance)
Laws Applicable:

FACTS:

Azucena Palomo bought a parcel of land and building from Rolando Gonzales and assumed a
mortgage of the building in favor of S.S.S. which was insured with S.S.S. Accredited Group of
Insurers
April 19, 1975: Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of
P100,000 and to secure it, the land and building was mortgaged
June 11, 1975: Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000
with Zenith Insurance Corporation
July 16, 1975: another Fire Insurance policy was procured from Philippine British Assurance
Company, covering the same building for P50,000 and the contents thereof for P70,000
Before the occurrence of the peril insured against the Palomos had already paid their credit due
the
July 31, 1975: building and the contents were totally razed by fire
Palomo was able to claim P41,546.79 from Philippine British Assurance Co., P11,877.14 from
Zenith Insurance Corporation and P5,936.57 from S.S.S. Group of Accredited Insurers but
Travellers Multi-Indemnity refused so it demanded the balance from the other three but they
refused so they filed against them
Insurance Commission, CFI: absolved Travellers on the basis that Arsenio Cua was claiming and
NOT Tai Tong Chuache
Palomo Appealed
Travellers reasoned that the policy is endorsed to Arsenio Chua, mortgage creditor
Tai Tong Chuache & Co. filed a complaint in intervention claiming the proceeds of the fire
Insurance Policy issued by travellers
affirmative defense of lack of insurable interest that before the occurrence of the peril insured
against the Palomos had already paid their credit due the petitioner

ISSUE: W/N Tai Tong Chuache & Co. has insurable interest

HELD: YES. Travellers Multi-Indemnity Corporation to pay Tai Tong Chuache & Co.

when the creditor is in possession of the document of credit, he need not prove non-payment
for it is presumed
The validity of the insurance policy taken b petitioner was not assailed by private respondent.
Moreover, petitioner's claim that the loan extended to the Palomos has not yet been paid was
corroborated by Azucena Palomo who testified that they are still indebted to herein petitioner
Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership.
Being an agent, it is understood that he acted for and in behalf of the firm
Upon its failure to prove the allegation of lack of insurable interest on the part of the petitioner,
Travellers must be held liable

Insurance Case Digest: Cha V. CA (1997)

G.R. No. 124520 August 18, 1997
Lessons Applicable: Effect of Lack of Insurable Interest (Insurance)

Laws Applicable: Sec. 17, Sec. 18, Sec. 25 of the Insurance Code

FACTS:

 Spouses Nilo Cha and Stella Uy-Cha and CKS Development Corporation entered a 1 year
lease contract with a stipulation not to insure against fire the chattels, merchandise,
textiles, goods and effects placed at any stall or store or space in the leased premises
without first obtaining the written consent and approval of the lessor. But it insured
against loss by fire their merchandise inside the leased premises for P500,000 with the
United Insurance Co., Inc. without the written consent of CKS
 On the day the lease contract was to expire, fire broke out inside the leased premises and
CKS learning that the spouses procured an insurance wrote to United to have the proceeds
be paid directly to them. But United refused so CKS filed against Spouses Cha and United.
 RTC: United to pay CKS the amount of P335,063.11 and Spouses Cha to pay P50,000 as
exemplary damages, P20,000 as attorney’s fees and costs of suit
 CA: deleted exemplary damages and attorney’s fees
ISSUE: W/N the CKS has insurable interest because the spouses Cha violated the stipulation

HELD: NO. CA set aside. Awarding the proceeds to spouses Cha.

 Sec. 18. No contract or policy of insurance on property shall be enforceable except for the
benefit of some person having an insurable interest in the property insured
 A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses
over their merchandise is primarily a contract of indemnity. Insurable interest in the
property insured must exist a t the time the insurance takes effect and at the time the loss
occurs. The basis of such requirement of insurable interest in property insured is based on
sound public policy: to prevent a person from taking out an insurance policy on property
upon which he has no insurable interest and collecting the proceeds of said policy in case of
loss of the property. In such a case, the contract of insurance is a mere wager which is void
under Section 25 of the Insurance Code.
 SECTION 25. Every stipulation in a policy of Insurance for the payment of loss, whether the
person insured has or has not any interest in the property insured, or that the policy shall
be received as proof of such interest, and every policy executed by way of gaming or
wagering, is void
 Section 17. The measure of an insurable interest in property is the extent to which the
insured might be damnified by loss of injury thereof
 The automatic assignment of the policy to CKS under the provision of the lease contract
previously quoted is void for being contrary to law and/or public policy. The proceeds of
the fire insurance policy thus rightfully belong to the spouses. The liability of the Cha
spouses to CKS for violating their lease contract in that Cha spouses obtained a fire
insurance policy over their own merchandise, without the consent of CKS, is a separate and
distinct issue which we do not resolve in this case.

DELSAN TRANSPORT LINES, INC., vs CA G.R. No. 127897 November 15, 2001 Common carrier,
Marine Insurance, Subrogation
OCTOBER 24, 2017

FACTS:

Caltex Philippines entered into a contract of affreightment with the petitioner, Delsan Transport
Lines, Inc., for a period of 1 year whereby the said common carrier agreed to transport Caltex’s
industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country.

Under the contract, petitioner took on board its vessel, MT Maysun, industrial fuel oil of Caltex
to be delivered tothe Caltex Oil Terminal in Zamboanga City. The shipment was insured with the
private respondent, American Home Assurance Corporation.

The vessel sank taking with it the entire cargo of fuel oil. Private respondent paid Caltex the
sum of P5,096,635.57 representing the insured value of the lost cargo. Exercising its right of
subrogation the private respondent demanded of the petitioner the sameamount it paid to
Caltex.
Due to its failure to collect from the petitioner despite prior demand, private respondent filed a
complaint with the RTC for collection of a sum of money. The trial court dismissed the
complaint against herein petitioner. The trial court found that the vessel, MT Maysun, was
seaworthy to undertake the voyage as determined by the Philippine Coast Guard per Survey
Certificate Report No. M5-016-MH upon inspection during its annual dry-docking and that the
incident was caused by unexpected inclement weather condition or force majeure, thus
exempting the common carrier (herein petitioner) from liability for the loss of its cargo.

The decision of the trial court was reversed by the Court of Appeals. In the absence of any
explanation as to what may have caused the sinking of the vessel coupled with the finding that
the same was improperly manned, the appellate court ruled that the petitioner is liable on its
obligation as common carrier to herein private respondent insurance company as subrogee of
Caltex.

ISSUE:

Whether the payment made by the private respondent to Caltex for the insured value of the
lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action
for recovery against the petitioner.

RULING:

NO. The payment made by the private respondent for the insured value of the lost cargo
operates as waiver of its (private respondent) right to enforce the term of the implied warranty
against Caltex under the marine insurance policy. However, the same cannot be validly
interpreted as an automatic admission of the vessel’s seaworthiness by the private respondent
as to foreclose recourse against the petitioner for any liability under its contractual obligation
as a common carrier. The fact of payment grants the private respondent subrogatory right
which enables it to exercise

Insurance Case Digest: Gaisano Cagayan, Inc. V. Insurance Company Of North America (2006)

G.R. No. 147839 June 8, 2006

Lessons Applicable: Existing Interest (Insurance)

Laws Applicable: Article 1504,Article 1263, Article 2207 of the Civil Code, Section 13 of
Insurance Code

FACTS:

 Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. while Levi
Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned by
Levi Strauss & Co
 IMC and LSPI separately obtained from Insurance Company of North America fire insurance
policies for their book debt endorsements related to their ready-made clothing materials
which have been sold or delivered to various customers and dealers of the Insured
anywhere in the Philippines which are unpaid 45 days after the time of the loss
 February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro City, owned by Gaisano
Cagayan, Inc., containing the ready-made clothing materials sold and delivered by IMC and
LSPI was consumed by fire.
 February 4, 1992: Insurance Company of North America filed a complaint for damages
against Gaisano Cagayan, Inc. alleges that IMC and LSPI filed their claims under their
respective fire insurance policies which it paid thus it was subrogated to their rights
 Gaisano Cagayan, Inc: not be held liable because it was destroyed due to fortuities event or
force majeure
 RTC: IMC and LSPI retained ownership of the delivered goods until fully paid, it must bear
the loss (res perit domino)
 CA: Reversed - sales invoices is an exception under Article 1504 (1) of the Civil Code to res
perit domino

ISSUE: W/N Insurance Company of North America can claim against Gaisano Cagayan for the
debt that was isnured

HELD: YES. petition is partly GRANTED. order to pay P535,613 is DELETED

 insurance policy is clear that the subject of the insurance is the book debts and NOT goods
sold and delivered to the customers and dealers of the insured
 ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is
transferred to the buyer the goods are at the buyer's risk whether actual delivery has been
made or not, except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his obligations under the contract, the goods
are at the buyer's risk from the time of such delivery;

 IMC and LSPI did not lose complete interest over the goods. They have an insurable interest
until full payment of the value of the delivered goods. Unlike the civil law concept of res
perit domino, where ownership is the basis for consideration of who bears the risk of loss,
in property insurance, one's interest is not determined by concept of title, but whether
insured has substantial economic interest in the property
 Section 13 of our Insurance Code defines insurable interest 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." Parenthetically, under
Section 14 of the same Code, an insurable interest in property may consist in: (a) an existing
interest; (b) an inchoate interest founded on existing interest; or (c) an expectancy, coupled
with an existing interest in that out of which the expectancy arises.
 Anyone has an insurable interest in property who derives a benefit from its existence or
would suffer loss from its destruction.
 it is sufficient that the insured is so situated with reference to the property that he would
be liable to loss should it be injured or destroyed by the peril against which it is insured
 an insurable interest in property does not necessarily imply a property interest in, or a lien
upon, or possession of, the subject
 matter of the insurance, and neither the title nor a beneficial interest is requisite to the
existence of such an interest
 insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC
and LSPI that remained unpaid 45 days after the fire - obligation is pecuniary in nature
 obligor should be held exempt from liability when the loss occurs thru a fortuitous event
only holds true when the obligation consists in the delivery of a determinate thing and
there is no stipulation holding him liable even in case of fortuitous event
 Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not extinguish the obligation (Genus
nunquan perit)
 The subrogation receipt, by itself, is sufficient to establish not only the relationship of
respondent as insurer and IMC as the insured, but also the amount paid to settle the
insurance claim
 Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who has violated the contract.
 As to LSPI, no subrogation receipt was offered in evidence.
 Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of
the amount of P535,613